Federal Register, Volume 75 Issue 226 (Wednesday, November 24, 2010)

[Federal Register Volume 75, Number 226 (Wednesday, November 24, 2010)]
[Rules and Regulations]
[Pages 71799-72580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27926]

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Part II

Department of Health and Human Services

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Center for Medicare & Medicaid Services

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42 CFR Parts 410, 411, 412, et al.

Medicare Program: Hospital Outpatient Prospective Payment System and CY
2011 Payment Rates; Ambulatory Surgical Center Payment System and CY
2011 Payment Rates; Payments to Hospitals for Graduate Medical
Education Costs; Physician Self-Referral Rules and Related Changes to
Provider Agreement Regulations; Payment for Certified Registered Nurse
Anesthetist Services Furnished in Rural Hospitals and Critical Access
Hospitals; Final Rule

Federal Register / Vol. 75 , No. 226 / Wednesday, November 24, 2010 /
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 412, 413, 416, 419, and 489

[CMS-1504-FC and CMS-1498-IFC2]
RIN 0938-AP82 and RIN 0938-AP80

Medicare Program: Hospital Outpatient Prospective Payment System
and CY 2011 Payment Rates; Ambulatory Surgical Center Payment System
and CY 2011 Payment Rates; Payments to Hospitals for Graduate Medical
Education Costs; Physician Self-Referral Rules and Related Changes to
Provider Agreement Regulations; Payment for Certified Registered Nurse
Anesthetist Services Furnished in Rural Hospitals and Critical Access
Hospitals

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

ACTION: Final rule with comment period; final rules; and interim final
rule with comment period.

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SUMMARY: The final rule with comment period in this document revises
the Medicare hospital outpatient prospective payment system (OPPS) to
implement applicable statutory requirements and changes arising from
our continuing experience with this system and to implement certain
provisions of the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation Act of 2010
(Affordable Care Act). In this final rule with comment period, we
describe the 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 are applicable to services
furnished on or after January 1, 2011.
In addition, this final rule with comment period updates the
revised Medicare ambulatory surgical center (ASC) payment system to
implement applicable statutory requirements and changes arising from
our continuing experience with this system and to implement certain
provisions of the Affordable Care Act. In this final rule with comment
period, we set forth the applicable relative payment weights and
amounts for services furnished in ASCs, specific HCPCS codes to which
these changes apply, and other pertinent ratesetting information for
the CY 2011 ASC payment system. These changes are applicable to
services furnished on or after January 1, 2011.
In this document, we also are including two final rules that
implement provisions of the Affordable Care Act relating to payments to
hospitals for direct graduate medical education (GME) and indirect
medical education (IME) costs; and new limitations on certain physician
referrals to hospitals in which they have an ownership or investment
interest.
In the interim final rule with comment period that is included in
this document, we are changing the effective date for otherwise
eligible hospitals and critical access hospitals that have been
reclassified from urban to rural under section 1886(d)(8)(E) of the
Social Security Act and 42 CFR 412.103 to receive reasonable cost
payments for anesthesia services and related care furnished by
nonphysician anesthetists from cost reporting periods beginning on or
after October 1, 2010, to December 2, 2010.

DATES: Effective Dates: The provisions of these rules are effective
January 1, 2011, except for the amendment to 42 CFR
412.113(c)(2)(i)(A), which is effective on December 2, 2010.
Applicability Dates: (1) The amendments to 42 CFR
412.105(f)(1)(ii)(A), (B), (C), and (D) are applicable retroactive to
January 1, 1983; (2) the amendment to 42 CFR 412.105(f)(1)(ii)(E) is
applicable retroactive to July 1, 2010; (3) the amendments to 42 CFR
412.105(f)(1)(iii)(C) and (D) are applicable retroactive to January 1,
1983; (4) the amendment to 42 CFR 413.75(b) is applicable retroactive
to July 1, 2009; (5) the amendment to 42 CFR 413.78(f)(1) is applicable
retroactive to July 1, 2009; (6) the amendment to 42 CFR 413.78(g) is
applicable retroactive to July 1, 2010; and (7) the amendment to 42 CFR
413.78(h) is applicable retroactive to January 1, 1983. In accordance
with sections 1871(e)(1)(A)(i) and (e)(1)(A)(ii) of the Social Security
Act, the Secretary has determined that the retroactive application of
the specified regulatory amendments is necessary to comply with the
statute and that failure to apply these changes retroactively would be
contrary to public interest.
Comment Period: To be assured consideration, comments on the
payment classifications assigned to HCPCS codes identified in Addenda
B, AA, and BB to the final rule with comment period with the ``NI''
comment indicator and on other areas specified throughout the final
rule with comment period, must be received at one of the addresses
provided in the ADDRESSES section no later than 5 p.m. EST on January
3, 2011.
To be assured consideration, comments on the interim final rule
with comment period (under section XXIII. of the preamble and the
amendment to 42 CFR 412.113(c)(2)(i)(A)) relating to reasonable cost
payments to otherwise eligible hospitals and critical access hospitals
that have reclassified from urban to rural for anesthesia services and
related care furnished by nonphysician anesthetists must be received at
one of the addresses provided in the ADDRESSES section no later than 5
p.m. EST on January 3, 2011.
Application Deadline--New Class of New Technology Intraocular
Lenses: Requests for review of applications for a new class of new
technology intraocular lenses must be received by 5 p.m. EST on March
5, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1504-FC for the
provisions of the OPPS/ASC final rule with comment period, and to CMS-
1498-IFC2 for the interim final rule with comment period. 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 under
the ``More Search Options'' tab.
2. By regular mail. You may mail written comments to the following
address only: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1504-FC or CMS-1498-IFC2, as
applicable, 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 to
the following address only: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1504-FC or CMS-
1498-IFC2, as applicable, 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 before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and

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Human Services, Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue, SW., Washington, DC 20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call the telephone number (410) 786-7195 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: Gift Tee, (410) 786-9316, Hospital
outpatient prospective payment issues.
Paula Smith, (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.
Tzvi Hefter, (410) 786-4487 and Ing-Jye Cheng, (410) 786-4548,
Direct graduate medical education and indirect medical education
payments issues.
Jacqueline Proctor, (410) 786-8852, Physician ownership and
investment in hospitals issues.
Marc Hartstein, (410) 786-4539, Pass-through payments for certified
registered nurse anesthetists services furnished in rural hospitals and
critical access hospitals.

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

Electronic Access

This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
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password required).

Alphabetical List of Acronyms Appearing in This Federal Register
Document

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
AWP Average wholesale price
AWV Annual Wellness Visit
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
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP Conditions of Participation
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians'] Current Procedural Terminology, Fourth Edition,
2009, copyrighted by the American Medical Association
CRNA Certified registered nurse anesthetist
CY Calendar year
DMEPOS Durable medical equipment, prosthetics, orthotics, and
supplies
DMERC Durable medical equipment regional carrier
DRA Deficit Reduction Act of 2005, 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 [Direct] Graduate medical education
HCERA Health Care and Education Reconciliation Act of 2010, Public
Law 111-152
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
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
IDE Investigational device exemption
IHS Indian Health Service
IME Indirect medical education
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IPPE Initial preventive physical examination
IPPS [Hospital] Inpatient prospective payment system
IVIG Intravenous immune globulin
MAC Medicare Administrative Contractor
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

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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
PPACA Patient Protection and Affordable Care Act of 2010, Public Law
111-148
PPI Producer Price Index
PPPS Personalized preventive plan services
PPS Prospective payment system
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
QAPI Quality Assessment and Performance Improvement
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
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
USPSTF United States Preventive Services Task Force
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. In
addition, we address provisions of the Affordable Care Act, relating to
payments to hospitals for direct graduate medical education (GME) and
indirect medical education (IME) costs. We also address provisions
relating to new limitations on certain physician referrals to hospitals
in which they have an ownership or investment interest and making
related changes to the provider agreement regulations. The provisions
relating to the OPPS are included in sections I. through XIV. and XVI.
through XIX. of this final rule with comment period and in Addenda A,
B, C (Addendum C is available on the Internet only; we refer readers to
section XVIII.A. of this final rule with comment period), D1, D2, E, L,
and M to this final rule with comment period. The provisions related to
the revised ASC payment system are included in sections XV., XVI.
through XIX. of this final rule with comment period and in Addenda AA,
BB, DD1, DD2, and EE to this final rule with comment period. (Addendum
EE is available on the Internet only; we refer readers to section
XVII.B. of this final rule with comment period.) The provisions related
to payments to hospitals for direct GME and IME costs are included in
the final rule in section XXI. of this document. The provisions
relating to the new limitations on certain physician referrals to
hospitals in which they have an ownership or investment interest and
related changes to the provider agreement regulations are included in
the final rule in section XXII. of this document. The provision
relating to a change in the effective date for otherwise eligible rural
hospitals and critical access hospitals (CAHs) that have reclassified
from urban to rural areas to receive reasonable cost payments for
anesthesia services and related care furnished by nonphysician
anesthetists is included in the interim final rule with comment period
in section XXIII. of this document.

Table of Contents

I. Background and Summary of the CY 2011 OPPS/ASC Proposed and Final
Rules
A. Legislative and Regulatory Authority for the Hospital
Outpatient Prospective Payment System
B. Excluded OPPS Services and Hospitals
C. Prior Rulemaking
D. The Affordable Care Act
E. Advisory Panel on Ambulatory Payment Classification (APC)
Groups
1. Authority of the APC Panel
2. Establishment of the APC Panel
3. APC Panel Meetings and Organizational Structure
F. Background and Summary of the CY 2011 OPPS/ASC Proposed Rule
1. Updates Affecting OPPS Payments
2. OPPS Ambulatory Payment Classification (APC) Group Policies
3. OPPS Payment for Devices
4. OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
5. Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, Radiopharmaceuticals, and Devices
6. OPPS Payment for Brachytherapy Sources
7. OPPS Payment for Drug Administration Services
8. OPPS Payment for Hospital Outpatient Visits
9. Payment for Partial Hospitalization Services
10. Procedures That Would Be Paid Only as Inpatient Procedures
11. OPPS Nonrecurring Technical and Policy Changes and
Clarifications
12. OPPS Payment Status and Comment Indicators
13. OPPS Policy and Payment Recommendations
14. Updates to the Ambulatory Surgical Center (ASC) Payment
System
15. Reporting Quality Data for Annual Payment Rate Updates
16. Changes Relating to Payments to Hospitals for GME and IME
Costs
17. Changes to Whole Hospital and Rural Provider Exceptions to
the Physician Self-Referral Prohibition and Related Changes to
Provider Agreement Regulations
18. Regulatory Impact Analysis
G. Public Comments Received in Response to the August 3, 2010
OPPS/ASC Proposed Rule
H. Public Comments Received on the November 20, 2009 OPPS/ASC
Final Rule with Comment Period
I. Interim Final Rule on Certified Registered Nurse Anesthetist
(CRNA) Services Furnished in Rural Hospitals and Critical Access
Hospitals
II. Updates Affecting OPPS Payments
A. Recalibration of APC Relative Weights
1. Database Construction
a. Database Source and Methodology
b. Use of Single and Multiple Procedure Claims
c. Calculation of Cost to Charge Ratios (CCRs)
2. Data Development Process and Calculation of Median Costs
a. Claims Preparation
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure
Claims
(1) Splitting Claims
(2) Creation of ``Pseudo'' Single Procedure Claims
c. Completion of Claim Records and Median Cost Calculations
d. Calculation of Single Procedure APC Criteria-Based Median
Costs
(1) Device-Dependent APCs
(2) Blood and Blood Products
(3) Single Allergy Tests (APCs 0370 and 0381)
(4) Hyperbaric Oxygen Therapy (APC 0659)
(5) Payment for Ancillary Outpatient Services When Patient
Expires (APC 0375)
(6) Pulmonary Rehabilitation (APC 0102)
(7) Endovascular Revascularization of the Lower Extremity (APCs
0083, 0229, and 0319)
(8) Non-Congenital Cardiac Catheterization (APC 0080)
(9) Cranial Neurostimulator and Electrodes (APCs 0318)
(10) Cardiac and Intensive Cardiac Rehabilitation (APC 0095)
e. 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. Changes to Packaged Services
a. Background
b. Packaging Issues

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(1) CMS Presentation of Findings Regarding Expanded Packaging at
the February 2010 APC Panel
(2) Packaging Recommendations of the APC Panel at Its February
2010 Meeting
(3) Packaging Services Addressed by the August 2010 APC Panel
Recommendations and Other Issues Raised in Public Comments
(4) Other Service-Specific Packaging Issues
4. Calculation of OPPS Scaled Payment Weights
B. Conversion Factor Update
C. Wage Index Changes
D. Statewide Average Default CCRs
E. OPPS Payment to Certain Rural and Other Hospitals
1. Hold Harmless Transitional Payment Changes Made by Public Law
110-275 (MIPPA)
2. Adjustment for Rural SCHs Implemented in CY 2006 Related to
Public Law 108-173 (MMA)
F. OPPS Payments to Certain Cancer Hospitals Described by
Section 1886(d)(1)(B)(v) of the Act
1. Background
2. Study of Cancer Hospital Costs Relative to Other Hospitals
3. Adjustment for Certain Cancer Hospitals
G. Hospital Outpatient Outlier Payments
1. Background
2. Proposed Outlier Calculation
3. Final Outlier Calculation
4. Outlier Reconciliation
H. Calculation of an Adjusted Medicare Payment From the National
Unadjusted Medicare Payment
I. Beneficiary Copayments
1. Background
2. OPPS Copayment Policy
3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
A. OPPS Treatment of New CPT and Level II HCPCS Codes
1. Treatment of New Level II HCPCS Codes and Category I CPT
Vaccine Codes and Category III CPT Codes for Which We Solicited
Public Comment in the Calendar Year 2010 Proposed Rule
2. Process for New Level II HCPCS Codes and Category I and
Category III CPT Codes for Which We Are Soliciting Public Comments
on This Calendar Year 2011 OPPS/ASC Final Rule With Comment Period
3. Temporary HCPCS Codes for 2010-2011 Seasonal Influenza
Vaccines
B. OPPS Changes--Variations Within APCs
1. Background
2. Application of the 2 Times Rule
3. Exceptions to the 2 Times Rule
C. New Technology APCs
1. Background
2. Movement of Procedures From New Technology APCs to Clinical
APCs
D. OPPS APC-Specific Policies
1. Cardiovascular Services
a. Cardiovascular Telemetry (APC 0209)
b. Myocardial Position Emission Tomography (PET) Imaging (APC
0307)
c. Cardiovascular Computed Tomography (CCT) (APC 0340 and 0383)
d. Multifunction Cardiogram (APC 0340)
e. Unlisted Vascular Surgery Procedure (APC 0624)
f. Implantable Loop Recorder Monitoring (APC 0691)
2. Gastrointestinal (GI) Services: Upper GI Endoscopy (APC 0141,
0384, and 0422)
3. Genitourinary Services
a. Radiofrequency Remodeling of Bladder Neck (APC 0165)
b. Percutaneous Renal Cryoablation (APC 0423)
4. Nervous System Services
a. Pain-Related Procedures (APCs 0203, 0204, 0206, 0207, and
0388)
b. Revision Removal of Neurotransmitter Electrodes (APC 0687)
5. Radiation Therapy Services
a. Stereotactic Radiosurgery (SRS) Treatment Delivery Services
(APCs 0065, 0066, 0067, and 0127)
b. Proton Beam Therapy (APCs 0664 and 0667)
c. Device Construction for Intensity Modulated Radiation Therapy
(APC 303)
d. High Dose Rate Brachytherapy (APC 0313)
e. Electronic Brachytherapy (APC 0313)
f. Tumor Imaging (APCs 0406 and 0414)
6. Other Services
a. Skin Repair (APCs 0134 and 0135)
b. Insertion of Anterior Segment Aqueous Drainage Device (APCs
0234, 0255 and 0673)
c. Group Psychotherapy (APCs 0322, 0323, 0324, and 0325)
IV. OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
2. Provisions for Reducing Transitional Pass-Through Payments To
Offset Costs Packaged Into APC Groups
a. Background
b. Proposed and Final Calendar Year 2011 Policy
B. Adjustment to OPPS Payment for No Cost/Full Credit and
Partial Credit Devices
1. Background
2. APCs and Devices Subject to the Adjustment Policy
V. OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
A. OPPS Transitional Pass-Through Payment for Additional Costs
of Drugs, Biologicals, and Radiopharmaceuticals
1. Background
2. Drugs and Biologicals With Expiring Pass-Through Status in CY
2010
3. Drugs, Biologicals, and Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY 2011
4. 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. Payment Offset Policy for Contrast Agents
B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
Without Pass-Through Status
1. Background
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
b. Cost Threshold for Packaging of Payment for HCPCS Codes That
Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
c. Packaging Determination for HCPCS Codes That Describe the
Same Drug or Biological But Different Dosages
d. Packaging of Payment for Diagnostic Radiopharmaceuticals,
Contrast Agents, and Implantable Biologicals (``Policy-Packaged''
Drugs and Devices)
3. Payment for Drugs and Biologicals Without Pass-Through Status
That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and
Other Separately Payable and Packaged Drugs and Biologicals
b. Payment Policy
c. Payment Policy for Therapeutic Radiopharmaceuticals
4. Payment for Blood Clotting Factors
5. Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital
Claims Data
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs,
Biologicals, Radiopharmaceuticals, and Devices
A. Background
B. Estimate of Pass-Through Spending
VII. OPPS Payment for Brachytherapy Sources
A. Background
B. OPPS Payment Policy
VIII. OPPS Payment for Drug Administration Services
A. Background
B. Coding and Payment for Drug Administration Services
IX. OPPS Payment for Hospital Outpatient Visits
A. Background
B. Policies for Hospital Outpatient Visits
1. Clinic Visits: New and Established Patient Visits
2. Emergency Department Visits
3. Visit Reporting Guidelines
X. Payment for Partial Hospitalization Services
A. Background
B. PHP APC Update for CY 2011
C. Changes to Regulations To Incorporate Provisions of HCERA
2010
D. Separate Threshold for Outlier Payments to CMHCs
XI. Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
B. Changes to the Inpatient List
XII. OPPS Nonrecurring Technical and Policy Changes and
Clarifications
A. Physician Supervision
1. Background
a. Outpatient Therapeutic Services
b. Outpatient Diagnostic Services
2. Issues Regarding the Supervision of Hospital Outpatient
Services Raised by Hospitals and Other Stakeholders

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3. Policies for Supervision of Outpatient Therapeutic Services
in Hospital and CAHs
4. Supervision of Hospital Outpatient Diagnostic Services
B. Payment for Preventive Services
1. Definition of ``Preventive Services''
2. Coinsurance and Deductible for Preventive Services
3. Extension of Waiver of Part B Deductible to Services
Furnished in Connection With or in Relation to a Colorectal Cancer
Screening Test That Becomes Diagnostic or Therapeutic
C. Payment for Pulmonary Rehabilitation, Cardiac Rehabilitation,
and Intensive Cardiac Rehabilitation Services Furnished to Hospital
Outpatients
D. Expansion of Multiple Procedure Payment Reduction Under the
Medicare Physician Fee Schedule (MPFS) to Therapy Services
XIII. OPPS Payment Status and Comment Indicators
A. OPPS Payment Status Indicator Definitions
1. Payment Status Indicators To Designate Services That Are Paid
Under the OPPS
2. Payment Status Indicators To Designate Services That Are Paid
Under a Payment System Other Than the OPPS
3. Payment Status Indicators To Designate Services That Are Not
Recognized Under the OPPS But That May Be Recognized by Other
Institutional Providers
4. Payment Status Indicators To Designate Services That Are Not
Payable by Medicare on Outpatient Claims
B. Comment Indicator Definitions
XIV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
B. APC Panel Recommendations
C. OIG Recommendations
XV. 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. Treatment of New Codes
1. Process for Recognizing New Category I and Category III CPT
Codes and Level II HCPCS Codes
2. Treatment of New Level II HCPCS Codes and Category III CPT
Codes Implemented in April and July 2010 for Which We Solicited
Public Comments in Calendar Year 2011 OPPS/ASC Proposed Rule
3. Process for New Level II HCPCS Codes and Category I and
Category III CPT Codes for Which We Are Soliciting Public Comments
in This Calendar Year 2011 OPPS/ASC Final Rule With Comment Period
C. Update to the List of ASC Covered Surgical Procedures and
Covered Ancillary Services
1. Covered Surgical Procedures
a. Additions to the List of ASC Covered Surgical Procedures
b. Covered Surgical Procedures Designated as Office-Based
(1) Background
(2) Changes to Covered Surgical Procedures Designated as Office-
Based for CY 2011
c. ASC Covered Surgical Procedures Designated as Device-
Intensive
(1) Background
(2) Changes to List of Covered Surgical Procedures Designated as
Device-Intensive for CY 2011
d. ASC Treatment of Surgical Procedures Removed From the OPPS
Inpatient List for CY 2011
2. Covered Ancillary Services
D. ASC Payment for Covered Surgical Procedures and Covered
Ancillary Services
1. Payment for Covered Surgical Procedures
a. Background
b. Update to ASC Covered Surgical Procedure Payment Rates for CY
2011
c. Adjustment to ASC Payments for No Cost/Full Credit and
Partial Credit Devices
d. Waiver of Coinsurance and Deductible for Certain Preventive
Services
2. Payment for Covered Ancillary Services
a. Background
b. Payment for Covered Ancillary Services for CY 2011
E. New Technology Intraocular Lenses (NTIOLs)
1. Background
2. NTIOL Application Process for Payment Adjustment
3. Classes of NTIOLs Approved and New Requests for Payment
Adjustment
a. Background
b. Request To Establish New NTIOL Class for CY 2011
4. Payment Adjustment
5. ASC Payment for Insertion of IOLs
6. Announcement of Calendar Year 2011 Deadline for Submitting
Request for CMS Review of Appropriateness of ASC Payment for
Insertion of an NTOL Following Cataract Surgery
F. ASC Payment and Comment Indicators
1. Background
2. ASC Payment and Comment Indicators
G. ASC Policy and Payment Recommendations
H. Calculation of the ASC Conversion Factor and the ASC Payment
Rates
1. Background
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2011 and
Future Years
b. Updating the ASC Conversion Factor
3. Display of Calendar Year 2011 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 MIEA-TRHCA
3. ASC Quality Data Reporting Under Section 109(b) of MIEA-TRHCA
4. HOP QDRP Quality Measures for the CY 2009 Payment
Determination
5. HOP QDRP Quality Measures for the CY 2010 Payment
Determination
6. HOP QDRP Quality Measures, Technical Specification Updates,
and Data Publication for the CY 2011 Payment Determination
a. Quality Measures
b. Maintenance of Technical Specifications for Quality Measures
c. Publication of HOP QDRP Data
B. Expansion of HOP QDRP Quality Measures for the CY 2012, CY
2013, and CY 2014 Payment Determinations
1. Considerations in Expanding and Updating Quality Measures
Under the HOP QRDP
2. Retirement of HOP QDRP Quality Measures
3. HOP QDRP Quality Measures for the CY 2012 Payment
Determination
a. Retention of Existing HOP QDRP Measures for the CY 2012
Payment Determination
b. New Structural Measure for CY 2012 Payment Determination
c. New Claims-Based Measures for CY 2012 Payment Determination
d. New Chart-Abstracted Measures for CY 2012 Payment
Determination
4. HOP QDRP Quality Measures for the CY 2013 Payment
Determination
a. Retention of CY 2012 HOP QDRP Measures for the CY 2013
Payment Determination
b. New Structural Measure for the CY 2013 Payment Determination
c. New Chart-Abstracted Measures for the CY 2013 Payment
Determination
5. HOP QDRP Quality Measures for the CY 2014 Payment
Determination
a. Retention of CY 2013 HOP QDRP Measures for the CY 2014
Payment Determination
b. New Chart-Abstracted Measures for the CY 2014 Payment
Determination
6. Possible Quality Measures Under Consideration for Future
Inclusion in the HOP QDRP
C. Payment Reduction for Hospitals That Fail To Meet the HOP
QDRP Requirements for the CY 2011 Payment Update
1. Background
2. Reporting Ratio Application and Associated Adjustment Policy
for CY 2011
D. Requirements for HOPD Quality Data Reporting for CY 2012 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 for Chart-Abstracted Data:
Data Validation Approach for CY 2012 and Subsequent Years
a. Background
b. Data Validation Requirements for CY 2012
c. Additional Data Validation Conditions Under Consideration for
CY 2013 and Subsequent Years
E. HOP QDRP Reconsideration and Appeals Procedures
F. Reporting of ASC Quality Data
G. Electronic Health Records

[[Page 71805]]

XVII. Files Available to the Public via the Internet
A. Information in Addenda Related to the CY 2011 Hospital OPPS
B. Information in Addenda Related to the CY 2011 ASC Payment
System
XVIII. Collection of Information Requirements
A. Legislative Requirements for Solicitation of Comments
B. Associated Information Collections Not Specified in
Regulatory Text
1. Hospital Outpatient Quality Data Reporting Program (HOP QDRP)
2. HOP QDRP Quality Measures for the CY 2011 and CY 2012 Payment
Determinations
3. HOP QDRP Validation Requirements
4. HOP QDRP Reconsideration and Appeals Procedures
5. Additional Topics
XIX. Response to Comments
XX. Regulatory Impact Analysis
A. Overall Impact
1. Executive Order 12866
2. Regulatory Flexibility Act
3. Small Rural Hospitals
4. Unfunded Mandates
5. Federalism
B. Effects of OPPS Changes in This Final Rule With Comment
Period
1. Alternatives Considered
2. Limitations of Our Analysis
3. Estimated Effects of This Final Rule With Comment Period on
Hospitals
4. Estimated Effects of This Final Rule With Comment Period on
CMHCs
5. Estimated Effects of This Final Rule With Comment Period on
Beneficiaries
6. Conclusion
7. Accounting Statement
C. Effects of ASC Payment System Changes in This Final Rule With
Comment Period
1. Alternatives Considered
2. Limitations of Our Analysis
3. Estimated Effects of This Final Rule With Comment Period on
Payments to ASCs
4. Estimated Effects of This Final Rule With Comment Period on
Beneficiaries
5. Conclusion
6. Accounting Statement
D. Effects of Requirements for Reporting of Quality Data for
Annual Hospital Payment Update
E. Executive Order 12866
XXI. Final Rule: Changes Relating to Payments to Hospitals for
Direct Graduate Medical Education (GME) and Indirect Medical
Education (IME) Costs
A. Background
B. Counting Resident Time in Nonprovider Settings (Section 5504
of the Affordable Care Act)
1. Background and Changes Made by the Affordable Care Act
2. Elimination of the ``All or Substantially All of the Costs
for the Training Program in the Nonhospital Setting'' Requirement
and New Cost Requirements for Hospitals
3. Revision to Regulations To Allow More Than One Hospital To
Incur the Costs of Training Programs at Nonhospital Settings, Either
Directly or Through a Third Party
4. Changes to Regulations Regarding Recordkeeping and Comparison
to a Base Year
C. Counting Resident Time for Didactic and Scholarly Activities
and Other Activities (Section 5505 of the Affordable Care Act)
1. Background and Changes Made by the Affordable Care Act
2. Definition of ``Nonprovider Setting That is Primarily Engaged
in Furnishing Patient Care''
3. Distinguishing Between Allowed ``Nonpatient Care Activities''
and Nonallowable Research Time
4. Approved Leave of Absence
D. Reductions and Increases to Hospitals' FTE Resident Caps for
GME Payment Purposes
1. General Background on Methodology for Determining the FTE
Resident Count
2. Reduction of Hospitals' FTE Resident Caps Under the
Provisions of Section 5503 of the Affordable Care Act
3. Hospitals Subject to the FTE Resident Cap Reduction
4. Exemption From FTE Resident Cap Reduction for Certain Rural
Hospitals
5. Application of Section 5503 to Hospitals That Participate in
Demonstration Projects or Voluntary Reduction Programs and Certain
Other Hospitals
6. Determining the Estimated Number of FTE Resident Slots
Available for Redistribution
7. Reference Cost Reports That Are Under Appeal
8. Determining the Reduction to a Hospital's FTE Resident Cap
a. Reference Resident Level--General
b. Audits of the Reference Cost Reporting Period
c. Medicare GME Affiliation Agreements
d. Treatment of Hospitals That Have Merged
9. Application of Section 5503 to Hospitals That File Low
Utilization Medicare Cost Reports
10. Treatment of Hospitals With Caps That Have Been Reduced or
Increased Under Section 422 of Public Law 108-173
11. Criteria for Determining Hospitals That Will Receive
Increases in Their FTE Resident Caps
12. Application Process for the Increases in Hospitals' FTE
Resident Caps
13. CMS Evaluation of Applications for Increases in FTE Resident
Caps
14. CMS Evaluation of Application for Increases in FTE Resident
Caps--Evaluation Criteria
15. Exception If Positions Are Not Redistributed by July 1, 2011
16. Application of Direct GME PRAs for Primary Care and
Nonprimary Care Residents and Conforming Changes for the IME
Multiplier
17. Other Issues Related to a Request for Increase in the FTE
Caps Under Section 5503 of the Affordable Care Act
a. Rural Hospitals or Urban Nonteaching Hospitals
b. Closed Teaching Hospitals
c. Requirements for Hospitals That Receive Additional Slots
Under Section 5503
d. No Administrative or Judicial Review
E. Preservation of Resident Cap Positions From Closed Hospitals
(Section 5506 of the Affordable Care Act)
1. Background
2. Definition of a ``Closed Hospital''
3. Priority for Hospitals in Certain Areas
4. Application Process
5. Ranking Criteria
6. Demonstrated Likelihood of Filling the Positions Within a
Certain Time Period
7. No Duplication of FTE Cap Slots
8. Other Payment Issues Regarding Hospitals That Receive
Increase in FTE Caps Based on Slots From Closed Hospitals
9. Other Comments and Responses Regarding Section 5506
10. Application--No Reopening of Settled Cost Reports
11. No Administrative or Judicial Review Under Section 5506
F. Collection of Information Requirements
G. Regulatory Impact Analysis
XXII. Final Rule: Changes to Whole Hospital and Rural Provider
Exceptions to the Physician Self-Referral Prohibition and Related
Changes to Provider Agreement Regulations
A. Background
B. Changes Made by the Affordable Care Act Relating to the Whole
Hospital and Rural Provider Exceptions to Ownership and Investment
Prohibition
C. Changes to Physician Self-Referral Regulations
1. Physician Ownership and Provider Agreement
2. Limitation on Expansion of Facility Capacity
3. Preventing Conflicts of Interest
4. Ensuring Bona Fide Investment
5. Patient Safety
6. Conversion From Ambulatory Surgery Center (ASC)
7. Publication of Information Reported
8. Enforcement
D. Related Changes to Provider Agreement Regulations
E. Conditions of Participation for Hospitals
F. Collection of Information Requirements
G. Regulatory Impact Analysis
XXIII. Interim Final Rule With Comment Period: Certified Nurse
Anesthetists (CRNAs) Services Furnished in Rural Hospitals and
Critical Access Hospitals (CAHs)
A. Background
B. Revised Policy
C. Waiver of Notice of Proposed Rulemaking and Delay in the
Effective Date
D. Response to Comments
E. Collection of Information Requirements
F. Regulatory Impact Analysis
Regulation Text
Addenda
Addendum A--Final OPPS APCs for CY 2011
Addendum AA--Final ASC Covered Surgical Procedures for CY 2011
(Including Surgical Procedures for Which Payment Is Packaged)
Addendum B--Final OPPS Payment by HCPCS Code for CY 2011
Addendum BB--Final ASC Covered Ancillary Services Integral to
Covered

[[Page 71806]]

Surgical Procedures for CY 2011 (Including Ancillary Services for
Which Payment Is Packaged)
Addendum D1--Final OPPS Payment Status Indicators for CY 2011
Addendum DD1--Final ASC Payment Indicators for CY 2011
Addendum D2--Final OPPS Comment Indicators for CY 2011
Addendum DD2--Final ASC Comment Indicators for CY 2011
Addendum E--HCPCS Codes That Will Be Paid Only as Inpatient
Procedures for CY 2011
Addendum L--Final CY 2011 OPPS Out-Migration Adjustment
Addendum M--Final HCPCS Codes for Assignment to Composite APCs for
CY 2011

I. Background and Summary of the CY 2011 OPPS/ASC Proposed and Final
Rules

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

When Title XVIII of the Social Security Act (the Act) 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 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; the Medicare Improvements for Patients and Providers Act
(MIPPA) of 2008 (Pub. L. 110-275), enacted on July 15, 2008; and most
recently the Patient Protection and Affordable Care Act (Pub. L. 111-
148), enacted on March 23, 2010, as amended by the Health Care and
Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on
March 30, 2010. We refer readers to section I.D. of this final rule
with comment period for a summary of the provisions of Public Law 111-
148, as amended by Public Law 111-152, that we are implementing in this
final rule with comment period.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the 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 final rule with comment period.
Section 1833(t)(1)(B)(i) 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.
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, 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, 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. It
also excludes screening mammography, diagnostic mammography, and
effective January 1, 2011, an annual wellness visit providing
personalized prevention plan services. The Secretary exercised the
authority granted under the statute to also exclude from the OPPS those
services that are paid under fee schedules or other payment systems.
Such excluded services include, for example, the professional services
of physicians and nonphysician practitioners paid under the Medicare
Physician Fee Schedule (MPFS); laboratory services paid under the
Clinical Diagnostic Laboratory Fee Schedule (CLFS); services for
beneficiaries with end-stage renal disease (ESRD) that are paid under
the ESRD composite rate; and services and procedures that require an
inpatient stay that are paid under the hospital inpatient prospective
payment system

[[Page 71807]]

(IPPS). We set forth the services that are excluded from payment under
the OPPS in 42 CFR 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 (IHS) 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.gov/HospitalOutpatientPPS/. The CY 2010 OPPS/ASC final rule
with comment period appears in the November 20, 2009 Federal Register
(74 FR 60316). 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 2010 OPPS on the basis of claims data from January
1, 2008, through December 31, 2008, and to implement certain provisions
of Public Law 110-173 and Public Law 110-275. In addition, we responded
to public comments received on the provisions of the November 18, 2008
final rule with comment period (73 FR 68502) pertaining to the APC
assignment of HCPCS codes identified in Addendum B to that rule with
the new interim (``NI'') comment indicator, and public comments
received on the July 20, 2009 OPPS/ASC proposed rule for CY 2010 (74 FR
35232). On December 31, 2009, we issued in the Federal Register (74 FR
69502) a notice that corrected technical and typographic errors that
appeared in the CY 2010 OPPS/ASC final rule with comment period issued
on November 20, 2009. On August 3, 2010, we issued in the Federal
Register (75 FR 45700) a notice that contained further corrections of
technical errors in the CY 2010 OPPS/ASC final rule with comment period
issued in the Federal Register on November 20, 2009 (74 FR 60316), and
in the correction document for that final rule with comment period that
was issued in the Federal Register on December 31, 2009 (74 FR 69502).
On August 3, 2010, we issued in the Federal Register (75 FR 46169)
a proposed rule for the CY 2011 OPPS/ASC payment systems to implement
statutory requirements and changes arising from our continuing
experience with both systems and to implement certain provisions of the
Affordable Care Act.
On August 3, 2010, we issued a notice in the Federal Register (75
FR 45769) that contained the final wage indices, hospital
reclassifications, payment rates, impacts, and addenda for payments
made under the OPPS for CY 2010 and the final payment rates and addenda
for payments under the ASC payment system for CY 2010, that were
revised to address the provisions of the Affordable Care Act that
impacted both the CY 2010 OPPS and the ASC payment system.

D. Provisions of the Patient Protection and Affordable Care Act (Pub.
L. 111-148), as Amended by the Health Care and Education Reconciliation
Act of 2010 (Pub. L. 111-152)

On March 23, 2010, the Patient Protection and Affordable Care Act,
Public Law 111-148, was enacted. Following the enactment of Public Law
111-148, the Health Care and Education Reconciliation Act of 2010,
Public Law 111-152 (enacted on March 30, 2010), amended certain
provisions of Public Law 111-148. (These two public laws are
collectively known as the Affordable Care Act.) A number of the
provisions of the Affordable Care Act affect the OPPS and the ASC
payment system and the providers and suppliers addressed in this final
rule with comment period. Listed below are the provisions of the
Affordable Care Act that we proposed to implement in the CY 2011 OPPS/
ASC proposed rule and that we are finalizing in this final rule with
comment period. We note that, due to the timing of the passage of the
legislation, we were unable to address some of the provisions of the
Affordable Care Act that affected the IPPS and the LTCH PPS in the FY
2011 IPPS/LTCH PPS proposed rule published in the Federal Register on
May 4, 2010. Therefore, we also included some proposals to implement
certain provisions relating to the IPPS and LTCH PPS in the CY 2011
OPPS/ASC proposed rule and are finalizing them in this final rule. In
addition, we noted in the CY 2011 OPPS/ASC proposed rule that we had
issued or planned to issue separate documents in the Federal Register
addressing other provisions of the Affordable Care Act (75 FR 30756 and
75 FR 31118).
Section 1301 of the Affordable Care Act amended sections
1861(ff)(3))(A) and (B) of the Act to establish new additional
requirements for CMHCs applicable to items or services furnished to
Medicare beneficiaries on or after the first day of the first calendar
quarter that begins at least 12 months after the date of enactment of
Public Law 111-152 (that is, beginning April 1, 2011). The new
requirements specify that a CMHC provide at least 40 percent of its
services to individuals who are not eligible for Medicare benefits
under Title XVIII of the Act and that a partial hospitalization program
must be a distinct and organized intensive ambulatory treatment service
offering less than 24-hour daily care ``other than an individual's home
or in an inpatient or residential setting.'' This provision is
addressed in section X. of this final rule with comment period.
Section 3121(a) of the Affordable Care Act amended section
1833(t)(7)(D)(i) of the Act to extend hold harmless payment adjustments
(called transitional corridor payments or transitional outpatient
payments (TOPS)) to rural hospitals with 100 or fewer beds and that are
not sole community hospitals for covered OPD services furnished on or
after January 1, 2006 and before January 1, 2011. Section 3121(b)
amended section 1833(t)(7)(D)(i)(III) of the Act to provide that, for
SCHs, in the case of covered OPD services furnished on or after January
1, 2010, and before January 1, 2011, the hold harmless TOPS provisions
shall be applied without regard to the 100-bed limitation. These
provisions are addressed in section II.E. of this final rule with
comment period.
Section 3138 of the Affordable Care Act amended section
1833(t) of the Act to direct the Secretary to conduct a study to
determine if costs incurred by cancer hospitals (described in section
1886(d)(1)(B)(v) of the Act) for outpatient hospital services with
respect to APC groups exceed those costs incurred by other hospitals
furnishing these services. In so far as the Secretary determines that
such costs exceed those

[[Page 71808]]

costs incurred by other hospitals, the Secretary shall provide for an
appropriate adjustment under the authority of section 1833(t)(2)(E) to
reflect those higher costs effective for services furnished on or after
January 1, 2011. This provision is addressed in section II.F. of this
final rule with comment period.
Section 3401(i) of the Affordable Care Act amended section
1833(t)(3) of the Act by, among other things, adding new paragraphs
(C)(iv)(F) and (G) to reduce the OPD fee schedule increase factor by a
productivity adjustment and an additional adjustment for payments to
hospital OPDs beginning in various years from CY 2010 through CY 2019
as applicable. These hospital OPD provisions are addressed in section
II.B.1. of this final rule with comment period. Section 3401(k) of the
Affordable Care Act amended section 1833(i)(2)(D) of the Act by
redesignating clause (v) as clause (iv) and adding a new clause (v) to
provide for a similar productivity adjustment for payment for ASC
services. This ASC provision is addressed in section XV.H.2.b. of this
final rule with comment period.
Section 4103(a) of the Affordable Care Act amended section
1861(s)(2) of the Act by adding a new subsection (FF) to provide
Medicare coverage of ``personalized prevention plan services,''
beginning January 1, 2011. Section 4103(b) of the Affordable Care Act
amended section 1861 of the Act by adding a new subsection (hhh) to
define ``personalized prevention plan services'' (also cited as the
``annual wellness visit''). Section 4103(c) of the Affordable Care Act
excludes the annual wellness visit from payment under the OPPS and
provides for the elimination of beneficiary coinsurance requirements
for certain preventive services in outpatient hospital settings and for
waiver of application of the deductible for these services. These
provisions are addressed in section XII.B. of this final rule with
comment period.
Section 4104(a) of the Affordable Care Act amended section
1861(ddd) of the Act to define ``preventive services'' under Medicare
to include screening and preventive services described under subsection
(ww)(2) of the Act (other than services under subparagraph (M)); an
initial preventive physical examination as defined in subsection (ww)
of the Act; and personalized prevention plan services as defined in
subsection (hhh)(1) of the Act. Sections 4104(b) and 10406 of the
Affordable Care Act amended section 1833(a)(1) of the Act, as amended
by section 4103(c)(1) of the Affordable Care Act, to provide for the
elimination of coinsurance for preventive services, and section 4104(c)
amended section 1833(b) of the Act to provide for the waiver of the
application of the deductible for both preventive services and,
specifically, for colorectal cancer screening tests that become
diagnostic and any related services performed with that diagnostic
colorectal cancer screening test performed in the same clinical
encounter, effective for items and services furnished on or after
January 1, 2011. These provisions are addressed in section XII.B. of
this final rule with comment period.
Sections 5503, 5504, 5505, and 5506 of the Affordable Care
Act made a number of changes to various sections of the Act relating to
payment for direct GME and IME costs to hospitals.
(1) Section 5503 amended the Act to add a provision to redistribute
medical residency positions that have been unfilled during a prior cost
reporting period to other hospitals and to direct slots for training
primary care physicians, effective for portions of cost reporting
periods occurring on or after July 1, 2011.
(2) Section 5504 amended sections 1886(h)(4)(E) and
1886(d)(5)(B)(iv) of the Act to allow any time spent by residents
training in a nonprovider setting to count toward direct GME and IME
costs if the hospital incurs the costs of residents' salaries and
fringe benefits, effective for cost reporting periods beginning on or
after July 1, 2010, for direct GME, and for discharges occurring on or
after July 1, 2010, for IME.
(3) Section 5505 amended section 1886(h) and section 1886(d)(5)(B)
of the Act to add a provision to allow hospitals to count resident time
spent in certain non-patient care activities while training in certain
nonprovider settings for direct GME purposes, effective for cost
reporting periods beginning on or after July 1, 2009; to allow
hospitals to count resident time spent in certain non-patient care
activities while training in certain hospital settings for IME purposes
for cost reporting periods beginning on or after January 1, 1983; and
to prohibit the counting of time spent by residents in research not
associated with the treatment or diagnosis of a particular patient for
IME purposes effective October 1, 2001 (with certain limitations).
(4) Section 5506 amended section 1886(h)(4)(H) and section
1886(d)(5)(B)(iv) of the Act to add a provision to allow for the
redistribution to other hospitals in the same or contiguous areas of
FTE resident positions from a hospital that closes (on or after the
date that is 2 years before the date of enactment of Pub. L. 111-148).
These provisions are addressed in section XXI. of this document.
Section 6001 of the Affordable Care Act amended section
1877 of the Act to add provisions under new subsection (i) relating to
the prohibition against referrals to a hospital by a physician who has
an ownership or investment interest in the hospital. This provision is
addressed in section XXII. of this document.
Section 10324(b) of the Affordable Care Act amended
section 1833(t) of the Act by adding a new subsection (19) to provide
for a floor on the area wage adjustment factor for hospital outpatient
department services furnished on or after January 1, 2011, in a State
in which at least 50 percent of the counties in the State are frontier
counties, that is, a county in which the population per square mile is
less than 6. This provision is addressed in section II.C. of this
document.

E. Advisory Panel on Ambulatory Payment Classification (APC) Groups

1. Authority of the Advisory Panel on Ambulatory Payment Classification
(APC) Groups (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 APC Panel, discussed under section I.E.2. of
this final rule with comment period, 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

[[Page 71809]]

November 1, 2004; on November 21, 2006; and on November 2, 2008. (We
note that the charter is scheduled to be renewed on or before November
21, 2010.) 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 Official (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 18 meetings, with the last
meeting taking place on August 23-24, 2010. 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
Subcommittee for APC Groups and Status Indicator (SI) Assignments
(previously known as 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
Subcommittee for APC Groups and SI Assignments advises the Panel on the
following issues: The appropriate SIs to be assigned to HCPCS codes,
including but not limited to whether a HCPCS code or a category of
codes should be packaged or separately paid; and the appropriate APCs
to be assigned to HCPCS codes regarding services for which separate
payment is made.
Each of these subcommittees was established by a majority vote from
the full APC Panel during a scheduled APC Panel meeting, and the APC
Panel recommended that the subcommittees continue at the August 2010
APC Panel meeting. We accept those recommendations of the APC Panel.
All subcommittee recommendations are discussed and voted upon by the
full APC Panel.
Discussions of the other recommendations made by the APC Panel at
the February and August 2010 meetings are included in the sections of
this final rule with comment period 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.

F. Summary of the Major Contents of the CY 2011 OPS/ASC Proposed Rule

A proposed rule appeared in the August 3, 2010 Federal Register (75
FR 46170) that set forth proposed changes to the Medicare hospital OPPS
and the revised Medicare ASC payment system for CY 2011 to implement
statutory requirements and changes arising from our continuing
experience with the system and to implement certain provisions of
Public Law 111-148, as amended by Public Law 111-152 (collectively
known as the Affordable Care Act). We proposed quality measures for the
Hospital Outpatient Quality Data Reporting Program (HOP QDRP) for
reporting quality data for annual payment rate updates for CY 2012 and
subsequent calendar years, the proposed 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 2011 payment update, in accordance with
the statutory requirement. We also proposed changes to implement
provisions of the Affordable Care Act relating to payments to hospitals
for direct GME and IME costs and the rules relating to physician self-
referrals to hospitals in which they have an ownership or investment
interest. In addition, we set forth proposals affecting certain
payments under the Medicare IPPS. The following is a summary of the
major changes that we proposed to make:
1. Updates Affecting OPPS Payments
In section II. of the 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 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. This proposal addressed the
provisions of section 10324 of the Affordable Care Act relating to the
establishment of a floor for the area wage adjustment factor for OPD
services furnished in frontier States.
The proposed update of statewide average default CCRs.
The proposed application of hold harmless transitional
outpatient payments (TOPs) for certain small rural hospitals, extended
by section 3121 of the Affordable Care Act.
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. OPPS Ambulatory Payment Classification (APC) Group Policies
In section III. of the proposed rule, we discussed--
The proposed additions of new HCPCS codes to APCs.
The proposed establishment of 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.
The proposed changes to specific APCs.
The proposed movement of procedures from New Technology
APCs to clinical APCs.
3. OPPS Payment for Devices
In section IV. of the proposed rule, we discussed the proposed
pass-through payment for specific categories of

[[Page 71810]]

devices and the proposed adjustment for devices furnished at no cost or
with partial or full credit.
4. OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
In section V. of the proposed rule, we discussed the proposed CY
2011 OPPS payment for drugs, biologicals, and radiopharmaceuticals,
including the proposed payment for drugs, biologicals, and
radiopharmaceuticals with and without pass-through status.
5. Estimate of OPPS Transitional Pass-Through Spending for Drugs,
Biologicals, Radiopharmaceuticals, and Devices
In section VI. of the proposed rule, we discussed the estimate of
CY 2011 OPPS transitional pass-through spending for drugs, biologicals,
and devices.
6. OPPS Payment for Brachytherapy Sources
In section VII. of the proposed rule, we discussed our proposal for
payment for brachytherapy sources.
7. OPPS Payment for Drug Administration Services
In section VIII. of the proposed rule, we set forth our proposed
policy concerning coding and payment for drug administration services.
8. OPPS Payment for Hospital Outpatient Visits
In section IX. of the 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. Payment for Partial Hospitalization Services
In section X. of the proposed rule, we set forth our proposed
payment for partial hospitalization services, including the proposed
separate threshold for outlier payments for CMHCs. We also set forth
our proposals to implement the new requirements for CMHCs established
by section 1301 of the Affordable Care Act.
10. Procedures That Would Be Paid Only as Inpatient Procedures
In section XI. of the proposed rule, we discussed the procedures
that we proposed to remove from the inpatient list and assign to APCs
for payment under the OPPS.
11. OPPS Nonrecurring Technical and Policy Changes and Clarifications
In section XII. of the proposed rule, we discussed nonrecurring
technical issues and proposed policy changes relating to physician
supervision of OPD services in hospitals, including CAHs. We also
proposed to implement the provisions of sections 4103 and 4104 of the
Affordable Care Act relating to payment for preventive services,
including personalized prevention plan services, and the waiver of
beneficiary coinsurance and deductibles.
12. OPPS Payment Status and Comment Indicators
In section XIII. of the proposed rule, we discussed our proposed
changes to the definitions of status indicators assigned to APCs and
present our proposed comment indicators.
13. OPPS Policy and Payment Recommendations
In section XIV. of the proposed rule, we addressed recommendations
made by the Medicare Payment Advisory Commission (MedPAC) in its March
2010 report to Congress, by the Office of Inspector General (OIG), and
by the APC Panel regarding the OPPS for CY 2011.
14. Updates to the Ambulatory Surgical Center (ASC) Payment System
In section XV. of the proposed rule, we discussed the proposed
updates of the revised ASC payment system and payment rates for CY
2011.
15. Reporting Quality Data for Annual Payment Rate Updates
In section XVI. of the proposed rule, we discussed 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 discussed the reduction
in the OPPS payment for hospitals that fail to meet the HOP Quality
Data Reporting Program (QDRP) requirements for CY 2011.
16. Payments to Hospitals for Direct GME and IME Costs
In section XVII. of the proposed rule, we discussed our proposed
implementation of the provisions of section 5503, 5504, 5505, and 5506
of the Affordable Care Act relating to redistribution of FTE resident
slots of closed hospitals and policy changes for the counting of FTE
residents in determining payments to hospitals for direct GME and IME
costs.
17. Physician Self-Referrals to Hospitals
In section XVIII. of the proposed rule, we discussed our proposal
to implement the changes made by section 6001 of the Affordable Care
Act relating to the rules governing the prohibition on referrals to a
hospital by a physician who has an ownership or investment interest in
the hospital.
18. Regulatory Impact Analysis
In section XXII. of the proposed rule, we set forth an analysis of
the impact that the proposed changes would have on affected entities
and beneficiaries.

G. Public Comments Received in Response to the CY 2011 OPPS/ASC
Proposed Rule

We received approximately 774 timely pieces of correspondence
containing multiple comments on the CY 2011 OPPS/ASC proposed rule that
appeared in the Federal Register on August 3, 2010. We note that we
received some public comments that were outside the scope of the CY
2011 OPPS/ASC proposed rule. These public comments are not addressed in
this CY 2011 OPPS/ASC final rule with comment period. Summaries of the
public comments that are within the scope of the proposals and our
responses to those public comments are set forth in the various
sections of this final rule with comment period under the appropriate
headings.

H. Public Comments Received on the November 20, 2009 OPPS/ASC Final
Rule With Comment Period

We received approximately 18 timely pieces of correspondence on the
CY 2010 OPPS/ASC final rule with comment period that appeared in the
Federal Register on November 20, 2009 (74 FR 60316), some of which
contained multiple comments on the interim APC assignments and/or
status indicators of HCPCS codes identified with comment indicator
``NI'' in Addendum B to that final rule with comment period. Summaries
of those public comments on topics open to comment in the CY 2010 OPPS/
ASC final rule with comment period and our responses to them are set
forth in the various sections of this final rule with comment period
under the appropriate headings.

I. Interim Final Rule on Certified Registered Nurse Anesthetist (CRNA)
Services Furnished in Rural Hospitals and Critical Access Hospitals

Under section XXIII. of this document, we set forth an interim
final rule with comment period that changes the effective date for
otherwise eligible hospitals and CAHs that have been reclassified from
urban to rural status under section 1886(d)(8)(E) of the Act and 42 CFR
412.103 to receive reasonable cost payments for anesthesia services and
related care furnished by

[[Page 71811]]

nonphysician anesthetists, from cost reporting periods beginning on or
after October 1, 2010, to December 2, 2010.

II. Updates Affecting OPPS Payments

A. 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.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46179), we proposed to
use for CY 2011 the same basic methodology that we described in the
November 20, 2009 OPPS final rule with comment period to recalibrate
the APC relative payment weights for services furnished on or after
January 1, 2011, and before January 1, 2012 (CY 2011). That is, we
proposed to recalibrate the relative payment weights for each APC based
on claims and cost report data for hospital outpatient department
(HOPD) services. We proposed 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 2011, we used approximately 133 million final action
claims for hospital outpatient department services furnished on or
after January 1, 2009, and before January 1, 2010. For this final rule
with comment period, for the purpose of recalibrating the final APC
relative payment weights for CY 2011, we used approximately 145 million
final action claims for hospital outpatient department services
furnished on or after January 1, 2009, and before January 1, 2010,
based on more recent updated data. (For exact counts of claims used, we
refer readers to the claims accounting narrative under supporting
documentation for the proposed rule and this final rule with comment
period on the CMS Web site at: http://www.cms.gov/
HospitalOutpatientPPS/HORD/.)
Of the 145 million final action claims for services provided in
hospital outpatient settings used to calculate the CY 2011 OPPS payment
rates for this final rule with comment period, approximately 109
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 109 million claims,
approximately 4 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 105 million claims, we created
approximately 103 million single records, of which approximately 71
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 792,000 claims were trimmed out
on cost or units in excess of +/-3 standard deviations from the
geometric mean, yielding approximately 102 million single bills for
median setting. As described in section II.A.2. of this final rule with
comment period, our data development process is designed with the goal
of using appropriate cost information in setting the APC relative
weights. The bypass process is described in section II.A.1.b. of this
final rule with comment period. This section discusses how we develop
``pseudo'' single procedure claims (as defined below), 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 2011
ratesetting some portion of approximately 95 percent of the CY 2009
claims containing services payable under the OPPS.
The final APC relative weights and payments for CY 2011 in Addenda
A and B to this final rule with comment period were calculated using
claims from CY 2009 that were processed before July 1, 2010, 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 underpinning the APC relative payment
weights and the CY 2011 payment rates.
b. Use of Single and Multiple Procedure Claims
For CY 2011, in general, we proposed 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 unit of 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 were able to
use more data from multiple procedure claims. In many cases, this
enabled us to create multiple ``pseudo'' single procedure claims from
claims that were submitted as multiple procedure claims spanning
multiple dates of service, or 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
procedure claims. The history of our use of a bypass list to generate
``pseudo'' single procedure claims is well documented, most recently in
the CY 2010 OPPS/ASC final rule with comment period (74 FR 60324
through 60342). In addition, for CY 2008, we increased packaging and
created the first composite APCs. We have continued our packaging
policies and the creation of composite APCs for CY 2009 and 2010, and
we proposed to continue them for CY 2011. 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), which also
increased the number of bills we were able to use to calculate APC
median costs. We have continued the composite APCs for

[[Page 71812]]

multiple imaging services for CY 2010, and we proposed to continue to
create them for CY 2011. We refer readers to section II.A.2.e. of the
proposed rule and this final rule with comment period for discussion of
the use of claims to establish median costs for composite APCs.
We proposed to continue to apply these processes to enable us to
use as much claims data as possible for ratesetting for the CY 2011
OPPS. This methodology enabled us to create, for the proposed rule,
approximately 64 million ``pseudo'' single procedure claims, including
multiple imaging composite ``single session'' bills (we refer readers
to section II.A.2.e.(5) of the proposed rule for further discussion),
to add to the approximately 31 million ``natural'' single procedure
claims. For the proposed rule, ``pseudo'' single procedure and ``single
session'' procedure bills represented approximately 67 percent of all
single procedure bills used to calculate median costs.
For CY 2011, we proposed to bypass 448 HCPCS codes for CY 2011 that
were identified in Table 1 of the proposed rule. Since the inception of
the bypass list, which is the list of codes to be bypassed to convert
multiple procedure claims to ``pseudo'' single procedure claims, we
have calculated the percent of ``natural'' single bills that contained
packaging for each HCPCS code and the amount of packaging on each
``natural'' single bill for each code. Each year, we generally retain
the codes on the previous year's bypass list and use the update year's
data (for CY 2011, data available for the February 2010 APC Panel
meeting from CY 2009 claims processed through September 30, 2009, and
CY 2008 claims data processed through June 30, 2009, used to model the
payment rates for CY 2010) to determine whether it would be appropriate
to propose to add additional codes to the previous year's bypass list.
For CY 2011, we proposed to continue to bypass all of the HCPCS codes
on the CY 2010 OPPS bypass list. We updated HCPCS codes on the CY 2010
bypass list that were mapped to new HCPCS codes for CY 2011 ratesetting
by adding the new replacement codes and also removing the deleted
codes, which were listed in Table 2 of the proposed rule. None of these
deleted codes were ``overlap bypass codes'' (those HCPCS codes that are
both on the bypass list and are members of the multiple imaging
composite APCs). We also proposed to add to the bypass list for CY 2011
all HCPCS codes not on the CY 2010 bypass list that, using both CY 2010
final rule data (CY 2008 claims) and February 2010 APC Panel data
(first 9 months of CY 2009 claims), met the same previously established
empirical criteria for the bypass list that are summarized below. The
entire list proposed for CY 2011 (including the codes that remain on
the bypass list from prior years) was open to public comment. Because
we must make some assumptions about packaging in the multiple procedure
claims in order to assess a HCPCS code for addition to the bypass list,
we assumed that the representation of packaging on ``natural'' single
procedure claims for any given code is comparable to packaging for that
code in the multiple procedure claims. The proposed criteria for the
bypass list were:
There are 100 or more ``natural'' single procedure claims
for the code. This number of single procedure 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 procedure
claims for the code have packaged costs on that single procedure claim
for the code. This criterion results in limiting the amount of
packaging being redistributed to the separately payable procedures
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 procedure claims is equal to or less than $50. This criterion
also limits the amount of error in redistributed costs. Throughout the
bypass process, we do not know the dollar value of the packaged cost
that should be appropriately attributed to the other procedures on the
claim. Ensuring that redistributed costs associated with a bypass code
are small in amount and volume protects the validity of cost estimates
for low cost services billed with the bypassed service.
In response to comments to the CY 2010 OPPS/ASC proposed rule
requesting that the packaged cost threshold be updated, we noted that
we would consider whether it would be appropriate to update the $50
packaged cost threshold for inflation when examining potential bypass
list additions (74 FR 60328). For the CY 2011 OPPS, based on CY 2009
claims data, we proposed to apply the final market basket of 3.6
percent published in the CY 2009 OPPS/ASC final rule with comment
period (73 FR 26584) to the $50 packaged cost threshold used in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60325) that we
initially established in the CY 2005 OPPS final rule based on our
analysis of the data (69 FR 65731), rounded to the nearest $5
increment. This calculation led us to a proposed packaged cost
threshold for bypass list additions of $50 ($51.80 rounded to $50). We
stated that we believe that applying the market basket from the year of
claims data to the packaged cost threshold, rounded to the nearest $5
increment, would appropriately account for the effects of inflation
when considering additions to the bypass list because the market basket
increase percentage reflects the extent to which the price of inputs
for hospital services has increased compared to the price of inputs for
hospital services in the prior year. As discussed in the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60328), the real value of
this packaged cost threshold criterion has declined due to inflation,
making the packaged cost threshold more restrictive over time when
considering additions to the bypass list. Therefore, adjusting the
threshold by the market basket would prevent continuing decline in the
threshold's real value. The dollar threshold would not change for CY
2011 under this proposed policy, because when rounded to the nearest $5
increment after adjustment for the market basket increase, the
threshold would for CY 2011 remain at $50. Therefore, we did not
propose to add any additional bypass codes for CY 2011 as a result of
the proposed policy.
The code is not a code for an unlisted service.
In addition, we proposed 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 2011 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 packaging associated with specific
services. We also proposed to continue to include on the bypass list
certain HCPCS codes in order to purposefully direct the assignment of
packaged costs to a companion code where services always appear
together and where there would otherwise be few single procedure claims
available for ratesetting. For example, we have previously discussed
our reasoning for adding HCPCS code G0390 (Trauma response team
associated 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).

[[Page 71813]]

As a result of the multiple imaging composite APCs that we
established in CY 2009, the program logic for creating ``pseudo''
single procedure claims from bypassed codes that are also members of
multiple imaging composite APCs changed. When creating the set of
``pseudo'' single procedure claims, claims that contain ``overlap
bypass codes'' (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 procedure claims. (We refer readers to section
II.A.2.b. of the proposed rule and this final rule with comment period
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 were identified by asterisks (*) in Table 1 of
the proposed rule.
Table 1 published in the CY 2011 OPPS/ASC proposed rule includes
the proposed list of bypass codes for CY 2011. As noted in that
proposed rule (75 FR 46181), the list of bypass codes contained codes
that were reported on claims for services in CY 2009 and, therefore,
included codes that were in effect in 2009 and used for billing but
were deleted for CY 2010. We retained these deleted bypass codes on the
proposed CY 2011 bypass list because these codes existed in CY 2009 and
were covered OPD services in that period. Since these bypass codes were
deleted for billing in CY 2010, we did not need to retain them for the
CY 2010 bypass list. Keeping these deleted bypass codes on the bypass
list potentially allowed us to create more ``pseudo'' single procedure
claims for ratesetting purposes. ``Overlap bypass codes'' that were
members of the proposed multiple imaging composite APCs were identified
by asterisks (*) in the third column of Table 1 of the proposed rule.
HCPCS codes that we proposed to add for CY 2011 also were identified by
asterisks (*) in the fourth column of Table 1 of the proposed rule.
Table 2 of the proposed rule contained the list of codes that we
proposed to remove from the CY 2011 bypass list because they were
deleted from the HCPCS before CY 2009. None of these proposed deleted
codes were ``overlap bypass'' codes.
Comment: Several commenters expressed support for the ratesetting
methodology using single and ``pseudo'' single claims and recommended
that CMS continue to explore additional methodologies to increase the
number of multiple procedure claims used for ratesetting, including
expanding the empirical criteria for inclusion on the bypass list. One
commenter recommended that CMS examine the bypass list on an annual
basis to ensure that the Agency is utilizing as many claims as possible
for ratesetting. One commenter supported the proposal to maintain the
current radiation oncology procedure codes on the CY 2011 bypass list.
Response: We appreciate the commenters' support. We expect to
continue to use our established methodologies and to evaluate
additional refinements and improvements to our methodologies, with the
goal of achieving appropriate and accurate estimates of the costs of
services in the HOPD. We examine the bypass list on an annual basis to
ensure that we are using as much information as is available through
our claims data.
Comment: One commenter requested that CMS explore alternative
methodologies to capture more multiple procedure claims used for future
rate setting of composite APC 8001 (LDR Prostate Brachytherapy
Composite), noting that a number of multiple procedure claims were not
used to model the composite due to containing other payable radiation
therapy codes.
Response: As described above, one of the challenges in estimating
costs for individual items and services is in how to address the
allocation of packaged costs in multiple procedure claims. While we
continue to apply the empirical criteria and examine CMS medical
advisor and public commenter recommendations in determining additions
to the bypass list, we must ensure that the bypass process itself does
not improperly allocate packaged costs. We will continue to explore
methods through which we might obtain more information from our
existing set of claims data.
Comment: Several commenters recommended that CPT codes 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) and 93307 (Echocardiography, transthoracic, real-time
with image documentation (2D), includes M-mode recording, when
performed, complete, without spectral or color Doppler
echocardiography) be removed from the bypass list. The commenters
believed that adding those codes to the bypass list would not
appropriately capture costs associated with providing the services.
Moreover, they believed that these codes do not meet the criteria for
the bypass list. The commenters suggested that hospitals were
continuing to bill CPT 93307 in conjunction with CPT codes 93320
(Doppler echocardiography, pulsed wave and/or continuous wave with
spectral display (List separately in addition to codes for
echocardiographic imaging); complete) and 93325 (Doppler
echocardiography color flow velocity mapping (List separately in
addition to codes for echocardiography) rather than using new CY 2009
CPT code 93306 because they were still adjusting to billing with CPT
code 93306. They noted that because CPT code 93307 was a proposed
addition to the bypass list, the code would not include the packaged
costs of CPT codes 93320 and 93325. The commenters also noted that CPT
code 93307 did not appear to meet the empirical criteria in the
proposed rule claims data. They suggested that, if CMS did not remove
CPT code 93307 from the CY 2011 bypass list, claims with combinations
of CPT codes 93307, 93320, and 93325 be reconstructed as CPT code 93306
and that the simulated claims be used, together with the claims for CPT
code 99306, to set the median costs for CPT code 99306. A few
commenters suggested that assigning CPT code 93307 to the same APC as
CPT code 93306 was inappropriate because that reassignment was based on
the addition of both codes to the bypass list. The commenters also
identified APC 0269 (Level II Echocardiogram Without Contrast) as
having a 2 times rule violation because, they stated, the median cost
of the code with the highest median cost in the APC is more than twice
that of the code with the lowest median cost. The application of the 2
times rule is discussed in section III.B.2. of this final rule with
comment period. Thus, the commenters recommended that CMS review the
coding issues associated with the creation of those codes to ensure
that they are not unduly

[[Page 71814]]

influencing the respective APC payment rates.
Response: We note that, in the CY 2011 OPPS/ASC proposed rule (75
FR 46180), we described our process for identifying additions to the
bypass code list by determining codes that, ``using both CY 2010 final
rule data (CY 2008 claims) and February 2010 APC Panel data (first 9
months of CY 2009 claims), met the same previously established
empirical criteria for the bypass list.'' However, we wish to clarify
that proposed additions to the bypass list were identified by applying
the empirical criteria to both sets of data individually. Thus, a code
that met the empirical criteria in either of the two sets of claims
data would be eligible for addition to the proposed bypass list.
In proposing to add CPT code 93307 to the CY 2011 bypass list, we
had examined the single major claims using CY 2010 final rule data,
after performing the process described in the CY 2010 OPPS/ASC final
rule with comment period to simulate billing for CPT code 93306 (74 FR
60374 through 60376). That is, after we removed the claims that we used
to simulate the code configuration for CPT code 93306, we assessed only
the remaining claims for CPT code 93307 for the bypass list. When we
applied the bypass criteria to these residual final rule claims for CPT
code 93307, CPT code 93307 met the empirical criteria and we added it
to the proposed rule bypass list. However, when we assessed CPT code
93307 against the CY 2009 claims in the APC Panel data, it did not meet
the criteria and, similarly, it does not meet the criteria when
assessed against the proposed rule data. Therefore we are accepting the
comment, and for the CY 2011 OPPS final rule, we are removing CPT code
93307 from the CY 2011 bypass list. However, we are not creating
simulated claims for CPT code 93306 from the claims that report these
services using CPT codes 93307, 93320, and 93325 in place of reporting
CPT code 93306. We have approximately 765,000 single bills for CPT code
93306, and we see no reason to create simulated median costs for
services for which we have adequate cost data from correctly coded
claims. We note that, although miscoded claims for CPT code 93306 (that
is, CPT code 93307 plus CPT code 93320 plus CPT code 93325) appeared in
the data, only CPT code 93307 was paid on these claims because we
implemented NCCI edits on January 1, 2009, that stopped CPT codes 93320
and 93325 from being paid if reported with CPT code 93307. Hospitals
that reported the service using the three codes instead of reporting
CPT code 93306 received payments based on the CY 2009 national
unadjusted payment rate of $255.05 for CPT code 93307 rather than a
payment based on a national unadjusted payment rate of $431.37 that
they would have received if they had reported the correct code for the
service.
Regarding the issue of reassignment of CPT code 93307 from APC 0697
(Level I Echocardiogram Without Contrast) to APC 0269, after removing
CPT code 93306 from the bypass list, the calculated median cost for CPT
code 93306 based on final rule data was approximately $399. The
calculated median cost of approximately $399 for CPT code 93306
suggests that the costs of these two procedures are similar. CPT codes
93306 and 93307 would thus meet the APC recalibration standards of
clinical and resource homogeneity. Thus, we are finalizing our proposal
to assign CPT code 93307 to APC 0269.
As we discussed in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60436), in the determination of APCs that violate the 2
times rule, we apply the 2 times rule to HCPCS codes that are
determined to be significant, either based on having a frequency of
more than 1,000 single major claims or having both more than 99 single
major claims and contributing more than 2 percent of the claims used to
determine the APC median cost. Codes that do not meet these criteria as
``significant procedures'' are not used to determine if there is a 2
times rule violation in an APC. The 2 times rule is discussed in
section III.B. of this final rule with comment period.
Comment: One commenter requested that the proposed application of
market basket update to the median cost of packaging threshold for the
bypass criteria be applied retroactively beginning from CY 2005, when
the $50 median packaged cost threshold criterion was first applied.
Response: In the CY 2011 OPPS/ASC proposed rule, we proposed to
apply the final market basket update for CY 2009, since it is the most
appropriate representation of changes for hospital input prices for CY
2009 and, therefore, most applicable to CY 2009 claims data used to set
the CY 2011 OPPS payment rates, to the median packaged cost threshold
of $50 established in the CY 2010 OPPS/ASC final rule with comment
period (75 FR 46181). We believe that this would ensure that the
packaged cost threshold would accurately reflect changes in costs from
the prior year. However, we proposed that this market basket adjustment
to the packaged cost criterion would apply prospectively. The $50
threshold has historically been an appropriate measure for limiting the
impact of redistributing the packaged costs on the multiple procedure
claims. We established a criterion of a maximum median amount of
packaging of $50 as a means of ensuring that the typical packaging for
the service being placed on the bypass list is minimal in amount. With
respect to the comment that we apply a market basket update to the
median cost of the packaging threshold for the bypass criteria
retroactively to CY 2005, we note that, in general, we update our
payment rates on a prospective basis and, as explained above, we
believe that our proposed and final policy adequately and appropriately
accounts for the effects of inflation over time.
Therefore, for the CY 2011 OPPS, we are applying the final CY 2009
market basket update (which is 3.6 percent) to the $50 median packaged
cost criterion and rounding the result ($51.80) to the neared $5
increment. Thus, for this CY 2011 OPPS/ASC final rule with comment
period, the median cost of packaging criterion for the CY 2011 OPPS
bypass list remains at $50.
Comment: One commenter requested that CPT codes 77310 (Teletherapy,
isodose plan (whether hand or computer calculated); intermediate (3 or
more treatment ports directed to a single area of interest)) and 77789
(Surface application of radiation source) be added to the bypass list
because they believed that these codes meet the bypass criteria. The
commenter also suggested that there was a lack of transparency in how
the criteria were applied, and that when codes were not added that met
the empirical criteria the reasons for doing so should be explained.
Response: Both CPT codes 77310 and 77789 failed to meet the
empirical criterion for addition to the bypass list of having 100 or
more ``natural'' single procedure claims in both the APC Panel data and
the proposed rule data. Specifically, CPT code 77310 had 0 natural
single bills in the CY 2010 final rule data and 2 natural single bills
in the CY 2011 APC Panel data; CPT code 77789 had 30 natural single
bills in the CY 2010 final rule data and 13 natural single bills in the
CY 2011 APC Panel data. As described above, this criterion ensures that
we have an adequate base of claims billed for each code so that we can
bypass lines with the bypass code from the multiple procedure claims.
In addition to failing the number of ``natural'' single procedure
claims criterion, CPT code 77789 failed to meet the percentage of
single claims with packaged costs criterion (no more than

[[Page 71815]]

5 percent of ``natural'' single procedure claims can have any
packaging) because packaged cost appeared on 6.7 percent of the code's
``natural'' single major claims in the CY 2010 final rule data and 38.5
percent of the code's ``natural'' single major claims in the CY 2011
APC Panel data. We are not aware of any codes that met the empirical
criteria for addition to the bypass list that are not included on the
bypass list.
However, in the course of our review of the comment, we realized
that CPT code 77315 (Teletherapy; isodose plan (whether hand or
computer calculated); complex (mantle or inverted Y, tangential ports,
the use of wedges, compensators, complex blocking, rotational beam, or
special beam considerations)) meets the empirical criteria and is on
the bypass list and that two other CPT codes that are very similar were
not on any of the previous bypass code lists. There are three CPT codes
for teletherapy, isodose plan, for which CPT code 77315 reports the
complex level of service. CPT code 77310, which the commenters
requested be added to the bypass list, reports the intermediate level
of the service and CPT code 77305 (Teletherapy, isodose plan (whether
hand or computer calculated); simple (1 or 2 parallel opposed
unmodified ports directed to a single area of interest)) reports the
simple level of the service. However, neither CPT codes 77305 (simple)
nor CPT code 77310 (intermediate) were on any of the previous bypass
code lists, notwithstanding that CPT code 77315 meets the empirical
criteria and is on the bypass list. Agency clinicians believe that the
packaging for CPT codes 77305 and 77310 would be less than for CPT code
77315, because CPT code 77315 represents the most complex level of the
service. Moreover, while the ``natural'' single major claims for CPT
codes 77305 (9 claims) and 77310 (6 claims) did not meet the
``natural'' single major claims criteria of a minimum of 100 claims
each in the CY 2011 proposed rule data, they met all other criteria for
addition to the bypass list. After consultation with our CMS clinical
advisors, we believe that because of the nature of the services and the
fact that both codes meet all criteria for the bypass list other than
the minimum number of single bills, it is appropriate to add them to
the bypass list. We note that, in prior years, we have added low volume
services to the bypass list that are similar to requested additions,
such as CPT codes for hyperthermia added to the CY 2010 bypass list in
the CY 2010 OPPS/ASC final rule with comment period (74 FR 60329).
Thus, for this CY 2011 OPPS/ASC final rule with comment period, we are
adding CPT codes 77305 and 77310 to the bypass list.
However, CPT code 77789 failed to meet both the ``natural'' single
major claims criterion of 100 natural single procedure claims and
greatly exceeded the maximum percentage of single claims with packaging
criteria. Specifically, there were only 30 natural single procedure
claims and 38.5 percent of the ``natural'' single procedure claims for
CPT code 77789 had packaging and thus failed, by a significant amount,
the 5 percent maximum allowable percent of claims with packaging.
Therefore, we are not adding the code to the CY 2011 bypass list.
We believe that the empirical criteria described above are
transparent and clear, and explain the purpose of each criterion in
detail. Moreover we make available our claims data for the public's use
in assessing the bypass criteria or any other purpose. We believe the
extremely detailed comments we receive on our proposals, such as the
comments we received on CPT codes 93306 and 93307, demonstrate that the
information we make public is fully sufficient for purposes of
analyzing our proposed bypass list. In addition, we have a longstanding
practice of adding or removing codes to or from the bypass list through
analysis other than application of the empirical criteria. When we do
this, we explain our rationale for adding or removing those codes from
the bypass list, as we did with the addition of codes for additional
hours of drug administration (71 FR 68117 through 68118), which did not
meet the empirical criteria but which were added because otherwise we
would have had very few claims on which to base the median costs of
both initial and additional drug administration services.
We always appreciate the empirical information that commenters
submit regarding their suggested additions to the bypass list. However,
we note that, due to the redistributive properties of the bypass list
and our process for creating ``pseudo'' single procedure claims, we
carefully consider the redistributive impact of additions to the bypass
list on all HCPCS code and APC median costs. Future recommendations
from the public for additions to the bypass list should consider the
global changes to the bypass list in order to facilitate our evaluation
of codes suggested for inclusion on the bypass list in the future.
After consideration of the public comments we received, we are
adopting as final the proposed ``pseudo'' single claims process and the
final CY 2011 bypass list of 449 HCPCS codes, as displayed in Tables 1
and 2 below. The list has been modified from the CY 2011 proposed list,
with the removal of CPT code 93307 from the CY 2011 bypass list and the
addition of CPT codes 77305 and 77310, as discussed above in this
section.

Table 1--Final CY 2009 Bypass Codes for Creating ``Pseudo'' Single Procedure Claims for Calculating Median Costs
for CY 2011 OPPS
----------------------------------------------------------------------------------------------------------------
``Overlap
CY 2009 HCPCS code CY 2009 Short descriptor bypass codes'' Additions
----------------------------------------------------------------------------------------------------------------
11056......................................... Trim skin lesions, 2 to 4....... .............. ..............
11057......................................... Trim skin lesions, over 4....... .............. ..............
11300......................................... Shave skin lesion............... .............. ..............
11301......................................... Shave skin lesion............... .............. ..............
11719......................................... Trim nail(s).................... .............. ..............
11720......................................... Debride nail, 1-5............... .............. ..............
11721......................................... Debride nail, 6 or more......... .............. ..............
11954......................................... Therapy for contour defects..... .............. ..............
17000......................................... Destruct premalg lesion......... .............. ..............
17003......................................... Destruct premalg les, 2-14...... .............. ..............
23600......................................... Treat humerus fracture.......... .............. *
29220......................................... Strapping of low back........... .............. ..............
29530......................................... Strapping of knee............... .............. *
31231......................................... Nasal endoscopy, dx............. .............. ..............

[[Page 71816]]

31579......................................... Diagnostic laryngoscopy......... .............. ..............
51798......................................... Us urine capacity measure....... .............. ..............
53661......................................... Dilation of urethra............. .............. ..............
54240......................................... Penis study..................... .............. ..............
56820......................................... Exam of vulva w/scope........... .............. ..............
57150......................................... Treat vagina infection.......... .............. ..............
57452......................................... Exam of cervix w/scope.......... .............. *
57454......................................... Bx/curett of cervix w/scope..... .............. *
67820......................................... Revise eyelashes................ .............. ..............
69210......................................... Remove impacted ear wax......... .............. ..............
69220......................................... Clean out mastoid cavity........ .............. ..............
70030......................................... X-ray eye for foreign body...... .............. ..............
70100......................................... X-ray exam of jaw............... .............. ..............
70110......................................... X-ray exam of jaw............... .............. ..............
70120......................................... X-ray exam of mastoids.......... .............. ..............
70130......................................... X-ray exam of mastoids.......... .............. ..............
70140......................................... X-ray exam of facial bones...... .............. ..............
70150......................................... X-ray exam of facial bones...... .............. ..............
70160......................................... X-ray exam of nasal bones....... .............. ..............
70200......................................... X-ray exam of eye sockets....... .............. ..............
70210......................................... X-ray exam of sinuses........... .............. ..............
70220......................................... X-ray exam of sinuses........... .............. ..............
70240......................................... X-ray exam, pituitary saddle.... .............. *
70250......................................... X-ray exam of skull............. .............. ..............
70260......................................... X-ray exam of skull............. .............. ..............
70320......................................... Full mouth x-ray of teeth....... .............. *
70328......................................... X-ray exam of jaw joint......... .............. ..............
70330......................................... X-ray exam of jaw joints........ .............. ..............
70336......................................... Magnetic image, jaw joint....... * ..............
70355......................................... Panoramic x-ray of jaws......... .............. ..............
70360......................................... X-ray exam of neck.............. .............. ..............
70370......................................... Throat x-ray & fluoroscopy...... .............. ..............
70371......................................... Speech evaluation, complex...... .............. ..............
70450......................................... Ct head/brain w/o dye........... * ..............
70480......................................... Ct orbit/ear/fossa w/o dye...... * ..............
70486......................................... Ct maxillofacial w/o dye........ * ..............
70490......................................... Ct soft tissue neck w/o dye..... * ..............
70544......................................... Mr angiography head w/o dye..... * ..............
70547......................................... Mr angiography neck w/o dye..... * *
70551......................................... Mri brain w/o dye............... * ..............
71010......................................... Chest x-ray..................... .............. ..............
71015......................................... Chest x-ray..................... .............. ..............
71020......................................... Chest x-ray..................... .............. ..............
71021......................................... Chest x-ray..................... .............. ..............
71022......................................... Chest x-ray..................... .............. ..............
71023......................................... Chest x-ray and fluoroscopy..... .............. ..............
71030......................................... Chest x-ray..................... .............. ..............
71034......................................... Chest x-ray and fluoroscopy..... .............. ..............
71035......................................... Chest x-ray..................... .............. ..............
71100......................................... X-ray exam of ribs.............. .............. ..............
71101......................................... X-ray exam of ribs/chest........ .............. ..............
71110......................................... X-ray exam of ribs.............. .............. ..............
71111......................................... X-ray exam of ribs/chest........ .............. ..............
71120......................................... X-ray exam of breastbone........ .............. ..............
71130......................................... X-ray exam of breastbone........ .............. ..............
71250......................................... Ct thorax w/o dye............... * ..............
72010......................................... X-ray exam of spine............. .............. ..............
72020......................................... X-ray exam of spine............. .............. ..............
72040......................................... X-ray exam of neck spine........ .............. ..............
72050......................................... X-ray exam of neck spine........ .............. ..............
72052......................................... X-ray exam of neck spine........ .............. ..............
72069......................................... X-ray exam of trunk spine....... .............. ..............
72070......................................... X-ray exam of thoracic spine.... .............. ..............
72072......................................... X-ray exam of thoracic spine.... .............. ..............
72074......................................... X-ray exam of thoracic spine.... .............. ..............
72080......................................... X-ray exam of trunk spine....... .............. ..............
72090......................................... X-ray exam of trunk spine....... .............. ..............
72100......................................... X-ray exam of lower spine....... .............. ..............
72110......................................... X-ray exam of lower spine....... .............. ..............
72114......................................... X-ray exam of lower spine....... .............. ..............

[[Page 71817]]

72120......................................... X-ray exam of lower spine....... .............. ..............
72125......................................... Ct neck spine w/o dye........... * ..............
72128......................................... Ct chest spine w/o dye.......... * ..............
72131......................................... Ct lumbar spine w/o dye......... * ..............
72141......................................... Mri neck spine w/o dye.......... * ..............
72146......................................... Mri chest spine w/o dye......... * ..............
72148......................................... Mri lumbar spine w/o dye........ * ..............
72170......................................... X-ray exam of pelvis............ .............. ..............
72190......................................... X-ray exam of pelvis............ .............. ..............
72192......................................... Ct pelvis w/o dye............... * ..............
72202......................................... X-ray exam sacroiliac joints.... .............. ..............
72220......................................... X-ray exam of tailbone.......... .............. ..............
73000......................................... X-ray exam of collar bone....... .............. ..............
73010......................................... X-ray exam of shoulder blade.... .............. ..............
73020......................................... X-ray exam of shoulder.......... .............. ..............
73030......................................... X-ray exam of shoulder.......... .............. ..............
73050......................................... X-ray exam of shoulders......... .............. ..............
73060......................................... X-ray exam of humerus........... .............. ..............
73070......................................... X-ray exam of elbow............. .............. ..............
73080......................................... X-ray exam of elbow............. .............. ..............
73090......................................... X-ray exam of forearm........... .............. ..............
73100......................................... X-ray exam of wrist............. .............. ..............
73110......................................... X-ray exam of wrist............. .............. ..............
73120......................................... X-ray exam of hand.............. .............. ..............
73130......................................... X-ray exam of hand.............. .............. ..............
73140......................................... X-ray exam of finger(s)......... .............. ..............
73200......................................... Ct upper extremity w/o dye...... * ..............
73218......................................... Mri upper extremity w/o dye..... * ..............
73221......................................... Mri joint upr extrem w/o dye.... * ..............
73510......................................... X-ray exam of hip............... .............. ..............
73520......................................... X-ray exam of hips.............. .............. ..............
73540......................................... X-ray exam of pelvis & hips..... .............. ..............
73550......................................... X-ray exam of thigh............. .............. ..............
73560......................................... X-ray exam of knee, 1 or 2...... .............. ..............
73562......................................... X-ray exam of knee, 3........... .............. ..............
73564......................................... X-ray exam, knee, 4 or more..... .............. ..............
73565......................................... X-ray exam of knees............. .............. ..............
73590......................................... X-ray exam of lower leg......... .............. ..............
73600......................................... X-ray exam of ankle............. .............. ..............
73610......................................... X-ray exam of ankle............. .............. ..............
73620......................................... X-ray exam of foot.............. .............. ..............
73630......................................... X-ray exam of foot.............. .............. ..............
73650......................................... X-ray exam of heel.............. .............. ..............
73660......................................... X-ray exam of toe(s)............ .............. ..............
73700......................................... Ct lower extremity w/o dye...... * ..............
73718......................................... Mri lower extremity w/o dye..... * ..............
73721......................................... Mri jnt of lwr extre w/o dye.... * ..............
74000......................................... X-ray exam of abdomen........... .............. ..............
74010......................................... X-ray exam of abdomen........... .............. ..............
74020......................................... X-ray exam of abdomen........... .............. ..............
74022......................................... X-ray exam series, abdomen...... .............. ..............
74150......................................... Ct abdomen w/o dye.............. * ..............
74210......................................... Contrst x-ray exam of throat.... .............. ..............
74220......................................... Contrast x-ray, esophagus....... .............. ..............
74230......................................... Cine/vid x-ray, throat/esoph.... .............. ..............
74246......................................... Contrst x-ray uppr gi tract..... .............. ..............
74247......................................... Contrst x-ray uppr gi tract..... .............. ..............
74249......................................... Contrst x-ray uppr gi tract..... .............. ..............
76100......................................... X-ray exam of body section...... .............. ..............
76510......................................... Ophth us, b & quant a........... .............. ..............
76511......................................... Ophth us, quant a only.......... .............. ..............
76512......................................... Ophth us, b w/non-quant a....... .............. ..............
76513......................................... Echo exam of eye, water bath.... .............. ..............
76514......................................... Echo exam of eye, thickness..... .............. ..............
76516......................................... Echo exam of eye................ .............. ..............
76519......................................... Echo exam of eye................ .............. ..............
76536......................................... Us exam of head and neck........ .............. ..............
76645......................................... Us exam, breast(s).............. .............. ..............
76700......................................... Us exam, abdom, complete........ * ..............
76705......................................... Echo exam of abdomen............ * ..............

[[Page 71818]]

76770......................................... Us exam abdo back wall, comp.... * ..............
76775......................................... Us exam abdo back wall, lim..... * ..............
76776......................................... Us exam k transpl w/Doppler..... * ..............
76801......................................... Ob us < 14 wks, single fetus.... .............. ..............
76805......................................... Ob us >/= 14 wks, sngl fetus.... .............. ..............
76811......................................... Ob us, detailed, sngl fetus..... .............. ..............
76816......................................... Ob us, follow-up, per fetus..... .............. ..............
76817......................................... Transvaginal us, obstetric...... .............. ..............
76830......................................... Transvaginal us, non-ob......... .............. ..............
76856......................................... Us exam, pelvic, complete....... * ..............
76857......................................... Us exam, pelvic, limited........ * ..............
76870......................................... Us exam, scrotum................ * ..............
76880......................................... Us exam, extremity.............. .............. ..............
76970......................................... Ultrasound exam follow-up....... .............. ..............
76977......................................... Us bone density measure......... .............. ..............
77072......................................... X-rays for bone age............. .............. ..............
77073......................................... X-rays, bone length studies..... .............. ..............
77074......................................... X-rays, bone survey, limited.... .............. ..............
77075......................................... X-rays, bone survey complete.... .............. ..............
77076......................................... X-rays, bone survey, infant..... .............. ..............
77077......................................... Joint survey, single view....... .............. ..............
77078......................................... Ct bone density, axial.......... .............. ..............
77079......................................... Ct bone density, peripheral..... .............. ..............
77080......................................... Dxa bone density, axial......... .............. ..............
77081......................................... Dxa bone density/peripheral..... .............. ..............
77082......................................... Dxa bone density, vert fx....... .............. ..............
77083......................................... Radiographic absorptiometry..... .............. ..............
77084......................................... Magnetic image, bone marrow..... .............. ..............
77300......................................... Radiation therapy dose plan..... .............. ..............
77301......................................... Radiotherapy dose plan, imrt.... .............. ..............
77305......................................... Teletx isodose plan simple...... .............. ..............
77310......................................... Teletx isodose plan intermediate .............. ..............
77315......................................... Teletx isodose plan complex..... .............. ..............
77327......................................... Brachytx isodose calc interm.... .............. ..............
77331......................................... Special radiation dosimetry..... .............. ..............
77336......................................... Radiation physics consult....... .............. ..............
77370......................................... Radiation physics consult....... .............. ..............
77401......................................... Radiation treatment delivery.... .............. ..............
77600......................................... Hyperthermia treatment.......... .............. ..............
77605......................................... Hyperthermia treatment.......... .............. ..............
77610......................................... Hyperthermia treatment.......... .............. ..............
78350......................................... Bone mineral, single photon..... .............. *
80500......................................... Lab pathology consultation...... .............. ..............
80502......................................... Lab pathology consultation...... .............. ..............
85097......................................... Bone marrow interpretation...... .............. ..............
86510......................................... Histoplasmosis skin test........ .............. ..............
86850......................................... RBC antibody screen............. .............. ..............
86870......................................... RBC antibody identification..... .............. ..............
86880......................................... Coombs test, direct............. .............. ..............
86885......................................... Coombs test, indirect, qual..... .............. ..............
86886......................................... Coombs test, indirect, titer.... .............. ..............
86890......................................... Autologous blood process........ .............. ..............
86900......................................... Blood typing, ABO............... .............. ..............
86901......................................... Blood typing, Rh (D)............ .............. ..............
86903......................................... Blood typing, antigen screen.... .............. ..............
86904......................................... Blood typing, patient serum..... .............. ..............
86905......................................... Blood typing, RBC antigens...... .............. ..............
86906......................................... Blood typing, Rh phenotype...... .............. ..............
86930......................................... Frozen blood prep............... .............. ..............
86970......................................... RBC pretreatment................ .............. ..............
86977......................................... RBC pretreatment, serum......... .............. ..............
88104......................................... Cytopath fl nongyn, smears...... .............. ..............
88106......................................... Cytopath fl nongyn, filter...... .............. ..............
88107......................................... Cytopath fl nongyn, sm/fltr..... .............. ..............
88108......................................... Cytopath, concentrate tech...... .............. ..............
88112......................................... Cytopath, cell enhance tech..... .............. ..............
88160......................................... Cytopath smear, other source.... .............. ..............
88161......................................... Cytopath smear, other source.... .............. ..............
88162......................................... Cytopath smear, other source.... .............. ..............
88172......................................... Cytopathology eval of fna....... .............. ..............

[[Page 71819]]

88173......................................... Cytopath eval, fna, report...... .............. ..............
88182......................................... Cell marker study............... .............. ..............
88184......................................... Flowcytometry/tc, 1 marker...... .............. ..............
88185......................................... Flowcytometry/tc, add-on........ .............. ..............
88300......................................... Surgical path, gross............ .............. ..............
88302......................................... Tissue exam by pathologist...... .............. ..............
88304......................................... Tissue exam by pathologist...... .............. ..............
88305......................................... Tissue exam by pathologist...... .............. ..............
88307......................................... Tissue exam by pathologist...... .............. ..............
88311......................................... Decalcify tissue................ .............. ..............
88312......................................... Special stains group 1.......... .............. ..............
88313......................................... Special stains group 2.......... .............. ..............
88314......................................... Histochemical stain add-on...... .............. *
88321......................................... Microslide consultation......... .............. ..............
88323......................................... Microslide consultation......... .............. ..............
88325......................................... Comprehensive review of data.... .............. ..............
88331......................................... Path consult intraop, 1 bloc.... .............. ..............
88342......................................... Immunohistochemistry............ .............. ..............
88346......................................... Immunofluorescent study......... .............. ..............
88347......................................... Immunofluorescent study......... .............. ..............
88348......................................... Electron microscopy............. .............. ..............
88358......................................... Analysis, tumor................. .............. ..............
88360......................................... Tumor immunohistochem/manual.... .............. ..............
88361......................................... Tumor immunohistochem/comput.... .............. ..............
88365......................................... Insitu hybridization (fish)..... .............. ..............
88368......................................... Insitu hybridization, manual.... .............. ..............
89049......................................... Chct for mal hyperthermia....... .............. ..............
89230......................................... Collect sweat for test.......... .............. ..............
89240......................................... Pathology lab procedure......... .............. ..............
90472......................................... Immunization admin, each add.... .............. ..............
90474......................................... Immune admin oral/nasal addl.... .............. ..............
90801......................................... Psy dx interview................ .............. ..............
90802......................................... Intac psy dx interview.......... .............. ..............
90804......................................... Psytx, office, 20-30 min........ .............. ..............
90805......................................... Psytx, off, 20-30 min w/e&m..... .............. ..............
90806......................................... Psytx, off, 45-50 min........... .............. ..............
90807......................................... Psytx, off, 45-50 min w/e&m..... .............. ..............
90808......................................... Psytx, office, 75-80 min........ .............. ..............
90809......................................... Psytx, off, 75-80 min, w/e&m.... .............. ..............
90810......................................... Intac psytx, off, 20-30 min..... .............. ..............
90811......................................... Intac psytx, 20-30 min, w/e&m... .............. ..............
90812......................................... Intac psytx, off, 45-50 min..... .............. ..............
90816......................................... Psytx, hosp, 20-30 min.......... .............. ..............
90818......................................... Psytx, hosp, 45-50 min.......... .............. ..............
90826......................................... Intac psytx, hosp, 45-50 min.... .............. ..............
90845......................................... Psychoanalysis.................. .............. ..............
90846......................................... Family psytx w/o patient........ .............. ..............
90847......................................... Family psytx w/patient.......... .............. ..............
90853......................................... Group psychotherapy............. .............. ..............
90857......................................... Intac group psytx............... .............. ..............
90862......................................... Medication management........... .............. ..............
92002......................................... Eye exam, new patient........... .............. ..............
92004......................................... Eye exam, new patient........... .............. ..............
92012......................................... Eye exam established pat........ .............. ..............
92014......................................... Eye exam & treatment............ .............. ..............
92020......................................... Special eye evaluation.......... .............. ..............
92025......................................... Corneal topography.............. .............. ..............
92060......................................... Special eye evaluation.......... .............. *
92081......................................... Visual field examination(s)..... .............. ..............
92082......................................... Visual field examination(s)..... .............. ..............
92083......................................... Visual field examination(s)..... .............. ..............
92135......................................... Ophth dx imaging post seg....... .............. ..............
92136......................................... Ophthalmic biometry............. .............. ..............
92225......................................... Special eye exam, initial....... .............. ..............
92226......................................... Special eye exam, subsequent.... .............. ..............
92230......................................... Eye exam with photos............ .............. ..............
92240......................................... Icg angiography................. .............. ..............
92250......................................... Eye exam with photos............ .............. ..............
92275......................................... Electroretinography............. .............. ..............
92285......................................... Eye photography................. .............. ..............

[[Page 71820]]

92286......................................... Internal eye photography........ .............. ..............
92520......................................... Laryngeal function studies...... .............. ..............
92541......................................... Spontaneous nystagmus test...... .............. ..............
92542......................................... Positional nystagmus test....... .............. *
92546......................................... Sinusoidal rotational test...... .............. ..............
92548......................................... Posturography................... .............. ..............
92552......................................... Pure tone audiometry, air....... .............. ..............
92553......................................... Audiometry, air & bone.......... .............. ..............
92555......................................... Speech threshold audiometry..... .............. ..............
92556......................................... Speech audiometry, complete..... .............. ..............
92557......................................... Comprehensive hearing test...... .............. ..............
92567......................................... Tympanometry.................... .............. ..............
92582......................................... Conditioning play audiometry.... .............. ..............
92585......................................... Auditor evoke potent, compre.... .............. ..............
92603......................................... Cochlear implt f/up exam 7 >.... .............. ..............
92604......................................... Reprogram cochlear implt 7 >.... .............. ..............
92626......................................... Eval aud rehab status........... .............. ..............
93005......................................... Electrocardiogram, tracing...... .............. ..............
93017......................................... Cardiovascular stress test...... .............. ..............
93225......................................... ECG monitor/record, 24 hrs...... .............. ..............
93226......................................... ECG monitor/report, 24 hrs...... .............. ..............
93231......................................... Ecg monitor/record, 24 hrs...... .............. ..............
93232......................................... ECG monitor/report, 24 hrs...... .............. ..............
93236......................................... ECG monitor/report, 24 hrs...... .............. ..............
93270......................................... ECG recording................... .............. ..............
93271......................................... Ecg/monitoring and analysis..... .............. ..............
93278......................................... ECG/signal-averaged............. .............. ..............
93279......................................... Pm device progr eval, sngl...... .............. *
93280......................................... Pm device progr eval, dual...... .............. *
93281......................................... Pm device progr eval, multi..... .............. *
93282......................................... Icd device progr eval, 1 sngl... .............. *
93283......................................... Icd device progr eval, dual..... .............. *
93284......................................... Icd device progr eval, mult..... .............. *
93285......................................... Ilr device eval progr........... .............. *
93288......................................... Pm device eval in person........ .............. *
93289......................................... Icd device interrogate.......... .............. *
93290......................................... Icm device eval................. .............. *
93291......................................... Ilr device interrogate.......... .............. *
93292......................................... Wcd device interrogate.......... .............. *
93293......................................... Pm phone r-strip device eval.... .............. *
93296......................................... Pm/icd remote tech serv......... .............. *
93306......................................... Tte w/doppler, complete......... .............. *
93786......................................... Ambulatory BP recording......... .............. ..............
93788......................................... Ambulatory BP analysis.......... .............. ..............
93797......................................... Cardiac rehab................... .............. ..............
93798......................................... Cardiac rehab/monitor........... .............. ..............
93875......................................... Extracranial study.............. .............. ..............
93880......................................... Extracranial study.............. .............. ..............
93882......................................... Extracranial study.............. .............. ..............
93886......................................... Intracranial study.............. .............. ..............
93888......................................... Intracranial study.............. .............. ..............
93922......................................... Extremity study................. .............. ..............
93923......................................... Extremity study................. .............. ..............
93924......................................... Extremity study................. .............. ..............
93925......................................... Lower extremity study........... .............. ..............
93926......................................... Lower extremity study........... .............. ..............
93930......................................... Upper extremity study........... .............. ..............
93931......................................... Upper extremity study........... .............. ..............
93965......................................... Extremity study................. .............. ..............
93970......................................... Extremity study................. .............. ..............
93971......................................... Extremity study................. .............. ..............
93975......................................... Vascular study.................. .............. ..............
93976......................................... Vascular study.................. .............. ..............
93978......................................... Vascular study.................. .............. ..............
93979......................................... Vascular study.................. .............. ..............
93990......................................... Doppler flow testing............ .............. ..............
94015......................................... Patient recorded spirometry..... .............. ..............
94690......................................... Exhaled air analysis............ .............. ..............
95115......................................... Immunotherapy, one injection.... .............. ..............
95117......................................... Immunotherapy injections........ .............. ..............

[[Page 71821]]

95165......................................... Antigen therapy services........ .............. ..............
95250......................................... Glucose monitoring, cont........ .............. ..............
95805......................................... Multiple sleep latency test..... .............. ..............
95806......................................... Sleep study unatt & resp efft... .............. ..............
95807......................................... Sleep study, attended........... .............. ..............
95808......................................... Polysomnography, 1-3............ .............. ..............
95812......................................... Eeg, 41-60 minutes.............. .............. ..............
95813......................................... Eeg, over 1 hour................ .............. ..............
95816......................................... Eeg, awake and drowsy........... .............. ..............
95819......................................... Eeg, awake and asleep........... .............. ..............
95822......................................... Eeg, coma or sleep only......... .............. ..............
95869......................................... Muscle test, thor paraspinal.... .............. ..............
95872......................................... Muscle test, one fiber.......... .............. ..............
95900......................................... Motor nerve conduction test..... .............. ..............
95921......................................... Autonomic nerv function test.... .............. ..............
95925......................................... Somatosensory testing........... .............. ..............
95926......................................... Somatosensory testing........... .............. ..............
95930......................................... Visual evoked potential test.... .............. ..............
95950......................................... Ambulatory eeg monitoring....... .............. ..............
95953......................................... EEG monitoring/computer......... .............. ..............
95970......................................... Analyze neurostim, no prog...... .............. ..............
95972......................................... Analyze neurostim, complex...... .............. ..............
95974......................................... Cranial neurostim, complex...... .............. ..............
95978......................................... Analyze neurostim brain/1h...... .............. ..............
96000......................................... Motion analysis, video/3d....... .............. ..............
96101......................................... Psycho testing by psych/phys.... .............. ..............
96111......................................... Developmental test, extend...... .............. ..............
96116......................................... Neurobehavioral status exam..... .............. ..............
96118......................................... Neuropsych tst by psych/phys.... .............. ..............
96119......................................... Neuropsych testing by tec....... .............. ..............
96150......................................... Assess hlth/behave, init........ .............. ..............
96151......................................... Assess hlth/behave, subseq...... .............. ..............
96152......................................... Intervene hlth/behave, indiv.... .............. ..............
96153......................................... Intervene hlth/behave, group.... .............. ..............
96361......................................... Hydrate iv infusion, add-on..... .............. *
96366......................................... Ther/proph/diag iv inf addon.... .............. *
96367......................................... Tx/proph/dg addl seq iv inf..... .............. *
96370......................................... Sc ther infusion, addl hr....... .............. *
96371......................................... Sc ther infusion, reset pump.... .............. *
96375......................................... Tx/pro/dx inj new drug addon.... .............. *
96402......................................... Chemo hormon antineopl sq/im.... .............. ..............
96411......................................... Chemo, iv push, addl drug....... .............. ..............
96415......................................... Chemo, iv infusion, addl hr..... .............. ..............
96417......................................... Chemo iv infus each addl seq.... .............. ..............
96423......................................... Chemo ia infuse each addl hr.... .............. ..............
96900......................................... Ultraviolet light therapy....... .............. ..............
96910......................................... Photochemotherapy with UV-B..... .............. ..............
96912......................................... Photochemotherapy with UV-A..... .............. ..............
96913......................................... Photochemotherapy, UV-A or B.... .............. ..............
96920......................................... Laser tx, skin < 250 sq cm...... .............. ..............
98925......................................... Osteopathic manipulation........ .............. ..............
98926......................................... Osteopathic manipulation........ .............. ..............
98927......................................... Osteopathic manipulation........ .............. ..............
98940......................................... Chiropractic manipulation....... .............. ..............
98941......................................... Chiropractic manipulation....... .............. ..............
98942......................................... Chiropractic manipulation....... .............. ..............
99203......................................... Office/outpatient visit, new.... .............. *
99204......................................... Office/outpatient visit, new.... .............. ..............
99212......................................... Office/outpatient visit, est.... .............. ..............
99213......................................... Office/outpatient visit, est.... .............. ..............
99214......................................... Office/outpatient visit, est.... .............. ..............
99241......................................... Office consultation............. .............. ..............
99242......................................... Office consultation............. .............. ..............
99243......................................... Office consultation............. .............. ..............
99244......................................... Office consultation............. .............. ..............
99245......................................... Office consultation............. .............. ..............
99406......................................... Behav chng smoking 3-10 min..... .............. *
99407......................................... Behav chng smoking > 10 min..... .............. *
0144T......................................... CT heart wo dye; qual calc...... .............. ..............
G0008......................................... Admin influenza virus vac....... .............. ..............

[[Page 71822]]

G0101......................................... CA screen; pelvic/breast exam... .............. ..............
G0127......................................... Trim nail(s).................... .............. ..............
G0130......................................... Single energy x-ray study....... .............. ..............
G0166......................................... Extrnl counterpulse, per tx..... .............. ..............
G0175......................................... OPPS Service,sched team conf.... .............. ..............
G0248......................................... Demonstrate use home inr mon.... .............. *
G0249......................................... Provide INR test mater/equip.... .............. *
G0340......................................... Robt lin-radsurg fractx 2-5..... .............. ..............
G0365......................................... Vessel mapping hemo access...... .............. ..............
G0389......................................... Ultrasound exam AAA screen...... .............. ..............
G0390......................................... Trauma Respons w/hosp criti..... .............. ..............
G0402......................................... Initial preventive exam......... .............. *
G0404......................................... EKG tracing for initial prev.... .............. *
M0064......................................... Visit for drug monitoring....... .............. ..............
Q0091......................................... Obtaining screen pap smear...... .............. ..............
----------------------------------------------------------------------------------------------------------------

Table 2--HCPCS Codes Removed From the CY 2011 Bypass List Because They
Were Deleted Prior to CY 2009
------------------------------------------------------------------------
HCPCS Code HCPCS Short descriptor
------------------------------------------------------------------------
90761............................. Hydrate iv infusion, add-on.
90766............................. Ther/proph/dg iv inf, add-on.
90767............................. Tx/proph/dg addl seq iv inf.
90770............................. Sc ther infusion, addl hr.
90771............................. Sc ther infusion, reset pump.
90775............................. Tx/pro/dx inj new drug add-on.
93727............................. Analyze ilr system.
93731............................. Analyze pacemaker system.
93732............................. Analyze pacemaker system.
93733............................. Telephone analy, pacemaker.
93734............................. Analyze pacemaker system.
93735............................. Analyze pacemaker system.
93736............................. Telephonic analy, pacemaker.
93741............................. Analyze ht pace device sngl.
93742............................. Analyze ht pace device sngl
93743............................. Analyze ht pace device dual.
93744............................. Analyze ht pace device dual.
G0344............................. Initial preventive exam.
G0367............................. EKG tracing for initial prev.
G0376............................. Smoke/tobacco counseling >10.
------------------------------------------------------------------------

c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
In the CY 2011 OPPS/ASC proposed rule (75 FR 46195), we proposed to
continue for CY 2011 to use the hospital-specific overall ancillary and
departmental CCRs to convert charges to estimated costs through
application of a revenue code-to-cost center crosswalk. To calculate
the APC median costs on which the proposed CY 2011 APC payment rates
were based, we calculated hospital-specific overall ancillary CCRs and
hospital-specific departmental CCRs for each hospital for which we had
CY 2009 claims data from the most recent available hospital cost
reports, in most cases, cost reports beginning in CY 2008. For the CY
2011 OPPS proposed rates, we used the set of claims processed during CY
2009. We applied the hospital-specific CCR to the hospital's charges at
the most detailed level possible, based on a revenue code-to-cost
center crosswalk that contains a hierarchy of CCRs used to estimate
costs from charges for each revenue code. That crosswalk is available
for review and continuous comment on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.
To ensure the completeness of the revenue code-to-cost center
crosswalk, we reviewed changes to the list of revenue codes for CY 2009
(the year of the claims data we used to calculate the CY 2011 OPPS
proposed payment rates). For CY 2009, there were several changes to
these revenue codes. The National Uniform Billing Committee (NUBC) is
the organization that is responsible for the data specifications for
the Uniform Bill (currently the UB-04). For CY 2009, the NUBC changed
the title of revenue code series 076X from ``Specialty Room--Treatment/
Observation Room'' to ``Specialty Services'' and changed the title of
subclassification revenue code 0762 from ``Observation Room'' to
``Observation Hours.'' We did not propose to change the revenue code-
to-cost center crosswalk as a result of this change because we believe
that hospitals have historically reported charges for observation based
on hours of care and that this change reflects existing practices. In
addition, for CY 2009, NUBC removed a note that indicated that
subcategory revenue codes 0912, Behavioral Health Treatment/Services
(also see 091X, an extension of 090X), and 0913, Behavioral Health
Treatment/Services--Extension of 090X, were designed as zero-billed
revenue codes (that is, no dollar in the amount field). This change has
no impact on the revenue code-to-cost center crosswalk. We note that
the addition of revenue codes with effective dates in CY 2010 is not
relevant to this process because the revenue codes were not applicable
to claims for services furnished during CY 2009.
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). One
longstanding exception to this general methodology for calculation of
CCRs used 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 the proposed rule and this final rule with comment period and which
has been our standard policy since the CY 2005 OPPS.
For the CCR calculation process, we used the same general approach
that we used in developing the final APC rates for CY 2007 and
thereafter, using the revised CCR calculation that 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 2009 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

[[Page 71823]]

Report Information System (HCRIS). We used the most recent available
cost report data, in most cases, cost reports with cost reporting
periods beginning in CY 2007. For the 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 2011 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 then 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. of the proposed
rule for all purposes that require use of an overall ancillary CCR.
Since the implementation of the OPPS, some commenters have raised
concerns about potential bias in the OPPS cost-based weights due to
``charge compression,'' which is the practice of applying a lower
charge markup to higher-cost services and a higher charge markup to
lower-cost services. As a result, the cost-based weights may reflect
some 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.
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 cost-based relative weights, particularly with
regard to the impact on inpatient diagnosis-related group (DRG)
payments, and to consider methods to better capture the variation in
cost and charges for individual services when calculating costs for the
IPPS relative weights across services in the same cost center. RTI
issued a report in March 2007 with its findings on charge compression,
which is available on the CMS Web site at: http://www.cms.gov/reports/
downloads/Dalton.pdf. Although this report was focused largely on
charge compression in the context of the IPPS cost-based relative
weights, because several of the findings were relevant to the OPPS, we
discussed that report in the CY 2008 OPPS/ASC proposed rule (72 FR
42641 through 42643) and discussed those findings again in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66599 through 66602).
In August 2007, we contracted with RTI to evaluate the cost
estimation process for the OPPS relative weights because its 2007
report had concentrated on IPPS DRG cost-based relative weights. The
results of RTI's analyses had implications for both the OPPS APC cost-
based relative weights and the IPPS MS-DRG (Medicare severity) cost-
based 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).
We addressed the RTI finding that there was aggregation bias in
both the IPPS and the OPPS cost estimation of expensive and inexpensive
medical supplies in the FY 2009 IPPS final rule. Specifically, we
finalized our proposal for both the OPPS and IPPS to create one cost
center for ``Medical Supplies Charged to Patients'' and one cost center
for ``Implantable Devices Charged to Patients,'' essentially splitting
the then current CCR for ``Medical Supplies and Equipment'' into one
CCR for low-cost medical supplies and another CCR for high-cost
implantable devices in order to mitigate some of the effects of charge
compression. Accordingly, in Transmittal 20 of the Provider
Reimbursement Manual, Part II (PRM-II), Chapter 36, Form CMS-2552-96,
which was issued in July 2009, we created a new subscripted Line 55.01
on Worksheet A for the ``Implantable Devices Charged to Patients'' cost
center. This new subscripted cost center, placed under the standard
line for ``Medical Supplies Charged to Patients,'' is available for use
for cost reporting periods beginning on or after May 1, 2009. A
subscripted cost center is the addition of a separate new cost center
line and description which bears a logical relationship to the standard
cost center line and is located immediately following a standard cost
center line. Subscripting a cost center line adds flexibility and cost
center expansion capability to the cost report. For example, Line 55 of
Worksheet A on Form CMS 2552-96 (the Medicare hospital cost report) is
``Medical Supplies Charged to Patients.'' The additional cost center,
which isolates the costs of ``Implantable Medical Supplies Charged to
Patients'', was created by adding subscripted Line 55.01 to Worksheet
A.
Because there is approximately a 3-year lag in 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 for implantable devices
for the CY 2013 OPPS relative weights. For a complete discussion of the
rationale for the creation of the new cost center for ``Implantable
Devices Charged to Patients,'' public comments, and our responses, we
refer readers to the FY 2009 IPPS final rule (73 FR 48458 through
45467).
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. Specifically, these changes
included modifications to the cost reporting software and the addition
of three new nonstandard cost centers. With regard to modifying the
cost reporting preparation software in order to offer additional
descriptions for nonstandard cost centers to improve the accuracy of
reporting for nonstandard cost centers, we indicated that the change
would be made for the next release of the cost report software. These
changes have been made to the cost reporting software with the
implementation of CMS Transmittal 21, under Chapter 36 of the Provider
Reimbursement Manual--Part II, available online at http://www.cms.hhs.gov/Manuals/PBM/, which is effective for cost reporting
periods ending on or after October 1, 2009.
We also indicated that we intended to add new nonstandard cost
centers for Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and
Lithotripsy. We note that in January 2010, CMS issued Transmittal 21
which updated the PRM-II, Chapter 36, Form CMS-2552-96. One of the
updates in this transmittal established nonstandard cost centers for
Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and Lithotripsy for
use on Worksheet A. These three new nonstandard cost centers are now
available for cost reporting periods ending on or after October 1,
2009.
Furthermore, we noted in the FY 2010 IPPS/LTCH PPS final rule (74
FR 43781 through 43782) that we were updating the cost report form to
eliminate outdated requirements, in conjunction with the Paperwork
Reduction Act (PRA), and that we had proposed actual changes to the
cost reporting form, the attending cost reporting software, and the
cost report instructions in Chapters 36 and 40 of the PRM-II. The new
draft hospital cost report Form CMS-2552-10

[[Page 71824]]

was published in the Federal Register on July 2, 2009, and was subject
to a 60-day review and comment period, which ended on August 31, 2009.
We received numerous comments on the draft hospital cost report Form
CMS-2552-10, specifically regarding the creation of new cost centers
from which data might be used in the OPPS cost-based relative weights
calculation. We proposed to create new standard cost centers for
Computed Tomography (CT), Magnetic Resonance Imaging (MRI), and Cardiac
Catheterization in Form CMS-2552-10. We also stated that if these
standard cost centers are finalized, when the data become available, we
would analyze the cost and charge data to determine if it is
appropriate to use those data to create distinct CCRs from these cost
centers in setting the relative weights. For a discussion of these cost
centers, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75
FR 50075 through 50080). Comments will be addressed in detail in the
Federal Register notice that will finalize Form CMS-2552-10. The
revised draft of hospital cost report Form CMS-2552-10 went on public
display on April 23, 2010, and appeared in the Federal Register on
April 30, 2010 (75 FR 22810) with a 30-day public comment period. The
public comment period ended on June 1, 2010. We believe that improved
cost report software, the incorporation of new standard and nonstandard
cost centers, and the 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. We will continue our standard
practice of examining ways in which we can improve the accuracy of our
cost estimation processes.
Comment: One commenter noted that Medicare cost report data show
that there is still much confusion about how hospitals should report
the costs of large imaging equipment. Consequently, the commenter
recommended that CMS delay implementation of the new CT and MRI cost
center data until the cost reports reflect at least 90 percent of CT
and MRI capital costs, based on a comparison to industry average
equipment purchases. Some commenters requested that CMS delay
establishing the new standard cost centers for CT and MRI until the
causes of the associated payment distortions are understood and cost
reporting is improved to more properly allocate large capital costs.
The commenters requested more careful analysis of the impact of
creating the cost centers because of the payment impacts on other
Medicare payment systems. Several commenters encouraged CMS to continue
monitoring the reporting of CT and MRI capital costs over the next few
years. Some commenters recommended that CMS provide explicit,
unambiguous guidance to hospitals on how to improve allocation of the
large capital costs of imaging equipment directly to the new MRI or CT
cost centers. Several commenters supported the decision to establish a
standard cost center for cardiac catheterization but did not support
the creation of cost centers for CT and MRI. Other commenters asked
that CMS ensure that all hospitals are fully educated about the cost
center requirements, ensure that the cost centers are implemented in a
timely manner, and validate the accuracy of the data produced by the
new cost centers to ensure that they are correct and result in more
accurate ratesetting. They did not support use of the resulting cost
center data at the departmental level for ratesetting until after CMS
has produced information on the impact of the use of such data.
Response: We understand the commenters' statements regarding the
challenges and difficulties in appropriately reporting the cost and
charge data accurately for these standard cost centers. We responded to
these concerns in the FY 2011 IPPS/LTCH final rule, including the
treatment of CT and MRI equipment costs as ``major moveable equipment''
rather than as a ``building equipment cost,'' our goal of obtaining
more accurate data in creating these new standard cost centers, the
application of these standard cost centers only for those hospitals who
maintain distinct departments or accounts in their internal accounting
systems for CT scanning, MRI or cardiac catheterization, and other
concerns (75 FR 50076 through 50080). However, we note that hospitals
have been responsible for properly reporting the cost of the equipment
and facilities that are necessary to furnish services for the many
years since the inception of the Medicare program and that the creation
of cost centers for CT, MRI, and cardiac rehabilitation does not alter
the fundamental principles of cost reporting to which hospitals have
been and remain bound and for which they should follow the instructions
in the Medicare Provider Reimbursement Manual.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50080), we finalized
a policy of establishing standard cost centers for CT scanning, MRI
scans, and cardiac catheterization. This policy required hospitals that
furnish these services and maintain distinct departments or accounts in
their internal accounting systems for them to report the costs and
charges under the new cost centers on the revised Medicare cost report
Form CMS 2552-10 for cost report periods beginning on or after May 1,
2010. We established these standard cost centers because we believe
that we should collect cost and charge data for these areas, and use
those data to assess the resulting CCRs specific to CT scanning and MRI
services as a possible means of eliminating aggregation bias for these
and other radiology services in the IPPS and the OPPS. We believe that
establishing these standard cost centers is necessary to improving the
accuracy of estimating costs for imaging services and will allow us to
perform the impact assessment that some commenters want us to do.
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880) and the CY
2011 OPPS/ASC proposed rule (75 FR 46196), we noted that there is
typically a 3-year lag between the availability of the cost report data
that we use to calculate the relative weights both under the IPPS and
the OPPS and a given fiscal or calendar year, and therefore the data
from the standard cost centers for CT scans, MRI, and cardiac
catheterization respectively, should they be finalized, would not be
available for possible use in calculating the relative weights earlier
than 3 years after Form CMS-2552-10 becomes available. At that time, we
would analyze the data and determine if it is appropriate to use those
data to create distinct CCRs from these cost centers for use in the
relative weights for the respective payment systems. Therefore, we wish
to reassure the commenters that there is no need for immediate concern
regarding possible negative payment impacts on MRI and CT scans under
the IPPS and the OPPS. We will first thoroughly analyze and run impacts
on the data and provide the public with the opportunity to comment, as
usual, before distinct CCRs for MRI and CT scans would be finalized for
use in the calculation of the relative weights. Our decision to
finalize our proposal regarding cost centers for these services is only
the first step to a longer process during which we will continue to
consider public comment.
Comment: One commenter expressed concern over potential payment
changes for cryoablation probes as a result of the cost center creation
of ``Implantable Devices Charged to Patients'' and how hospitals bill
for them. The commenter stated that claims data show hospitals
typically billing for cryoablation probes using revenue code 0272
(Medical/

[[Page 71825]]

Surgical Supplies; Sterile Supplies) rather than revenue code 0278
(Medical/Surgical Supplies; Other Implants). The commenter requested
that interim payment measures regarding how the rates are calculated be
considered until the data demonstrates appropriate revenue assignment
of the devices into revenue code 0278, suggesting that, in the event
that payment for the probes decreases, hospitals may elect not to
provide the service.
Response: In the FY 2009 IPPS final rule (73 FR 48458 through
48467), we explained in detail the reasoning behind the development of
the cost center split for the ``Medical Supplies Charged to Patients''
cost center and our decision to ultimately have hospitals use the
American Hospital Association's National Uniform Billing Committee
(NUBC) revenue codes to determine what would be reported in the
``Medical Supplies Charged to Patients'' and the ``Implantable Devices
Charged to Patients'' cost centers. In that discussion, we noted that
while we require that the device broadly be considered implantable to
have its costs and charges included in the new ``Implantable Devices
Charged to Patients'' cost center, our final policy did not require the
device to remain in the patient at discharge (73 FR 48462 through
48463). In response to comments on our proposal to create the new cost
center in the FY 2009 IPPS final rule, we did define the new
``Implantable Devices Charged to Patients'' cost center by the revenue
codes that we believe would map to this cost center to facilitate ease
of reporting by hospitals. We note that revenue code definitions are
established by the NUBC, and we fully expect hospitals to follow
existing guidelines regarding revenue code use. As we stated in the CY
2010 OPPS/ASC final rule with comment period, with regard to reporting
cryoablation probes, we do not believe that the current NUBC definition
of revenue code 0278 (Medical/Surgical Supplies and Devices (also see
062x, an extension of 027x); Other implants (a)) precludes reporting
hospital charges for cryoablation probes under this revenue code (74 FR
60344). Therefore, we believe hospitals can report charges for
cryoablation probes under the revenue code 0278 using the definitions
in the official UB-04 Data Specifications Manual.
In the FY 2009 IPPS final rule, we noted that using existing
revenue codes and definitions as they have been currently established
by the NUBC made sense, as the definitions have been in place for some
time and are used across all payors (73 FR 48461). Further, we noted
that that methodology and the accuracy of the relative weights are
heavily dependent upon hospitals' reporting practices. Nothing
precludes a hospital that currently reports charges for cryoablation
probes under revenue code 0272 from changing the revenue code under
which it reports charges for cryoablation probes to revenue code 0278
or otherwise, if it determines that doing so would result in more
appropriate payment for the service.
While CMS is responsible for issuing cost reporting instructions
that are clear, hospitals are responsible for ensuring that their cost
reporting and billing practices are consistent and conform to Medicare
policy. We fully expect providers to follow existing guidelines
regarding revenue code use, and we see no basis on which to make
payment on a basis other than the standard OPPS methodology. Therefore,
we are not adopting an interim payment measure in the median cost
calculation of cryoablation probes.
Comment: One commenter requested that CMS acknowledge current
payment inaccuracies for Magnetoencephalography (MEG), also known as
Magnetic Source Imaging. The commenter asked CMS to create a cost
center on the Medicare cost report that would be used solely to capture
hospitals' costs of MEG and indicated that the NUBC had approved a
request for a dedicated revenue code for the reporting of charges for
MEG. The commenter argued that if CMS would create a cost center for
the costs of MEG from which a specific CCR could be developed for
application to MEG charges, the resulting median cost would be a more
accurate reflection of the cost of MEG and would, therefore, result in
more appropriate payment. The commenter suggested that, based on
previous experience where subscripted lines created for MEG identified
significantly different CCRs for the service, there was evidence that
the current methodology of calculating payment for MEG was flawed.
Response: We disagree that a new cost center is needed to capture
the costs of MEG. Over the past several years, we have either proposed
or discussed potential new standard and nonstandard cost centers for
the Medicare hospital cost report in our 2008, 2009, and 2010 hospital
inpatient and outpatient final rules. All of the potential cost centers
that we have discussed for addition to the cost report, whether
standard or nonstandard, have demonstrated volume in the electronic
hospital cost report data. In its July 2008 report on using cost report
data to estimate costs for both the IPPS and OPPS (http://www.rti.org/reports/cms/), RTI International examined the electronic hospital cost
report database and recommended new standard and nonstandard cost
centers on the basis of reporting volume across hospitals. RTI
International typically identified no fewer than 200 institutions
reporting a specific service category, such as cardiac catheterization
or cardiac rehabilitation, in subscripted or other lines for the new
nonstandard and standard cost centers. Historically, our rationale for
adding official nonstandard cost centers to the cost report has been at
the request of Medicare contractors experiencing a significant volume
of requests for a cost center for a specific type of service.
In contrast, the volume of MEG services is extremely low. In the
hospital outpatient CY 2010 OPPS claims data, hospitals reported 131
units of MEG spread among the three CPT codes for MEG among the three
CPT codes for MEG: 52 units of CPT code 95965 (Magnetoencephalography
(MEG), recording and analysis; for spontaneous brain magnetic activity
(e.g. epileptic cerebral cortex localization)); 39 units of CPT code
95966 (Magnetoencephalography (MEG), recording and analysis; for
spontaneous brain magnetic activity (e.g. epileptic cerebral cortex
localization) for evoked magnetic fields, single modality (e.g.
sensory, motor, language or visual cortex localization)); and 40 units
of CPT code 95967 (Magnetoencephalography (MEG), recording and
analysis; for spontaneous brain magnetic activity (e.g. epileptic
cerebral cortex localization), for evoked magnetic fields, each
additional modality (e.g. sensory, motor language, or visual cortex
localization (List separately in addition to code for primary
procedure))). This continues the pattern of low volumes of the total of
the 3 MEG codes that have been reported in the outpatient setting since
the creation of the codes in CY 2005 (39 in CY 2005, 75 in CY 2006, 102
units in CY 2007, 75 units in 2008, 131 units in 2009). Moreover in CY
2009, only 13 hospitals reported CPT code 95965, the highest volume of
the 3 MEG codes. We do not believe that it is necessary to create a
cost center for a service for which so few providers furnish so few
services in a year. We recognize that our claims data show only
Medicare hospital outpatient billings and that there are likely to be
more MEG services that are furnished to Medicare beneficiaries who are
in covered inpatient stays and to patients who are not Medicare
beneficiaries. However,

[[Page 71826]]

the extremely low volume of claims for MEG services furnished to
Medicare beneficiaries in the hospital outpatient setting and the
extremely low number of hospitals that report these codes relative to
the volumes we typically have considered in adding both standard and
nonstandard cost centers to the cost report lead us to conclude that a
specific cost center for MEG is not justified at this time.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to continue to
assign CPT code 95965 (which has a CPT level median of approximately
$2,521) to APC 0067, with a final CY 2010 APC median cost of
approximately $3,272, on which payment will be based, and to continue
to assign CPT codes 95966 (which has a CPT level median of
approximately $1,632) and 96967 (which has a CPT level median of
approximately $1,415) to APC 0065, with a final CY 2010 APC median cost
of approximately $967, on which the payment will be based.
2. Data Development Process and Calculation of Median Costs
In this section of this final rule with comment period, we discuss
the use of claims to calculate final OPPS payment rates for CY 2011.
The hospital OPPS page on the CMS Web site on which this final rule
with comment period is posted provides an accounting of claims used in
the development of the final payment rates at: http://www.cms.gov/
HospitalOutpatientPPS. The accounting of claims used in the development
of this final rule with comment period is included on the CMS Web site
under supplemental materials for this CY 2011 OPPS/ASC final rule with
comment period. That accounting provides additional detail regarding
the number of claims derived at each stage of the process. In addition,
below in this section we discuss the file of claims that comprises the
data set that is available for purchase under a CMS data use agreement.
Our CMS Web site, http://www.cms.gov/HospitalOutpatientPPS, includes
information about purchasing the ``OPPS Limited Data Set,'' which now
includes 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 2009 claims that
were used to calculate the final payment rates for the CY 2011 OPPS.
We used the methodology described in sections II.A.2.a. through
II.A.2.e. of this final rule with comment period to calculate the
median costs we use to establish the relative weights used in
calculating the final OPPS payment rates for CY 2011 shown in Addenda A
and B to this final rule with comment period. We refer readers to
section II.A.4. of this final rule with comment period for a discussion
of the conversion of APC median costs to scaled payment weights.
a. Claims Preparation
For this final rule with comment period, we used the CY 2009
hospital outpatient claims processed before July 1, 2010 to calculate
the median costs of APCs that underpin the final relative weights for
CY 2011. To begin the calculation of the relative weights for CY 2011,
we pulled all claims for outpatient services furnished in CY 2009 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 110 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).
To convert charges on the claims to estimated cost, we multiplied
the charges on each claim by the appropriate hospital specific CCR
associated with the revenue code for the charge as discussed in section
II.A.1.c. of this final rule with comment period. We then flagged and
excluded 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 0.0001); 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, which is 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 as the default CCR. 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.gov/HospitalOutpatientPPS. Revenue
codes that we do not use to set medians or to model impacts are
identified with an ``N'' in the revenue code-to-cost center crosswalk.
At the February 17-18, 2010 APC Panel Meeting, the Panel
recommended that CMS present to the Data Subcommittee an analysis of
the effect of using a different lower-level threshold in the overall
CCR error trim as part of the standard methodology. The Panel members
were concerned that our current CCR trimming policy (excluding
providers with an overall ancillary CCR greater than 90 or less than
0.0001 or above and then excluding remaining providers with overall
ancillary CCRs beyond +/-3 standard deviations from the geometric mean)
could result in the exclusion of

[[Page 71827]]

claims from providers that could otherwise be used for ratesetting and
modeling. As we indicated in the proposed rule (75 FR 46198), we
accepted this recommendation. At the August 23-24, 2010 APC Panel
meeting, we provided the Data Subcommittee with an analysis that
displayed the number of hospitals trimmed by our current process for
removing hospitals based on aberrant overall ancillary CCRs, as well as
our assessment of the impact if we were to use the error CCR thresholds
established by the IPPS of less than 0.01 and greater than 10.0 (75 FR
50136). Specifically, we found that, using our current trimming
methodology, we trimmed out data from 36 hospitals due to having error
CCRs, while we trimmed data from 61 hospitals because they have CCRs
that were outside 3 standard deviations from the geometric mean. When
we applied the IPPS tolerances, we found that we would trim out data
from 46 hospitals due to having error CCRs, while we would trim data
from 57 hospitals due to the outlier trim (beyond +/-3 standard
deviations from the geometric mean). The slight change between the
numbers occurs because changing the error CCR trim to match the IPPS
tolerances shifts hospitals from being trimmed based on the outlier
trim to being trimmed based on the error trim. The standard outlier
trim is more significant in removing data from hospitals with aberrant
CCRs because it ensures that our claims data are accurately reflective
of hospitals under the OPPS, independent of the actual numeric values
of the CCRs. Observing that the number of hospitals whose data were
removed based on the error CCR trim was limited, that a more
significant number of hospitals were trimmed by the standard trim of
three standard deviations beyond the geometric mean, and that the
impact of adopting the IPPS CCR tolerances had minimal impact on a
small subset of APCs, the Data Subcommittee recommended that CMS
continue to use the current error CCR thresholds of 0.0001 and 90.
We applied the 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 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.
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 and
nonimplantable biologicals, 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 policy adopted in this final rule with comment
period to redistribute some portion of total cost of packaged drugs and
biologicals to the separately payable drugs and biologicals as
acquisition and pharmacy overhead and handling costs discussed in
section V.B.3. of this final rule with comment period, 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
July 2010 ASP amount multiplied by total units for each drug or
biological in the CY 2009 claims data). These values are ASP+13 percent
(for all drugs and biologicals with HCPCS codes, whether separately
paid or packaged), ASP-1 percent (for drugs and biologicals that are
separately paid), and ASP+296 percent (for drugs and biologicals that
have HCPCS codes and that are packaged), respectively. As we discuss in
section V.B.3. of this final rule with comment period, as we proposed,
in this final rule with comment period, we are redistributing $150
million of the total cost in our claims data for packaged drugs and
biologicals that have an associated ASP from packaged drugs with an ASP
to separately payable drugs and biologicals. As we also proposed, in
this final rule with comment period, we are redistributing an
additional $50 million of the total cost in our claims data for drugs
and biologicals lacking an ASP, largely for estimated costs associated
with uncoded charges billed under pharmacy revenue code series 025X
(Pharmacy (also see 063X, an extension of 025X)), 026X (IV Therapy),
and 063X (Pharmacy--Extension of 025X). We observe approximately $652
million for packaged drugs lacking a HCPCs code and an ASP in our CY
2009 claims data. This total excludes the cost of diagnostic and
therapeutic radiopharmaceuticals because they are not reported under
pharmacy revenue codes or under the pharmacy cost center on the
hospital cost report.
Removing a total of $150 million in pharmacy overhead cost from
packaged drugs and biologicals reduces the $612 million cost of
packaged drugs and biologicals with HCPCS codes and ASPs to $462
million, approximately a 25-percent reduction. Removing $50 million
from the cost of drugs lacking an ASP reduces the $652 million to $602
million, approximately an 8-percent reduction. To implement our CY 2011
policy adopted in this final rule with comment period to redistribute
$150 million in claim cost from packaged drugs and biologicals with an
ASP to separately payable drugs and biologicals and $50 million in
claim cost from packaged drugs and biologicals lacking an ASP,
including uncoded pharmacy revenue code charges, we multiplied the cost
of each packaged drug or biological with a HCPCS code and ASP pricing
information in our CY 2009 claims data by 0.75, and we multiplied all
other packaged drug costs in our CY 2009 claims data, excluding those
for diagnostic radiopharmaceuticals, by 0.92. We also added the
redistributed $200 million to the total cost of separately payable
drugs and biologicals in our CY 2009 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 from
ASP-1 percent to ASP+5 percent. We refer readers to section V.B.3. of
this final rule with comment period for a complete discussion of our
policy to pay for separately paid drugs and biologicals and pharmacy
overhead for CY 2011.
We then removed line-items that were not paid during claim
processing, presumably for a line-item rejection or denial. We added
this process to our median cost calculation methodology for the CY 2010
OPPS, as discussed in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60359). 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

[[Page 71828]]

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 and a status indicator of
``S,'' ``T,'' ``V,'' or ``X'' when separately paid under the
prospective year's 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 that
were assigned status indicator ``C'' in the claim year. It also
preserves charges for packaged services so that the costs can be
included in the cost of the services with which they are reported, even
if the CPT codes for the packaged services were not paid because the
service is part of another service that was reported on the same claim
or the code otherwise violates claims processing edits.
For CY 2011, for this final rule with comment period, we are
expanding the application of this trim to exclude line-item data for
pass-through drugs and biologicals (status indicator ``G'' for CY 2009)
and nonpass-through drugs and biologicals (status indicator ``K'' for
CY 2009) where the charges reported on the claim for the line were
either denied or rejected during claims processing. Removing lines that
were eligible for payment but were not paid ensures that we are using
appropriate data. The trim avoids using cost data on lines that we
believe were defective or invalid because those rejected or denied
lines did not meet the Medicare requirements for payment. For example,
edits may reject a line for a separately paid drug because the number
of units billed exceeded the number of units that would be reasonable
and, therefore, is likely a billing error (for example, a line
reporting 55 units of a drug for which 5 units is known to be a fatal
dose). For approximately 90 percent of the codes with status indicators
``G'' and ``K'' in their claims year, to which the expansion of the
trim would apply, between 0 and 10 percent of lines would be removed
due to receiving zero payment. As with our trimming in the CY 2010
OPPS/ASC final rule with comment period (74 FR 60359) of line items
with a status indicator of ``S,'' ``T,'' ``V,'' or ``X'', we believe
that unpaid line-items represent services that are invalidly reported
and, therefore, should not be used for ratesetting. 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 mean unit costs for use in the ASP+X
calculation described in section V.B.3. of this final rule with comment
period.
Comment: One commenter requested that CMS conduct analysis of the
overall CCR error trim in 2010 and provide APC-specific impacts for all
radiation oncology services. The commenter also recommended that CMS
consider implementation of a lower-level threshold for the CCR error
trim in future rulemaking.
Response: As we noted above, the impact of moving the lower-level
error CCR threshold is minimal because of its interaction with the
standard trim of all hospitals whose overall ancillary CCR is three
standard deviations beyond the geometric mean. Established tolerances
of 0.0001 and 90 remove those hospitals whose CCRs are highly aberrant
relative to the others in the data set, in particular because they
apply at the hospital level and not at the departmental level. While
the commenter has requested that we conduct an analysis of the impact
of the overall CCR error trim on the APCs for radiation oncology, we
note that this standard error CCR trim is intended to remove all claims
(not limited to a particular category of care) from hospitals with
highly aberrant CCRs so that the relativity of the APC payment weights
is accurate. Therefore, the impact on selected APCs, such as radiation
oncology APCs, is not relevant to a determination of whether a
hospital's overall CCR is so extreme that all claims for the hospital
should be excluded from the data on which the OPPS relative weights are
based. We will continue to monitor whether our established error CCR
thresholds are appropriate. However, based on the recent study we
provided to the APC Panel Data Subcommittee, we agree with the Panel's
assessment that the current error CCR tolerances are appropriate.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure 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.) For CY 2011, we
proposed 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 2011,
we proposed 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 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 proposed to treat these codes in the
same manner for data purposes for CY 2011 as we have treated them since
CY 2008. Specifically, we proposed to continue to evaluate whether the
criteria for separate payment of codes with status indicator ``Q1'' or
``Q2'' are met in determining whether they are treated as major or
minor codes. Codes with status indicator ``Q1'' or ``Q2'' are carried
through the data either with status indicator ``N'' as packaged or, if
they meet the criteria for separate payment, they are given the status
indicator of the APC to which they are assigned and are considered as
``pseudo'' single procedure claims for 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 procedure major claims is discussed in section II.A.2.e. of
this final rule with comment period.
Specifically, we divided the remaining claims into the following
five groups:
1. Single Procedure 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.

[[Page 71829]]

2. Multiple Procedure 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 Procedure 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 Procedure 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 final rule with comment period. Claims that contain
codes to which we have assigned status indicator ``Q3'' (composite APC
members) appear in both the data of the single and multiple major files
used in this final rule with comment period, depending on the specific
composite calculation.
We did not receive any public comments on our proposed process of
organizing claims by type. Therefore, for the reasons set forth in the
proposed rule (75 CFR 46199), we are finalizing our CY 2011 proposal
without modification.
(2) Creation of ``Pseudo'' Single Procedure Claims
As proposed, to develop ``pseudo'' single procedure claims for this
final rule with comment period, we examined both the multiple procedure
major claims and the multiple procedure minor claims. We first examined
the multiple major procedure 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).
As proposed, for this final rule with comment period, we also used
the bypass codes listed earlier in Table 1 and discussed in section
II.A.1.b. of this final rule with comment period 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 procedure claims. The
CY 2011 ``overlap bypass codes'' are listed in Table 1 in section
II.A.1.b. of this final rule with comment period. 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 procedure 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 procedure claim from that residual claim record,
which retained the costs of packaged revenue codes and packaged HCPCS
codes. This enabled us to use claims that would otherwise be multiple
procedure claims and could not be used.
As proposed, for this final rule with comment period, 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 final
rule with comment period, 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 procedure claim. We also identified line-items of
overlap bypass codes as a ``pseudo'' single procedure claim. This
allowed us to use more claims data for ratesetting purposes.
As proposed, for this final rule with comment period, we also
examined the multiple procedure minor claims to determine whether we
could create ``pseudo'' single procedure claims. Specifically, where
the claim contained multiple codes with status indicator

[[Page 71830]]

``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
2010 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 2010
relative weight to create a ``pseudo'' single procedure claim for that
code: Additional units of the status indicator ``Q1'' HCPCS code with
the highest CY 2010 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, as we proposed, for this final rule with comment period,
where a multiple procedure 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 2010 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 2010 relative weight to create a
``pseudo'' single procedure claim for that code: Additional units of
the status indicator ``Q2'' HCPCS code with the highest CY 2010
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, as proposed, for this final rule with comment period, where
a multiple procedure 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 2010 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
procedure claim for that code: Additional units of the status indicator
``Q2'' HCPCS code with the highest CY 2010 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 2010 relative weights.
If a status indicator ``Q1'' HCPCS code had a higher CY 2010 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.
In public comments received on the CY 2010 OPPS/ASC proposed rule,
a public commenter suggested that CMS could use more claims data to
develop medians for these conditionally packaged codes if CMS applied
the ``pseudo'' single creation process to the conditionally packaged
codes in the multiple major claims that still contained unusable data.
We agreed with the commenter and in the CY 2011 proposed rule, we
proposed to use the otherwise unusable multiple procedure claims data
that remain after the standard pseudo single creation process is
applied to them, in order to create more pseudo single procedure
claims. We did not receive any public comments on this proposal, and
therefore, for the reasons set forth in the proposed rule (75 FR
46201), we followed this practice in creating pseudo single bills for
the proposed rule and this final rule with comment period. We do this
by treating the conditionally packaged codes that do not meet the
criteria for packaging as if they were separately payable major codes
and applying the pseudo single process to the claims data to create
single procedure claims from them if they meet the criteria for single
procedure claims. Conditionally packaged codes are identified using
status indicators ``Q1'' and ``Q2,'' and are described in section
XIII.A.1. of this final rule with comment period. Using the February
2010 APC Panel data, we estimated that the impact of adding this
proposed additional step to the pseudo single creation process would
result in a small increase in the number of claims usable for
ratesetting in most cases, but with more significant increases of
between 5 to 10 percent of claims for a few codes. For most of the
codes affected by adding this proposed additional step to the
``pseudo'' single creation process, we found no significant changes to
the APC medians. Some HCPCS codes do experience some fluctuations, with
the impact of additional claims causing their APC median to decrease.
We believe that this change is consistent with our goal of using more
available data from within the existing set of claims information and
results in a more accurate estimation of the APC median cost for
conditionally packaged services.
As proposed, for this final rule with comment period, we excluded
those claims that we were not able to convert to single procedure
claims even after applying all of the techniques for creation of
``pseudo'' single procedure claims to multiple procedure major claims
and to multiple procedure 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 hospitals billed the code with a unit
of one.
c. Completion of Claim Records and Median Cost Calculations
As proposed, for this final rule with comment period, we then
packaged the costs of packaged HCPCS codes (codes with status indicator
``N'' listed in Addendum B to this final rule with comment period and
the costs of those lines for codes with status indicator ``Q1'' or
``Q2'' when they are not separately paid), and the costs of the
services reported under packaged revenue codes in Table 3 that appeared
on the claim without a HCPCS code into the cost of the single major
procedure remaining on the 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 CMS should review the final list of packaged revenue codes for
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, we will continue to
compare the final list of packaged revenue codes that we adopt for CY
2011 to the revenue codes that

[[Page 71831]]

the I/OCE will package for CY 2011 to ensure consistency.
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 changing the proposed list of revenue codes. In the CY 2010
OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we
finalized changes to the packaged revenue code list based on our
examination of the updated NUBC codes and public comment to the CY 2010
proposed list of packaged revenue codes. As proposed, for this CY 2011
OPPS/ASC final rule with comment period, we reviewed the changes to
revenue codes that were effective during CY 2009 for purposes of
determining the charges reported with revenue codes but without HCPCS
codes that we would package for the CY 2011 OPPS. As we discuss in the
context of the revenue code-to-cost center crosswalk in section
II.A.1.c. of this final rule with comment period, for CY 2009, the NUBC
changed the title of revenue code series 076x from ``Specialty Room--
Treatment/Observation Room'' to ``Specialty Services'' and changed the
title of subclassification revenue code 0762 from ``Observation Room''
to ``Observation Hours.'' In addition, the NUBC deleted an explanatory
note following revenue code 0913, ``Behavioral Health Treatment
Services--Extension of 090x.'' As we proposed, for this final rule with
comment period, we are revising the title for revenue code 076x,
Observation Hours, in Table 3 to comport to the CY 2009 revenue code
title for revenue code 076x. There is no need to revise the table as a
result of the deletion of the explanatory note. We believe that the
charges reported under the revenue codes listed in Table 3 continue to
reflect ancillary and supportive services for which hospitals report
charges without HCPCS codes. Therefore, as we proposed, we are
continuing to package the costs that we derive from the charges
reported under the revenue codes displayed in Table 3 below for
purposes of calculating the median costs on which the CY 2011 OPPS are
based.
We did not receive any public comments on the proposed packaged
revenue codes for CY 2011. Therefore, for the reasons set forth in the
proposed rule (75 FR 46201) we are finalizing the proposed packaged
revenue codes for CY 2011, without modification, which are identified
in Table 3 below. We note that these revenue codes include only revenue
codes that were in effect for CY 2009, the year of the claims data on
which the CY 2011 OPPS payment rates are based.

Table 3--CY 2011 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.
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.
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.

[[Page 71832]]

0684.................. Trauma Response; Level IV Trauma.
0689.................. Trauma Response; Other.
0700.................. Cast Room; General Classification.
0710.................. Recovery Room; General Classification.
0720.................. Labor Room/Delivery; General Classification.
0721.................. Labor Room/Delivery; Labor.
0732.................. EKG/ECG (Electrocardiogram); Telemetry.
0762.................. Specialty services; Observation Hours.
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 accordance with our longstanding policy, we are continuing to
exclude: (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 less than $1.01 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. As we proposed, for this final rule with
comment period, we are continuing these processes for the CY 2011 OPPS.
As proposed, for this final rule with comment period, 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. The
claims accounting that we provide for the proposed and final rule
contains the formula we use to standardize the total cost for the
effects of the wage index. As has been our policy since the inception
of the OPPS, we proposed 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.
In accordance with our longstanding practice, as proposed, for this
final rule with comment period, we also excluded single and pseudo
single procedure claims for which the total cost on the claim was
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 105 million
claims were left. Using these 105 million claims, we created
approximately 103 million single and ``pseudo'' single procedure
claims, of which we used slightly more than 101 million single bills
(after trimming out approximately 792,000 claims as discussed above in
this section) in the final CY 2011 median development and ratesetting.
We used these claims to calculate the final CY 2011 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). We note that, for purposes of identifying significant HCPCS for
examination in the 2 times rule, we consider codes that have more than
1,000 single major claims or codes that have both more than 99 single
major claims and contribute at least 2 percent of the single major
claims used to establish the APC median cost to be significant.
Unlisted codes are not used in establishing the percent of claims
contributing to the APC, nor are their costs used in the calculation of
the APC median. Finally, we reviewed the median costs for the services
for which we are paying separately under this final rule with comment
period, and we reassigned HCPCS codes to different APCs where it was
necessary to ensure clinical and resource homogeneity within the APCs.
Section III of this final

[[Page 71833]]

rule with comment period includes a discussion of many of the HCPCS
code assignment changes that resulted from examination of the median
costs 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 procedure claims.
As we discuss in sections II.A.2 d. and II.A.2.e. and in section
X.B. of this final rule with comment period, in some cases, APC median
costs are calculated using variations of the process outlined above.
Specifically, section II.A.2.d. of this final rule with comment period
addresses the calculation of single APC criteria-based median costs.
Section II.A.2.e. of this final rule with comment period discusses the
calculation of composite APC criteria-based median costs. Section X.B.
of this final rule with comment period addresses the methodology for
calculating the median cost for partial hospitalization services.
We received several general comments on the payment rates CMS
proposed in the CY 2011 OPPS/ASC proposed rule:
Comment: Several commenters objected to the volatility of the OPPS
rates from year to year. The commenters asserted that the absence of
stability in the OPPS rates creates budgeting, planning, and operating
problems for hospitals. One commenter suggested that the median costs
from claims be adjusted to limit changes from year to year. Some
commenters asked that CMS limit any decreases in payment compared to
the prior year to no more than a 10-percent decline.
Response: There are a number of factors pertinent to the OPPS that
may cause median costs to change from one year to the next. Some of
these are a reflection of hospital behavior, and some of them are a
reflection of fundamental characteristics of the OPPS as defined in
statute. For example, the OPPS payment rates are based on hospital cost
report and claims data. However, hospital costs and charges change each
year and this results in both changes to the CCRs taken from the most
currently available cost reports and also differences in the charges on
the claims that are the basis of the calculation of the median costs on
which OPPS rates are based. Similarly, hospitals adjust their mix of
services from year to year by offering new services and ceasing to
furnish services and changing the proportion of the various services
they furnish, which have an impact on the CCRs that we derive from
their cost reports. CMS cannot stabilize these hospital-driven
fundamental inputs to the calculation of OPPS payment rates.
Moreover, there are other essential elements of the OPPS that
contribute to the changes in relative weights each year. These include,
but are not limited to, reassignments of HCPCS codes to APCs to rectify
2 times rule violations as required by the law, to address the costs of
new services, to address differences in hospitals' costs that may
result from changes in medical practice, and to respond to public
comments. Our efforts to improve payment accuracy may also contribute
to payment volatility in the short run, as may be the case when we may
eventually be able to use more specific CCRs to estimate the costs of
implantable devices, based on the final policy that we adopted to
disaggregate the single cost center for medical supplies into two more
specific cost centers, as described in the FY 2009 IPPS final rule (73
FR 48458 through 48467). Moreover, for some services, we cannot avoid
using small numbers of claims, either because the volume of services is
naturally low or because the claims data do not facilitate the
calculation of a median cost for a single service. Where there are
small numbers of claims that are used in median calculation, there is
more volatility in the median cost from one year to the next. Lastly,
changes to OPPS payment policy (for example, changes to packaging) also
contribute, to some extent, to the fluctuations in the OPPS payment
rates for the same services from year to year.
We cannot avoid the naturally occurring volatility in the cost
report and claims data that hospitals submit and on which the payment
rates are based. Moreover (with limited exceptions), we reassign HCPCS
codes to APCs where it is necessary to avoid 2 times rule violations.
However, we have made other changes to resolve some of the other
potential reasons for instability from year to year. Specifically, we
continue to seek ways to use more claims data so that we have fewer
APCs for which there are small numbers of single bills used to set the
APC median costs. Moreover, we have tried to eliminate APCs with very
small numbers of single bills where we could do so. We recognize that
changes to payment policies, such as the packaging of payment for
ancillary and supportive services and the implementation of composite
APCs, may contribute to volatility in payment rates in the short term,
but we believe that larger payment packages and bundles should help to
stabilize payments in the long term by enabling us to use more claims
data and by establishing payments for larger groups of services.
While we recognize the reasoning behind a request to limit
reductions in the weights or payment rates of the OPPS, this would not
be as simple or beneficial as commenters have implied. Implementing
such a policy would require the assumption that payment policy is
static from year to year. Based on the data used to develop the OPPS,
we know that this is not true. Further, in seeking to mitigate
fluctuations in the OPPS, implementing such a system would make
payments less reflective of the true service costs. Limiting decreases
to payments across all APCs in a budget neutral payment system could
unfairly reduce the payments for other services due to the effects of
the scaling that is necessary to maintain budget neutrality and would
distort the realtivity of payment that is based on the cost of all
services.
Comment: Several commenters noted that an analysis of the hospital
Medicare cost reports showed a disturbing trend of negative margins and
a wide gap between the outpatient margins of major teaching hospitals
and those of all other hospitals. The commenters recommended that CMS
study whether the hospital outpatient costs of teaching hospitals are
higher than the costs of other hospitals for purposes of determining
whether there should be a teaching hospital adjustment. The commenters
requested that CMS conduct its own analysis and that if that analysis
showed a difference due to the unique missions of teaching hospitals,
CMS should add a teaching adjustment to the OPPS.
Response: Unlike payment under the IPPS, section 1833(t) of the Act
does not require payment for indirect medical education costs to be
made under the OPPS. However, section 1833(t)(2)(E) of the Act provides
the Secretary with authority to make adjustments under the OPPS in
certain circumstances. Specifically, section 1833(t)(2)(E) of the Act
states that the Secretary shall establish, in a budget neutral manner
``* * * other adjustments as determined to be necessary to ensure
equitable payments, such as adjustments for certain classes of
hospitals.'' We have not found such an adjustment to be necessary to
ensure equitable payments to teaching hospitals and, therefore, have
not developed such an adjustment. Furthermore, in this final rule with
comment period, we have developed payment weights that we believe
provide appropriate and adequate payment for the complex medical
services, such as new technology

[[Page 71834]]

services and device-dependent procedures, which we understand are
furnished largely by teaching hospitals. We note that teaching
hospitals benefit from the recalibration of the APCs in this final rule
with comment period and that teaching hospitals benefit from being
generally located in areas with relatively high wage indices. With
respect to the comment that teaching hospitals experience negative
margins and a wide gap in payment between teaching hospitals and other
hospitals, we note it is not clear the extent to which a gap between
teaching hospitals and other hospitals may be attributable to OPPS or
to the costs of medical education for which the law provides payment
outside the OPPS. The final CY 2011 impacts by class of hospital are
displayed in Table 66 in section XX.B. of this final rule with comment
period.
APC Panel Recommendations Regarding Data Development
At the August 2010 APC Panel Meeting, we provided the APC Panel a
list of all APCs decreasing by more than 5 percent and increasing by
more than 15 percent when comparing the proposed CY 2011 median costs
based on data available for the August 2010 APC Panel meeting from CY
2009 claims processed through June 30, 2010, to those based on CY 2010
OPPS/ASC final rule data (CY 2008 claims). The APC Panel reviewed these
fluctuations in the APC median costs and recommended that CMS continue
to identify increases or decreases in APC median costs of 10 percent or
greater and that CMS develop and present explanatory information on
APCs with significant changes. The Panel believes that this would help
the Data Subcommittee to be able to identify APCs that fluctuate due to
coding and APC reassignment changes, and allow them to focus on those
that required more investigation. We accept this comment and will
furnish the Panel with these data. We note that, in some cases, we may
be unable to clearly identify causes for median cost changes, but we
will provide explanatory information to the extent possible.
At its August 23-24, 2010 meeting, the APC Panel made a number of
recommendations related to the data process. The Panel's
recommendations and our responses follow. In instances where we discuss
the issue on which the Panel made a recommendation elsewhere in this
preamble, we provide the cross-reference to the appropriate section of
this final rule with comment period.
Recommendation 1
The Panel recommends that CMS retain the current overall ancillary
cost-to-charge ratio (CCR) trim tolerances of 0.0001, 90, and +/- 3
standard deviations from the geometric mean for determining the
hospitals whose claims are to be included in ratesetting. The study
upon which the Panel based this recommendation is described in section
II.A.2.a. of this final rule with comment period.
We are accepting this recommendation.
Recommendation 2
The Panel recommends that CMS investigate and report at a future
Panel meeting on the reason for the decline in median cost for APC 0307
(Myocardial Positron Emission Tomography (PET) Imaging) from the
calendar year (CY) 2010 OPPS to the proposed CY 2011 OPPS.
This recommendation and APC specific-policies are discussed in
section III.D. of this final rule with comment period.
Recommendation 3
The Panel recommends that CMS identify increases or decreases in
APC median costs of 10 percent or greater and that CMS develop and
present explanatory information on APCs with significant changes.
We are accepting this recommendation, and we discuss APC median
cost fluctuations and the recommendation to identify these changes and
their potential causes in this section.
Recommendation 4
The Panel commends CMS for providing data analyses requested by the
Data Subcommittee.
We appreciate this recommendation.
Recommendation 5
The Panel recommends that Patrick Grusenmeyer, Sc.D., be named
chair of the Data Subcommittee.
We are accepting this recommendation.
Recommendation 6
The Panel recommends that the work of the Data Subcommittee
continue.
We are accepting this most recent recommendation, and 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. 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).
In the CY 2011 OPPS/ASC proposed rule (75 FR 46204 through 46205),
we proposed to continue for CY 2011 to use the standard methodology for
calculating median costs for device-dependent APCs that was finalized
in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60365).
This methodology utilizes claims data that generally represent the full
cost of the required device. Specifically, we proposed to calculate the
median costs for device-dependent APCs for CY 2011 using only the
subset of single procedure claims from CY 2009 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 was present for the first time on
claims that were used in OPPS ratesetting for CY 2010. The procedure-
to-device edits require that when a particular procedural HCPCS code is
billed, the claim must also contain an appropriate device code, while
the device-to-procedure edits require that a claim that contains one of
a specified set of device codes also contain an appropriate procedure
code. We stated in the proposed rule that we continue to believe the
standard methodology for calculating median costs for device-dependent
APCs gives us the most appropriate median costs for device-

[[Page 71835]]

dependent APCs in which the hospital incurs the full cost of the
device.
The median costs for the majority of device-dependent APCs that
were calculated using the CY 2011 proposed rule claims data were
generally stable, with most median costs increasing moderately compared
to the median costs upon which the CY 2010 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) demonstrated significant
fluctuation. Specifically, the proposed CY 2011 median cost for APC
0225 increased approximately 40 percent compared to its final CY 2010
median cost, while the proposed CY 2011 median cost for APC 0418, which
had increased approximately 53 percent from CY 2009 to CY 2010, showed
a decrease of approximately 27 percent based on the claims data
available for the proposed rule. We indicated in the CY 2011 OPPS/ASC
proposed rule that 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.
Comment: Several commenters supported CMS' proposal to continue
using the standard methodology for calculating median costs for device-
dependent APCs. Some commenters recommended that CMS continue examining
and refining the ratesetting methodology for procedures involving
devices in order to encourage the continued development and
proliferation of new technology. Some commenters also requested the
mandatory reporting of all HCPCS device C-codes on hospital claims for
services involving devices. The commenters urged CMS to continue
educating hospitals on the importance of accurate coding for devices,
supplies, and other technologies, and to continue to encourage
hospitals to remain vigilant in reporting the costs of performing
services involving devices, in order to help ensure that these items
are more appropriately reflected in future years' payment rates for
outpatient services.
Response: We appreciate the commenters' support of the continued
use of the standard device-dependent APC ratesetting methodology.
As we have stated in the past (73 FR 68535 through 68536 and 74 FR
60367), we agree that accurate reporting of device, supply, and
technology charges will help to ensure that these items are
appropriately accounted for in future years' OPPS payment rates. We
encourage stakeholders to carefully review HCPCS code descriptors, as
well as any guidance CMS may have provided for specific HCPCS codes. In
addition, we have provided further instructions on the billing of
medical and surgical supplies in the October 2008 OPPS update
(Transmittal 1599, Change Request 6196, dated September 19, 2008) and
the April 2009 OPPS update (Transmittal 1702, Change Request 6416,
dated March 13, 2009). For HCPCS codes that are paid under the OPPS,
providers may also submit inquiries to the AHA Central Office on HCPCS,
which serves as a clearinghouse on the proper use of Level I HCPCS
codes for hospitals and certain Level II HCPCS codes for hospitals,
physicians, and other health professionals. Inquiries must be submitted
using the approved form, which may be downloaded from the AHA Web site
(http://www.ahacentraloffice.org) and either faxed to 312-422-4583 or
mailed directly to the AHA Central Office: Central Office on HCPCS,
American Hospital Association, One North Franklin, Floor 29, Chicago,
IL 60606.
As we have stated in the past (74 FR 60367), we agree with the
commenters that we should continue to encourage the development and
proliferation of new technology under the OPPS. We have special
mechanisms to provide payment for new technologies and services under
the OPPS, including new technology APCs and transitional pass-through
payments devices. We refer readers to sections III.C. and IV.A.,
respectively, of this final rule with comment period for more
information on these payment methodologies. For all OPPS services, we
continue our efforts to use the data from as many claims as possible,
through approaches such as use of the bypass list and date splitting of
claims as described further in section II.A. of this final rule with
comment period, and through methodologies such as increased packaging
and composite APCs.
Comment: Several commenters supported the proposed CY 2011 payment
rate for the implantation of auditory osseointegrated devices,
described by CPT codes 69714 (Implantation, osseointegrated implant,
temporal bone, with percutaneous attachment to external speech
processor/cochlear stimulator; without mastoidectomy); 69715
(Implantation, osseointegrated implant, temporal bone, with
percutaneous attachment to external speech processor/cochlear
stimulator; with mastoidectomy); 69717 (Replacement (including removal
of existing device), osseointegrated implant, temporal bone, with
percutaneous attachment to external speech processor/cochlear
stimulator; without mastoidectomy); and 69718 (Replacement (including
removal of existing device), osseointegrated implant, temporal bone,
with percutaneous attachment to external speech processor/cochlear
stimulator; with mastoidectomy), which are assigned to APC 0425. Other
commenters also supported the proposed payment rate for APC 0259 (Level
VII ENT Procedures), which includes the insertion of a cochlear
implant.
Response: We appreciate the commenters' support of the proposed
payment rates for procedures involving auditory osseointegrated devices
and cochlear implants. We agree that the payment rates for APCs 0259
and 0425, calculated according to the standard device-dependent APC
ratesetting methodology for the proposed rule and this final rule with
comment period, appropriately reflect hospitals' relative costs for
providing these procedures as reported to us in the claims and cost
report data.
Comment: One commenter concurred with CMS' determination that APC
0385 (Level I Prosthetic Urological Procedures) and APC 0386 (Level II
Prosthetic Urological Procedures) continue to be recognized as device-
dependent APCs. The commenter supported CMS' continued application of
procedure-to-device edits for procedures assigned to these APCs to
ensure the reporting of the appropriate C-code for all device-dependent
APCs.
Response: We appreciate the commenter's support of the continued
recognition of APCs 0385 and 0386 as device-dependent APCs. We agree
that claims processing edits for devices that are integral to the
performance of procedures assigned to device-dependent APCs are an
important element of the standard device-dependent APC ratesetting
methodology.
Comment: Some commenters recommended that CMS create a new APC for
three CPT codes currently assigned to APC 0425 (Level II Arthroplasty
or Implantation with Prosthesis): CPT code 24363 (Arthroplasty, elbow;
with distal humerus and proximal ulnar prosthetic

[[Page 71836]]

replacement (e.g.., total elbow)); CPT code 25446 (Arthroplasty with
prosthetic replacement; distal radius and partial or entire carpus
(total wrist)); and CPT code 27446 (Arthroplasty, knee, condyle and
plateau; medial OR lateral compartment). One commenter suggested that
it would be acceptable also to include CPT code 23470 (Arthroplasty,
glenohumeral joint; hemiarthroplasty) in the new APC. According to the
commenters, CMS should create a new APC because the proposed payment
rate for APC 0425 would result in a significant underpayment for these
arthroplasty procedures. The commenters argued that the broad range in
the median costs of procedures assigned to APC 0425 violates the 2
times rule.
Response: We do not believe that it is necessary to create a new
APC for arthroplasty procedures. We do not agree with the assertion
that the current placement of CPT codes 24363, 25446, and 27446 in APC
0425 would result in significant underpayment for these services.
Payment based on a measure of central tendency is a principle of any
prospective payment system. As we have stated in the past (73 FR
68562), in some individual cases, payment exceeds the average cost, and
in other cases, payment is less than the average cost. However, on
balance, payment should approximate the relative cost of the average
case, recognizing that, as a prospective payment system, the OPPS is a
system of averages. As stated in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66639) and the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68546), a fundamental characteristic of a
prospective payment system is that payment is to be set at an average
for the service which, by definition, means that some services are paid
more or less than the average.
We also do not agree with the commenters' claim that the current
configuration of APC 0425 violates the 2 times rule, which indicates
that an APC group cannot be considered comparable with respect to the
use of resources if the highest median cost (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 (or mean cost, if so elected) for
an item or service within the same group. As we describe in section
III.B.2. of the proposed rule and this final rule with comment period,
we make exceptions to the 2 times rule in unusual cases, such as low-
volume items and services, and we only consider significant procedures
for purposes of the 2 times assessment. We define significant
procedures as those with a single claim frequency of greater than 1,000
or those with a frequency of greater than 99 and that constitute at
least 2 percent of single claims in the APC. There are three
significant procedures in APC 0425, CPT codes 27446, 23470, and 69714.
The CY 2009 hospital outpatient claims used for CY 2011 ratesetting
show that the median cost of the lowest cost significant service in the
APC, described by CPT code 69714, is approximately $8,212, compared to
approximately $9,557 for the highest cost significant service. Based on
our claims data, there is no 2 times violation in APC 0425.
Comment: Several commenters have noted that, as discussed earlier
in this section, APC 0418 (Insertion of Left Ventricular Pacing
Electrode) has demonstrated a significant fluctuation in median costs.
The commenters agreed that a significant contributing factor to this
fluctuation is a low volume of single bills available for use in
ratesetting. The commenters suggested that CMS develop composite APCs
for cardiac resynchronization services in order to enable CMS to use
more claims data in median cost calculations and to create more
appropriate payment rates.
Response: For all OPPS services, we continue our efforts to use the
data from as many multiple procedure claims as possible, through
approaches such as use of the bypass list and date splitting of claims
as described further in section II.A. of this final rule with comment
period, and through methodologies such as increased packaging and
composite APCs. We refer readers to section II.A.2.e. of this final
rule with comment period for a detailed summary of the public comments
related to the establishment of a composite payment methodology for
procedures involving cardiac resynchronization therapy services and our
responses.
After consideration of the public comments we received, we are
finalizing our proposed CY 2011 payment policies for device-dependent
APCs without modification. The CY 2011 OPPS payment rates for device-
dependent APCs are based on their median costs calculated from CY 2009
claims and the most recent cost report data, using only single
procedure claims that pass the procedure-to-device and device-to-
procedure edits, do not contain token charges for devices, do not have
an ``FB'' modifier signifying that the device was furnished without
cost or with full credit, and do not contain an ``FC'' modifier
signifying that the hospital received partial credit for the device. We
continue to believe that the median costs calculated from the single
claims that meet these criteria represent the most valid estimated
relative costs of these services to hospitals when they incur the full
cost of the devices required to perform the procedures.
Table 4 below lists the APCs for which we used our standard device-
dependent APC ratesetting methodology for CY 2011. We note that we are
adding two new device-dependent APCs for CY 2011 to Table 4 APC 0318
(Implantation of Cranial Neurostimulator Pulse Generator and Electrode)
and APC 0319 (Endovascular Revascularization of the Lower Extremity).
As discussed in sections II.A.2.d.7. and II.A.2.d.9. of this final rule
with comment period, we are creating these new device-dependent APCs in
order to accommodate revisions to coding in CY 2011 for services that
were previously assigned to other device-dependent APCs. We also are
deleting APC 0225 from Table 4 below because it is replaced with APC
0318 for CY 2011. We refer readers to Addendum A to this final rule
with comment period for the final payment rates for these APCs.

Table 4--CY 2011 Device-Dependent APCs
------------------------------------------------------------------------
CY 2011 Status
CY 2011 APC indicator CY 2011 APC 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.

[[Page 71837]]

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.
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.
0318........................... S Implantation of
Cranial
Neurostimulator Pulse
Generator and
Electrode.
0319........................... T Endovascular
Revascularization of
the Lower Extremity.
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 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.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46206), we proposed
for CY 2011 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 public 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 proposed 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 2011 payment rates for blood and blood products were 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 indicated in the CY 2011 OPPS/ASC proposed rule (75 FR 46206)
that we continue to believe 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 hospital, we believe
that it yields more accurate estimated costs for these products. We
indicated that we believe that continuing with this methodology in CY
2011 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
blood products in general.
We requested public comments in the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60373) that addressed whether plasma protein
fraction (PPF) products should be recognized as blood and blood
products,

[[Page 71838]]

designated with status indicator ``R,'' or as nonpass-through drugs and
biologicals, designated with status indicator ``K.'' Specifically, we
were interested in how PPF is derived and manufactured, and whether the
same access and safety concerns that apply to the blood and blood
products recognized under the OPPS for payment purposes also apply to
PPF. Finally, we were interested in the relationship between albumin
and PPF, from clinical, manufacturing, and safety perspectives, and
whether there would be a rationale for treating these products
similarly for OPPS payment purposes.
Comment: Several commenters asserted that CMS' proposed payments
for blood and blood products fail to cover the acquisition and overhead
costs incurred by hospitals for procuring, storing, and processing
blood and blood products, especially high volume products such as
leukocyte reduced red blood cells, described by HCPCS code P9016 (Red
blood cells, leukocytes reduced, each unit). Several commenters noted
that the most recent preliminary data from the National Blood
Collection and Utilization Survey support this assertion, and that the
Bureau of Labor and Statistics Producer Price Index (PPI) for blood and
blood products increased 1.8 percent in 2010 compared to 2009. Other
commenters stated that, as the costs of blood and blood products
continue to rise, it is important for CMS to ensure that APC payment
rates keep pace with technological advances, safety measures, and donor
recruitment challenges. They believed that the 2-year lag inherent in
the OPPS ratesetting process does not allow current payment rates to
reflect these rising costs.
Response: As we indicated in the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60372), we continue to believe that using blood-
specific CCRs applied to hospital claims data results in payments that
appropriately reflect hospitals' relative costs of providing blood and
blood products as reported to us by hospitals. We do not believe it is
necessary or appropriate to use the PPI for blood and organ banks or
survey data as a benchmark for updating the payment rates for blood and
blood products from year to year, because it is not our standard
process under the OPPS for any item or service to update payment rates
by implementing across-the-board, product-specific inflation updates,
or updates based on survey data, to the payment rates that were in
place the year before. Rather, we annually update payment groups and
payment weights using the most recently available hospital claims and
cost report data. This process allows us to recalibrate the payment
groups and payment weights in response to changes in hospitals' costs
from year to year. A fundamental principle of the OPPS is that it is
based on relative weights, and as we have stated in the past (73 FR
68541), it is the relativity of the costs to one another, rather than
absolute cost, that is important in setting payment rates. To deviate
from our standard OPPS ratesetting methodology and update the payment
rates for blood and blood products by the PPI or based on survey data
would skew this relativity. We also note that the median costs per unit
(calculated using the blood-specific CCR methodology) for this final
rule with comment period increase for the majority of the most commonly
provided blood and blood products (including the highest volume blood
and blood product, described by HCPCS code P9016) by 4 percent or
greater compared to the CY 2010 median costs.
For all APCs whose payment rates are based upon relative payment
weights, we note that the quality and accuracy of reported units and
charges significantly influence the median costs that are the basis for
our payment rates, especially for low volume items and services. Beyond
our standard OPPS trimming methodology (described in section II.A.2. of
this final rule with comment period) that we apply to those claims that
have passed various types of claims processing edits, it is not our
general policy to judge the accuracy of hospital coding and charging
for purposes of ratesetting.
Comment: One commenter requested that CMS exclude blood and blood
products from the reductions to the increase factor for OPPS services
that are mandated by section 3401(i) of the Affordable Care Act.
Response: As discussed in section II.B.1. of this final rule with
comment period, for CY 2011, section 3401(i) of the Affordable Care Act
mandates a 0.25 percent reduction to the OPPS increase factor. The law
does not exclude blood and blood products from this reduction in
payment for CY 2011, and we see no basis to implement an exclusion.
Comment: One commenter responded to the request for public comments
made in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60373) concerning whether CMS should recognize PPF products as drugs
under the OPPS and assign status indicator ``K,'' rather than
recognizing them as blood and blood products and assigning them status
indicator ``R.'' The same stakeholder also commented on the proposal in
the CY 2011 OPPS/ASC proposed rule to maintain the ``R'' status
indicators for these products in CY 2011. In both comment letters, the
commenter delineated the relationship between PPF and albumin,
indicating that, according to the American Association of Blood Banks
(AABB) and the American Hospital Formulary Service, albumin and PPF are
derived through very similar processes from human plasma, although PPF
is subject to fewer purification steps. According to the commenter,
neither albumin nor PPF is given through a filter as is common with
blood products, they possess similar pharmacologic properties,
contraindications, precautions and adverse reactions; and they are
commonly administered interchangeably. The commenter stated that,
unlike blood products, PPF and albumin should be stored similarly and
not frozen, and although there is potential for transmission of human
virus, the risk is rare. The commenter further stated that they do not
require type and crossmatching, contain no coagulation factors, and are
compatible with whole blood and whole packed red blood cells. Finally,
according to the commenter, the AABB indicates in its billing guide for
transfusion that albumin and PPF are both blood derivatives. The
commenter again recommended that CMS assign HCPCS codes P9043
(Infusion, plasma protein fraction (human), 5%, 50 ml) and P9048
(Infusion, plasma protein fraction (human), 5%, 250 ml) to status
indicator ``K.'' The commenter also requested that CMS instruct
hospitals to bill for PPF using pharmacy revenue codes, and appropriate
injection or infusion CPT codes rather than the CPT code for blood
transfusion because the commenter believed this product is a blood
derivative.
Response: In the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60373), we indicated that, because changing the status
indicators for these products as the commenter recommended could have
significant payment implications, we are seeking information and input
from all interested stakeholders. Specifically, changing the status
indicator from ``R'' to ``K'' would require us to calculate the payment
rates for PPF using mean unit costs from hospital claims data, as we
currently do for albumin products, rather than using our standard
blood-specific CCR methodology for blood and blood products. We did not
receive public comments from other stakeholders within the blood
community regarding this potential change in policy, either in response
to

[[Page 71839]]

the CY 2010 OPPS/ASC final rule with comment period or to the CY 2011
OPPS/ASC proposed rule, and we do not believe we have sufficient
clinical information at this time to warrant changing how we have paid
for PPF for the last several years. Therefore, we do not believe it is
appropriate to change the status indicator assignments for HCPCS codes
P9043 and P9048 from status indicator ``R'' to status indicator ``K''
for CY 2011.
After consideration of the public comments we received, we are
finalizing, without modification, our CY 2011 proposal to calculate
median costs upon which the CY 2011 payments rates for blood and blood
products are based 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 (the methodology we have utilized since CY 2005). We
believe that continuing this methodology in CY 2011 results 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 final rule with comment
period for the final CY 2011 payment rates for blood and blood
products, which are identified with status indicator ``R.'' For a 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
In the CY 2011 OPPS/ASC proposed rule (75 FR 46206), we proposed 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 2011. 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 (as defined in
the CPT code descriptor) of these CPT codes to describe all of the
tests provided. However, as noted in the proposed rule, our CY 2009
claims data available for the proposed rule for APC 0381 did not
reflect improved and more consistent hospital billing practices of
``per test'' for single allergy tests. The median cost of APC 0381,
calculated for the proposed rule according to the standard single
claims OPPS methodology, was approximately $52, significantly higher
than the CY 2010 median cost of APC 0381 of approximately $29
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 calculated a proposed ``per unit'' median cost for APC 0381,
based upon 595 claims containing multiple units or multiple occurrences
of a single CPT code. The proposed CY 2011 median cost for APC 0381
using the ``per unit'' methodology was 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).
We did not receive any public comments on our CY 2011 proposal for
determining payment of single allergy tests. We are finalizing our CY
2011 proposal, without modification, to calculate a ``per unit'' median
cost for APC 0381 as described above in this section. The final CY 2011
median cost of APC 0381 is approximately $33.
(4) Hyperbaric Oxygen Therapy (APC 0659)
Since the implementation of OPPS in August 2000, the OPPS has
recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full
body chamber, per 30 minute interval) for hyperbaric oxygen therapy
(HBOT) provided in the hospital outpatient setting. In the CY 2005
final rule with comment period (69 FR 65758 through 65759), we
finalized a ``per unit'' median cost calculation for APC 0659
(Hyperbaric Oxygen) using only claims with multiple units or multiple
occurrences of HCPCS code C1300 because delivery of a typical HBOT
service requires more than 30 minutes. We observed that claims with
only a single occurrence of the code were anomalies, either because
they reflected terminated sessions or because they were incorrectly
coded with a single unit. In the same rule, we also established that
HBOT would not generally be furnished with additional services that
might be packaged under the standard OPPS APC median cost methodology.
This enabled us to use claims with multiple units or multiple
occurrences. Finally, we also used each hospital's overall CCR to
estimate costs for HCPCS code C1300 from billed charges rather than the
CCR for the respiratory therapy or other departmental cost centers. 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 5
years.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46206), for CY 2011,
we proposed to continue using the same methodology to estimate a ``per
unit'' median cost for HCPCS code C1300. This methodology resulted in a
proposed APC median cost of approximately $109 using 328,960 claims
with multiple units or multiple occurrences for HCPCS code C1300 for CY
2011.
We did not receive any public comments on our proposal to continue
to use our established ratesetting methodology for calculating the
median cost of APC 0659 for payment of HBOT for CY 2011. We are
finalizing our CY 2011 proposal, without modification, to continue to
use our established ratesetting methodology for calculating the median
cost of APC 0659 for payment of HBOT, with a final CY 2011 median cost
of approximately $150.
(5) Payment for Ancillary Outpatient Services When Patient Expires (APC
0375)
In the November 1, 2002 final rule with comment period (67 FR
66798), we discussed the creation of the new HCPCS modifier -CA 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. HCPCS modifier -CA
is defined as a procedure payable only in the inpatient setting when
performed emergently on an outpatient who expires prior to admission.
In 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

[[Page 71840]]

payment methodology for these services, we refer readers to the CY 2007
OPPS/ASC final rule with comment period (71 FR 68157 through 68158).
In the CY 2011 OPPS/ASC proposed rule (75 FR 46207), for CY 2011,
we proposed 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 HCPCS modifier -CA. We proposed to calculate the relative payment
weight for APC 0375 by using all claims reporting a status indicator
``C'' (inpatient procedures) appended with HCPCS modifier -CA, using
estimated costs from claims data for line-items with a HCPCS code
assigned to status indicators ``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 refer
readers to section XIII.A.1. of this final rule with comment period for
a complete listing of status indicators). 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.
As discussed in the CY 2011 OPPS/ASC proposed rule (75 FR 46207),
we believe that hospitals are reporting the HCPCS modifier -CA
according to the policy initially established in CY 2003. We note that
the claims frequency for APC 0375 has been relatively stable over the
past few years. Although the median cost for APC 0375 has increased,
the median in the CY 2009 OPPS claims data used for development of
proposed rates for CY 2011 was only slightly higher than that for CY
2010. 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 HCPCS modifier -CA 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 HCPCS modifier -CA. Table 5 of the proposed rule (75
FR 46207) showed the number of claims and the proposed median costs for
APC 0375 for CYs 2007, 2008, 2009, and 2010. For CY 2011, we proposed a
median cost of approximately $6,566 for APC 0375 based on 117 claims.
We did not receive any public comments regarding this proposal.
Therefore, for the reasons explained in the CY 2011 OPPS/ASC proposed
rule (75 FR 46207), we are finalizing our CY 2011 proposal, without
modification, to continue to use our established ratesetting
methodology for calculating the median cost of APC 0375, which has a
final CY 2011 APC median cost of approximately $6,304. Table 5 below
shows the number of claims and the final median costs for APC 0375 for
CYs 2007, 2008, 2009, 2010, and 2011.

Table 5--Claims for Ancillary Outpatient Services When Patient Expires (-
CA Modifier) for CYs 2007 Through 2011
------------------------------------------------------------------------
APC
Prospective payment year Number of median
claims cost
------------------------------------------------------------------------
CY 2007........................................... 260 $3,549
CY 2008........................................... 183 4,945
CY 2009........................................... 168 5,545
CY 2010........................................... 182 5,911
CY 2011........................................... 168 6,304
------------------------------------------------------------------------

(6) Pulmonary Rehabilitation (APC 0102)
Section 144(a)(1) of Public Law 110-275 (MIPPA) added section
1861(fff) to the Act to provide Medicare Part B coverage and payment
for a comprehensive program of pulmonary rehabilitation services
furnished to beneficiaries with chronic obstructive pulmonary disease,
effective January 1, 2010. Accordingly, in the CY 2010 OPPS/ASC final
rule with comment period, we established a policy to pay for pulmonary
rehabilitation (PR) services furnished as a part of the comprehensive
PR program benefit (74 FR 60567). We created new HCPCS code G0424
(Pulmonary rehabilitation, including exercise (includes monitoring),
one hour, per session, up to two sessions per day) and assigned the
code to new APC 0102 (Level II Pulmonary Treatment).
In the CY 2011 OPPS/ASC proposed rule (75 FR 46207 through 46208),
for CY 2011, we proposed to continue to require hospitals to report PR
services provided under the comprehensive PR benefit provided by
section 1861(fff) of the Act using HCPCS code G0424. We also proposed
to continue to use the methodology described in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60567 through 60570) to calculate
the median cost on which the proposed payment rate for CY 2011 is
based. Specifically, we proposed to continue to assign HCPCS code G0424
to APC 0102 and to calculate a median ``per session'' cost simulated
from historical hospital claims data for similar pulmonary therapy
services for the CY 2011 OPPS.
To simulate the proposed ``per session'' median cost of HCPCS code
G0424 from claims data for existing services, we used only hospital
claims that contained at least one unit of HCPCS code G0239
(Therapeutic procedures to improve respiratory function or increase
strength or endurance of respiratory muscles, two or more individuals
(includes monitoring)), the group code that is without limitation on
time duration, and one unit of HCPCS code G0237 (Therapeutic procedures
to increase strength or endurance of respiratory muscles, face to face,
one on one, each 15 minutes (includes monitoring)) or G0238
(Therapeutic procedures to improve respiratory function, other than
described by G0237, one on one, face to face, per 15 minutes (includes
monitoring)), the individual, face-to-face codes that report 15 minutes
of service on the same date of service. We continue to believe that
patients in a PR program would typically receive individual and group
services during each session of approximately 1 hour in duration. This
proposal is consistent with public comments received on the CY 2010
OPPS/ASC proposed rule that were addressed in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60569). The commenters to the CY
2010 OPPS/ASC proposed rule suggested that PR is often provided in
group sessions in the HOPD, although patients commonly require
additional one-on-one care in order to fully participate in the
program. We note that our use of ``per session'' claims that report one
unit of HCPCS code G0237 or G0238 and one unit of HCPCS code G0239 in
this simulation methodology is also consistent with our overall finding
that approximately 2.4 service units of the HCPCS G-codes are furnished
per day on a single date of service, usually consisting of both
individual and group services, for patients receiving pulmonary therapy
services in the HOPD based upon CY 2008 claims used for CY 2010 OPPS
final rule ratesetting. We continue to believe that the typical session
of PR is 1 hour based on public comments that indicated a session of PR
is typically 1 hour and on our findings that the most commonly reported
HCPCS code for pulmonary treatment is HCPCS code G0239, which has no
time definition for this group service.
In the calculation of the CY 2011 proposed median cost for APC
0102, we included all costs of the related tests and assessment
services, including CPT codes 94620 (Pulmonary stress testing, simple
(e.g. 6-minute walk test,

[[Page 71841]]

prolonged exercise test for bronchospasm with pre- and post-spirometry
and oximetry)), 94664 (Demonstration and/or evaluation of patient
utilization of an aerosol generator, nebulizer, metered dose inhaler or
IPPB device), and 94667 (Manipulation chest wall, such as cupping,
percussing, and vibration to facilitate lung function; initial
demonstration and/or evaluation) and all the costs of all CPT codes for
established patient clinic visits on the same date of service as the
HCPCS codes in the claims we used to simulate the median cost for HCPCS
code G0424, which is the only HCPCS code in APC 0102. After identifying
these ``per session'' claims, which we believe represent 1 hour of
care, we summed the costs and calculated the median cost for the set of
selected claims. In light of the cost and clinical similarities of PR
and the existing services described by HCPCS codes G0237, G0238, and
G0239 and the CPT codes for related assessments and tests, and the
significant number of ``per session'' hospital claims we found, we
indicated in the CY 2011 OPPS/ASC proposed rule that we were confident
that the proposed simulated median cost for HCPCS code G0424 and APC
0102 of approximately $68 was a valid estimate of the expected hospital
cost of a PR session. We noted that this proposed median cost was
higher than the CY 2010 final rule median cost for HCPCS code G0424 and
APC 0102 of approximately $50 on which the CY 2010 payment is based.
Comment: Several commenters approved the increase in payment for PR
services to $68 per hour for CY 2011, stating that the rate better
represents actual costs. One commenter noted a CPT proposal to change
the reference code for the pulmonary rehabilitation portion of lung
volume reduction surgery from CPT code 93797 (Physician services for
outpatient cardiac rehabilitation; without continuous ECG monitoring
(per session) to CPT code 93798 (Physician services for outpatient
cardiac rehabilitation; with continuous ECG monitoring (per session).
The commenter stated that CPT code 93798 is a more appropriate
comparison for HCPCS code G0424. In addition, the commenters noted that
CPT code 94620 (Pulmonary stress testing; simple (e.g. 6-minute walk
test, prolonged exercise test for bronchospasm with pre- and post-
spirometry and oximetry)) is paid at a rate of $65 in the office
setting when performed alone, and when performed with pulmonary
rehabilitation, they are bundled into APC 0102 with a proposed payment
rate of $68 in the hospital outpatient setting and with a proposed
payment rate of $28.58 when the service is provided in the office
setting.
Response: We appreciate the provided information on the change to
the reference code for the pulmonary rehabilitation portion of lung
volume reduction surgery. We believe the commenter relayed this
information to support the proposed increase in payment for HCPCS code
G0424 because CPT code 97398 contains continuous ECG monitoring and CPT
code 97397 does not. While we observe a minimal difference in estimated
cost for CPT codes 93797 and 93798 in the CY 2009 claims data that we
used to model payments in this final rule with comment period, we do
not believe this influenced the observed increase between the CY 2010
median cost of $50 and the proposed CY 2011 median cost of $68. The
proposed CY 2011 median cost for HCPCS code G0424 was based on costs
estimated from hospital charges on CY 2009 claims for HCPCS codes
G0237, G0238, and G0239 and supporting services CPT codes 94620, 94664,
and 94667 and all costs of all CPT codes for established patient clinic
visits reported on the same date. We believe the observed increase in
the median cost for HCPCS code G0424 may be attributable to changes in
hospital charges for these codes or to a change in the mix of hospitals
reporting these services in the CY 2009 claims data.
With regard to the comment about CPT code 94620, we believe the
commenter intended to point out that the median cost for HCPCS code
G0424 does not adequately reflect the cost associated with the 6 minute
walk test. In our analysis for creating a simulated median cost for
G0424 in the CY 2010 final rule with comment period, we observed that
CPT code 94620 appeared on the same claim as HCPCS codes G0237, G0238,
and G0239 in approximately 3 percent of the cases, indicating that this
service is rarely performed as part of a typical pulmonary
rehabilitation session. The proposed median cost of $68 for HCPCS code
G0424 reflects the packaged cost of CPT code 94620 and related services
to the extent that hospitals report this service in conjunction with
pulmonary rehabilitation.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to establish a median
cost for APC 0102 by using claims with one unit of HCPCS code G0239,
and one unit of HCPCS code G0237 or G0238, and including all costs of
the related tests and assessment services (CPT codes 94620, 94664, and
94667 and all the costs of all CPT codes for established patient clinic
visits reported on the same date), which results in a final CY 2011
median cost for HCPCS code G0424 of approximately $62.
(7) Endovascular Revascularization of the Lower Extremity (APCs 0083,
0229, and 0319)
For CY 2011, the AMA's CPT Editorial Panel created 16 new CPT codes
in the Endovascular Revascularization section of the 2011 CPT Code Book
to describe endovascular revascularization procedures of the lower
extremity performed for occlusive disease. Table 6 lists the 16 new CPT
codes that will be effective January 1, 2011.

Table 6--New Endovascular Revascularization CPT Procedure Codes
Effective January 1, 2011
------------------------------------------------------------------------
CPT Code Long descriptor
------------------------------------------------------------------------
37220............................. Revascularization, endovascular,
open or percutaneous, iliac artery,
unilateral, initial vessel; with
transluminal angioplasty.
37221............................. Revascularization, endovascular,
open or percutaneous, iliac artery,
unilateral, initial vessel; with
transluminal stent placement(s),
includes angioplasty within the
same vessel, when performed.
37222............................. Revascularization, endovascular,
open or percutaneous, iliac artery,
each additional ipsilateral iliac
vessel; with transluminal
angioplasty (List separately in
addition to code for primary
procedure).
37223............................. Revascularization, iliac artery,
each additional ipsilateral iliac
vessel; with transluminal stent
placement(s) (List separately in
addition to code for primary
procedure), includes angioplasty
within the same vessel, when
performed.
37224............................. Revascularization, endovascular,
open or percutaneous, femoral/
popliteal artery(s), unilateral;
with transluminal angioplasty.
37225............................. Revascularization, endovascular,
open or percutaneous, femoral/
popliteal artery(s), unilateral;
with atherectomy, includes
angioplasty within the same vessel,
when performed.

[[Page 71842]]

37226............................. Revascularization, endovascular,
open or percutaneous, femoral/
popliteal artery(s), unilateral;
with transluminal stent
placement(s), includes angioplasty
within the same vessel, when
performed.
37227............................. Revascularization, endovascular,
open or percutaneous, femoral/
popliteal artery(s), unilateral;
with transluminal stent
placement(s) and atherectomy,
includes angioplasty within the
same vessel, when performed.
37228............................. Revascularization, endovascular,
open or percutaneous, tibial/
peroneal artery, unilateral,
initial vessel; with transluminal
angioplasty.
37229............................. Revascularization, endovascular,
open or percutaneous, tibial/
peroneal artery, unilateral,
initial vessel; with atherectomy,
includes angioplasty within the
same vessel, when performed.
37230............................. Revascularization, endovascular,
open or percutaneous, tibial/
peroneal artery, unilateral,
initial vessel; with transluminal
stent placement(s), includes
angioplasty within the same vessel,
when performed.
37231............................. Revascularization, endovascular,
open or percutaneous, tibial/
peroneal artery, unilateral,
initial vessel; with transluminal
stent placement(s) and atherectomy,
includes angioplasty within the
same vessel, when performed.
37232............................. Revascularization, endovascular,
open or percutaneous, tibial/
peroneal artery, unilateral, each
additional vessel; with
transluminal angioplasty (List
separately in addition to code for
primary procedure).
37233............................. Revascularization, endovascular,
open or percutaneous, tibial/
peroneal artery, unilateral, each
additional vessel; with atherectomy
(List separately in addition to
code for primary procedure),
includes angioplasty within the
same vessel, when performed.
37234............................. Revascularization, endovascular,
open or percutaneous, tibial/
peroneal artery, unilateral, each
additional vessel; with
transluminal stent placement(s)
(List separately in addition to
code for primary procedure),
includes angioplasty within the
same vessel, when performed.
37235............................. Revascularization, endovascular,
open or percutaneous, tibial/
peroneal artery, unilateral, each
additional vessel; with
transluminal stent placement(s) and
atherectomy (List separately in
addition to code for primary
procedure), includes angioplasty
within the same vessel, when
performed.
------------------------------------------------------------------------

Our standard process for dealing with new CPT codes is to assign
the code to the APC that we believe contains services that are
comparable with respect to clinical characteristics and resources
required to furnish the service. The new CPT code is given a comment
indicator of ``NI'' to identify it as a new interim APC assignment for
the new year and the APC assignment for the new codes is then open to
public comment. In some, but not all, cases, we are able to use the
existing data from established codes to simulate an estimated median
cost for the new code to guide us in the assignment of the new code to
an APC. In the case of the new endovascular revascularization codes, we
were able to use the existing CY 2009 claims and most current cost
report data to create simulated median costs for 12 of the 16 new
separately payable codes.
Specifically, to estimate the hospital costs associated with the 16
new endovascular revascularization CPT codes based on their CY 2011
descriptors, we used claims data from hospital outpatient claims
submitted in CY 2009 and the most recent cost report information
submitted by the hospitals that submitted claims for the services as
they were reported in CY 2009. We note that all of the services that
were previously reported to describe endovascular revascularization of
the lower extremity for occlusive disease were assigned to three APCs
in CY 2009. These included APCs 0082 (Coronary or Non-Coronary
Atherectomy), 0083 (Coronary or Non-Coronary Angioplasty and
Percutaneous Valvuloplasty), and 0229 (Transcatheter Placement of
Intravascular Shunts).
Because the endovascular revascularization CPT codes are new for CY
2011, we used our CY 2009 single and ``pseudo'' single claims data to
simulate the new CY 2011 CPT code definitions. As shown in Table 7
below, many of the new endovascular revascularization CPT codes were
previously reported using a combination of CY 2009 CPT codes. In order
to simulate median costs, we selected claims that we believe meet the
definition for each of the new endovascular revascularization CPT
codes. Table 7 shows the criteria we applied to select a claim to be
used in the calculation of the median cost for the new codes (shown in
column A). We developed these criteria based on our clinicians'
understanding of services that were reported by CY 2009 CPT codes that,
in various combinations, reflect the services provided that are
described by the new CPT codes for CY 2011. For example, in CY 2009,
the procedure described by new CY 2011 CPT code 37222
(Revascularization, endovascular, open or percutaneous, iliac artery,
each additional ipsilateral iliac vessel; with transluminal angioplasty
(List separately in addition to code for primary procedure)) would have
been reported using the following combination of procedures: (1) The
transluminal balloon angioplasty of the iliac would have been reported
using CPT code 35454 (Transluminal balloon angioplasty, open; iliac) or
35473 (Transluminal balloon angioplasty, percutaneous; iliac); (2) the
catheter placement would have been reported using CPT code 36248
(Selective catheter placement, arterial system; additional second
order, third order, and beyond, abdominal, pelvic, or lower extremity
artery branch, within a vascular family (List in addition to code for
initial second or third order vessel as appropriate)); and (3) the
radiological supervision and interpretation of the transluminal balloon
angioplasty would have been reported using CPT code 75962 (Transluminal
balloon angioplasty, peripheral artery, other than cervical carotid,
renal or other visceral artery, iliac or lower extremity, radiological
supervision and interpretation) and/or 75964 (Transluminal balloon
angioplasty, each additional peripheral artery other than cervical
carotid, renal or other visceral artery, iliac and lower extremity,
radiological supervision and interpretation (List separately in
addition to code for primary procedure)). In columns B, C, D, and E of
Table 7, for each new CY 2011 CPT code listed under column A, we
identified the CY 2009 CPT codes that we believed corresponded to each
new code for which we had CY 2009 claims data and that we required or
permitted to be reported on the same line-item date of service for a
particular claim to be used for calculating the median costs for the
new codes. Specifically, we

[[Page 71843]]

required that at least one unit of one of the separately payable codes
in column B must be on the claim (we permitted any number of units of
these codes to be on the claim). Where there are codes listed in column
C, we also required that at least one unit of one and only one of the
codes that appears under column C must be on the claim (we permitted
any number of units of the code to be on the claim). Where there are
codes in column D, we required at least one unit of each of the codes
in column D (we permitted any number of units of these codes to be on
the claim). In addition, in column E, we identified several codes that
were paid separately in CY 2009 but which we decided should be packaged
into the new endovascular revascularization CPT codes if they appeared
on the claim with the other codes in columns B through D.
For example, in determining the CPT median cost for new CPT code
37221, we used only those claims that contained one unit of one and
only one of the CPT codes listed under column B, specifically CPT code
37205 or 37207, and at least one unit (while allowing multiple units)
of one and only one of the CPT codes that appear under column C,
specifically CPT codes 36000, 36245, or 36246. We allowed any number of
units for the code in column D, and packaged the costs for the codes in
column E (CPT codes 35454 and 35473) if they appeared on the claim. We
applied this same methodology to select claims that we believe
reflected the services defined in each new CPT code. In addition, we
excluded claims that met these criteria if the claim contained a
service to which a status indicator of ``S,'' ``T,'' ``V,'' or ``X''
was assigned, if such code did not meet the criteria for the new code.
By doing this, we simulated a single procedure bill for the new code.
In addition, we applied the standard packaging, trimming, and wage
standardization that we apply in the median calculation process. We
used approximately 19,283 claims that met the code specific criteria to
calculate CPT level medians and the median cost for these new codes.
Table 7 below displays the combinations of CY 2009 code data that we
used to select the claims we used to create simulated median costs for
the new codes (columns A through E), and the frequency of claims that
met the criteria (column F) we calculated for each new code using the
CY 2009 data for the previously existing CPT codes for these services.
We note that we did not identify any claims that met the criteria for
new CPT codes 37222, 37223, 37234 and 37235, in part due to the
requirement that there must be no major separately paid procedures on
the claim other than those we identified for the new code.

[[Page 71844]]

Table 7--Simulated CY 2009 Code Combinations and Frequencies for the New CY 2011 Endovascular Revascularization CPT Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
First Required CY 2009 Second Required CY 2009 Third Required CY 2009
CPT Code (At least one CPT Code (At least one CPT Code (At least one
unit (and allow any unit (and allow any unit of each code is Fourth Required CY 2009
CY 2011 CPT Code number of units) of one number of units) of one required and any number CPT Code (Packaged if Frequencies
and only one code must and only one code must of units of all codes appeared on claim)
appear on the claim) appear on the claim) permitted)
Column A Column B Column C Column D Column E Column F
--------------------------------------------------------------------------------------------------------------------------------------------------------
37220 35454 36000 75962 ....................... 508
35473 36245 ........................ ....................... .......................
........................ 34246 ........................ ....................... .......................
37221 37205 36000 75960 35454 4,758
37207 36245 ........................ 35473 .......................
........................ 36246 ........................ ....................... .......................
37222 35454 36248 75962 ....................... 0
35473 ........................ 75964 ....................... .......................
37223 37206 36248 75960 35454 0
37208 ........................ ........................ 35473 .......................
37224 35456 ........................ 75962 ....................... 3,653
35474 ........................ 36247 ....................... .......................
37225 35483 ........................ 75992 35456 1,974
35493 ........................ 36247 35474 .......................
37226 37205 ........................ 75960 35456 2,927
37207 ........................ 36247 35474 .......................
37227 37205 35483 75960 35456 647
37207 35493 75992 35474 .......................
........................ ........................ 36247 ....................... .......................
37228 35459 ........................ 75962 ....................... 1,431
35470 ........................ 36247 ....................... .......................
37229 35485 ........................ 75992 35459 780
35495 ........................ 36247 35470 .......................
37230 37205 ........................ 75960 35459 2,542
37207 ........................ 36247 35470 .......................
37231 37205 35485 75960 35459 53
37207 35495 75992 35470 .......................
........................ ........................ 36247 ....................... .......................
37232 35459 ........................ 75964 ....................... 7
35470 ........................ 36248 ....................... .......................
37233 35485 ........................ 75993 35459 3
35495 ........................ 36248 35470 .......................
37234 37206 ........................ 75960 35459 0
37208 ........................ 36248 35470 .......................
37235 37206 35485 36247 35459 0
37208 35495 36248 35470 .......................
........................ ........................ 75960 ....................... .......................
........................ ........................ 75993 ....................... .......................
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 71845]]

After determining the simulated median costs for the procedures, we
assigned each CPT code to appropriate APCs based on their clinical
homogeneity and resource use. Of the 16 new codes, we assigned nine CPT
codes to APC 0083, five to APC 0229, and created a new APC for two CPT
codes. Specifically, we assigned CPT codes 37220, 37221, 37222, 37223,
37224, 37228, 37232, 37234, and 37235 to APC 0083, which has a final CY
2011 APC median cost of approximately $3,740. In addition, we assigned
CPT codes 37225, 37226, 37229, 37230, and 37233 to APC 0229, which has
a final CY 2011 APC median cost of approximately $7,940. Because the
resource costs associated with CPT codes 37227 and 37231 are not
similar to the costs of procedures in the existing APCs, we established
a new APC, specifically APC 0319 (Endovascular Revascularization of the
Lower Extremity), which has a final CY 2011 APC median cost of
approximately $13,751 to appropriately pay for these services.
The new CY 2011 endovascular revascularization CPT codes and their
final CY 2011 APC assignments and APC median costs are displayed in
Table 8 below. We note that because these codes are new for CY 2011,
they will be identified with comment indicator ``NI'' in Addendum B of
this final rule to identify them as subject to public comment. We
specifically request public comment on our methodology for simulating
the median costs for these new CY 2011 CPT codes, in addition to public
comments on the payment rates themselves.

Table 8--Final CY 2011 APC Assignments and Median Costs for the Endovascular Revascularization CPT Codes
----------------------------------------------------------------------------------------------------------------
Final CY 2011
CY 2011 CPT Code CY 2011 Long descriptor Final CY 2011 CPT median
APC cost
----------------------------------------------------------------------------------------------------------------
37220.................................... Revascularization, endovascular, open 0083 $5,080
or percutaneous, iliac artery,
unilateral, initial vessel; with
transluminal angioplasty.
37221.................................... Revascularization, endovascular, open 0083 6,710
or percutaneous, iliac artery,
unilateral, initial vessel; with
transluminal stent placement(s),
includes angioplasty within the same
vessel, when performed.
37222.................................... Revascularization, endovascular, open 0083 N/A
or percutaneous, iliac artery, each
additional ipsilateral iliac vessel;
with transluminal angioplasty (List
separately in addition to code for
primary procedure).
37223.................................... Revascularization, endovascular, open 0083 N/A
or percutaneous, iliac artery, each
additional ipsilateral iliac vessel;
with transluminal stent placement(s)
(List separately in addition to code
for primary procedure), includes
angioplasty within the same vessel,
when performed.
37224.................................... Revascularization, endovascular, open 0083 5,247
or percutaneous, femoral/popliteal
artery(s), unilateral; with
transluminal angioplasty.
37225.................................... Revascularization, endovascular, open 0229 9,023
or percutaneous, femoral/popliteal
artery(s), unilateral; with
atherectomy, includes angioplasty
within the same vessel, when
performed.
37226.................................... Revascularization, endovascular, open 0229 9,600
or percutaneous, femoral/popliteal
artery(s), unilateral; with
transluminal stent placement(s),
includes angioplasty within the same
vessel, when performed.
37227.................................... Revascularization, endovascular, open 0319 13,754
or percutaneous, femoral/popliteal
artery(s), unilateral; with
transluminal stent placement(s) and
atherectomy, includes angioplasty
within the same vessel, when
performed.
37228.................................... Revascularization, endovascular, open 0083 5,563
or percutaneous, tibial/peroneal
artery, unilateral, initial vessel;
with transluminal angioplasty.
37229.................................... Revascularization, endovascular, open 0229 9,231
or percutaneous, tibial/peroneal
artery, unilateral, initial vessel;
with atherectomy, includes
angioplasty within the same vessel,
when performed.
37230.................................... Revascularization, endovascular, open 0229 7,868
or percutaneous, tibial/peroneal
artery, unilateral, initial vessel;
with transluminal stent placement(s)
, includes angioplasty within the
same vessel, when performed.
37231.................................... Revascularization, endovascular, open 0319 13,604
or percutaneous, tibial/peroneal
artery, unilateral, initial vessel;
with transluminal stent placement(s)
and atherectomy, includes
angioplasty within the same vessel,
when performed.
37232.................................... Revascularization, endovascular, open 0083 9,412
or percutaneous, tibial/peroneal
artery, unilateral, each additional
vessel; with transluminal
angioplasty (List separately in
addition to code for primary
procedure).
37233.................................... Revascularization, endovascular, open 0229 10,183
or percutaneous, tibial/peroneal
artery, unilateral, each additional
vessel; with atherectomy (List
separately in addition to code for
primary procedure), includes
angioplasty within the same vessel,
when performed.
37234.................................... Revascularization, endovascular, open 0083 N/A
or percutaneous, tibial/peroneal
artery, unilateral, each additional
vessel; with transluminal stent
placement(s) (List separately in
addition to code for primary
procedure), includes angioplasty
within the same vessel, when
performed.
37235.................................... Revascularization, endovascular, open 0083 N/A
or percutaneous, tibial/peroneal
artery, unilateral, each additional
vessel; with transluminal stent
placement(s) and atherectomy (List
separately in addition to code for
primary procedure), includes
angioplasty within the same vessel,
when performed.
----------------------------------------------------------------------------------------------------------------

[[Page 71846]]

(8) Non-Congenital Cardiac Catheterization (APC 0080)
For CY 2011, the AMA CPT Editorial Panel deleted 19 non-congenital
cardiac catheterization-related CPT codes and replaced them with 20 new
CPT codes in the Cardiac Catheterization and Injection-Related section
of the 2011 CPT Code Book to describe more precisely the specific
services provided during cardiac catheterization procedures. In
particular, the CPT Editorial Panel deleted 19 non-congenital cardiac
catheterization-related CPT codes from the 93500 series and created 14
new CPT codes in the 93400 series and 6 in the 93500 series. Table 9
below lists the specific CPT codes that will be deleted December 31,
2010, and Table 10 lists the new CPT codes that will be effective
January 1, 2011.

Table 9--Non-Congenital Cardiac Catheterization-Related CPT Procedure
Codes That Will Be Deleted December 31, 2010
------------------------------------------------------------------------
CY 2010 CPT Code Long descriptor
------------------------------------------------------------------------
93501............................. Right heart catheterization
93508............................. Catheter placement in coronary
artery(s), arterial coronary
conduit(s), and/or venous coronary
bypass graft(s) for coronary
angiography without concomitant
left heart catheterization
93510............................. Left heart catheterization,
retrograde, from the brachial
artery, axillary artery or femoral
artery; percutaneous
93511............................. Left heart catheterization,
retrograde, from the brachial
artery, axillary artery or femoral
artery; by cutdown
93514............................. Left heart catheterization by left
ventricular puncture
93524............................. Combined transseptal and retrograde
left heart catheterization
93526............................. Combined right heart catheterization
and retrograde left heart
catheterization
93527............................. Combined right heart catheterization
and transseptal left heart
catheterization through intact
septum (with or without retrograde
left heart catheterization)
93528............................. Combined right heart catheterization
with left ventricular puncture
(with or without retrograde left
heart catheterization)
93529............................. Combined right heart catheterization
and left heart catheterization
through existing septal opening
(with or without retrograde left
heart catheterization)
93539............................. Injection procedure during cardiac
catheterization; for selective
opacification of arterial conduits
(e.g., internal mammary), whether
native or used for bypass
93540............................. Injection procedure during cardiac
catheterization; for selective
opacification of aortocoronary
venous bypass grafts, one or more
coronary arteries
93541............................. Injection procedure during cardiac
catheterization; for pulmonary
angiography
93542............................. Injection procedure during cardiac
catheterization; for selective
right ventricular or right atrial
angiography
93543............................. Injection procedure during cardiac
catheterization; for selective left
ventricular or left atrial
angiography
93544............................. Injection procedure during cardiac
catheterization; for aortography
93545............................. Injection procedure during cardiac
catheterization; for selective
coronary angiography (injection of
radiopaque material may be by hand)
93555............................. Imaging supervision, interpretation
and report for injection
procedure(s) during cardiac
catheterization; ventricular and/or
atrial angiography
93556............................. Imaging supervision, interpretation
and report for injection
procedure(s) during cardiac
catheterization; pulmonary
angiography, aortography, and/or
selective coronary angiography
including venous bypass grafts and
arterial conduits (whether native
or used in bypass)
------------------------------------------------------------------------

Table 10--New Cardiac Catheterization-Related CPT Procedure Codes
Effective January 1, 2011
------------------------------------------------------------------------
CY 2011 CPT Code Long descriptor
------------------------------------------------------------------------
93451............................. Right heart catheterization
including measurement(s) of oxygen
saturation and cardiac output, when
performed
93452............................. Left heart catheterization including
intraprocedural injection(s) for
left ventriculography, imaging
supervision and interpretation,
when performed
93453............................. Combined right and left heart
catheterization including
intraprocedural injection(s) for
left ventriculography, imaging
supervision and interpretation,
when performed
93454............................. Catheter placement in coronary
artery(s) for coronary angiography,
including intraprocedural
injection(s) for coronary
angiography, imaging supervision
and interpretation
93455............................. Catheter placement in coronary
artery(s) for coronary angiography,
including intraprocedural
injection(s) for coronary
angiography, imaging supervision
and interpretation; with catheter
placement(s) in bypass graft(s)
(internal mammary, free arterial
venous grafts) including
intraprocedural injection(s) for
bypass graft angiography
93456............................. Catheter placement in coronary
artery(s) for coronary angiography,
including intraprocedural
injection(s) for coronary
angiography, imaging supervision
and interpretation; with right
heart catheterization
93457............................. Catheter placement in coronary
artery(s) for coronary angiography,
including intraprocedural
injection(s) for coronary
angiography, imaging supervision
and interpretation; with catheter
placement(s) in bypass graft(s)
(internal mammary, free arterial,
venous grafts) including
intraprocedural injection(s) for
bypass graft angiography and right
heart catheterization
93458............................. Catheter placement in coronary
artery(s) for coronary angiography,
including intraprocedural
injection(s) for coronary
angiography, imaging supervision
and interpretation; with left heart
catheterization including
intraprocedural injection(s) for
left ventriculography, when
performed
93459............................. Catheter placement in coronary
artery(s) for coronary angiography,
including intraprocedural
injection(s) for coronary
angiography, imaging supervision
and interpretation; with left heart
catheterization including
intraprocedural injection(s) for
left ventriculography, when
performed, catheter placement(s) in
bypass graft(s) (internal mammary,
free arterial, venous grafts) with
bypass graft angiography

[[Page 71847]]

93460............................. Catheter placement in coronary
artery(s) for coronary angiography,
including intraprocedural
injection(s) for coronary
angiography, imaging supervision
and interpretation; with right and
left heart catheterization
including intraprocedural
injection(s) for left
ventriculography, when performed
93461............................. Catheter placement in coronary
artery(s) for coronary angiography,
including intraprocedural
injection(s) for coronary
angiography, imaging supervision
and interpretation; with right and
left heart catheterization
including intraprocedural
injection(s) for left
ventriculography, when performed,
catheter placement(s) in bypass
graft(s) (internal mammary, free
arterial, venous grafts) with
bypass graft angiography
93462............................. Left heart catheterization by
transseptal puncture through intact
septum or by transapical puncture
(List separately in addition to
code for primary procedure)
93463............................. Pharmacologic agent administration
(e.g., inhaled nitric oxide,
intravenous infusion of
nitroprusside, dobutamine,
milrinone, or other agent)
including assessing hemodynamic
measurements before, during, after
and repeat pharmacologic agent
administration, when performed
93464............................. Physiologic exercise study (e.g.,
bicycle or arm ergometry including
assessing hemodynamic measurements
before and after) (List separately
in addition to code for primary
procedure)
93563............................. Injection procedure during cardiac
catheterization including imaging
supervision, interpretation, and
report; for selective coronary
angiography during congenital heart
catheterization (List separately in
addition to code for primary
procedure)
93564............................. Injection procedure during cardiac
catheterization including imaging
supervision, interpretation, and
report; for selective opacification
of aortocoronary venous or arterial
bypass graft(s) (e.g.,
aortocoronary saphenous vein, free
radial artery, or free mammary
artery graft) to one or more
coronary arteries and in situ
arterial conduits (e.g., internal
mammary), whether native or used
for bypass to one or more coronary
arteries during congenital heart
catheterization, when performed
(List separately in addition to
code for primary procedure)
93565............................. Injection procedure during cardiac
catheterization including imaging
supervision, interpretation, and
report; for selective left
ventricular or left atrial
angiography (List separately in
addition to code for primary
procedure)
93566............................. Injection procedure during cardiac
catheterization including imaging
supervision, interpretation, and
report; for selective right
ventricular or right atrial
angiography (List separately in
addition to code for primary
procedure)
93567............................. Injection procedure during cardiac
catheterization including imaging
supervision, interpretation, and
report; for supravalvular
aortography (List separately in
addition to code for primary
procedure)
93568............................. Injection procedure during cardiac
catheterization including imaging
supervision, interpretation, and
report; for pulmonary angiography
(List separately in addition to
code for primary procedure)
------------------------------------------------------------------------

Of the 19 deleted non-congenital cardiac catheterization-related
CPT codes, 9 of the CPT codes describe either a left heart
catheterization, right heart catheterization, or a combined left and
right heart catheterization, 7 CPT codes describe injection procedures
during cardiac catheterization, 2 CPT codes describe imaging
supervision during cardiac catheterization, and only 1 CPT code
describes a catheter placement. Of the 19 deleted non-congenital
cardiac catheterization-related CPT codes, 10 CPT codes have been
separately payable under the hospital OPPS, while the other 9 CPT codes
that describe injection procedures and imaging supervision during
cardiac catheterization have been packaged. Specifically, the 10 non-
congenital cardiac catheterization-related CPT codes that have been
separately payable under the hospital OPPS include CPT codes 93501,
93508, 93510, 93511, 93514, 93524, 93526, 93527, 93528, and 93529.
Alternatively, the nine non-congenital cardiac catheterization-related
CPT codes that have been packaged under the hospital OPPS include CPT
codes 93539, 93540, 93541, 93542, 93543, 93544, 93545, 93555, and
93556.
Of the 20 new CPT codes, 4 CPT codes describe either a left heart
catheterization, right heart catheterization, or a combined left and
right heart catheterization, 8 CPT codes describe a catheter placement,
1 CPT code describes a pharmacologic agent administration, 1 CPT code
describes a physiologic exercise study, and 6 CPT codes describe a
combination of injection procedures with imaging supervision during
cardiac catheterization. With the exception of one CPT code (CPT code
93451), many of the new CY 2011 CPT codes are described by multiple CY
2010 CPT codes.
Our standard process for assigning new CPT codes to APCs is to
assign the code to the APC that we believe contains services that are
comparable with respect to clinical characteristics and resources
required to furnish the service. The new CPT code is given a comment
indicator of ``NI'' to identify it as a new interim APC assignment for
the new first year and the APC assignment for the new codes is then
open to public comment. In some, but not all, cases, we are able to use
the existing data from established codes to simulate an estimated
median cost for the new code to guide us in the assignment of the new
code to an APC. In the case of the new cardiac catheterization codes,
we were able to use the existing CY 2009 claims data and the most
recent cost report data to create simulated medians for the new
separately payable CPT codes.
Specifically, to estimate the hospital costs associated with the 20
new non-congenital cardiac catheterization-related CPT codes based on
their CY 2011 descriptors, we used claims and cost report data from CY
2009. We note that all of the services that describe cardiac
catheterization procedures, which include both congenital and non-
congenital cardiac catheterization, are assigned to APC 0080
(Diagnostic Cardiac Catheterization) in CY 2010. Because of the
substantive coding changes associated with the new non-congenital
cardiac catheterization-related CPT codes for CY 2011, we used our CY
2009 single and ``pseudo'' single claims data to simulate the new CY
2011 CPT code definitions. As shown in Table 11 and as stated above,
many of the new CPT codes were previously reported using multiple CY
2009 CPT codes. In order to simulate median costs, we selected claims
that we believe meet the definition for each of the new CY 2011 non-
congenital cardiac catheterization codes. Table 11 shows the criteria
we applied to select a claim to be used in the calculation of the
median cost for the new codes (shown in column A). We developed these

[[Page 71848]]

criteria based on our clinicians' understanding of services that were
reported by CY 2009 CPT codes that, in various combinations, reflect
the services provided that are described in the new CPT codes. For
example, in CY 2009, the procedure described by new CY 2011 CPT code
93454 (Catheter placement in coronary artery(s) for coronary
angiography, including intraprocedural injection(s) for coronary
angiography, imaging supervision and interpretation) would have been
reported using the following combination of procedures: (1) The
catheter placement would have been reported using CPT code 93508
(Catheter placement in coronary artery(s), arterial coronary
conduit(s), and/or venous coronary bypass graft(s) for coronary
angiography without concomitant left heart catheterization); and (2)
the injection procedure would have been reported using CPT code 93545
(Injection procedure during cardiac catheterization; for selective
coronary angiography (injection of radiopaque material may be by hand);
and CPT code 93556 (Imaging supervision, interpretation and report for
injection procedure(s) during cardiac catheterization; pulmonary
angiography, aortography, and/or selective coronary angiography
including venous bypass grafts and arterial conduits (whether native or
used in bypass)). In columns B, C, and D of Table 11, for each new CY
2011 CPT code listed under column A, we identified both the CPT codes
that corresponded to each new code for which we had CY 2009 claims data
and that we required or permitted to be reported on the same line-item
date of service for a particular claim to be used for median setting
for the new codes. Specifically, we required that only one unit of one
and only one of the separately payable codes in column B must be
present on the claim. We also required that at least one unit of each
code that appears under column C must be present on the claim, and we
permitted any number of these codes and any number of units of these
codes to be present on the claim. Where there are codes in column D, we
required at least one unit of one of at least one of the codes in
column D must be on the claim, but we permitted any number of units of
any of the codes shown in column D for the new code.
For example, in determining the CPT median cost for new CPT code
93452, we used only those claims that contained one unit of one and
only one of the CPT codes listed under column B, specifically, CPT
codes 93510, 93511, 93514, or 93524, and at least one unit (while
allowing multiple units) of each of the CPT codes that appear under
column C, specifically, CPT codes 93543 and 93555. Because, in the case
of CPT code 93452, there are no third level codes in the definition of
CPT code 93452, no other code criteria applied and column D is left
blank. In the case of new CPT codes 93459 and 93461, there are third
level criteria in column D, and for those two CPT codes, we required
that the claim contain at least one unit of one code in column D, and
we allowed any number of units for any code in column D. We applied
this same methodology to select claims that we believe reflected the
services defined in each new CPT code. We used approximately 175,000
claims for the new non-congenital catheterization-related CPT codes,
together with the single and pseudo single procedure claims for the
remaining congenital catheterization-related CPT codes in APC 0080, to
calculate CPT level median costs and the median cost for APC 0080 of
approximately $2,698. Table 11 displays the combinations of CY 2009 CPT
code data that we used to select the claims we used to create simulated
median costs for the new CPT codes (columns A through D), the frequency
of claims that met the criteria (column E), and the median costs we
calculated for each new CPT code using the CY 2009 claims data for the
previously existing CPT codes describing these services (column F). We
note that because the CPT codes listed in column A are new for CY 2011,
they will be identified with comment indicator ``NI'' in Addendum B of
this final rule with comment period to identify them as subject to
public comment. We are specifically requesting public comment on our
methodology for simulating the median costs for these new CY 2011 CPT
codes, in addition to public comments on the payment rates themselves.

[[Page 71849]]

Table 11--CY 2009 Code Combinations, Frequencies, and Simulated Median Costs for New CY 2011 Cardiac Catheterization-Related Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Second Required CY 2009 Third Required CY 2009
First Required CY 2009 CPT Code (At least one CPT Code (Any number of
CPT Code (Only one unit unit of each code; any units of at least one
CY 2011 CPT Code of one and only one code number of codes or units code; any number of Frequencies CPT Medians
must appear on the of a code may be on the units of all codes
claim) claim) permitted)
Column A Column B Column C Column D Column E Column F
--------------------------------------------------------------------------------------------------------------------------------------------------------
93451 93501 ........................ ........................ 3,552 1,493
93452 93510 93543 ........................ 1,055 2,876
93511 93555 ........................ ....................... .......................
93514 ........................ ........................ ....................... .......................
93524 ........................ ........................ ....................... .......................
93453 93526 93543 ........................ 225 3,182
93527 93555 ........................ ....................... .......................
93528 ........................ ........................ ....................... .......................
93529 ........................ ........................ ....................... .......................
93454 93508 93545 ........................ 7,852 2,497
........................ 93556 ........................ ....................... .......................
93455 93508 93545 ........................ 1,683 2,673
........................ 93556 ........................ ....................... .......................
........................ 93539 ........................ ....................... .......................
........................ 93540 ........................ ....................... .......................
93456 93508 93501 ........................ 914 2,502
........................ 93545 ........................ ....................... .......................
........................ 93556 ........................ ....................... .......................
93457 93508 93545 ........................ 159 3,923
........................ 93556 ........................ ....................... .......................
........................ 93539 ........................ ....................... .......................
........................ 93540 ........................ ....................... .......................
........................ 93501 ........................ ....................... .......................
93458 93510 93545 ........................ 112,395 2,663
93511 93555 ........................ ....................... .......................
93514 93556 ........................ ....................... .......................
93524 93543 ........................ ....................... .......................
93459 93510 93545 93539 23,352 2,911
93511 93555 93540 ....................... .......................
93514 93556 ........................ ....................... .......................
93524 93543 ........................ ....................... .......................
93460 93526 93545 ........................ 20,697 3,135
93527 93556 ........................ ....................... .......................
93528 93543 ........................ ....................... .......................
93529 93555 ........................ ....................... .......................
93461 93526 93545 93539 3,445 3,382
93527 93556 93540 ....................... .......................
93528 93543 ........................ ....................... .......................
93529 93555 ........................ ....................... .......................
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 71850]]

(9) Cranial Neurostimulator and Electrodes (APC 0318)
For CY 2011, the AMA CPT Editorial Panel created a new CPT code
64568 (Incision for implantation of cranial nerve (e.g., vagus nerve)
neurostimulator electrode array and pulse generator) and indicates that
it describes the services formerly included in the combinations of (1)
CPT code 64573 (Incision for implantation of neurostimulator
electrodes; cranial nerve) and CPT code 61885 (Insertion or replacement
of cranial neurostimulator pulse generator or receiver, direct or
inductive coupling; with connection to a single electrode array); or
(2) CPT code 64573 and CPT code 61886 (Insertion or replacement of
cranial neurostimulator pulse generator or receiver, direct or
inductive coupling; with connection to two or more electrode arrays).
Our standard process for assigning new CPT codes to APCs is to assign
the code to the APC that we believe contains services that are
comparable with respect to clinical characteristics and resources
required to furnish the service. The new CPT code is given a comment
indicator of ``NI'' to identify it as a new interim APC assignment for
the new first year and the APC assignment for the new code is then open
to public comment. In some, but not all, cases, we are able to use the
existing data from established codes to simulate an estimated median
cost for the new code to guide us in the assignment of the new code to
an APC. In the case of the new neurostimulator electrode and pulse
generator implantation CPT code, we were able to use the existing CY
2009 claims and most current cost report data to create a simulated
median cost.
Specifically, to estimate the hospital costs of CPT code 64568
based on its CY 2011 descriptor, we used CY 2009 claims and the most
recent cost report data, using the single and ``pseudo'' single claims
within this data set to simulate the new CY 2011 definition of this
service. Specifically, we selected claims with CPT code 64573 on which
CPT code 61885 or 61886 was also present and consistent with the
description of the new CPT code 64568, and we treated the summed costs
on these claims as if they were a single procedure claim for CPT code
64568. We created an estimated median cost of approximately $22,562 for
CPT code 64568 from 298 single claims to set a final payment rate for
CY 2011 for the new code. We are creating new APC 0318 (Implantation of
Cranial Neurostimulator Pulse Generator and Electrode) for CY 2011, to
which CPT code 64568 is the only procedure assigned. APC 0225
(Implantation of Neurostimulator Electrodes, Cranial Nerve), which
contained only the predecessor CPT code 64573, is deleted effective
January 1, 2011.
We note that because CPT code 64568 is new for CY 2011, it is
identified with comment indicator ``NI'' in Addendum B of this final
rule with comment period to identify it as subject to public comment.
We are specifically requesting public comment on our methodology for
simulating the median cost for this new CY 2011 CPT code, in addition
to public comments on the payment rate itself.
(10) Cardiac and Intensive Cardiac Rehabilitation (APC 0095)
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60566
through 60574), we implemented the provisions of section 144(a) of the
Medicare Improvements for Patients and Providers Act (MIPPA, Pub. L.
110-275). Section 144(a) of Public Law 110-275 amended the Act to
expand Medicare Part B coverage for cardiac rehabilitation (CR) and
intensive cardiac rehabilitation (ICR) services furnished to
beneficiaries with certain conditions, effective January 1, 2010.
Section 144(a) of Public Law 110-275 also expanded coverage for
pulmonary rehabilitation. Section 1861(eee)(4)(C) of the Act provides
for up to 72 one-hour sessions of ICR with up to 6 sessions per day,
over a period of 18 weeks. Medicare limits the number of cardiac
rehabilitation program sessions to a maximum of 2 1-hour sessions per
day, for up to 36 sessions, over up to 36 weeks. Medicare contractors
have the authority to approve additional CR sessions, up to 72 total
sessions, over an additional period of time. Section 144(a)(2) of Pub.
Law 110-275 also includes specific language governing payment for
services furnished in an ICR program under the MPFS, including a
requirement that the Secretary shall substitute the Medicare OPD fee
schedule amount established under the prospective payment system for
hospital outpatient department services under the OPPS.
Last year, we also finalized our requirement that all ICR programs
be approved through the NCD process. Once we have approved an ICR
program or programs through the NCD process, individual sites wishing
to furnish ICR items and services via an approved ICR program may
enroll with their local Medicare contractor to become an ICR program
supplier as outlined in Sec. 424.510. This enrollment is designed to
ensure that the specific sites meet the specific statutory and
regulatory requirements to furnish these services and will provide a
mechanism to appeal a disapproval of a prospective ICR program site.
With regards to billing and payment for CR and ICR services, we stated
that hospital providers will continue to use their CMS Certification
Number (CCN or provider number) and that appeals related to the payment
of claims will follow those established processes.
For CY 2010, we finalized two new HCPCS codes G0422 (Intensive
cardiac rehabilitation; with or without continuous ECG monitoring, with
exercise, per hour, per session) and G0423 (Intensive cardiac
rehabilitation; with or without continuous ECG monitoring, without
exercise, per hour, per session) to describe intensive cardiac
rehabilitation and accompany the CPT codes for cardiac rehabilitation
already recognized for payment under the OPPS: CPT codes 93797
(Physician services for outpatient cardiac rehabilitation; without
continuous ECG monitoring (per session)) and 93798 (Physician services
for outpatient cardiac rehabilitation; with continuous ECG monitoring
(per session)). We finalized payment for all of these HCPCS codes in
APC 0095 with a payment rate of approximately $38 per session. We noted
our belief that hospital costs for a single session would be similar
and that OPPS payment for both CR and ICR services would be provided on
a per session basis (74 FR 60571). Because there were historic claims
data for CR services, we used our standard methodology to estimate a
median cost and $38 payment rate for CR and ICR services.
As discussed in section II.A.2 of this final rule with comment
period, the standard OPPS rate setting methodology we used to establish
a median cost for APC 0095 relies upon converting hospital charges for
CPT codes 97397 and 97398 on claims to costs using hospital-specific
cost-to-charge ratios (CCRs) from the hospital's Medicare cost report
and crosswalking them to claim services based on a ``revenue code-to-
cost center crosswalk'' that matches the revenue codes on a claim to a
hierarchy of cost centers. The OPPS uses this uniform approach to
setting the cost-based relative payment weights for its payment groups,
and these annually updated cost-based weights are the basis for the
prospective payment rates for hospital outpatient services.
In 2008, the results of a study by RTI International (RTI)
commissioned by CMS indicated that cost estimates for CR services may
be under-estimated (``Refining Cost to Charge Ratios for Calculating
APC and MS-DRG Relative Payment Weights: Final Report''

[[Page 71851]]

available at http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/
Refining_Cost_to_Charge_Ratios_200807_Final.pdf). Specifically,
RTI indicated that several changes in cost reporting methods would
result in a more accurate estimated median cost. Accordingly, in
February 2010, CMS established a CR-specific cost center for voluntary
use on the cost report to create a CR-specific CCR and thereby improve
the accuracy of cost estimation. However, we will not have the new cost
report data available for ratesetting until CY 2013. We did not propose
to use interim data from the new cost center to set CY 2011 payment
rates because, as we previously explained, we would have to modify the
data from its submitted form and make assumptions in a methodology that
would be contrary to our principle of using data as submitted by
hospitals in OPPS ratesetting (74 FR 60571 and 73 FR 68525).
Comment: One commenter indicated that the finalized payment of $38
is too low for ICR services, does not cover the extensive cost to
providers to offer these services, and that many providers are closing
due to insufficient payment. The commenter cited the RTI report again
as a source of key recommendations to improve CMS cost estimation
methodology. The commenter indicated that, in comparison to RTI's
finding of about $100 median cost after incorporating all
recommendations, the CMS proposed payment rate of about $39 is
artificially low. The commenter suggested that CMS possesses special
authority to conduct payment evaluations and make changes for services
that are being implemented under national coverage determinations. With
respect to ICR services, the commenter indicated that while more
resources are consumed than during traditional CR programs in terms of
hospital, physician, and patient commitments, ICR services are more
efficacious and yield better outcomes than alternative treatment
measures not only for cardiac conditions but also for comorbidities
such as obesity and diabetes. The commenter stated that Congress
recognized these principles in subjecting ICR programs to a heightened
demonstration of efficacy through a series of measures, as proved
through peer-reviewed literature. The commenter also stated that the
two ICR demonstration programs at Highmark Blue Cross Blue Shield and
Mutual of Omaha evidenced cost savings.
Response: In response to the commenter, we revisited RTI's study.
In further reviewing its recommendations, we agree with the commenter
that payment for CR and ICR services could be improved in this final
rule with comment period. Specifically, we believe that, in addition to
adding the non-standard cost center, we may improve the accuracy of
payment for CR and ICR services by incorporating a second policy that
was recommended in the RTI study. RTI also recommended that we
incorporate a clinic CCR into the ``revenue code-to-cost center
crosswalk'' for cardiac rehabilitation as we did for pulmonary
rehabilitation last year. Therefore, we will add a clinic cost center
to revenue code-to-cost center crosswalk for the hierarchy of cost
centers used to estimate costs from charges for revenue code 0943 for
cardiac rehabilitation. With this revision, the estimated median cost
for CR services rises to $68.08. We are establishing $68.08 as the
median cost for APC 0095 for CR and ICR services. We also believe that
there are other revenue codes for OPPS clinic services that could
include a clinic CCR in their hierarchy, and we will assess potential
changes to the crosswalk for CY 2012.
This policy would follow RTI's general approach of including a
clinic revenue code for services provided in the clinic setting, which
we incorporated last year for pulmonary rehabilitation when we updated
the crosswalk by adding a clinic CCR into the hierarchy for the PR
revenue code 0948 (74 FR 60347). Adding a clinic revenue code to the
crosswalk is consistent with our approach of having up to four tiers in
our hierarchy of cost centers used to apply CCRs to charges by revenue
code on claims data. We also note that the specific new benefits of CR
and PR are similar under the OPPS and that the authorizing statute
defines comparable components for CR, ICR, and PR services, which we
believe supports using a comparable cross-walk approach for these
services.
We appreciate the commenter's information on the efficacy of ICR
programs and their cost effectiveness, but note that this has no
bearing on establishing payments under the OPPS. Also, we disagree with
the commenter that the facility resources required to provide a one
hour session of ICR services differ from the resources required to
provide a one hour session of CR. In our CY 2010 OPPS/ASC final rule
with comment period, we noted our belief that hospital costs for a
single session would be similar and that OPPS payment for both CR and
ICR services would be provided on a per session basis (74 FR 60571).
Therefore, because we believe that CR and ICR services are similar from
a per hour resource perspective, we will continue to assign the CPT
codes for both CR and ICR services per hour to the same APC for CY
2011. However, because we implemented HCPCS codes G0422 and G0423 in CY
2010, we will have historic charge information specific to ICR programs
for CY 2012 ratesetting, and we will reevaluate whether estimated costs
for ICR are sufficiently different from standard CR services to warrant
proposing placement in a different APC. Finally, when the new cost
report information becomes available beginning in CY 2013, we will
reassess placement of CR and ICR in the same APC.
e. 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).
At its February 2010 meeting, the APC Panel recommended that, in
order to support stem cell transplantation, CMS consider creating a
composite APC or custom APC that captures the costs of stem cell
acquisition performed in conjunction with recipient transplantation and
preparation of tissue. In the CY 2011 OPPS/ASC

[[Page 71852]]

proposed rule (75 FR 46208), we indicated that we were accepting this
APC Panel recommendation to consider creating a composite APC or custom
APC that captures the costs of stem cell acquisition performed in
conjunction with recipient transplantation and preparation of tissue,
and would report the results of our assessment to the APC Panel at a
future meeting.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46208), for CY 2011,
we proposed 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 the proposed rule and this final rule with comment
period.
Comment: A number of commenters recommended that we establish new
composite APCs in the clinical areas of cardiac resynchronization
therapy (CRT) and stem cell transplantation. Regarding a request for a
new CRT composite APC, a few commenters stated that a CRT composite is
appropriate, recalling that the APC Panel at its February and August
2009 meetings recommended that we evaluate the implications of the
creation of a new composite APC for CRT and recommended that we
reconsider creating a composite APC or group of composite APCs for CRT.
The commenters were concerned that we have not yet reported back to the
APC Panel with an evaluation or a proposed composite APC for CRT
services. Some commenters noted that the procedures involved with
implantation of CRT, CRT with defibrillator (CRT-D) or CRT with
pacemaker (CRT-P) are never captured in claims data as single bills,
which we use in our standard ratesetting methodology; rather, the
correctly coded CRT services always involve the submission of two CPT
codes on the same claim. These commenters asserted that the CY 2011
proposed rule claims data demonstrate that the percentage of single
claims available for use in CRT ratesetting is very low compared to the
total number of claims submitted for CRT-D or CRT-P services. The
result, the commenters claimed, is payment fluctuations over the years
for APC 0418 (Insertion of Left Ventricular Pacing Electrode), which a
CRT composite APC payment methodology will lessen through a more robust
set of claims.
Several commenters supported the APC Panel's recommendation and
welcomed our acceptance of that APC Panel recommendation to consider
creating a composite APC or custom APC that captures the costs of stem
cell acquisition performed in conjunction with recipient
transplantation and preparation of tissue.
Response: 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, in the CY 2011 OPPS/ASC
proposed rule, we did not propose any new composite APCs for CY 2011 so
that we may monitor the effects of the existing composite APCs on
utilization and payment, similar to our treatment of the composite APC
methodology mentioned in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60391). As indicated below, we have accepted the APC
Panel recommendations to consider composite APCs for CRT, and we will
reconsider whether it would be appropriate to propose in the future
composite APCs for CRT services and evaluate the implications of such a
potential policy change, and report our findings to the APC Panel at a
future meeting. We note that several commenters to the CY 2011 proposed
rule supported that we did not propose any new composite APCs for CY
2011, such as new multiple imaging APCs, without public notice and
comment.
As noted by a few commenters, at its February 2009 meeting, the APC
Panel recommended that CMS evaluate the implications of creating
composite APCs for CRT services with a defibrillator or pacemaker and
report its findings to the APC Panel. The APC Panel also recommended at
its August 2009 meeting that CMS reconsider creating a new composite
APC or group of composite APCs for CRT procedures. While we did not
propose any new composite APCs for CY 2010 or CY 2011, we accepted both
of these APC Panel recommendations, as noted in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60391). We will reconsider
proposing to create composite APCs for CRT services and evaluate the
implications of such a potential policy change, and report our findings
to the APC Panel at a future meeting. As discussed in the 2011 OPPS/ASC
proposed rule (75 FR 46208), we accepted the APC Panel recommendation
made at its February 2010 meeting, that we consider creating a
composite APC or custom APC that captures the costs of stem cell
acquisition performed in conjunction with recipient transplantation and
preparation of tissue. We also will consider bringing other potential
composite APCs to the APC Panel for further discussion.
After consideration of the public comments we received, for CY
2011, we are finalizing, without modification, our proposal 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
final rule with comment period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and
8003)
In the CY 2011 OPPS/ASC proposed rule (75 FR 46208), we proposed 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 2011. For CY
2008, we created these two 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 for observation services 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 through 66649),
the Integrated Outpatient Code Editor (I/OCE) evaluates every claim
received to determine if payment through a composite APC is
appropriate. If

[[Page 71853]]

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 2011 median costs for these composite APCs. We did not
propose to change these criteria for the CY 2011 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 also issued guidance
clarifying the correct method for reporting the starting time for
observation services sections 290.2.2 through 290.5 in the Medicare
Claims Processing Manual (Pub. 100-4), Chapter 4, through Transmittal
1745, Change Request 6492, issued May 22, 2009 and implemented July 6,
2009. We did not propose to change these reporting requirements for the
CY 2011 OPPS.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46209), for CY 2011,
we proposed to continue the extended assessment and management
composite APC payment methodology for APCs 8002 and 8003. We stated in
the proposed rule that 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 proposed to calculate the median costs
for APCs 8002 and 8003 using all single and ``pseudo'' single procedure
claims for CY 2009 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 procedure
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.
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 CY 2009 OPPS/ASC final rule with comment period (73 FR
68684), we added HCPCS code G0384 to the eligibility criteria for
composite APC 8003 for CY 2009.)
As discussed further in section IX. of the proposed rule and this
final rule with comment period, and consistent with our CY 2008, CY
2009, and CY 2010 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 0630), we utilize our methodology that excludes those claims
for visits that are eligible for payment through the two extended
assessment and management composite APCs, that is APC 8002 or APC 8003.
We believe that this approach results in the most accurate cost
estimates for APCs 0604 through 0617 and 0626 through 0630 for CY 2011.
At its February 2010 meeting, the APC Panel recommended that CMS
study the feasibility of expanding the extended assessment and
management composite APC methodology to include services commonly
furnished in conjunction with visits and observation services, such as
drug infusion, electrocardiogram, and chest X-ray. As we indicated in
the proposed rule, we are accepting this recommendation, and we will
share our assessment with the APC Panel at a future meeting. At the
August 2010 APC Panel meeting, a similar recommendation was made that
CMS consider including other services commonly provided with extended
assessment and management services in the extended assessment and
management composite APC. We are accepting this recommendation as well.
In summary, for CY 2011, we proposed to continue to include
composite APCs 8002 and 8003 in the OPPS. We proposed to continue the
extended assessment and management composite APC payment methodology
and criteria that we finalized for CYs 2009 and 2010. We also proposed
to calculate the median costs for APCs 8002 and 8003 using the same
methodology that we used to calculate the medians for composite APCs
8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we used all
single and ``pseudo'' single procedure claims from CY 2009 that met the
criteria for payment of each composite APC and applied the standard
packaging and trimming rules to the claims before calculating the
proposed CY 2011 median costs. The proposed CY 2011 median cost
resulting from this methodology for composite APC 8002 was
approximately $401, which was calculated from 17,398 single and
``pseudo'' single bills that met the required criteria. The proposed CY
2011 median cost for composite APC 8003 was approximately $743, which
was calculated from 201,189 single and ``pseudo'' single bills that met
the required criteria.
Comment: One commenter supported CMS' policy to package payment for
observation care and to not provide additional payment through an
extended assessment and management composite APC payment when
observation services are billed with significant surgical procedures.
According to the commenter, the observation services in such cases are
most likely related to post-procedural recovery, and thus no additional
payment is warranted. The commenter stated that minor procedures with
extended observation care, on the other hand, should be eligible for
additional payment through APCs 8002 and 8003.
Response: We appreciate the commenter's support of our policy not
to allow payment of APC 8002 or 8003 for claims that include a HCPCS
code to which we have assigned status indicator

[[Page 71854]]

``T'' that is reported with a date of service on the same day as or one
day prior to the date of the service associated with HCPCS code G0378.
We agree that payment for such services is included in the payment for
the surgical procedure. It is unclear to us exactly how the commenter
defines minor procedures; however, we do allow payment of APCs 8002 and
8003 when ancillary services with status indicator ``X'' or packaged
services with status indicator ``N'' appear on the same claim as HCPCS
code G0378.
Comment: One commenter recommended that CMS consider adopting the
National Universal Billing Committee (NUBC) guidelines, utilized by
private insurance carriers, which permit payment for observation care
furnished during the time of an inpatient hospital stay that is
subsequently overturned by a hospital's utilization review committee.
Response: This comment is outside of the scope of the proposals in
the CY 2011 OPPS/ASC proposed rule. However, we will consider the
possibility of addressing this concern through other available
mechanisms, as appropriate. We note that we have continued to emphasize
that observation care is a hospital outpatient service, ordered by a
physician and reported with a HCPCS code, like any other outpatient
service. It is not a patient status for Medicare payment purposes.
After consideration of the public comments we received, we are
adopting as final, without modification, our CY 2011 proposal to
continue to include composite APCs 8002 and 8003 in the OPPS and to
continue the extended assessment and management composite APC payment
methodology and criteria that we finalized for CYs 2009 and 2010. We
also are calculating the median costs for APCs 8002 and 8003 using all
single and ``pseudo'' single procedure claims from CY 2009 that meet
the criteria for payment of each composite APC. The final CY 2011
median cost resulting from this methodology for APC 8002 is
approximately $390, which was calculated from 19,156 single and
``pseudo'' single bills that met the required criteria. The final CY
2011 median cost for composite APC 8003 is approximately $707, which
was calculated from 221,246 single and ``pseudo'' single bills that met
the required criteria.
(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 mainly 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.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46210), for CY 2011,
we proposed to continue paying for LDR prostate brachytherapy services
using the composite APC methodology proposed and implemented for CYs
2008, 2009, and 2010. That is, we proposed to use CY 2009 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 through CY 2010 practice, we proposed
not to 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 indicated in the proposed rule that 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 2009 claims data available for the CY 2011
proposed rule, we were able to use 788 claims that contained both CPT
codes and 55875 and 77778 to calculate the median cost upon which the
proposed CY 2011 payment for composite APC 8001 was based. The proposed
median cost for composite APC 8001 for CY 2011 was approximately
$3,265. This is an increase compared to the CY 2010 OPPS/ASC final rule
with comment period in which we calculated a final median cost for this
composite APC of approximately $3,084 based on a full year of CY 2008
claims data. The proposed CY 2011 median cost for this composite APC
was slightly less than $3,604, the sum of the proposed median costs for
APCs 0163 and 0651 ($2,606 + $998), the APCs to which CPT codes 55875
and 77778 map if one service is billed on a claim without the other. We
indicated in the proposed rule that we believe the proposed CY 2011
median cost for composite APC 8001 of approximately $3,265, calculated
from

[[Page 71855]]

claims we believe to be correctly coded, would result in a reasonable
and appropriate payment rate for this service in CY 2011.
Comment: One commenter expressed appreciation for the proposed
payment increase for composite APC 8001 based on an increase in median
costs, and recommended that CMS finalize the proposed CY 2011 payment
rate. Another commenter was concerned that the 788 claims with both CPT
codes 55875 and 77778 were used for development of the proposed CY 2011
payment rate for APC 8001 was an extremely low number of claims
compared to the number of these procedures performed in hospitals for
cancer patients, and encouraged CMS to explore ways to capture more
multiple claims to be used in future ratesetting for composite APC
8001.
Response: We appreciate the commenter's support for our proposed
payment rate for composite APC 8001. Regarding the commenter's concern
with the number of CY 2011 proposed rule claims used for APC 8001
proposed rate, for the CY 2011 final rule with comment period, we have
849 claims that contain both CPT codes 55875 and 77778 to calculate the
median cost of APC 8001 of approximately $3,195. We believe this is a
robust number of claims from which to calculate accurate and
appropriate payment rates for the services assigned to APC 8001. For
all OPPS services, we continue our efforts to use the data from as many
multiple procedure claims as possible, through approaches such as use
of the bypass list and date splitting of claims as described further in
section II.A. of this final rule with comment period, and through
methodologies such as increased packaging and composite APCs.
After consideration of the public comments we received, we are
finalizing, without modification, our proposal to continue paying for
LDR prostate brachytherapy services using the composite APC methodology
implemented for CYs 2008, 2009, and 2010 described above in this
section. The final CY 2011 median cost for composite APC 8001 is
approximately $3,195 calculated from 849 single bills.
(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 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.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46210), for CY 2011,
we proposed to continue to pay for cardiac electrophysiologic
evaluation and ablation services using the composite APC methodology
proposed and implemented for CY 2008, CY 2009, and CY 2010. Consistent
with our CY 2008 through CY 2010 practice, we proposed not to 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 would continue to be calculated
using single procedure claims. As we indicated in the proposed rule, 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.
For CY 2011, using partial year CY 2009 claims data available for
the proposed rule, we were able to use 8,964 claims containing a
combination of group A and group B codes and calculated a proposed
median cost of approximately $10,834 for composite APC 8000. This was
an increase compared to the CY 2010 OPPS/ASC final rule with comment
period in which we calculated a final median cost for this composite
APC of approximately $10,026 based on a full year of CY 2008 claims
data. We indicated in the proposed rule that we believe the proposed
median cost of $10,834 calculated from a high volume of correctly coded
multiple procedure claims would result 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.
Comment: One commenter supported CMS' proposal to continue to pay
for cardiac electrophysiologic evaluation and ablation services using
composite APC 8001, as the most efficient and

[[Page 71856]]

effective way to use claims data for these services.
Response: We appreciate the supportive comment, and agree that
composite APC 8001 promotes efficient use of resources and results in
accurate and appropriate payment rates for cardiac electrophysiologic
evaluation and ablation services.
After consideration of the public comments received, we are
finalizing our proposal, without modification, to continue to pay for
cardiac electrophysiologic evaluation and ablation services using the
composite APC methodology implemented for CY 2008, CY 2009, and CY
2010. For this final rule with comment period, we were able to use
9,736 claims from CY 2009 containing a combination of group A and group
B codes and calculated a final CY 2011 median cost of approximately
$10,673 for composite APC 8000. Table 12 below lists the groups of
procedures upon which we based composite APC 8000 for CY 2011.

Table 12--Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite APC 8000
Is Based
----------------------------------------------------------------------------------------------------------------
Final single
Codes used in combinations: At least one in group A and one in CY 2011 CPT code CY 2011 Final CY 2011
group B code APC SI (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 93620 0085 Q3
and 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 93650 0085 Q3
function, 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)
In the CY 2011 OPPS/ASC proposed rule (75 FR 46211), we proposed 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 2011. We refer readers to the April 7,
2000 OPPS final rule with comment period (65 FR 18452 through 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.
As discussed in detail in section X. of the CY 2011 OPPS/ASC
proposed rule (75 FR 46298 through 46301) and this final rule with
comment period, for CY 2011, we proposed to use a provider-specific two
tiered payment approach for partial hospitalization services that
distinguishes payment made for services furnished in a CMHC from
payment made for services furnished in a hospital. Specifically, we
proposed one APC for partial hospitalization program days with three
services furnished in a CMHC (APC 0172, Level I Partial Hospitalization
(3 services) for CMHCs) and one APC for days with four or more services
furnished in a CMHC (APC 0173, Level II Partial Hospitalization (4 or
more services) for CMHCs). We proposed that the payment rates for these
two APCs be based upon the median per diem costs calculated using data
only from CMHCs. Similarly, we proposed one APC for partial
hospitalization program days with three services furnished in a
hospital (APC 0175, Level I Partial Hospitalization (3 services) for
Hospital-Based PHPs), and one APC for days with four or more services
furnished in a hospital (APC 0176, Level II Partial Hospitalization (4
or more services) for Hospital-Based PHPs). We proposed that the
payment rates for these two APCs be based on the median per diem costs
calculated using data only from hospitals.
Because our longstanding policy of limiting the aggregate payment
for specified less resource-intensive mental health services furnished
on the same date to the payment rate for the most resource-intensive of
all outpatient mental health treatment, we proposed to set the CY 2011
payment rate for APC 0034 (Mental Health Services Composite) at the
same rate as we proposed for APC 0176, which is the maximum partial
hospitalization per diem payment. As we stated in the CY 2011 OPPS/ASC
proposed rule (75 FR 46212), 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 0176. 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
proposed that those specified mental health services would be assigned
to APC 0034. We proposed that APC 0034 would have the same payment rate
as APC 0176 and that the hospital would continue to be paid one unit of
APC

[[Page 71857]]

0034. The I/OCE currently determines, and we proposed for CY 2011 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 0176 per diem rate for partial hospitalization for all
of the specified mental health services furnished by the hospital on
that single date of service.
Comment: Many commenters strongly supported the CMS proposal to use
the hospital-based partial hospitalization APC 0176 (4 or more units of
service) as the daily payment cap for less intensive mental health
services provided in hospital outpatient departments.
Response: We appreciate the commenters' support for utilizing the
hospital-based partial hospitalization APC 0176 (4 or more units of
service) as the daily payment cap for less intensive mental health
services provided in hospital outpatient departments. We continue to
believe that the costs associated with administering a partial
hospitalization program represent the most resource intensive of all
outpatient mental health treatment, and we do not believe CMS should
pay more for a day of individual mental health services under the OPPS.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to limit the
aggregate payment for specified less intensive outpatient mental health
services furnished on the same date by a hospital to the payment for a
day of partial hospitalization, specifically APC 0176.
(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 recommendations 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: (1) Ultrasound; (2) computed
tomography (CT) and computed tomographic angiography (CTA); and (3)
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 13 of the CY
2010 OPPS/ASC final rule with comment period (74 FR 60403 through
60407).
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 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).
At its February 2010 meeting, the APC Panel recommended that CMS
continue providing analysis on an ongoing basis of the impact on
beneficiaries of the multiple imaging composite APCs as data become
available. In the CY 2011 OPPS/ASC proposed rule, we indicated that we
are accepting this recommendation and will provide the requested
analysis to the APC Panel at a future meeting.
In summary, for CY 2011, we proposed 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. The proposed CY 2011 payment rates for the five multiple
imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC
8008) were based on median costs calculated from the partial year CY
2009 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 2010 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 appeared in Table 8 of the proposed
rule. (We note that, consistent with our proposal in section II.A.1.b.
of the proposed rule to add CPT code 70547 (Magnetic resonance
angiography, neck; without contrast material(s)) to the list of bypass
codes for CY 2011, we also proposed to add CPT code 70547 to the list
of proposed OPPS imaging family services overlapping with HCPCS codes
on the proposed CY 2010 bypass list.) We integrated the identification
of imaging composite ``single session'' claims, that is, claims with
multiple imaging procedures within the same family on the same date of
service, into the creation of ``pseudo'' single procedure 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

[[Page 71858]]

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 2.7 million potential composite cases from our
ratesetting claims data, or well over half of all eligible claims, to
calculate the proposed CY 2011 median costs for the multiple imaging
composite APCs. We listed in Table 7 of the proposed rule the HCPCS
codes that would be subject to the proposed multiple imaging composite
policy and their respective families for CY 2011.
Comment: A large number of commenters were concerned with the
composite APC policy for imaging services, and recommended separate
payment for all imaging procedures regardless of whether multiple
procedures are performed during the same session. Commenters supported
the fact that CMS did not propose new composite APCs or to expand the
multiple imaging composite APC policy for CY 2011, opining that no
expansion of the imaging composite APCs should be considered until
substantial data on the initial five APCs are available for public
review and comment. The commenters further recommended that future
proposals for expanding the imaging composite APCs should be subject to
public notice and comment. A few commenters suggested that CMS
undertake robust data collection to determine if imaging costs are
correctly captured. Other commenters appreciated our proposed increases
in payment for multiple imaging composite APCs. However, the commenters
were concerned that the multiple imaging composite APC payment rates
remained insufficient to reflect the current costs of diagnostic
imaging procedures, particularly when more than two imaging procedures
are performed. One commenter recommended that we evaluate whether the
methodology used to establish existing composite APCs results in
payments that accurately reflect all of the resources needed to perform
these services. A number of commenters voiced agreement with the APC
Panel's recommendation that we continue to provide analyses on an
ongoing basis of the impact on beneficiaries of the multiple imaging
composite APC methodology as data becomes available.
One commenter requested separate payment when imaging services of
the same modality are performed on the same day but at different times.
The commenter claimed that for some patients, such as cancer or trauma
patients, such protocols are essential for safety and efficacy, and
that the same economies of scale that can be achieved by performing
multiple imaging procedures during the same sitting may not be realized
if a significant amount of time passes between the first and subsequent
imaging procedures. The commenter recommended that CMS implement a
modifier or condition code to distinguish between imaging services
performed during the same sitting and imaging services performed at
different times on the same day.
Another commenter opposed the multiple imaging composite APCs,
stating that the policy penalizes specific imaging services under the
guise of creating incentives for efficiencies, which will not be
achieved because payment rates are already very low under the Deficit
Reduction Act. The commenter further asserted that hospitals will be
encouraged to perform imaging studies on separate days to avoid payment
under composite APCs, thus causing inconvenience to Medicare
beneficiaries.
Response: We appreciate the support for our decision not to propose
any new composite APCs for CY 2011, and for the proposed CY 2011
payment rate for the multiple imaging composite APCs. We would subject
any future proposals on composite APCs to public notice and opportunity
for comment through our normal rulemaking process. As noted previously,
we are accepting the APC Panel recommendation to provide analysis on an
ongoing basis of the impact on beneficiaries of the multiple imaging
composite APCs as data become available, which would include analysis
of whether imaging costs are correctly captured. We do not agree with
the comments that the composite APC payment rates are insufficient to
reflect the current costs of diagnostic imaging procedures when more
than two imaging procedures are performed. As we stated in the CY 2010
OPPS/ASC final rule with comment period (74 FR 60400), we do not
believe that, in aggregate, OPPS payment for multiple imaging services
will be inadequate under the multiple imaging composite APC payment
methodology so as to limit beneficiary access, even considering the
minority of cases in which hospitals provide more than two imaging
procedures on a single date of service. The median costs upon which the
payment rates for the multiple imaging composite APCs are based are
calculated using CY 2009 claims that would have qualified for composite
payment, including those with only two imaging procedures and those
with substantially higher numbers of imaging procedures. Payment based
on a measure of central tendency is a principle of any prospective
payment system. In some individual cases, payment exceeds the average
cost and in other cases payment is less than the average cost. On
balance, however, payment should approximate the relative cost of the
average case, recognizing that, as a prospective payment system, the
OPPS is a system of averages. Moreover, consistent with our policy
regarding APC payments made on a prospective basis, multiple composite
imaging services are subject to the outlier provision of section
1833(t)(5) of the Act for high cost cases meeting specific conditions.
We also do not agree with the commenters that the multiple imaging
composite APC payment methodology will result in hospitals requiring
patients who need more than two imaging procedures to return for
additional sittings on other days. As we stated in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68562), we do not believe that,
in general, hospitals would routinely and for purposes of financial
gain put patients at unnecessary risk of harm from radiation or
contrast exposure, or inconvenience them or risk lack of timely follow-
up to the point of making them return to the hospital on separate days
to receive medically necessary diagnostic studies. However, we again
note that we do have the capacity to examine our claims data for
patterns of fragmented care. If we were to find a pattern in which a
hospital appears to be fragmenting imaging services across multiple
days for individual beneficiaries, we could refer it for review by the
Quality Improvement Organizations (QIOs) with respect to the quality of
care furnished, or for review by the Program Safeguard Contractors of
claims against the medical record, as appropriate to the circumstances
we found.
As we stated in the CY 2010 final rule with comment period (74 FR
60399), we do not agree with the commenters that multiple imaging
procedures of the same modality provided on the same date of service
but at different times

[[Page 71859]]

should be exempt from the multiple imaging composite payment
methodology. As we indicated in the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68565) and the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60399), we believe that composite payment is
appropriate even when procedures are provided on the same date of
service but at different times because hospitals do 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 these circumstances would receive imaging procedures
at different times during a single prolonged hospital outpatient
encounter. The efficiencies that may be gained from providing multiple
imaging procedures during a single session are achieved in ways other
than merely not having to reposition the patient. 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 the payment rates for the multiple imaging composite
APCs. Therefore, we do not believe it is necessary or appropriate for
hospitals to report imaging procedures provided on the same date of
service but during different sittings any differently than they would
report imaging procedures performed consecutively in one sitting with
no time in between the imaging services. In addition, for the above
reasons, we do not believe it is necessary to implement a modifier or
condition code to distinguish between such cases.
We disagree with the commenter that multiple imaging composite APCs
penalize specific imaging services rather than create incentives for
efficiencies, and that efficiencies cannot be achieved because payment
rates are already very low under the DRA. As stated in the CY 2009
OPPS/ASC final rule with comment period (72 FR 66613) and previously in
this section, we believe that 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. The DRA does not reduce OPPS payment rates for imaging, so
we do not agree that this contributes in any way to payment rates for
imaging services that are too low under the OPPS.
After consideration of the public comments we received, we are
adopting our CY 2011 proposal, without modification, 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. The CY 2011 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 CY 2009 claims 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). Using the same ratesetting
methodology described in the CY 2011 OPPS/ASC proposed rule (75 FR
46213), we were able to identify 1.9 million ``single session'' claims
out of an estimated 2.9 million potential composite cases from our
ratesetting claims data, or well over half of all eligible claims, to
calculate the final CY 2011 median costs for the multiple imaging
composite APCs.
Table 13 below lists the HCPCS codes that will be subject to the
multiple imaging composite policy and their respective families for CY
2011. We note that we have updated Table 13 to reflect HCPCS coding
changes for CY 2011. Specifically, we added CPT code 74176 (Computed
tomography, abdomen and pelvis; without contrast material), CPT code
74177 (Computed tomography, abdomen and pelvis; with contrast
material(s)), and CPT code 74178 (Computed tomography, abdomen and
pelvis; without contrast material in one or both body regions, followed
by contrast material(s) and further sections in one or both body
regions) to the CT and CTA family. These codes are new for CY 2011. We
also added codes C8931 (Magnetic resonance angiography with contrast,
spinal canal and contents), C8932 (Magnetic resonance angiography
without contrast, spinal canal and contents), C8933 (Magnetic resonance
angiography without contrast followed by with contrast, spinal canal
and contents), C8934 (Magnetic resonance angiography with contrast,
upper extremity), C8935 (Magnetic resonance angiography without
contrast, upper extremity), and C8936 (Magnetic resonance angiography
without contrast followed by with contrast, upper extremity), to the
MRI and MRA family. These codes were recognized for OPPS payment in the
October 2010 OPPS Update (Transmittal 2050, Change Request 7117, dated
September 17, 2010). The HCPCS codes listed in Table 13 are assigned
status indicated ``Q3''' in Addendum B to this final rule with comment
period to identify their status as potentially payable through a
composite APC. Their composite APC assignment is identified in Addendum
M to this final rule with comment period. Table 14 below lists the OPPS
imaging family services that overlap with HCPCS codes on the CY 2011
bypass list.

Table 13--OPPS Imaging Families and Multiple Imaging Procedure Composite
APCs
------------------------------------------------------------------------

------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
CY 2011 APC 8004 (Ultrasound composite) CY 2011 Approximate APC
median
cost = $188
------------------------------------------------------------------------
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
------------------------------------------------------------------------
CY 2011 APC 8005 (CT and CTA without CY 2011 Approximate APC
Contrast Composite)* Median Cost = $416
------------------------------------------------------------------------
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.
74261..................................... Ct colonography, w/o dye.
74176..................................... Ct angio abd & pelvis.
------------------------------------------------------------------------

[[Page 71860]]

CY 2011 APC 8006 (CT and CTA with Contrast CY 2011 Approximate APC
Composite) Median Cost = $622
------------------------------------------------------------------------
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.
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.
74262..................................... Ct colonography, w/dye.
75635..................................... Ct angio abdominal arteries.
74177..................................... Ct angio abd & pelv w/
contrast.
74178..................................... Ct angio abd & pelv 1+
regns.
------------------------------------------------------------------------
* 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
------------------------------------------------------------------------
CY 2011 APC 8007 (MRI and MRA without CY 2011 Approximate APC
Contrast Composite)* Median Cost = $699
------------------------------------------------------------------------
70336..................................... Magnetic image, jaw joint.
70540..................................... Mri orbit/face/neck w/o dye.
70544..................................... Mri angiography head w/o
dye.
70547..................................... Mri 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.
C8932..................................... MRA, w/o dye, spinal canal.
C8935..................................... MRA, w/o dye, upper extr.
------------------------------------------------------------------------
CY 2011 APC 8008 (MRI and MRA with CY 2011 Approximate APC
Contrast Composite) Median Cost = $984
------------------------------------------------------------------------
70549..................................... Mri angiograph neck w/o & w/
dye.
70542..................................... Mri orbit/face/neck w/dye.
70543..................................... Mri orbt/fac/nck w/o & w/
dye.
70545..................................... Mri angiography head w/dye.
70546..................................... Mri angiograph head w/o & w/
dye.
70548..................................... Mri 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.
C8931..................................... MRA, w/dye, spinal canal.
C8933..................................... MRA, w/o & w/dye, spinal
canal.
C8934..................................... MRA, w/dye, upper extremity.
C8936..................................... MRA, w/o & w/dye, upper
extr.
------------------------------------------------------------------------
* 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..
------------------------------------------------------------------------

[[Page 71861]]

Table 14--OPPS Imaging Family Services Overlapping With HCPCS Codes on
the CY 2011 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..................................... Mri angiography head w/o
dye.
70551..................................... Mri brain w/o dye.
72141..................................... Mri neck spine w/o dye.
72146..................................... Mri chest spine w/o dye.
72148..................................... Mri lumbar spine w/o dye.
73218..................................... Mri upper extremity w/o dye.
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. 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
payment for multiple interrelated services into a single payment
creates incentives for providers to furnish services in the most
efficient way by enabling hospitals to manage their resources with
maximum flexibility, thereby encouraging long-term cost containment.
For example, where there are a variety of supplies that could be used
to furnish a service, some of which are more expensive than others,
packaging encourages hospitals to use the least expensive item that
meets the patient's needs, rather than to routinely use a more
expensive item. Packaging also encourages hospitals to negotiate
carefully with manufacturers and suppliers to reduce the 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. Packaging payments into larger
payment bundles promotes the stability of payment for services over
time. Finally, packaging also may reduce the importance of refining
service-specific payment because there is more opportunity for
hospitals to average payment across higher cost cases requiring many
ancillary services and lower cost cases requiring fewer ancillary
services. For these reasons, packaging payment for services that are
typically ancillary and supportive to a primary service has been a
fundamental part of the OPPS since its implementation in August 2000.
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 codes'' are conditionally packaged. We refer readers to
section XIII.A.1. of this final rule with comment period 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. 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.''
Hospitals include HCPCS codes and 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 provide other guidance. The appropriateness of the OPPS
payment rates depend on the quality and completeness of the claims data
that hospitals submit for the services they furnish to our Medicare
beneficiaries.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610
through 66659), we adopted the packaging of payment for items and
services in seven categories 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: (1) Guidance services; (2) image processing services; (3)
intraoperative services; (4) imaging

[[Page 71862]]

supervision and interpretation services; (5) diagnostic
radiopharmaceuticals; (6) contrast media; and (7) 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 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.
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 final rule with comment period.
We recognize that 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. Therefore, we welcomed
public comments regarding our packaging proposals for the CY 2011 OPPS.
b. Packaging Issues
(1) CMS Presentation of Findings Regarding Expanded Packaging at the
February 2010 APC Panel Meeting
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 I.E. of this final rule with comment
period, the APC Panel advises CMS on the clinical integrity of payment
groups and their weights, and the APC Panel has had a Packaging
Subcommittee, now renamed the Subcommittee for APC Groups and Status
Indicator (SI) Assignments, that 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. The
APC Panel has considered packaging issues at several earlier meetings.
For discussions of earlier APC Panel meetings and recommendations, we
refer readers to previously published hospital OPPS/ASC proposed and
final rules on the CMS Web site at: http://www.cms.gov/FACA/05_
AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
During the August 5-6, 2009 meeting of the APC Panel, we agreed to
continue to provide the Panel with information on the impact of
increased packaging on Medicare beneficiaries building on the analyses
we had presented at the February 2009 APC Panel meeting. We did not
share additional packaging data with the APC Panel at the August 2009
meeting because we had already presented analysis comparing CY 2007 and
CY 2008 claims data and believed the APC Panel's discussions would
benefit from analyses of CY 2007 and CY 2009 claims data. We indicated
that we planned to incorporate analysis of CY 2009 claims into the
information we would bring to the APC Panel for its review at the
winter 2010 meeting.
At the February 17-18, 2010 APC Panel meeting, we presented
subsequent analyses that compared CY 2007 claims processed through
September 30, 2007 to CY 2009 claims processed through September 30,
2009. Similar to the initial analysis that we presented to the APC
Panel in 2009, the HCPCS codes that we compared are the ones that we
identified in the CY 2008 OPPS final rule with comment period as
fitting into one of the packaging categories, including HCPCS codes
that became effective for CY 2009. As noted above, the seven packaging
categories in our CY 2008 packaging proposal are guidance services,
image processing services, intraoperative services, imaging supervision
and interpretation services, diagnostic radiopharmaceuticals, contrast
media, and observation services. We note that, similar to the initial
analysis, we did not make any adjustments for inflation, changes in the
Medicare population, changes in payment due to APC recalibration,
changes in frequency due to known changes in code definitions and
coding practices, or changes in the population of hospitals paid under
the OPPS. A summary of these data analyses is provided below.
Analysis of the diagnostic radiopharmaceuticals category showed
that the diagnostic radiopharmaceuticals were billed 1 percent more
often during the first 9 months of CY 2009 as compared to the first 9
months of CY 2007. We noticed very little change in the frequency of
hospitals reporting one or more diagnostic radiopharmaceutical between
CY 2007 and CY 2009. Beginning in CY 2008, we required reporting of a
radiolabeled product (including diagnostic radiopharmaceuticals) when
billing a nuclear medicine procedure, and we believe that the modest
increases in frequency of reporting diagnostic radiopharmaceuticals and
the percentage of reporting hospitals generally reflects hospitals
adhering to our reporting requirements.
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 2009. 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 approximately the same amount for nuclear
medicine procedures and diagnostic radiopharmaceuticals during the
first 9 months of CY 2009, when payment for diagnostic
radiopharmaceuticals was packaged. This suggests that frequency and
payment for nuclear medicine procedures remained fairly steady between
the first 9 months of CY 2007 and the first 9 months of CY 2009.
We conducted the same analysis for guidance services that were
packaged beginning in CY 2008. Analysis of the guidance category (which
includes image-guided radiation therapy services) showed that guidance
services were billed 8 percent more often during CY 2009 as compared to
CY 2007 and that the number of hospitals reporting

[[Page 71863]]

guidance services declined by 1 percent between CY 2007 and CY 2009.
We also analyzed the same data for all contrast services that were
packaged beginning in CY 2008. Analysis of this category showed that
contrast services were billed 9 percent more often during CY 2009 as
compared to CY 2007 and that the number of hospitals reporting contrast
media increased by 1 percent between CY 2007 and CY 2009.
Analysis of the data for image supervision and interpretation
services showed that these services were billed 10 percent more often
during CY 2009 as compared to CY 2007 and, similar to guidance services
and contrast agents, the number of hospitals reporting image
supervision and interpretation services declined by 1 percent between
CY 2007 and CY 2009.
We also analyzed the first 9 months of CY 2007 and CY 2009 data
related to all image processing services that were packaged beginning
in the CY 2008 OPPS. This analysis was difficult because there were
significant changes to the CPT codes in this category for CY 2009. For
example, the procedures described by CPT codes 93320 (which describes
spectral Doppler and which we classified as an intraoperative service)
and 93325 (which describes color flow Doppler and which we classified
as an image processing service) are now reported using one
comprehensive code, CPT 93306, which describes complete transthoracic
echocardiogram with spectral and color flow Doppler. In an effort to
isolate the effects of the changes to coding from our analysis, we
removed the data for any codes experiencing significant modifications
and observed a 7 percent decrease from CY 2007 to CY 2009 in the
frequency of image processing services billed. However, as we pointed
out to the APC panel, these numbers are not necessarily the majority of
services in the category or reflective of behavioral changes for the
services of interest. When we included the image processing services
with the revised coding for CY 2009, the data showed a 61-percent
decrease in the billing of these services between CY 2007 and CY 2009
and a 6-percent decrease in the number of hospitals reporting these
services during the same timeframe.
Our analysis of changes in intraoperative services between CY 2007
and CY 2009 showed a 5-percent decrease in the billing of these
services and a 5-percent decrease in the number of hospitals reporting
these services during the same timeframe.
As we did for our presentation at the February 2009 APC Panel
meeting, we also found that cardiac catheterization and other
percutaneous vascular procedures that would typically be accompanied by
Intravascular Ultrasound (IVUS), Intracardiac echocardiography (ICE),
and Fractional flow reserve (FFR) (including IVUS, ICE, and FFR) were
billed approximately 376,000 times in CY 2007 and approximately 473,000
times in CY 2009, representing an increase of 26 percent in the number
of services and items billed between CY 2007 and CY 2009. IVUS, ICE,
and FFR are intraoperative and image supervision and interpretation
services that have received a lot of attention. Further analysis showed
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 paid separately. In the first 9
months of CY 2009, the OPPS paid hospitals approximately $1.4 billion
for cardiac catheterization and other percutaneous vascular procedures
and IVUS, ICE, and FFR, when payments for IVUS, ICE, and FFR were
packaged. This is a 58-percent increase in payment from CY 2007. Using
the first 9 months of claims data for both CY 2007 and CY 2009, we
calculated an average payment per service or item provided of $2,430 in
CY 2007 and $3,048 in CY 2009 for cardiac catheterization and other
related services, an increase of 25 percent in average payment per item
or service. This observed increase in average payment per service is
most likely attributable to the observed increase in the frequency of
these cardiac catheterization and other percutaneous vascular
procedures that would typically be accompanied by IVUS, ICE and FFR
(including IVUS, ICE, and FFR) billed in CY 2009.
We also cannot determine how much of the 58-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 annual APC
recalibration and typical fluctuations in service frequency. However,
we believe that all of these factors contributed to the notable
increase in aggregate payment between CY 2007 and CY 2009.
We further analyzed the first 9 months of CY 2007 and CY 2009
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 3.8 million times in CY
2009, representing a decrease in frequency of approximately 6 percent
between CY 2007 and CY 2009. These numbers represented each instance
where a radiation oncology service or a radiation oncology guidance
service was billed. Our analysis indicated that hospitals were paid
over $811 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 2009, when payments for
radiation oncology guidance were packaged, hospitals were paid over
$827 million for radiation oncology services under the OPPS. This $827
million included packaged payment for radiation oncology guidance
services and represented a 2-percent increase in aggregate payment from
CY 2007 to CY 2009. Using the first 9 months of claims data for both CY
2007 and CY 2009, we calculated an average payment per radiation
oncology service or item billed of $199 in CY 2007 and $216 in CY 2009,
representing a per service increase of 8 percent from CY 2007 to CY
2009.
At the February 2009 meeting, the APC panel also requested that CMS
provide separate analyses of radiation oncology guidance, by type of
radiation oncology service, specifically, intensity modulated radiation
therapy (IMRT), stereotactic radiosurgery (SRS), brachytherapy, and
conventional radiation therapy. The results from these analyses are
discussed below:
We conducted these analyses on the specified categories using the
first 9 months of claims and cost report data from CY 2007, before the
expanded packaging went into effect, and the first 9 months of claims
and cost report data from CY 2009--the second year of packaged payment
for the radiation guidance services. We found that IMRT services were
billed approximately 670,000 times during the first 9 months of CY
2007. During this same timeframe, Medicare paid hospitals approximately
$227 million for IMRT services. In comparison, during the first 9
months of CY 2009, IMRT services were billed 713,000 times,
representing an increase in frequency of 6 percent. Further, during the
first 9 months of CY 2009, when payments for radiation oncology
guidance were packaged into the payments for the separately paid IMRT
procedures, we paid hospitals over $298 million, representing a 31-
percent increase in payments from CY 2007 to CY 2009.
We further analyzed the data for SRS services and found that, for
the first 9 months of CY 2007 and CY 2009, SRS services were billed
approximately

[[Page 71864]]

9,000 and 13,000 times, respectively, representing an increase in
frequency of 43 percent. Aggregate Medicare payments for these SRS
services increased by 24 percent from $34 million in CY 2007 to $42
million in CY 2009.
Our review of the data for brachytherapy services revealed that,
for the first 9 months of CY 2007 and CY 2009, these services were
billed approximately 10,000 and 11,000 times, respectively,
representing an increase in frequency of 8 percent. During this
timeframe, aggregate Medicare payments for these brachytherapy services
increased by 1 percent from $9.8 million in CY 2007 to $9.9 million in
CY 2009.
Our review of the data for conventional radiation therapy services
revealed that conventional radiation therapy services were billed 1.4
million times and 1.1 million times, in the first 9 months of CY 2007
and CY 2009, respectively, representing a decrease in frequency of 20
percent. During this timeframe, aggregate Medicare payments for these
conventional radiation services decreased by 10 percent from $189
million in CY 2007 to $169 million in CY 2009.
In reviewing our early CY 2009 claims data, which reflect the
second year of packaged payment for services in the packaged categories
identified in the CY 2008 OPPS/ASC final rule with comment period, we
generally observed increases in the billing and reporting of packaged
services described by these categories, with the caveat that we were
not able to untangle the various causes of declines in the image
processing category, indicating steady beneficiary access to these
categories of supporting and ancillary services. In aggregate, our
analysis showed that hospitals do not appear to have significantly
changed their reporting patterns as a result of the expanded packaging
policy nor do the analyses suggest that hospitals have stopped offering
these supporting and ancillary services with the primary diagnostic and
therapeutic modalities that they support.
(2) Packaging Recommendations of the APC Panel at Its February 2010
Meeting
During the February 2010 APC panel meeting, the APC Panel accepted
the report of the Packaging Subcommittee (the Subcommittee for APC
Groups and Status Indicator (SI) Assignments beginning in August 2010)
heard several presentations related to packaged services, discussed the
deliberations of the Packaging Subcommittee, and made six
recommendations. The Report of the February 2010 meeting of the APC
Panel may be found at the Web site at: http://www.cms.gov/FACA/05_
AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
To summarize, the APC Panel made the following recommendations
regarding packaging of payment under the CY 2011 OPPS:
1. That CMS consider whether CPT code 31627 (Bronchoscopy, rigid or
flexible, including fluoroscopic guidance, when performed; with
computer-assisted, image-guided navigation) (also known as
electromagnetic navigational bronchoscopy (ENB)) should be packaged or
paid separately; if it should be paid separately, CMS should
investigate the appropriate APC assignment. The Panel suggested that
CMS use bronchoscopic ultrasonography (EBUS) as a clinical example for
comparison. (Recommendation 1)
2. That CMS make CPT code 96368 (Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify substance or drug); concurrent
infusion) and CPT code 96376 (Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug); subcutaneous or intramuscular,
each additional sequential intravenous push of the same substance/drug
provided in the facility (List separately in addition to code for
primary procedure)) separately payable in the CY 2011 OPPS/ASC final
rule with comment period at an appropriate payment rate as determined
by CMS. (Recommendation 2)
3. That CMS conditionally package payment for the guidance
procedures that would accompany breast needle placement (specifically
CPT code 19290 (Preoperative placement of needle localization wire,
breast); CPT code 19291 (Preoperative placement of needle localization
wire, breast; each additional lesion (List separately in addition to
code for primary procedure)); CPT code 19295 (Image guided placement,
metallic localization clip, percutaneous, during breast biopsy/
aspiration (List separately in addition to code for primary
procedure)); CPT code 77031 (Stereotactic localization guidance for
breast biopsy or needle placement (e.g., for wire localization or for
injection)), each lesion, radiological supervision and interpretation);
CPT code 77032 (Mammographic guidance for needle placement, breast
(e.g., for wire localization or for injection), each lesion,
radiological supervision and interpretation); CPT code 76942
(Ultrasonic guidance for needle placement (e.g., biopsy, aspiration,
injection, localization device), imaging supervision and
interpretation)) when these guidance services are performed separately.
(Recommendation 3)
4. The Panel encourages the public to submit common clinical
scenarios involving currently packaged HCPCS codes and recommendations
of specific services or procedures for which payment would be most
appropriately packaged under the OPPS for review by the Packaging
Subcommittee members. (Recommendation 4)
5. That CMS continue providing analysis on an ongoing basis of the
impact on beneficiaries of the multiple imaging composite APCs as data
become available. (Recommendation 5)
6. That the work of the Packaging Subcommittee continue.
(Recommendation 6)
We address each of these recommendations in the discussion that
follows:
Recommendation 1
At the APC Panel's February 2010 meeting, the manufacturer asserted
that use of ENB technology during a bronchoscopy procedure enables
access to distal lesions that are otherwise not accessible without use
of the ENB technology. The manufacturer also argued that without
separate payment for ENB, hospitals would likely not adopt the
technology and the population that would likely benefit from ENB would
not have access to this technology. In response to the manufacturer's
assertion, the APC Panel asked CMS to consider whether CPT code 31627,
which describes Electromagnetic Navigational Bronchoscopy (ENB), should
be packaged or paid separately; and if it should be paid separately,
the APC Panel asked CMS to investigate the appropriate APC assignment.
CPT code 31627 is new for CY 2010, and we assigned it a new interim
status indicator of ``N'' in our CY 2010 OPPS/ASC final rule with
comment period based on our packaging policies (discussed in section
II.A.3.a. of this final rule with comment period). We stated in the
proposed rule that we considered the information available to us for
CPT code 31627 and believed that the code describes a procedure that is
supportive of and ancillary to the primary diagnostic or therapeutic
modality, in this case, bronchoscopy procedures (for example, CPT code
31622 (Bronchoscopy, rigid or flexible, including fluoroscopic
guidance, when performed: Diagnostic, with cell washing, when performed
(separate procedure)). We stated that we currently package payment for
CPT code 31627,

[[Page 71865]]

and that we continued to believe that this is the appropriate treatment
of that code. Therefore, in the CY 2011 OPPS/ASC proposed rule (75 FR
46223), we proposed to package payment for CPT code 31627. As we have
discussed in past rules, in making our decision on whether to package a
service or pay for it separately we consider a variety of factors,
including whether the service is normally provided separately or in
conjunction with other services because it supports those services. By
proposing to packaging payment for this procedure, we would be treating
it in the same manner as similar computer-assisted, navigational
diagnostic procedures that are supportive of and ancillary to a primary
diagnostic or therapeutic modality.
In its recommendation regarding whether to make separate payment
under an APC for CPT code 31627, the APC Panel suggested that we use
bronchoscopic ultrasonography as a clinical example for comparison. We
considered CPT code 31620 (Endobronchial ultrasound (EBUS) during
bronchoscopic diagnostic or therapeutic intervention(s) (List
separately in addition to code for primary procedure)) to be a suitable
comparison because it describes another bronchoscopic procedure in
which a guidance technology (that is, ultrasonography) is used to
achieve the therapeutic benefit of the procedure. Similar to our
proposed payment for CPT code 31627, payment for CPT code 31620 is
currently packaged into the primary modality with which it would be
appropriately billed. In CY 2008, as part of our increased packaging
proposal, we identified the EBUS procedure as an intraoperative
ancillary service that would typically be reported in conjunction with
an independent service. In addition, similar to CPT code 31627, CPT
code 31620 is an add-on code that, in accordance with CPT reporting
guidelines, would only be appropriately reported in conjunction with
specified bronchoscopy procedures with which it would be performed.
Based on these general comparisons of CPT code 31627 to the EBUS
procedure described by CPT code 31620, we stated in the proposed rule
that we believe that our proposal to package payment for CPT code 31627
would be consistent with the packaging approach that we have adopted in
recent years. As we have stated in past rules with regard to EBUS, we
also fully expected that, to the extent these services are billed
appropriately, payment for the primary service would reflect the cost
of the packaged ENB procedure. For example, in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68584), we discussed packaging of
CPT code 31620; we state that we observed increased packaged costs
associated with the services into which CPT code 31620 had been
packaged, which increased the APC payment rates for bronchoscopy
procedures.
In summary, we stated in the proposed rule that we continued to
believe that CPT code 31627 describes a procedure that is ancillary to
and supportive of the primary service with which it is often billed.
Therefore, in the CY 2011 OPPS/ASC proposed rule, for CY 2011, we
proposed to maintain CPT code 31627 as a packaged service.
The APC Panel at its August 23-24, 2010 meeting heard presentations
from the public and discussed whether ENB should remain packaged for CY
2011. We discuss the public comments we received and the Panel
recommendation, and provide our response to the public comments on ENB,
in section II.A.3.b.(2) of this final rule with comment period.
Recommendation 2
In the CY 2011 OPPS/ASC proposed rule (75 FR 46223), we stated that
we did not accept the APC Panel's recommendation that CMS make CPT code
96368 and CPT code 96376 separately payable for the CY 2011 OPPS. We
consider a variety of factors in making a decision whether to package a
service or pay for it separately, including whether the service is
normally provided separately or in conjunction with other services and
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. In
the proposed rule, we stated that CPT codes 93676 and 96368 describe
concurrent and sequential services that have always been packaged under
the OPPS. We stated that from the inception of the OPPS through CY
2006, we paid for drug administration under the OPPS using HCPCS
alphanumeric codes that packaged payment for concurrent infusions and
administration of new drugs into the payment for the alphanumeric codes
for drug administration. In CY 2007, we adopted CPT codes for drug
administration services. The CY 2007 CPT codes did not separately
recognize administration of new drugs during the same encounter with a
separate CPT code. Therefore, administration of a new drug continued to
be packaged into payment for the service of which it was a part.
Moreover, for CY 2007, CPT code 90768 (Intravenous infusion, for
therapy, prophylaxis, or diagnosis; concurrent infusion), which was
replaced by CPT code 96368, was packaged under the OPPS, continuing the
longstanding practice of not making separate payment for concurrent
infusion. We also pointed out that, during our implementation of this
new CPT code, while it was new for CY 2007, it represented the same
procedures as described by the previous drug administration HCPCS code
set, and, as a result, the payment data for these procedures would be
captured in the claims that were available to us for ratesetting
purposes.
Similarly, CPT codes 96368 and 96376, which were created by CPT in
2008, are replacement codes for those same procedures that were
described by the previous drug administration code sets and their
associated data would be captured in our claims database. We proposed
that the costs for these services, concurrent infusion and additional
push of the same drug, would continue to be packaged into payment for
the drug administration codes with which they are reported. In the
proposed rule, we indicated that we considered a variety of factors,
including whether the service is normally provided separately or in
conjunction with other services. CPT codes 96368 and 96376 describe
concurrent and sequential drug administration services that, in
accordance with CPT guidelines, are always provided in association with
an initial drug administration service. Therefore, we indicated that we
believe that they continue to be appropriately packaged into the
payment for the separately payable services that they usually
accompany. For example, CPT code 96376 would be billed with CPT code
96374 (Therapeutic, prophylactic, or diagnostic injection; intravenous
push, single or initial substance/drug), which describes an initial
intravenous push code and, as a result, the cost for CPT code 96376
would be reflected in the total cost for CPT code 96374. Moreover, we
said that payment for these services has always been packaged into
payment for the drug administration services without which they cannot
be correctly reported.
In the proposed rule, we stated that these two codes each describe
services that, by definition, are always provided in conjunction with
an initial drug administration code and that we believed that these
services have been packaged since the inception of the OPPS. We further
stated that we continued to believe that they are appropriately
packaged into the payment for the separately payable services without
which, under CPT

[[Page 71866]]

guidelines and definition, they cannot be appropriately reported.
Therefore, for CY 2011, we proposed to continue our established policy
of making packaged payment for CPT code 96368 and CPT code 96376, and
we proposed to assign them a status indicator of ``N.''
Comment: Commenters objected to CMS' proposal to package payment
for CPT codes 96376 and 96368 into payment for the services with which
they are furnished. The commenters believed that the resources
associated with CPT code 96376 are similar to those associated with CPT
code 96374 (Therapeutic, prophylactic, or diagnostic injection (specify
substance or drug); intravenous push, single or initial substance/drug)
(status indicator ``S''). They also believed that while the resources
associated with CPT code 96368 somewhat resemble the resources
associated with CPT code 96366 (Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify substance or drug); each additional
hour (List separately in addition to code for primary procedure)
(status indicator ``S''), they are more similar to the services
described by CPT code 96375 (Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug); each additional sequential
intravenous push of a new substance/drug (List separately in addition
to code for primary procedure) (status indicator ``S''). The commenters
believed that the fact that CPT codes 96376 and 96368 are add-on codes
does not preclude them from being separately paid.
Several commenters disagreed with CMS' statement that these
services have been packaged since the inception of the OPPS. They
stated that hospitals formerly used a single CPT code for reporting IV
push administrations, CPT code 90784. They further stated that this
code was reported and paid separately for each and every IV push of
either the same or different medications. The commenters indicated that
when the CPT coding system changed, the payment for the ``initial''
successor CPT code (90774 [now 96374]) remained virtually identical to
the rate for the previous code. Similarly, they indicated that services
now reported with CPT code 96368 were historically reported under CPT
codes 90780 and 90781 and received separate payment.
Response: As we discussed in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66787 through 66788) and in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68674), in deciding whether to
package a service or pay for it separately, we consider 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. CPT codes 96376 and 96368, by
definition, are always provided in association with other drug
administration services and the costs of these services are highly
likely to be mapped to the separately paid codes with which they are
performed and reported. For these reasons, we continue to believe that
they are most appropriately packaged under the OPPS. Therefore, we are
not accepting the APC Panel's recommendation to pay them separately.
Furthermore, we do not agree with the commenters that the services
described by CPT code 96376 are similar to those described by CPT code
96374. CPT code 96374 is an initial intravenous push code, and, per CPT
instructions, special billing guidelines apply. Commonly, this service
requires the initial establishment of intravenous access in a patient,
a resource-intensive task performed by hospital staff using special
supplies. In contrast, CPT code 96376 is an add-on code and is reported
for each additional sequential intravenous push of the same substance/
drug. In the case of this sequential service, the patient already has
established intravenous access, so we would expect the service to
require fewer hospital resources. In addition, we do not agree with
commenters that the services described by CPT code 96368 are similar to
those described by CPT code 96375. CPT code 96368 describes a
concurrent intravenous infusion while CPT code 96375 describes a
sequential intravenous push, and we would expect these services to
require different hospital resources because the services require
different medical supplies, require different nursing skills, and
require different amounts of staff time.
With regard to the comment that the predecessor codes were
separately payable until CY 2008 under the OPPS, we acknowledge that
CPT code 90784 (Therapeutic, prophylactic or diagnostic injection
(specify material injected; intravenous) was separately paid from the
inception of the OPPS until its deletion, which was effective December
31, 2005, and might have been reported for an additional sequential
intravenous push of the same substance, although the code was not
defined as being for an additional sequential push. Similarly, CPT code
C8952 (Therapeutic, prophylactic or diagnostic injection; intravenous
push of each new substance/drug), which was effective January 1, 2006,
and was deleted effective December 31, 2006, also was separately paid
during the period that it was effective and might also have been
reported for an additional sequential intravenous push of the same
substance, although the code was not defined as being for an additional
sequential push. CPT code 90776 (Therapeutic, prophylactic or
diagnostic injection (specify substance or drug); each additional
sequential intravenous push of the same substance/drug provided in a
facility (list separately in addition to code for primary procedure)),
which was effective January 1, 2008, and deleted effective December 31,
2008, is the first code to specify that the service is an additional
sequential intravenous push of the same substance/drug and CPT code
90776 was packaged. Hence, before the creation of CPT code 90776, no
code existed to specifically report an additional sequential
intravenous push of the same substance; therefore, when the incidental
service was furnished, there was no separate payment specifically for
this service. We believe that hospital charges for the separately
payable codes for the initial administration would have included a
charge for this service, and therefore, the payment for it would have
been packaged into payment for the separately paid code for the initial
administration service. However, we acknowledge that it is possible
that hospitals reported the service using separately paid codes that
were not defined to be an additional sequential intravenous push of the
same substance, in which case we would have paid for the service under
the code that was reported. When CPT code 96376, which replaces CPT
code 90776, was created effective January 1, 2009, we assigned it the
packaged status of its predecessor code, CPT code 90776. For the
reasons we articulate above, we disagree with the commenter that
predecessor codes were separately payable and continue to believe that
we should continue our policy of packaging the payment for the service
reported by this code.
With respect to CPT code 96368, we disagree with the commenters
that the service has been paid separately since the inception of the
OPPS. CPT code 96368 was made effective January 1, 2009, and for CYs
2009 and 2010, we assigned this code to status indicator ``N'' to
indicate that it is a packaged code under the OPPS. Prior to 2009, CPT
code 96368 was described by its predecessor CPT code 90768
((Intravenous infusion, for therapy, prophylaxis, or diagnosis (specify

[[Page 71867]]

substance or drug); concurrent infusion), which was also assigned to
status indicator ``N'' from January 1, 2006 through December 30, 2008.
Prior to January 2006, there was no specific code that accurately
described this service, and as a result, payment for this service was
packaged. Therefore, we do not believe that we have paid separately in
the past for concurrent intravenous infusions for therapeutic,
prophylaxis, or diagnostic purposes under the OPPS.
After consideration of the APC Panel's recommendation and the
public comments that we received, we are finalizing our CY 2011
proposal, without modification, to continue to assign HCPCS codes 96368
and 96376 to status indicator ``N'' to indicate that payment for these
codes is packaged into the payment for the primary service with which
they are reported.
Recommendation 3
In the CY 2011 OPPS/ASC proposed rule (75 FR 46224), we indicated
that we were not accepting the APC Panel's recommendation that we
propose to conditionally package CPT codes 19290 (Preoperative
placement of needle localization wire, breast), 19291 (Preoperative
placement of needle localization wire, breast; each additional lesion
(List separately in addition to code for primary procedure)), 19295
(Image guided placement, metallic localization clip, percutaneous,
during breast biopsy/aspiration (List separately in addition to code
for primary procedure)), 77031 (Stereotactic localization guidance for
breast biopsy or needle placement (e.g., for wire localization or for
injection)), each lesion, radiological supervision and interpretation),
77032 (Mammographic guidance for needle placement, breast (e.g., for
wire localization or for injection), each lesion, radiological
supervision and interpretation), and 76942 (Ultrasonic guidance for
needle placement (e.g., biopsy, aspiration, injection, localization
device), imaging supervision and interpretation). During the APC
Panel's February 2010 meeting, we shared with the Packaging
Subcommittee our most recent claims data for the guidance procedures
that would accompany breast needle placement, demonstrating that, for
some of these services, the code was billed by itself up to 25 percent
of the time. While the Packaging Subcommittee broadly discussed
clinical scenarios in which these services may be billed separately, it
remains unclear to us why these services are being performed separately
and whether they should be paid separately. We believe that these
services typically are performed in conjunction with surgical
procedures involving the breast and, therefore, are appropriately
packaged. Therefore, we indicated that we were not accepting the APC
Panel's recommendation that we conditionally package payment for these
guidance procedures when they are performed separately.
For CY 2011, we proposed to maintain the unconditional packaged
payment status for these procedures. Specifically, we proposed to
package payment, indicated by a status indicator of ``N,'' for CPT
codes 19290, 19291, 19295, 77031, 77032, and 76942, into the primary
modality with which they would be appropriately billed. However,
observing such a sizable percentage of services that are the only
service appearing on a claim for a packaged item, especially when these
services do not receive separate payment, led us to encourage the
public to submit any clinical scenarios in their public comments
involving these services that show the circumstances under which these
services may be appropriately billed without a primary procedure that
is furnished on the same date.
Comment: Commenters asked that CMS accept the APC Panel's February
2010 recommendation to conditionally package the placement of needle
localization wires and the supporting procedures. Specifically, they
asked that CMS permit CPT codes 19290, 19291, 19295, 77031, 77032, and
76942 to be paid when they are not furnished with a service to which we
have assigned a payable status indicator (for example, ``S,'' ``T,''
``V,'' and ``X'').
Commenters noted that CMS has found that these services are
furnished without a base procedure approximately 25 percent of the
time. They indicated that they believed that this occurs because the
patient is taken to a freestanding radiology center or ASC (which may
or may not be located on the hospital campus) with which the hospital
has a collaborative arrangement for the non-hospital entity to perform
the base procedure and that therefore the hospital does not bill for
the base procedure. The commenters believed that the hospitals should
be paid for the service that they furnish in these circumstances and,
therefore, CMS should change the status of the procedure to
conditionally packaged.
Commenters indicated that it is becoming increasingly common for a
patient to have a radiographic marker (not a wire exiting the skin,
which has the potential for bleeding and infection) on one day, and to
have a stereotactic or ultrasound wire localization breast biopsy on a
different day. This technique permits intraoperative x-ray verification
that the MRI targeted lesion has been removed. The commenters indicated
that this is becoming increasingly common with the growing use of
breast MRI. They stated that, in addition, some patients undergo image-
guided percutaneous placement of a radioactive pellet which is
identified days later at the time of surgery using an intraoperative
hand held gamma probe. Some surgeon and radiology groups have found
that this separation of placement of localization ``wire'' from the
surgical procedure has facilitated scheduling so that any difficulties
or delays in the localization do not translate into delay in the
operating room. Moreover, they stated that some patients with locally
advanced breast cancer benefit from placement of multiple radiographic
markers around the tumor prior to initiating neoadjuvant chemotherapy
because the newer chemotherapy regimens have become so effective at
shrinking aggressive locally advanced breast cancers that surgeons are
faced with performing lumpectomies on patients with no clinically or
radiographically detectable breast cancer. The commenters stated
further that while, in many cases, residual calcifications combined
with the initial marker placed at the time of the needle biopsy are
sufficient for localization, in some cases, it is necessary to
delineate the extent of the primary tumor using several percutaneously
placed markers. The commenters indicated that, in these cases, the
markers are placed after the initial breast biopsy but months before
the patient's definitive surgery.
Response: After further analysis, we agree that it is appropriate
to pay separately for the placement of CPT code 19295 (Image guided
placement, metallic localization clip, percutaneous, during breast
biopsy/aspiration (List separately in addition to code for primary
procedure)) when it is not reported on a claim with any other
separately paid procedure with a status indicator of ``S,'' ``T,''
``V,'' or ``X.'' This makes CPT code 19295 an ``STVX-packaged code.''
As already discussed, 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. We are convinced by the
clinical scenarios provided by the commenter that it is appropriate for
a metallic localization clip to be inserted at some point significantly
prior to the procedure for which the localization is needed. Therefore,
separate payment for the performance of the procedure

[[Page 71868]]

described by CPT code 19295 will be made in those circumstances when
the hospital does not report another separately paid procedure with a
status indicator of ``S,'' ``T,'' ``V,'' or ``X'' on the same claim.
CPT code 19295 is used to report the placement of a radiographic marker
(not a wire exiting the skin, which has the potential for bleeding and
infection).
However, we continue to believe that it remains appropriate to
package payment for CPT codes 19290, 19291, 77031, 77032, and 76942
into the payment for the procedures of which these services are a part.
CPT codes 19290 and 19291 may be used to report the placement of
external wires, which, the commenters note, carry a risk of bleeding
and infection, and, therefore, they are not appropriately performed on
a different date than the primary procedure of which they are a part.
With regard to CPT code 76942, the clinical scenario the commenters
presented does not apply to this code, and the commenters did not
present an additional clinical scenario to support the need to pay
separately for this service. In addition, while hospitals reported CPT
codes 77031 and 77032 on claims without any other procedure with a
status indicator of ``S,'' ``T,'' ``V,'' or ``X'' approximately 21
percent and 20 percent of time, respectively, the definitions of the
codes do not fit the clinical scenarios for which the commenters
presented convincing arguments, and the commenters presented no
additional clinical scenarios that supported separate payment for these
codes. For these reasons, we believe that it is inappropriate to make
separate payment that may encourage hospitals to furnish CPT codes
19290, 19291, 77031, 77032, and 76942 without also providing the
primary service.
After considering the APC Panel's recommendation and the public
comments we received on this issue, we believe that it is appropriate
to pay separately for CPT code 19295 when it is not furnished on the
same date as a procedure that is separately paid and, therefore, we
have assigned it a status indicator of ``Q1'' (packaged when reported
with a procedure with a status indicator of ``S,'' ``T,'' ``V,'' or
``X''; otherwise separately paid), and have assigned CPT code 19295 to
APC 0340 (Minor Ancillary Procedures), for which the median cost for CY
2011 is $48.72. We chose APC 0340 because, in the absence of cost data
for the service for CY 2011, we believe that the resources required to
furnish the service are most similar to the resources required to
furnish other separately paid minor ancillary services. However, we
continue to believe that payment for CPT codes 19290, 19291, 77031,
77032, and 76942 should be made as part of the payment for the
procedures with which these codes are reported and, therefore, for CY
2011, we are retaining the status indicator of ``N'' for these codes.
Recommendation 4
In the CY 2011 OPPS/ASC proposed rule (75 FR 46224), we indicated
that we were accepting the APC Panel's recommendation to continue to
encourage submission of common clinical scenarios involving currently
packaged HCPCS codes to the Packaging Subcommittee for its ongoing
review. We also encouraged recommendations from the public on specific
services or procedures whose payment would be most appropriately
packaged under the OPPS. Additional detailed suggestions for the
Packaging Subcommittee could be submitted by e-mail to
[email protected] with Packaging Subcommittee in the subject line.
Recommendation 5
In the CY 2011 OPPS/ASC proposed rule (75 FR 46224), we indicated
that we were accepting the APC Panel's recommendation that CMS provide
information to the APC Panel on the impact of the creation of the
imaging composite APCs on services to beneficiaries. We will present
information on the impact of the imaging composites to the APC Panel at
its winter CY 2011 meeting. Information on the impact of the creation
of the imaging composites and our proposal with regard to the imaging
composite APCs was discussed in detail in section II.A.2.e.(5) of the
proposed rule. Our discussion of the imaging composite APCs is
contained in section II.A.2.e.(5) of this final rule with public
comment period.
Recommendation 6
The Packaging Subcommittee of the APC Panel was established to
review packaging issues. In the CY 2011 OPPS/ASC proposed rule (75 FR
46224), we indicated that we were accepting the APC Panel's
recommendation that the Packaging Subcommittee remain active until the
next APC Panel meeting. That meeting occurred on August 23-24, 2010,
and resulted in a recommendation to broaden the function of the
Packaging Subcommittee and revise its name to Subcommittee for APC
Groups and Status Indicator (SI) Assignments. We refer readers to our
discussion of Recommendation 4 in section II.A.3.b.(2) of this final
rule with comment period.
(3) Packaged Services Addressed by the August 2010 APC Panel
Recommendations and Other Issues Raised in Public Comments
The APC Panel met again on August 23-24, 2010 to hear public
presentations on the proposals set forth in the CY 2011 OPPS/ASC
proposed rule. The APC Panel's Packaging Subcommittee reviewed the
packaging status of several CPT codes and reported its findings to the
APC Panel. The full report of the August 23-24, 2010 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 made the following eight
recommendations:
1. The Panel recommends that Current Procedural Terminology (CPT)
code 31627, Bronchoscopy, rigid or flexible, including fluoroscopic
guidance, when performed; with computer-assisted, image-guided
navigation (List separately in addition to code for primary
procedure[s]), continue to be assigned a status indicator of ``N.''
2. The Panel recommends that CMS provide claims data at the Panel's
winter 2012 meeting about CPT code 31627, Bronchoscopy, rigid or
flexible, including fluoroscopic guidance, when performed; with
computer-assisted, image-guided navigation (List separately in addition
to code for primary procedure[s]), for the Panel's consideration.
3. The Panel recommends that CMS assign CPT 0191T, Insertion of
anterior segment aqueous drainage device, without extraocular
reservoir; internal approach, to APC 0673, Level V Anterior Segment Eye
Procedures, on the basis of its clinical similarity with both CPT
0192T, Insertion of anterior segment aqueous drainage device, without
extraocular reservoir; external approach, and HCPCS code 66180, Aqueous
shunt to extraocular reservoir (e.g., Molteno, Schocket, Denver-
Krupin).
4. The Panel recommends that the Packaging Subcommittee be renamed
the Subcommittee for APC Groups and Status Indicator (SI) Assignments.
5. The Panel requests that CMS provide data for all unconditionally
packaged items and services that appear by themselves on separate bills
in outpatient claims data to the Subcommittee for APC Groups and SI
Assignments.
6. The Panel encourages the public to submit common clinical
scenarios

[[Page 71869]]

involving currently packaged HCPCS codes and recommendations of
specific services or procedures for which payment would be most
appropriately packaged under the Outpatient Prospective Payment System
(OPPS) for review by the Subcommittee for APC Groups and Status
Indicator (SI) Assignments.
7. The Panel recommends that Judith Kelly, R.H.I.T., R.H.I.A.,
C.C.S., be named chair of the Subcommittee for APC Groups and SI
Assignments.
8. The Panel recommends that the work of the Subcommittee for APC
Groups and Status Indicator (SI) Assignments continue.
Our response to the APC Panel's recommendations resulting from its
August 23-24, 2010 public meeting, a summary of the public comments we
received on the proposed rule for related topics, and our responses to
those public comments follow:
Recommendation 1--Packaged Status of CPT Code 31627 (Electromagnetic
Navigational Bronchoscopy (ENB))
Comment: Commenters asked that CMS pay separately for ENB and that
CMS assign it to APC 0415 with a status indicator of ``T''. Another
commenter asked that CMS create a composite APC for ENB that would
establish a separate payment when ENB is performed on the same date as
CPT codes 31625 (Bronchoscopy, rigid or flexible, including
fluoroscopic guidance, when performed; with bronchial or endobronchial
biopsy(s), single or multiple sites), 31626 (Bronchoscopy, rigid or
flexible, including fluoroscopic guidance, when performed; with
placement of fiducial markers, single or multiple), 31628
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when
performed; with transbronchial lung biopsy(s), single lobe), or 31629
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when
performed; with transbronchial needle aspiration biopsy(s), trachea,
main stem and/or lobar bronchus(i)). The commenters believed that such
a composite APC would ensure that the payment would include the full
costs of the bronchoscopy and the service described by CPT code 31627.
One commenter stated that it is inconsistent for CMS to package
payment for ENB when CMS pays separately for services that are very
similar. The commenter described in detail how ENB is most clinically
similar to CPT code 31636 (Bronchoscopy, rigid or flexible, including
fluoroscopic guidance, when performed; with placement of bronchial
stent(s) (includes tracheal/bronchial dilation as required), initial
bronchus), which is separately paid under the OPPS. The commenter
further stated that both procedures use a computer for registration and
use a bronchoscope to facilitate access for either a guide wire or
catheter. In both procedures, once the guide wire or catheter is in
place, then either a stent or a fiducial marker is placed. In addition,
the commenter noted that CPT code 19103 (Biopsy of breast;
percutaneous, automated vacuum assisted or rotating biopsy device,
using imaging guidance) is not packaged, notwithstanding that it uses
imaging to guide the needle to the lesion for biopsy and is similar to
ENB where the previously obtained CT scan is used to plan the pathway
to the lung lesion and then the ENB catheter is used to reach the
lesion for biopsy. The commenter stated that ENB is different from the
other computer-assisted navigational procedures that CMS has packaged
because, for example, those procedures use a computer only to assist
with coordinate determination (for example, CPT 61795 (Stereotactic
computer-assisted volumetric (navigational) procedure, intracranial,
extracranial, or spinal (List separately in addition to code for
primary procedure)) or anatomy determination (for example, CPT code
20985 (Computer-assisted surgical navigational procedure for
musculoskeletal procedures, image-less (List separately in addition to
code for primary procedure)) but do not describe the steering of a
catheter through an airway of the lung for the purpose of a biopsy or
treatment. The commenter disagreed with the APC Panel that CPT code
31620 (Endobronchial ultrasound (EBUS) during bronchoscopic diagnostic
or therapeutic intervention(s) (List separately in addition to code for
primary procedure)) is a comparable procedure because they stated that
ENB, unlike EBUS, does not produce an image, is not an ancillary
procedure and does not enable a biopsy or placement of a marker for
radiation therapy. The commenter believed that the definition of CPT
code 31627 as an add-on code that can only be correctly reported with a
primary procedure, does not justify packaging payment for the code into
the payment for the primary procedure with which it is furnished
because CMS routinely pays separately for add-on codes.
Several commenters noted that physicians are reimbursed for both
the bronchoscopy and CPT code 31627 when they perform both and that
several physician organizations support that separate payment should be
made for CPT code 31627. Commenters also disagreed that payment for the
primary service would reflect the cost of the packaged ENB procedure
because they believed that a study performed in 2005 found the cost of
ENB to be approximately $2,700 but the payment for bronchoscopy is much
less than $2,700. Other commenters believed that packaging ENB violates
the 2 times rule because CMS proposed to package ENB under a standard
bronchoscopy procedure which is reimbursed under APC 0076 with a
proposed payment of $719.84, although they believed that ENB costs
$2,875.50, which is more than two times the highest median in APC 0076
(CPT code 31899 (Unlisted procedure, trachea, bronchi) at $1,247.56).
In addition, the commenter stated that all Medicare Administrative
Contractor medical directors are covering and making payment for ENB.
In addition, the commenters stated that Administrative Law Judges have,
on multiple occasions, overturned denials of separate payment for ENB
and have ordered CMS to pay for ENB in addition to standard
bronchoscopy. In addition, the commenter stated that all Medicare
Administrative Contractor (MAC) Medicare Directors are covering and
making payment for ENB.
Response: For the CY 2011 OPPS, we proposed to continue to package
the payment for ENB into the payment for the bronchoscopy to which we
believe that it is ancillary and supportive (75 FR 46223). The APC
Panel met on August 23-24, 2010, to discuss the CMS proposed rule and
recommended that CMS continue to package payment for CPT code 31627
into payment for the procedure with which it is performed and asked
that CMS bring claims data on the cost of CPT code 31627 to the APC
Panel's winter 2011 meeting for review. The full set of APC Panel
recommendations that resulted from the Panel's August 23-24, 2010
meeting is provided in this section.
After consideration of all of the information provided by
commenters on this issue, and discussing the issue with the APC Panel
at its August 23-24, 2010 meeting, we are accepting the APC Panel's
Recommendation 1 to continue to package payment for CPT code 31627 into
the payment for the major separately paid procedure with which it is
reported for CY 2011. In addition, we are accepting the APC Panel's
Recommendation 2, discussed below, that CMS bring claims data to the
winter 2011 APC Panel meeting.
We continue to believe that packaging payment for ENB into payment
for the procedure in which it is furnished is appropriate because CPT
code 31627

[[Page 71870]]

describes the computer assisted image guided navigation that is
reported in addition to a specified range of bronchoscopy codes. As
such, we believe that it is an ancillary and dependent service that
enhances and supplements another service. The CPT code does not
describe an independent service that can be reported alone.
We do not believe that CPT code 31627 describes a service that is
similar to the services described by CPT code 31636 or 19103 because
CPT code 31627 is neither for placement of a stent (CPT code 31636) nor
for a biopsy (CPT code 19103). Similarly, we do not agree that ENB is
significantly different from the services described by CPT codes 61795
and 20985 and from EBUS. The commenter stated that these navigation
codes are unlike ENB (CPT code 31627 (Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when performed; with computer-
assisted, image-guided navigation (List separately in addition to code
for primary procedure[s])) because ENB requires steering a catheter
through an airway of the lung for the purpose of a biopsy or treatment.
While a catheter may be used to accomplish localization of the target
during the ENB procedure, when the services described by CPT codes
61795 and 20985 are utilized, another method of localization of the
target is utilized. For example, when CPT code 20985 (Computer-assisted
surgical navigational procedure for musculoskeletal procedures, image-
less (List separately in addition to code for primary procedure)) is
performed, an infra-red, electromagnetic or other form of tracker may
be utilized for localization of the target. Like CPT codes 61795 and
20985, ENB is an add-on code that adds computer-assisted navigation to
the primary procedure, which, in the case of ENB, is a bronchoscopy.
We believe that ENB is an enhancement to the bronchoscopy with
which it must be performed and as such is an ancillary and dependent
service in the same manner that CPT code 31620 (EBUS) is an ancillary
and supportive procedure. Both of these procedures enable the
bronchoscopy with which they are performed to be more effective. We
agree with the APC Panel that EBUS is the most suitable comparison
because it describes another bronchoscopic procedure in which a
guidance technology (that is, ultrasonography) is used to achieve the
therapeutic benefit of the procedure. Similar to our proposed payment
for CPT code 31627, payment for CPT code 31620 is currently packaged
into the primary modality with which it would be appropriately billed.
In CY 2008, as part of our increased packaging proposal, we identified
the EBUS procedure as an intraoperative ancillary service that would
typically be reported in conjunction with an independent service. In
addition, similar to CPT code 31627, CPT code 31620 would only be
appropriately reported in conjunction with specified bronchoscopy
procedures with which it would be performed. Like EBUS, CPT code 31627,
ENB is not an independent separately furnished procedure.
We agree that the status of CPT code 31627 as an add-on code does
not, of its own accord, justify packaged payment for the service as is
evidenced, as the commenter noted, by separate payment under the OPPS
for many add-on services. However, the status of the code as an add-on
code supports the view that the procedure is a service that is always
furnished in addition to another procedure and cannot be performed
independently. We recognize that the Medicare Physician Fee Schedule
(MPFS) pays separately for CPT code 31627, as it does for all add-on
codes, but the MPFS and the OPPS are very different payment systems.
Each is established under a different set of statutory and regulatory
principles and the policies established under the physician fee
schedule do not have bearing on the payment policies under the OPPS.
With regard to the commenter's view that the costs of ENB cannot be
packaged into payment for a bronchoscopy because a study shows the cost
of ENB to be $2,700 or $2,875.50, depending on the commenter, while the
proposed payment CMS proposed for CY 2011 for a bronchoscopy assigned
to APC 0076 is $719.84, we note that we will develop, analyze, and
provide to the APC Panel at its winter 2011 meeting, the cost and
frequency data we derive from the CY 2010 claims for CPT code 31627 for
purposes of illuminating consideration of whether the costs of ENB are
being reflected in the claims for the service with which they are
furnished. With regard to making a composite APC for ENB that would
establish a separate payment for ENB when it is performed on the same
date as the services that are reported using CPT code 31625, 31626,
31628 or 31629, it is unclear whether ENB is a good candidate for a
composite APC because composite APCs usually make payment for two
separately paid procedures that are commonly performed together, and
CPT code 31627 is currently a packaged service.
With regard to the comment that packaging ENB is a violation of the
2 times rule, we note that a 2 times rule violation can exist only
within an APC and ENB has not been assigned to an APC because it is
packaged and hence there is no application of the 2 times rule. We
refer readers to section III. B. of this final rule with comment period
for a more complete discussion of the 2 times rule.
With regard to the argument that CMS should pay separately for ENB
because MAC medical directors cover it and may have made separate
payment for it, and that Administrative Law Judges may have overturned
denials of separate payment for ENB is not relevant to whether the
payment for it should be packaged into the payment for the bronchoscopy
to which it is ancillary and supportive.
After consideration of the public comments we received on this
issue and the APC Panel's August 2010 recommendation on ENB, we are
packaging payment for the service represented by CPT code 31627 into
payment for the procedure with which it is performed for the CY 2011
OPPS.
Recommendation 2--Developing and Sharing Cost Data for ENB
We accept the APC Panel's recommendation to provide cost data on
ENB, and we will provide the APC Panel with cost and frequency data at
the winter 2011 APC Panel meeting for the Panel's use in providing CMS
with a recommendation for CY 2012.
Recommendation 3--APC Assignment for CPT Code 0192T
We are accepting the APC Panel's recommendation. We refer readers
to section III.D. of this final rule with comment period for a
discussion of CPT code 0192T.
Recommendation 4--Name and Function of the Packaging Subcommittee
We agree with the APC Panel's recommendation and have changed the
name and function of the committee to include the assessment of the
content of APCs as well as the appropriate status indicator for each
CPT code, including but not limited to the decision of whether, and if
so when, to package payment for the service into payment for the
services with which it is furnished. The Packaging Subcommittee will be
renamed the ``Subcommittee for APC Groups and Status Indicator (SI)
Assignments.''
Recommendation 5
We agree and will, at the winter 2011 APC Panel meeting, furnish
data about the frequency with which hospitals report unconditionally
packaged HCPCS

[[Page 71871]]

codes on claims without another separately paid procedure.
Recommendation 6
We support the APC Panel's recommendation that the public submit
common clinical scenarios involving currently packaged HCPCS codes and
make recommendations of specific services or procedures for which
payment would be most appropriately packaged under the OPPS for review
by the Subcommittee for APC Groups and Status Indicator (SI)
Assignments.
Recommendation 7--Chair of the Subcommittee for APC Groups and Status
Indicator (SI) Assignments
We are accepting the APC Panel's recommendation that Judith Kelly,
R.H.I.T., R.H.I.A., C.C.S., be named chair of the Subcommittee for APC
Groups and Status Indicator (SI) Assignment.
Recommendation 8
We are accepting the APC Panel's recommendation that the work of
the Subcommittee for APC Groups and Status Indicator (SI) Assignments
continue. We are continuing the work of the APC Panel Subcommittee for
APC Groups and Status Indicator (SI) Assignments, and we appreciate the
Subcommitee's expertise and experience regarding packaging under the
OPPS and the valuable advice the Subcommittee continues to provide to
us. We will continue to bring to the Subcommittee's attention clinical
scenarios identified by us or the public regarding services that are
currently packaged or are candidates for future packaging under the
OPPS.
We received public comments in response to the proposed rule on
several issues related to packaging of payment that were in addition to
those about which the APC Panel has made a recommendation that are
related to packaging payment for ancillary and dependent services into
payment for services that may be furnished independently.
Comment: Commenters stated that CMS' packaging policies would
likely lead to less efficient use of resources, limited access to
innovative treatment options and greater instability in payments
because the policies are based on several flawed assumptions.
Commenters believed that to the extent that hospitals control the array
of services they provide, CMS' packaging policies assume that the same
incentives apply to hospital outpatient departments as to inpatient
services. One commenter stated that under the inpatient prospective
payment system (IPPS), hospitals have an incentive to provide care,
including advanced technologies, in an efficient manner to ensure the
lowest cost for the patient's diagnosis. In contrast, in hospital
outpatient departments, because Medicare payment is based on procedures
rather than diagnoses, the commenter believed that a hospital has an
incentive to provide the lowest cost item or service included in an
APC. The commenter further believed that if that service does not fully
address the patient's needs, the hospital would receive better
reimbursement by bringing the patient back for a second visit or
admitting the patient for inpatient care than by providing a more
costly option within the same APC. Moreover, the commenters believed
that when an APC's payment rate is significantly less than the cost of
a technology, hospitals have a strong disincentive to use that
technology, even if it could reduce the costs of care at a later date.
The commenters believed that CMS' use of expanded packaging has the
risk of encouraging hospitals to forego performing needed services and
using new technologies that may be more resource intensive during one
visit, but could save the patient future outpatient department visits
or inpatient care.
Response: Packaging payment for items and services that are
ancillary to and dependent on the major procedure for which a payment
rate is established is a fundamental concept of the OPPS, based in
regulation in the definition of costs that are included in the national
payment rate for a service (42 CFR 419.2(b)) and in place since the
inception of the OPPS (65 FR 18447). We continue to believe that
packaging creates incentives for hospitals and their physician partners
to work together to establish appropriate protocols that eliminate
unnecessary services where they exist and institutionalize approaches
to providing necessary services more efficiently. With respect to new
services or new applications of existing technology, we believe that
packaging payment for ancillary and dependent services creates
appropriate incentives for hospitals to seriously consider whether a
new service or a new technology offers a benefit that is sufficient to
justify the cost of the new service or technology. Where this review
results in reductions in services that are only marginally beneficial
or hospitals' choices not to utilize certain technologies, we believe
that this could improve, rather than harm, the quality of care for
Medicare beneficiaries because every service furnished in a hospital
carries some level of risk to the patient. Moreover, we believe that
hospitals strive to provide the best care they can to the patients they
serve so that when new technologies are proven to improve the quality
of care, their utilization will increase appropriately, whether the
payment for them is packaged or not.
However, we are aware that there are financial pressures on
hospitals that might motivate some providers to split services among
different hospital encounters in such a way as to maximize payments.
While we do not expect that hospitals would routinely change the way
they furnish services or the way they bill for services in order to
maximize payment, we recognize that it would be possible and we
consider that possibility as we annually review hospital claims data.
We will continue to examine claims data for patterns of fragmented
care, and if we find a pattern in which a hospital appears to be
dividing care across multiple days, we will refer it for investigation
to the QIO or to the program safeguard contractor, as appropriate to
the circumstances we find.
In section II.A.1. of this final rule with comment period, we
discuss the established methodology we use to incorporate the costs of
packaged services into payment for the associated independent
procedures. We package the costs of services into the payment for the
major separately paid procedure on the same claim on which the packaged
service appears. Hence, it is the practice of hospitals with regard to
reporting and charging for packaged services that determines the
separately paid service into which the cost of a packaged service is
incorporated and the amount of packaged cost included the payment for
that separately paid procedure.
We believe it is important to continue to advance value-based
purchasing by Medicare in the hospital outpatient setting by furthering
the focus on value of care rather than volume. While we acknowledge the
concerns of the commenters and, as discussed below, are committed to
considering the impact of packaging payment on Medicare beneficiaries
further in the future, we must balance the concerns of the commenters
with our goal of continuing to encourage efficient use of hospital
resources. As we noted in the CY 2009 OPPS/ASC final rule with comment
period in our response to comments on the CY 2009 OPPS/ASC proposed
rule (73 FR 68572) and as we note in our responses to public comments
on the CY 2011 OPPS/ASC proposed rule, the suggestions and packaging
criteria

[[Page 71872]]

recommended by most commenters are focused almost exclusively on
preventing packaging, rather than on determining when packaging would
be appropriate. We also welcome suggestions from the public on
approaches to packaging that would encourage efficient use of hospital
resources.
Comment: Commenters asked that CMS make underlying payment rates
for packaged services, including utilization rates, estimated median
costs and numbers of hospitals furnishing various services available to
the public. Commenters also asked that CMS continue to compare
utilization of services in 2007 prior to packaging to utilization of
the same services after packaging at the CPT level and make that
information public. In addition, commenters asked that CMS study and
report annually on the impact of packaged payment on beneficiary access
to care. Commenters urged CMS to continue to monitor use of and payment
for these services and share these reports with stakeholders, so that
they can verify that Medicare's payment policies do not harm access to
care. Commenters stated that CMS should provide data that demonstrates
that the full cost of packaged services is reflected in the median cost
for the services in which they are used.
Response: As we note in our discussion above, we have reviewed the
provision of packaged services for several years since we expanded
packaging in CY 2008 and we see no evidence that increased packaging
has caused harm to patient access to care, nor have we been presented
with evidence that documents that packaging has been responsible for
harm to patient access. Each year, CMS makes available an extensive
amount of OPPS data that can be used for any data analysis an
interested party would care to perform. Specifically, we make available
a considerable amount of data for public analysis each year through the
supporting data files that are posted on the CMS Web site in
association with the display of the proposed and final rules. In
addition, we make available the public use files of claims, including,
for CY 2008 and later, supplemental line item cost data for every HCPCS
code under the OPPS and a detailed narrative description of our data
process for the annual OPPS/ASC proposed and final rules that the
public can use to perform any desired analyses. Therefore, commenters
are able to examine and analyze these data to develop specific
information to assess the impact and effect of packaging for the
services of interest to them. Therefore, this information is available
to support their requests for changes to payments under the OPPS,
whether with regard to separate payment for a packaged service or other
issues. We understand that the OPPS is a complex payment system and
that it may be difficult to determine the quantitative amount of
packaged cost included in the median cost for every independent
service. However, commenters routinely provide us with meaningful
analyses at a very detailed and service-specific level based on the
claims data we make available. We routinely receive complex and
detailed public comments including extensive code-specific data
analysis on packaged and separately paid codes, using the data from
this and prior proposed and final rules. With respect to the request
for assurance that the full cost of packaged services is included in
the median cost used to set the payment rate for the independent
service with which the packaged services are reported, we note that the
use of a median cost as the measure of central tendency means that the
full cost of a packaged service becomes part of the cost of the service
with which it is furnished and is reflected in the median cost for the
independent procedure since the median cost reflects the cost at the
50th percentile of the array of the total costs for all claims in the
set of single bills used to calculate the median cost for the CPT code
or the APC.
Comment: Commenters stated that, for packaged services such as
guidance, image processing, and intraoperative services, CMS should
provide separate, additional payment for innovative procedures. They
urged CMS establish a 2- to 3-year data collection period during which
separate payment would be made for these packaged services (or any new
applications of these services). The commenters stated that the data
collected during this period should be used to evaluate the clinical
utilization and financial effects of the new services and that CMS
should use this information to determine whether to propose packaging
for the services or whether to maintain separate payment. They further
stated that hospitals are reluctant to invest in new technologies
because they are uncertain whether they will be able to recoup the cost
of the services and that packaging payment for new technologies into
payment for existing major separately paid procedures discourages them
from making the investment.
Response: We do not agree that innovative guidance, image
processing, and intraoperative services or innovative uses of guidance,
image processing, and intraoperative services should always be
separately paid for a 2- to 3-year data collection period before a
decision to make separate or packaged payment for them. We do not
believe that making separate payment for 2 to 3 years would create
incentives for hospitals to carefully consider whether the innovative
service or innovative use of a pre-existing service represents
sufficient value to be worthy of the investment. We continue to believe
that hospitals will invest in innovative services or services with
innovative uses where these services represent genuinely increased
value to patient care, and where hospitals can furnish them
efficiently. Of course, we will continue to pay separately for
innovative technologies where a device meets the conditions for
separate payment as a pass-through device or where a new procedure
meets the criteria for payment as a new technology APC.
Comment: Commenters believed that CMS assumes that its packaging
policies will allow it to continue to collect the data it needs to set
appropriate, stable payment rates in the future. The commenters
believed that CMS' review of data from 2009 indicates that hospitals
have continued to report codes for packaged services, but they stated
that it remains to be seen if hospitals will continue this practice in
subsequent years, particularly for services that have been packaged
since their introduction. Commenters further stated that CMS' past
experience with packaging payment for ancillary items indicates that
hospitals do not submit codes for services that do not directly affect
their payment and see no reason to believe that this will change and
ask that CMS require complete and correct coding for packaged services
so that all items and services that are not individually reimbursed
must be included on the claim to provide CMS with essential data for
future OPPS updates. Commenters expressed concern about what they
believed to be decreases in the number of hospitals reporting services
as a result of packaging and bundling. They believed that the decline
could be due to one or both of two reasons: Hospitals may no longer be
providing these services or hospitals could be providing these services
but not reporting codes and charges for them, denying CMS accurate data
for use in ratesetting. The commenters were concerned that decreased
reporting of services will result in the costs of packaged services not
being included in the payment for the independent service with which
they are furnished.

[[Page 71873]]

Response: We do not believe that there has been or will be a
significant change in what hospitals report and charge for the
outpatient services they furnish to Medicare beneficiaries and other
patients as a result of our current packaging methodology. Medicare
cost reporting standards specify that hospitals must impose the same
charges for Medicare patients as for other patients. We are often told
by hospitals that many private payers pay based on a percentage of
charges and that, in accordance with Medicare cost reporting rules and
generally accepted accounting principles, hospital chargemasters do not
differentiate between the charges to Medicare patients and other
patients. Therefore, we have no reason to believe that hospitals will
stop reporting HCPCS codes and charges for packaged services they
provide to Medicare beneficiaries. As we stated in the CY 2009 OPPS/ASC
final rule with comment period (74 FR 68575), we strongly encourage
hospitals to report a charge for each packaged service they furnish,
either by billing the packaged HCPCS code and a charge for that service
if separate reporting is consistent with CPT and CMS instructions, by
increasing the charge for the separately paid associated service to
include the charge for the packaged service, or by reporting the charge
for the packaged service with an appropriate revenue code but without a
HCPCS code. Any of these means of charging for the packaged service
will result in the cost of the packaged service being incorporated into
the cost we estimate for the separately paid service. If a HCPCS code
is not reported when a packaged service is provided, we acknowledge
that it can be challenging to specifically track the utilization
patterns and resource cost of the packaged service itself. However, we
have no reason to believe that hospitals have not considered the cost
of the packaged service in reporting charges for the independent,
separately paid service.
We expect that hospitals, as other prudent businesses, have a
quality review process that ensures that they accurately and completely
report the services they furnish, with appropriate charges for those
services to Medicare and all other payers. We encourage hospitals to
report on their claim for payment all HCPCS codes that describe
packaged services that were furnished, unless the CPT Editorial Panel
or CMS provides other guidance. To the extent that hospitals include
separate charges for packaged services on their claims, the estimated
costs of those packaged services are then added to the costs of
separately paid procedures on the same claims and used in establishing
payment rates for the separately paid services.
It is impossible to know with any certainty whether hospitals are
failing to report HCPCS codes and charges for services for which the
payment is packaged into payment for the independent service with which
the packaged service is furnished. Moreover, where hospitals fail to
report the HCPCS codes and charges for packaged services, the reason
may be that the hospital has chosen to package the charge for the
ancillary and dependent service into the charge for the service with
which it is furnished. Although we prefer that hospitals report HCPCS
codes and charges for all services they furnish, if the hospital's
charge for the independent service also reflects the charge for all
ancillary and supportive services it typically provides, the absence of
HCPCS codes and separate charges would not result in inappropriately
low median cost for the independent service, although CMS would not
know which specific ancillary and supportive services were being
furnished. Where a hospital is no longer providing a service, there may
be many reasons that a hospital chooses not to provide a particular
service or chooses to cease providing a particular service, including,
but not limited to, because the hospital has determined that it is no
longer cost effective for the hospital to furnish the service and that
there may be other hospitals in the community that can furnish the
service more efficiently.
Comment: Many commenters who objected to payment for ancillary and
dependent services being packaged into payment for the procedures that
they support said that packaged payment will cause hospitals not to
make these important services available to Medicare beneficiaries
because they are not being paid separately for them by Medicare.
Response: We do not believe that hospitals will cease to furnish
Medicare beneficiaries with the ancillary and dependent services that
are available in the facility when they are necessary to achieve the
best therapeutic effect for their patients because the payment for the
service is made as part of the payment for the procedure that they
support. Instead, we believe that packaging will encourage hospitals to
carefully review whether the ancillary and dependent services are
genuinely necessary in individual cases to all patients and will
carefully evaluate whether the staff and capital investments that are
often necessary to furnish them are worthwhile. We note also that
hospitals that fail to provide Medicare beneficiaries with the same
services that they make available to other patients with the same
conditions are subject to termination from the Medicare program under
42 CFR 489.53(a)(2). Therefore, hospitals have a significant
disincentive to treat Medicare patients differently from other patients
with regard to the nature and scope of the services they furnish them.
Comment: One commenter stated that CMS should provide further
transparency and clarification of its analysis of image processing
procedures because it is not clear why CMS has discussed coding issues
pertaining to intraoperative procedures to support conclusions about
packaging of image processing procedures. Specifically, the commenter
stated that CMS notes that the intraoperative procedures described by
CPT codes 93320 (which describes spectral Doppler) and 93325 (which
describes color flow Doppler) are now reported using one comprehensive
code, CPT 93306, which describes complete transthoracic echocardiogram
with spectral and color flow Doppler. The commenter further reiterated
CMS' statements that when data for any codes experiencing significant
modifications were removed, there was a 7 percent decrease from CY 2007
to CY 2009 in the frequency of image processing services billed. In a
second analysis involving all image processing services, including
those with revised codes, the data showed a 61-percent decrease in the
billing of these services between CY 2007 and CY 2009 and a 6-percent
decrease in the number of hospitals reporting these services during the
same timeframe. The commenter believed the estimated declines in
utilization of imaging processing services should not simply be
disregarded, but in fact may suggest negative impacts on beneficiary
access to these services.
Response: The example we provided was not optimal and we were
incorrect to characterize both CPT codes 93320 and 93325 as
intraoperative services. For purposes of our analysis, we treated CPT
code 93320 as an intraoperative service and we treated CPT code 93325
as an imaging processing service. The point of the example is that
because both codes are reported using CPT code 93306, effective for
services on and after January 1, 2009, the CY 2009 data for these codes
(93320 and 93325) cannot be compared to the data for them in CY 2007 in
a meaningful way and for that reason we believe that the decreases we
found are suspect.

[[Page 71874]]

(4) Other Service-Specific Packaging Issues
We received the following public comments regarding the proposal to
package specific services or services in a specific category.
Comment: Commenters recommended that CMS eliminate packaging of
IGRT services represented by CPT codes 76950 (Ultrasonic guidance for
aspiration of ova, imaging supervision and interpretation), 76965
(Ultrasonic guidance for interstitial radioelement application), 77417
(Therapeutic radiology port film(s)), 77421 (Stereoscopic X ray
guidance for localization of target volume for the delivery of
radiation therapy), and 77014 (Computed tomography guidance for
placement of radiation fields) for CY 2011. The commenters believed
that if packaging is continued, closer monitoring of the claims data is
necessary to better approximate the real costs associated with these
services. They believed that these services are vital to the safe
provision of radiation therapy, and unconditionally packaging payment
for them may discourage hospitals from providing them. The commenters
also believed that hospitals may not be reporting the services
correctly and, therefore, not charging for them, which would lead to
the cost of the service not being reflected into the packaged payment
for the service for which separate payment is made.
Response: We continue to believe that these services are ancillary
and dependent services that, as the commenters indicated, are
fundamental to the provision of optimal radiation therapy services and
that the payment for them should be packaged into the payment for the
procedure to which they are ancillary and supportive. We agree that it
is vital that hospitals ensure that they report the charges for these
services so that the cost of the independent service reflects the cost
of these important ancillary services. We strongly encourage hospitals
to report both the codes and the charges for these services,
recognizing that some hospitals may prefer to incorporate the charge
for the ancillary service into the charge for the service it supports.
We remind hospitals that the payments they receive are developed from
the charges they submit on claims and the charge and costs they report
on their Medicare cost report. Therefore, it behooves them to ensure
that they are fully reporting the charges on the claims they submit for
payment. Moreover, we do not believe that there is value in closer
monitoring of claims data for the purpose of better approximation of
the real costs associated with ancillary and dependent services because
we believe that our standard data process ensures that, to the extent
that hospitals report charges for these services, whether with separate
HCPCS codes or as part of the charge for the procedure to which they
are ancillary and supportive, the cost of the service will be included
in the APC median cost and, therefore, in the payment for the APC to
which the separately paid procedure is assigned.
Comment: One commenter was concerned that intravascular ultrasound
and intracardiac echocardiography services are relatively high cost and
low frequency services and, therefore, a small proportion of their cost
is reflected in the payments for the services with which they are used.
Although the commenter recognized that CMS found increases in reporting
of these codes and payment for the procedures into which they are
packaged from CY 2007 to CY 2009, the commenter continued to be
concerned that payment is not adequate to protect access to these
services and asked that CMS reinstate separate payment for
intravascular ultrasound and intracardiac echocardiography services.
Response: We note that IVUS, ICE, and FFR services are existing,
established, technologies and that hospitals have provided some of
these services in the HOPD since the implementation of the OPPS in CY
2000. IVUS, FFR, and ICE are all dependent services that are always
provided in association with independent services. Given the sizable
increase in the number of services furnished and the associated payment
between CY 2007 and CY 2009, as demonstrated by the analysis we
presented in the proposed rule and recapped earlier in this section, we
have seen no evidence from our claims data that beneficiary access to
care is being harmed by packaging payment for IVUS, ICE, and FFR
services or that payment is inadequate for hospitals to be able to
afford to furnish these services with their associated independent
services. We believe that packaging creates appropriate incentives for
hospitals and their physician partners to carefully consider the
technologies that are used in the care of patients in order to ensure
that technologies are selected for use in each case based on their
expected benefit to a particular Medicare beneficiary.
Comment: Some commenters recommended that if the existing policy to
package payment for nonpass-through implantable biologicals were to
continue, CMS develop a crosswalk that includes specific procedure
codes for nonpass-through implantable biologicals so that procedures
involving those products could be reassigned to new APCs. The
commenters also recommended that CMS provide an in-depth analysis of
the packaging methodology to ensure that the costs of nonpass-through
implantable biologicals are included in the procedural APCs.
Response: We believe that creating and maintaining a crosswalk of
nonpass-through implantable biological HCPCS codes and associated
procedure codes would not be feasible because implantable biologicals
may be used in a wide variety of surgical procedures. We also do not
believe that it is necessary to develop such a crosswalk to ensure that
the costs of nonpass-through implantable biologicals are included in
the APC payment rates. As we discuss in section II.A.3. of this final
rule with comment period, hospitals include HCPCS codes and charges for
packaged services on their claims. Our packaging methodology ensures
that the estimated costs associated with those packaged services are
added to the costs of separately payable procedures on the same claims
in establishing payment rates for the separately payable services.
Regarding the request for in-depth data analysis, we note that each
year CMS makes available an extraordinary amount of OPPS data that can
be used for any data analysis an interested party would care to
perform. Specifically, we make available a considerable amount of data
for public analysis each year through the supporting data files that
are posted on the CMS Web site in association with the display of the
proposed and final rules. In addition, we make available the public use
files of claims, including, for CY 2008 and later, supplemental line
item cost data for every HCPCS code under the OPPS and a detailed
narrative description of our data process for the annual OPPS/ASC
proposed and final rules that the public can use to perform any desired
analyses. Therefore, commenters are able to examine and analyze these
data to develop specific information to assess the impact and effect of
packaging for the services of interest to them or to support their
requests for changes to payments under the OPPS, whether with regard to
separate payment for a packaged service or other issues. We understand
that the OPPS is a complex payment system and that it may be difficult
to determine the quantitative amount of packaged cost included in the
median cost for every independent service. However, commenters
routinely provide us with meaningful analyses at a very detailed and
service-specific level

[[Page 71875]]

based on the claims data we make available. We routinely receive
complex and detailed public comments including extensive code-specific
data analysis on packaged and separately paid codes, using the data
from this and prior proposed and final rules.
Comment: One commenter objected to CMS' policy of packaging payment
for tositumomab into HCPCS code G3001 (Administration and supply of
tositumomab, 450 mg) and requested that CMS create a HCPCS J-code for
tositumomab, which is currently provided under a radioimmunotherapy
regiment and billed as part of HCPCS code G3001. The commenter argued
that because tositumomab is listed in compendia, is approved by the FDA
as part of the BEXXAR[supreg] regimen, and has its own National Drug
Code (NDC) number, it should be recognized as a drug and, therefore, be
paid as other drugs are paid under the OPPS methodology, instead of
having a payment rate determined by hospital claims data. The commenter
suggested that a payment rate could be established using the ASP
methodology.
Response: As we stated in the CY 2010 OPPS/ASC final rule with
comment period (75 FR 60517), we have consistently noted that unlabeled
tositumomab is not approved as either a drug or a radiopharmaceutical,
but it is a supply that is required as part of the radioimmunotherapy
treatment regiment (CY 2009 OPPS/ASC final rule with comment period (73
FR 68658); CY 2008 OPPS/ASC final rule with comment period (72 FR
66765); CY 2006 OPPS final rule with comment period (70 FR 68654); and
CY 2004 OPPS final rule with comment period (68 FR 63443)). We do not
make separate payment for supplies used in services provided under the
OPPS. Payments for necessary supplies are packaged into payment for the
separately payable services provided by the hospital. Specifically,
administration of unlabeled tostitumomab is a complete service that
qualifies for separate payment under its own clinical APC. This
complete service is currently described by HCPCS code G3001. Therefore,
we do not agree with the commenter's recommendation that we assign a
separate HCPCS code to the supply of unlabeled tositumomab. Rather, we
will continue to make separate payment for the administration of
tositumomab while payment for the supply of unlabeled tostitumomab will
continue to be packaged into the administration payment.
In addition to our final policies for specific packaged services,
we will continue to package payment for the services we identified with
a status indicator of ``N'' in Addendum B of the proposed rule with
public comment into the payment for the separately paid procedures with
which they are reported on a claim. We refer readers to section
V.B.2.d. of this final rule with comment period for further discussion
of our final policy to package payment for contrast agents and
diagnostic radiopharmaceuticals. We refer readers to section
II.A.2.e.(1) of this final rule with comment period for further
discussion of our final policy to pay for observation services through
extended assessment and management composite APCs under certain
circumstances.
4. Calculation of OPPS Scaled Payment Weights
As we proposed in the CY 2011 OPPS/ASC proposed rule (75 FR 46224
through 46225), using the APC median costs discussed in sections
II.A.1. and II.A.2. of this final rule with comment period, we
calculated the final relative payment weights for each APC for CY 2011
shown in Addenda A and B to this final rule with comment period. 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, in the CY 2011 OPPS/ASC proposed rule (75 FR 46225), for CY
2011, to maintain consistency in using a median for calculating
unscaled weights representing the median cost of some of the most
frequently provided services, we proposed to continue to use the median
cost of the mid-level clinic visit APC (APC 0606) to calculate unscaled
weights. Following our standard methodology, but using the proposed CY
2011 median cost for APC 0606, for CY 2011 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 the
estimated aggregate weight under the OPPS for CY 2011 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 proposed to compare the estimated
aggregate weight using the CY 2010 scaled relative weights to the
estimated aggregate weight using the proposed CY 2011 unscaled relative
weights. For CY 2010, we multiplied the CY 2010 scaled APC relative
weight applicable to a service paid under the OPPS by the volume of
that service from CY 2009 claims to calculate the total weight for each
service. We then added together the total weight for each of these
services in order to calculate an estimated aggregate weight for the
year. For CY 2011, we performed the same process using the proposed CY
2011 unscaled weights rather than scaled weights. We then calculated
the weight scaler by dividing the CY 2010 estimated aggregate weight by
the proposed CY 2011 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.gov/HospitalOutpatientPPS/. We
included payments to CMHCs in our comparison of estimated unscaled
weight in CY 2011 to estimated total weight in CY 2010 using CY 2009
claims data, holding all other components of the payment system
constant to isolate changes in total weight. Based on this comparison,
we adjusted the unscaled relative weights for purposes of budget
neutrality. The proposed CY 2011 unscaled relative payment weights were
adjusted by multiplying them by a proposed weight scaler of 1.3650 to
ensure budget neutrality of the proposed CY 2011 relative weights.
Section 1833(t)(14) of the Act provides the payment rates for
certain ``specified covered outpatient drugs.'' That section states
that ``Additional expenditures resulting from this paragraph shall not
be taken into

[[Page 71876]]

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.'' Therefore, the cost of those
specified covered outpatient drugs (as discussed in section V.B.3. of
the proposed rule and this final rule with comment period) was included
in the proposed budget neutrality calculations for the CY 2011 OPPS.
We did not receive any public comments on the proposed methodology
for calculating scaled weights from the median costs for the CY 2011
OPPS. Therefore, for the reasons set forth in the proposed rule (75 FR
46224 and 46225), we are finalizing our proposed methodology without
modification, including updating of the budget neutrality scaler for
this final rule with comment period as we proposed. Under this
methodology, the final unscaled payment weights were adjusted by a
weight scaler of 1.4477 for this final rule with comment period. The
final scaled relative payment weights listed in Addenda A and B to this
final rule with comment period incorporate the recalibration
adjustments discussed in sections II.A.1. and II.A.2. of this final
rule with comment period.

B. 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 by applying the OPD fee schedule increase factor. For CY
2011, for purposes of section 1833(t)(3)(C)(iv) of the Act, subject to
sections 1833(t)(17) and (t)(3)(F), the OPD fee schedule increase
factor is equal to the hospital inpatient market basket percentage
increase applicable to hospital discharges under section
1886(b)(3)(B)(iii) of the Act, which we refer to as the hospital market
basket update, or simply the market basket, in this discussion.
The proposed hospital market basket increase for FY 2011 published
in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 24062) prior to
changes required by the Affordable Care Act was 2.4 percent. New
sections 1833(t)(3)(F)(iii) and 1833(t)(3)(G)(i) of the Act, as added
by section 3401(i) of the Affordable Care Act and as amended by section
10319(g) of such Act and further amended by section 1105(e) of such
Act, require a 0.25 percentage point reduction to the CY 2011 OPD fee
schedule increase factor, which resulted in a proposed CY 2011 OPPS
market basket update of 2.15 percent. The applicable percentage
increase for FY 2011 published in the IPPS final rule on August 16,
2010, is 2.35 percent (75 FR 50352), which is the 2.6 percent market
basket update, less the 0.25 percentage point reduction required by the
Affordable Care Act. We announced the CY 2010 OPPS conversion factor of
$67.241 in an OPPS/ASC notice (CMS 1504-N), issued in the Federal
Register on August 3, 2010 (75 FR 45771). 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 OPD fee schedule increase factor adjustment
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 final rule
with comment period.
To set the OPPS conversion factor for CY 2011, we increased the CY
2010 conversion factor of $67.241 by 2.35 percent. In accordance with
section 1833(t)(9)(B) of the Act, we further adjusted the conversion
factor for CY 2011 to ensure that any revisions we make to the updates
for a revised wage index and rural adjustment are made on a budget
neutral basis. We calculated an overall budget neutrality factor of
1.0009 for wage index changes by comparing total payments from our
simulation model using the FY 2011 IPPS final wage indices to those
payments using the current (FY 2010) IPPS wage indices, as adopted on a
calendar year basis for the OPPS, as indicated in the August 3, 2010
OPPS/ASC Federal Register notice announcing Affordable Care Act changes
to the wage indices (CMS-1504-N, 75 FR 45771). For CY 2011, as we
proposed, we are not making a change to our rural adjustment policy.
Therefore, the budget neutrality factor for the rural adjustment is
1.0000. For CY 2011, we are not finalizing a cancer hospital adjustment
policy, as discussed in section II.G. of this final rule with comment
period, and, therefore, would not have a budget neutrality adjustment
for that policy.
For this final rule with comment period, we estimated that pass-
through spending for both drugs and biologicals and devices for CY 2011
would equal approximately $57.7 million, which represents 0.15 percent
of total projected CY 2011 OPPS spending. Therefore, the conversion
factor was also adjusted by the difference between the 0.14 percent
estimate of pass-through spending for CY 2010 and the 0.15 percent
estimate of CY 2011 pass-through spending. Finally, estimated payments
for outliers remain at 1.0 percent of total OPPS payments for CY 2011.
The OPD fee schedule increase factor of 2.35 percent for CY 2011
(that is, the CY 2011 estimate of the hospital market basket increase
of 2.6 percent minus a 0.25 percentage point adjustment as required by
the Affordable Care Act), the required wage index budget neutrality
adjustment of approximately 1.0009, and the adjustment of 0.01 percent
of projected OPPS spending for the difference in the pass-through
spending resulted in a conversion factor for CY 2011 of $68.876, which
reflects the full OPD fee schedule increase, after the adjustment
required by the Affordable Care Act. To calculate the CY 2011 reduced
market basket conversion factor for those hospitals that fail to meet
the requirements of the HOP QDRP for the full CY 2011 payment update,
we made all other adjustments discussed above, but used a reduced
market basket increase update factor of 0.35 percent (that is, an
unadjusted OPD fee schedule increase factor (market basket update) of
2.6 percent reduced by 0.25 percentage point as required by the
Affordable Care Act and further reduced by 2.0 percentage points as
required by section 1833(t)(17)(A)(i) of the Act for failure to comply
with the OPD quality reporting requirements) . This resulted in a
reduced conversion factor for CY 2011 of $67.530 for those hospitals
that fail to meet the HOP QDRP requirements (a difference of -$1.346 in
the conversion factor relative to those hospitals that met the HOP QDRP
requirements).
As we mentioned above, in accordance with section 1833(t)(3)(C)(iv)
of the Act, each year we update the OPPS conversion factor by an OPD
fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv)
of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the
Act, the OPD fee schedule increase factor is equal to the market basket
percentage increase applicable under section 1886(b)(3)(B)(iii) of the
Act to hospital discharges occurring during the fiscal year ending in
such year, reduced by 1 percentage point for such factor for services
furnished in each of 2000 and 2002.
For hospitals that do not meet the HOP QDRP reporting requirements
discussed in section XVI. of this final rule with comment period, the
update is equal to the OPD fee schedule increase factor less an
additional 2.0 percentage points. In accordance with these statutory
provisions, in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60419), we finalized an OPD fee schedule increase factor equal

[[Page 71877]]

to the IPPS full market basket update of 2.1 percent. Hospitals that
failed to meet the HOP QDRP reporting requirements were subject to a
reduced OPD fee schedule increase factor of 0.1 percent.
We note that sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(i) of the
Act, as added by section 3401(i) of the Affordable Care Act and as
amended by section 10319(g) and section 1105(e) of such Act, require
that, after determining the OPD fee schedule increase factor, the
Secretary shall reduce such factor for CY 2010 by 0.25 percentage
point. Therefore, the reduction of 0.25 percentage point applied to the
full IPPS hospital operating market basket increase factor of 2.1
percent results in a revised OPD fee schedule increase factor of 1.85
percent. For hospitals that do not meet the HOP QDRP reporting
requirements, the update is equal to the OPD fee schedule increase
factor, less the additional 0.25 percentage point required by sections
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(i) of the Act, minus 2.0 percentage
points. New section 1833(t)(3)(F) of the Act further states that the
application of section 1833(t)(3)(F) of the Act may result in the OPD
fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act
being less than zero for a given year. Thus, the CY 2010 OPD fee
schedule increase factor was 1.85 percent (that is, 2.1 percent minus
0.25 percentage point) for hospitals that met the HOP QDRP reporting
requirements and negative 0.15 percent (2.1 percent, less the 0.25
percentage point, minus the 2.0 percentage points) for hospitals
failing to meet the HOP QDRP reporting requirements.
As with the CY 2010 OPD fee schedule increase factor, new sections
1833(t)(3)(F)(ii) and (t)(3)(G)(i) of the Act require that the CY 2011
OPD fee schedule increase factor be reduced by 0.25 percentage point,
subject to the hospital submitting quality information under rules
established by the Secretary in accordance with section 1833(t)(17) of
the Act. For hospitals that do not meet the HOP QDRP reporting
requirements, the update is equal to the OPD fee schedule increase
factor minus 0.25 percentage point minus 2.0 percentage points. Section
1833(t)(3)(F) of the Act further states that this amendment may result
in the applicable percentage increase being less than zero.
In the FY 2011 IPPS/LTCH final rule (75 FR 50352), consistent with
current law, based on IHS Global Insight, Inc.'s second quarter 2010
forecast of the FY 2011 market basket increase, we estimated that the
FY 2011 IPPS market basket update is 2.6 percent. However, consistent
with the amendments to sections 1833(t)(3)(F)(ii) and (t)(3)(G)(i) of
the Act, we are required to reduce the OPD fee schedule increase factor
by 0.25 percentage point. Therefore, the market basket update to the CY
2011 OPD fee schedule increase factor is 2.35 percent (that is, the CY
2011 estimate of the OPD fee schedule increase factor of 2.6 percent
minus 0.25 percentage point). For hospitals that do not meet the HOP
QDRP reporting requirements, the update to the OPPS conversion factor
is 0.35 percent (that is, the adjusted CY 2011 estimate of the market
basket rate-of increase of 2.35 percent minus 2.0 percentage points).
In the CY 2011 OPPS/ASC proposed rule (75 FR 46226), we proposed to
revise Sec. 419.32(b)(1)(iv) of the regulations to reflect
requirements of the Affordable Care Act for a 0.25 percentage point
reduction to the OPPS fee schedule increase factor for each of CY 2010
and CY 2011.
Comment: One commenter supported the increase in the proposed
conversion factor, which was updated by the market basket.
Response: We appreciate the commenter's support.
After consideration of the public comment we received, we are
finalizing our proposed changes to Sec. 419.32(b)(1)(iv), without
modification, to reflect requirements of the Affordable Care Act for a
0.25 percentage point reduction to the OPPS fee schedule increase
factor for each of CY 2010 and CY 2011. We are finalizing our CY 2011
proposal, without modification, to update the OPPS conversion factor by
the FY 2011 OPD fee schedule increase factor, which is set at the IPPS
market basket percentage increase of 2.6 percent minus the 0.25
percentage point reduction required under the Affordable Care Act,
resulting in a final full conversion factor of $68.876 and in a reduced
conversion factor of $67.530 for those hospitals that fail to meet the
HOP QDRP reporting requirements for the full CY 2011 payment update.

C. 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 final rule
with comment period.
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, for all hospitals, 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, in the CY 2011 OPPS/ASC
proposed rule (75 FR 46226), we did not propose to revise this policy
for the CY 2011 OPPS. We refer readers to section II.H. of this final
rule with comment period 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 final rule with comment
period, for estimating national median APC costs, we standardize 60
percent of estimated claims costs for geographic area wage variation
using the same FY 2011 pre-reclassified wage index 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 fiscal year IPPS wage index as the calendar year wage index 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 proposed to
use the final FY 2011 version of the IPPS wage index used to pay IPPS
hospitals to adjust the CY 2011 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).
The Affordable Care Act contains a number of provisions affecting
the FY 2011 IPPS wage index values, including revisions to the
reclassification wage

[[Page 71878]]

comparability criteria that were finalized in the FY 2009 IPPS final
rule (73 FR 48568 through 48570), and the application of rural floor
budget neutrality on a national, rather than State-specific, basis
through a uniform, national adjustment to the area wage index. These
specific provisions are discussed in more detail in the supplemental FY
2011 IPPS/LTCH PPS proposed rule published on June 2, 2010 in the
Federal Register (75 FR 30920) and in the FY 2011 IPPS/LTCH PPS final
rule which appears in the August 16, 2010 issue of the Federal Register
(75 FR 50159). The Affordable Care Act also required CMS to establish
an adjustment to create a wage index floor of 1.00 for hospitals
located in States determined to be frontier States (section 10324). We
discuss this provision and how it applies to hospital outpatient
departments in more detail below.
Section 10324 of the Affordable Care Act specifies that, for
services furnished beginning CY 2011, the wage adjustment factor
applicable to any hospital outpatient department that is located in a
frontier State (as defined in section 1886(d)(3)(E)(iii)(II) of the
Act) may not be less than 1.00. Further, section 10324 states that this
adjustment to the wage index for these outpatient departments should
not be made in a budget neutral manner. As such, for the CY 2011 OPPS,
we proposed to adjust the wage index for all HOPDs, including those
providers that are not paid under the IPPS, which are identified as
being located in a frontier State, in the manner specified in the
Affordable Care Act. Specifically, we proposed to adjust the FY 2011
IPPS wage index, as adopted on a calendar year basis for the OPPS, for
all hospitals paid under the OPPS, including non-IPPS hospitals,
located in a frontier State to 1.00 in instances where the assigned FY
2011 wage index (that reflects MGCRB reclassifications, application of
the rural floor and rural floor budget neutrality adjustment) for these
hospitals is less than 1.00. Similar to our current policy for HOPDs
that are affiliated with multicampus hospital systems, we fully expect
that the HOPD would receive a wage index based on the geographic
location of the specific inpatient hospital with which it is
associated. Therefore, if the associated hospital is located in a
frontier State, the wage index adjustment applicable for the hospital
would also apply for the affiliated HOPD. We refer readers to the FY
2011 IPPS/LTCH PPS final rule (75 FR 50160) for a detailed discussion
regarding this provision, including our methodology for identifying
which areas meet the definition of frontier States as provided for in
section 1886(d)(3)(E)(iii)(II)) of the Act.
Comment: Commenters supported CMS' frontier State wage index
proposal.
Response: We appreciate the commenters' support.
After consideration of the comments we received, we are finalizing
our proposal, without modification, to adjust the FY IPPS 2011 wage
index, as adopted on a calendar year basis for the OPPS, for all
hospitals paid under the OPPS, including non-IPPS hospitals, located in
a frontier State to 1.00 in instances where the assigned final FY 2011
wage index (that reflects MGCRB reclassifications, application of the
rural floor and rural floor budget neutrality adjustment) for these
hospitals is less than 1.00.
In addition, in the CY 2011 OPPS/ASC proposed rule (75 FR 46227),
we proposed to revise 42 CFR 419.43(c) of the regulations to
incorporate the amendments made by section 10324 of the Affordable Care
Act. Specifically, we proposed to include a provision under a new
paragraph (c)(2) of Sec. 419.43 to state that, for services furnished
beginning January 1, 2011, the wage adjustment factor referenced in the
existing regulations applicable to any HOPD that is located in a
frontier State, as defined in the statute and regulations, may not be
less than 1.00. We also proposed to add a new paragraph (c)(3) to Sec.
419.43 to not consider these additional payments in budget neutrality
calculations.
We did not receive any public comments concerning our proposal to
revise Sec. 419.43(c) of the regulations to incorporate the amendments
made by section 10324 of the Affordable Care Act. Therefore, we are
finalizing our proposed revisions to Sec. 419.43(c)(2) and (c)(3)
without modification.
In addition to the changes required by the Affordable Care Act, we
note that the FY 2011 IPPS wage indices continue to reflect a number of
adjustments implemented over the past few years, including, but not
limited to, revised Office of Management and Budget (OMB) standards for
defining geographic statistical areas (Core-Based Statistical Areas or
CBSAs), reclassification of hospitals to different geographic areas,
rural floor provisions, 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. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR
50157 through 50180) for a detailed discussion of all changes to the
final FY 2011 IPPS wage indices, including changes required by the
Affordable Care Act. In addition, we refer readers to the CY 2005 OPPS
final rule with comment period (69 FR 65842 through 65844) and
subsequent OPPS rules for a detailed discussion of the history of these
wage index adjustments as applied under the OPPS.
The IPPS wage index that we are adopting in this final rule with
comment period includes all reclassifications that are approved by the
Medicare Geographic Classification Review Board (MGCRB) for FY 2011. We
note that reclassifications under section 508 of Public Law 108-173 and
certain special exception wage indices 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, and, most recently, by section 3137, as
amended by section 10317, of the Affordable Care Act through September
30, 2010. We did not make any proposals related to these provisions for
the CY 2010 OPPS wage index because the Affordable Care Act was enacted
after issuance of the CY 2010 OPPS/ASC proposed and final rules. In
accordance with section 10317 of the Affordable Care Act, for CY 2010,
we adopted all section 508 geographic reclassifications through
September 30, 2010. Similar to our treatment of section 508
reclassifications extended under Public Law 110-173 (MMSEA) as
described in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68586), hospitals with section 508 reclassifications will revert to
their home area wage index, with out-migration adjustment if
applicable, or a current MGCRB reclassification, for the last quarter
of CY 2010 (October 1, 2010 to December 31, 2010). In addition, as we
did for CY 2009, we will recognize the revised wage index values for
certain special exception hospitals from January 1, 2010 through
December 31, 2010, 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 section 508 reclassification
discussion in the FY 2010 IPPS/LTCH PPS notice issued in the Federal
Register on June 2, 2010 (75 FR 31118) for a detailed discussion of the
changes to the wage indices as required by section 10317 of the
Affordable Care Act. We also discuss the impact of the extension of
reclassifications under section 508 and

[[Page 71879]]

special exception wage indices in the OPPS/ASC notice (CMS-1504-N)
published in the Federal Register on August 3, 2010 (75 FR 45771).
Because the provisions of section 10317 of the Affordable Care Act
expire in 2010 (September 30, 2010) and are not applicable to FY 2011,
as we proposed, we are not making any changes related to those
provisions for the OPPS wage indices for CY 2011.
For purposes of the OPPS, as we proposed in the CY 2011 OPPS/ASC
proposed rule (75 FR 46228), we are continuing our policy in CY 2011 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 FY
2011 IPPS/LTCH PPS final rule (75 FR 50540) 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 final rule with comment period with the addition
of non-IPPS hospitals that will receive the section 505 out-migration
adjustment under the CY 2011 OPPS.
As stated earlier in this section, we continue to believe that
using the IPPS wage index as the source of an adjustment factor for the
OPPS is reasonable and logical, given the inseparable, subordinate
status of the HOPD within the hospital overall. Therefore, as we
proposed, we are using the final FY 2011 IPPS wage indices for
calculating OPPS payments in CY 2011. With the exception of the out-
migration wage adjustment table (Addendum L to this final rule with
comment period), which includes non-IPPS hospitals paid under the OPPS,
we are not reprinting the FY 2011 IPPS final 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.gov/HospitalOutpatientPPS/. At this
link, readers will find a link to the FY 2011 IPPS final wage index
tables.
Comment: Several commenters expressed support for the CMS proposal
to extend the IPPS wage indices to the OPPS in CY 2011, consistent with
prior year policies under the OPPS.
Response: We appreciate the commenters' support of our proposed CY
2011 wage index policies.
Comment: One commenter recommended that CMS incorporate a different
labor-related share for APCs with high device or supply costs. The
commenter suggested, based on its internal data analysis, that a labor-
related share of 20 percent, rather than the current labor-related
share of 60 percent, would be more appropriate for these APCs.
Response: We do not believe it is appropriate to vary the
percentage of the national payment that is wage adjusted for different
services provided under the OPPS. Such a change could not be considered
without first assessing its impact on the OPPS labor-related share
calculation. The OPPS labor-related share of 60 percent was determined
through regression analyses conducted for the initial OPPS proposed
rule (63 FR 47581) and confirmed for the CY 2006 OPPS final rule with
comment period (70 FR 68556). The labor-related share is a provider-
level adjustment based on the relationship between the labor input
costs and a provider's average OPPS unit cost, holding all other things
constant. While numerous individual services may have variable labor
shares, these past analyses identified 60 percent as the appropriate
labor-related share across all types of outpatient services and are the
basis for our current policy. The provider-level adjustment is an
aggregate, not service-specific, adjustment; it addresses payment for
almost all services paid under the OPPS.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to use the final
FY 2011 IPPS wage indices to adjust the OPPS standard payment amounts
for labor market differences.

D. Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims
for ratesetting, CMS uses overall hospital-specific CCRs calculated
from the hospital's most recent cost report 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). As we proposed, in this final rule with comment period,
we are updating the default ratios for CY 2011 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 2011, as proposed, we are continuing to use 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 2011 OPPS relative weights. Table 9
published in the CY 2011 OPPS/ASC proposed rule listed the proposed CY
2011 default urban and rural CCRs by State and compared them to last
year's default CCRs. These proposed CCRs represented the ratio of total
costs to total charges for those cost centers relevant to outpatient
services from each hospital's most recently submitted cost report,
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 overall CCR for the cost
centers relevant to outpatient services 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.
We did not receive any public comments on our CY 2011 proposal. We
are finalizing our proposal to apply our standard methodology of
calculating the statewide average default CCRs using the same hospital
overall CCRs that we used to adjust charges to costs on claims data. We
used this methodology to calculate the statewide average default CCRs
listed in Table 15 below.

[[Page 71880]]

For this CY 2011 OPS/ASC final rule with comment period,
approximately 47 percent of the submitted cost reports utilized in the
default ratio calculations represented data for cost reporting periods
ending in CY 2009 and 52 percent were for cost reporting periods ending
in CY 2008. 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 general, observed changes in the statewide
average default CCRs between CY 2010 and CY 2011 were modest and the
few significant changes are associated with areas that have a small
number of hospitals.
Table 15 below list the finalized statewide average default CCRs
for OPPS services furnished on or after January 1, 2011.

Table 15--CY 2011 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
Previous
Final CY 2011 default CCR
State Urban/Rural default CCR (CY 2010 OPPS
final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA.......................................................... RURAL 0.479 0.499
ALASKA.......................................................... URBAN 0.315 0.328
ALABAMA......................................................... RURAL 0.212 0.220
ALABAMA......................................................... URBAN 0.193 0.193
ARKANSAS........................................................ RURAL 0.223 0.251
ARKANSAS........................................................ URBAN 0.282 0.263
ARIZONA......................................................... RURAL 0.231 0.251
ARIZONA......................................................... URBAN 0.202 0.217
CALIFORNIA...................................................... RURAL 0.195 0.208
CALIFORNIA...................................................... URBAN 0.205 0.210
COLORADO........................................................ RURAL 0.350 0.345
COLORADO........................................................ URBAN 0.233 0.255
CONNECTICUT..................................................... RURAL 0.356 0.375
CONNECTICUT..................................................... URBAN 0.291 0.319
DISTRICT OF COLUMBIA............................................ URBAN 0.313 0.324
DELAWARE........................................................ RURAL 0.279 0.320
DELAWARE........................................................ URBAN 0.362 0.363
FLORIDA......................................................... RURAL 0.185 0.198
FLORIDA......................................................... URBAN 0.172 0.184
GEORGIA......................................................... RURAL 0.246 0.265
GEORGIA......................................................... URBAN 0.220 0.246
HAWAII.......................................................... RURAL 0.356 0.359
HAWAII.......................................................... URBAN 0.308 0.307
IOWA............................................................ RURAL 0.252 0.332
IOWA............................................................ URBAN 0.288 0.302
IDAHO........................................................... RURAL 0.419 0.507
IDAHO........................................................... URBAN 0.384 0.409
ILLINOIS........................................................ RURAL 0.251 0.273
ILLINOIS........................................................ URBAN 0.239 0.253
INDIANA......................................................... RURAL 0.302 0.299
INDIANA......................................................... URBAN 0.270 0.296
KANSAS.......................................................... RURAL 0.286 0.291
KANSAS.......................................................... URBAN 0.215 0.226
KENTUCKY........................................................ RURAL 0.220 0.223
KENTUCKY........................................................ URBAN 0.244 0.254
LOUISIANA....................................................... RURAL 0.256 0.271
LOUISIANA....................................................... URBAN 0.235 0.259
MARYLAND........................................................ RURAL 0.284 0.294
MARYLAND........................................................ URBAN 0.256 0.267
MASSACHUSETTS................................................... URBAN 0.314 0.323
MAINE........................................................... RURAL 0.460 0.433
MAINE........................................................... URBAN 0.450 0.452
MICHIGAN........................................................ RURAL 0.312 0.318
MICHIGAN........................................................ URBAN 0.320 0.320
MINNESOTA....................................................... RURAL 0.483 0.502
MINNESOTA....................................................... URBAN 0.311 0.330
MISSOURI........................................................ RURAL 0.258 0.266
MISSOURI........................................................ URBAN 0.264 0.270
MISSISSIPPI..................................................... RURAL 0.229 0.244
MISSISSIPPI..................................................... URBAN 0.182 0.192
MONTANA......................................................... RURAL 0.444 0.438
MONTANA......................................................... URBAN 0.399 0.462
NORTH CAROLINA.................................................. RURAL 0.254 0.270
NORTH CAROLINA.................................................. URBAN 0.264 0.285
NORTH DAKOTA.................................................... RURAL 0.351 0.333
NORTH DAKOTA.................................................... URBAN 0.360 0.361
NEBRASKA........................................................ RURAL 0.328 0.340
NEBRASKA........................................................ URBAN 0.259 0.260
NEW HAMPSHIRE................................................... RURAL 0.323 0.329

[[Page 71881]]

NEW HAMPSHIRE................................................... URBAN 0.290 0.285
NEW JERSEY...................................................... URBAN 0.221 0.235
NEW MEXICO...................................................... RURAL 0.277 0.259
NEW MEXICO...................................................... URBAN 0.307 0.329
NEVADA.......................................................... RURAL 0.269 0.296
NEVADA.......................................................... URBAN 0.178 0.187
NEW YORK........................................................ RURAL 0.415 0.423
NEW YORK........................................................ URBAN 0.375 0.383
OHIO............................................................ RURAL 0.327 0.350
OHIO............................................................ URBAN 0.241 0.250
OKLAHOMA........................................................ RURAL 0.260 0.267
OKLAHOMA........................................................ URBAN 0.208 0.225
OREGON.......................................................... RURAL 0.306 0.303
OREGON.......................................................... URBAN 0.340 0.344
PENNSYLVANIA.................................................... RURAL 0.275 0.280
PENNSYLVANIA.................................................... URBAN 0.210 0.223
PUERTO RICO..................................................... URBAN 0.505 0.514
RHODE ISLAND.................................................... URBAN 0.284 0.299
SOUTH CAROLINA.................................................. RURAL 0.222 0.232
SOUTH CAROLINA.................................................. URBAN 0.227 0.242
SOUTH DAKOTA.................................................... RURAL 0.316 0.320
SOUTH DAKOTA.................................................... URBAN 0.251 0.261
TENNESSEE....................................................... RURAL 0.221 0.233
TENNESSEE....................................................... URBAN 0.204 0.214
TEXAS........................................................... RURAL 0.245 0.251
TEXAS........................................................... URBAN 0.216 0.222
UTAH............................................................ RURAL 0.386 0.397
UTAH............................................................ URBAN 0.362 0.400
VIRGINIA........................................................ RURAL 0.241 0.242
VIRGINIA........................................................ URBAN 0.263 0.255
VERMONT......................................................... RURAL 0.411 0.413
VERMONT......................................................... URBAN 0.365 0.397
WASHINGTON...................................................... RURAL 0.367 0.365
WASHINGTON...................................................... URBAN 0.327 0.340
WISCONSIN....................................................... RURAL 0.412 0.384
WISCONSIN....................................................... URBAN 0.334 0.329
WEST VIRGINIA................................................... RURAL 0.291 0.283
WEST VIRGINIA................................................... URBAN 0.337 0.339
WYOMING......................................................... RURAL 0.393 0.407
WYOMING......................................................... URBAN 0.296 0.315
----------------------------------------------------------------------------------------------------------------

E. 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 payment (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 sole community hospitals
(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 ending 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 amounts 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

[[Page 71882]]

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.
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 amounts for CY 2009.
For CY 2009, we revised our regulations at 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 made 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 now indicates that
the adjustment applies to small SCHs, rather than to rural SCHs.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60425), we stated that, effective for services provided on or after
January 1, 2010, rural hospitals and SCHs (including EACHs) having 100
or fewer beds would no longer be eligible for TOPs, in accordance with
section 147 of Public Law 110-275. However, subsequent to issuance of
the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) of
the Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the
Act by extending the period of TOPs to rural hospitals that are not
SCHs with 100 beds or fewer for 1 year, for services provided before
January 1, 2011. Section 3121(a) of the Affordable Care Act amended
section 1833(t)(7)(D)(i)(III) of the Act and extended the period of
TOPs to SCHs (including EACHs) for 1 year, for services provided before
January 1, 2011, with section 3121(b) of the Affordable Care Act
removing the 100-bed limitation applicable to such SCHs for covered OPD
services furnished on and after January 1, 2010, and before January 1,
2011. In accordance with section 3121 of the Affordable Care Act, 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 amounts for CY 2010. Accordingly, in the CY
2011 OPPS/ASC proposed rule (75 FR 46232), we proposed to update Sec.
419.70(d) of the regulations to reflect the TOPs extensions and
amendments described in section 3121 of the Affordable Care Act.
We did not receive any public comments on our proposed policy for
updating the language in Sec. 419.70(d) of the regulations. For the
reasons we specify in the CY 2011 OPPS/ASC proposed rule (75 FR 46231-
46232), we are finalizing our proposed revisions of Sec. 419.70(d)
without modification. Effective for services provided on or after
January 1, 2011, rural hospitals having 100 or fewer beds that are not
SCHs and SCHs (including EACHs) will no longer be eligible for hold
harmless TOPs, in accordance with section 3121 of the Affordable Care
Act.
2. 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 areas 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 2011 OPPS, we proposed 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 (75
FR 46232). In the CY 2011 OPPS/ASC proposed rule, we indicated that we
intend to reassess the 7.1 percent adjustment in the near future by

[[Page 71883]]

examining differences between urban and rural hospitals' costs using
updated claims, cost reports, and provider information.
Comment: One commenter supported our proposal to continue to apply
the budget neutral 7.1 percent adjustment to OPPS payment for rural
sole community hospitals. The commenter also recommended that CMS
update the analysis in the near future to assess if the 7.1 percent
payment adjustment remains a valid figure.
Response: We agree that it is appropriate to continue the 7.1
percent adjustment for rural SCHs (including EACHs) as we proposed for
CY 2011. As we indicated above, and in the proposed rule (75 FR 46232),
we intended to reassess the 7.1 percent rural adjustment in the near
future by examining differences between urban rural hospitals' costs
using updated claims, cost reports, and provider information.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to apply the 7.1
percent payment adjustment to rural SCHs, including EACHs, for all
services and procedures paid under the OPPS in CY 2011, excluding
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs.

F. OPPS Payments to Certain Cancer Hospitals Described by Section
1886(d)(1)(B)(v) of the Act

1. Background
Since the inception of the OPPS, which was authorized by the
Balanced Budget Act of 1997 (BBA), Medicare has paid cancer hospitals
identified in section 1886(d)(1)(B)(v) of the Act (cancer hospitals)
under the OPPS for covered outpatient hospital services. There are 11
cancer hospitals that meet the classification criteria in section
1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted
from payment under the IPPS. With the Medicare, Medicaid and SCHIP
Balanced Budget Refinement Act of 1999, Congress created section
1833(t)(7) of the Act, ``Transitional Adjustment to Limit Decline in
Payment,'' to serve as a permanent payment floor by limiting cancer
hospitals' potential losses under the OPPS. Through section
1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full
amount of the difference between payments for covered outpatient
services under the OPPS and a pre-BBA amount. That is, cancer hospitals
are permanently held harmless to their ``pre-BBA'' amount, and they
receive TOPs to ensure that they do not receive a payment that is lower
under the OPPS than the payment they would have received before
implementation of the OPPS, as set forth in section 1833(t)(7)(F) of
the Act. The pre-BBA payment amount is an amount equal to the product
of the reasonable cost of the hospital for such services for the
portions of the hospital's cost reporting period (or periods) occurring
in the year and the base payment to cost ratio (base PCR) for the
hospital. The pre-BBA amount, including the determination of the base
PCR, are defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet
E, Part B, of the Hospital and Hospital Health Care Complex Cost Report
(Form CMS-2552-96) each year. Section 1833(t)(7)(I) of the Act exempts
TOPs from budget neutrality calculations. Almost all of the 11 cancer
hospitals receive TOPs each year. The volume weighted average payment
to cost ratio (PCR) for the cancer hospitals is 0.83, or outpatient
payment with TOPs to cancer hospitals is 83 percent of reasonable cost.
Section 3138 of the Affordable Care Act instructs the Secretary to
conduct a study to determine if, under the OPPS, outpatient costs
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of
the Act with respect to ambulatory classification groups exceed the
costs incurred by other hospitals furnishing services under this
subsection (section 1833(t) of the Act) as determined appropriate by
the Secretary. In addition, section 3138 of the Affordable Care Act
requires the Secretary to take into consideration the cost of drugs and
biologicals incurred by such hospitals when studying cancer hospital
costliness. Further, section 3138 of the Affordable Care Act states
that if the cancer hospitals' costs are determined to be greater than
the costs of other hospitals paid under the OPPS, the Secretary shall
provide an appropriate adjustment to reflect these higher costs.
Section 3138 of the Affordable Care Act also requires that this
adjustment be budget neutral, and that the adjustment be effective for
outpatient services provided at cancer hospitals on or after January 1,
2011. Cancer hospitals described in section 1886(d)(1)(B)(v) of the Act
remain eligible for TOPs (which are not budget neutral) and outlier
payments (which are budget neutral).
2. Study of Cancer Hospitals' Costs Relative to Other Hospitals
It has been our standard analytical approach to use a combination
of explanatory and payment regression models to assess the costliness
of a class of hospitals while controlling for other legitimate
influences of costliness, such as ability to achieve economies of
scale, to ensure that costliness is due to the type of hospital and to
identify appropriate payment adjustments. We used this approach in our
CY 2006 OPPS final rule with comment period to establish the 7.1
percent payment adjustment for rural SCHs (70 FR 68556 through 68561).
In our discussion for the CY 2006 OPPS proposed rule, we stated that a
simple comparison of unit costs would not be sufficient to assess the
costliness of a class of hospitals because the costs faced by
individual hospitals, whether urban or rural, are a function of many
varying factors, including local labor supply and the complexity and
volume of services provided (70 FR 42699).
In constructing our analysis of cancer hospitals' costs relative to
other hospitals, we considered whether our standard analytical approach
to use a combination of explanatory and payment regression models would
lead to valid results for this particular study, or whether we should
develop a different or modified analytic approach. We note that the
analyses presented in the CY 2006 OPPS proposed and final rules were
designed to establish an adjustment for a large class of rural
hospitals. In contrast, section 3138 of the Affordable Care Act is
specifically limited to identifying an adjustment for 11 cancer
hospitals. With such a small sample size (11 out of approximately 4,000
hospitals paid under the OPPS), we are concerned that the standard
explanatory and payment regression models used to establish the rural
hospital adjustment would lead to imprecise estimates of payment
adjustments for this small group of hospitals. Further, section 3138 of
the Affordable Care Act specifies explicitly that cost comparisons
between classes of hospitals must include the cost of drugs and
biologicals. In our CY 2006 analysis of rural hospitals, we excluded
the cost of drugs and biologicals in our model because the extreme
units associated with proper billing for some drugs and biologicals can
bias the calculation of a service mix index, or volume weighted average
APC relative weight, for each hospital (70 FR 42698). Therefore, we
chose not to pursue our standard combination of explanatory and payment
regression modeling to identify costliness and determine a cancer
hospital adjustment.
While we chose not to use our standard models to calculate a
proposed cancer hospital adjustment, we determined it still would be
appropriate

[[Page 71884]]

to construct our usual provider-level analytical dataset consisting of
variables related to assessing costliness, including average cost per
unit for a hospital and the hospitals average APC relative weight as an
indicator of the hospitals resource intensity, as measured by the APC
relative weights. We used these variables to calculate univariate
statistics that describe the costliness and related aspects of cancer
hospitals and other hospitals paid under the OPPS. While descriptive
statistics cannot control for the myriad factors that contribute to
observed costs, we believe that we can assume that stark differences in
cost between cancer hospitals and other hospitals paid under the OPPS
that would be observable by examining descriptive univariate statistics
would provide some indication of relative costliness. We began our
analysis of the cancer hospitals as we did for the rural hospitals by
creating an analytical dataset of hospitals billing under the OPPS for
CY 2009 (a total of 3,933) that were included in our claims dataset for
establishing the CY 2011 OPPS proposed APC relative weights (discussed
in detail in section II.A. of this final rule with comment period).
This analytical dataset includes the 3,933 OPPS hospitals' total
estimated cost (including packaged cost), total lines, total discounted
units as modeled for CY 2011 OPPS payment, and the average weight of
their separately payable services (total APC weight divided by total
units) as modeled for CY 2011 OPPS. We create this dataset from the
hospital-specific service utilization files that we use to model budget
neutrality and to perform impact analyses after we complete estimating
a median cost (or equivalent amount depending on unique APC
methodologies as discussed in section II of this final rule with
comment period) for each APC. Using the CY 2009 claims that we use to
model the CY 2011 proposed OPPS, we used the utilization on those
claims to model APC payment under the CY 2011 proposed payment
policies, such as proposed payment for drugs and biologicals at ASP+6
percent and proposed reassignment of some HCPCS codes to different
APCs. We then summarized this estimated utilization and payment for
each hospital (``hospital-level''). These files consist of hospital-
level aggregate costs (including the cost of packaged items and
services), total estimated discounted units under the modeled proposed
CY 2011 OPPS, total estimated volume of number of occurrences of
separately payable HCPCS codes under the modeled proposed CY 2011 OPPS,
and total relative weight of separately payable services under the
modeled proposed CY 2011 OPPS. The calculation of these summary files
are discussed in Stage 6 of our claims accounting narrative available
under supporting documentation for the proposed rule on the CMS Web
site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/. After
summarizing modeled payment to the hospital-level, we removed 48
hospitals in Puerto Rico from our dataset because we do not believe
that their cost structure reflects the costs of most hospitals paid
under the OPPS and because they could bias the calculation of hospital-
weighted statistics. We then removed an additional 66 hospitals with a
cost per unit of more than 3 standard deviations from the geometric
mean (mean of the natural log) because including outliers in hospital-
weighted descriptive statistics also could bias those statistics. This
resulted in a dataset with 11 cancer hospitals and 3,808 other
hospitals.
We included the following standard hospital-level variables that
describe hospital costliness in our analysis file: Outpatient cost per
discounted unit under the modeled CY 2011 OPPS (substituting a cost per
administration, rather than a cost per unit, for drugs and
biologicals); each hospital's proposed CY 2011 wage index as a measure
of relative labor cost; the service mix index, or volume-weighted
average proposed CY 2011 APC relative weight (including a simulated
weight for drugs and biologicals created by dividing the CY 2010 April
ASP-based payment amount at ASP+6 percent appearing in Addendum A and B
of the proposed rule by the proposed conversion factor of $68.267);
outpatient volume based on number of occurrences of HCPCS codes in the
CY 2009 claims data; and number of beds. We used these variables
because they are key indicators of costliness under the modeled OPPS
system, and they allow us to assess the relative costliness of classes
of hospitals under the proposed CY 2011 OPPS. We further discussed
these variables in our CY 2006 proposed rule analysis (70 FR 42698
through 42701). A hospital's service mix index is a measure of resource
intensity of the services provided by the hospital as measured by the
proposed CY 2011 OPPS relative weights, and standardizing the cost per
discounted unit by the service mix index creates an adjusted cost per
unit estimate that reflects the remaining relative costliness of a
hospital remaining after receiving the estimated payments that we
proposed to make under the CY 2011 OPPS. In short, if a class of
hospitals demonstrates higher cost per unit after standardization by
service mix, it is an early indication that the class of hospitals may
be significantly more costly in the regression models. We used these
data to calculate the descriptive univariate statistics for cancer
hospitals appearing in Table 16 below. We note that because drugs and
biologicals are such a significant portion of the services that the
cancer hospitals provide, and because section 3138 of the Affordable
Care Act explicitly requires us to consider the cost of drugs and
biologicals, we included the cost of these items in our total cost
calculation for each hospital, counting each occurrence of a drug in
the modeled proposed CY 2011 data (based on units in CY 2009 claims
data). That is, we sought to treat each administration of a drug or
biological as one unit.
In reviewing these descriptive statistics, we observe that cancer
hospitals had a standardized cost per discounted unit of $150.12
compared to a standardized cost per discounted unit of $94.14 for all
other hospitals. That is, cancer hospitals' average cost per discounted
unit remains high even after accounting for payment under the modeled
proposed CY 2011 payment system, which is not true for all other
hospitals. Observing such differences in standardized cost per
discounted unit led us to conclude that cancer hospitals are more
costly than other hospitals paid under the OPPS, even without the
inferential statistical models that we typically employ.

Table 16--Means and Standard Deviations for Key Variables by Cancer and Non-Cancer OPPS Hospitals
----------------------------------------------------------------------------------------------------------------
Cancer hospitals Non-cancer hospitals
---------------------------------------------------
Variable Standard Standard
Mean deviation Mean deviation
----------------------------------------------------------------------------------------------------------------
Outpatient Cost per Unit *.................................. $344.20 (64.68) $264.11 (165.86)

[[Page 71885]]

Unit Cost Standardized by Service Mix Wage Indices.......... 150.12 (31.64) 94.14 (81.19)
Wage Index.................................................. 1.10 (0.13) 0.98 (0.16)
Service Mix Index *......................................... 2.19 (0.26) 3.18 (2.25)
Outpatient Volume........................................... 192,197 (186,063) 34,578 (43,094)
Beds........................................................ 173 (162.33) 173 (171.46)
Number of Hospitals......................................... 11 ........... 3,808 ...........
----------------------------------------------------------------------------------------------------------------
* Includes drugs and biologicals based on per administration rather than per unit.

3. Adjustment for Certain Cancer Hospitals
Having reviewed the cost data from the standard analytic database
and determined that cancer hospitals are more costly than other
hospitals within the OPPS system, we decided to examine hospital cost
report data from Worksheet E, Part B (where TOPs are calculated on the
Hospital and Hospital Health Care Complex Cost Report each year) in
order to determine whether our findings were further supported by cost
report data and to determine an appropriate proposed payment adjustment
methodology. Analyses on our standard analytic database and descriptive
statistics presented in Table 16 above, did not consider TOPs in
assessing costliness of cancer hospitals relative to other hospitals
furnishing services under section 1833(t) of the Act. This is because
section 3138 of the Affordable Care Act requires that any cancer
adjustment be made within the budget neutral system. In making a
determination about a payment adjustment subject to budget neutrality,
we believe it is appropriate to assess costliness and payments within
the budget neutral payment system. We note that TOPs are based on
reasonable cost and are not part of the budget neutral payment system.
Further, TOPs have no associated relative weight that could be included
in an assessment of APC-based payment. TOPs are paid at cost report
settlement on an aggregate basis, not a per service basis, and we would
have no way to break these payments down into a relative weight to
incorporate these retrospective aggregate payments in the form of
relative weight under the proposed modeled CY 2011 OPPS. The cost
report data we selected for the analysis were limited to the OPPS-
specific payment and cost data available on Worksheet E, Part B, which
is also where TOPs are calculated including aggregate OPPS payments,
including outlier payments and the cost of medical and other health
services. These aggregate measures of cost and payment also include the
cost and payment for drugs and biologicals and other adjustments that
we typically include in our regression modeling, including wage index
adjustment and rural adjustment, if applicable. While these cost report
data cannot provide an estimate of cost per unit after controlling for
other potential factors that could influence cost per unit, we can use
this aggregate cost and payment data to examine the cancer hospitals'
OPPS PCR and OPPS PCR with TOPs, and compare these to the OPPS PCR for
other hospitals.
PCRs calculated from the most recent cost report data also indicate
that costs relative to payments at cancer hospitals are higher than
those at other hospitals paid under the OPPS (that is, cancer hospitals
have lower PCRs). In order to calculate PCRs for hospitals paid under
the OPPS (including cancer hospitals), we used the same extract of cost
report data from the HCRIS, as discussed in section II.A. of this final
rule with comment period, that we used to calculate the CCRs that we
used to estimate median costs for the CY 2011 OPPS. Using these cost
report data, we included data from Worksheet E, Part B for each
hospital, keeping data from each hospital's most recent cost report,
whether as submitted or settled. We then limited the dataset to the
hospitals with CY 2009 claims data that we used to model the CY 2011
proposed APC relative weights (3,933 hospitals) because we used the
claims from these hospitals to calculate the estimated costs we used
for the descriptive statistics in our first analysis and because it is
appropriate to use the same set of hospitals that we used to calibrate
the modeled proposed CY 2011 OPPS. The cancer hospitals in this dataset
largely had cost report data from cost reporting periods ending in FY
2008 and FY 2009. The cost report data for the other hospitals were
from cost report periods with fiscal year ends ranging from 2005 to
2009. We then removed the cost report data for 48 hospitals from Puerto
Rico from our dataset because we do not believe that their cost
structure reflects the costs of most hospitals paid under the OPPS and,
therefore, may bias the results of the study. We also removed 301
hospitals with cost report data that were not complete (missing OPPS
payments including outliers, missing aggregate cost data, or both) so
that all cost reports in the study would have both the payment and cost
data necessary to calculate a PCR for each hospital, leading to a final
analytic file of 3,584 hospitals with cost report data. We believe that
the costs, PPS payments, and TOPs reported on Worksheet E, Part B for
the hospitals included in our CY 2011 modeling should be sufficiently
accurate for assessing hospital's relative costliness because all of
the key elements that we believe to be necessary for the analysis
(payment, cost, and TOPs) are contained on this worksheet.
Using this much smaller dataset of cost report data, we estimate
that, on average, the OPPS payments to the 11 cancer hospitals, not
including TOPs, are approximately 62 percent of reasonable cost (that
is, we calculated a PCR of 0.615 for the cancer hospitals), whereas we
estimate that, on average, the OPPS payments to other hospitals paid
under the OPPS are approximately 87 percent of reasonable cost
(resulting in a PCR of 0.868). Individual cancer hospitals' OPPS PCRs
range from approximately 48 percent to approximately 82 percent. When
TOPS are included in the calculation of the PCR, cancer hospitals, as a
group, receive payments that are approximately 83 percent of reasonable
cost, which is still lower than the average PCR of other OPPS hospitals
of approximately 87 percent of reasonable cost. Considering these data,
we find that the cancer hospitals are more costly than other hospitals
paid under the OPPS. The dataset of hospital cost report data that

[[Page 71886]]

we used to model the proposed adjustment is available under supporting
documentation for the proposed rule on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/.)
Based on our findings that cancer hospitals, as a class, have a
significantly lower volume weighted average PCR than the volume
weighted PCR of other hospitals paid under the OPPS and our findings
above that the cancer hospitals cost per discounted unit standardized
for service mix remains much higher than the standardized cost per
discounted unit of all other hospitals, in the CY 2011 OPPS/ASC
proposed rule (75 FR 46235 to 46237), we proposed an adjustment for
cancer hospitals to reflect these higher costs, effective January 1,
2011, as mandated by section 3138 of the Affordable Care Act. For
purposes of calculating a proposed adjustment, we chose to rely on this
straightforward assessment of payments and costs from the cost report
data because of the concerns outlined above with respect to the small
number of hospitals, and because of the challenges associated with
accurately including drug and biological costs in our standard
regression models. We believe that an appropriate adjustment would
redistribute enough payments from other hospitals paid under the OPPS
to the cancer hospitals to give cancer hospitals a PCR that is
comparable to the average PCR for other hospitals paid under the OPPS.
Therefore, we proposed a hospital-specific payment adjustment
determined as the percentage of additional payment needed to raise each
cancer hospital's PCR to the weighted average PCR for all other
hospitals paid under OPPS (0.868) in the CY 2011 dataset. This would be
accomplished by adjusting each cancer hospital's OPPS payment by the
percentage difference between their individual PCR (without TOPs) and
the weighted average PCR of the other hospitals paid under OPPS.
We stated in the proposed rule that the proposed methodology would
result in the proposed percentage payment adjustments for the 11 cancer
hospitals that appeared in Table 11 of the proposed rule. We proposed
that this hospital-specific adjustment would be applied to the wage
adjusted payments for all items, except for items and services paid at
charges adjusted to cost or devices receiving pass-through status
defined in 42 CFR 419.66. We proposed that the proposed cancer hospital
adjustment would not be applied to items and services paid at charges
adjusted to cost because these items and services are always paid the
estimated full cost of the item or service. We proposed to amend the
regulations at Sec. 419.43 to add a new paragraph (i)(2) which would
establish the amount of the adjustment to cancer hospitals. We also
proposed that this adjustment would be budget neutral as set forth in
proposed new Sec. 419.43(i)(3), consistent with section 3138 of the
Affordable Care Act. We note that outlier payments would be
appropriately assessed after application of the cancer adjustment and
that TOPs would continue to apply. The changes made by section 3138 of
the Affordable Care Act do not affect the existing statutory provisions
that provide for outlier payment for all hospitals paid under the OPPS,
including cancer hospitals and TOPs payments for cancer hospitals.
Further, both outlier payments and TOPs serve as a safety net for
hospitals, although outliers are budget neutral and TOPs are not, and
TOPs are limited to certain hospitals. As a means of buffering the
financial risk associated with a prospective payment system, both
adjustments (outliers and TOPs) only should be assessed after final
payments have been made. Because outlier payments are made within the
budget neutrality, outlier payments should be assessed after all budget
neutral payments for an individual service have been made, including
the cancer adjustment. The TOPs payments would be assessed after all
payments have been made for a cost reporting period. We noted that the
proposed adjustment for all cancer hospitals would have result in an
estimated aggregate increase in OPPS payments to cancer hospitals of
41.2 percent for CY 2011 within the PPS system, based on cost report
data, and a net increase in total payments, including TOPs payments, of
5 percent.
Comment: Many commenters urged CMS to consider TOPs when
calculating the cancer hospital payment adjustment. The commenters
stated that the proposed methodology to adjust each cancer hospital's
OPPS payment by the percentage difference between their individual PCR
without TOPs and the weighted average PCR of the other hospitals paid
under OPPS results, largely, in a change in the form of outpatient
payments to cancer hospitals by shifting payment from hold harmless
payments under the TOPs provision to APC payments. This substitution of
TOPs for APC payments, in turn, results in savings to the Medicare
program which, the commenters asserted, is in violation of the
statutory requirement that the policy be budget neutral. The commenters
suggested that because the Congressional Budget Office scoring of
section 3138 of the Affordable Care Act estimates no federal budgetary
impact, Congress did not intend for savings under this provision.
Commenters also suggested that the associated budget neutral
payment reduction of 0.7 percent is not appropriate or equitable to
other hospitals paid under the OPPS. The commenters indicated that it
was not the intent of Congress for the provision to impact the non-
cancer hospitals in a manner that is disproportionate to the benefits
obtained by the cancer hospitals. Many commenters noted that the
majority of cancer care provided in the country is provided by the non-
cancer hospitals that would experience a payment reduction under the
proposal.
Commenters also expressed concern that the proposed payment
adjustment increases beneficiary copayments. That is, they believed
that the proposed cancer hospital adjustment would increase APC
payments and, because beneficiary copayment is a percentage of the APC
payment, Medicare beneficiaries seeking services at the 11 designated
cancer hospitals will experience higher copayments due to the proposed
methodology. One commenter suggested that the cancer hospitals could
potentially lose more payment to bad debt under increased copayments
than benefit from the proposed adjustment. The commenters strongly
encouraged CMS to implement the adjustment in a way that does not
increase beneficiary copayments.
Several commenters indicated that CMS selected an inappropriate
benchmark against which to compare each cancer hospital's PCR.
Specifically, the commenters indicated that CMS should have taken into
account the concentration of outpatient services at the designated
cancer hospitals as compared to other PPS hospitals and adjust the PCR
benchmark higher. The commenters argued that other PPS hospitals have
the ability to improve their Medicare margins through other payment
systems, but that cancer hospitals receive the majority of their
Medicare payments through the OPPS. These commenters asserted that
because concentration of outpatient services was not considered in
establishing the benchmark, the proposed adjustment was not valid.
Several commenters addressed CMS' study methodology. One commenter
suggested that the CMS analysis is inadequate to conclude that costs
are higher in cancer hospitals and that an adjustment is warranted.
This commenter noted that the CMS analysis did not control for the many
factors that

[[Page 71887]]

might explain differences in costliness or assess to what extent cost
differences could be explained by differences in efficiency. This
commenter also asserted that the exclusion of TOPs from the comparison
of costliness distorts the analysis and makes the findings invalid.
Another commenter suggested that CMS examine the costs of cancer
patients generally for all hospitals, and compare the costs of these 11
hospitals to all hospitals providing cancer care to ensure an
adjustment does not reinforce high-cost characteristics of the 11
designated cancer hospitals. One commenter requested that CMS confirm
that it used a regression analysis, similar to that used to determine
the current adjustment for rural SCHs (discussed in section II.E. of
this final rule with comment period) and provide detail on coefficients
and how CMS incorporated drugs into that model. Finally, the commenter
requested that CMS confirm the bed size estimates in the analytic file
that CMS made available with the proposed rule. Another commenter
requested that CMS recalibrate the adjustment annually suggesting that
the PCR for other hospitals will decline proportionate to the cancer
hospital increase and that this should be reflected in any adjustment
for future years.
Another commenter indicated that additional payments to cancer
hospitals should be guided by quality of care and, because the
Affordable Care Act requires the 11 cancer hospitals to begin
submitting quality data in fiscal year 2014, suggested that additional
payments to cancer hospitals be delayed until these quality data are
available to serve as a basis for payment. Another commenter favored
the adjustment, stating that it offered improved beneficiary access to
cancer care.
Response: The many public comments we received have identified a
broad range of very important issues and concerns associated with the
proposed cancer hospital adjustment. After consideration of these
public comments, we have determined that further study and deliberation
related to these issues is critical. This process, however, will take a
longer period of time than is permitted in order for us to meet the
publication deadline of this final rule with comment period. Therefore,
we are not finalizing an adjustment for certain cancer hospitals
identified in section 1886(d)(1)(B)(v) of the Act at this time.

G. Hospital Outpatient Outlier Payments

1. Background
Currently, the OPPS pays outlier payments on a service-by-service
basis. For CY 2010, 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 $2,175
fixed-dollar threshold. We introduced a fixed-dollar threshold in CY
2005 in addition to the traditional multiple threshold in order to
better target outliers to those high cost and complex procedures where
a very costly service could present a hospital with significant
financial loss. If 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. Our current estimate of
total outlier payments as a percent of total CY 2009 OPPS payment,
using available CY 2009 claims and the revised OPPS expenditure
estimate for the Trustee's Report for FY 2010, is approximately 1.3
percent of the total aggregated OPPS payments. Therefore, for CY 2009,
we estimate that we paid 0.3 percent more than the CY 2009 outlier
target of 1.0 percent of total aggregated OPPS payments.
As explained in the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60426 through 60427), we set our projected target for aggregate
outlier payments at 1.0 percent of the aggregate total payments under
the OPPS for CY 2010. The outlier thresholds were set so that estimated
CY 2010 aggregate outlier payments would equal 1.0 percent of the total
aggregated payments under the OPPS. Using CY 2009 claims data and CY
2010 payment rates, we currently estimate that the aggregate outlier
payments for CY 2010 would be approximately 0.85 percent of the total
CY 2010 OPPS payments. The difference between 1.0 percent and 0.85
percent is reflected in the regulatory impact analysis in section XXII.
of this final rule with comment period. We note that we provide
estimated CY 2011 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
In the CY 2011 OPPS/ASC proposed rule (75 FR 46237 through 46238),
we proposed for CY 2011 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 proposed that a portion of that
1.0 percent, specifically 0.04 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.D. of this final rule with comment period, for CMHCs, as we proposed,
we are continuing our longstanding policy 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.D. of this final rule with comment period.
To ensure that the estimated CY 2011 aggregate outlier payments
would equal 1.0 percent of estimated aggregate total payments under the
OPPS, we proposed 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 $2,025 fixed-dollar
threshold. This proposed threshold reflects the methodology discussed
below in this section, as well as the proposed APC recalibration for CY
2011.
We calculated the proposed fixed-dollar threshold for the CY 2010
OPPS/ASC proposed rule using largely the same methodology as we did in
CY 2009 (73 FR 41462). For purposes of estimating outlier payments for
the proposed rule, we used the hospital-specific overall ancillary CCRs
available

[[Page 71888]]

in the April 2010 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 the proposed rule, we used CY 2009
claims to model the CY 2011 OPPS. In order to estimate the proposed CY
2011 hospital outlier payments for the proposed rule, we inflated the
charges on the CY 2009 claims using the same inflation factor of 1.1059
that we used to estimate the IPPS fixed-dollar outlier threshold for
the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 24068). We used an
inflation factor of 1.0516 to estimate CY 2010 charges from the CY 2009
charges reported on CY 2009 claims. The methodology for determining
this charge inflation factor was discussed in the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24068). 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 inpatient routine service cost centers, hospitals use
the same ancillary and outpatient cost centers to capture costs and
charges for 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 proposed to apply the same CCR
inflation adjustment factor that we proposed to apply for the FY 2011
IPPS outlier calculation to the CCRs used to simulate the proposed CY
2011 OPPS outlier payments that determine the fixed-dollar threshold.
Specifically, for CY 2011, we proposed to apply an adjustment of 0.9890
to the CCRs that were in the April 2010 OPSF to trend them forward from
CY 2010 to CY 2011. The methodology for calculating this adjustment was
discussed in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 24068
through 24070).
Therefore, to model hospital outlier payments for the CY 2011 OPPS/
ASC proposed rule, we applied the overall CCRs from the April 2010 OPSF
file after adjustment (using the proposed CCR inflation adjustment
factor of 0.9890 to approximate CY 2011 CCRs) to charges on CY 2009
claims that were adjusted (using the proposed charge inflation factor
of 1.1059 to approximate CY 2011 charges). We simulated aggregated CY
2011 hospital outlier payments using these costs for several different
fixed-dollar thresholds, holding the 1.75 multiple threshold constant
and assuming that outlier payments 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 2011 OPPS
payments. We estimated that a proposed fixed-dollar threshold of
$2,025, 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 proposed 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
threshold of $2,025 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 proposed 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 final rule with comment period.
Comment: Several commenters supported the proposed fixed-dollar
threshold for CY 2011 in order to maintain the target outlier spending
percentage of 1.0 percent of total OPPS payments. One commenter
supported CMS' proposal to develop the OPPS fixed-dollar outlier
threshold using the same assumptions and projections that are used in
the IPPS. One commenter believed that the proposed outlier fixed-dollar
threshold was inappropriate and should be reduced because the CMS
projection of estimated outlier spending for CY 2010 was only 0.85
percent in the CY 2011 OPPS/ASC proposed rule (75 FR 46237). That
commenter recommended that the threshold be proportionally reduced
based on the percentage difference between target and actual outlier
percentage spending. One commenter requested that CMS release the
``actual'' percent that outlier payments represent of total OPPS
payments for CY 2007 through CY 2009. One commenter believed that the
threshold calculation should be based on actual payments rather than
estimated payments, and requested that CMS provide the actual percents
of OPPS spending that OPPS outliers represent. One commenter suggested
that visit intensity data or diagnoses are not the only issues when
looking at outliers, and that any methodology related to outliers
should also consider a comprehensive look at resource utilization.
Response: We appreciate the commenters' support regarding the
development of the OPPS outlier policy. We agree that the charge and
CCR inflation factors that apply to inpatient hospitals services are
equally applicable to services provided under the OPPS. As we discussed
in our CY 2005 OPPS final rule, we believe that the use of this charge
inflation factor is appropriate for OPPS because, with the exception of
the routine service cost centers, hospitals use the same cost centers
to capture costs and charges across inpatient and outpatient services
(69 FR 65845). Therefore, as specified below, we are applying the
charge inflation factors that were used to calculate the outlier fixed-
dollar threshold for the IPPS in the calculation of the fixed-dollar
threshold for the CY 2011 OPPS. We are not raising the threshold to
account for the 0.15 percent of OPPS payment that we estimated was not
paid relative to the target outlier percent of 1 percent for CY 2010
because we do not adjust the fixed-dollar threshold for prior year
differences in actual expenditure of outlier payments. We believe that
our proposed and final methodology uses the best available data we have
at the time to yield the most accurate prospective fixed-dollar outlier
threshold for the CY 2011 OPPS. The multiple and fixed-dollar
thresholds are important parts of a prospective

[[Page 71889]]

payment system and should be based on projected payments using the
latest available historical data without adjustments for prior year
outlier payments. In this case, the 0.85 percent is only an estimate
made from CY 2009 claims for purposes of presenting an impact of the
change in the outlier threshold in the regulatory impact analysis.
Although estimated outlier payments for the current PPS year, which
appear in the impact tables, frequently are below the 1 percent target
outlier spending percentage, as we discuss below, we more often than
not pay slightly more than 1 percent of aggregate total OPPS payments
in outlier payments in a given year. We continue to believe that it is
appropriate to maintain the target outlier percentage of 1.0 percent of
estimated aggregate total payment under the OPPS and to have a fixed-
dollar threshold so that OPPS outlier payments are made only when the
hospital would experience a significant loss for supplying a particular
service.
With respect to the commenter that requested that we release the
``actual'' payment percentages for CY 2007 through CY 2009, we note
that we have previously provided and continue to provide estimated
actual percentage spending based on the claims data. In the CY 2009
OPPS/ASC final rule with comment period (73 FR 68592), using CY 2007
claims, we found OPPS outlier spending was 0.9 percent of the total
aggregated OPPS payment for CY 2007. In the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60426), using CY 2008 claims, we found that
OPPS outlier spending was 1.2 percent of the total aggregated OPPS
payments for CY 2008. As discussed earlier in this section, using CY
2009 claims, we found that OPPS outlier spending was 1.3 percent of the
total aggregated OPPS payments for CY 2009. We note that actual outlier
payments can only be determined based on the claims data available and
setting a prospective fixed-dollar outlier threshold without accounting
for changes in CCRs and charges would potentially lead to greater
inaccuracy in establishing the outlier fixed-dollar threshold. OPPS
outliers account for the financial risk hospitals experience when
providing an extraordinarily costly and complex service, and account
for the resource utilization in the methodology by identifying the
costs associated with providing services on each claim. We note that
visit intensity data and diagnoses data are not incorporated into the
calculation of the threshold because these are not components of OPPS
payments or our longstanding policy for determining outlier eligibility
and payment amount.
3. Final Outlier Calculation
For CY 2011, we are applying the overall CCRs from the July 2010
Outpatient Provider-Specific File with a CCR adjustment factor of
0.9910 to approximate CY 2011 CCRs to charges on the final CY 2009
claims that were adjusted to approximate CY 2011 charges (using the
final 2-year charge inflation factor of 1.0988). These are the same CCR
adjustment and charge inflation factors that were used to set the IPPS
fixed-dollar threshold for the FY 2011 IPPS/LTCH PPS final rule (75 FR
50427 through 50431). We simulated aggregated CY 2011 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 2011 OPPS payments. We
estimate that a fixed-dollar threshold of $2,025, combined with the
multiple threshold of 1.75 times the APC payment rate, will allocate
1.0 percent of estimated aggregated total OPPS payments to outlier
payments.
In summary, for CY 2011, we will 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 final fixed-dollar $2,025
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 is
calculated as 50 percent of the amount by which the cost exceeds 3.40
times the APC 0173 payment rate. We estimate that this threshold will
allocate 0.02 percent of outlier payments to CMHCs for PHP outlier
payments.
4. 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 more fully ensures accurate 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 (73 FR 68598). As under the IPPS, we do not adjust the fixed-
dollar threshold or the amount of total OPPS payments set aside for
outlier payments for reconciliation activity because such action would
be contrary to the prospective nature of the system. Our outlier
threshold calculation assumes that overall ancillary 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, as we stated in the proposed rule, and have previously
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68596), we are not incorporating any assumptions about the effects of
reconciliation into our calculation of the OPPS fixed-dollar outlier
threshold.
Comment: One commenter asked that CMS report the amount of outlier
reconciliation activity suggesting that, if the reconciled amounts are
significant, these amounts should be factored into the annual fixed-
dollar outlier threshold in the future. One commenter supported the
current criteria for when OPPS outlier payments would go through a
reconciliation process.
Response: We appreciate the commenter's support for our policy. As
we discuss above, we do not take outlier reconciliation amounts into
account in our projections of future outlier payments. It is difficult
to predict the specific hospitals that will have CCRs and outlier
payments that may be reconciled in any given year. We also note that
reconciliation occurs because hospitals' actual CCRs for the cost
reporting period are different from the interim CCRs used to calculate
outlier payment when a bill is processed. Our fixed-dollar threshold
calculation assumes that CCRs accurately estimate hospital costs based
on information available to us at the time we set the prospective
fixed-dollar threshold. Furthermore, we do not believe that estimating
the fixed-dollar threshold to account for the amount of payment that is
recovered or removed as a result of outlier reconciliation in any given
year would necessarily result in a more accurate estimate of outlier
payments or a more accurate calculation of the fixed-dollar threshold
for outlier payment for the prospective payment year. In our experience
modeling the OPPS fixed dollar threshold each year, changing the CCRs
for a handful for hospitals would not typically result in enough change
in estimated total outlier payments to change the modeled fixed dollar

[[Page 71890]]

threshold. For these reasons, we will not make any assumptions about
the amount of anticipated reconciliation of outlier payments on the
outlier threshold calculation nor will we report the amount of
reconciliation activity.

H. 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. As proposed, for this final rule with
comment period, 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 final rule
with comment period and the relative weight determined under section
II.A. of this final rule with comment period. Therefore, as proposed,
for this final rule with comment period, the national unadjusted
payment rate for most APCs contained in Addendum A to this final rule
with comment period and for most HCPCS codes to which separate payment
under the OPPS has been assigned in Addendum B to this final rule with
comment period was calculated by multiplying the CY 2011 scaled weight
for the APC by the CY 2011 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, 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 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 payment
reduction for hospitals that fail to meet the requirements of the HOP
QDRP, we refer readers to section XVI.C. of this final rule with
comment period.
We demonstrate in the steps below how to determine the APC payments
that will 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
final rule with comment period), in a circumstance in which the
multiple procedure discount does not apply, the procedure is not
bilateral, and conditionally packaged services (status indicator of
``Q1'' and ``Q2'') qualify for separate payment. We note that, although
blood and blood products with status indicator ``R'' and brachytherapy
sources with status indicator ``U'' are not subject to wage adjustment,
they are subject to reduced payments when a hospital fails to meet the
HOP QDRP requirements.
Individual providers interested in calculating the payment amount
that they would receive for a specific service from the national
unadjusted payment rates presented in Addenda A and B to this final
rule with comment period 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 0.980 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 2011 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 2011 under the IPPS,
reclassifications through the MGCRB, section 1886(d)(8)(B) ``Lugar''
hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as
defined in Sec. 412.103 of the regulations, and hospitals designated
as urban under section 601(g) of Public Law 98-21. We note that the
reclassifications of hospitals under section 508 of Public Law 108-173,
as extended by section 3137 of the Affordable Care Act, expired on
September 30, 2010, and, therefore, are not applicable under the IPPS
for FY 2011. Therefore, these reclassifications will not apply to the
CY 2011 OPPS. (For further discussion of the changes to the FY 2011
IPPS wage indices, as applied to the CY 2011 OPPS, we refer readers to
section II.C. of this final rule with comment period.) In section II.C.
of this final rule with comment period, we also discuss our
implementation of section 10324 of the Affordable Care Act, which
establishes a wage index floor of 1.00 for frontier States, effective
for services furnished on and after January 1, 2011.
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 final rule with comment period contains the
qualifying counties and the associated wage index increase developed
for the FY 2011 IPPS and published as Table 4J in the FY 2011 IPPS/LTCH
PPS final rule (75 FR 50450 through 50646). This step is to be followed
only if the hospital is not reclassified or redesignated under section
1886(d)(8) or section 1886(d)(10) of the Act.
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

[[Page 71891]]

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 full
and reduced national unadjusted payment rates that will apply to
certain outpatient items and services performed by hospitals that meet
and that fail to meet the HOP QDRP requirements, using the steps
outlined above. For purposes of this example, we use a provider that is
located in Brooklyn, New York that is assigned to CBSA 35644. This
provider bills one service that is assigned to APC 0019 (Level I
Excision/Biopsy). The CY 2011 full national unadjusted payment rate for
APC 0019 is $350.49. The reduced national unadjusted payment rate for a
hospital that fails to meet the HOP QDRP requirements is $343.48. This
reduced rate is calculated by multiplying the reporting ratio of 0.980
by the full unadjusted payment rate for APC 0019.
The FY 2011 wage index for a provider located in CBSA 35644 in New
York is 1.3122. The labor-related portion of the full national
unadjusted payment is $275.95 (.60 * $350.49 * 1.3122). The labor-
related portion of the reduced national unadjusted payment is $270.43
(.60 * $343.48 * 1.3122). The nonlabor-related portion of the full
national unadjusted payment is $140.20 (.40 * $350.49). The nonlabor-
related portion of the reduced national unadjusted payment is $137.39
(.40 * $343.48). The sum of the labor-related and nonlabor-related
portions of the full national adjusted payment is $416.15 ($275.95 +
$140.19). The sum of the reduced national adjusted payment is $407.82
($270.43 + $137.39).

I. 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. Until CY 2011, sections 1834(d)(2)(C)(ii)
and 1834(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. However, section 4104 of
the Affordable Care Act eliminated the coinsurance (to which section
1833(t)(2)(B) refers as the ``copayment'') for preventive services that
meet certain requirements, including flexible sigmoidoscopies and
screening colonscopies, and waived the Part B deductible for screening
colonoscopies that become diagnostic during the procedure. We discuss
our implementation of this provision in section XII.B. of this final
rule with comment period.
2. OPPS Copayment Policy
In the CY 2011 OPPS/ASC proposed rule, for CY 2011, we proposed 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 proposed 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 will be effective January 1, 2011, are shown in Addenda A
and B to this final rule with comment period. As discussed in section
XVI.D. of this final rule with comment period, for CY 2011, 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.
We did not receive any public comments regarding the proposed
methodology for calculating copayments for CY 2011. Therefore, for the
reasons set forth in the proposed rule (74 FR 46240), we are finalizing
our CY 2011 copayment amounts without modification. We note that we
received comments on the copayments that would apply to beneficiaries
who receive services from dedicated cancer hospitals under our proposal
to provide an adjustment to payments to these hospitals. Those
copayment-related public comments are discussed in section II.F of this
final rule with comment period.
3. 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.

[[Page 71892]]

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, $70.10 is 20 percent of the full national
unadjusted payment rate of $350.49. For APCs with only a minimum
unadjusted copayment in Addendum A and B of this final rule with
comment period, the beneficiary payment percentage is 20 percent.
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 Steps 2 through 4
under section II.H. of this final rule with comment period. Calculate
the rural adjustment for eligible providers as indicated in Step 6
under section II.H. of this final rule with comment period.
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.H. of this final rule with comment
period, 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 0.980.
The unadjusted copayments for services payable under the OPPS that
are effective January 1, 2011, are shown in Addenda A and B to this
final rule with comment period. We note that the national unadjusted
payment rates and copayment rates shown in Addenda A and B to this
final rule with comment period reflect the full market basket
conversion factor increase, as discussed in section XVI.D. of this
final rule with comment period.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. OPPS Treatment of New HCPCS and CPT 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 American
Medical Association (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 timelier 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 the CY 2011 OPPS/ASC proposed rule (75 FR 46241
through 46246, we summarized and sought public comments on our process
for updating codes as well as our proposed treatment of certain codes.
As we proposed, in Table 17 below, using the April 1, 2010 through
January 1, 2011 time period, we summarize our process for updating
codes through our OPPS quarterly update CRs, seeking public comments,
and finalizing their treatment under the OPPS. We note that because of
the timing of the publication of the proposed rule, the codes
implemented through the July 2010 OPPS quarterly update were not
included in Addendum B but were listed in Table 14 of the proposed rule
(75 FR 46243), while those codes based upon the April 2010 OPPS
quarterly update were included in Addendum B.

Table 17--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
OPPS quarterly update CR Type of code Effective date Comments sought When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 2010................... Level II HCPCS April 1, 2010..... CY 2011 OPPS/ASC CY 2011 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
July 1, 2010.................... Level II HCPCS July 1, 2010...... CY 2011 OPPS/ASC CY 2011 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
Category I July 1, 2010...... CY 2011 OPPS/ASC CY 2011 OPPS/ASC
(certain vaccine proposed rule. final rule with
codes) and III comment period.
CPT codes.
October 1, 2010................. Level II HCPCS October 1, 2010... CY 2011 OPPS/ASC CY 2012 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
January 1, 2011................. Level II HCPCS January 1, 2011... CY 2011 OPPS/ASC CY 2012 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
Category I and III January 1, 2011... CY 2011 OPPS/ASC CY 2012 OPPS/ASC
CPT Codes. final rule with final rule with
comment period. comment period.
----------------------------------------------------------------------------------------------------------------

[[Page 71893]]

This process is discussed in detail below. We have separated our
discussion into two sections based on whether we proposed to solicit
public comments in the CY 2011 OPPS/ASC proposed rule or are soliciting
public comments in this CY 2011 OPPS/ASC final rule with comment
period. In the CY 2011 OPPS/ASC proposed rule, we noted that we sought
public comments in the CY 2010 OPPS/ASC final rule with comment period
on the new CPT and Level II HCPCS codes that were effective January 1,
2010. We also sought public comments in the CY 2010 OPPS/ASC final rule
with comment period on the new Level II HCPCS codes effective October
1, 2009. These new codes with an effective date of October 1, 2009, or
January 1, 2010, 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 2010 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 CY
2010 OPPS/ASC final rule with comment period. We received public
comments on the interim APC assignments for CPT codes 63663 (Revision
including replacement, when performed, of spinal neurostimulator
electrode percutaneous array(s), including fluoroscopy, when
performed), 63664 (Revision including replacement, when performed, of
spinal neurostimulator electrode plate/paddle(s) placed via laminotomy
or laminectomy, including fluoroscopy, when performed), 75571 (Computed
tomography, heart, without contrast material, with quantitative
evaluation of coronary calcium), and 77338 (Multi-leaf collimator (MLC)
device(s) for intensity modulated radiation therapy (IMRT), design and
construction per IMRT plan) in the CY 2010 OPPS/ASC final rule with
comment period. These codes were assigned to comment indicator ``NI''
in that final rule with comment period. We note that we also received
the same comments for these codes from the CY 2011 OPPS/ASC proposed
rule, and a summary of the comments and our responses with our
discussion of our final treatment of these CPT codes can be found in
section III.D. of this final rule with comment period.
1. Treatment of New Level II HCPCS Codes and Category I CPT Vaccine
Codes and Category III CPT Codes for Which We Solicited Public Comments
in the CY 2011 Proposed Rule
As of April 1 and July 1 of CY 2010, we made effective a total of
22 new Level II HCPCS codes, 4 new Category I CPT vaccine codes, and 11
new Category III CPT codes that were not addressed in the CY 2010 OPPS/
ASC final rule with comment period that updated the OPPS. Twenty-two
new Level II HCPCS codes were effective for the April and July 2010
updates, and of the 22 new HCPCS codes, a total of 14 Level II HCPCS
codes were newly recognized for separate payment under the OPPS.
Through the April 2010 OPPS quarterly update CR (Transmittal 1924,
Change Request 6857, dated February 26, 2010), we allowed separate
payment for a total of 6 of the 22 Level II HCPCS codes. Specifically,
as displayed in Table 18 below, these included HCPCS codes C9258
(Injection, telavancin, 10 mg), C9259 (Injection, pralatrexate, 1 mg),
C9260 (Injection, ofatumumab, 10 mg), C9261 (Injection, ustekinumab, 1
mg), C9262 (Fludarabine phosphate, oral, 1 mg), and C9263 (Injection,
ecallantide, 1 mg).
In addition to the six HCPCS C-codes, five new HCPCS G-codes were
made effective on April 1, 2010. We did not recognize the five new
HCPCS G-codes for separate payment under the OPPS because they were
either paid under another Medicare payment system or were noncovered
services under Medicare. Specifically, we assigned HCPCS codes G0432
(Infectious agent antigen detection by enzyme immunoassay (EIA)
technique, qualitative or semi-quantitative, multiple-step method, HIV-
1 or HIV-2, screening), G0433 (Infectious agent antigen detection by
enzyme-linked immunosorbent assay (ELISA) technique, antibody, HIV-1 or
HIV-2, screening), G0435 (Infectious agent antigen detection by rapid
antibody test of oral mucosa transudate, HIV-1 or HIV-2, screening),
and G9143 (Warfarin responsiveness testing by genetic technique using
any method, any number of specimen(s)), to status indicator ``A'' (Not
paid under OPPS. Paid by fiscal intermediaries/MACs under a fee
schedule or payment system other than OPPS) to indicate that these
services are paid under the Medicare Clinical Laboratory Fee Schedule
(CLFS). Further, we did not recognize for separate payment HCPCS code
G9147 (Outpatient Intravenous Insulin Treatment (OIVIT) and assigned it
to status indicator ``E'' (Not paid by Medicare when submitted on
outpatient claims (any outpatient bill type)) because this service is
nationally a noncovered service under Medicare.
In the CY 2011 OPPS/ASC proposed rule, we solicited public comments
on the status indicators and APC assignments of the 11 Level II HCPCS
codes, which were listed in Table 13 of that proposed rule (75 FR
46242) and now appear in Table 18 of this final rule with comment
period.
We did not receive any public comments on the proposed APC
assignments and status indicators for the 11 Level II HCPCS codes
included in Table 13 of the proposed rule. However, for CY 2011, the
HCPCS Workgroup replaced the five of the six HCPCS C-codes with
permanent HCPCS J-codes. Specifically, HCPCS code C9258 was replaced
with HCPCS code J3095 (Injection, telavancin, 10 mg); HCPCS code C9259
with HCPCS code J9307 (Injection, pralatrexate, 1 mg); HCPCS code C9260
with HCPCS code J9302 (Injection, ofatumumab, 10 mg); HCPCS code C9261
with HCPCS code J3357 (Injection, ustekinumab, 1 mg); and HCPCS code
C9263 with HCPCS code J1290 (Injection, ecallantide, 1 mg). We also
note that HCPCS code C9262 was deleted on June 30, 2010, and replaced
with HCPCS code Q2025 (Fludarabine phosphate oral, 1 mg) effective July
1, 2010. Finally, for the CY 2011 update, the HCPCS Workgroup deleted
HCPCS code Q2025 and replaced it with HCPCS code J8562 (Fludarabine
phosphate oral, 10 mg) effective January 1, 2011.
Consistent with our general policy of streamlining coding by using
permanent HCPCS codes if appropriate rather than HCPCS C-codes for the
reporting of drugs under the OPPS, we are showing the replacement HCPCS
J-codes for the same descriptor in Table 18 that replace the HCPCS C-
codes first implemented in April 2010, effective January 1, 2011. With
the exception of HCPCS code C9262, which was deleted June 30, 2010, all
five HCPCS C-codes will be deleted on December 31, 2010. Because HCPCS
codes C9258, C9259, C9260, C9261, and C9263 describe the same drugs and
the same dosages currently designated by HCPCS codes J3095, J9307,
J9302, J3357, and J1290, respectively, these drugs will continue their
pass-through status in CY 2011. Therefore, we are assigning HCPCS codes
J3095, J9307, J9302, J3357, and J1290 to the same status indicators and
APCs as their predecessor C-codes, as shown in Table 18.
We did not receive any public comments on the new Level II HCPCS

[[Page 71894]]

codes that were implemented in April 2010. Therefore, as discussed in
the CY 2011 OPPS/ASC proposed rule (75 FR 46242), we are adopting as
final for CY 2011, without modification, our proposal to assign the
Level II HCPCS codes listed in Table 18 to the specific APCs and status
indicators set forth in the CY 2011 OPPS/ASC proposed rule. Table 18
below shows the final APC and status indicator assignments for all 11
Level II HCPCS codes.

Table 18--Level II HCPCS Codes With a Change in OPPS Status Indicator or Newly Implemented in April 2010
----------------------------------------------------------------------------------------------------------------
Final CY 2011
CY 2011 HCPCS Code CY 2010 HCPCS CY 2011 Long descriptor Status Final CY 2011
Code Indicator APC
----------------------------------------------------------------------------------------------------------------
J3095.......................... C9258 Injection, telavancin, 10 mg.. G 9258
J9307.......................... C9259 Injection, pralatrexate, 1 mg. G 9259
J9302.......................... C9260 Injection, ofatumumab, 10 mg.. G 9260
J3357.......................... C9261 Injection, ustekinumab, 1 mg.. G 9261
J8562.......................... C9262 Fludarabine phosphate, oral, G 1339
10 mg.
J1290.......................... C9263 Injection, ecallantide, 1 mg.. G 9263
G0432.......................... G0432 Infectious agent antibody A NA
detection by enzyme
immunoassay (EIA) technique,
qualitative or
semiquantitative, multiple-
step method, HIV-1 or HIV-2,
screening.
G0433.......................... G0433 Infectious agent antibody A NA
detection by enzyme-linked
immunosorbent assay (ELISA)
technique, antibody, HIV-1 or
HIV-2, screening.
G0435.......................... G0435 Infectious agent detection by A NA
rapid antibody test of oral
mucosa transudate, HIV-1 or
HIV-2, screening.
G9143.......................... G9143 Warfarin responsiveness A NA
testing by genetic technique
using any method, any number
of specimen(s).
G9147.......................... G9147 Outpatient Intravenous Insulin E NA
Treatment (OIVIT) either
pulsatile or continuous, by
any means, guided by the
results of measurements for:
respiratory quotient; and/or,
urine urea nitrogen (UUN);
and/or, arterial, venous or
capillary glucose; and/or
potassium concentration.
----------------------------------------------------------------------------------------------------------------
* Level II HCPCS code C9262 was deleted June 30, 2010, and replaced with HCPCS code Q2025 effective July 1,
2010. Level II HCPCS code Q2025 will be deleted on December 31, 2010, and replaced with HCPCS code J8562
effective January 1, 2011.

Through the July 2010 OPPS quarterly update CR (Transmittal 1980,
Change Request 6996, dated June 4, 2010), which included HCPCS codes
that were made effective July 1, 2010, we allowed separate payment for
8 of the 22 new Level II HCPCS codes. Specifically, as displayed in
Table 14 of the proposed rule, we provided separate payment for HCPCS
codes C9264 (Injection, tocilizumab, 1 mg), C9265 (Injection,
romidepsin, 1 mg), C9266 (Injection, collagenase clostridium
histolyticum, 0.1 mg), C9267 (Injection, von Willebrand factor complex
(human), Wilate, per 100 IU VWF: RCO), C9268 (Capsaicin, patch, 10cm2),
C9367 (Skin substitute, Endoform Dermal Template, per square
centimeter), Q2025 (Fludarabine phosphate oral, 10mg), and C9800
(Dermal injection procedure(s) for facial lipodystrophy syndrome (LDS)
and provision of Radiesse or Sculptra dermal filler, including all
items and supplies).
We note that HCPCS code C9262 was made effective April 1, 2010, and
deleted June 30, 2010, when it was replaced with HCPCS code Q2025. As
discussed in section V.A.3. of the CY 2011 OPPS/ASC proposed rule,
pass-through status began for this drug on April 1, 2010. Because HCPCS
code Q2025 describes the same drug as HCPCS code C9262, we are
continuing its pass-through status and assigning the HCPCS Q-code to
the same APC and status indicator as its predecessor HCPCS C-code, as
shown in Table 19. Specifically, HCPCS code Q2025 is assigned to APC
9262 with a status indicator ``G.''
Of the 12 HCPCS codes that were made effective July 1, 2010, we did
not recognize 4 HCPCS codes for separate payment. Specifically, we did
not recognize HCPCS codes G0428 (Collagen Meniscus Implant procedure
for filling meniscal defects (e.g., CMI, collagen scaffold, Menaflex)),
G0429 (Dermal filler injection(s) for the treatment of facial
lipodystrophy syndrome (LDS) (e.g., as a result of highly active
antiretroviral therapy), Q2026 (Injection, Radiesse, 0.1 ml), and Q2027
(Injection, Sculptra, 0.1 ml). Under the hospital OPPS, we have
assigned HCPCS code G0428 to status indicator ``E'' (Not paid by
Medicare when submitted on outpatient claims (any outpatient bill
type)) because this service is nationally noncovered by Medicare.
Further, because HCPCS code C9800 describes both the injection
procedure and the dermal filler supplies, we have assigned HCPCS codes
G0429, Q2026, and Q2027 to status indicator ``B'' to indicate that
these HCPCS codes are not recognized by OPPS when submitted on an
outpatient hospital Part B bill type 12x and 13x. Specifically,
hospitals must report HCPCS code C9800 to report the dermal filler
supplies and the dermal filler injection procedure. Under the hospital
OPPS, we have assigned HCPCS code C9800 to APC 0135 with a status
indicator ``T.''
Comment: One commenter stated that the proposed payment rate for
HCPCS code C9800 does not cover the cost of Sculptra. The commenter
requested that CMS reevaluate the proposed payment rate for HCPCS code
C9800 to ensure that it covers a hospital's acquisition cost and that
Medicare provide access to this nationally covered therapy. The
commenter provided no pricing information for Sculptra or other
supplies used in this procedure.
Response: The payment rate for HCPCS code C9800 for CY 2011
includes both the administration of the dermal fillers as well as the
dermal filler supplies. We further stated in the CY 2011 OPPS/ASC
proposed rule (75 FR 46242) that because the payment for HCPCS code
C9800 includes both the injection procedure and the dermal filler
supplies, we have assigned HCPCS codes G0429, Q2026, and Q2027 to
indicator ``B'' to indicate that these HCPCS codes are not recognized
by OPPS when submitted on a hospital outpatient Part B bill types 12x
and 13x.

[[Page 71895]]

Specifically, hospital outpatient facilities must use HCPCS code C9800
to report dermal filler supplies and the dermal filler injection
procedure. Although there are two HCPCS codes that describe dermal
filler supplies, specifically, HCPCS codes Q2026 for Radiesse and Q2027
for Sculptra, CMS has not received ASP pricing for these two products.
Under the OPPS, there is no provision to contractor-price drugs and
biologicals, and without ASP information, we could not recognize the Q-
codes for separate payment. We will reevaluate the status indicator
assignments for the HCPCS codes that describe dermal injection
procedure(s) for facial lipodystrophy syndrome (LDS) once we receive
ASP information for the dermal filler supplies. That is, we will
reevaluate the APC and status indicator assignments for HCPCS codes
C9800, G0429, Q2026, and Q20207.
Also, it should be noted that with all new codes for which we lack
pricing information, our policy has been to assign the service to an
existing APC based on input from a variety of sources, including, but
not limited to, review of the clinical similarity of the service to
existing procedures; input from CMS medical advisors; information from
interested specialty societies; and review of all other information
available to us. The OPPS is a prospective payment system that provides
payment for groups of services that share clinical and resource use
characteristics. Based on our review, we believe that the service
described by HCPCS code C9800 shares similar resource and clinical
characteristics to the procedures included in APC 0135 (Level III Skin
Repair). Although we currently do not have ASP information for the
dermal filler supplies, we believe that the service is appropriately
placed in APC 0135 based on the latest available information that we
have. We believe that the service described by HCPCS code C9800 is
analogous to those services currently assigned to APC 0135 because
HCPCS code C9800 and the procedures listed in this APC relate to
procedures involving the skin, and HCPCS code C8900 and other
procedures in this APC involve injection(s) into the dermal layers.
Therefore, after consideration of the public comment we received,
we are adopting as final, without modification, our proposal to
continue to assign HCPCS code C9800 to APC 0135, which has a final CY
2011 APC median cost of approximately $316.
We did not receive any public comments on the other proposed APC
assignments and status indicators for the other 11 Level II HCPCS codes
listed in Table 14 of the CY 2011 OPPS/ASC proposed rule. However, for
CY 2011, the HCPCS Workgroup replaced the six HCPCS C-codes with
permanent HCPCS J-codes. Specifically, HCPCS code C9264 was replaced
with HCPCS code J3262 (Injection, tocilizumab, 1 mg); HCPCS code C9265
was replaced with HCPCS code J9315 (Injection, romidepsin, 1 mg); HCPCS
code C9266 was replaced with HCPCS code J0775 (Injection, collagenase
clostridium histolyticum, 0.01 mg); HCPCS code C9267 was replaced with
HCPCS code J7184 (Injection, von Willebrand factor complex (human),
Wilate, per 100 IU VWF: RCO); HCPCS code C9268 was replaced with J7335
(Capsaicin 8% patch, per 10 square centimeters); and HCPCS code Q2025
(previously described as HCPCS code C9262) was replaced with HCPCS code
J8562 (Fludarabine phosphate oral, 10 mg).
Consistent with our general policy of using permanent HCPCS codes
if appropriate rather than HCPCS C-codes for the reporting of drugs
under the OPPS in order to streamline coding, we are showing the
replacement HCPCS J-codes in Table 19 that will replace the HCPCS C-
codes, effective January 1, 2011. Because HCPCS codes C9264, C9265,
C9267, and C9268 describe the same drugs and the same dosages currently
designated by HCPCS codes J3262, J9315, J7184, and J7335, respectively,
these drugs will continue their pass-through status in CY 2011.
Therefore, we are assigning HCPCS codes J3262, J9315, J7184, and J7335
to the same status indicators and APCs as their predecessor C-codes, as
shown in Table 19. We note that replacement codes for HCPCS codes C9266
and Q2025 do not describe the same dosage descriptors, and
consequently, the replacement HCPCS codes will be given new APCs.
Specifically, HCPCS code C9266 describes a dosage descriptor of 0.1 mg,
however, its replacement HCPCS code J0775 describes a dosage descriptor
of 0.01 mg. Similarly, HCPCS code Q2025 describes a dosage descriptor
of 1 mg; however, its replacement HCPCS code J8562 describes a dosage
descriptor of 10 mg. For CY 2011, HCPCS codes J0775 and J8562 are
assigned to APC 1340 and APC 1339, respectively. Because their
predecessor codes were assigned to pass-through status, both HCPCS
codes J0775 and J8562 continue to be assigned to status indicator ``G''
for CY 2011. We note that we generally assign only one APC to those
HCPCS codes that describe separately payable drugs, and maintain that
same APC when there is no change to the dosage descriptor of a HCPCS
drug code. Alternatively, when there is a change to the dosage
descriptor, we will reassign the separately payable HCPCS drug code to
a new APC to maintain data consistency for future rulemaking.
After consideration of the public comment that we received, we are
adopting as final, without modification, our proposal to assign the
Level II HCPCS codes listed in Table 19 to the APCs and status
indicators as proposed for CY 2011. Table 19 below includes a complete
list of the HCPCS codes that were made effective July 1, 2010, with
their status indicators and APC assignment for CY 2011.

Table 19--New Level II HCPCS Codes Implemented in July 2010
----------------------------------------------------------------------------------------------------------------
Final CY 2011
CY 2011 HCPCS Code CY 2010 HCPCS CY 2011 Long descriptor status Final CY 2011
Code indicator APC
----------------------------------------------------------------------------------------------------------------
J3262.......................... C9264 Injection, tocilizumab, 1 mg.. G 9264
J9315.......................... C9265 Injection, romidepsin, 1 mg... G 9265
J0775.......................... C9266 Injection, collagenase G 1340
clostridium histolyticum,
0.01 mg.
J7184.......................... C9267 Injection, von Willebrand G 9267
factor complex (human),
Wilate, per 100 IU VWF: RCO.
J7335.......................... C9268 Capsaicin 8% patch, per 10 G 9268
square centimeters.
C9367.......................... C9367 Skin substitute, Endoform G 9367
Dermal Template, per square
centimeter.
C9800.......................... C9800 Dermal injection procedure(s) T 0135
for facial lipodystrophy
syndrome (LDS) and provision
of Radiesse or Sculptra
dermal filler, including all
items and supplies.

[[Page 71896]]

G0428.......................... G0428 Collagen meniscus implant E NA
procedure for filling
meniscal defects (e.g., CMI,
collagen scaffold, Menaflex).
G0429.......................... G0429 Dermal filler injection(s) for B NA
the treatment of facial
lipodystrophy syndrome (LDS)
(e.g., as a result of highly
active antiretroviral
therapy).
J8562.......................... Q2025 Fludarabine phosphate oral, 10 G 1339
mg.
Q2026.......................... Q2026 Injection, Radiesse, 0.1 ml... B NA
Q2027.......................... Q2027 Injection, Sculptra, 0.1 ml... B NA
----------------------------------------------------------------------------------------------------------------

For CY 2011, we proposed 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 quarterly update
CR, consistent with the AMA's implementation date for the codes.
Through the July 2010 OPPS quarterly update CR, we allowed separate
payment for 10 of the 11 new Category III CPT codes effective July 1,
2010. Specifically, as displayed in Table 15 of the proposed rule, we
allow separate payment for CPT codes 0223T (Acoustic cardiography,
including automated analysis of combined acoustic and electrical
intervals; single, with interpretation and report), 0224T (Multiple,
including serial trended analysis and limited reprogramming of device
parameter--AV or VV delays only, with interpretation and report), 0225T
(Multiple, including serial trended analysis and limited reprogramming
of device parameter--AV and VV delays, with interpretation and report),
0226T (Anoscopy, high resolution (HRA) (with magnification and chemical
agent enhancement); diagnostic, including collection of specimen(s) by
brushing or washing when performed), 0227T (Anoscopy, high resolution
(HRA) (with magnification and chemical agent enhancement); with
biopsy(ies)), 0228T (Injection(s), anesthetic agent and/or steroid,
transforaminal epidural, with ultrasound guidance, cervical or
thoracic; single level), 0229T (Injection(s), anesthetic agent and/or
steroid, transforaminal epidural, with ultrasound guidance, cervical or
thoracic; each additional level (List separately in addition to code
for primary procedure)), 0230T (Injection(s), anesthetic agent and/or
steroid, transforaminal epidural, with ultrasound guidance, lumbar or
sacral; single level), 0231T (Injection(s), anesthetic agent and/or
steroid, transforaminal epidural, with ultrasound guidance, lumbar or
sacral; each additional level (List separately in addition to code for
primary procedure)), and 0232T (Injection(s), platelet rich plasma, any
tissue, including image guidance, harvesting and preparation when
performed). We note that CMS has issued a national coverage
determination (NCD) of noncoverage specifically for chronic, non-
healing cutaneous wounds and acute surgical wounds when the autologous
platelet rich plasma (PRP) is applied directly to the closed incision
or for dehiscent wounds. Category III CPT code 0232T has been assigned
to APC 0340 to provide a payment amount when payment is appropriate,
both under the NCD provisions and any local coverage determinations.
Under the hospital OPPS, Category III CPT code 0233T (Skin advanced
glycation endproducts (AGE) measurement by multi-wavelength fluorescent
spectroscopy) is not recognized under the hospital OPPS. However, the
service is paid under the MPFS.
Further, CMS does not recognize the four new H1N1 Category I CPT
vaccine codes or the administration code that are effective on July 1,
2010, for separate payment under the OPPS because we already recognize
an existing HCPCS G-code for reporting the H1N1 vaccine, specifically
HCPCS code G9142 (Influenza a (h1n1) vaccine, any route of
administration) and an existing HCPCS G-code G9141 ((Influenza a (h1n1)
immunization administration (includes the physician counseling the
patient/family)) for reporting the administration of that vaccine,
which was effective September 1, 2009. We have assigned HCPCS code
G9142 to status indicator ``E'' under the OPPS because the vaccine is
expected to be free. Consequently, Category I CPT vaccine codes 90470
(H1N1 immunization administration (intramuscular, intranasal),
including counseling when performed), 90664 (Influenza virus vaccine,
pandemic formulation, live, for intranasal use), 90666 (Influenza virus
vaccine, pandemic formulation, split virus, preservative free, for
intramuscular use), 90667 (Influenza virus vaccine, pandemic
formulation, split virus, adjuvanted, for intramuscular use), and 90668
(Influenza virus vaccine, pandemic formulation, split virus, for
intramuscular use), are assigned to status indicator ``E'' (Not paid
under OPPS or any other Medicare payment system). We note that CPT code
90470 was effective September 28, 2009, when it was released by the AMA
on its Web site.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46243 through 46245),
we solicited public comments on the proposed status indicators and the
APC assignments for the new Category I and III CPT codes. We received
public comments on our payment proposal for CPT code 0232T, and our
coding proposal not to recognize the H1N1 CPT codes 90470, 90664,
90666, 90667, and 90668.
Comment: One commenter requested that CMS reevaluate the APC
assignment for CPT code 0232T, which is assigned to APC 0340 (Minor
Ancillary Procedures) with a proposed payment rate of $47.10 for CY
2011, based on additional cost data that may be provided to CMS.
Response: As part of our review for new CPT codes available mid-
year, we examine the APC assignments for all items and services under
the OPPS for appropriate placements in the context of our proposed
policies for the update year. This review involves careful analysis of
data we have available to us, such as the cost of comparable items or
services, as well as input from our medical advisors, the APC Panel,
and recommendations from the public. Based on our analysis of the
service associated with Category III CPT code 0232T, we believe that
APC 0340 is the

[[Page 71897]]

most appropriate assignment based on its clinical and resource
considerations to other procedures currently assigned in APC 0340. When
the CY 2011 claims data become available for future rulemaking, we will
reevaluate the cost of the service described by Category III CPT code
0232T to assess the appropriateness of the structure of APC 0340 and
its payment rate.
Therefore, after consideration of the public comments we received,
we are finalizing our proposal, without modification, to continue to
assign CPT code 0232T to APC 0340, which has a final CY 2011 APC median
cost of approximately $46.
Comment: Several commenters requested that CMS recognize the H1N1
vaccine administration CPT code 90470 and the four H1N1 vaccine CPT
codes, specifically CPT codes 90664, 906606, 90667, and 90668, because
they are more descriptive than the Level II HCPCS codes G9141 and G9142
describing to the same vaccine and its administration. These commenters
stated that it is operationally burdensome for hospitals to report one
code to Medicare and another code to other payers for the same service,
and requested the deletion of the temporary HCPCS codes G9141 and G9142
to enable a single, standard mechanism for reporting these services
across all payers.
Response: While we agree that CPT codes 90470, 90664, 906606,
90667, and 90668 are more descriptive than the Level II HCPCS codes
G9141 and G9142, payment for H1N1 services are not based on specific
formulations of the H1N1 administered to Medicare beneficiaries. The
new CPT codes describe specific formulations of H1N1, which are not
required for Medicare payment. Further, we do not recognize the H1N1
vaccine and administration CPT codes because Medicare already
recognizes two existing Level II HCPCS codes G9141 and G9142 to
describe the H1N1 vaccine and its administration. As we stated in the
October 2009 OPPS update change request (Transmittal 1803, Change
Request 6626), Level II HCPCS codes G9141 and G9142 were made effective
September 1, 2009.
After consideration of the public comments we received, we are
finalizing our proposal, without modification. For CY 2011, we are
continuing 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. Specifically, for CY
2011 under the OPPS, we are recognizing the current HCPCS codes G9141
and G9142 and are not recognizing the H1N1 vaccine and administration
CPT codes 90470, 90664, 90666, 90667, and 90668. Moreover, we are
assigning HCPCS code G9141 to APC 0350, which has a final CY 2011 APC
median cost of approximately $26, and assigning HCPCS code G9142 to
status indicator ``E.'' Table 20 below lists the Category I CPT vaccine
and Category III CPT codes that were implemented in July 2010 for which
we are allowing separate payment, along with their status indicators,
APC assignments, and payment rates for CY 2011.

Table 20--Category I Vaccine and Category III CPT Codes Implemented in
July 2010
------------------------------------------------------------------------
Final CY 2011
CY 2011 CPT Code CY 2011 Long status Final CY 2011
descriptor indicator APC
------------------------------------------------------------------------
0223T............. Acoustic S 0099
cardiography,
including
automated analysis
of combined
acoustic and
electrical
intervals; single,
with
interpretation and
report.
0224T............. Multiple, including S 0690
serial trended
analysis and
limited
reprogramming of
device parameter--
AV or VV delays
only, with
interpretation and
report.
0225T............. Multiple, including S 0690
serial trended
analysis and
limited
reprogramming of
device parameter--
AV and VV delays,
with
interpretation and
report.
0226T............. Anoscopy, high X 0340
resolution (HRA)
(with
magnification and
chemical agent
enhancement);
diagnostic,
including
collection of
specimen(s) by
brushing or
washing when
performed.
0227T............. Anoscopy, high T 0146
resolution (HRA)
(with
magnification and
chemical agent
enhancement); with
biopsy(ies).
0228T............. Injection(s), T 0207
anesthetic agent
and/or steroid,
transforaminal
epidural, with
ultrasound
guidance, cervical
or thoracic;
single level.
0229T............. Injection(s), T 0206
anesthetic agent
and/or steroid,
transforaminal
epidural, with
ultrasound
guidance, cervical
or thoracic; each
additional level
(List separately
in addition to
code for primary
procedure).
0230T............. Injection(s), T 0207
anesthetic agent
and/or steroid,
transforaminal
epidural, with
ultrasound
guidance, lumbar
or sacral; single
level.
0231T............. Injection(s), T 0206
anesthetic agent
and/or steroid,
transforaminal
epidural, with
ultrasound
guidance, lumbar
or sacral; each
additional level
(List separately
in addition to
code for primary
procedure).
0232T............. Injection(s), X 0340
platelet rich
plasma, any
tissue, including
image guidance,
harvesting and
preparation when
performed.
0233T............. Skin advanced A NA
glycation
endproducts (AGE)
measurement by
multi-wavelength
fluorescent
spectroscopy.
90664............. Influenza virus E NA
vaccine, pandemic
formulation, live,
for intranasal use.
90666............. Influenza virus E NA
vaccine, pandemic
formulation, split
virus,
preservative free,
for intramuscular
use.
90667............. Influenza virus E NA
vaccine, pandemic
formulation, split
virus, adjuvanted,
for intramuscular
use.
90668............. Influenza virus E NA
vaccine, pandemic
formulation, split
virus, for
intramuscular use.
------------------------------------------------------------------------

In the CY 2011 OPPS/ASC proposed rule (75 FR 46243 through 46246),
we solicited public comments on the CY 2011 proposed status indicators
and the proposed APC assignments and payment rates, if applicable, for
the Level II HCPCS codes and the Category I vaccine codes and Category
III CPT codes that are newly recognized in April or July 2010 through
the respective OPPS quarterly update CRs. These codes were listed in
Tables 13, 14, and

[[Page 71898]]

15 of the proposed rule. We proposed to finalize their status
indicators and their APC assignments and payment rates, if applicable,
in this CY 2011 OPPS/ASC final rule with comment period. Because the
July 2010 OPPS quarterly update CR is issued close to the publication
of the proposed rule, the Level II HCPCS codes and the Category I
vaccine and Category III CPT codes implemented through the July 2010
OPPS quarterly update CR could not be included in Addendum B to the
proposed rule. These codes are listed in Tables 19 and 20,
respectively, of this final rule with comment period, and are
incorporated into Addendum B to this 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 2010 OPPS update
CR and displayed in Table 18 are included in Addendum B to this final
rule with comment period, where their CY 2011 payment rates also are
shown. We did not receive any additional comment on this process.
Therefore, as we explained in the CY 2011 OPPS/ASC proposed rule (75 FR
46243 through 46246), we are finalizing the status indicators and their
APC assignments and payment rates, if applicable, for Category I
vaccine codes and Category III CPT codes that are newly recognized in
April or July 2010, in this CY 2011 OPPS/ASC final rule with comment
period.
2. Process for New Level II HCPCS Codes and Category I and Category III
CPT Codes for Which We Are Soliciting Public Comments on This CY 2011
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 final rule with comment
period, and we respond to these comments in the OPPS/ASC final rule
with comment period for the next calendar year's OPPS/ASC update. In
the CY 2011 OPPS/ASC proposed rule (75 FR 46246), we proposed to
continue this process for CY 2011. Specifically, for CY 2011, we
proposed to include in Addendum B to the CY 2011 OPPS/ASC final rule
with comment period the new Category I and III CPT codes effective
January 1, 2011 (including those Category I vaccine and Category III
CPT codes that were released by the AMA in July 2010) that would be
incorporated in the January 2011 OPPS quarterly update CR and the new
Level II HCPCS codes, effective October 1, 2010, or January 1, 2011,
that would be released by CMS in its October 2010 and January 2011 OPPS
quarterly update CRs. As proposed, these codes are flagged with comment
indicator ``NI'' in Addendum B to this CY 2011 OPPS/ASC final rule with
comment period to indicate that we have assigned them an interim OPPS
payment status for CY 2011. Their status indicators and their APC
assignments and payment rates, if applicable, are open to public
comment in this final rule with comment period and will be finalized in
the CY 2012 OPPS/ASC final rule with comment period. We note that the
Category I vaccine and Category III CPT codes that were released by the
AMA in July 2010 that were subject to comment in the CY 2011 OPPS/ASC
proposed rule, and were listed in Table 15, will not be assigned to
comment indicator ``NI'' in Addendum B because comments about these
codes are addressed in this final rule with comment period.
Comment: Some commenters requested that CMS reconsider the timeline
for APC assignments for new CPT and HCPCS codes for which comments are
sought. The commenters indicated that the current schedule has the
potential to produce long gaps of inappropriate payment with no
mechanism for changes over the short term period. One commenter
suggested including the new Category I CPT codes that are approved in
February to be included in the proposed rule to enable interested
parties to comment on the interim payment values before they are
finalized. This commenter further recommended that CMS should be
prepared to implement corrections on a quarterly basis.
Response: With respect to the comment regarding new Category I CPT
codes that are effective in February, we believe the commenter meant
the new Category I CPT codes that are released in late September or
October when the annual CPT code book for the upcoming year are
published that are then implemented in January, which are not discussed
in the proposed rule but are published in the final rule with comment
period. Because the CPT codes for the January 2011 update were not
issued to the public until October 2010 when AMA published the CY 2011
CPT codes, we could not include them in the CY 2011 OPPS/ASC proposed
rule for comment because the proposed rule is published in the summer,
usually several months in advance of the publication of the CPT code
books. Similarly, the Level II HCPCS codes that are made effective in
October are published after the publication of the proposed rule.
Because these codes are released after the publication of the proposed
rule, we do not discuss either the new Category I CPT codes or the
Level II HCPCS codes that are effective for the upcoming January in the
proposed rule, which is published sometime in the summer.
As has been our practice for the past several years, we list the
new Category I CPT codes and the Level II HCPCS codes in the final
rules and flag them 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 indicate that the codes are assigned
to an interim payment status and an APC and payment rate, if
applicable, that is subject to public comment following the publication
of the final rule with comment period. For these new codes, we are only
able to finalize their assignments in another OPPS final rule in order
to allow for the necessary public notice and comment period and to
allow time for CMS to respond to such comments. Therefore, we only
assign HCPCS codes permanently for the year through the annual
regulatory process.
Because we are not able to revise APC and/or status indicator
assignments for the newly implemented HCPCS codes in CY 2010 that are
assigned an interim final status in this CY 2011 OPPS/ASC final rule
with comment period outside of the rulemaking process, the next
available opportunity to update an APC or status indicator for these
codes is in the CY 2012 final rule with comment period. These HCPCS
codes retain their interim final APC and status indicator assignments
for all of CY 2011. Therefore, only in the CY 2012 OPPS/ASC final rule
with comment period will we be able to finalize the APC and/

[[Page 71899]]

or status indicator assignments of the new CY 2011 HCPCS codes and
respond to all public comments received on their interim designations.
We also cannot implement any changes in status indicator or APC
assignment on a quarterly basis because we have an annual process
subject to notice and comment for the assignment of a status indicator
and, if applicable, APC group. Therefore, actual changes to status
indicator or APC assignments cannot be implemented on a quarterly
basis.
After consideration of the public comments we received, we are
finalizing our policy to include in Addendum B to the CY 2011 OPPS/ASC
final rule with comment period the new Category I and III CPT codes
effective January 1, 2011 (including those Category I vaccine and
Category III CPT codes that were released by the AMA in July 2010) that
would be incorporated in the January 2011 OPPS quarterly update CR and
the new Level II HCPCS codes, effective October 1, 2010, or January 1,
2011, that would be released by CMS in its October 2010 and January
2011 OPPS quarterly update CRs.
3. Temporary HCPCS Codes for 2010-2011 Seasonal Influenza Vaccines
In Addendum B of the CY 2011 OPPS/ASC proposed rule (75 FR 46662),
CPT code 90658 (Influenza virus vaccine, split virus, when administered
to 3 years of age and older, for intramuscular use) was assigned to
status indicator ``L'' to indicate that the code is not paid under the
OPPS; rather, it is paid at a reasonable cost that is not subject to a
deductible or coinsurance. Under the Medicare ASP pricing methodology,
CPT code 90658 currently includes multiple brand name products. For
influenza vaccines, the payment limit is 95 percent of the AWP of the
lowest brand-name product within each billing code. We understand that
the production capacity and supply of the lowest priced brand-name
influenza vaccine product will not meet the program demands of the
Medicare population for the 2010-2011 influenza season. Because of this
patient access problem, we believe it necessary to establish separate
HCPCS codes for the individual brand products currently associated with
CPT code 90658. Thus, Medicare has established five HCPCS Q-codes to
identify the individual influenza products that are reported with CPT
code 90658. The specific list of HCPCS Q-codes can be found in Table 21
below CY 2011. Because the HCPC Q-codes will be recognized by Medicare,
CPT code 90658 will be assigned to status indicator ``E'' to indicate
that the code is not recognized under the hospital OPPS. Hospitals are
advised to report the influenza HCPCS Q-codes rather than CPT code
90658 for CY 2011. These codes have been included in the HCPCS file
with an added date of January 1, 2011, but the HCPCS codes will be
implemented effective October 1, 2010. That is, CPT code 90658 is
assigned to status indicator ``E'' effective October 1, 2010, and HCPCS
Q-codes Q2035, Q2036, Q2037, Q2038, and Q2039 are assigned to status
indicator ``L'' effective January 1, 2011. Table 21 below contains the
final CY 2011 status indicators for CPT code 90658 and HCPCS Q-codes
Q2035, Q2036, Q2037, Q2038, and Q2039.

Table 21--Influenza HCPCS Q-Codes for CY 2011
------------------------------------------------------------------------
Short Final CY 2011
HCPCS descriptor Long descriptor SI
------------------------------------------------------------------------
90658........... Flu vaccine, 3 Influenza virus E
yrs & >, im. vaccine, split
virus, when
administered to 3
years of age and
older, for
intramuscular use.
Q2035........... Afluria vacc, 3 Influenza virus L
yrs & >, im. vaccine, split
virus, when
administered to
individuals 3 years
of age and older,
for intramuscular
use (afluria).
Q2036........... Flulaval vacc, Influenza virus L
3 yrs & >, im. vaccine, split
virus, when
administered to
individuals 3 years
of age and older,
for intramuscular
use (flulaval).
Q2037........... Fluvirin vacc, Influenza virus L
3 yrs & >, im. vaccine, split
virus, when
administered to
individuals 3 years
of age and older,
for intramuscular
use (fluvirin).
Q2038........... Fluzone vacc, 3 Influenza virus L
yrs & >, im. vaccine, split
virus, when
administered to
individuals 3 years
of age and older,
for intramuscular
use (fluzone).
Q2039........... NOS flu vacc, 3 Influenza virus L
yrs & >, im. vaccine, split
virus, when
administered to
individuals 3 years
of age and older,
for intramuscular
use (not otherwise
specified).
------------------------------------------------------------------------

B. OPPS Changes--Variations Within APCs

1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient department
services. Section 1833(t)(2)(B) of the Act provides that the Secretary
may establish groups of covered OPD 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 services
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 final rule
with comment period); (7) incidental services such as venipuncture; and
(8) guidance services, image processing services, intraoperative
services, imaging supervision and interpretation services, diagnostic
radiopharmaceuticals, and

[[Page 71900]]

contrast media. Further discussion of packaged services is included in
section II.A.3. of this final rule with comment period.
In CY 2008, we implemented composite APCs to provide a single
payment for groups of services that are typically performed together
during a single clinical encounter and that result in the provision of
a complete service (72 FR 66650 through 66652). Under CY 2010 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
final rule with comment period.
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 hospital clinic
visit APC (that is, where the Level 3 hospital clinic visit CPT code of
five levels of hospital clinic visits is assigned), and because middle
level hospital 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
and revise the groups, the relative payment weights, and the wage and
other adjustments 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; the Act further requires us to
repeat this process on a basis that is not less often than annually.
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of the
BBRA, also requires the Secretary, beginning in CY 2001, to consult
with an expert outside advisory panel composed of an appropriate
selection of representatives of providers 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 2011 OPPS and our responses to them are discussed
in the relevant specific sections throughout this final rule with
comment period).
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 of the item or service in implementing this provision. The
statute authorizes the Secretary to make exceptions to the 2 times rule
in unusual cases, such as low-volume items and services (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. In making this
determination, we consider only those HCPCS codes that are significant
based on the number of claims. That is, we consider only those HCPCS
codes whose claim data reflect more than 1,000 singles, or if less than
1,000 singles, at least those HCPCS codes with more than 99 singles and
represent more than 2 percent of the claims for a given APC (74 FR
60436). In the CY 2011 OPPS/ASC proposed rule (75 FR 46247), we
proposed 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 2011.
During the APC Panel's February 2010 meeting, we presented median
cost and utilization data for services furnished during the period of
January 1, 2009 through September 30, 2009, about which we had concerns
or about which the public had raised concerns regarding their APC
assignments, status indicator assignments, or payment rates. The
discussions of most service-specific issues, the APC Panel
recommendations, if any, and our proposals for CY 2011 were contained
mainly in sections III.C. and III.D. of the proposed rule and are
included in the same sections of this final rule with comment period.
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 proposed changes to their HCPCS codes' APC assignments in
Addendum B to the proposed rule. In these cases, to eliminate a 2 times
violation or to improve clinical and resource homogeneity, we proposed
to reassign the codes to APCs that contain services that are similar
with regard to both their clinical and resource characteristics. We
also proposed 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 2011 included in the proposed rule were related to changes in
median costs of services that were observed in the CY 2009 claims data
newly available for CY 2011 ratesetting. We also proposed changes to
the status indicators for some codes that are not specifically and
separately discussed in the proposed rule. In these cases, we proposed
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 proposed
for CY 2011.
We received many public comments regarding the proposed APC and
status indicator assignments for CY 2011 for specific HCPCS codes.
These public comments are discussed mainly in sections III.C. and
III.D. of this final rule with comment period, and the final action for
CY 2011 related to each HCPCS code is noted in those sections.
Addendum B to this final rule with comment period identifies with
comment indicator ``CH'' those HCPCS codes for which we are finalizing
in this final rule with comment period a change to the APC assignment
or status indicator that were initially assigned in the April 2010
Addendum B update (via Transmittal 1924, Change Request 6857, dated
February 26, 2010).
3. Exceptions to the 2 Times Rule
As discussed earlier, we may make exceptions to the 2 times limit
on the variation of costs within each APC group in unusual cases such
as low-volume items and services. Taking into account the APC changes
that we proposed for CY 2011 based on the APC Panel recommendations
that were discussed mainly in sections III.C. and III.D. of the
proposed rule, the other

[[Page 71901]]

proposed changes to status indicators and APC assignments as identified
in Addendum B to the proposed rule, and the use of CY 2009 claims data
to calculate the median costs of procedures classified in the APCs, we
reviewed all the APCs to determine which APCs would not satisfy the 2
times rule. We used the following criteria to decide whether to propose
exceptions to the 2 times rule for affected APCs:
Resource homogeneity.
Clinical homogeneity.
Hospital outpatient setting.
Frequency of service (volume).
Opportunity for upcoding and code fragments.
For a detailed discussion of these criteria, we refer readers to
the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and
18458). Table 16 of the proposed rule listed 17 APCs that we proposed
to exempt from the 2 times rule for CY 2011 based on the criteria cited
above (75 FR 46248).
We did not receive any general public comments related to the list
of proposed exceptions to the 2 times rule. We received a number of
specific public comments about some of the procedures assigned to APCs
that we proposed to make exempt from the 2 times rule for CY 2011.
Those public comments are discussed elsewhere in this preamble, and can
be found in sections related to the types of procedures that were the
subjects of the public comments.
For the proposed rule, the list of 17 APCs that appeared in Table
16 of the CY 2011 OPPS/ASC proposed rule (75 FR 46248) that were
exempted from the 2 times rule were based on data from January 1, 2009,
through September 30, 2009. For this final rule with comment period, we
used claims data for dates of service between January 1, 2009, and
December 31, 2009, that were processed on or before June 30, 2010, and
updated CCRs, if available. Thus, after responding to all of the public
comments on the CY 2010 OPPS/ASC proposed rule and making changes to
APC assignments based on those comments, we analyzed the CY 2009 claims
data used for this final rule with comment period to identify the APCs
with 2 times violations. Based on the final rule CY 2009 claims data,
we found 22 APCs with 2 times rule violations, which is a cumulative
increase of 5 APCs from the proposed rule. We applied the criteria as
described earlier to identify the APCs that are exceptions to the 2
times rule for CY 2010, and identified 10 APCs that meet the criteria
for exception to the 2 times rule for this final rule with comment
period, but that did not meet those criteria using proposed rule data:
APC 0060 (Manipulation Therapy); APC 0076 (Level I Endoscopy Lower
Airway); APC 0083 (Coronary or Non Coronary Angioplasty and
Percutaneous Valvuloplasty), APC 0133 (Level I Skin Repair); APC 0203
(Level IV Nerve Injections); APC 0304 (Level I Therapeutic Radiation
Treatment Preparation); APC 0341 (Skin Tests); APC 0343 (Level III
Pathology); APC 0433 (Level II Pathology); and APC 0607 (Level 4
Hospital Clinic Visits). These APC exceptions are listed in Table 22
below. For this final rule with comment period, we also determined that
there are 5 APCs that no longer violate the 2 times rule: APC 0051
(Level III Musculoskeletal Procedures Except Hand and Foot); APC 0138
(Level II Closed Treatment Fracture Finger/Toe/Trunk); APC 0173 (Level
II Partial Hospitalization (4 or more services)); APC 0325 (Group
Psychotherapy); and APC 0344 (Level IV Pathology). We have not included
in this count those APCs where a 2 times violation is not a relevant
concept, such as APC 0375 (Ancillary Outpatient Services When Patient
Expires), with an APC median cost set based on multiple procedure
claims. As a result, we have identified only final APCs, including
those with criteria-based median costs, such as device-dependent APCs,
with 2 times violations. Table 22 below lists 22 APCs that we are
exempting from the 2 times rule for CY 2011 based on the criteria cited
above and a review of updated claims data.
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 2009
claims data used to determine the APC payment rates that we are
finalizing for CY 2011. The median costs for hospital outpatient
services for these and all other APCs that were used in the development
of this final rule with comment period can be found on the CMS Web site
at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp.

Table 22--Final APC Exceptions to the 2 Times Rule for CY 2011
------------------------------------------------------------------------
CY 2011 APC CY 2011 APC title
------------------------------------------------------------------------
0057.............................. Bunion Procedures.
0058.............................. Level I Strapping and Cast
Application.
0060.............................. Manipulation Therapy.
0076.............................. Level I Endoscopy Lower Airway.
0080.............................. Diagnostic Cardiac Catheterization.
0083.............................. Coronary and Noncoronary Angioplasty
and Percutaneous Valvuloplasty.
0105.............................. Repair/Revision/Removal of
Pacemakers, AICDs, or Vascular
Devices.
0133.............................. Level I Skin Repair.
0142.............................. Small Intestine Endoscopy.
0203.............................. Level IV Nerve Injections.
0235.............................. Level I Posterior Segment Eye
Procedures.
0245.............................. Level I Cataract Procedures without
IOL Insert.
0303.............................. Treatment Device Construction.
0304.............................. Level I Therapeutic Radiation
Treatment Preparation.
0340.............................. Minor Ancillary Procedures.
0341.............................. Skin Tests.
0343.............................. Level III Pathology.
0432.............................. Health and Behavior Services.
0433.............................. Level II Pathology.
0604.............................. Level 1 Hospital Clinic Visits.
0607.............................. Level 4 Hospital Clinic Visits.
0664.............................. Level I Proton Beam Radiation
Therapy.
------------------------------------------------------------------------

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 to $2,000 in increments of $100, and from $2,000 to $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

[[Page 71902]]

($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-$10,000). 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.
Every year we receive many requests for higher payment amounts
under our New Technology APCs for specific procedures under the OPPS
because they require the use of expensive equipment. We are taking this
opportunity to reiterate our response in general to the issue of
hospitals' capital expenditures as they relate to the OPPS and
Medicare.
Under the OPPS, one of our goals is to make payments that are
appropriate for the services that are necessary for the treatment of
Medicare beneficiaries. The OPPS, like other Medicare payment systems,
is budget neutral and increases are limited to the hospital inpatient
market basket increase. We believe that our payment rates generally
reflect the costs that are associated with providing care to Medicare
beneficiaries in cost efficient settings, and we believe that our rates
are adequate to ensure access to services.
For many emerging technologies, there is a transitional period
during which utilization may be low, often because providers are first
learning about the techniques and their clinical utility. Quite often,
parties request that Medicare make higher payment amounts under our New
Technology APCs for new procedures in that transitional phase. These
requests, and their accompanying estimates for expected total patient
utilization, often reflect very low rates of patient use of expensive
equipment, resulting in high per use costs for which requesters believe
Medicare should make full payment. Medicare does not, and we believe
should not, assume responsibility for more than its share of the costs
of procedures based on Medicare beneficiary projected utilization and
does not set its payment rates based on initial projections of low
utilization for services that require expensive capital equipment. For
the OPPS, we rely on hospitals to make informed business decisions
regarding the acquisition of high cost capital equipment, taking into
consideration their knowledge about their entire patient base (Medicare
beneficiaries included) and an understanding of Medicare's and other
payers' payment policies.
We note that, in a budget neutral environment, payments may not
fully cover hospitals' costs in a particular circumstance, including
those for the purchase and maintenance of capital equipment. We rely on
hospitals to make their decisions regarding the acquisition of high
cost equipment with the understanding that the Medicare program must be
careful to establish its initial payment rates, including those made
through New Technology APCs, for new services that lack hospital claims
data based on realistic utilization projections for all such services
delivered in cost-efficient hospital outpatient settings. As the OPPS
acquires claims data regarding hospital costs associated with new
procedures, we regularly examine the claims data and any available new
information regarding the clinical aspects of new procedures to confirm
that our OPPS payments remain appropriate for procedures as they
transition into mainstream medical practice.
2. 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 the CY 2011 OPPS/ASC
proposed rule (75 FR 46249), we proposed for CY 2011 to retain services
within New Technology APC groups until we gather sufficient 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 data upon which to base a
decision for reassignment have not been collected. Table 17 of the
proposed rule listed the HCPCS codes and associated status indicators
that we proposed to reassign from a New Technology APC to a clinically
appropriate APC or to a different New Technology APC for CY 2011.
We note that, for CY 2010, there are four services described by
four HCPCS G-codes receiving payment through a New Technology APC.
Specifically, HCPCS code G0416 (Surgical pathology, gross and
microscopic examination for prostate needle saturation biopsy sampling,
1-20 specimens) is assigned to New Technology APC 1505 (New
Technology--Level V ($300-$400)); HCPCS code G0417 (Surgical pathology,
gross and microscopic examination for prostate needle saturation biopsy
sampling, 21-40 specimens) is assigned to New Technology APC 1507 (New
Technology--Level VII ($500-$600)); HCPCS code G0418 (Surgical
pathology, gross and microscopic examination for prostate needle
saturation biopsy sampling, 41-60 specimens) is assigned to New
Technology APC 1511 (New Technology--Level XI ($900-$1,000)); and HCPCS
code G0419 (Surgical pathology, gross and microscopic examination for
prostate needle saturation biopsy sampling, greater than 60 specimens),
is assigned to New Technology APC 1513 (New Technology--Level XIII
($1,100-$1,200)).
In the CY 2011 OPPS/ASC proposed rule (75 FR 46249), we proposed to
reassign HCPCS code G0416 from New Technology APC 1505 to clinical APC
0661 (Level V Pathology), and HCPCS code G0417 from New Technology APC
1507 (New Technology-Level VII ($500 to $600)) to New Technology APC
1506 (New Technology--Level VI ($400-$500)). Based on our claims data
used for CY 2011 rate setting, as well as clinical characteristics, we
believed that HCPCS code G0416 is comparable clinically and with
respect to the use of resources as other pathology services currently
assigned to APC 0661. Further, we believed that HCPCS code G0417 is
more appropriately placed in New Technology APC 1506 based on the
median cost data for the CY 2011 ratesetting and based on its clinical
and

[[Page 71903]]

resource similarities to procedures currently in APC 1506.
We did not receive any public comments on the APC reassignments of
HCPCS codes G0416 and G0417. Therefore, for the reasons explained
above, we are finalizing our proposal, without modification, to assign
HCPCS code G0416 to APC 0616, which has a final CY 2011 APC median cost
of approximately $149, and to assign HCPCS code G0417 to APC 1506,
which has a final CY 2011 APC median cost of approximately $489. Table
23 below lists the HCPCS codes and associated status indicators that we
are reassigning from a New Technology APC to a clinically appropriate
APC or to a different New Technology APC for CY 2011.
For CY 2011, we also proposed to continue the New Technology APC
assignments for HCPCS codes G0418 and G0419 based on our understanding
of the clinical and cost characteristics of the procedures described by
these HCPCS codes. As we stated in the CY 2011 OPPS/ASC proposed rule
(75 FR 46249), we do not believe we have enough claims data to assign
these codes to a different APC. While we believed that these services
will always be low volume, given the number of specimens being
collected, we believed that we should continue the New Technology
payments for HCPCS codes G0418 and G0419 for another year to see if
more claims data become available. Specifically, we proposed to
continue to assign HCPCS code G0418 to New Technology APC 1511 (New
Technology--Level XI ($900-$1,000)) and HCPCS code G0419 to New
Technology APC 1513 (New Technology--Level XIII ($1,100-$1,200)).
We did not receive any public comments on the continuation of the
APC assignments of HCPCS code G0418 and G0419. Therefore, for the
reasons explained above, we are finalizing our proposal, without
modification, to continue to assign HCPCS code G0418 to APC 1511, and
to continue to assign HCPCS code G0419 to APC 1513. The final CY 2011
payment rates for HCPCS codes G048 and G0419 can be found in Addendum B
of this final rule with comment period.

Table 23--CY 2011 Reassignment of Procedures Assigned to New Technology APCS in CY 2010
----------------------------------------------------------------------------------------------------------------
CY 2010 Short Final CY 2011 Final CY 2011
CY 2010 HCPCS code descriptor CY 2010 SI CY 2010 APC SI APC
----------------------------------------------------------------------------------------------------------------
G0416.................. Sat biopsy prostate 1- S 1505 X 0661
20 spc.
G0417.................. Sat biopsy prostate S 1507 S 1506
21-40.
----------------------------------------------------------------------------------------------------------------

D. OPPS APC-Specific Policies

1. Cardiovascular Services
a. Cardiovascular Telemetry (APC 0209)
For CY 2011, we proposed to continue to assign CPT code 93229
(Wearable mobile cardiovascular telemetry with electrocardiographic
recording, concurrent computerized real time data analysis and greater
than 24 hours of accessible ECG data storage (retrievable with query)
with ECG-triggered and patient-selected events transmitted to a remote
attended surveillance center for up to 30 days; technical support for
connection and patient instructions for use, attended surveillance,
analysis and physician prescribed transmission of daily and emergent
data reports) to APC 0209 (Level II Extended EEG, Sleep, and
Cardiovascular Studies), with a proposed payment rate of approximately
$782.
Comment: Some commenters recommended that CMS assign status
indicator ``A'' (Services furnished to a hospital outpatient that are
paid under a fee schedule or payment system other than OPPS) to CPT
code 93229 in order to make this service nonpayable under the OPPS for
CY 2011. The commenters stated that there are currently no hospitals
that can provide the type of constant monitoring that the service
described by CPT code 93229 requires. For this reason, according to the
commenters, any claims submitted for CPT code 93229 by hospitals are
incorrectly coded. The commenters suggested that, if CMS chose not to
adopt their recommendation and instead chose to continue recognizing
CPT code 93229 as payable under the OPPS, CMS reconsider the proposed
assignment of the service to APC 0209. According to the commenters, the
service described by CPT code 93229 is not similar, clinically or in
terms of resource utilization, to the other procedures assigned to APC
0209, in particular, the polysomnography procedures described by CPT
codes 95810 (Polysomnography; sleep staging with 4 or more additional
parameters of sleep, attended by a technologist) and 95811
(Polysomnography; sleep staging with 4 or more additional parameters of
sleep, with initiation of continuous positive airway pressure therapy
or bilevel ventilation, attended by a technologist), which are the most
commonly reported procedures in APC 0209 with the highest number of
single claims contributing to the APC's median cost. The commenters
urged CMS to assign CPT code 93229 to the New Technology APC 1513 (New
Technology--Level XIII ($1,100-$1,200)), with a proposed payment rate
of approximately $1,150. The commenters stated that, if any hospitals
were to provide the remote cardiac monitoring service described by CPT
code 93229, the proposed payment rate for APC 0209 would be less than
hospitals' costs for providing this service.
Response: We do not agree with the commenters that we should assign
status indicator ``A'' to CPT code 93229 in order to make the service
nonpayable under the OPPS for CY 2011. We typically recognize, for OPPS
payment purposes, HCPCS codes describing services that could be covered
by Medicare when provided to hospital outpatients, regardless of
whether, as the commenters indicated, those services are actually being
provided by hospitals at the time the OPPS/ASC final rule with comment
period for the upcoming year is issued. We believe that CPT code 93229
describes a diagnostic study that could be provided to Medicare
beneficiaries in the hospital outpatient setting and, therefore, could
be covered by Medicare. We also do not agree with the commenters'
statement that there are currently no hospitals that can provide the
type of constant monitoring that the service described by CPT code
93229 requires. Our ratesetting methodology is based on claims
submitted by hospitals, and our final rule claims data show 103 single
claims and 114 total claims for this service. Based on these claims
data, we calculated a final median cost for CPT code 93229 of
approximately $287. (We note that placement of CPT code 93229 in APC
0209 with higher median cost procedures does not violate the 2 times
rule because this service is a low

[[Page 71904]]

volume procedure relative to the other procedures in APC 0209.) As to
whether these claims are miscoded, it is generally not our policy to
judge the accuracy of hospital coding and charging for purposes of
ratesetting. New Technology APCs are designed to allow us to provide
appropriate and consistent payment for designated new procedures that
are not yet reflected in our claims data (74 FR 60438). Because we
already have sufficient claims data for CPT code 93229 to assign it to
a clinically appropriate APC, it would be inappropriate to move it to
the New Technology APC 1513.
As we stated in the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60441), we also continue to believe the service described by CPT
code 93229 is similar, clinically and in terms of resource utilization,
to the other procedures assigned to APC 0209 for CY 2011. For example,
similar to the remote cardiac monitoring service described by CPT code
93229, the polysomnography procedures described by CPT codes 95810 and
95811 involve continuous and simultaneous monitoring and recording of
various physiological and pathophysiological parameters, with
attendance by a technologist.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to assign CPT
code 93229 to APC 0209, with a final CY 2011 APC median cost of
approximately $772.
b. Myocardial Positron Emission Tomography (PET) Imaging (APC 0307)
For CY 2011, we proposed to assign CPT codes 78459 (Myocardial
imaging, positron emission tomography (PET), metabolic evaluation),
78491 (Myocardial imaging, positron emission tomography (PET),
perfusion; single study at rest or stress), and 78492 (Myocardial
imaging, positron emission tomography (PET), perfusion; multiple
studies at rest and/or stress) to APC 0307 (Myocardial Position
Emission Tomography (PET) Imaging), with a proposed median cost of
approximately $1,121. For CY 2010, APC 0307 has a national unadjusted
payment rate of approximately $1,433 based on a CY 2010 OPPS final rule
median cost of approximately $1,420. At its August 2010 meeting, the
APC Panel recommended that CMS investigate and report at a future Panel
meeting on the reason for the decline in median cost for APC 0307 from
the CY 2010 OPPS to the proposed CY 2011 OPPS.
Comment: Commenters objected to the proposed decrease in the
payment rate for myocardial PET under APC 0307. They indicated that
there is increasing interest in the service due to shortages of
radioisotopes required for SPECT myocardial perfusion imaging as well
as developing evidence favoring use of myocardial PET imaging and
growing expertise in the use of myocardial PET imaging. The commenters
were concerned that the volatility of the payment rates from one year
to the next at least since 2006, and the reduction in the payment rate
from $1,433 in CY 2010 to the $1,099 proposed payment rate for APC 0307
for CY 2011 will make it hard for hospitals to plan and budget for the
forthcoming year. The commenters urged CMS to validate the estimated
costs on the CY 2009 claims data for the limited numbers of hospitals
reporting CPT codes 78459, 78491, and 78492 (APC 0307) to determine the
reason for the proposed change in payment. The commenters believed that
the proposed payment rate is a result of the service largely being
furnished by a relatively small number of facilities that may be
driving the observed reduction. One commenter stated that hospitals do
not always align the costs and charges for the service properly in
their accounts and, therefore, the CCRs that result from the cost
reports understate the cost of the services. Another commenter believed
that hospitals with disproportionately low CCRs may have been
disproportionately included in the single bills (compared to the total
volume of service that they furnish). This commenter also stated that
the median cost for single scans, represented by CPT code 78491 has
been higher than the median cost for multiple scans, represented by CPT
code 78492 in 2007, 2009 and 2010 and that the evidence indicates that
the data on which CMS is basing the payment rate are flawed.
One commenter urged CMS to average the median costs over a 4-year
period to provide stability to the payment rates or to assign CPT codes
78459, 78491, and 78492 to New Technology APC Level XIV so that the
services would be paid $1,250 for CY 2011. Another commenter stated
that payment under the MPFS for these services is carrier priced and,
therefore, has remained stable over the years. The commenter asked that
CMS use the payment rates being paid under the MPFS as the basis for
payment under the OPPS for these services. One commenter asked that CMS
eliminate all single bills from hospitals that have a CCR that is less
than 0.2 for the calculation of costs for myocardial PET services and
that CMS establish a cost center and CCR specific to PET that would be
used to reduce charges for PET to costs. Several commenters asked that
CMS limit to 10 percent the amount of decrease in the median cost for
CY 2011 compared to CY 2010 and slowly phase in any reduction beyond 10
percent. Other commenters asked that CMS set the relative weight for
payment for APC 0307 using the mean cost rather than the median cost.
Response: To determine the reason that the median cost declined
from CY 2010 to CY 2011, we examined the data for the single bills that
were used to set the median cost for APC 0307 for CY 2010, the proposed
CY 2011 proposed rule, and the CY 2011 final rule with comment period,
and we determined that there are multiple reasons that the median cost
for APC 0307 declined from CY 2010 to CY 2011. In general, when we
looked the charges and the CCRs for CPT codes 78459, 78491, and 78492
in APC 0307, we found that the charges either stayed the same or
declined, that the CCRs used to estimate cost from charges for these
codes declined, and that the cost of HCPCS code A9555 (Rb82 rubidium),
the radiopharmaceutical that is used in a myocardial PET scan, also
declined. Specifically, the median of the line item charge for CPT code
78492, the highest volume code in APC 0307 (comprising 96 percent of
single bills used to establish the median cost for APC 0307 in the CY
2011 final rule claims data) remained virtually unchanged between the
CY 2010 final rule claims data ($3,859.00) and the CY 2011 final rule
claims data ($3,858.75). However, the median hospital CCR applicable to
the line item charge for CPT code 78492, largely derived from cost
center 4100 (Radiology-Diagnostic), declined from 0.2342 in the CY 2010
HCRIS data to 0.1708 in the CY 2011 final rule claims data. Moreover,
the estimated per day cost of rubidium, which is reported with 95
percent of claims for CPT code 78492, declined from $418.05 per day in
the CY 2010 final rule claims data to $330.06 in the CY 2011 final rule
claims data. The hospital CCR used to estimate costs from charges for
rubidium also is based on cost center 4100. The other two myocardial
PET codes, CPT codes 78459 and 78491, show similar patterns of charges
and CCRs, although they account for a much lower percent of single
bills than CPT code 78492, which causes them to have much less
influence on the median cost for APC 0307. We believe that the absence
of increase in the line item charge, the significant decline in the
applicable CCRs for CPT code 78492, and the significant decline in the
estimated cost

[[Page 71905]]

of rubidium combine to explain the reduction in the median cost for APC
0307 for CY 2011 compared to CY 2010. We also used a substantial volume
of single bills for the APC (3,638 single bills out of 5,732 total
frequency or approximately 64 percent of the claims for services in APC
0307). In addition, as is our standard practice, we used the most
recently submitted cost reports to calculate the CCRs (largely CCRs for
cost center 4100 that are applied to the charges for these imaging
services) to estimate the cost.
We agree that the modest number of hospitals that furnish the
service (50 in the CY 2010 final rule claims data and 61 in the CY 2011
final rule claims data) and the addition of claims from 11 hospitals
that reported the service for the first time in CY 2009 may have some
bearing on the volatility in the median costs, and we will continue to
monitor these data in the future. However, it is also possible that
hospitals are becoming more efficient and that the cost of the service
is declining as it becomes better established. Our standard methodology
of estimating costs from charges and creating single claims with a
unique resource cost for individual services resulted in the use of 64
percent of the claims for services in APC 0307 for ratesetting; and, we
used the most current claims and cost report data that are available
for the estimation of the cost of the service. With regard to the
comment that the estimated cost for CPT code 78491 has been higher than
CPT code 78492 in past years, the low sample size and differences in
the mix of hospitals reporting these codes likely accounts for this
observation and do not suggest the data are flawed. We also note that
any difference in estimated cost between single and multiple studies
would not impact the payment rate as claims for CPT code 78492 drive
the estimated median cost for this APC.
Based on our review of the claim charge data and cost report data,
we believe our estimated cost data for the services in APC 0307 are
accurate and, therefore, will not adopt an alternative methodology,
such as commenters requests to limit CCRs to those at 0.2 or above,
calculating a rolling average based on 4 years of past medians,
assigning the codes to a new technology APC, limiting the decline in
the median cost to 10 percent, setting the weight on the mean cost
rather than the median cost, or setting the payment rate at the amount
paid to physicians for the service. Similarly, we do not believe that
the CCRs that are applied to the charges for myocardial PET result in
flawed estimated costs for the service and that a cost center specific
to PET services is necessary to provide valid CCRs for PET services.
After consideration of the public comments we received and
examination of the reasons for the decline in the median cost for APC
0307, we are not making any of the adjustments to the median cost that
commenters request because we believe that the data on which the median
is calculated are valid and that the median is accurate. Therefore we
are finalizing a payment rate for APC 0307 for CY 2011 based on the CY
2011 OPPS final rule median cost of approximately $1,096. We are
accepting the APC Panel's recommendation and will report the findings
of our investigation into the reason for the decline in median cost for
APC 0307 from the CY 2010 OPPS to the proposed CY 2011 OPPS at the
winter 2011 APC Panel meeting.
c. Cardiovascular Computed Tomography (CCT) (APCs 0340 and 0383)
The AMA CPT Editorial Panel created the following new codes for
Cardiovascular Computed Tomography (CCT) services, effective January 1,
2010: CPT codes 75571 (Computed tomography, heart, without contrast
material, with quantitative evaluation of coronary calcium), 75572
(Computed tomography, heart, with contrast material, for evaluation of
cardiac structure and morphology (including 3D image postprocessing,
assessment of cardiac function, and evaluation of venous structures, if
performed)), 75573 (Computed tomography, heart, with contrast material,
for evaluation of cardiac structure and morphology in the setting of
congenital heart disease (including 3D image postprocessing, assessment
of LV cardiac function, RV structure and function and evaluation of
venous structures, if performed)), and 75574 (Computed tomographic
angiography, heart, coronary arteries and bypass grafts (when present),
with contrast material, including 3D image postprocessing (including
evaluation of cardiac structure and morphology, assessment of cardiac
function, and evaluation of venous structures, if performed). For CY
2010, we assigned CPT code 75571 to APC 0340 (Minor Ancillary
Procedures). For CY 2010, we also assigned CPT codes 75572, 75573, and
75574 to APC 0383 (Cardiac Computed Tomographic Imaging). For CY 2011,
we proposed to maintain these APC assignments, with a proposed rule
median cost for APC 0340 of approximately $48 and a proposed rule
median cost for APC 0383 of approximately $263.
Comment: One commenter urged CMS to consider using data sources in
addition to our claims and cost report data to establish the basis for
payment for CCT because the commenter believed that hospitals have
reported incorrect or incomplete data for CY 2009 for CCT services. The
commenter stated that the incorrect data are due to unfamiliarity or
misinterpretation of Category III CPT codes that were used prior to CY
2010, and are reflected in the charges on the claims for services in CY
2009 on which the median costs for CY 2011 will be based. The commenter
stated that it is developing a data collection to present to CMS to
substantiate that CCT services are more costly than the CY 2009 data
that CMS used. The commenter urged CMS to be open to accepting new
data.
Response: We have no reason to believe that the median costs we
have calculated for CPT codes 75571, 75572, 75573, and 75574 do not
reflect valid estimates of the cost of these services. We proposed to
continue to assign CPT code 75571 to APC 0340, which had a CY 2011
proposed rule APC median cost of approximately $46. We also proposed to
continue to assign CPT codes 75572, 75573, and 75574 to APC 0383, which
had a proposed rule CY 2011 APC median cost of approximately $254.
Because CPT codes 75571, 75572, 75573, and 75574 are all new for CY
2010, we do not have CY 2009 claims data for these codes for CY 2011
OPPS ratesetting. However, we assigned them to APCs 0340 and 0383 based
on what we believe to be their clinical and resource similarity to the
other services in the APC, for which we have claims data.
Concerning the request that we review external data that may be
provided in the future, we do review data that the public wishes to
share with us. However, because the OPPS is a budget neutral relative
weight based system, we believe that it is critical that the same
source of data and the same cost estimation process be used to
establish the median costs for services paid under the OPPS so that the
payment rates derived from the median costs are correct in relativity
to one another.
After considering the public comments we received and reviewing our
updated CY 2009 claims data, we are continuing to maintain the
assignment of CPT code 75571 to APC 0340 for CY 2011, for which we have
calculated a final rule median cost of approximately $46. We also are
maintaining the assignment of CPT codes 75572, 75573, and 75574 to APC
0383, for which we have calculated a

[[Page 71906]]

final rule median cost of approximately $254 for CY 2011.
d. Multifunction Cardiogram (APC 0340)
For CY 2011, we proposed to continue to assign Category III CPT
code 0206T (Algorithmic analysis, remote, of electrocardiographic-
derived data with computer probability assessment, including report) to
APC 0340 (Minor Ancillary Procedures), with a proposed payment rate of
approximately $47.
Comment: One commenter defined the procedure described by CPT code
0206T as a multifunction cardiogram. The commenter stated that CMS
should reconsider the proposed assignment of CPT code 0206T to APC 0340
because it is not similar, clinically or in terms of resource
utilization, to the other procedures assigned to APC 0340. The
commenter stated that the majority of the other procedures in APC 0340
are minor office procedures that are quickly done and do not require
data transmission or analysis. According to the commenter, the complex
data obtained and analyzed by the multifunction cardiogram is
comparable to the data obtained and analyzed during cardiac stress
tests or electrocardiograms, and serve as an alternative to
radionuclide stress testing in the diagnosis of coronary artery
disease. Based on the use of the multifunction cardiogram and the data
it generates, the commenter believed that the procedure described by
CPT code 0206T is most similar clinically to the procedures assigned to
APC 0100 (Cardiac Stress Tests), which had a proposed payment rate of
approximately $180. However, in terms of resource utilization, the
commenter claimed that payment for the multifunction cardiogram should
be $75 more than the payment for APC 0100. The commenter pointed out
that CPT code 0206T was new for CY 2010, and, therefore, no CY 2009
claims data are available for CY 2011 OPPS ratesetting. The commenter
described a multifunction cardiogram as a non-traditional systems
analysis tool that creates a mathematical model for the detection of
myocardial ischemia, and argued that this tool represents a completely
new technology. The commenter recommended that CMS reassign CPT code
0206T to APC 1504 (New Technology--Level IV ($200-$300)).
Response: We appreciate the commenter's submission of this clinical
information for the procedure described by Category III CPT code 0206T
for our review. As a new Category III CPT code for CY 2010, we do not
yet have hospital claims data for the procedure. Category III CPT codes
are temporary codes that describe emerging technology, procedures, and
services, and they are created by the AMA to allow for data collection
for new services or procedures. Under the OPPS, we generally assign a
payment rate to a new Category III CPT code based on input from a
variety of sources, including but not limited to, review of resource
costs and clinical homogeneity of the service to existing procedures,
information from specialty societies, input from CMS medical advisors,
and other information available to us. Based on our review of the
clinical characteristics of CPT code 0206T and the information provided
by the commenter, we do not believe that we have sufficient clinical or
cost information to justify a reassignment to a different APC at this
time. However, the APC Panel Subcommittee for APC Groups and Status
Indicator (SI) Assignments provides substantive advice to us on the
correct assignment of services to APCs, and the Subcommittee members
bring expertise and experience to their review of clinical issues.
Therefore, we will review the procedure described by the commenter with
the APC Panel's Subcommittee for APC Groups and Status Indicator (SI)
Assignments at the winter 2011 APC Panel meeting.
After review of the public comment we received, we are finalizing
our CY 2011 proposal, without modification, to continue to assign
Category III CPT code 0206T to APC 0340. As we indicated earlier, we
also will review the APC assignment of Category III CPT code 0206T with
the APC Panel's Subcommittee for APC Groups and SI Assignments at the
winter 2011 APC Panel meeting.
e. Unlisted Vascular Surgery Procedure (APC 0624)
For CY 2011, we proposed to continue to assign CPT code 37799
(Unlisted procedure, vascular surgery) to APC 0624 (Phlebotomy and
Minor Vascular Access Device Procedures), which had a proposed payment
rate of approximately $43.
Comment: One commenter requested that CMS reassign CPT code 37799
from APC 0624 to APC 0103 (Miscellaneous Vascular Procedures), which
had a proposed CY 2011 OPPS payment rate of approximately $1,309. The
commenter stated that CPT code 37799 is most clinically related to the
services assigned to APC 0103. The commenter further stated that
continuing to assign CPT code 37799 to APC 0624 would limit patient
access to new technology and clinically advanced procedures.
Response: As a matter of policy, which we have stated previously in
the OPPS final rules with comment period since 2005 (69 FR 65724
through 65725), HCPCS codes that are unlisted procedures, not otherwise
classified, or not otherwise specified codes, are assigned to the
lowest level APC that is appropriate to the clinical nature of the
service. We also do not consider the costs of these services in
assessing APCs for 2 times rule violations. We do not believe that the
assignment of CPT code 37799 to APC 0103, as the commenter suggested,
would be consistent with our policy to assign HCPCS codes for unlisted
procedures to the lowest level APC that is appropriate to the clinical
nature of the service. Because unlisted codes do not describe any
specific service, we believe that assigning them to the lowest level
APC is appropriate under the hospital OPPS. Furthermore, we cannot
assess whether the procedure described by CPT code 37799 is similar to
procedures in APC 0103 because the CPT code does not describe any
particular service. We note that the CPT instruction that appears
underneath CPT code 36592 (Collection of blood specimen using
established central or peripheral catheter, venous, not otherwise
specified) refers to the use of unlisted CPT code 37799 for blood
collection from an established arterial catheter, a very low intensity
service. We also note that we would assign a service or procedure to a
more appropriate APC once it is assigned to a specific CPT or HCPCS
code.
After consideration of the public comment we received, we are
finalizing our proposal, without modification, to continue to assign
CPT code 37799 to APC 0624, which has a final CY 2011 APC median cost
of approximately $43.
f. Implantable Loop Recorder Monitoring (APC 0691)
For CY 2011, we proposed to assign CPT code 93299 (Interrogation
device evaluation(s), (remote) up to 30 days; implantable
cardiovascular monitor system or implantable loop recorder system,
remote data acquisition(s), receipt of transmissions and technician
review, technical support and distribution of results) to APC 0691
(Level III Electronic Analysis of Devices), with a proposed payment
rate of approximately $169.
Comment: Some commenters acknowledged that APC 0691 is a reasonable
placement for CPT code 93299 based on its proposed rule median cost of
approximately $274, but questioned the accuracy of the CY 2009 proposed
rule claims data that CMS used to calculate the median cost. One

[[Page 71907]]

commenter stated that claims data were available for this service for
the first time for CY 2011 ratesetting and argued that the proposed
rule median cost for CPT code is too high, pointing out that the
average physician charge for the same service in CY 2009 was only
$42.87. In addition, the commenter stated that the OPPS median cost for
a similar service, described by CPT 93296 (Interrogation device
evaluation(s), (remote), up to 90 days; single, dual, or multiple lead
pacemaker system or implantable cardioverter-defibrillator system,
remote data acquisition(s), receipt of transmissions and technician
review, technical support and distribution of results) is significantly
lower than the median cost for CPT code 93299. Therefore, the commenter
suggested that CPT code 93299 be assigned to APC 0690 (Level I,
Electronic Analysis of Devices), the same APC to which CPT code 93296
is assigned.
Response: The commenters mistakenly cited $274 as the proposed rule
median cost for CPT code 93299 for CY 2011. The proposed rule
``median'' cost for CPT code 93299 was approximately $184, while the
proposed rule ``mean'' cost for CPT code 93299 was approximately $274.
We understand that the commenters are concerned about differences in
costs for services provided in different settings (HOPDs versus
physicians' offices) when the same services are provided to Medicare
beneficiaries. Even though both settings use the standard CPT code set,
the costs of providing these services in one setting may not be the
same as the costs in another setting. The OPPS and the MPFS are
fundamentally different payment systems with essential differences in
their payment policies. Specifically, the OPPS is a prospective payment
system, based on the concept of paying for groups of services that
share clinical and resource characteristics. Payment is made under the
OPPS according to prospectively established payment rates that are
related to the relative costs of hospital resources for services, as
calculated from claims data and Medicare cost reports. The MPFS is a
fee schedule that generally provides separate payment for each
individual service, reflecting the expected typical inputs into these
services. The OPPS methodology allows hospitals to actively contribute
on an ongoing basis to the ratesetting process through its annual
updates and to influence future payment rates for services by
submitting correctly coded and accurately priced claims for the
services they provide. According to this methodology, it is generally
not our policy to judge the accuracy of hospital coding and charging
for purposes of ratesetting. The CY 2011 final rule median cost for CPT
code 93299 is approximately $180, calculated from 558 single claims.
Therefore, we do not agree with commenters that we should assign this
procedure to APC 0690, which has a final rule median cost of only $35.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to continue to
assign CPT code 93299 to APC 0691, with a final CY 2011 APC median cost
of approximately $165.
2. Gastrointestinal (GI) Services: Upper GI Endoscopy (APCs 0141, 0384,
and 0422)
For CY 2011, we proposed to reassign four upper gastrointestinal
endoscopy CPT codes from APC 0141 (Level I Upper GI Procedures) to APC
0422 (Level II Upper GI Procedures). Specifically, we proposed to
reassign CPT codes 43216 (Esophagoscopy, rigid or flexible; with
removal of tumor(s), polyp(s), or other lesion(s) by hot biopsy forceps
or bipolar cautery), 43242 (Upper gastrointestinal endoscopy including
esophagus, stomach, and either the duodenum and/or jejunum as
appropriate; with transendoscopic ultrasound-guided intramural or
transmural fine needle aspiration/biopsy(s) (includes endoscopic
ultrasound examination of the esophagus, stomach, and either the
duodenum and/or jejunum as appropriate), 43510 Gastrotomy; with
esophageal dilation and insertion of permanent intraluminal tube (e.g.,
celestin or mousseaux-barbin)), and 43870 (Closure of gastrostomy,
surgical) from APC 0141, with a proposed payment rate of approximately
$606, to APC 0422, with a proposed payment rate of approximately
$1,113.
For CY 2011, we proposed to continue to assign CPT code 43240
(Upper gastrointestinal endoscopy including esophagus, stomach, and
either the duodenum and/or jejunum as appropriate; with transmural
drainage of pseudocyst) to APC 0141, with a proposed payment rate of
approximately $600. We also proposed to continue to assign CPT code
43228 (Esophagoscopy, rigid or flexible; with ablation of tumor(s),
polyp(s), or other lesion(s), not amenable to removal by hot biopsy
forceps, bipolar cautery or snare technique) to APC 0422 with a
proposed payment rate of approximately $1,113.
Comment: Several commenters disagreed with the reassignment of CPT
codes 43216, 43242, 43510, and 43870 from APC 0141 to APC 0422 because,
they stated, these procedures are similar to those services that will
continue to be assigned to APC 0141, specifically CPT codes 43231
(Esophagoscopy, rigid or flexible; with endoscopic ultrasound
examination), 43232 (Esophagoscopy, rigid or flexible; with
transendoscopic ultrasound-guided intramural or transmural fine needle
aspiration/biopsy(s)), 43237 (Upper gastrointestinal endoscopy
including esophagus, stomach, and either the duodenum and/or jejunum as
appropriate; with endoscopic ultrasound examination limited to the
esophagus), 43238 (Upper gastrointestinal endoscopy including
esophagus, stomach, and either the duodenum and/or jejunum as
appropriate; with transendoscopic ultrasound-guided intramural or
transmural fine needle aspiration/biopsy(s), esophagus (includes
endoscopic ultrasound examination limited to the esophagus)), and 43259
(Upper gastrointestinal endoscopy including esophagus, stomach, and
either the duodenum and/or jejunum as appropriate; with endoscopic
ultrasound examination, including the esophagus, stomach, and either
the duodenum and/or jejunum as appropriate). The commenters stated that
the reassignment to APC 0422 does not maintain the clinical homogeneity
and resource characteristics of these services.
Response: Section 1833(t)(9)(A) of the Act requires the Secretary
to review and revise the groups, the relative payment weights, and the
wage and other adjustments 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; the Act further
requires us to repeat this process on a basis that is not less often
than annually. As such, we review, on an annual basis, all APC
assignments for both general appropriateness and for violations of the
2 times rule and, when necessary, reassign CPT codes to more
appropriate APCs. Although there was no violation of the 2 times rule
in APC 0141, based on our review of the CY 2009 proposed rule claims
data used for ratesetting, we believed that a change in APC assignment
was necessary for CPT codes 43216, 43242, 43510, and 43870. For CY
2011, the proposed median cost for APC 0141 was approximately $618.
However, the median cost for CPT codes 43216, 43242, 43510, and 43870
were significantly higher. Specifically, CPT code 43216 had a median
cost of approximately $1,329, CPT code 43242

[[Page 71908]]

had a median cost of approximately $1,074, CPT code 43510 had a median
cost of approximately $1,471, and CPT code 43870 had a median cost of
approximately $1,509. Based on the proposed rule median costs, we
proposed to reassign the four CPT codes to APC 0422, which had a
proposed APC median cost of approximately $1,136.
Our review of the CY 2011 final rule claims data indicates that the
median costs for these CPT codes continue to be more consistent with
assignment to APC 0422. Specifically, CY 2011 final rule claims data
shows that CPT code 43216 has a final rule median cost of approximately
$1,100, CPT code 43242 has a final rule median cost of approximately
$1,067, CPT code 43510 has a final rule median cost of approximately
$1,362, and CPT code 43870 has a final rule median cost of
approximately $1,454. Based on our examination of the CY 2011 OPPS
final rule claims data, we continue to believe that CPT codes 43216,
43242, 43510, and 43870 are appropriately placed in APC 0422, which has
a final rule APC median cost of approximately $1,137, based on clinical
homogeneity and resource costs.
Comment: Some commenters specifically disagreed with the APC
reassignment of CPT code 43242, which describes an ultrasound
procedure, because, the commenters stated, all the other ultrasound
procedures would continue to be assigned to APC 0141. The commenters
believed that the change may result in upcoding that could lead to
incorrect coding or inappropriate payment, and suggested that, to help
eliminate upcoding, CMS create a new APC specifically for ultrasound
upper GI procedures. Specifically, the commenters suggested the
creation of a new APC whose payment rate would be between the Level I
Upper GI Procedures APC 0141 and Level II Upper GI Procedures APC 0422.
The commenters stated that the restructuring of the current two APCs to
three upper level GI APCs would provide appropriate payment for upper
GI procedures consistent with CMS' policy of APC restructuring based on
resource homogeneity, clinical homogeneity, provider concentration,
frequency of service, and minimal opportunities for upcoding and code
fragmentation.
Response: Based on our review of the hospital outpatient claims
data used for ratesetting for the proposed rule, we determined that a
change in APC assignment for CPT code 43242 was necessary. As we
describe above, we continue to believe that the service associated with
CPT code 43242 is more similar in resource use to those services
assigned to APC 0422.
We do not agree with the commenters' suggestion for creating a new
APC specific to ultrasound upper GI procedures. Based on our medical
review team's assessment of the clinical characteristics of the
procedure described by CPT code 43242 and the other procedures assigned
to APC 0422, and based on the proposed rule and final rule claims data,
we believe that CPT code 43242 is similar clinically and in terms of
resource utilization to the upper GI procedures in APC 0422. Therefore,
for CY 2011, as we proposed, we will reassign CPT code 43242 to APC
0422. We note that, in all cases, hospitals must report HCPCS codes
that accurately reflect the services furnished; upcoding in order to
receive higher payment is considered fraudulent billing.
Comment: Several commenters requested that CMS reassign CPT code
43240 from APC 0141 to APC 0384 (GI Procedures with Stents), which had
a proposed payment rate of approximately $1,876. The commenters
believed that CPT code 43240 would be appropriately placed in APC 0384
based on resource and clinical homogeneity to other procedures assigned
to APC 0384.
Response: After review of our claims data for both the proposed
rule and the final rule and consideration of the clinical
characteristics, we do not agree with the commenters' recommendation to
reassign CPT code 43240 to APC 0384. We believe that the procedure
described by CPT code 43240 shares clinical similarities with the other
upper GI procedures assigned to APC 0141. Furthermore, our CY 2011
final rule claims data show that the median cost for CPT code 43240 of
approximately $738 based on 30 single claims (out of a total of 116
total claims) is substantially dissimilar to the median cost of
approximately $1,893 for APC 0384. We believe that the final rule
median cost of approximately $738 is more similar to the median cost of
approximately $605 for APC 0141. Therefore, for CY 2011, we will
continue to assign CPT code 43240 to APC 0141.
Comment: One commenter stated that the proposed payment reduction
for APC 0422 from $1,635 for CY 2010 to $1,113.48 for CY 2011 will
restrict Medicare beneficiary access to services that are in APC 0422.
The commenter further stated that the payment rate for APC 0422 is
inadequate to pay for the medical device required to perform the
service described by CPT code 43228.
Response: Review of our CY 2011 final rule claims data shows that
the median cost for CPT code 43228 is approximately $1,797 based on
1,759 single claims (out of a total of 2,199 claims), which is
relatively similar to the final rule median cost of $1,137 for APC
0422, which includes many upper GI procedures such as the procedure
described by CPT code 43228. Therefore, we continue to believe that the
procedure described by CPT code 43228 is appropriately placed in APC
0422 based on resource and clinical homogeneity to other procedures
currently assigned to APC 0422. We note that our cost-finding
methodology is based on reducing each hospital's charge for its
services to an estimated cost by applying the most discrete hospital-
specific CCR available for the hospital that submitted the claim.
Hence, it is the hospital's claims and cost reports that determine the
estimated costs that are used to calculate the median cost for each
service and, when aggregated into APC groups, the hospital data is used
to calculate the median cost for the APC on which the APC payment rate
is based.
With regard to the commenter's statement that hospitals will reduce
access to these services for Medicare beneficiaries if the payment for
them declines, we note that our regulations at 42 CFR 489.53(a)(2)
permit CMS to terminate a hospital's provider agreement if the hospital
places restriction on the persons it will accept for treatment and
fails either to exempt Medicare beneficiaries from those restrictions
or to apply them to Medicare beneficiaries the same as to all other
persons seeking care.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to reassign CPT
codes 43216, 43242, 43510, and 43870 from APC 0141 to APC 0422, which
has a final CY 2011 APC median cost of approximately $1,137. We also
are finalizing our CY 2011 proposal, without modification, to continue
to assign CPT code 43240 to APC 0141, which has a final CY 2011 APC
median cost of approximately $605, and to continue to assign CPT code
43228 to APC 0422, which has a final CY 2011 APC median cost of
approximately $1,137.
3. Genitourinary Services
a. Radiofrequency Remodeling of Bladder Neck (APC 0165)
For CY 2011, we proposed to continue to assign Category III CPT
code 0193T

[[Page 71909]]

(Transurethral, radiofrequency micro-remodeling of the female bladder
neck and proximal urethra for stress urinary incontinence) to APC 0165
(Level IV Urinary and Anal Procedures), with a proposed payment rate of
approximately $1,403. This CPT code has been assigned to APC 0165 since
it became effective in CY 2009.
Comment: Some commenters disagreed with the proposed continued APC
assignment of CPT code 0193T to APC 0165. The commenters believed that
the proposed payment rate for APC 0165 does not accurately reflect the
costs incurred by hospitals that perform the procedure described by CPT
code 0193T, especially because the procedure itself utilizes a costly
single-use disposable medical device. The commenters suggested the
assignment of CPT code 0193 to APC 0202 (Level VII Female Reproductive
Procedures), which had a proposed payment rate of $3,086, because APC
0202 contains procedures that are very similar to the provedure
described by CPT code 0193T. Specifically, the commenters indicated
that CPT code 0193T is similar in clinical characteristics and resource
costs to HCPCS codes 58356 (Endometrial cryoablation with ultrasonic
guidance, including endometrial curettage, when performed) and 58565
(Hysteroscopy, surgical; with bilateral fallopian tube cannulation to
induce occlusion by placement of permanent implants), which are
assigned to APC 0202. As an alternative, the commenters recommended the
reassignment of CPT code 0193T to APC 0168 (Level II Urethral
Procedures), which had a proposed payment rate of $2,211, because CPT
code 0193T is also similar clinically and resource costs to CPT code
51715 (Endoscopic injection of implant material into the submucosal
tissues of the urethra and/or bladder neck), which are assigned to APC
0168. The commenters added that the probe used in the procedure
associated with CPT code 0193T costs $1,095, and, overall, the total
procedure cost with the probe is approximately $2,600.
Response: We do not have any CY 2009 hospital claims data for CPT
code 0193T, which became effective on January 1, 2009. Category III CPT
codes are temporary codes that describe emerging technology,
procedures, and services, and these CPT codes were created by AMA to
allow for data collection for new services or procedures. Under the
OPPS, we generally assign new Category III CPT codes to clinical APCs
based on input from a variety of sources, including, but not limited
to, review of resource costs and clinical homogeneity of the service to
existing procedures, information from specialty societies, input from
our medical officers, and other information available to us. Based on
our review of the clinical characteristics of CPT code 0193T, as well
as the other procedures assigned to APCs 0165, 0168, and 0202, we
continue to believe that the most appropriate APC for CPT code 0193T is
APC 0165, and that the procedures contained in APC 0165 are clinically
similar to that of CPT code 0193T. As we have stated in the past (74 FR
60446), we do not agree with the commenters that the procedures
assigned to APC 0202 that involve fallopian tube cannulation or
endometrial ablation are sufficiently similar to the procedure
described by CPT code 0193T based on procedure duration, device
utilization, use of guidance, or other characteristics to warrant
reassignment of CPT code 0193T to APC 0202 based on considerations of
clinical homogeneity. We also do not believe that CPT code 0193T is
sufficiently similar to CPT code 51715, which involves an endoscopic
injection of implant material, to warrant reassignment.
Furthermore, we note that, at the August 2009 APC Panel meeting, a
presenter requested that the APC Panel recommend that CMS reassign CPT
code 0193T to either APC 0202 or APC 0168 based on resource
intensiveness and therapeutic benefit. The presenter claimed that the
device cost associated with CPT code 0193T is comparable to those
single-use devices that are used with certain procedures listed under
APC 0202, specifically those described by CPT codes 58356, 58565, and
57288. This same presenter indicated that, unlike the medical devices
used in the procedures that are in APC 0202, the costs of the single-
use medical devices for the procedures in APC 0165 are very minimal.
After a discussion, the APC Panel recommended that CMS maintain the APC
assignment of CPT code 0193T to APC 0165.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to assign
CPT code 0193T to APC 0165, which has a final CY 2011 median cost of
approximately $1,369.
For CY 2011, the AMA CPT Editorial Panel decided to delete Category
III CPT code 0193T on December 31, 2010, and replace it with CPT code
53860 (Transurethral radiofrequency micro-remodeling of the female
bladder neck and proximal urethra for stress urinary incontinence)
effective January 1, 2011. Similar to its predecessor CPT code, the
replacement CPT code 53860 will be assigned to APC 0165 effective
January 1, 2011.
b. Percutaneous Renal Cryoablation (APC 0423)
For CY 2011, we proposed to continue to assign CPT code 50593
(Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) to
APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures), with
a proposed payment rate of approximately $3,905. This CPT code was a
new code in CY 2008; however, the same service was previously described
by CPT code 0135T (Ablation renal tumor(s), unilateral, percutaneous,
cryotherapy). We note that, for CY 2007, based upon the APC Panel's
recommendation made at its March 2006 meeting, we reassigned CPT code
50593 (then CPT code 0135T) from APC 0163 (Level IV Cystourethroscopy
and other Genitourinary Procedures) to APC 0423, effective January 1,
2007.
Comment: One commenter expressed concern that the proposed payment
rate of approximately $3,905 for CPT code 50593 is inadequate because
the payment does not accurately account for the costs incurred by
hospitals in performing the procedure described by this code. The
commenter argued that the proposed payment rate for CPT code 50593,
which the commenter considered low, is attributable to claims data that
do not accurately capture the full costs of CPT code 50593 because only
57 percent of the claims data used to establish the median cost for
this procedure were correctly coded, and that the single claims do not
contain the HCPCS code and associated charge for the required device,
specifically HCPCS code C2618 (Probe, cryoablation). The commenter
requested that CMS designate CPT code 50593 as a device-dependent
procedure, which would require hospitals to submit claims with the
appropriate device HCPCS code, assign the procedure to its own APC, and
set the payment rate for that APC based on claims for CPT code 50593
reported with HCPCS code C2618. The commenter argued that this request
would be appropriate because the procedure described by CPT code 50593
cannot be performed without the utilization of the device described by
HCPCS code C2618. The commenter's analysis concluded that the median
cost on which payment for CPT code 50593 would be based if the request
were honored would be approximately $5,598, resulting in a more
accurate payment rate for the procedure and continued Medicare
beneficiary access to percutaneous renal cryoablation in the hospital
outpatient setting. The

[[Page 71910]]

commenter further stated that, although APC 0423 groups similar
ablation procedures, none of the other procedures in the APC involve
high-cost devices.
Response: We continue to believe that CPT code 50593 is
appropriately assigned to APC 0423 based on clinical and resource
considerations when compared to other procedures also proposed for
assignment to APC 0423 for CY 2011. As we stated in the CY 2007 OPPS
final rule with comment period (71 FR 68049 through 68050), the CY 2008
OPPS/ASC final rule with comment period (72 FR 66709), the CY 2009
OPPS/ASC final rule with comment period (73 FR 68611), and the CY 2010
OPPS/ASC final rule with comment period (74 FR 60444), we initially
revised the APC assignment for the percutaneous renal cryoablation
procedure from APC 0163 to APC 0423 in CY 2007 based on the APC Panel's
recommendation to reassign the procedure to APC 0423. The median costs
of the four HCPCS codes assigned to APC 0423 for CY 2011 range from
approximately $3,477 to $4,736, well within the two-fold variation in
median cost that is permitted by law for an OPPS payment group. Even if
we were to calculate the median cost for CPT code 50593 using only
claims that also contain HCPCS code C2618, estimated by the commenter
to be approximately $5,598 using proposed rule data, the grouping of
these procedures in the same APC would not violate the 2 times rule.
We also do not agree that CPT code 50593 should be designated as a
device-dependent procedure and assigned to its own separate APC. We
have only 344 single claims (out of a total of 757 claims) for CPT code
50593 from CY 2009 and, as such, the procedure has the second lowest
frequency of the four procedures assigned to APC 0423. As we stated in
the CY 2010 OPS/ASC final rule with comment period (74 FR 60444 through
60445), we continue to believe this relatively low volume procedure
should be assigned to a payment group with similar services, as we have
proposed, in order to promote payment stability and encourage hospital
efficiency. In addition, we do not identify individual HCPCS codes as
device-dependent HCPCS codes under the OPPS. Rather, we first consider
the clinical and resource characteristics of a procedure and determine
the most appropriate APC assignment. When we determine that we should
assign a procedure to an APC that is device-dependent, based on whether
that APC has been historically identified under the OPPS as having very
high device costs, we then consider the implementation of device edits,
as appropriate. We again note that the identification of device-
dependent APCs was particularly important in the early years of the
OPPS when separate pass-through payment for many implantable devices
expired. At that time, a variety of methodologies to package the costs
of those devices into procedural APCs was utilized over several years
to ensure appropriate incorporation of the device costs into the
procedure payments. At this point in time, hospitals have significantly
more experience reporting HCPCS codes for packaged and separately
payable items and services under the OPPS and the payment groups are
more mature. We believe our standard ratesetting methodology typically
results in appropriate payment rates for new procedures that utilize
devices, as well as those that do not use high cost devices. In recent
years, we have not encountered circumstances for which we have had to
establish new device-dependent APCs because we were not able to
accommodate the clinical and resource characteristics of a procedure by
assigning it to an existing APC (whether device-dependent or non-
device-dependent), and the procedure described by CPT code 50593 is not
an exception.
While all of the procedures assigned to APC 0423 require the use of
implantable devices, for many of the procedures, there are no Level II
HCPCS codes that describe all of the technologies that may be used in
the procedures. Therefore, as we indicated in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60445), it would not be possible
for us to develop procedure-to-device edits for all of the CPT codes
assigned to APC 0423. Under the OPPS, there are many other procedures
that require the use of implantable devices that, because they are
assigned to OPPS APCs that are not device-dependent, do not have
procedure-to-device edits applied, even if those claims processing
edits would be feasible. We continue to believe that our payments for
procedures that utilize high cost devices are appropriate for those
services, even when those services are grouped with other procedures
that either do not require the use of implantable devices or which
utilize devices that are not described by specific Level II HCPCS
codes.
When reporting CPT code 50593, we expect hospitals to also report
the device HCPCS code C2618, which is associated with this procedure.
We also remind hospitals that they must report all of the HCPCS codes
that appropriately describe the items used to provide services,
regardless of whether the HCPCS codes are packaged or paid separately.
If hospitals use more than one probe in performing the procedure
described by CPT code 50593, we expect hospitals to report this
information on the claim and adjust their charges accordingly.
Hospitals should report the number of cryoablation probes used to
perform the procedure described by CPT code 50593 as the units of HCPCS
code C2618 which describes these devices, with their charges for the
probes. Since CY 2005, we have required hospitals to report device
HCPCS codes for all devices used in procedures if there are appropriate
HCPCS codes available. In this way, we can be confident that hospitals
have included charges on their claims for costly devices used in
procedures when they submit claims for those procedures.
After consideration of the public comment we received, we are
finalizing our CY 2011 proposal, without modification, to continue to
assign CPT code 50593 to APC 0423, which has a final CY 2011 APC median
cost of approximately $3,855.
4. Nervous System Services
a. Pain-Related Procedures (APCs 0203, 0204, 0206, 0207, and 0388)
For CY 2011, we proposed to set the payment rates for APCs to which
pain-related procedures were assigned based on the median costs
determined under the standard OPPS ratesetting methodology.
Specifically, we proposed the following CY 2011 payment rates for the
pain-related APCs: APC 0203 (Level IV Nerve Injections), with a
proposed payment rate of approximately $908; APC 0204 (Level I Nerve
Injections), with a proposed payment rate of approximately $182; APC
0206 (Level II Nerve Injections), with a (proposed payment rate of
approximately $265); APC 0207 (Level III Nerve Injections), with a
proposed payment rate of approximately $527), and APC 0388
(Discography), with a proposed payment rate of approximately $1,702).
For CY 2011, we proposed to reassign CPT codes 62273 (Injection,
epidural, of blood or clot patch) and 64408 (Injection, anesthetic
agent; vagus nerve) from APC 0206 to APC 0207, and to reassign CPT code
62319 (Injection, including catheter placement, continuous infusion or
intermittent bolus, not including neurolytic substances, with or
without contrast (for either localization or epidurography), of
diagnostic or therapeutic substance(s) (including anesthetic,
antispasmodic, opioid, steroid, other solution), epidural

[[Page 71911]]

or subarachnoid; lumbar, sacral (caudal)) from APC 0207 to APC 0203.
Table 24 provides the CPT codes on which we received comments together
with the CY 2010 APC assignment, the CY 2011 proposed rule APC
assignment, and the CY 2011 final rule APC assignment for each code.

Table 24--Pain-Related Procedures On Which We Received Public Comments
----------------------------------------------------------------------------------------------------------------
Proposed CY Final CY 2011
CPT Code Long descriptor CY 2010 APC 2011 APC APC
----------------------------------------------------------------------------------------------------------------
62273.................... Injection, epidural, of blood or clot 0206 0207 0207
patch), 64408 (Injection, anesthetic
agent; vagus nerve.
62318.................... Injection, including catheter 0207 0207 0207
placement, continuous infusion or
intermittent bolus, not including
neurolytic substances, with or
without contrast (for either
localization or epidurography), of
diagnostic or therapeutic
substance(s) (including anesthetic,
antispasmodic, opioid, steroid,
other solution), epidural or
subarachnoid; cervical or thoracic.
62319.................... Injection, including catheter 0207 0203 0203
placement, continuous infusion or
intermittent bolus, not including
neurolytic substances, with or
without contrast (for either
localization or epidurography), of
diagnostic or therapeutic
substance(s) (including anesthetic,
antispasmodic, opioid, steroid,
other solution), epidural or
subarachnoid; lumbar, sacral
(caudal).
64408.................... Injection, anesthetic agent; vagus 0207 0207 0207
nerve.
64410.................... Injection, anesthetic agent; phrenic 0207 0207 0207
nerve.
64412.................... Injection, anesthetic agent; spinal 0207 0207 0207
accessory nerve.
64480.................... Injection, anesthetic agent and/or 0206 0206 0206
steroid, transforaminal epidural;
cervical or thoracic, each
additional level (List separately in
addition to code for primary
procedure).
64484.................... Injection, anesthetic agent and/or 0206 0206 0206
steroid, transforaminal epidural;
lumbar or sacral, each additional
level (List separately in addition
to code for primary procedure).
64491.................... Injection(s), diagnostic or 0204 0204 0204
therapeutic agent, paravertebral
facet (zygapophyseal) joint (or
nerves innervating that joint) with
image guidance (fluoroscopy or CT),
cervical or thoracic; second level
(List separately in addition to code
for primary procedure).
64492.................... Injection(s), diagnostic or 0204 0204 0204
therapeutic agent, paravertebral
facet (zygapophyseal) joint (or
nerves innervating that joint) with
image guidance (fluoroscopy or CT),
cervical or thoracic; third and any
additional level(s) (List separately
in addition to code for primary
procedure).
64493.................... Injection(s), diagnostic or 0207 0207 0207
therapeutic agent, paravertebral
facet (zygapophyseal) joint (or
nerves innervating that joint) with
image guidance (fluoroscopy or CT),
lumbar or sacral; single level.
64494.................... Injection(s), diagnostic or 0204 0204 0204
therapeutic agent, paravertebral
facet (zygapophyseal) joint (or
nerves innervating that joint) with
image guidance (fluoroscopy or CT),
lumbar or sacral; second level (List
separately in addition to code for
primary procedure).
64623.................... Destruction by neurolytic agent, 0207 0207 0207
paravertebral facet joint nerve;
lumbar or sacral, each additional
level (List separately in addition
to code for primary procedure).
64626.................... Destruction by neurolytic agent, 0207 0207 0207
paravertebral facet joint nerve;
cervical or thoracic, single level.
64627.................... Destruction by neurolytic agent, 0204 0204 0204
paravertebral facet joint nerve;
cervical or thoracic, each
additional level (List separately in
addition to code for primary
procedure).
72285.................... Discography, cervical or thoracic, 0338 0338 0338
radiological supervision and
interpretation.
72295.................... Discography, lumbar, radiological 0338 0338 0338
supervision and interpretation.
----------------------------------------------------------------------------------------------------------------

Comment: One commenter objected to what the commenter stated were
continuing declines in OPPS payment for CPT add-on codes 64491, 64492,
64493, 64494, 64480, 64484, 64623, and 64627. The commenter objected
both to the declines in the payment rates, which they indicate have
been as much as 50 percent since CY 2007, and to the application of the
multiple procedure reduction to them which further reduces the payment
for them by both Medicare and other payers.
Response: CPT codes 64491, 64492, 64493, and 64494 were new codes
in CY 2010. Therefore, we do not have CY 2009 claims data on which to
calculate a median cost for CY 2011 ratesetting purposes. In accordance
with our standard ratesetting policy, we proposed to assign the new
codes to the APCs that our clinicians believe are appropriate based on
their understanding of the nature of the service and the resources that
are required by services that they believe to be comparable. These
codes had new interim APC placements for CY 2010 and were open to a 60-
day public comment period. We received no public comments objecting to
the APC placement of the new codes.
With regard to the variation in costs for CPT codes 64480, 64484,
64623, and 64627, as we have stated in the past, OPPS payment rates
fluctuate based on a variety of factors, including, but not limited to,
changes in the mix of hospitals billing the services, differential
changes in hospital charges and costs for the services, and changes in
the volumes of services reported (74 FR 60447). Therefore, the median
costs upon which the OPPS payment rates are based vary from one year to
another. We note that the median costs of all of the APCs to which CPT
codes 64480, 64484, 64623, and 64627 are assigned increased

[[Page 71912]]

between CY 2009 and CY 2010 and again between CY 2010 and CY 2011.
Specifically, for CPT codes 64480 and 64484, the median cost of APC
0206 to which they are assigned increased from approximately $236 in CY
2009 to approximately $249 in CY 2010 and to approximately $265 based
on CY 2011 final rule data. In the case of CPT code 64627, the median
cost of APC 0204 to which CPT code 64627 is assigned increased from
approximately $161 in CY 2009 to approximately $171 in CY 2010 and to
approximately $182 based on CY 2011 final rule data. Lastly, for CPT
code 64623, the median cost of APC 0207 to which the code is assigned
increased from approximately $463 in CY 2009 to approximately $481 in
CY 2010 and to approximately $517 based on final rule data for CY 2011.
We are finalizing the APC assignments for all of these procedures as
shown in Table 24.
With regard to the application of the multiple procedure reduction
for APCs 0204, 0206, and 0207, we continue to believe that it is
appropriate to reduce the payment for services furnished in these APCs
by 50 percent when they are furnished with a procedure that is paid at
the same or a higher rate because we believe that there are significant
efficiencies associated with providing multiple procedures during the
same encounter.
Comment: One commenter objected to the proposed payment rate for
CPT codes 72285 and 72295, which the commenter indicated is a 73-
percent increase compared to the CY 2007 OPPS payment rate. The
commenter stated that CPT codes 62290 (Injection procedure for
discography, each level; lumbar) and 62291 (Injection procedure for
discography, each level; cervical or thoracic) describe the procedures
and that CPT codes 72285 and 72295 are paid at an unreasonable rate.
Response: As we have noted in the past (74 FR 60447), CPT codes
72285 and 72295, both of which are assigned to APC 0388, are ``T''
packaged codes and, as such, are paid separately only if there is no
separately paid surgical procedure with a status indicator of ``T'' on
the same claim. When there is a separate payment made for these
services, the payment is not only payment for the service itself but
also includes payment for all services reported on the claim that are
always packaged (that is, those with a status indicator of ``N''). The
median cost of APC 0388 to which CPT codes 72285 and 72295 are assigned
for payment when separate payment can be made increased from
approximately $1,470 in CY 2009 to approximately $1,727 in CY 2010 and
decreased to approximately $1,654 based on final rule data for CY 2011.
The median costs reflect the cost of all conditionally and
unconditionally packaged services on the claim. Payment for CPT codes
62290 and 62291 is always packaged into payment for the independent,
separately paid procedures with which these codes are reported because
we believe that these codes are ancillary and supportive to other major
separately paid procedures and that they are furnished only as an
ancillary and dependent part of an independent separately paid
procedure. Therefore when CPT codes 72285 and 72295 are the only
separately paid procedures that appear on the claim, payment for CPT
codes 72285 and 72295 includes the payment for CPT codes 62290 and
62291.
Comment: One commenter supported the proposed payment for CPT code
62273 and 62318.
Response: We appreciate the commenter's support.
Comment: One commenter argued that the proposed payment rates for
CPT codes 64408, 64410, and 64412 are excessive because these codes
were proposed to be paid at the same level as epidural and neurolytic
injections. The commenter objected to neurolytic epidural injections
receiving less payment than the payment proposed for these services.
The commenter did not identify the CPT codes of concern.
Response: We proposed to assign CPT codes 64408, 64410, and 64412
to APC 0207 based on what our clinicians believe to be clinical
similarity with other procedures in APC 0207 and because these
procedures have median costs that are similar to the median costs of
other procedures in APC 0207. We continue to believe that these APC
assignments are correct and are finalizing the proposed assignments. We
are unable to compare the clinical characteristics of the services
without knowing the specific CPT codes of the epidural and neurolytic
injections of concern to the commenter.
Comment: One commenter objected to the proposed reassignment of CPT
code 62319 from APC 0207 to APC 0203. The commenter believed this
proposed reassignment would result in excessive payment for CPT code
62319.
Response: CPT code 62319 is assigned to APC 0207 for CY 2010, with
a national unadjusted payment rate of approximately $485. We proposed
to reassign CPT code 62319 from APC 0207 to APC 0203 because the
proposed rule median cost for CPT code 62319 was approximately $887
and, therefore, was far more similar to the proposed rule median cost
of approximately $926 for APC 0203 than it was similar to the proposed
rule median cost of approximately $537 for APC 0207. In the final rule
claims data, the median cost for CPT code 62319, which is approximately
$801, continues to be more similar to the median cost of approximately
$872 for APC 0203 than to the median cost of approximately $517 for APC
0207. Therefore, we are assigning CPT code 62319 to APC 0203 for CY
2011 as we proposed.
Comment: One commenter objected to the proposed reduction in
payment for CPT code 64626 from $908.40 for CY 2010 to $527.12 for CY
2011. The commenter believed that the proposed reduction results from a
reassignment of the code to a new category.
Response: CPT code 64626 is assigned to APC 0207 for CY 2010 and
the national unadjusted payment rate is approximately $485. For CY
2011, we did not propose to reassign CPT code 64626 as the commenter
believed. For CY 2011, we proposed to continue to assign CPT code 64626
to APC 0207, for which we proposed a national unadjusted payment rate
of approximately $527. Based on our analysis of final rule claims data,
we are continuing to assign CPT code 64626, which has a final rule
median cost of approximately $915, to APC 0207, which has a final rule
median cost of approximately $517. We continue to believe that CPT code
64626 is clinically similar and requires resources similar to the other
codes that are assigned to APC 0207. We note that there are no 2 times
violations in APC 0207.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposals, without modification, to pay for CPT
codes 64491, 64492, 64493, 64494, 64480, 64484, 64623, 64627, 72285,
72295, 64408, 64410, 64412, 62318, 62319, and 64626 through APCs 0203,
0204, 0206, 0207, and 0388, as shown in Table 24 above. APC 0203 has a
CY 2011 final rule median cost of approximately $872, APC 0204 has a CY
2011 final rule median cost of approximately $182, APC 0206 has a CY
2011 final rule median cost of approximately $265, APC 0207 has a CY
2011 final rule median cost of approximately $517, and APC 0388 has a
CY 2011 final rule median cost of approximately $1,654. We are
finalizing our proposed assignment of CPT code 62273 to APC 0207. We
also are finalizing our proposed reassignment of CPT code 62319 from
APC 0207 to APC 0203, and we are continuing to assign CPT code 64626 to
APC 0207.

[[Page 71913]]

b. Revision/Removal of Neurostimulator Electrodes (APC 0687)
For CY 2011, we proposed to continue to assign CPT codes 63661
(Removal of spinal neurostimulator electrode percutaneous array(s),
including fluoroscopy, when performed), 63662 (Removal of spinal
neurostimulator electrode plate/paddle(s) placed via laminotomy or
laminectomy, including fluoroscopy, when performed), 63663 (Revision,
including replacement, when performed, of spinal neurostimulator
electrode percutaneous array(s), including fluoroscopy, when
performed), and 63664 (Revision, including replacement, when performed,
of spinal neurostimulator electrode plate/paddle(s) placed via
laminotomy or laminectomy, including fluoroscopy, when performed) to
APC 0687 (Revision/Removal of Neurostimulator Electrodes), for which we
proposed a CY 2011 median cost of approximately $1,527. For CY 2010,
these CPT codes were assigned to APC 0687, which has a CY 2010 national
unadjusted payment rate of approximately $1,324. These new codes were
created effective for services performed on or after January 1, 2010,
when the AMA CPT Editorial Board deleted CPT code 63660 (Revision or
removal of spinal neurostimulator electrode percutaneous array(s) or
plate/paddle(s)) and created new CPT codes 63661, 63662, 63663, and
63664 to differentiate between revision and removal procedures, and to
also differentiate between percutaneous leads (arrays) and surgical
leads (plates/paddles). In accordance with our standard policy, we
indicated in Addendum B of the CY 2010 final rule that the APC
assignments for these new CPT codes for CY 2010 were new interim APC
assignments by showing comment indicator ``NI'' for each new code, and
we accepted public comment on them. We received public comments both in
response to the CY 2010 final rule interim APC assignment and in
response to our CY 2011 proposal to continue to assign the new codes to
APC 0687. We have incorporated the CY 2010 final rule comments and
responses into the summary of the comments and responses on our
proposal to continue to assign the new codes to APC 0687 for CY 2011.
Comment: Commenters supported the placement of CPT codes 63661 and
63662 in APC 0687. However, they objected to the placement of CPT codes
63664 and 63665 in APC 0687 because, they stated, these codes are used
to report both revision and replacement of neurostimulator electrodes.
The commenters believed that hospital resources are substantially
greater when neurostimulator electrodes are being replaced rather than
revised. They asked that CMS create and require hospitals to use four
new Level II alpha numeric codes to report these services in place of
the CPT codes. Specifically, they asked that CMS create Level II alpha
numeric HCPCS codes for (1) Revision of spinal neurostimulator
electrode percutaneous arrays; (2) Revision of spinal neurostimualtor
electrode plate/paddle arrays; (3) Replacement of spinal
neurostimulator electrode percutaneous arrays; and (4) Replacement of
spinal neurostimulator electrode plate/paddle arrays. They stated that
CMS could continue to assign the two new HCPCS codes for revision of
electrodes to APC 0687, which has a CY 2010 national unadjusted payment
rate of approximately $1,324. However, the commenters suggested stated
that CMS assign the new HCPCS codes for replacement of percutaneous
electrodes to device-dependent APC 0040 (Percutaneous Implantation of
Neurostimulator Electrodes), which has a CY 2010 national unadjusted
payment rate of approximately $4,429. They also suggested that CMS
assign the new HCPCS codes for replacement of plate/paddle electrodes
to device dependent APC 0061 (Laminectomy, Laproscopy, or Incision for
Implantation of Neurostimulator Electrodes), which has a CY 2010
national unadjusted payment rate of approximately $5,832. The
commenters believed that the creation of the two Level II alpha numeric
HCPCS codes for replacement of the neurostimulator electrode devices
and their assignment to device-dependent APCs 0040 and 0061 are
necessary to ensure that hospitals are paid appropriately for the cost
of the electrodes that are inserted during a replacement procedure. One
commenter stated that an analysis of the registration information it
maintains on individual patients, products, and associated procedures
from June 2004 to April 2010 shows that 343 lead revisions would
currently fall into CPT code 63663 or 63664. The commenter further
stated that, of these 343 cases, 22 percent were revised without a
device while 78 percent were revised with replacement of a device (the
commenter provided aggregate information across both CPT codes). The
commenter indicated that its data support the need to create the new
Level II alpha numeric HCPCS codes and to assign the codes for
neurostimulator electrode replacement to APCs 0040 and 0061. The
commenter stated that CMS has created Level II alpha numeric HCPCS
codes for the same reason in the past and, therefore, has a precedent
for creating the Level II alpha numeric HCPCS codes as the commenter
requested.
Response: For CY 2011, we are assigning CPT codes 63661, 63662,
63663, and 63664 to APC 0687 as we proposed, with a CY 2011 final rule
median cost of approximately $1,480. We do not have CY 2009 claims data
on the cost of these codes upon which to make an assessment of whether
there is a meaningful difference between the cost of revising the
electrodes or replacing them. Therefore, we are not convinced by the
commenters that the use of the CPT codes for these services and the
assignment of the codes for revision/replacement of neurostimulator
electrodes to APC 0687 are inappropriate. Further, the OPPS is a
payment system of averages in which the payment for a service is based
on the estimated relative cost of the service, including a range of
supply and other input costs, as well as other services in the same APC
that are comparable in resource cost and clinical homogeneity. We
expect that hospital charges for a service, which are derived from the
cost of a service, can vary across individual patients. Therefore, we
expect variability in the estimated cost of a service, across cases in
a hospital and among hospitals, to be reflected at some level in the
final APC relative payment weight. Further, hospitals frequently advise
us that when we create and require that they report Level II alpha
numeric HCPCS codes to report services for which CPT codes exist, it
imposes a significant and costly administrative burden on them. Hence,
we prefer not to create Level II alpha numeric codes unless there is a
strong need to do so to administer the Medicare program, particularly
when there are CPT codes that can be used to accurately report the
service. However, we will examine estimated costs for these four new
CPT codes in the CY 2010 claims data we will use to model the CY 2012
proposed rule when that data are available.
After carefully considering the public comments we received in
response to the CY 2010 final rule with comment period and the CY 2011
proposed rule, we are continuing to assign CPT codes 63661, 63662,
63663, and 63664 to APC 0687, with a CY 2011 final rule median cost of
approximately $1,480.

[[Page 71914]]

5. Radiation Therapy Services
a. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs
0065, 0066, 0067, and 0127)
For CY 2011, we proposed to continue to assign CPT code 77371
(Radiation treatment delivery, stereotactic radiosurgery (SRS),
complete course of treatment of cranial lesion(s) consisting of 1
session; multi-source Cobalt 60 based) to APC 0127 (Level IV
Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed payment
rate of approximately $7,221.
We also proposed to continue to recognize four existing HCPCS G-
codes that describe linear accelerator-based SRS treatment delivery
services for separate payment in CY 2011. Specifically, we proposed the
following: to assign HCPCS code G0173 (Linear accelerator based
stereotactic radiosurgery, complete course of therapy in one session)
and HCPCS code G0339 (Image-guided robotic linear accelerator-based
stereotactic radiosurgery, complete course of therapy in one session or
first session of fractionated treatment) to APC 0067 (Level III
Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed payment
rate of approximately $3,414; to assign HCPCS code G0251 (Linear
accelerator-based stereotactic radiosurgery, delivery including
collimator changes and custom plugging, fractionated treatment, all
lesions, per session, maximum five sessions per course of treatment) to
APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and MEG), with a
proposed payment rate of approximately $960; and to assign HCPCS code
G0340 (Image-guided robotic linear accelerator-based stereotactic
radiosurgery, delivery including collimator changes and custom
plugging, fractionated treatment, all lesions, per session, second
through fifth sessions, maximum five sessions per course of treatment)
to APC 0066 (Level II Stereotactic Radiosurgery, MRgFUS, and MEG), with
a proposed payment rate of approximately $2,517.
Further, we proposed to continue to assign SRS CPT codes 77372
(Radiation treatment delivery, stereotactic radiosurgery (SRS)
(complete course of treatment of cerebral lesion(s) consisting of 1
session); linear accelerator based) and 77373 (Stereotactic body
radiation therapy, treatment delivery, per fraction to 1 or more
lesions, including image guidance, entire course not to exceed 5
fractions) status indicator ``B'' (Codes that are not recognized by
OPPS when submitted on an outpatient hospital Part B bill type (12x and
13x)) under the OPPS, to indicate that these CPT codes are not payable
under the OPPS.
Comment: One commenter urged CMS to reevaluate the APC assignments
for the linear accelerator-based (LINAC) and robotic Cobalt-60 based
stereotactic radiosurgery (r-SRS) HCPCS codes, given the recent
introduction of a frameless Cobalt-60 system that can be used to
deliver treatments in multiple sessions. The commenter stated that no
clinical data exist to support the need for differential payments for
LINAC-based and Cobalt-60 r-SRS procedures. The commenter further
explained that current medical literature cites no difference in
clinical effectiveness for one system over another, and stated that
treatment with a Cobalt-60 system, when compared to LINAC-based system,
does not lead to superior outcomes. The commenter recommended that CMS
assign HCPCS code G0339 and CPT code 77371 to the same APC, thereby
establishing payment parity for the complete course of treatment for
intracranial and other head and neck r-SRS, regardless of equipment,
energy source, or whether a frame is used in the procedure. In
addition, the commenter argued that this APC reevaluation is necessary
to protect the Medicare program and beneficiaries from excessive costs
associated with Cobalt-60 system, when both the LINAC-based and Cobalt-
60 systems are similar in clinical homogeneity and resource costs.
Response: We disagree with the comment's argument that the LINAC-
based and Cobalt-60 based systems have similar resource costs. For the
past several years, we have seen resource differences based on the
median costs for the LINAC-based and Cobalt-60 based systems, and
analysis of our claims data show that the median costs for LINAC-based
and Cobalt-60 SRS procedures vary significantly. Since CY 2007, when
CPT code 77371 became effective, our claims data have shown
consistently a median cost of more than $7,000 for the service
associated with the Cobalt-60 system, which is higher than the median
cost of approximately $3,500 for the LINAC-based system (described by
HCPCS G-code G0339).
Analysis of the updated CY 2009 claims data used for this final
rule with comment period indicates that the code-specific median costs
for the LINAC-based and Cobalt-60 systems continue to vary. Our updated
claims data on the hospital outpatient claims available for CY 2011
ratesetting show a median cost of approximately $7,580 for CPT code
77371 based on 529 single claims (out of a total of 4,336 claims),
which is significantly higher than the median costs associated with
HCPCS codes G0173, G0251, G0339, and G0340. Specifically, our claims
data indicate a median cost of approximately $2,960 for HCPCS code
G0173 based on 627 single claims (out of a total of 1,460 claims), a
median cost of approximately $964 for HCPCS code G0251 based on 7,005
single claims (out of a total of 7,739 claims), a median cost of
approximately $3,510 for HCPCS code G0339 based on 5,762 single claims
(out of a total of 7,735 claims), and a median cost of approximately
$2,478 for HCPCS code G0340 based on 18,539 single claims (out of a
total of 18,713 claims). Because the median costs of HCPCS code G0339
and CPT code 77371 vary significantly, we do not believe it would be
appropriate to provide OPPS payment through a single APC for these r-
SRS treatment delivery services in CY 2011. We continue to believe that
APC 0127 is an appropriate APC assignment for CPT code 77371, and,
similarly, that APC 0067 is an appropriate APC assignment for HCPCS
code G0339 based on consideration of the clinical characteristics
associated with these procedures and based on the median costs for
these services calculated from the most recently available hospital
outpatient claims and cost report data. Consistent with our current
policy to annually assess the appropriateness of the APC assignments
for all services under the hospital OPPS, we will continue to monitor
our claims data for the SRS treatment delivery services in the future.
As we have stated in the past (74 FR 60456), the OPPS is a
prospective payment system, where APC payment rates are based on the
relative costs of services as reported to us by hospitals according to
the most recent claims and cost report data as described in section
II.A. of this final rule with comment period. The 2 times rule
specifies that the median cost of the highest cost item or service
within a payment group may be no more than 2 times greater than the
median cost of the lowest cost item or service within the same group.
Based on the 2 times rule, HCPCS code G0339 and CPT code 77371 could
not be assigned to the same APC and, because hospitals continue to
report very different costs for these services, we believe it is
appropriate to maintain their assignments to different payment groups
for CY 2011. As a matter of payment policy, the OPPS does not set
payment rates for services based on considerations of clinical
effectiveness. Furthermore, in accordance with the statute, we budget
neutralize the OPPS each year in the annual update so that projected
changes in spending for

[[Page 71915]]

certain services are redistributed to payment for other services.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposals, without modification, to continue to
assign CPT code 77371 to APC 0127, which has a final CY 2011 APC median
cost of approximately $7,580, and to continue to assign HCPCS code
G0339 to APC 0067, which has a final CY 2011 APC median cost of
approximately $3,372.
Comment: One commenter recommended that CMS redefine HCPCS G-code
G0340 to include subsequent fractions delivered with both robotic
LINAC-based and Cobalt-60 based systems because r-SRS can now be
performed with the Cobalt-60 system based over 2 to 5 fractions.
Response: Earlier this year, we met with stakeholders to discuss
this topic, particularly with respect to the OPPS payment assignment of
the LINAC-based and Cobalt-60 SRS procedures. At this meeting we were
informed of recent technological developments that existed in Europe
that utilizes the Cobalt-60 systems to deliver treatments over multiple
fractions. We were informed that, while the technology currently exists
in Europe, it would eventually migrate to the United States. Because
only one CPT code exists currently that describes a procedure that
utilizes a Cobalt-60 system, we believe that stakeholders would seek
guidance from the AMA CPT Editorial Panel on the appropriate reporting
of this service if it is being provided in the United States in a
manner that makes the current CPT coding insufficient or inappropriate.
Specifically, CPT code 77371 is defined as ``Radiation treatment
delivery, stereotactic radiosurgery (SRS), complete course of treatment
of cranial lesion(s) consisting of 1 session; multi-source Cobalt 60
based,'' and does not describe a Cobalt-60 based multi-fraction
service.
We believe that HCPCS G-code G0340 appropriately describes the
service associated with a LINAC-based system that is delivered in
multiple fractions. We do not agree that there is a programmatic need
to modify the descriptor for HCPCS G-code G0340 due to potential
changes in the Cobalt-60 system. We remind hospitals that HCPCS code
G0340 describes a multi-fraction treatment delivery that utilizes a
LINAC-based SRS technology.
Comment: One commenter requested that CMS finalize the proposed APC
and status indicator assignments for HCPCS codes G0173, G0251, G0339,
and G0340 for CY 2011 and the proposed assignment of status indicator
``B'' to CPT codes 77372 and 77373. The commenter also recommended that
CMS revise the code descriptors for HCPCS code G0173, G0251, G0339, and
G0340 to distinguish between robotic and non-robotic gantry-based SRS
systems. Based on analysis of claims data for HCPCS codes G0339 and
G0340, the commenter found that 33 percent of the claims submitted
during CY 2009 were paid to hospitals without image-guided robotic SRS
systems. The commenter suggested specific code descriptor changes for
the four HCPCS G-codes to ensure submission of correctly coded claims.
Alternatively, the commenter requested that CMS provide guidance on the
reporting of the existing SRS HCPCS G-codes if no change is made to the
HCPCS code descriptors.
Response: These HCPCS G-codes for SRS have been in effect for
several years and, based on questions brought to our attention by
hospitals, we have no reason to believe that hospitals are confused
about the reporting of these codes. Moreover, based on our analysis of
the hospital outpatient claims data that we use for ratesetting, we see
resource differences reflected in the median costs of the four HCPCS G-
codes that are reasonably consistent with our expectations for
different median costs for the services based on the current code
descriptors. We believe it would be confusing to hospitals if we were
to revise the code descriptors for HCPCS codes G0173, G0251, G0339, and
G0340 at this point in time and could lead to instability in our median
costs and inaccurate payments for some services. Therefore, we believe
that modifying the G-code descriptors is not necessary for us to
continue to provide appropriate payment for the services they describe.
Further, we have provided instruction on the reporting of these SRS
codes in Chapter 4, Section 200.3 of the Medicare Claims Processing
Manual of the Internet-Only Manual.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposals, without modification, to maintain the
existing CY 2010 APC assignments for the SRS HCPCS codes for CY 2011.
Specifically, we are continuing to assign HCPCS G-codes G0173 and G0339
to APC 0067, which has a final CY 2011 APC median cost of approximately
$3,372; HCPCS G-code G0251 to APC 0065, which has a final CY 2011 APC
median cost of approximately $967; HCPCS G-code G0340 to APC 0066,
which has a final CY 2011 APC median cost of approximately $2,478; and
CPT code 77371 to APC 0127, which has a final CY 2011 APC median cost
of approximately $7,580. In addition, we are finalizing our proposals,
without modification, to continue to assign CPT codes 77372 and 77373
to status indicator ``B'' under the OPPS.
b. Proton Beam Therapy (APCs 0664 and 0667)
For CY 2011, we proposed to continue to assign CPT codes 77520
(Proton treatment delivery; simple, without compensation) and 77522
(Proton treatment delivery; simple, with compensation) to APC 0664
(Level I Proton Beam Radiation Therapy), which had a proposed payment
rate of approximately $902. We also proposed to continue to assign CPT
codes 77523 (Proton treatment delivery; intermediate) and 77525 (Proton
treatment delivery; complex) to APC 0667 (Level II Proton Beam
Radiation Therapy), which had a proposed payment rate of approximately
$1,180.
Comment: Several commenters supported the proposed payments for the
proton beam treatment CPT codes. However, one commenter expressed
concern over the proposed payment rates and requested an explanation on
the fluctuation in payments for CPT codes 77520, 77522, 77523, and
77525 for the past 6 years, which the commenter displayed in a
submitted table.
Another commenter expressed concern with the reduction in the
relative weights for APCs 0664 and 0667. The commenter indicated that
it understood that APC 0664 is exempt from the 2 times rule violation
based on the list of APCs that appeared in Table 16 of the CY 2011
OPPS/ASC proposed rule, but stated that the decrease in the relative
weights would result in decreased payments for these four CPT codes.
Response: In accordance with section 1833(t)(2)(B) 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 and clinical homogeneity. The
payment rates, including the relative weights, set annually for these
services are based on review of the claims data used for ratesetting.
For the CY 2011 update, the payment rates for APCs 0664 and 0667 are
based on data from claims submitted during CY 2009 according to the
standard OPPS ratesetting methodology. Specifically, we used 11,963
single claims (out of 12,995 total claims) from CY 2011 proposed rule
claims data (and we used 11,963 single claims (out of 12,995 total
claims) from CY 2011 final rule claims data) to calculate the median
cost upon which the CY 2011 payment rate for APC 0664 is based. In
addition,

[[Page 71916]]

we used 2,799 single claims (out of 3,081 total claims) from CY 2011
proposed rule claims data (and we used 2,799 single claims (out of
3,081 total claims) from CY 2011 final rule claims data) to calculate
the median cost for APC 0667.
For CY 2011, we are setting the final payment rate for proton beam
therapy based on median costs of approximately $1,021 for APC 0664 and
approximately $1,335 for APC 0667. These median costs result in modest
declines in the final CY 2011 payment rates for proton beam therapy
compared to the CY 2010 final payment rates. We note that our cost-
finding methodology is based on reducing each hospital's charge for its
services to an estimated cost by applying the most discrete hospital-
specific CCR available for the hospital that submitted the claim.
Hence, it is the hospital's claims and cost reports that determine the
estimated costs that are used to calculate the median cost for each
service and, when aggregated into APC groups, the hospital data are
used to calculate the median cost for the APC on which the APC payment
rate is based.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to pay for
proton beam therapy through APCs 0664 and 0667, with payment rates
based upon the most current claims and cost report data for these
services. Specifically, we will continue to assign CPT codes 77520 and
77522 to APC 0664, with a final CY 2011 APC median cost of
approximately $1,021, and CPT codes 77523 and 77525 to APC 0667, with a
final CY 2011 APC median cost of approximately $1,335.
c. Device Construction for Intensity Modulated Radiation Therapy (APC
0303)
For CY 2011, we proposed to continue to assign CPT code 77338
(Multi-leaf collimator (MLC) device(s) for intensity modulated
radiation therapy (IMRT), design and construction per IMRT plan) to APC
0303 (Treatment Device Construction), with a proposed payment rate of
approximately $198. CPT code 77338 is a new code for CY 2010 and,
therefore, there are no claims for it in the CY 2009 claims data on
which we are basing the CY 2011 OPPS payment rates. In CY 2009, the
services represented by CPT code 77338 were reported using CPT code
77334 (Treatment devices, design and construction; complex (irregular
blocks, special shields, compensators, wedges, molds or casts)). For CY
2010, CPT code 77338 is assigned to APC 0303, the same APC to which CMS
assigned CPT code 77334. The CY 2010 OPPS payment rate for APC 0303 is
approximately $191.
Comment: Commenters objected to the assignment of CPT code 77338 to
APC 0303 for CY 2010 and to the proposal to continue to assign CPT code
77338 to APC 0303 for CY 2011. The commenters stated that CPT code
77338 is used to report all devices that are necessary for an intensive
modulated radiation therapy (IMRT) treatment and that a typical
treatment requires 3 to 9 devices, whereas CPT code 77334 is used to
report a single device. Therefore, the commenters believed that the
payment for one unit of 77338 should not be paid the same amount as one
unit of CPT code 77334. The commenters stated that there are typically
two courses of IMRT treatment furnished to patients; hence, before the
creation of CPT code 77338, hospitals reported and were paid for 3 to 9
units of CPT code 77334 for each of the two treatments, resulting in an
approximate total payment for all devices required for two courses of
treatment ranging from roughly $1,500 to $3,500. The commenters stated
that assignment of CPT code 77338 to the same APC as CPT code 77334
results in an inappropriate reduction in payment for the creation of
the devices that are necessary to furnish IMRT. One commenter asked CMS
to use the first 6 months of CY 2010 claims data, which would contain
charges for CPT code 77338, to establish an appropriate payment rate
for CPT code 77338.
Response: We examined our updated claims data to determine how many
units of CPT code 77334 were reported in CY 2009 for each Medicare
beneficiary who also received IMRT services. We found that the median
number of units of CPT code 77334 that were furnished to patients who
received IMRT in CY 2009 was eight. This finding is consistent with the
commenters' statement that hospitals furnish three to nine devices per
each of two IMRT treatments (a range of 6 to 18 devices across two
treatments in a year). We then developed a simulated cost for one unit
of CPT code 77338 by using the frequency information we acquired from
the study and the median cost of one unit of CPT code 77334. We assumed
that if a total of eight devices were typically furnished across two
treatments, then approximately four devices were furnished for each
treatment. We assumed that the cost of each device for IMRT would be
approximately the same as a single unit of CPT code 77334 because one
unit of CPT code 77334 represents one device. CPT code 77334 has a
final rule median cost of approximately $198. Therefore, we estimated
that the cost of the devices that would be reported by one unit of CPT
code 77338 would be approximately $792 (4 devices at an estimated per
device cost of $198 each). Using this hypothetical cost per unit for
CPT code 77338, we determined that CPT code 77338 would most
appropriately be assigned to APC 0310 (Level III Therapeutic Radiation
Treatment Preparation), which has a final rule median cost of
approximately $917. We chose not to use our estimated per unit cost for
CPT code 77338 in the calculation of the CY 2011 median cost for APC
0310 because our estimated cost is not derived from claims and cost
report data according to our standard process, and because we made
several assumptions modeling a representative cost, such as whether the
per unit cost for CPT code 77334 for treatment devices specific to IMRT
patients was an appropriate proxy for the cost of each of the multiple
devices, all of which would be reported by one unit of CPT code 77338.
Moreover, we did not consider the other option that commenters
recommended, using CY 2010 claims data to calculate a median cost for
CPT code 77338, because costs estimated from CY 2010 claims would not
be consonant with costs estimated from claims in CY 2009. Our standard
methodology is to use the claims from the same year for all services to
set the relative weights for payment under the OPPS. We believe that
using claims from different years for different services has the
potential to skew the relativity of the median costs on which the OPPS
relative payment weights are based.
After consideration of the public comments we received and
examination of updated CY 2009 claims data, we are reassigning CPT code
77338 from APC 0303 to APC 0310 for CY 2011. For CY 2012 OPPS
ratesetting, we will have claims data for CPT code 77338. For CY 2012,
we plan to use our standard cost estimation process using the CY 2010
claims data and the most recent cost report data to establish a median
cost for CPT code 77338. In addition, we will assess whether placement
of CPT code 77338 in APC 0310 remains appropriate for the CY 2012 OPPS.
d. High Dose Rate Brachytherapy (APC 0313)
For CY 2011, we proposed to include four CPT codes in APC 0313
(Brachytherapy). Specifically, APC 0313 would contain CPT codes 77785
(Remote afterloading high dose rate radionuclide brachytherapy; 1
channel), 77786 (Remote afterloading high dose rate radionuclide
brachytherapy; 2-12

[[Page 71917]]

channels), 77787 (Remote afterloading high dose rate radionuclide
brachytherapy; over 12 channels), and 0182T (High dose rate electronic
brachytherapy, per fraction). For the CY 2011 OPPS, the proposed APC
median cost of APC 0313 was approximately $724.
Comment: One commenter objected to the proposed payment rate of
approximately $724 for APC 0313 because it would be a reduction in
payment from the CY 2010 payment rate of $777.55. The commenter
questioned whether there was an error in the data or calculation of the
proposed median cost for APC 0313. The commenter noted that, for the CY
2010 calculation of the median cost for APC 0313, deleted CPT code
77784 (Remote afterloading high intensity brachytherapy; over 12 source
positions or catheters) had 7,577 total claims, while currently active
CPT code 77787, which the commenter believes is analogous to CPT code
77784 in complexity, had only 1,899 CY 2010 proposed rule total claims.
The commenter stated that, for the CY 2010 OPPS, deleted CPT code
77784, the most complex level of high intensity brachytherapy,
accounted for 23.4 percent of the single bills used to calculate the
median cost for APC 0313, while the most analogous currently active
code, CPT code 77787, accounted for only 4.4 percent of the claims used
to calculate the CY 2011 proposed median cost. The commenter suggested
that the lower percentage of single frequency claims for CPT code
77787, which had a proposed rule median cost of approximately $812,
resulted in a lower median cost for APC 0313. The commenter also noted
that less than half of the total claims were used for CPT codes 77785
and 77786 in the proposed rule median cost calculations. The commenter
asked that CMS check for possible errors in the calculation of the
median cost and the payment rate for APC 0313 and that CMS closely
monitor this APC.
Response: We have reviewed the CY 2011 final rule claims data for
APC 0313, and we have not identified flaws in the data or the process
we used to calculate the median cost of APC 0313. The CY 2011 final
rule median cost for APC 0313 is approximately $693, and the median
cost for CPT code 77785 is approximately $654 based on 11,075 single
bills (out of a total frequency of 19,799 for CPT code 77785). For CPT
code 77786, the median is approximately $748 based on 4,164 single
bills (out of a total frequency of 9,421). For CPT code 77787, the
median cost is approximately $811 based on 687 single bills (out of a
total frequency of 2,149). For CPT code 0182T, the median cost is
approximately $994 based on 101 single bills (out of a total frequency
of 334).
The commenter is correct that the relative weights and median costs
of the procedures that make up APC 0313 influence the overall APC
median cost. However, some fluctuation in median costs across APCs is
always present due to changes in hospital charging practices and costs.
In addition, the CY 2011 median costs are based on CY 2009 claims. CPT
codes 77785, 77786, and 77787 were new for CY 2009. Therefore, the
charge for each of these codes represents a charge for a different
combination of services than was true for the charges of the four CY
2008 predecessor codes on which the median costs for the CY 2010 OPPS
were based. Hence, it is not clear to us that the medians from CY 2010
(based on charges for the four CY 2008 predecessor codes) and CY 2011
(based on charges for the first year for the new codes) can be
appropriately compared. We have reviewed the claims and cost report
data for APC 0313, and have found nothing that causes us to believe
that the median costs at either the CPT code or APC level for APC 0313
are flawed.
After consideration of the public comments we received and analysis
of our CY 2011 final rule claims data, we are finalizing our proposal
to base the APC 0313 payment rate on its CY 2011 final rule median
cost, which is approximately $693.
e. Electronic Brachytherapy (APC 0313)
The AMA CPT Editorial Panel created CPT code 0182T (High dose rate
electronic brachytherapy, per fraction) effective July 1, 2007. We
assigned CPT code 0182T to New Technology APC 1519 from July 1, 2007
through December 31, 2010, with a payment rate of $1,750. For CY 2010,
we assigned CPT code 0182T to APC 0313 (Brachytherapy) because the CY
2010 OPPS final rule median cost for CPT code 0182T was approximately
$506 and the final rule median cost for APC 0313, which contained
services that we believed were clinically similar, was approximately
$770. For CY 2011, we proposed to retain CPT code 0182T in APC 0313,
with a proposed payment rate of approximately $710.
Comment: Several commenters recommended that CPT code 0182T be
removed from APC 0313 and assigned its own APC. The commenters stated
there are significant clinical differences between CPT code 0182T and
the remaining three high dose rate (HDR) service codes in APC 0313: CPT
code 77785 (Remote afterloading high dose rate radionuclide
brachytherapy, 1 channel); CPT code 77786 (Remote afterloading high
dose rate radionuclide brachytherapy, 2-12 channels); and CPT code
77787 (Remote afterloading high dose rate radionuclide brachytherapy,
over 12 channels). However, the commenters did not provide a clinical
rationale to support their statement. The commenters further stated
that the total payment for CPT code 0182T is dissimilar to the total
payment for CPT codes 77785, 77786, and 77787. They stated that CPT
codes 77785, 77786, and 77787 are proposed to be paid both the APC 0313
payment rate, plus the payment rate for the separately paid
brachytherapy source code C1717 (Brachytherapy source, non-stranded,
High Dose Rate Iridium-192, per source), which had a proposed CY 2011
payment rate of approximately $220, thereby resulting in a total
payment of approximately $949 for these codes. In contrast, the
commenters stated that CMS does not allow providers to report the
separate costs of the electronic brachytherapy source, but instead
proposed to pay only the APC 0313 national unadjusted payment rate of
approximately $710. The commenters believed that CMS should permit
providers to capture the cost of the electronic brachytherapy source by
establishing a separate APC for CPT code 0182T based on the median cost
of CPT code 0182T alone.
Response: We believe the clinical characteristics of high dose rate
brachytherapy and electronic brachytherapy are similar because both use
brachytherapy to treat malignancies. Moreover, we do not agree that
there is a need for an additional APC specific to electronic
brachytherapy to ``capture the cost of the electronic brachytherapy
source'' because there is no separate source in the case of electronic
brachytherapy. The costs of electronic brachytherapy are included in
the fractionated costs of the procedure.
The CY 2011 final rule median cost for CPT code 0182T of
approximately $994, based on 101 single service claims, falls well
within two times the APC 0313 median cost. The CY 2011 final rule APC
0313 median is approximately $693, based on 16,027 single bills for CPT
codes 77785, 77786, 77787, and 0182T, which are assigned to APC 0313.
We believe that CPT code 0182T is appropriately placed in APC 0313 for
both resource and clinical reasons, as discussed above. We note that,
in a system of averages, such as the OPPS, we expect that the cost of
some services will fall above the APC median

[[Page 71918]]

cost and that the cost of other services will fall below the APC median
cost.
After consideration of the public comments we received and analysis
of the CY 2011 OPPS final rule claims data, we are assigning CPT code
0182T to APC 0313 for CY 2011. Based on the CY 2011 final rule claims
data, we determined a median cost for CPT code 0182T of approximately
$994 and a median cost for APC 0313 of approximately $693.
f. Tumor Imaging (APC 0406 and 0414)
For CY 2011, we proposed to assign CPT codes 78805
(Radiopharmaceutical localization of inflammatory process; limited
area) and 78806 (Radiopharmaceutical localization of inflammatory
process; whole body) to APC 0414 (Level II Tumor/Infection Imaging),
with a proposed rule APC median cost of approximately $497. We proposed
to assign CPT code 78807 (Radiopharmaceutical localization of
inflammatory process; tomographic (SPECT)) to APC 0406 (Level I Tumor/
Infection Imaging), with a proposed rule APC median cost of
approximately $298. For CY 2011, CPT code 78805 had a proposed median
cost of approximately $545; CPT code 78806 had a proposed median cost
of approximately $561; and CPT code 78807 had a proposed median cost of
approximately $442.
Comment: One commenter asked CMS to restructure APCs 0406 and 0414
to separate tumor imaging procedures from infection imaging procedures
because the respective procedures use different drugs and resources.
Specifically, the commenter recommended that CMS create a new APC for
CPT codes 78805, 78806, and 78807 that would be for infection imaging.
Response: We continue to believe that tumor imaging and infection
imaging are sufficiently clinically similar because they are all
imaging services to justify the inclusion of CPT codes 78805, 78806,
and 78807, which are for infection imaging, in APC 0414 with tumor
imaging procedures. Therefore, we are not creating an APC that is
limited to CPT codes 78805, 78806, and 78807 for infection imaging.
However, after review of the CY 2011 OPPS final rule median costs for
CPT codes 78805, 78806, and 78807, we believe that it is appropriate to
reassign CPT code 78807 to APC 0414 (instead of APC 0406) for CY 2011
because the median cost for CPT code 78807 is similar to the median
cost for CPT codes 78805 and 78806, which are also assigned to this
APC. Based on the CY 2011 OPPS final rule claims data, CPT code 78805
has a median cost of approximately $519, CPT code 78806 has a median
cost of approximately $539, and CPT code 78807 has a final rule median
cost of approximately $428.
At its February 17-18, 2010 meeting, the APC Panel recommended that
CMS analyze claims data for the tumor imaging APCs in terms of the
average, median, and range of costs of packaged diagnostic
radiopharmaceuticals. We are accepting the APC Panel's recommendation
and will present the statistics regarding the use of diagnostic
radiopharmaceuticals in tumor imaging at a forthcoming APC Panel
meeting.
After consideration of the public comments we received and analysis
of the final rule cost data for CPT codes 78805, 78806, and 78807, for
CY 2011, we are retaining CPT codes 78805 and 78806 in APC 0414; we are
assigning CPT code 78807 to APC 0414 (instead of APC 0406 as proposed);
and we are basing the payment for APC 0414 on the CY 2011 final rule
median cost of approximately $470.
6. Other Services
a. Skin Repair (APCs 0134 and 0135)
In the CY 2011 OPPS/ASC proposed rule (75 FR 46251), we proposed to
continue to assign the CPT skin repair codes for the application of
Apligraf, Oasis, and Dermagraft skin substitutes to the same procedural
APCs to which they were assigned for CY 2010. Specifically, we proposed
to continue to assign the Apligraf application CPT codes 15340 (Tissue
cultured allogeneic skin substitute; first 25 sq cm or less) and 15341
(Tissue cultured allogeneic skin substitute; each additional 25 sq cm,
or part thereof) to APC 0134 (Level II Skin Repair), with a proposed
payment rate of approximately $217. Likewise, we proposed to continue
to assign the Dermagraft application CPT codes 15365 (Tissue cultured
allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears,
orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm
or less, or 1% of body area of infants and children) and 15366 (Tissue
cultured allogeneic dermal substitute, face, scalp, eyelids, mouth,
neck, ears, orbits, genitalia, hands, feet, and/or multiple digits;
each additional 100 sq cm, or each additional 1% of body area of
infants and children, or part thereof) to APC 0134. We proposed to
continue to assign the Oasis application CPT codes 15430 (Acellular
xenograft implant; first 100 sq cm or less, or 1% of body area of
infants and children) and 15431 (Acellular xenograft implant; each
additional 100 sq cm, or each additional 1% of body area of infants and
children, or part thereof) to APC 0135 (Level III Skin Repair), with a
proposed payment rate of approximately $318. In addition, we proposed
to pay the Apligraf, Oasis, and Dermagraft skin substitutes separately.
Specifically, we proposed to pay separately for the Apligraf skin
product HCPCS Q-code Q4101 (Skin substitute, Apligraf, per square
centimeter), the Dermagraft skin product HCPCS Q-code Q4106 ('Skin
substitute, Dermagraft, per square centimeter), and the Oasis skin
product HCPCS Q-codes Q4102 (Skin substitute, Oasis Wound Matrix, per
square centimeter) and Q4103 (Skin substitute, Oasis burn matrix, per
square centimeter), Also, as discussed in more detail below, we also
proposed for CY 2011 to create two new Level II HCPCS G-codes to report
the application of Apligraf or Dermagraft specific to the lower
extremities in order to provide appropriate and consistent payment for
these services as they are commonly furnished, consistent with the CY
2011 proposal for the MPFS.
With regard to the assignment of CPT codes 15340, 15341, 15365,
15366, 15430 and 15431, at the August 2009 APC Panel meeting, one
public presenter requested that the APC Panel recommend that CMS
reassign the Apligraf application CPT codes, specifically CPT codes
15340 and 15341, from APC 0134 to APC 0135. The same presenter
requested that CMS continue to assign the Dermagraft application CPT
codes, specifically CPT codes 15365 and 15366, to APC 0134. The public
presenter believed that the CY 2010 proposal to continue to assign both
the Apligraf and the Dermagraft application CPT codes to APC 0134 would
create a financial incentive favoring the Dermagraft application.
Specifically, the presenter explained that CPT instructions allow the
separate reporting of the CPT codes for site preparation and
debridement when Dermagraft is applied, while the CPT instructions for
Apligraf application codes specify that site preparation and
debridement cannot be separately reported. The presenter believed that
this reporting difference and the resulting expected differences in the
associated application procedure costs could be addressed by assigning
the Apligraf application CPT codes to a higher paying APC than the
Dermagraft application CPT codes, instead of the same APC as CMS
proposed for CY 2010.
During the discussion, the APC Panel members were provided with the
historical information on the coding and APC assignments for the skin
substitute application procedures assigned to

[[Page 71919]]

APCs 0134 and 0135. Specifically, the Apligraf application CPT codes
15340 and 15341, the Dermagraft application CPT codes 15365 and 15366,
as well as the Oasis application CPT codes 15430 and 15431, were at one
time assigned to the same APC level (Level II Skin Repair). However,
because of violations of the 2 times rule, CMS reconfigured the skin
repair APCs and reassigned the Oasis application CPT codes 15430 and
15431 to APC 0135 in CY 2008.
At the August 2009 APC Panel meeting, panel members debated whether
the differences in sizes in each product's application CPT codes and
the ability to bill separately for site preparation and debridement for
Dermagraft application required different APC placement for any of the
skin substitute application codes. We note that the long descriptors
for the Apligraf application CPT codes 15340 and 15341 are scaled to
``25 sq cm,'' whereas the Oasis application CPT codes 15430 and 15431
and the Dermagraft application CPT codes 15365 and 15366 are scaled to
``100 sq cm.'' After review of median cost data from the CY 2008
hospital outpatient claims available at that time (those processed from
January 1, 2008 through December 31, 2009), the APC Panel recommended
that CMS continue to assign all six skin substitute application CPT
codes to their existing APCs for CY 2010. In addition, because of the
variable sizes associated with the skin repair application CPT codes,
the Panel requested that CMS provide data at the next Panel meeting on
the frequency of primary and add-on CPT codes billed for the Apligraf,
Oasis, and Dermagraft applications in order to assess the variability
in billing for the application of these products. In addition, because
of the CPT instructions allowing site preparation and debridement to be
reported separately only for the Dermagraft application, the Panel
requested median cost data for site preparation and debridement.
We accepted the APC Panel's recommendation to continue to assign
the skin repair CPT codes for the application of Apligraf, Oasis, and
Dermagraft skin substitutes to the same procedural APCs for CY 2010 as
their CY 2009 assignments. As a result, we continued to assign the
Apligraf application CPT codes 15340 and 15341 and the Dermagraft
application CPT codes 15365 and 15366 to APC 0134 and assigned the
Oasis application CPT codes 15430 and 15431 to APC 0135 for CY 2010.
At the February 2010 APC Panel meeting, CMS presented the results
of the data requested at the August 2009 meeting to the APC Panel. In
response to data on the frequency of primary and add-on CPT codes,
based on our analysis of the available CY 2009 hospital outpatient
claims data on frequency of primary and add-on CPT codes billed for the
Apligraf, Oasis, and Dermagraft applications (claims processed from
January 1 through September 30, 2009), we found that hospitals report
the application of Apligraf with only the primary code (CPT code 15340)
on 77 percent of claims, while the add-on CPT code 15341 is billed in
addition to the primary code on another 23 percent of claims.
Specifically, our data showed that, for the Apligraf application, there
were a total of 8,614 claims with only the primary CPT code 15340
reported, and 2,545 claims with the add-on CPT code 15341 also reported
on the same date of service. We note that each unit of the add-on CPT
code is paid at 50 percent of the payment for the primary code in
addition to the full payment for the primary code. We also found in our
analysis that, on claims with the Dermagraft and Oasis application CPT
codes, hospitals report the primary code only in approximately 98 to 99
percent of the cases. In addition, in response to the request for data
for site preparation and debridement that may be reported separately
for the Dermagraft application, we found that approximately 87 percent
of procedures for the application of Dermagraft were reported without
debridement or site preparation on the same day. Similarly, we found
that the Apligraf and Oasis procedures were rarely reported with the
site preparation or debridement CPT procedure codes on the same day.
Specifically, we found that the CPT procedure code for the application
of Apligraf was reported without site preparation or debridement in
approximately 94 percent of these cases, and that the CPT procedure
code for application of Oasis was reported without site preparation or
debridement in approximately 95 percent of these cases. Our data
analysis also showed that the CPT median costs for the Apligraf
application CPT code 15340 and the Dermagraft application CPT code
15365 are very similar. Specifically, the CPT code-specific median cost
of CPT code 15340 is approximately $234 for the Apligraf application
and approximately $237 for CPT code 15365 for the Dermagraft
application. In contrast, the CPT median cost for the Oasis application
primary CPT code 15430 of approximately $299 is higher.
At the February 2010 APC Panel meeting, a public presenter again
requested that the APC Panel recommend that CMS reassign the Apligraf
application CPT codes 15340 and 15341 from APC 0134 to APC 0135. The
presenter indicated that the additional payment for site preparation
and debridement procedures that may be reported separately with the
Dermagraft application can significantly affect the total payment for
the procedure. The presenter also provided data on the use of each
product in relation to the size of the wounds treated, and concluded
that the size of the wound treated does not affect the resources used.
After further review of the available CY 2009 hospital outpatient
claims data, the APC Panel recommended that CPT codes 15340 and 15341
remain in APC 0134.
As noted above, in the CY 2011 OPPS/ASC proposed rule (75 FR
46251), we proposed to continue to assign the Apligraf application CPT
codes 15340 and 15341 and the Dermagraft application CPT codes 15365
and 15366 to APC 0134, and, at the same time, continue to assign the
Oasis application CPT codes 15430 and 15431 to APC 0135. Secondly, we
proposed to continue to pay separately for the Apligraf, Dermagraft,
and Oasis products in CY 2011.
Comment: One commenter disagreed with the APC assignment for the
Apligraf CPT codes 15340 and 15341 and recommended a reassignment from
APC 0134 to APC 0135.
Response: We examined the updated CY 2009 claims data available for
the CY 2011 final rule with comment period and, based on the claims
data, we believe that CPT codes 15340 and 15341 are appropriately
placed in APC 0134. Specifically, our claims data show that the median
cost of approximately $231 for CPT code 15340, based on 15,648 single
claims (out of a total of 19,949 claims), and the median cost of
approximately $189 for CPT code 15341, based on 2,621 single claims
(out of a total of 5,468 claims), are relatively similar to the median
cost of approximately $215 for APC 0134, and are dissimilar to the
median cost of approximately $316 for APC 0135. Therefore, we are
assigning CPT codes 15340 and 15341 to APC 0134 for CY 2011.
As noted above, we also proposed for CY 2011 to create two new
Level II HCPCS G-codes to report the application of Apligraf or
Dermagraft specific to the lower extremities in order to provide
appropriate and consistent payment for these services as they are
commonly furnished, consistent with

[[Page 71920]]

the CY 2011 proposal for the MPFS. (We refer readers to the CY 2011
MPFS proposed rule for additional information regarding the MPFS
proposal and to the MPFS final rule for the final CMS decision
regarding the use of these codes for the MPFS.) The proposed HCPCS
codes were: GXXX1 (Application of tissue cultured allogeneic skin
substitute or dermal substitute; for use on lower limb, includes the
site preparation and debridement if performed; first 25 sq cm or less);
and GXXX2 (Application of tissue cultured allogeneic skin or dermal
substitute; for use on lower limb, includes the site preparation and
debridement if performed; each additional 25 sq cm). We note that, for
this CY 2011 OPPS/ASC final rule with comment period, GXXX1 has been
designated as HCPCS code G0440 and HCPCS code GXXX2 as HCPCS code
G0441. As indicated in the HCPCS G-code descriptors, these codes will
not allow separate reporting of CPT codes for site preparation or
debridement. In the proposed rule, we indicated that we believed the
descriptors of the proposed HCPCS G-codes more specifically reflect the
characteristics of the application of Apligraf or Dermagraft to the
lower limb so that reporting would result in more accurate cost data
for OPPS ratesetting and, ultimately, more appropriate payment.
Consistent with the proposed CY 2011 APC assignment for the Apligraf
and Dermagraft application CPT codes, we proposed to assign new HCPCS
codes G0440 and G0441 to APC 0134, with a proposed APC median cost of
approximately $222. We indicated that we were specifically interested
in public comment on the appropriateness of recognizing these proposed
new HCPCS G-codes under the OPPS and their proposed APC assignments.
Comment: Some commenters agreed with the establishment of HCPCS
codes GXXX1 and GXXX2, and supported their APC assignment to APC 0134.
One commenter suggested that, if CMS finalizes the proposal to
establish the HCPCS G-codes, then it should recognize for CY 2011 the
skin repair CPT codes, and also recommended that the HCPCS G-codes be
assigned to APC 0135 rather than the proposed APC 0134. The commenter
requested clarification on the definition of ``dermal substitute.''
However, many commenters disagreed with the establishment of the
HCPCS G-codes. The commenters argued that, although they understood the
need to report the services accurately, they did not believe that
creating two HCPCS G-codes is appropriate because there are existing
CPT codes that describe the application of both the Apligraf and
Dermagraft. They stated that if a revision to the CPT code descriptors
is necessary to accurately describe the services associated with these
products, CMS should work with the AMA CPT Editorial Panel in making
the revisions rather than creating two new HCPCS G-codes. One commenter
stated that the inappropriate reimbursement for the application of
these products is a MPFS issue and does not apply to the hospital OPPS.
The commenter suggested that the proposed changes to create two HCPCS
G-codes would cause providers to use the two more expensive products
and, thereby, inadvertently create a competitive disadvantage for other
products.
Response: We are persuaded from the commenters' statements that
this is a payment issue that applies to the MPFS and not to the
hospital OPPS, because the existing CPT codes for the application of
these products does not impede our ability, under the standard OPPS
ratesetting methodology, to calculate accurate median costs for these
procedures and to assign them to appropriate APCs. Therefore, we are
not finalizing our proposal to assign HCPCS G-codes G0440 and G0441 to
APC 0134. For CY 2011, we are assigning the status indicators for both
HCPCS G-codes to status indicator ``B'' to indicate that these HCPCS
codes are not recognized under the hospital OPPS, and that hospitals
should use a more specific HCPCS code(s) to describe the services
associated with HCPCS codes G0440 and G0441.
With regard to the definition of ``dermal substitute,'' we are
directing our Medicare contractors to provide further guidance if
specific questions arise.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to assign
the Apligraf application CPT codes 15340 and 15341 and the Dermagraft
application CPT codes 15365 and 15366 to APC 0134, with a final CY 2011
APC median cost of approximately $215 and to assign the Oasis
application CPT codes 15430 and 15431 to APC 0135, with a final CY 2011
APC median cost of approximately $316. In addition, we received no
comments on our proposal to continue to pay separately for the skin
products. For CY 2011, we are finalizing our proposal, without
modification, to continue to pay separately for the skin products,
which are described by Level II HCPCS Q-codes. That is, we are
finalizing our proposal to pay separately for the Apligraf skin product
HCPCS Q-code Q4101, the Dermagraft skin product HCPCS Q-code Q4106, and
the Oasis skin product HCPCS Q-codes Q4102 and Q4103. Further, HCPCS Q-
codes Q4101, Q4102, Q4103, and Q4106 are assigned to status indicator
``K'' to indicate that they are separately payable under the hospital
OPPS for CY 2011. In addition, we are not finalizing our proposal to
recognize new HCPCS G-codes G0440 and G0441 as payable under the
hospital OPPS. New HCPCS codes G0440 and G0441 are assigned to status
indicator ``B'' to indicate that hospitals must report a more specific
HCPCS code(s) to describe the services associated with HCPCS codes
G0440 and G0441 for CY 2011.
b. Insertion of Anterior Segment Aqueous Drainage Device (APCs
0234, 0255, and 0673)
The AMA CPT Editorial Panel created Category III CPT code 0191T
(Insertion of anterior segment aqueous drainage device, without
extraocular reservoir; internal approach) effective on July 1, 2008. We
assigned CPT code 0191T to APC 0234 (Level III Anterior Segment Eye
Procedures) in the OPPS, effective July 1, 2008, and maintained this
APC assignment for CY 2009 and CY 2010. For CY 2011, we proposed to
continue to assign CPT code 0191T to APC 0234, with a proposed payment
rate of approximately $1,674. For CY 2011, we also proposed to create
new APC 0255 (Level III Anterior Segment Eye Procedures), and to rename
APC 0234 as ``Level IV Anterior Segment Eye Procedures'' and APC 0673
as ``Level V Anterior Segment Eye Procedures.''
At its August 2010 meeting, the APC Panel recommended that CMS
assign CPT code 0191T to APC 0673 (Level V Anterior Segment Eye
Procedures), on the basis of its clinical similarity to both CPT code
0192T (Insertion of anterior segment aqueous drainage device, without
extraocular reservoir; external approach), and to CPT code 66180
(Aqueous shunt to extraocular reservoir (e.g., Molteno, Schocket,
Denver-Krupin)), which were proposed to be assigned to APC 0673 for CY
2011.
The AMA CPT Editorial Panel revised the descriptor of CPT code
0191T to ``Insertion of anterior segment aqueous drainage device,
without extraocular reservoir; internal approach, into the trabecular
meshwork,'' to be effective January 1, 2011.
Comment: A large number of commenters recommended that CMS reassign
CPT code 0191T from APC 0234 to APC 0673, with a proposed CY 2011
payment rate of approximately $3,039. The commenters claimed that CPT
code 0191T is more appropriately assigned to APC 0673 based on clinical

[[Page 71921]]

homogeneity and resource costs. They pointed out that none of the
procedures in APC 0234 have implanted device costs associated with the
procedures, except CPT code 0191T, while most procedures in APC 0673
have implanted device costs, including glaucoma procedures with
implanted device costs, namely CPT code 66180 and CPT code 0192T. A few
commenters claimed that each of the shunt devices in APC 0673 serve to
shunt the aqueous fluid in the eye to another region in order to lower
intraocular pressure, a common clinical purpose related to CPT code
0191T. Commenters asserted that the major cost of performing the
procedure described by CPT code 0191T is the device itself, and that
the proposed payment rate for APC 0234 is too low to compensate
hospitals and ASCs for the cost of the procedure, thus preventing
Medicare beneficiary access. Commenters also pointed out that cataract
surgery is almost always performed with CPT code 0191T, as many
cataract patients have mild to moderate glaucoma, resulting in a
multiple procedure surgical session with a 50 percent multiple
procedure reduction in payment for CPT code 0191T, which is
predominantly performed in the ASC setting.
Many commenters asserted that the shunt device implantation
performed with CPT code 0191T has much in common clinically with the
implantation of the shunt device procedure performed with CPT code
0192T, which is assigned to APC 0673. Some commenters stated that the
CPT code 0191T procedure is well within the skill set of a general
ophthalmologist performing cataract surgery and promises to avoid some
glaucoma medication usage.
One commenter argued that the resource costs of CPT code 0191T as
demonstrated by CMS claims data is closer to the costs in APC 0673 than
APC 0234, pointing out that the CY 2011 proposed rule median cost of
approximately $2,964 for CPT code 0191T is appreciably higher than the
range of costs of approximately $1,726 to approximately $2,026 for the
10 most frequent procedures in APC 0234. On the other hand, the
commenter stated that the CY 2011 proposed rule median cost of CPT code
0191T is closer to the proposed rule median cost of approximately
$3,099 for APC 0673 and the costs of its two most frequent procedures,
that of CPT code 66180 (approximately $3,092) and CPT code 0192T
(approximately $3,131). The commenter claimed that CMS has grouped
clinically similar CPT codes together into an APC even though some
services are significantly below the proposed APC costs. The commenter
also noted that the procedure's device, the iStent Trabecular Micro-
Bypass Stent (iStent), is currently under an investigational device
exemption (IDE) and is awaiting full premarket approval (PMA) from the
FDA, which it expects to receive by the end of 2011.
Response: After further analysis of this issue, we agree with the
APC Panel and the commenters that CPT code 0191T is similar clinically
and in terms of resource utilization to the procedures in APC 0673.
Several procedures in APC 0673 have device implants that are related to
glaucoma, such as CPT 0192T and CPT code 66180, and the CY 2011 final
median cost for CPT code 0191T of approximately $3,139 is very similar
to the median cost calculated for APC 0673 of approximately $2,946.
Therefore, we are accepting the APC Panel's and the commenters'
recommendation to reassign CPT code 0191T to APC 0673 for CY 2011.
After consideration of the public comments we received, we are
modifying our CY 2011 proposal and reassigning CPT code 0191T to APC
0673 for CY 2011. We will continue to monitor claims and cost report
data for CPT code 0191T in APC 0673.
c. Group Psychotherapy (APCs 0322, 0323, 0324, and 0325)
For CY 2011, we proposed to set the CY 2011 payment rates for APCs
0322 (Brief Individual Psychotherapy), 0323 (Extended Individual
Psychotherapy), 0324 (Family Psychotherapy), and 0325 (Group
Psychotherapy) based on the median costs determined under the OPPS
standard ratesetting methodology. We also proposed to continue to
assign CPT codes 90849 (Multiple family group psychotherapy), 90853
(Group psychotherapy (other than of a multiple-family group)), and
90857 (Interactive group psychotherapy) to APC 0325, with a proposed
payment rate of approximately $54, calculated according to the standard
OPPS ratesetting methodology. In CY 2010, these three CPT codes also
were the only codes assigned to APC 0325, with a payment rate of
approximately $60.
Comment: Some commenters expressed concern over the decreases in
the proposed payment rates for APCs 0322, 0323, 0324, and 0325.
Particularly, several commenters expressed concern that the CY 2011
proposed payment rate for APC 0325 of approximately $54 is 10 percent
less than the CY 2010 payment rate for this APC. The commenters
believed that the proposed payment rate would be insufficient to cover
hospitals' costs for providing group mental health services and, as a
result, would threaten Medicare beneficiary access to these services.
Some commenters stated that the utilization of recent cost report data
lags behind the provision of current services by approximately 3 to 5
years, and a stronger level of reimbursement would seem justified and
appropriate.
Response: We set the payment rates for APCs 0322, 0323, 0324, and
0325 using our standard OPPS methodology based on relative costs from
hospital outpatient claims and the most recent cost report data that
are available. We have no reason to believe that our claims and cost
report data, as reported by hospitals, do not accurately reflect
hospitals' costs of the services assigned to these APCs. As we have
stated in the past, specifically with respect to APC 0325 (72 FR 66739
and 73 FR 68627), we cannot speculate as to why the median cost of
group psychotherapy services has decreased significantly in recent
years. We again note that we have robust claims data for the CPT codes
that map to APC 0325. Specifically, we were able to use more than 99
percent of the approximately 1.7 million claims submitted by hospitals
to report group psychotherapy services. It would appear that the
relative cost of providing these mental health services, in comparison
with other HOPD services, has decreased in recent years.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to calculate the
payment rate for APCs 0322, 0323, 0324, and 0325 by applying our
standard OPPS ratesetting methodology that relies on all single claims
for all procedures assigned to these APCs, and to continue to assign
CPT codes 90849, 90853, and 90857 to APC 0325, with a final payment
rate of approximately $54.

IV. 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

[[Page 71922]]

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 that are no longer eligible for pass-through payments into the
costs of the procedures with which the devices are reported in the
claims data used to set the payment rates (67 FR 66763). Brachytherapy
sources, which are now separately paid in accordance with section
1833(t)(2)(H) of the Act, are an exception to this established policy.
There currently is one new device category eligible for pass-
through payment, described by HCPCS code C1749 (Endoscope, retrograde
imaging/illumination colonoscope device (implantable), which we
announced in the October 2010 OPPS Update (Transmittal 2050, Change
Request 7117, dated September 17, 2010). There are no categories for
which we proposed expiration of pass-through status in CY 2011. If we
create new device categories for pass-through payment status during the
remainder of CY 2010 or during CY 2011, 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.
Comment: Some commenters expressed concern that there currently are
no pass-through categories for new devices, and that there have been
very few new categories approved over the past several years. The
commenters were concerned that CMS may not be recognizing technologies
that demonstrate a substantial clinical improvement for Medicare
beneficiaries, even though the commenters believed that there have been
past applications that have met or exceeded that criterion. One
commenter recommended that CMS reevaluate the criteria and approval
process currently used for device pass-through applications. Another
commenter believed that the need for separate payment for new
technologies is even more acute because of the OPPS policy of increased
packaging and bundled payment into composite APCs. One commenter
recommended that CMS annually publish a list of all devices for which
pass-through status was requested, along with the rationale supporting
its decisions regarding approval or denial of pass-through status.
Response: The criteria for establishing additional pass-through
categories for medical devices are included in the interim final rule
with comment period issued in the November 2, 2001 Federal Register (66
FR 55850), the final rule with comment period issued in the November 1,
2002 Federal Register (67 FR 66781), and the November 10, 2005 OPPS
final rule with comment period (70 FR 68628). We made no proposals
regarding our device pass-through process or criteria for CY 2011.
However, industry members have, from time to time, requested that we
provide additional information on our new technology processes, which
we have attempted to do in the past. We agree with the commenters that
separate payment for new technologies through the device pass-through
process is an important feature of the OPPS, and we continue to review
applications on an ongoing basis using our established process and
criteria and to establish new categories of pass-through devices when
those criteria are met. We disagree with the commenters who believe
that we may not be recognizing technologies that demonstrate a
substantial clinical improvement. We carefully evaluate each
application based on the established criteria, including whether the
device demonstrates a substantial clinical improvement.
We are not making any changes to the device pass-through process or
criteria in this final rule with comment period because we believe any
changes would require public input, including input from affected
parties, and, therefore, should be addressed through our rulemaking
cycle. For example, while some parties may approve of putting specific
information about pass-through applications on our Web site, such as
the basis for an application's denial, others who request that we treat
all or part of their applications as confidential may not support such
a change in the pass-through process. (We note that filing an
application to CMS does not guarantee that CMS is able to treat any
information as confidential because such information is used as part of
the OPPS ratesetting process.) However, we do appreciate the
commenters' perspectives and will take their comments under advisement
as we consider our device pass-through criteria and process in the
future.
2. 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 2010 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.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).
As of CY 2009, the costs of implantable biologicals without pass-
through status are packaged into the payment for the procedures in
which they are inserted or implanted because implantable biologicals
without pass-through status are not separately paid (73 FR 68633
through 68636). For CY 2010, we finalized a new policy to specify 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. As a result, for CY 2010, we included implantable

[[Page 71923]]

biologicals in our calculation of the device APC offset amounts (74 FR
60476). We calculated and set the device APC offset amount for a newly
established device pass-through category, which could include 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 are considered devices rather than drugs for purposes of
pass-through evaluation and payment under our established policy, the
device APC offset amounts include the costs of implantable biologicals.
For CY 2010, we also finalized a policy to utilize the 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, for CY 2010,
we also no longer used 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 (74 FR 60463).
b. Proposed and Final CY 2011 Policy
In the CY 2011 OPPS/ASC proposed rule (75 FR 46252), we proposed to
continue our policy 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. The rationale for this policy is
provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60471 through 60477). We also proposed to continue our established
policies for calculating and setting the device APC offset amounts for
each device category eligible for pass-through payment. In addition, we
proposed 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 also proposed to continue our policy established in CY 2010 to
include implantable biologicals in our calculation of the device APC
offset amounts. In addition, we proposed to continue 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
2011 using the same methodology we have historically used to calculate
and set device APC offset amounts for device categories eligible for
pass-through payment, and to include the costs of implantable
biologicals in the calculation of the device APC offset amounts, as we
did for CY 2010.
In addition, we proposed to update, on the CMS Web site at http://www.cms. gov/HospitalOutpatientPPS, the list of all procedural APCs
with the final CY 2011 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
CY 2011 device pass-through payment applications and by CMS in
reviewing those applications.
In summary, for CY 2011, consistent with the policy established for
CY 2010, we proposed to continue the following policies related to
pass-through payment for devices: (1) Treating 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 on or after January 1, 2010, as devices for purposes of the OPPS
pass-through evaluation process and payment methodology; (2) including
implantable biologicals in calculating the device APC offset amounts;
(3) using the device APC offset amounts to evaluate whether the cost of
a device (defined to include implantable biologicals) 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; and (4) reducing device pass-through payments
based on device costs already included in the associated procedural
APCs, when we determine that device costs associated with the new
category are already packaged into the existing APC structure.
Comment: Some commenters recommended that CMS not continue the
policy it began for CY 2010 to specify 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) be the device pass-through
process and payment methodology only. One commenter asserted that some
implantable biologicals meet the definition of biological under section
1861(t) of the Act, even though they are approved by the FDA as
devices. The commenter recommended that biologicals approved by the FDA
under a biologics license application (BLA) should be eligible for
pass-through payment under the drug and nonimplantable biological pass-
through process, regardless of whether or not they are implanted. The
commenter claimed that Congress intended for biologicals approved under
BLAs to be paid as pass-through drugs because the commenter believed
that Congress intended that biologicals be included under the specific
OPPS statutory provisions that apply to specified covered outpatient
drugs (SCODs). The commenter alternatively requested that if CMS
continues to define implantable biologicals as devices for pass-through
purposes, CMS clarify that it will apply device process and payment
only if the devices are solely surgically implanted according to their
FDA-approved indications. The commenter claimed that the current pass-
through policy is unclear regarding how CMS would evaluate eligibility
for pass-through payment of a biological that has both implantable and
nonimplantable indications.
Another commenter believed that CMS has not sufficiently defined
the term ``surgically inserted or implanted'' regarding applicability
of pass-through device process and payment for implantable biologicals.
The commenter questioned whether biologicals inserted into the body via
catheter (which requires a surgical incision to place a catheter) or an
injection of a biological administered through a natural orifice should
be considered implantable biologicals. The commenter asked whether a
biological that is inserted into the body as a drug administration,
that is, by means of injection or infusion, is considered surgically
inserted or implanted for purposes of pass-through status evaluation
and payment. The commenter also recommended paying for implantable
biologicals using the

[[Page 71924]]

drug payment methodology, proposed at ASP plus 6 percent, rather than
the current methodology of charges adjusted to costs. The commenter
asserted the advantages of the ASP payment methodology are as follows:
there would be identical payment methodologies for biologicals that
function as both implantable and nonimplantable biologicals; the ASP
methodology is well-understood by providers and contractors; the ASP
methodology avoids the problem of hospitals being reluctant to mark up
charges for new implantable biologicals, thereby resulting in charge
compression and an underestimation of costs; and the ASP methodology
assures a consistent payment method, rather than the hospital-specific,
charges-adjusted-to-cost methodology.
Response: As stated in the CY 2010 OPPS/ASC final rule with comment
period, we evaluate implantable biologicals that function as and are
substitutes for implantable devices, regardless of their category of
FDA approval, as devices for OPPS payment purposes (74 FR 60476). We do
not believe it is necessary to make our OPPS payment policies regarding
implantable biologicals dependent on categories of FDA approval, the
intent of which is to ensure the safety and effectiveness of medical
products.
We do not agree with the commenter who asserted that Congress
intended biologicals approved under BLAs to be paid under the specific
OPPS statutory provisions that apply to SCODs, including the pass-
through provisions. Moreover, as we stated in the CY 2010 OPPS/ASC
final rule with comment period, Congress did not specify that we must
pay for implantable biologicals as biologicals rather than devices, if
they also meet our criteria for payment as a device (74 FR 60476). We
continue to believe that implantable biologicals meet the definitions
of a device and a biological and that, for payment purposes, it is
appropriate for us to consider implantable biologicals as implantable
devices in all cases, not as biologicals.
We also do not agree with the commenter's request that we pay for
pass-through implantable biologicals using the ASP payment methodology.
As we stated in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60474), we do not believe that this payment methodology would be
appropriate because payment based on ASP for pass-through implantable
biologicals would not provide similar OPPS payment treatment of
biological and nonbiological implantable devices, which is our goal for
new devices. 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 generally similar regulation by the FDA as
devices, we continue to 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 and pay for all of these devices, both biological and
nonbiological, only under the device pass-through payment and
methodology.
Regarding the comment that claimed we have not sufficiently defined
the term ``surgically inserted or implanted'' regarding applicability
of pass-through device process and payment for implantable biologicals,
we believe that infusion or injection of a biological product through a
catheter is generally not considered implantation of a device since
these products are being administered through a catheter rather than
inserted or implanted into the body, in the same way that we have
stated in the past with respect to drug and device combination products
that it is not our intention to consider biologicals under the device
pass-through evaluation process when these products are merely
administered through the implantation of a delivery system for the
biological (74 FR 60476). We believe that applicants seeking pass-
through payment for a particular technology must determine whether to
apply through the drug or device pass-through process based on how the
individual product will be administered.
In response to the comment seeking clarity regarding how CMS would
evaluate eligibility for pass-through payment of a biological that has
both implantable and non-implantable indications, we again note that
applicants for pass-through status must determine whether to apply
through the drug or device pass-through process based on how the
individual product will be used. If we were to receive applications for
the same product for both drug pass-through status and device pass-
through status, and if both applications met the respective criteria
for approval, we would evaluate how it is administered in order to
determine whether it would be appropriate to differentiate the payment
methodology for the product depending on how it is used, as we do for
nonpass-through biologicals that may be sometimes used as drugs, and
sometimes used as devices.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue the policy
to specify 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 on or
after January 1, 2010, be the device pass-through process and payment
methodology only. We also are finalizing our other proposals, without
modification, to continue the following policies regarding device
offsets: (1) Including implantable biologicals in calculating the
device APC offset amounts; (2) using the device APC offset amounts to
evaluate whether the cost of a device (defined to include implantable
biologicals) 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; and (3)
reducing device pass-through payments based on device costs already
included in the associated procedural APCs, when we determine that
device costs associated with the new category are already packaged into
the existing APC structure.

B. 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, do not contain
the ``FB'' modifier signifying that the device was furnished without
cost or with a full credit, and do not contain the ``FC'' modifier
signifying that the device was furnished with partial credit. As
discussed in section II.A.2.d.(1) of this final rule with comment
period, as we proposed, we are continuing to use our standard
ratesetting methodology for device-dependent APCs for CY 2011.
To ensure equitable payment when the hospital receives a device
without

[[Page 71925]]

cost or with full credit, in CY 2007 we implemented a policy to reduce
the payment for specified device-dependent APCs by the estimated
portion of the APC payment attributable to device costs (that is, the
device offset) when the hospital receives a specified device at no cost
or with full credit (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. APCs and Devices Subject to the Adjustment Policy
In the CY 2011 OPPS/ASC proposed rule (75 FR 46253 through 46256),
we proposed to continue for CY 2011 the existing 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 stated in the CY
2011 OPPS/ASC proposed rule (75 FR 46253) that we continue to believe
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 final rule with
comment period for a description of our standard rate-setting
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.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46253), we also
proposed 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 proposed
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 stated in the CY 2011 OPPS/ASC
proposed rule (75 FR 46253) that we continue to believe 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.
As indicated in the CY 2011 OPPS/ASC proposed rule (75 FR 46253),
we examined the offset amounts calculated from the CY 2011 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 2010 continue to meet the criteria for
CY 2011, and to determine whether other APCs to which the policy does
not apply in CY 2010 would meet the criteria for CY 2011. Based on the
CY 2009 claims data available for the proposed rule, we did not propose
any changes to the APCs and devices to which this policy applies. Table
18 of the CY 2011 OPPS/APC proposed rule (75 FR 46254) listed the
proposed APCs to which the payment adjustment policy for no cost/full
credit and partial credit devices would apply in CY 2011 and displayed
the proposed payment adjustment percentages for both no cost/full
credit and partial credit circumstances. We proposed that the no cost/
full credit adjustment for each APC to which this policy would continue
to apply would be the device offset percentage for the APC (the
estimated percentage of the APC cost that is attributable to the device
costs that are packaged into the APC). We also proposed that the
partial credit device adjustment for each APC would continue to be 50
percent of the no cost/full credit adjustment for the APC. Table 19 of
the CY 2011 OPPS/APC proposed rule (75 FR 46256) listed the proposed
devices to which the payment adjustment policy for no cost/full credit
and partial credit devices would apply in CY 2011. We stated in the CY
2011 proposed rule (75 FR 46253) that we would update the lists of APCs
and devices to which the no cost/full credit and partial credit device
adjustment policy would apply for CY 2011, consistent with the three
selection criteria discussed earlier in this section, based on the
final CY 2009 claims data available for the CY 2011 OPPS/ASC final rule
with comment period.
Comment: One comment supported the 40-percent threshold as a
reasonable definition of significant cost when determining the APCs to
which the no cost/full credit and partial device adjustment policy
applies. However, the commenter expressed concern about the application
of this standard and questioned how CMS determines which

[[Page 71926]]

APCs meet the threshold based on claims data. The commenter also
expressed concern that, for implantable orthopedic devices in
particular, the existing codes do not include all of the devices
currently being used. The commenter stated that currently available
HCPCS codes do not comprehensively describe all implantable devices,
and that this may negatively impact calculations of the device offset.
For example, the commenter indicated that a large number of implantable
devices are reported using HCPCS code C1713 (Anchor/screw for opposing
bone-to-bone or soft tissue-to-bone (implantable)). The commenter
recommended that CMS evaluate the adequacy of the device codes to
facilitate accurate tracking and cost estimation.
Response: We appreciate the commenter's support for the 40 percent
threshold as a reasonable definition of significant cost. As described
in the CY 2007 OPPS final rule with comment period (71 FR 68063 through
68066), we calculate the APC offset amount used to determine which APCs
meet the 40-percent threshold by first calculating an APC median cost
including device costs and then calculating an APC median cost
excluding device costs using single bills that contain devices.
The device cost is estimated from the device HCPCS codes present on
the claims and charges in the lines for four specific revenue codes:
275 (Medical/Surgical Supplies: Pacemaker), 276 (Medical/Surgical
Supplies: Intraocular lens), 278 (Medical/Surgical Supplies: Other
implants), and 624 (Medical/Surgical Supplies: FDA investigational
devices). We then divide the ``without device'' median cost by the
``with device'' median cost and subtract the percent from 100 to
acquire the percent of cost attributable to devices in the APC.
We do not agree with the commenter that the available HCPCS codes
are not sufficiently specific to allow hospitals to accurately report
charges for implantable devices on their claims and for us to derive
accurate device offset amount estimates from those claims. We are aware
that devices of varying description and cost are billed with individual
device category codes, such as HCPCS code C1713, but we do not believe
that this limits hospitals' ability to report accurate costs and
charges for items that may be described by those codes. Hospitals must
determine how best to accurately report costs and charges for all items
and services they provide, such as assigning device charges to a C-code
or an uncoded revenue line. As described above, we use both the C-codes
and uncoded revenue lines to calculate the device offset.
After consideration of the public comment we received, we are
finalizing our CY 2011 proposals, without modification, to continue the
established no cost/full credit and partial credit adjustment policy.
Table 25 below lists the APCs to which the payment adjustment policy
for no cost/full credit and partial credit devices will apply in CY
2011 and displays the final payment adjustment percentages for both no
cost/full credit and partial credit circumstances. Table 26 below lists
the devices to which no cost/full credit and partial credit device
adjustment policy will apply for CY 2011, consistent with the three
selection criteria discussed earlier in this section, based on the
final CY 2009 claims data available for this final rule with comment
period. For CY 2011, OPPS payments for implantation procedures to which
the ``FB'' modifier is appended are reduced by 100 percent of the
device offset for no cost/full credit cases when both a device code
listed in Table 26 below, is present on the claim and the procedure
code maps to an APC listed in Table 25 below. OPPS payments for
implantation procedures to which the ``FC'' modifier is appended are
reduced by 50 percent of the device offset when both a device code
listed in Table 26 is present on the claim and the procedure code maps
to an APC listed in Table 25. Beneficiary copayment is based on the
reduced amount when either the ``FB'' modifier 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 note that we are adding one new APC for CY 2011 to Table 25, APC
0318 (Implantation of Cranial Neurostimulator Pulse Generator and
Electrode), and deleting APC 0225 (Implantation of Neurostimulator
Electrodes, Cranial Nerve). As discussed in section II.A.2.d.9. of this
final rule with comment period, we are making changes to these device-
dependent APCs in order to accommodate revisions to coding in CY 2011.

Table 25--APCs To Which The No Cost/Full Credit and Partial Credit
Device Adjustment Policy Will Apply in CY 2011
------------------------------------------------------------------------
Final CY 2011 Final CY 2011
device offset device offset
Final CY 2011 CY 2011 APC Title percentage for percentage for
APC no cost/full partial credit
credit case case
------------------------------------------------------------------------
0039............ Level I Implantation 86 43
of Neurostimulator
Generator.
0040............ Percutaneous 58 29
Implantation of
Neurostimulator
Electrodes.
0061............ Laminectomy, 64 32
Laparoscopy, or
Incision for
Implantation of
Neurostimulator
Electrodes.
0089............ Insertion/ 71 35
Replacement of
Permanent Pacemaker
and Electrodes.
0090............ Insertion/ 73 36
Replacement of
Pacemaker Pulse
Generator.
0106............ Insertion/ 46 23
Replacement of
Pacemaker Leads and/
or Electrodes.
0107............ Insertion of 88 44
Cardioverter-
Defibrillator.
0108............ Insertion/ 87 44
Replacement/Repair
of Cardioverter-
Defibrillator Leads.
0227............ Implantation of Drug 81 41
Infusion Device.
0259............ Level VII ENT 85 43
Procedures.
0315............ Level II 88 44
Implantation of
Neurostimulator
Generator.
0318............ Implantation of 85 43
Cranial
Neurostimulator
Pulse Generator and
Electrode.
0385............ Level I Prosthetic 61 31
Urological
Procedures.
0386............ Level II Prosthetic 71 36
Urological
Procedures.
0418............ Insertion of Left 73 36
Ventricular Pacing
Elect.
0425............ Level II 59 30
Arthroplasty or
Implantation with
Prosthesis.
0648............ Level IV Breast 46 23
Surgery.
0654............ Insertion/ 74 37
Replacement of a
permanent dual
chamber pacemaker.
0655............ Insertion/ 74 37
Replacement/
Conversion of a
permanent dual
chamber pacemaker.

[[Page 71927]]

0680............ Insertion of Patient 71 35
Activated Event
Recorders.
------------------------------------------------------------------------

Table 26--Devices To Which the No Cost/Full Credit and Partial Credit
Device Adjustment Policy Will Apply in CY 2011
------------------------------------------------------------------------
CY 2011 device HCPCS code CY 2011 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.
L8680............................. Implt neurostim elctr each.
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. OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals

A. 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 biologicals (also referred to as biologics). 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 biologicals and brachytherapy
sources used for the treatment of cancer; and current
radiopharmaceutical drugs and biologicals. For those drugs and
biologicals 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 biologicals 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 a period of at least 2 years but not more than 3 years after
the product's first payment as a hospital outpatient service under
Medicare Part B. CY 2011 pass-through drugs and biologicals and their
designated APCs are assigned status indicator ``G'' in Addenda A and B
to this final rule with comment period.
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 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. If the drug or biological is covered under
a competitive acquisition contract under section 1847B of the Act, the
pass-through payment amount is 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.
This methodology for determining the pass-through payment amount is
set forth in regulations at 42 CFR 419.64, which specify 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, the
wholesale acquisition cost (WAC), and the average wholesale price
(AWP). In this final rule with comment period, 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 provides
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 postponed beginning in CY 2009
(Medicare Learning Network (MLN) Matters Special Edition 0833,
available via the Web site: http://www.medicare.gov). As

[[Page 71928]]

of publication of this final rule with comment period, the postponement
of the Part B drug CAP program remains in effect and, there is no
effective CAP program rate for pass-through drugs and biologicals as of
January 1, 2009. Consistent with what we indicated in the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60466), if the program is
reinstituted during CY 2011 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.
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. For CY 2010, we estimated the OPPS pass-through payment
estimate for drugs and biologicals to be $35.5 million. Our OPPS pass-
through payment estimate for drugs and biologicals in CY 2011 is $15.5
million, which is discussed in section VI.B. of this final rule with
comment period.
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. Drugs and Biologicals With Expiring Pass-Through Status in CY 2010
In the CY 2011 OPPS/ASC proposed rule (75 FR 46257 through 46258),
we proposed that the pass-through status of 18 drugs and biologicals
would expire on December 31, 2010, as listed in Table 20 of the
proposed rule (75 FR 46258). 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, 2010. These drugs and biologicals
were approved for pass-through status on or before January 1, 2009.
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 $70 for CY 2011), as discussed further in section V.B.2.
of this final rule with comment period. 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 of the drug or
biological is greater than the OPPS drug packaging threshold, we would
provide separate payment at the applicable relative ASP-based payment
amount (which is at ASP+5 percent for CY 2011, as discussed further in
section V.B.3. of this final rule with comment period). Section
V.B.2.d. of this final rule with comment period discusses the packaging
of all nonpass-through contrast agents, diagnostic
radiopharmaceuticals, and implantable biologicals.
Two of the products for which we proposed to expire pass-through
status in CY 2011 are biologicals that are solely surgically implanted
according to their Food and Drug Administration approved indications.
As discussed in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60467), we package payment for those implantable biologicals that
have expiring pass-though status into payment for the associated
surgical procedure. In the CY 2011 OPPS/ASC proposed rule, we proposed
to package payment for two products described by HCPCS codes C9356
(Tendon, porous matrix of cross-linked collagen and glycosaminoglycan
matrix (TenoGlide Tendon Protector Sheet), per square centimeter) and
C9359 (Porous purified collagen matrix bone void filler (Integra Mozaik
Osteoconductive Scaffold Putty, Integra OS Osteoconductive Scaffold
Putty), per 0.5 cc).
To date, for other nonpass-through biologicals paid under the OPPS
that may sometimes be used as implantable devices, we have instructed
hospitals, via Transmittal 1336, Change Request 5718, dated September
14, 2007, to not separately bill for drug and biological HCPCS codes
for the biologicals when they are used 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.
When using drugs and biologicals during surgical procedures as
implantable devices, hospitals may include the charge for these items
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 the costs would appropriately contribute to the future
median setting for the associated procedure. 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.
As we established in the CY 2003 OPPS final rule with comment
period (67 FR 66763), when the pass-through payment period for an
implantable device ends, it is standard OPPS policy to package payment
for the implantable device into payment for its associated surgical
procedure. We consider nonpass-through implantable devices to be
integral and supportive items and services for which packaged payment
is most appropriate. According to our regulations at Sec. 419.2(b), as
a prospective payment system, the OPPS establishes a national payment
rate that includes operating and capital-related costs that are
directly related and integral to performing a procedure or furnishing a
service on an outpatient basis including, but not limited to,
implantable prosthetics, implantable durable medical equipment, and
medical and surgical supplies. Therefore, when the period of
nonbiological device pass-through payment ends, we package the costs of
the devices no longer eligible for pass-through payment into the costs
of the procedures with which the devices were reported in the claims
data used to set the payment rates for the upcoming calendar year. As
described in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68634), we believed that this policy to package payment for implantable
devices that are integral to the performance of separately paid
procedures should also apply to payment for implantable biologicals
without pass-through status, when those biologicals are used as
implantable devices. As stated above, 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. If we were to provide separate payment for these
implantable

[[Page 71929]]

biologicals without pass-through status, we would potentially be
providing duplicate device payment, both through the packaged
nonbiological device cost included in the surgical procedure's payment
and separate biological payment. We indicated in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68634) that we saw no basis for
treating implantable biological and nonbiological devices without pass-
through status differently for OPPS payment purposes because both are
integral to and supportive of the separately paid surgical procedures
in which either may be used.
We did not receive any public comments on our proposal to expire
the 18 drugs and biologicals that were identified in the proposed rule
from pass-through status, effective December 31, 2010. We are
finalizing our proposal, without modification, to expire the pass-
through status of the 18 drugs and biologicals listed in Table 27
below, effective December 31, 2010.

Table 27--Drugs and Biologicals for Which Pass-Through Status Will Expire December 31, 2010
----------------------------------------------------------------------------------------------------------------
Final CY 2011 Final CY 2011
CY 2010 HCPCS Code CY 2011 HCPCS Code CY 2011 long descriptor SI APC
----------------------------------------------------------------------------------------------------------------
A9581 A9581.................. Injection, gadoxetate N N/A
disodium, 1 ml.
C9248 C9248.................. Injection, clevidipien K 9248
butyrate, 1 mg.
C9356 C9356.................. Tendon, porous matrix of N N/A
cross-linked collagen and
glycosaminoglycan matrix
(TenoGlide Tendon Protector
Sheet), per square
centimeter.
C9358 C9358.................. Dermal substitute, native, K 9358
non-denatured collagen,
fetal bovine origin
(SurgiMend Collagen Matrix),
per 0.5 square centimeters.
C9359 C9359.................. Porous purified collagen N N/A
matrix bone void filler
(Integra Mozaik
Osteoconductive Scaffold
Putty, Integra OS
Osteoconductive Scaffold
Putty), per 0.5 cc.
J1267 J1267.................. Injection, doripenem, 10 mg.. N N/A
J1453 J1453.................. Injection, fosaprepitant, 1 K 9242
mg.
J1459 J1459.................. Injection, immune globulin K 1214
(privigen), intravenous, non-
lyophilized (e.g. liquid),
500 mg.
J1571 J1571.................. Injection, hepatitis b immune K 0946
globulin (hepagam b),
intramuscular, 0.5 ml.
J1573 J1573.................. Injection, hepatitis B immune K 1138
globulin (Hepagam B),
intravenous, 0.5 ml.
J1953 J1953.................. Injection, levetiracetam, 10 N N/A
mg.
J2785 J2785.................. Injection, regadenoson, 0.1 K 9244
mg.
J2796 J2796.................. Injection,romiplostim, 10 K 9245
micrograms.
J9033 J9033.................. Injection, bendamustine hcl, K 9243
1 mg.
J9207 J9207.................. Injection, ixabepilone, 1 mg. K 9240
J9225 J9225.................. Histrelin implant (vantas), K 1711
50 mg.
J9226 J9226.................. Histrelin implant (supprelin K 1142
la), 50 mg.
Q4114 Q4114.................. Dermal substitute, granulated K 1251
cross-linked collagen and
glycosaminoglycan matrix
(Flowable Wound Matrix), 1
cc.
----------------------------------------------------------------------------------------------------------------

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing
Pass-Through Status in CY 2011
In the CY 2011 OPPS/ASC proposed rule (75 FR 46258), we proposed to
continue pass-through status in CY 2011 for 31 drugs and biologicals.
None 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, 2010. These drugs and biologicals, which were approved for
pass-through status between April 1, 2009 and July 1, 2010, were listed
in Table 21 of the proposed rule. The APCs and HCPCS codes for these
drugs and biologicals were assigned status indicator ``G'' in Addenda A
and B to the proposed rule (75 FR 46259).
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. In the
proposed rule, we stated that 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 2011, the amount
that drugs and biologicals receive under section 1842(o) of the Act.
Thus, for CY 2011, we proposed 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 2011.
We proposed that a zero pass-through payment amount would be paid for
most pass-through drugs and biologicals under the CY 2011 OPPS because
the difference between the amount authorized under section 1842(o) of
the Act, which is ASP+6 percent, and the portion of the otherwise
applicable OPD fee schedule that the Secretary determines is
appropriate, proposed at ASP+6 percent, is zero. 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 proposed to continue to update pass-through payment
rates on a quarterly basis on the CMS Web site during CY 2011, if later
quarter ASP submission (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. For a full description
of this policy, we refer readers to the CY 2006 OPPS/ASC final rule
with comment period (70 FR 42722 and 42723). If the Part B drug CAP is
reinstated during CY 2011, and a drug or biological that has been
granted pass-

[[Page 71930]]

through status for CY 2011 becomes covered under the Part B drug CAP,
we proposed to provide pass-though payment at the Part B drug CAP rate
and to make the adjustments to the payment rates for these drugs and
biologicals on a quarterly basis, as appropriate. As is our standard
methodology, we annually review new permanent HCPCS codes and delete
temporary HCPCS C-codes if an alternate permanent HCPCS code is
available for purposes of OPPS billing and payment.
In CY 2011, as is consistent with our CY 2010 policy for diagnostic
and therapeutic radiopharmaceuticals, we proposed 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. Therefore, if a
diagnostic or therapeutic radiopharmaceutical receives pass-through
status during CY 2011, we proposed to follow the standard ASP
methodology to determine the pass-through payment rate that drugs
receive under section 1842(o) of the Act, which is, ASP+6 percent. If
ASP data are not available for a radiopharmaceutical, we proposed to
provide pass-through payment at WAC+6 percent, the equivalent payment
provided to pass-through drugs and biologicals without ASP information.
If WAC information is also not available, we proposed to provide
payment for the pass-through radiopharmaceutical at 95 percent of its
most recent AWP.
As discussed in more detail in section V.B.2.d. of this final rule
with comment period, over the last 3 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. In the CY 2011
OPPS/ASC proposed rule (75 FR 46271), we proposed to continue the
packaging of these items, regardless of their per day cost, in CY 2011.
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 consider to be a device when it functions as an implantable
device for all payment purposes, as discussed in sections V.A.4. and
V.B.2.d. of the CY 2010 OPPS/ASC final rule with comment period (74 FR
60458)) 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 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 device
APC offset amounts are described in more detail in section IV.A.2. of
this final rule with comment period. 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
those 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, as we did in CY 2010, we proposed to continue
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 for CY 2011. 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 proposed
to not publish a copayment amount for these items in Addenda A and B to
the proposed rule.
As is our standard methodology, we annually review new permanent
HCPCS codes and delete temporary HCPCS C-codes if an alternative
permanent HCPCS code is available for purposes of OPPS billing and
payment. We specifically review drugs with pass-through status for CY
2011 that will change from C-code to a permanent J-code for CY 2011.
For our CY 2011 review, we have determined that HCPCS code J2426
(Injection, paliperidone palmitate, extended release, 1 mg) describes
the product reported under HCPCS code C9255 (Injection, paliperidone
palmitate, 1 mg); HCPCS code J7312 (Injection, dexamethasone
intravitreal implant, 0.1 mg) describes the product reported under
HCPCS code C9256 (Injection, dexamethasone intravitreal implant, 0.1
mg); HCPCS code J3095 (Injection, telavancin, 10 mg) describes the
product reported under HCPCS code C9258 (Injection, telavancin, 10 mg);
HCPCS code J9307 (Injection, pralatrexate, 1 mg) describes the product
reported under HCPCS code C9259 (Injection, pralatrexate, 1 mg); HCPCS
code J9302 (Injection, ofatumumab, 10 mg) describes the product
reported under HCPCS code C9260 (Injection, ofatumumab, 10 mg); HCPCS
code J3357 (Injection, ustekinumab, 1 mg) describes the product
reported under HCPCS code C9261 (Injection, ustekinumab, 1 mg); HCPCS
code J1290 (Injection, ecallantide, 1 mg) describes the product
reported under HCPCS code C9263 (Injection, ecallantide, 1 mg); HCPCS
code J3262 (Injection, tocilizumab, 1 mg) describes the product
reported under HCPCS code C9264 (Injection, tocilizumab, 1 mg); HCPCS
code J9315 (Injection, romidepsin, 1 mg) describes the product reported
under HCPCS code C9265 (Injection, romidepsin, 1 mg); HCPCS code J0775
(Injection, collagenase clostridium histolyticum, 0.01 mg) describes
the product reported under HCPCS code C9266 (Injection, collagenase
clostridium histolyticum, 0.1 mg); HCPCS code J7184 (Injection, von
Willebrand factor complex (human), Wilate, per 100 IU VWF: RCO)
describes the product reported under HCPCS code C9267 (Injection, von
Willebrand factor complex (human), Wilate, per 100 IU VWF: RCO); HCPCS
code J7335 (Capsaicin 8% patch, per 10 square centimeters) describes
the product reported under HCPCS code C9268 (Capsaicin, patch, 10cm2);
HCPCS code J0597 (Injection, C-1 Esterase inhibitor (human), Berinert,
10 units) describes the product reported under HCPCS code C9269
(Injection, C-1 Esterase inhibitor (human), Berinert, 10 units); HCPCS
code J3385 (Injection, velaglucerase alfa, 100 units) describes the
product reported under HCPCS code C9271 (Injection, velaglucerase alfa,
100 units); and HCPCS code J8562

[[Page 71931]]

(Fludarabine phosphate, oral, 10 mg) describes the product reported
under HCPCS code Q2025 (Fludarabine phosphate, oral, 1 mg).
Comment: Several commenters supported CMS' proposal to provide
payment at ASP+6 percent for drugs, biologicals, contrast agents, and
radiopharmaceuticals that are granted pass-through status. One
commenter approved of the proposal to use the ASP methodology that
would provide payment based on WAC if ASP information is not available,
and payment at 95 percent of AWP if WAC information is not available.
Some commenters requested that CMS provide an additional payment for
radiopharmaceuticals that are granted pass-through status.
Response: As discussed above, the statutorily mandated pass-through
payment for CY 2011, in general, 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. Therefore,
the pass-through payment is determined by subtracting the otherwise
applicable payment amount under the OPPS (determined to be ASP+5
percent for CY 2011) from the amount determined under section 1842(o)
of the Act (ASP+6 percent).
For CY 2011, consistent with our CY 2010 payment policy for
diagnostic and therapeutic radiopharmaceuticals, we proposed to provide
payment for both diagnostic and therapeutic radiopharmaceuticals with
pass-through status based on the ASP methodology. As stated above, the
ASP methodology, as applied under the OPPS, uses several sources of
data as a basis for payment, including the ASP, WAC if ASP is
unavailable, and 95 percent of the radiopharmaceutical's most recent
AWP if ASP and WAC are unavailable. For purposes of pass-through
payment, we consider radiopharmaceuticals to be drugs under the OPPS.
Therefore, if a diagnostic or therapeutic radiopharmaceutical receives
pass-through status during CY 2011, we proposed to follow the standard
ASP methodology to determine its pass-through payment rate under the
OPPS. We have routinely provided a single payment for drugs,
biologicals, and radiopharmaceuticals under the OPPS to account for the
acquisition and pharmacy overhead costs, including compounding costs.
We continue to believe that a single payment is appropriate for
diagnostic radiopharmaceuticals with pass-through status in CY 2011 and
that the payment rate of ASP+6 percent (or payment based on the ASP
methodology) is appropriate to provide payment for both the
radiopharmaceutical's acquisition cost and any associated nuclear
medicine handling and compounding costs. We refer reader to section
V.B.3.c. of this final rule with comment period for further discussion
of payment for therapeutic radiopharmaceuticals based on ASP
information submitted by manufacturers and the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/.
Comment: Some commenters expressed concern that a
radiopharmaceutical may receive pass-through payment for a period of
possibly only 2 years. Several commenters recommended providing pass-
through payment for approved radiopharmaceuticals for a full 3 year
time period to allow hospitals time to incorporate new products into
their chargemasters and billing practices.
Response: The statute specifically allows for pass-through payment
for drugs and biologicals to be made for at least 2 years, but no more
than 3 years. We believe this period of payment facilitates
dissemination of these new products into clinical practice and for the
collection of hospital claims data reflective of their costs for future
OPPS ratesetting. Our longstanding practice has been to provide pass-
through payment for a period of 2 to 3 years, with expiration of pass-
through status proposed and finalized through the annual rulemaking
process. Each year, when proposing to expire the pass-through status of
certain drugs and biologicals, we examine our claims data for these
products. We observe that hospitals typically have incorporated these
products into their chargemasters based on the utilization and costs
observed in our claims data. Under the existing pass-through policy,
which has been generally supported by commenters, we begin pass-through
payment on a quarterly basis that depends on when applications are
submitted to us for consideration and we expire pass-through status
only on an annual basis, so there is no way to ensure that all pass-
through drugs and biologicals receive pass-through payment for a full 3
years, while also providing pass-through payment for no more than 3
years as the statute requires. Therefore, we will continue to provide
drug and biologicals pass-through payment for at least 2 years, but no
more than 3 years, as required by the statute.
There is currently one diagnostic radiopharmaceutical, described by
HCPCS code A9582 (Iodine I-123 iobenguane, diagnostic, per study dose,
up to 15 millicuries), that has been granted pass-through status at the
time of issuance of this final rule with comment period. We proposed to
continue pass-through status for this diagnostic radiopharmaceutical as
it would not have received at least 2 years but not more than 3 years
of pass-through payment by December 31, 2010. This is consistent with
the OPPS provision that provides for at least 2 years but not more than
3 years of pass-through payment for drugs and biologicals that are
approved for pass-through payments.
We provide an opportunity through the annual OPPS/ASC rulemaking
cycle for public comment on those drugs and biologicals that are
proposed for expiration of pass-through payment at the end of the next
calendar year. We have often received public comments related to our
proposed expiration of pass-through status for drugs and biologicals in
the future. In this manner, we address specific concerns about the
pass-through payment period for individual drugs, biologicals, and
radiopharmaceuticals.
Comment: One commenter recommended that CMS monitor the cost and
utilization data on HCPCS code A9583 (Injection, gadofosveset
trisodium, 1 ml) on a quarterly basis throughout CY 2010 and CY 2011 to
determine whether a third year of pass-through payment is necessary.
The commenter noted that HCPCS code A9583, as a contrast agent and a
``policy-packaged'' item, would be packaged after its pass-through
status ends.
Response: As stated above, section 1833(t)(6)(C)(i)(II) of the Act
provides transitional pass-through payments for a drug or biological
for at least 2 years, but not more than 3 years, beginning on the first
date on which payment is made as hospital outpatient services under
Medicare Part B. Under our current policy, supported by commenters, we
begin pass-though payment on a quarterly basis that depends on when
applications are submitted to us for consideration, and we expire pass-
through status only on an annual basis through the rulemaking process.
Accordingly, there is no way to ensure that all pass-through drugs and
biologicals receive pass-through payment for a full 3 years, while also
providing pass-through payment for no more than 3 years, as the statute
requires. Although it is our standard practice to monitor and review
the cost and utilization data of all drugs and biologicals, because of
our policy to expire pass-through status only on an annual basis
through rulemaking, we could not use this information to authorize a
full third year of pass-

[[Page 71932]]

through payment for an individual drug or biological. Therefore, once
pass-through status ends for the item described by HCPCS code A9583
(Injection, gadofosveset trisodium, 1 ml) after at least 2 years but
not more than 3 years according to the statute, as a contrast agent, it
will be packaged according to our policy described in section V.B.2.d.
of this final rule with comment period. We are finalizing our proposal
to continue pass-through status for the item described by HCPCS code
A9583 for CY 2011.
Comment: Several commenters supported the CY 2011 proposal to
continue to set the associated copayment amounts for pass-through
diagnostic radiopharmaceuticals, contrast agents, and implantable
biologicals that would otherwise be packaged if the product did not
have pass-through status to zero. The commenters noted that this policy
is consistent with statutory requirements and provides cost-saving
benefits to beneficiaries.
Response: We appreciate the commenters' support of our proposal. As
discussed in the CY 2011 OPPS/ASC proposed rule (75 FR 46259), we
believe that, for drugs and biologicals that are ``policy-packaged,''
the copayment for the nonpass-through payment portion of the total OPPS
payment for this subset of drugs and biologicals is 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, we believe that the amount
should be zero for drugs and biologicals that are ``policy-packaged,''
including diagnostic radiopharmaceuticals.
Comment: One commenter noted that CMS omitted 7 of the 31 pass-
through drugs and biologicals proposed to continue on pass-through
status for CY 2011 in Addendum B to the CY 2011 OPPS/ASC proposed rule.
The commenter was concerned that the absence of these drugs and
biologicals in Addendum B could cause hospitals or Medicare contractors
to believe that the products are not paid for under the OPPS as pass-
through drugs.
Response: Table 21 of the CY 2011 OPPS/ASC proposed rule (75 FR
46260) contained 31 drugs, biologicals, and radiopharmaceuticals that
we proposed to continue on pass-through status for CY 2011. This table
included drugs, biologicals, and radiopharmaceuticals approved for
pass-through status for the July 2010 quarterly update. While the
commenter did not specifically mention which codes were omitted from
Addendum B to the proposed rule, we note that HCPCS codes C9264
(Injection, tocilizumab, 1 mg), C9265 (Injection, romidepsin, 1 mg),
C9266 (Injection, collagenase clostridium histolyticum, 0.1 mg), C9267
(Injection, von Willebrand factor complex (human), Wilate, per 100 IU
VWF: RCO), C9268 (Capsaicin, patch, 10cm2), C9367 (Skin substitute,
Endoform Dermal Template, per square centimeter), all approved for
pass-through status for the July 2010 quarterly update, and Q2025
(Fludarabine phosphate, oral, 1 mg) were not included in Addendum B of
the proposed rule.
According to our current practice, we did not include pass-through
payment rates for those drugs, biologicals, and radiopharmaceuticals
that were newly approved for pass-through status for July 2010 in
Addendum B to the CY 2011 OPPS/ASC proposed rule. It has been our
longstanding practice to include only payment rates for pass-through
drugs, biologicals, and radiopharmaceuticals in Addendum B to the
proposed rule that have been approved for payment under the OPPS
through the April quarterly update because of the difficulty of
coordinating production of the Addendum B to the proposed rule
concurrently with decisions about pass-through drugs and biologicals
for the July quarterly update transmittal. Payment rates for all pass-
through drugs, biologicals, and radiopharmaceuticals that are proposed
and finalized to continue on pass-through status for a given calendar
year are included in Addendum B to the final rule with comment period.
Additionally, pass-through payment for the product described by
HCPCS code Q2025 (Fludarabine phosphate, oral, 1 mg) was included in
Addendum B to the CY 2011 OPPS/ASC proposed rule under the now
discontinued HCPCS code C9262 (Fludarabine phosphate, oral, 1 mg).
Beginning in July 2010, HCPCS code C9262 was deleted and replaced with
HCPCS code Q2025. For CY 2011, HCPCS code Q2025 is finalized as HCPCS
code J8562 (Fludarabine phosphate oral, 10mg) and will continue under
pass-through status for CY 2011.
We did not receive any public comments on our proposal to update
pass-through payment rates on a quarterly basis on the CMS Website
during CY 2011 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 and biologicals are
necessary.
After consideration of the public comments we received, we are
finalizing our CY 2011 pass-through payment proposals, without
modification. Specifically, we are providing pass-through payment in CY
2011 for those drugs, biologicals, and radiopharmaceuticals listed in
Table 28 below. Payment for drugs, biologicals, and
radiopharmaceuticals granted pass-through status will be made at the
payment rate specified in section 1842(o) of the Act, that is, ASP+6
percent. For drugs and biologicals that are not diagnostic
radiopharmaceuticals, contrast agents, or implantable biologicals, the
pass-through payment amount is equal to the difference between payment
for the otherwise applicable Medicare OPD fee schedule that the
Secretary determines is associated with the drug or biological, which
is payment at ASP+5 percent and the payment rate specified in section
1842(o) of the Act, ASP+6 percent or the Part B drug CAP rate as
applicable. For contrast agents, diagnostic radiopharmaceuticals, and
implantable biologicals, the pass-through payment is equal to the
difference between the policy-packaged offset amount associated with an
APC (discussed in V.A.4. of this final rule with comment period) and
the payment rate specified in section 1842(o) of the Act of ASP+6
percent. If ASP data are not available, payment for these pass-through
drugs and biologicals will be based on the standard OPPS ASP
methodology, that is, payment at WAC+6 percent if ASP data are not
available, and payment at 95 percent of the pass-through drug's,
biological's, or radiopharmaceutical's most recent AWP if WAC
information is not available. We will update pass-through payment rates
on a quarterly basis on the CMS website during CY 2011 if later ASP
submissions (or more recent WAC or AWP information, as applicable)
indicate that adjustments to the payment rates for pass-through drugs
and biologicals are necessary. We will set the associated copayment
amount for pass-through diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals approved for pass-through as a
biological prior to January 1, 2010 that would otherwise be packaged if
the item did not have pass-through status to zero. The separate OPPS
payment to a hospital for pass-through diagnostic radiopharmaceuticals,
contrast agents, or implantable biologicals, after taking into account
any applicable payment offset for the item due to the device or

[[Page 71933]]

``policy packaged'' APC offset policy, is the item's pass-through
payment, which is not subject to a copayment, according to the statute.
Finally, if a drug or biological that has been granted pass-through
status for CY 2011 becomes covered under the Part B drug CAP if the
program is reinstituted, we will provide pass-through payment at the
Part B drug CAP rate and make the appropriate adjustment to the payment
rates for the drugs and biologicals on a quarterly basis as
appropriate.
The 42 drugs and biologicals that are continuing on pass-through
status for CY 2011 or that have been granted pass-through status as of
January 2011 are displayed in Table 28 below.

Table 28--Drugs and Biologicals With Pass-Through Status in CY 2011
----------------------------------------------------------------------------------------------------------------
CY 2011 HCPCS Final CY 2011 Final CY 2011
CY 2010 HCPCS code code CY 2011 long descriptor SI APC
----------------------------------------------------------------------------------------------------------------
A9582.......................... A9582 Iodine I-123 iobenguane, G 9247
diagnostic, per study dose,
up to 15 millicuries.
A9583.......................... A9583 Injection, gadofosveset G 1299
trisodium, 1 ml.
C9250.......................... C9250 Human plasma fibrin sealant, G 9250
vapor-heated, solvent-
detergent (Artiss), 2 ml.
C9255.......................... J2426 Injection, paliperidone G 9255
palmitate, extended release,
1 mg.
C9256.......................... J7312 Injection, dexamethasone G 9256
intravitreal implant, 0.1 mg.
C9258.......................... J3095 Injection, telavancin, 10 mg.. G 9258
C9259.......................... J9307 Injection, pralatrexate, 1 mg. G 9259
C9260.......................... J9302 Injection, ofatumumab, 10 mg.. G 9260
C9261.......................... J3357 Injection, ustekinumab, 1 mg.. G 9261
C9263.......................... J1290 Injection, ecallantide, 1 mg.. G 9263
C9264.......................... J3262 Injection, tocilizumab, 1 mg.. G 9624
C9265.......................... J9315 Injection, romidepsin, 1 mg... G 9625
C9266.......................... J0775 Injection, collagenase G 1340
clostridium histolyticum,
0.01 mg.
C9267.......................... J7184 Injection, von Willebrand G 9267
factor complex (human),
Wilate, per 100 IU VWF: RCO.
C9268.......................... J7335 Capsaicin 8% patch, per 10 G 9268
square centimeters.
C9269.......................... J0597 Injection, C-1 Esterase G 9269
inhibitor (human), Berinert,
10 units.
C9270.......................... C9270 Injection, immune globulin G 9270
(Gammaplex), intravenous, non-
lyophilized (e.g. liquid),
500 mg.
C9271.......................... J3385 Injection, velaglucerase alfa, G 9271
100 units.
C9272.......................... C9272 Injection, denosumab, 1 mg.... G 9272
C9273.......................... C9273 Sipuleucel-T, minimum of 50 G 9273
million autologous CD54+
cells activated with PAPGM-
CSF in 250 mL of Lactated
Ringer's, including
leukapheresis and all other
preparatory procedures, per
infusion.
C9274 Crotalidae polyvalent immune G 9274
fab (ovine), 1 vial.
C9275 Injection, hexaminolevulinate G 9275
hydrochloride, 100 mg, per
study dose.
C9276 Injection, cabazitaxel, 1 mg.. G 9276
C9277 Injection, alglucosidase alfa G 9277
(Lumizyme), 1 mg.
C9278 Injection, incobotulinumtoxin G 9278
A, 1 unit.
C9279 Injection, ibuprofen, 100 mg.. G 9279
C9360.......................... C9360 Dermal substitute, native, non- G 9360
denatured collagen, neonatal
bovine origin (SurgiMend
Collagen Matrix), per 0.5
square centimeters.
C9361.......................... C9361 Collagen matrix nerve wrap G 9361
(NeuroMend Collagen Nerve
Wrap), per 0.5 centimeter
length.
C9362.......................... C9362 Porous purified collagen G 9362
matrix bone void filler
(Integra Mozaik
Osteoconductive Scaffold
Strip), per 0.5 cc.
C9363.......................... C9363 Skin substitute, Integra G 9363
Meshed Bilayer Wound Matrix,
per square centimeter.
C9364.......................... C9364 Porcine implant, Permacol, per G 9364
square centimeter.
C9367.......................... C9367 Skin substitute, Endoform G 9367
Dermal Template, per square
centimeter.
J0598.......................... J0598 Injection, C1 esterase G 9251
inhibitor (human), 10 units.
J0641.......................... J0641 Injection, levoleucovorin G 1236
calcium, 0.5 mg.
J0718.......................... J0718 Injection, certolizumab pegol, G 9249
1 mg.
J1680.......................... J1680 Injection, human fibrinogen G 1290
concentrate, 100 mg.
J2562.......................... J2562 Injection, plerixafor, 1 mg... G 9252
J8705.......................... J8705 Topotecan, oral, 0.25 mg...... G 1238
J9155.......................... J9155 Injection, degarelix, 1 mg.... G 1296
J9328.......................... J9328 Injection, temozolomide, 1 mg. G 9253
Q0138.......................... Q0138 Injection, Ferumoxytol, for G 1297
treatment of iron deficiency
anemia, 1 mg.
Q2025.......................... J8562 Fludarabine phosphate, oral, G 1339
10 mg.
----------------------------------------------------------------------------------------------------------------

[[Page 71934]]

4. 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 CY 2008, 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. In the CY 2011 OPPS/ASC proposed rule
(75 FR 46261), for CY 2011, we proposed to continue to package payment
for all nonpass-through diagnostic radiopharmaceuticals and contrast
agents, as discussed in section V.B.2.d. of the proposed rule and this
final rule with comment period.
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) of the Act
(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 A9582 (Iobenguane, I-123,
diagnostic, per study dose, up to 10 millicuries). HCPCS code A9582 was
granted pass-through status beginning April 1, 2009 and will continue
on pass-through status in CY 2011. 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 final rule
with comment period, new pass-through diagnostic radiopharmaceuticals
will be paid at ASP+6 percent, while those without ASP information will
be paid at WAC+6 percent or, if WAC is not available, payment will be
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 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). 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). In the CY 2010 OPPS/ASC final
rule with comment period (74 FR 60480 through 60484), we finalized a
policy to redefine ``policy-packaged'' drugs as only nonpass-through
diagnostic radiopharmaceuticals and contrast agents, as a result of the
policy discussed in sections V.A.4. and V.B.2.d. of the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60471 through 60477 and 60495
through 60499, respectively) that treats nonpass-through implantable
biologicals that are surgically inserted or implanted (through a
surgical incision or a natural 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.
The I/OCE processes claims for nuclear medicine procedures only
when they are performed with a radiolabeled product. Therefore, the
radiolabeled product edits in the I/OCE require a hospital to report a
diagnostic radiopharmaceutical with a nuclear medicine scan in order to
receive payment for the nuclear medicine scan. We have received
questions from hospitals on how to bill for a nuclear medicine scan
when they receive a diagnostic radiopharmaceutical free of charge or
with full credit. Currently, if a hospital receives a diagnostic
radiopharmaceutical free of charge or with full credit and uses it to
provide a nuclear medicine scan, the hospital could choose not to bill
for both the nuclear medicine scan and the diagnostic
radiopharmaceutical in order to bypass the radiolabeled product edits,
but the hospital clearly would not receive OPPS payment for the scan or
the diagnostic radiopharmaceutical. The hospital also could report the
diagnostic radiopharmaceutical with the nuclear medicine scan and
receive an APC payment that includes payment for the diagnostic
radiopharmaceutical, but this would lead to inaccurate billing and
incorrect payment. The OPPS should not pay for a free item. We believe
neither of the above alternatives is satisfactory.
In order to ensure that the OPPS is making appropriate and
equitable payments under such circumstances and that a hospital can
comply with the required radiolabeled product edits, in the CY 2011
OPPS/ASC proposed rule (75 FR 46261 through 46262), we proposed for CY
2011 to instruct hospitals to report the ``FB'' modifier on the line
with the procedure code for the nuclear medicine scan in the APCs
listed in Table 22 of the proposed rule in which the no cost/full
credit diagnostic radiopharmaceutical is used. Modifier ``FB'' is
defined as an ``Item Provided Without Cost to Provider, Supplier or
Practitioner, or Credit Received for Replacement Device (Examples, but
not Limited to: Covered Under Warranty, Replaced Due to Defect, Free
Samples).'' Although this modifier is specific to devices, it captures
the concept of the hospital receiving a key component of the service
without cost. In cases in which the diagnostic radiopharmaceutical is
furnished without cost or with full credit, we proposed to instruct the
hospital to report a token charge of less than $1.01. We refer readers
to the CY 2008 OPPS/ASC final rule with comment period for more
background information on the ``FB'' modifier payment adjustment
policies (72 FR 66743 through 66749). We proposed that when a hospital
bills with an ``FB'' modifier with the nuclear medicine

[[Page 71935]]

scan, the payment amount for procedures in the APCs listed in Table 22
of the proposed rule would be reduced by the full ``policy-packaged''
offset amount appropriate for diagnostic radiopharmaceuticals.
As discussed in the CY 2009 OPPS/ASC final rule with comment
period, the ``policy packaged'' offset amount that we calculate
estimates 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). As in our offset policy, discussed
below, we believe it is appropriate to remove the ``policy packaged''
offset amount from payment for a nuclear medicine scan with a
diagnostic radiopharmaceutical received at no cost or full credit which
is billed using one of the APCs appearing in Table 29 below, because it
represents the portion of the APC payment attributable to diagnostic
radiopharmaceuticals used in the performance of a nuclear medicine
scan. Using the ``FB'' modifier with radiolabeled products will allow
the hospital to bill accurately for a diagnostic radiopharmaceutical
received free of charge and will allow the hospital to comply with the
radiolabeled product edits to ensure appropriate payment.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46262), we did not
propose to recognize modifier ``FC,'' which is defined as ``Partial
credit received for replaced device,'' because we were unsure of the
circumstances in which hospitals would receive a diagnostic
radiopharmaceutical at reduced cost to replace a previously provided
diagnostic radiopharmaceutical. We note that most of the questions that
we have received pertain to coding of free sample or trial diagnostic
radiopharmaceuticals received free of charge. We invited public comment
on when a diagnostic radiopharmaceutical is provided for a
significantly reduced price and whether the ``FC'' modifier is
appropriate for radiolabeled products.
Comment: Several commenters supported CMS' proposal to instruct
hospitals to report modifier ``FB'' on the line with the procedure code
for the nuclear medicine scan when a diagnostic radiopharmaceutical is
received free of charge or with full credit. The commenters stated that
implementing this proposal would lead to more accurate billing and
would prevent inappropriate payment for diagnostic radiopharmaceuticals
received free of charge or with full credit. One commenter opposed CMS'
proposal to instruct hospitals to report modifier ``FB'' on the line
with the procedure code for the nuclear medicine scan, stating that a
modifier for radiopharmaceuticals is unnecessary. The commenter further
stated that radiopharmaceuticals cannot be compared to devices because
of their pricing differences, since devices generally constitute a
significant portion of the total procedure charges and
radiopharmaceuticals only make up a small portion of the charge for
radiology services. In addition, the commenter stated that the reasons
for free or partial charge devices are generally manufacturer-related
defects, such as recalls and other failures during the warranty period,
and that radiopharmaceuticals are treated differently, in that when
they are recalled, hospitals do not continue to stock them and,
therefore, they would not be administered or billed.
Response: We appreciate commenter's support for our proposal. As
stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46261 through
46262), instructing hospitals to use the ``FB'' modifier on the line
with the procedure code for the nuclear medicine scan would allow the
hospital to bill accurately for a diagnostic radiopharmaceutical
received free of charge and will allow the hospital to comply with the
radiolabeled product edits to ensure appropriate payment.
We have received questions from hospitals that have asked how to
properly bill for diagnostic radiopharmaceuticals obtained free of
charge. We believe that there is a need for hospitals to properly
account for diagnostic radiopharmaceuticals received free of charge.
Therefore, we disagree with the commenter's assertion that there is no
need for a modifier for diagnostic radiopharmaceuticals received with
no cost or free of charge. In addition, we do not find the argument
compelling that a modifier for radiopharmaceuticals is not necessary
because the cost of a radiopharmaceutical is lower than the cost of a
device and because the cost of a radiopharmaceutical constitutes a
lower percentage of the total charge for the associated primary
procedure. We believe the commenter is making a marginal cost argument,
that coding the ``FB'' modifier for devices makes sense because the
recouped costs to the Medicare program could be significant depending
on the device. While we agree that the device portion of a device-
dependent APC subject to the ``FB'' and ``FC'' policy will have a
higher absolute dollar value than the policy-packaged portion of a
nuclear medicine APC, we do not believe this should preclude a hospital
from being able to bill and be paid correctly for a nuclear medicine
scan when provided with a diagnostic radiopharmaceutical that the
hospital received free of charge or at no cost. We have consistently
emphasized the importance of correct coding for all drugs, biologicals,
and radiopharmaceuticals administered in the, regardless of the cost,
in our instructions to hospitals. Establishing the ``FB'' modifier to
correctly account for diagnostic radiopharmaceuticals received free of
charge allows for the diagnostic radiopharmaceutical to be reported and
coded correctly on the same claim as the nuclear medicine scan,
therefore fulfilling the required radiolabeled product edits. It also
is possible that volume for nuclear medicine scans may result in more
total aggregated savings on free-of-charge radiopharmaceuticals than
devices, but our primary goal in instituting the ``FB'' modifiers for
radiopharmaceuticals received free-of-charge or at no cost is for
accurate billing and payment. With regard to the comment that using the
``FB'' modifier with diagnostic radiopharmaceuticals is not necessary
because hospitals would choose not to stock any radiopharmaceuticals
after they are recalled or identified as having defects, we note that
most of the questions that we have received pertain to coding of free
sample or trial diagnostic radiopharmaceuticals received free of
charge.
Comment: One commenter supported CMS' proposal to require hospitals
to report the ``FB'' modifier but suggested that CMS revise the
description to read ``Item provided without cost to provider, supplier,
or practitioner, or full credit received for replaced device or
radiopharmaceutical (examples, but not limited to, covered under
warranty, replaced due to defect, free sample)'' (emphasis added).
Response: We appreciate the commenter's support. However, we do not
establish HCPCS code modifiers through rulemaking, including this OPPS
final rule with comment period. The CMS HCPCS Workgroup develops,
revises, and deletes Level II HCPCS codes and Level II HCPCS modifiers.
The ``FB'' modifier is a Level II HCPCS modifier. We will consider
taking this request to the CMS HCPCS Workgroup for their consideration.
Comment: One commenter suggested that CMS instruct hospitals to use
the ``FB'' modifier when hospitals incur no cost for the diagnostic
radiopharmaceutical when a diagnostic radiopharmaceutical is
administered in

[[Page 71936]]

a nonhospital location and then the nuclear medicine scan is performed
at another facility.
Response: We do not believe that the use of the ``FB'' modifier
should be extended to the situation where a nonhospital location
administers the diagnostic radiopharmaceutical under arrangement with a
hospital administering the nuclear medicine scan because the ``FB''
modifier is defined as ``Item Provided Without Cost to Provider,
Supplier or Practitioner, or Credit Received for Replacement Device
(Examples, but not Limited to: Covered Under Warranty, Replaced Due to
Defect, Free Samples)''. The hospital administering the scan didn't
receive the item at no cost or full credit. We believe it would be rare
for a nonhospital location, such as a physician office, to voluntarily
administer a diagnostic radiopharmaceutical and then refer the patient
to the hospital for the nuclear medicine scan as a hospital outpatient.
In that circumstance, the physician's office would already have billed
Medicare for the radiopharmaceutical. The hospital would be unable to
bill Medicare for that scan because our radiolabeled product edits
require a hospital always to bill a nuclear medicine scan with a
diagnostic radiopharmaceutical, and in this circumstance, the hospital
did not administer a diagnostic radiopharmaceutical. We do not believe
it is likely that a facility other than the hospital administering the
nuclear medicine scan would administer a diagnostic radiopharmaceutical
without conducting the nuclear medicine scan themselves unless the
facility had an arrangement with a hospital to provide the diagnostic
radiopharmaceutical for the hospital. We will monitor our
correspondence with hospitals about our radiolabeled product edits to
see if this situation is more common than we believe. We note that we
have addressed the more common scenario of an inpatient receiving a
diagnostic radiopharmaceutical in the inpatient setting, and having a
follow-up nuclear medicine scan the next day as a hospital outpatient
after discharge by creating HCPCS code C9898 (Input stay radiolabeled
item) for hospitals to report in place of a radiopharmaceutical.
We believe it is more likely that a nonhospital location, such as
an independent testing facility (IDTF), would provide a diagnostic
radiopharmaceutical under arrangement with a hospital. In this
circumstance, it would be inappropriate to remove the ``policy-
packaged'' offset amount from payment for the nuclear medicine scan
because the hospital location would incur the cost of the
radiopharmaceutical by paying the nonhospital location for furnishing
the radiopharmaceutical to the hospital's registered outpatient under
arrangement. We have given instructions in CMS Transmittal 2050, Change
Request 7117, issued September 17, 2010, addressing when a radiolabeled
product is administered in one hospital and the nuclear medicine scan
is subsequently performed at another hospital. Where a hospital or
other entity (a nonhospital location in this example) administers a
diagnostic radiopharmaceutical product for a different hospital
providing the nuclear medicine scan, the first hospital or other entity
may enter into an arrangement under section 1861(w)(1) of the Act, and
as discussed in 42 CFR 410.28(a)(1) and defined in 42 CFR 409.3, where
the second hospital that administers the nuclear medicine scan both
bills Medicare for the administration of the nuclear medicine scan with
diagnostic radiopharmaceutical and pays the first hospital or other
entity that administers the diagnostic radiopharmaceutical some amount
for administration of the diagnostic radiopharmaceutical.
Comment: A few commenters supported CMS' decision not to propose to
require hospitals to use the ``FC'' modifier in cases where a hospital
receives a diagnostic radiopharmaceutical at reduced cost to replace a
previously provided diagnostic radiopharmaceutical. The commenters
stated that this type of partial pricing is not common in the nuclear
medicine field, and hospitals already have ways to set two different
charges for the same radiopharmaceutical to account for reduced costs.
Response: We appreciate the commenters' response.
After consideration of the public comments we received, we are
finalizing our proposal to instruct hospitals to report the ``FB''
modifier on the line with the procedure code for the nuclear medicine
scan in the APCs listed in Table 29 in which the no cost/full credit
diagnostic radiopharmaceutical is used for CY 2011. We are also
finalizing our proposal to instruct hospitals to report a token charge
of less than $1.01 in cases in which the diagnostic radiopharmaceutical
is furnished without cost or with full credit. We did not propose to
finalize a policy to require hospitals to add an ``FC'' modifier to the
procedure code for the nuclear medicine scan to account for diagnostic
radiopharmaceuticals that are received at reduced cost.
Comment: One commenter supported the continuation of the pass-
through diagnostic radiopharmaceutical offset policy for CY 2011.
Response: We appreciate the commenter's support. We continue to
believe that a diagnostic radiopharmaceutical offset policy is
necessary in order to ensure that duplicate payment is not made for
diagnostic radiopharmaceuticals with pass-through status. We believe it
is appropriate to remove the radiopharmaceutical payment amount that is
already packaged into the payment for the associated nuclear medicine
procedure when we provide pass-through payment for a diagnostic
radiopharmaceutical with pass-through status.
Comment: One commenter requested that CMS post all data used to
calculate the offset amounts and stated that, without these amounts,
the public cannot make comments on the accuracy and appropriateness of
CMS' calculation of radiopharmaceutical costs packaged into the nuclear
medicine APC or the corresponding offset amounts for pass-through
radiopharmaceuticals. One commenter also requested that CMS post the
offset files at the same time that the OPPS/ASC proposed rules are
issued. The commenter stated that without these files, they are unable
to predict or comment prior to final offsets being implemented. These
commenters further stated that adequate pricing of all
radiopharmaceuticals is important as new technologies are being
developed and utilized.
Response: The exact data used to calculate all of the proposed and
final payment rates, including the associated offset amounts, for the
CY 2011 OPPS are available for purchase under a CMS data use agreement
through the CMS Web site at: http://www.cms.gov/hospitalOutpatientPPS.
This Web site includes information about purchasing the ``OPPS Limited
Data Set,'' which now includes the additional variables previously
available only in the OPPS Identifiable Data Set, including ICD-9-CMS
diagnosis codes and revenue code payment amounts. We refer readers to
section II.A.2. of this final rule with comment period for more
information on data development and the calculation of median costs. We
note that our description of the payment offset policy calculation for
diagnostic radiopharmaceuticals is referenced above. We typically have
not posted the offset amounts by APC until publication of the final
rule because we assign services to APCs based on our estimate

[[Page 71937]]

of their full resource cost, including, but not limited to, packaged
diagnostic radiopharmaceuticals. The offset amount is 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 and has no
bearing on APC assignment. We will consider making preliminary offset
amounts available for the CY 2011 proposed rule. With regard to pricing
for new radiopharmaceuticals and technologies, we note that the purpose
of the pass-through provision, with specific payment at ASP+6 using the
ASP methodology, is to make it easier for hospitals to try these new
products.
Comment: One commenter asked about the proper billing of diagnostic
radiopharmaceuticals and nuclear medicine scans when the diagnostic
radiopharmaceutical is administered in the HOPD and the nuclear
medicine scan is subsequently performed in the inpatient department of
a hospital.
Response: If a patient received a diagnostic radiopharmaceutical as
an outpatient and was then admitted as an inpatient before receiving a
nuclear medicine scan, payment to the hospital for this patient would
be paid using a Medicare Severity Diagnosis-Related Group (MS-DRG)
under the IPPS and would include the cost of both the nuclear medicine
scan and the diagnostic radiopharmaceutical because it is our long
standing policy to bundle billing of outpatient diagnostic services
into payment for the inpatient admission (42 CFR 412.2(c)(5)(ii)).
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to apply the
diagnostic radiopharmaceutical offset policy to payment for pass-
through diagnostic radiopharmaceuticals, as described above. Table 29
below displays the APCs to which nuclear medicine procedures are
assigned in CY 2011 and for which we expect that an APC offset could be
applicable in the case of diagnostic radiopharmaceuticals with pass-
through status.
We will continue to post annually on the CMS Web site at http://www.cms.gov/HospitalOutpatientPPS a file that contains the APC offset
amounts that will 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, including implantable biologicals; ``policy-packaged'' drugs,
including diagnostic radiopharmaceuticals and contrast agents; and
``threshold-packaged'' drugs and biologicals, which are all other
drugs, therapeutic radiopharmaceuticals, and nonimplantable
biologicals.

Table 29--APCs To Which Nuclear Medicine Procedures Are Assigned for CY
2011
------------------------------------------------------------------------
CY 2011 APC CY 2011 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 II Tumor/Infection
Imaging.
0414...................................... Level II Tumor/Infection
Imaging.
------------------------------------------------------------------------

c. 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) of the Act (or the Part B drug CAP rate) and the
otherwise applicable OPD fee schedule amount. There are currently two
contrast agents with pass-through status under the OPPS: HCPCS code
A9583 (Injection, gadoxetate disodium, per ml) and HCPCS code C9275
(Injection, hexaminolevulinate hydrochloride, 100 mg, per study dose).
HCPCS code A9583 was granted pass-through status beginning January 1,
2010, and will continue with pass-through status in CY 2011, and HCPCS
code C9275 was granted pass-through status beginning January 1, 2011,
and will continue with pass-through status in CY 2011. As described
earlier in section V.A.3. of this final rule with comment period, new
pass-through contrast agents will be paid at ASP+6 percent, while those
without ASP information will be paid at WAC+6 percent or, if WAC is not
available, payment will be based on 95 percent of the product's most
recently published AWP.
We believe that a payment offset 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

[[Page 71938]]

methodology, in the CY 2011 OPPS/ASC proposed rule (75 FR 46263), we
proposed for CY 2011 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 2010, we established a policy to estimate the portion of each
APC payment rate that could reasonably be attributed to the cost of
predecessor contrast agents when considering new contrast agents for
pass-through payment (74 FR 60482 through 60484). For CY 2011, we
proposed to continue to apply this same policy to contrast agents.
Specifically, we proposed 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, in CY 2010, we finalized a
policy to redefine ``policy-packaged'' drugs as only nonpass-through
diagnostic radiopharmaceuticals and contrast agents (74 FR 60495
through 60499). To determine the actual APC offset amount for pass-
through contrast agents that takes into consideration the otherwise
applicable OPPS payment amount, we proposed 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 did not receive any public comments on our proposal 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. We are finalizing the proposed CY 2011 pass-through contrast
agent offset policy to specify the procedural APCs to which offsets for
pass-through contrast agents would apply. In addition, as proposed, for
this final rule with comment period, we have identified in Table 30
below procedural APCs for which we expect a contrast agent offset could
be applicable in the case of a pass-through contrast agent as any
procedural APC with a ``policy-packaged'' drug amount greater than $20
that is not a nuclear medicine APC identified in Table 27 above. The
methodology used to determine a threshold cost for application of a
contrast agent offset policy is described in detail in the CY 2010
OPPS/ASC final rule with comment period (70 FR 60483 through 60484). We
are finalizing this methodology for CY 2011 to continue to recognize
that when a contrast agent with pass-through status is billed with any
procedural APC listed in Table 30, a specific offset based on the
procedural APC would be applied to payment for the contrast agent to
ensure that duplicate payment is not made for the contrast agent.
As proposed, for this final rule with comment period, we will
continue to post annually on the CMS Web site at http://www.cms.gov/
HospitalOutpatientPPS a file that contains the APC offset amounts that
will 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.

Table 30--APCs To Which a Contrast Agent Offset May Be Applicable for CY
2011
------------------------------------------------------------------------
CY 2011 APC CY 2011 APC Title
------------------------------------------------------------------------
0080...................................... Diagnostic Cardiac
Catheterization.
0082...................................... Coronary or Non-Coronary
Atherectomy.
0083...................................... Coronary or Non-Coronary
Angioplasty and
Percutaneous Valvulopasty.
0093...................................... Vascular Reconstruction/
Fistula Repair without
Device.
0104...................................... Transcatheter Placement of
Intracoronary Stents.
0128...................................... Echocardiogram with
Contrast.
0152...................................... Level I Percutaneous
Abdominal and Biliary
Procedures.
0229...................................... Transcatheter Placement of
Intravascular Shunts.
0278...................................... Diagnostic Urography.
0279...................................... Level II Angiography and
Venography.
0280...................................... Level III Angiography and
Venography.
0283...................................... Computed Tomography with
Contrast.
0284...................................... Magnetic Resonance Imaging
and Magnetic Resonance
Angiography with Contrast.
0333...................................... Computed Tomography without
Contrast followed by
Contrast.
0337...................................... Magnetic Resonance Imaging
and Magnetic Resonance
Angiography without
Contrast followed by
Contrast.
0375...................................... Ancillary Outpatient
Services When Patient
Expires.
0383...................................... Cardiac Computed Tomographic
Imaging.
0388...................................... Discography.
0418...................................... Insertion of Left
Ventricular Pacing Elect.
0442...................................... Dosimetric Drug
Administration.
0653...................................... Vascular Reconstruction/
Fistula Repair with Device.
0656...................................... Transcatheter Placement of
Intracoronary Drug-Eluting
Stents.
0662...................................... CT Angiography.
0668...................................... Level I Angiography and
Venography.
8006...................................... CT and CTA with Contrast
Composite.
8008...................................... MRI and MRA with Contrast
Composite.
------------------------------------------------------------------------

[[Page 71939]]

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

1. Background
Under the CY 2010 OPPS, we currently pay for drugs, biologicals,
and radiopharmaceuticals that do not have pass-through status in one of
two ways: As a packaged payment into the payment for the associated
service; or as a 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 were not new and did not have pass-through
status was established at $60. For CY 2010, the packaging threshold for
drugs, biologicals, and radiopharmaceuticals that were not new and did
not have pass-through status was established at $65. The methodology
used to establish the $55 threshold for CY 2007, the $60 threshold for
CYs 2008 and 2009, the $65 threshold for CY 2010, and our approach for
CY 2011 are discussed in more detail in section V.B.2.b. of this final
rule with comment period.
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
As indicated in section V.B.1. of this final rule with comment
period, 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 four quarter moving average Producer Price
Index (PPI) levels for Pharmaceutical Preparations (Prescription) 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. For CY 2010, we set the packaging threshold
at $65.
Following the CY 2007 methodology, for CY 2011, we used updated
four quarter moving average PPI levels to trend the $50 threshold
forward from the third quarter of CY 2005 to the third quarter of CY
2011 and again rounded the resulting dollar amount ($70.64) to the
nearest $5 increment, which yielded a figure of $70. In performing this
calculation, we used the most recent forecast of the quarterly index
levels for the PPI for Pharmaceuticals for Human Use (Prescription)
(Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS'
Office of the Actuary (OACT). We note that we are not making a change
to the PPI that is used to calculate the threshold for CY 2011;
however, there was a recent change to the BLS naming convention for
this series. We refer to this series generally as the PPI for
Prescription Drugs below. We chose this PPI as it reflects price
changes associated with the average mix of all pharmaceuticals in the
overall economy. In addition, we chose this price series because it is
publicly available and regularly published improving public access and
transparency. Forecasts of the PPI for Prescription Drugs are developed
by IHS Global Insight, Inc., a nationally recognized economic and
financial forecasting firm. 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, in the CY 2011
OPPS/ASC proposed rule (75 FR 46265), we proposed a packaging threshold
for CY 2011 of $70. (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. 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 2011 packaging status, for the CY
2011 OPPS/ASC 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 the proposed rule and this
final rule with comment period and excluding diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals that
we proposed to continue to package in CY 2011, as discussed in section
V.B.2.d. of the proposed rule and this final rule with comment period),
nonimplantable biologicals, and therapeutic radiopharmaceuticals
(collectively called ``threshold-packaged'' drugs) that had a HCPCS
code in CY 2009 and were paid (via packaged or separate payment) under
the OPPS, using CY 2009 claims data processed before January 1, 2010.
In order to calculate the per day costs for drugs, nonimplantable
biologicals, and therapeutic radiopharmaceuticals to determine their
proposed packaging status in CY 2011, 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 2011 proposed rule per day costs, we used an
estimated

[[Page 71940]]

payment rate for each drug and nonimplantable biological HCPCS code of
ASP+6 percent (which was the payment rate we proposed for separately
payable drugs and nonimplantable biologicals in CY 2011, as discussed
in more detail in section V.B.3.b. of the proposed rule and this final
rule with comment period). We used the manufacturer submitted ASP data
from the fourth quarter of CY 2009 (data that were used for payment
purposes in the physician's office setting, effective April 1, 2010) to
determine the proposed rule per day cost.
As is our standard methodology, for CY 2011, we proposed to use
payment rates based on the ASP data from the fourth quarter of CY 2009
for budget neutrality estimates, packaging determinations, impact
analyses, and completion of Addenda A and B to the proposed rule,
because these were the most recent data available for use at the time
of development of the proposed rule. These data were also the basis for
drug payments in the physician's office setting, effective April 1,
2010. For items that did not have an ASP-based payment rate, such as
some therapeutic radiopharmaceuticals, we used their mean unit cost
derived from the CY 2009 hospital claims data to determine their per
day cost. We proposed to package items with a per day cost less than or
equal to $70 and identified items with a per day cost greater than $70
as separately payable. Consistent with our past practice, we
crosswalked historical OPPS claims data from the CY 2009 HCPCS codes
that were reported to the CY 2010 HCPCS codes that we displayed in
Addendum B to the proposed rule for payment in CY 2011.
Comment: The majority of commenters objected to the proposed
increase in the OPPS packaging threshold to $70 for CY 2011. A few
commenters recommended that CMS consider either eliminating the drug
packaging threshold and providing separate payment for all drugs with
HCPCS codes or freezing the packaging threshold at $65 for CY 2011. One
commenter, in particular, suggested that CMS freeze the packaging
threshold for at least one year. Some commenters objected to the use of
a packaging threshold under the OPPS when one is not used for
physician's office payment. These commenters expressed concern that the
packaging threshold may impede beneficiary access to lower-cost
packaged drugs in the HOPD setting. A few commenters suggested that CMS
limit increases in the packaging threshold amount to the market basket
update for the year. One commenter also recommended that CMS not round
up the threshold amount to the nearest $5 increment and instead defer
increases in the threshold until changes in prices exceed $5.
Some commenters believed that eliminating the packaging threshold
and paying separately for all drugs in the HOPD setting would allow a
more accurate calculation of the separately payable payment amount for
drugs (otherwise referred to as the ASP+X calculation).
Response: As discussed in detail in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66757 through 66758), the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68643), and the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60485 through 60487), we continue
to believe that unpackaging payment for all drugs, biologicals and
radiopharmaceuticals is inconsistent with the concept of a prospective
payment system and that such a change could create an additional
reporting burden for hospitals. The OPPS and the MPFS that applies to
physician's office services are fundamentally different payment systems
with essential differences in their payment policies and structures.
Specifically, the OPPS is a prospective payment system, based on the
concept of payment for groups of services that share clinical and
resource characteristics. Payment is made under the OPPS according to
prospectively established payment rates that are related to the
relative costs of hospital resources for services. The MPFS is a fee
schedule based on the relative value of each individual component of
services. Under the MPFS approach, separate payment is made for each
drug provided in the physician's office, but the OPPS packages payment
for certain drugs into the associated procedure payment for the APC
group. Given the fundamental difference between the MPFS payment
mechanism and the OPPS payment mechanism, differences in the degrees of
packaged payment and separate payment between these two systems are to
be expected.
In general, we do not believe that our packaging methodology under
the OPPS results in limited beneficiary access to drugs because
packaging is a fundamental component of a prospective payment system
that account for the cost of certain items and services in larger
payment bundles, recognizing that some clinical cases may be more
costly and others less costly, but that, on average, OPPS payment is
appropriate for the services provided. The growing utilization
associated with packaged drugs and biologicals in our claims data
suggest Medicare beneficiaries have sufficient access to these items.
We note that, in CYs 2005 and 2006, the statutorily mandated drug
packaging threshold was set at $50, and we continue to believe that it
is appropriate to continue a modest drug packaging threshold for the CY
2011 OPPS for the reasons set forth below. As stated in the CY 2007
OPPS/ASC final rule with comment period (71 FR 68086), we believe that
packaging certain items is a fundamental component of a prospective
payment system, that packaging these items does not lead to beneficiary
access issues and does not create a problematic site of service
differential, that the packaging threshold is reasonable based on the
initial establishment in law of a $50 threshold for the CY 2005 OPPS,
that updating the $50 threshold is consistent with industry and
government practices, and that the PPI for Prescription Drugs is an
appropriate mechanism to gauge Part B drug inflation. Therefore,
because of our continued belief that packaging is a fundamental
component of a prospective payment system that continues to provide
important flexibility and efficiency in the delivery of high quality
hospital outpatient services, we are not adopting the commenters'
recommendations to pay separately for all drugs, biologicals, and
radiopharmaceuticals for CY 2011 or to eliminate or to freeze the
packaging threshold at $65.
We disagree with the commenters who suggested that CMS should limit
increases in the outpatient drug packaging threshold amount to the
market basket update for the year. As stated above, we continue to
believe that updating the $50 threshold is consistent with industry and
government practices and that the PPI for Prescription Drugs is an
appropriate mechanism to gauge Part B drug inflation. As we stated in
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085), we
believe that the PPI for Prescription Drugs reflects price changes at
the wholesale or manufacturer stage. Because OPPS payment rates for
drugs and biologicals are generally based on the ASP data that are
reported by their manufacturers, we believe that the PPI for
Prescription Drugs is an appropriate price index to use to update the
packaging threshold for CY 2007 and beyond.
We note that the market basket update contains numerous price
proxies, including but not limited to proxies for wages and salaries,
utilities, and nonlabor-related expenses, that are not related to price
increases for prescription drugs. Therefore, we

[[Page 71941]]

believe that the market basket as a whole is not an appropriate
mechanism for determining the outpatient drug packaging threshold
amount. Within the calculation of the market basket update, we use the
PPI for Prescription Drugs specifically to measure the price growth for
prescription drugs but price changes for prescription drugs are only
one component of price changes for the numerous items and services
hospital purchase. Additionally, we disagree with the commenters'
suggestion that we not round up the packaging threshold to the nearest
$5 increment and, instead, defer any increases in the threshold until
changes in prices exceed $5. We note that we equally round up or round
down to the nearest $5 increment, and we continue to believe that
rounding to the nearest $5 increment is appropriate when determining
the drug packaging threshold.
Finally, we believe that our continued application of the
methodology initially adopted in CY 2007 to update the drug packaging
threshold does not inhibit our ability to pay accurately for drugs and
biologicals. We have made several refinements to the ASP+X drug payment
methodology under the OPPS for nonpass-through drugs and biologicals
over the past several years to improve its accuracy. During that time,
we have continued to implement our established methodology for annually
updating the drug packaging threshold. For CY 2010, we finalized an
overhead adjustment methodology for determining payment for separately
payable drugs without pass-through status while we have continued to
consistently apply the methodology described above to update the drug
packaging threshold.
For purposes of this final rule with comment period, we again
followed the CY 2007 methodology for CY 2011 and used updated four
quarter moving average PPI index levels to trend the $50 threshold
forward from the third quarter of CY 2005 to the third quarter of CY
2011 and again rounded the resulting dollar amount ($68.57) to the
nearest $5 increment, which yielded a figure of $70. In performing this
calculation, we used the most recent forecast of the quarterly PPI
index levels from CMS' OACT.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to continue
using the established methodology for annually updating the OPPS
packaging threshold for drugs and biologicals by the PPI for
Prescription Drugs. The final CY 2011 drug packaging threshold is $70,
calculated according to the threshold update methodology that we have
applied since CY 2007.
Our policy during previous cycles of the OPPS has been to use
updated ASP and claims data to make final determinations of the
packaging status of HCPCS codes for drugs, nonimplantable biologicals,
and therapeutic radiopharmaceuticals for the final rule with comment
period. We note that it is also our policy to make an annual packaging
determination for a HCPCS code only when we develop the OPPS/ASC final
rule for the update year. Only HCPCS codes that are identified as
separately payable in the final rule with comment period are subject to
quarterly updates. For our calculation of per day costs of HCPCS codes
for drugs and nonimplantable biologicals in this CY 2011 OPPS/ASC final
rule with comment period, as we proposed, we used ASP data from the
first quarter of CY 2010, which is the basis for calculating payment
rates for drugs and biologicals in the physician's office setting using
the ASP methodology, effective July 1, 2010, along with updated
hospital claims data from CY 2009. We note that we also used these data
for budget neutrality estimates and impact analyses for this CY 2011
OPPS/ASC final rule with comment period. Payment rates for HCPCS codes
for separately payable drugs and nonimplantable biologicals included in
Addenda A and B to this final rule with comment period are based on ASP
data from the second quarter of CY 2010, which are the basis for
calculating payment rates for drugs and biologicals in the physician's
office setting using the ASP methodology, effective October 1, 2010.
These rates would then be updated in the January 2011 OPPS update,
based on the most recent ASP data to be used for physician's office and
OPPS payment as of January 1, 2011. For items that do not currently
have an ASP-based payment rate, we recalculate their mean unit cost
from all of the CY 2009 claims data and updated cost report information
available for this CY 2011 final rule with comment period to determine
their final per day cost.
Consequently, the packaging status of some HCPCS codes for drugs,
nonimplantable biologicals, and therapeutic radiopharmaceuticals in
this CY 2011 OPPS/ASC final rule with comment period using the updated
data may be different from the same drug HCPCS code's packaging status
determined based on the data used for the proposed rule. Under such
circumstances, as we proposed, we are continuing to follow the
established policies initially adopted for the CY 2005 OPPS (69 FR
65780) in order to more equitably pay for those drugs whose median cost
fluctuates relative to the CY 2011 OPPS drug packaging threshold and
the drug's payment status (packaged or separately payable) in CY 2010.
Specifically, as we proposed, for CY 2011, we applied the following
policies to these HCPCS codes for drugs, nonimplantable biologicals,
and therapeutic radiopharmaceuticals whose relationship to the $70 drug
packaging threshold changes based on the final updated data:
HCPCS codes for drugs and nonimplantable biologicals that
were paid separately in CY 2010 and that were proposed for separate
payment in CY 2011, and then have per day costs equal to or less than
$70, based on the updated ASPs and hospital claims data used for this
CY 2011 final rule with comment period, will continue to receive
separate payment in CY 2011.
HCPCS codes for drugs and nonimplantable biologicals that
were packaged in CY 2010 and that were proposed for separate payment in
CY 2011, and then have per day costs equal to or less than $70, based
on the updated ASPs and hospital claims data used for this CY 2011
final rule with comment period, will remain packaged in CY 2011.
HCPCS codes for drugs and nonimplantable biologicals for
which we proposed packaged payment in CY 2011 but then have per day
costs greater than $70, based on the updated ASPs and hospital claims
data used for this CY 2011 final rule with comment period, will receive
separate payment in CY 2011.
We did not receive any public comments on our proposal to apply the
established policies initially adopted for the CY 2005 OPPS (69 FR
65780) in order to more equitably pay for those drugs whose median cost
fluctuates relative to the CY 2011 OPPS drug packaging threshold and
the drug`s payment status (packaged or separately payable) in CY 2010.
Therefore, we are finalizing our proposal, without modification, for CY
2011.
We note that HCPCS codes J0945 (injection, brompheniramine maleate,
per 10 mg), J2320 (injection, nandrolone decanoate, up to 50 mg), and
J2724 (Injection, protein c concentrate, intravenous, human, 10 iu)
were paid separately for CY 2010 and were proposed for separate payment
in CY 2011 and had final per day costs of less than the $70 drug
packaging threshold, based on updated ASPs and the CY 2009 hospital
claims data available for this CY 2011 final rule with comment period.
Therefore HCPCS codes J0945,

[[Page 71942]]

J2320, and J2724 will continue to be paid separately in CY 2011
according to the established methodology set forth above.
In addition, we proposed to provide separate payment for HCPCS code
J1835 (injection, itraconazole, 50 mg) in CY 2011, although its payment
was packaged in CY 2010. Using updated ASPs and the CY 2009 hospital
claims data available for this final rule with comment period, HCPCS
code J1835 now has a per day cost of less than $70. In accordance with
our established policy for such cases, for CY 2011 we will package
payment for HCPCS code J1835.
Finally, we proposed to package HCPCS codes J0348 (Injection,
anidulafungin, 1 mg), J2510 (injection, penicillin g procaine, aqueous,
up to 600,000 units), J2700 (injection, oxacillin sodium, up to 250
mga), and J2805 (Injection, sincalide, 5 micrograms) for CY 2011. Using
updated ASPs and the CY 2009 hospital claims data available for this
final rule with comment period, HCPCS codes J0348, J2510, J2700, and
J2805 now have per day costs greater than $70. In accordance with our
established policy for such cases, for CY 2011 we will pay for HCPCS
codes J0348, J2510, J2700, and J2805 separately.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60485
through 60489), we implemented a policy to treat oral and injectable
forms of 5-HT3 antiemetics comparable to all other threshold packaged
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals
under our standard packaging methodology of packaging drugs with a per
day cost less than $70. In the CY 2011 OPPS/ASC proposed rule (75 FR
46266), we proposed for CY 2011 to continue our policy of not exempting
these 5-HT3 antiemetic products from our standard packaging methodology
and to package payment for all of the 5-HT3 antiemetics except
palonosetron hydrochloride, consistent with their estimated per day
costs from the CY 2009 claims data.
Comment: The majority of commenters opposed the proposal to
continue the CY 2010 policy of no longer exempting the oral and
injectable forms of 5-HT3 antiemetics from the packaging threshold,
thereby packaging all but one 5-HT3 antiemetic. Many commenters
requested that CMS exempt all 5-HT3 antiemetics from the packaging
methodology in order to preserve access to these products.
Response: We continue to believe that use of these antiemetics is
an integral part of an anticancer treatment regimen and that OPPS
claims data demonstrate their increasingly common hospital outpatient
utilization. As we stated in the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60488), we no longer believe that a specific
exemption to our standard drug payment methodology is necessary to
ensure access to the most appropriate antiemetic products for Medicare
beneficiaries. We continue to believe that our analysis conducted in
the CY 2010 OPPS/ASC proposed rule on 5-HT3 antiemetics (74 FR 35320),
along with the historical stability in prescribing patterns for these
products and the availability of generic alternatives for several of
these products, allows us to continue our policy of specifically not
exempting these products from the OPPS drug packaging threshold.
Therefore, we are finalizing our proposal of not exempting 5-HT3
antiemetic products from our standard packaging methodology and to
packaged payment for all of the 5-HT3 antiemetics consistent with their
per day costs from the CY 2009 claims data. Under this methodology,
palonosetron hydrochloride will receive separate payment for CY 2011.
We expect that packaging will encourage hospitals to use the most cost-
efficient 5-HT3 antiemetic that is clinically appropriate. We also
anticipate that hospitals will continue to provide care that is aligned
witht the best interests of the patient. We do not believe that our CY
2011 policy to apply the drug packaging threshold to 5-HT3 antiemetics
will limit beneficiaries' ability to receive clinically appropriate
drugs and biologicals.
Comment: One commenter suggested that CMS institute a packaging
threshold exemption for antineoplastic agents and other anticancer
therapeutic agents. The commenter believed that anticancer agents, as a
class, are not appropriate for packaging because of the toxicity, side
effects, potential interactions with other drugs, and level of patient
specificity associated with these therapies. The commenter requested
that CMS not apply the drug packaging threshold for anticancer agents
and any product that is typically used in chemotherapy supportive care
regimens. Instead the commenter requested that CMS provide separate
payment for all these products in CY 2011.
Response: As we discussed in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66757), the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68643), and the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60488), as we continue to explore the possibility
of additional encounter-based or episode based payment in future years,
we may consider additional options for packaging drug payment in the
future. For example, a higher drug packaging threshold could eliminate
existing disparities in payment methodologies for other drug groups and
provide similar methods of payment across items in a group.
Nevertheless, as discussed in the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68643), while we may be interested in alternative
threshold methodologies for future ratesetting purposes, we realize
that there are existing situations where drugs in a particular category
vary in their payment treatment under the OPPS with some drugs packaged
and other separately paid.
We continue to believe the challenges associated with categorizing
drugs to assess them for differences in their OPPS payment
methodologies are significant, and we do not agree that ensuring the
same payment treatment for all drugs in any particular drug category is
essential at this time. Therefore, it would not be appropriate at this
time to take any additional steps to ensure that all drugs in a
specific category, including antineoplastic agents, are all separately
paid (or alternatively, all packaged), as requested by the commenter.
While some commenters requested that we seek feedback from
interested stakeholders when the packaging threshold creates a payment
methodology disparity between drugs within a single therapeutic class,
we note that we provide an opportunity through the annual OPPS/ASC
rulemaking cycle for public comment on the proposed packaging status of
drugs and biologicals for the next calendar year. Further, we regularly
accept meeting requests from interested providers and stakeholders on a
variety of issues, and we address the APC Panel's recommendations in
our annual proposed and final rules. We have often received public
comments related to our proposed packaging status for particular drugs
and biologicals, and we expect to continue to receive public comments
regarding the proposed packaging status for drugs and biologicals in
the future. In this manner, we would address specific concerns about
the proposed packaging status for individual drugs and biologicals in
the future, including those within a single therapeutic class where
some drugs may be proposed to be packaged while others are proposed to
be separately payable.
In summary, after consideration of the public comments we received,
for CY

[[Page 71943]]

2011, we are finalizing our proposal to continue our policy of not
exempting 5-HT3 antiemetics from the drug packaging threshold. We will
pay separately for palonosetron hydrochloride for CY 2011 because its
per day cost is greater than the $70 packaging threshold. In addition,
we are not providing any exceptions to the standard drug packaging
methodology for any class of drugs, including anticancer therapies, for
CY 2011.
c. Packaging Determination for HCPCS Codes That Describe the Same Drug
or Biological But Different Dosages
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS
codes reporting different dosages for the same covered Part B drugs or
biologicals in order to reduce hospitals' administrative burden by
permitting them to report all HCPCS codes for drugs and biologicals. In
general, prior to CY 2008, the OPPS recognized for payment only the
HCPCS code that described the lowest dosage of a drug or biological. We
extended this recognition to multiple HCPCS codes for several other
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009,
we applied a policy that assigned the status indicator of the
previously recognized HCPCS code to the associated newly recognized
code(s), reflecting the new code(s)' packaged or separately payable
status. In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66775), we explained that once claims data were available for these
previously unrecognized HCPCS codes, we would determine the packaging
status and resulting status indicator for each HCPCS code according to
the general, established HCPCS code-specific methodology for
determining a code's packaging status for a given update year. However,
we also stated that we planned to closely follow our claims data to
ensure that our annual packaging determinations for the different HCPCS
codes describing the same drug or biological did not create
inappropriate payment incentives for hospitals to report certain HCPCS
codes instead of others.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490
through 60491), we finalized a policy to make a single packaging
determination for a drug, rather than an individual HCPCS code, when a
drug has multiple HCPCS codes describing different dosages. We analyzed
CY 2008 claims data for the HCPCS codes describing different dosages of
the same drug or biological that were newly recognized in CY 2008 and
found that our claims data would result in several different packaging
determinations for different codes describing the same drug or
biological. Furthermore, we found that our claims data would include
few units and days for a number of newly recognized HCPCS codes,
resulting in our concern that these data reflected claims from only a
small number of hospitals, even though the drug or biological itself
may be reported by many other hospitals under the most common HCPCS
code. Based on these findings from our first available claims data for
the newly recognized HCPCS codes, we believed that adopting our
standard HCPCS code-specific packaging determinations for these codes
could lead to payment incentives for hospitals to report certain HCPCS
codes instead of others, particularly because we do not currently
require hospitals to report all drug and biological HCPCS codes under
the OPPS in consideration of our previous policy that generally
recognized only the lowest dosage HCPCS code for a drug or biological
for OPPS payment. For CY 2011, we continue to believe that adopting the
standard HCPCS code-specific packaging determinations for these codes
could lead to payment incentives for hospitals to report certain HCPCS
codes for drugs instead of others. Making packaging determinations on a
drug-specific basis eliminates these incentives and allows hospitals
flexibility in choosing to report all HCPCS codes for different dosages
of the same drug or only the lowest dosage HCPCS code. Therefore, in
the CY 2011 OPPS/ASC proposed rule (75 FR46267), we proposed to
continue our policy to make packaging determinations on a drug-specific
basis, rather than a HCPCS code-specific basis, for those HCPCS codes
that describe the same drug or biological but different dosages in CY
2011.
For CY 2011, in order to propose a packaging determination that is
consistent across all HCPCS codes that describe different dosages of
the same drug or biological, we aggregated both our CY 2009 claims data
and our pricing information at ASP+6 percent across all of the HCPCS
codes that describe each distinct drug or biological in order to
determine the mean units per day of the drug or biological in terms of
the HCPCS code with the lowest dosage descriptor. In the CY 2011 OPPS/
ASC proposed rule (75 FR 46267), we noted that HCPCS codes J9093
(cyclophosphamide, lyophilized, 100 mg), J9094 (cyclophosphamide,
lyophilized, 200 mg), J9095 (cyclophosphamide, lyophilized, 500 mg),
J9096 (cyclophosphamide, lyophilized, 1g), and J9097 (cyclophosphamide,
lyophilized, 2g) did not have pricing information available for the ASP
methodology and, as is our current policy for determining the packaging
status of other drugs, we used the mean unit cost available from fourth
quarter CY 2009 claims data to make the packaging determinations for
these drugs. For all other drugs and biologicals that have HCPCS codes
describing different dosages, we then multiplied the weighted average
ASP+6 percent or mean unit cost payment amount across all dosage levels
of a specific drug or biological by the estimated units per day for all
HCPCS codes that describe each drug or biological from our claims data
to determine the estimated per day cost of each drug or biological at
less than or equal to $70 (whereupon all HCPCS codes for the same drug
or biological would be packaged) or greater than $70 (whereupon all
HCPCS codes for the same drug or biological would be separately
payable). The proposed packaging status of each drug and biological
HCPCS code, to which this methodology would apply was displayed in
Table 24 of the proposed rule.
We did not receive any public comments on our proposal to make
packaging determinations on a drug-specific basis for CY 2011.
Therefore, we are finalizing our CY 2011 proposal, without
modification, to make a single packaging determination for a drug,
rather than an individual HCPCS code, when a drug has multiple HPCS
codes describing different dosages. For this CY 2011 final rule with
comment period, we are finalizing our proposal to use the mean unit
cost available from CY 2009 claims data to make the packaging
determination for HCPCS codes J9097. We discuss the final status
indicator for HCPCS code J9097 and the discontinuation of HCPCS codes
J9093, J9094, J9095 and J9096 for CY 2011 below.
For CY 2011, we have aggregated both our CY 2009 claims data and
our pricing information at ASP+5 percent across all of the HCPCS codes
that describe each distinct drug or biological in order to determine
the mean units per day of the drug or biological in terms of the HCPCS
code with the lowest dosage descriptor. We then multiplied the weighted
average ASP+5 percent or mean unit cost payment amount across all
dosage levels of a specific drug or biological by the estimated units
per day for all HCPCS codes that describe each drug or biological from
our claims data to

[[Page 71944]]

determine the estimated per day cost of each drug or biological at less
than or equal to $70 (whereupon all HCPCS codes for the same drug or
biological would be packaged) or greater than $70 (whereupon all HCPCS
codes for the same drug or biological would be separately payable). The
final CY 2011 packaging status of each drug and biological HCPCS code
to which this methodology applies is displayed in Table 31 below.
We note that several HCPCS codes that were previously proposed in
the CY 2011 OPPS/ASC proposed rule (75 FR 46266 through 46270) to be
treated as drugs with multiple HCPCS codes with multiple dosage
descriptors and, therefore, calculated using the methodology described
above, are being deleted for CY 2011. Billing for these drugs will
continue under a new or already existing code as described below, for
CY 2011: HCPCS codes J0970 (Injection, estradiol valerate, up to 40 mg)
and J1390 (Injection, estradiol valerate, up to 20 mg) have been
deleted for CY 2011 and billing for these drugs will continue under
currently existing HCPCS code J1380 (Injection, estradiol valerate, up
to 10 mg). In order to make a packaging determination for HCPCS code
J1380, we used updated hospital claims data from HCPCS codes J0970,
J1390, and J1380 and ASP pricing information to determine the estimated
per day cost for the drug described above. Because the estimated per
day cost was less than our CY 2011 packaging threshold of $70, we
assigned status indicator ``N'' to HCPCS code J1380 for CY 2011.
HCPCS codes J1470 (Injection, gamma globulin, intramuscular 2 cc),
J1480 (Injection, gamma globulin, intramuscular 3 cc), J1490
(Injection, gamma globulin, intramuscular 4 cc), J1500 (Injection,
gamma globulin, intramuscular 5 cc), J1510 (Injection, gamma globulin,
intramuscular 6 cc), J1520 (Injection, gamma globulin, intramuscular 7
cc), J1530 (Injection, gamma globulin, intramuscular 8 cc), J1540
(Injection, gamma globulin, intramuscular 9 cc), and J1550 (Injection,
gamma globulin, intramuscular 10 cc) have been deleted for CY 2011 and
billing for these drugs will continue under two currently existing
HCPCS codes, J1460 (Injection, gamma globulin, intramuscular, 1 cc) and
J1560 (Injection, gamma globulin, intramuscular over 10 cc). In order
to make a packaging determination for HCPCS code J1460 and J1560, we
used updated hospital claims data from HCPCS codes J1460, J1470, J1480,
J1490, J1500, J1510, J1520, J1530, J1540, J1550 and J1560 and ASP
pricing information to determine the estimated per day cost for the
drugs described above. Because the estimated per day cost was more than
our CY 2011 packaging threshold of $70, we assigned status indicator
``K'' to HCPCS codes J1460 and J1560 for CY 2011.
HCPCS codes J2321 (Injection, nandrolone decanoate, up to 100 mg)
and J2322 (Injection, nandrolone decanoate, up to 200 mg) have been
deleted for CY 2011 and billing for these drugs will continue under
already existing HCPCS code J2320 (Injection, nandrolone decanoate, up
to 50 mg). In order to make a packaging determination for HCPCS code
J2320, we used updated hospital claims data from HCPCS codes J2320,
J2321, and J2322 and ASP pricing information to determine the estimated
per day cost for the drug described above. Although the estimated per
day cost was less than our CY 2011 packaging threshold of $70, we are
assigning status indicator ``K'' to HCPCS code J2320 for CY 2011, based
upon the policy that was finalized in section V.B.2.b. of this final
rule with comment period for HCPCS codes for drugs and nonimplantable
biologicals for which we paid separately in CY 2010 and that were
proposed for separate payment in CY 2011 and then have per day costs
equal to or less than $70, based on the updated ASPs and hospital
claims data used for this CY 2011 OPPS/ASC final rule with comment
period. We describe the assignment of J2320 to status indicator ``K''
above.
HCPCS code J9062 (Cisplatin, 50 mg) has been deleted for CY 2011
and billing for this drug will continue under existing HCPCS code J0960
(Cisplatin, powder or solution, per 10 mg). In order to make a
packaging determination for HCPCS code J9060, we used updated hospital
claims data from HCPCS codes J0960 and J9062 and ASP pricing
information to determine the estimated per day cost for the drug
described above. Because the estimated per day cost was less than our
CY 2011 packaging threshold of $70 and because these codes were
assigned status indicator ``N'' for the CY 2011 proposed rule, we
assigned status indicator ``N'' to HCPCS code J0960 for CY 2011.
HCPCS codes J9080 (Cyclophosphamide, 200 mg), J9090
(Cyclophosphamide, 500 mg), J9091 (Cyclophosphamide, 1.0 gram), J9092
(Cyclophosphamide, 2.0 gram), J9093 (Cyclophosphamide, lyophilized, 100
mg), J9094 (Cyclophosphamide, lyophilized, 200 mg), J9095
(Cyclophosphamide, lyophilized, 500 mg), J9096 (Cyclophosphamide,
lyophilized, 1.0 gram), and J9097 (Cyclophosphamide, lyophilized, 2.0
gram) have been deleted for CY 2011 and billing for these drugs will
continue under existing HCPCS code J9070 (Cyclophosphamide, 100 mg). In
order to make a packaging determination for HCPCS code J9070, we used
updated hospital claims data from HCPCS codes J9070, J9080, J9090,
J9091, J9092, J9093, J9094, J9095, J9096, and J9097 and ASP pricing
information to determine the estimated per day cost for the drug
described above. Because the estimated per day cost was less than our
CY 2011 packaging threshold of $70 and because these codes were
assigned status indicator ``N'' for the CY 2011 proposed rule, we
assigned status indicator ``N'' to HCPCS code J9070 for CY 2011 in this
final rule with comment period.
HCPCS code J9110 (Injection, cytarabine, 500 mg) has been deleted
for CY 2011 and billing for this drug will continue under existing
HCPCS code J9100 (Injection, cytarabine, 100 mg). In order to make a
packaging determination for HCPCS code J9100, we used updated hospital
claims data from HCPCS codes J9100 and J9110 and ASP pricing
information to determine the estimated per day cost for the drug
described above. Because the estimated per day cost was less than our
CY 2011 packaging threshold of $70 and because these codes were
assigned status indicator ``N'' for the CY 2011 proposed rule, we
assigned status indicator ``N'' to HCPCS code J9100 for CY 2011 in this
final rule with comment period.
HCPCS code J9140 (Dacarbazine, 100 mg) has been deleted for CY 2011
and billing for this drug will continue under HCPCS code J9130
(Injection, dacarbazine, 200 mg). In order to make a packaging
determination for HCPCS code J9130, we used updated hospital claims
data from HCPCS codes J9130 and J9140 and ASP pricing information to
determine the estimated per day cost for the drug described above.
Because the estimated per day cost was less than our CY 2011 packaging
threshold of $70 and because these codes were assigned status indicator
``N'' for the CY 2011 proposed rule, we assigned status indicator ``N''
to HCPCS code J9130 for CY 2011 in this final rule with comment period.
HCPCS codes J9290 (Mitomycin, 20 mg) and J9291 (Mitomycin, 40 mg)
have been deleted for CY 2011 and billing for these drugs will continue
under existing HCPCS code J9280 (Mitomycin, 5 mg). In order to make a
packaging determination for HCPCS code J9280, we used updated hospital
claims data from HCPCS codes J9280, J9290, and J9291 and ASP pricing
information to determine the estimated per day cost for

[[Page 71945]]

the drug described above. Because the estimated per day cost was more
than our CY 2011 packaging threshold of $70, we assigned status
indicator ``K'' to HCPCS code J9280 for CY 2011.
HCPCS codes J9375 (Vincristine sulfate, 2 mg) and J9380
(Viscristine sulfate, 5 mg) have been deleted for CY 2011 and billing
for these drugs will continue under existing HCPCS code J9370
(Vincristine sulfate, 1 mg). In order to make a packaging determination
for HCPCS code J9370, we used updated hospital claims data from HCPCS
codes J9370, J9375, and J9380 and ASP pricing information to determine
the estimated per day cost for the drug described above. Because the
estimated per day cost was less than our CY 2011 packaging threshold of
$70 and because these codes were assigned status indicator ``N'' for
the CY 2011 proposed rule, we assigned status indicator ``N'' to HCPCS
code J9370 for CY 2011 in this final rule with comment period.
We note that, in the CY 2011 OPPS/ASC proposed rule, HCPCS codes
J0560 (Injection, penicillin g benzathine, up to 600,000 units), J0570
(Injection, penicillin g benzathine, 1,200,000 units), and J0580
(Injection, penicillin g benzathine, up to 2,400,000 units) were
erroneously omitted from Table 24 of the proposed rule. As we did for
CY 2010 and several years before that, we continued to treat these as
drugs with multiple HCPCS codes with multiple dosage descriptors;
therefore, we calculated using the methodology described above for our
calculations for the CY 2011 proposed rule. The payment rates for these
HCPCS codes were given in Addendum B to the CY 2011 OPPS/ASC proposed
rule. For this CY 2011 OPPS/ASC final rule with comment period, HCPCS
codes J0560, J0570, and J0580 are being deleted and billing for these
drugs will continue under new HCPCS code J0561 (Injection, penicillin g
benzathine, 100,00 units). In order to make a packaging determination
for HCPCS code J0561, we used updated hospital claims data from HCPCS
codes J0560, J0570, and J0580 and ASP pricing information to determine
the estimated per day cost for the drug described above. Because the
estimated per day cost was less than our CY 2011 packaging threshold of
$70 and because these codes were assigned status indicator ``N'' for
the CY 2011 proposed rule, we assigned status indicator ``N'' to HCPCS
code J0561 for CY 2011 in this final rule with comment period.
Table 31 below displays the packaging status of each drug and
biological HCPCS code determined under the finalized package
determination methodology. We note that HCPCS codes J0560, J0570,
J0580, J0970, J1390, J1470, J1480, J1490, J1500, J1510, J1520, J1530,
J1540, J1550, J2321, J2322, J9062, J9080, J9090, J9091, J9092, J9093,
J9094, J9095, J9096, J9097, J9110, J9140, J9290, J9291, J9375, and
J9380 are not displayed in Table 31 below because they are deleted for
CY 2011.

Table 31--HCPCS Codes to Which the CY 2011 Drug-Specific Packaging
Determination Methodology Applies
------------------------------------------------------------------------
CY 2011 HCPCS Code CY 2011 Long descriptor CY 2011 SI
------------------------------------------------------------------------
C9257 Injection, bevacizumab, K
0.25 mg.
J9035 Injection, bevacizumab, 10 K
mg.
J1380 Injection, estradiol N
valerate, up to 10 mg.
J1020 Injection, N
methylprednisolone
acetate, 20 mg.
J1030 Injection, N
methylprednisolone
acetate, 40 mg.
J1040 Injection, N
methylprednisolone
acetate, 80 mg.
J1070 Injection, testosterone N
cypionate, up to 100 mg.
J1080 Injection, testosterone N
cypionate, 1 cc, 200 mg.
J1440 Injection, filgrastim (g- K
csf), 300 mcg.
J1441 Injection, filgrastim (g- K
csf), 480 mcg.
J1460 Injection, gamma globulin, K
intramuscular, 1 cc.
J1560 Injection, gamma globulin, K
intramuscular over 10 cc.
J1642 Injection, heparin sodium, N
(heparin lock flush), per
10 units.
J1644 Injection, heparin sodium, N
per 1000 units.
J1850 Injection, kanamycin N
sulfate, up to 75 mg.
J1840 Injection, kanamycin N
sulfate, up to 500 mg.
J2270 Injection, morphine N
sulfate, up to 10 mg.
J2271 Injection, morphine N
sulfate, 100mg.
J2320 Injection, nandrolone K
decanoate, up to 50 mg.
J2788 Injection, rho d immune K
globulin, human, minidose,
50 micrograms (250 i.u.).
J2790 Injection, rho d immune K
globulin, human, full
dose, 300 micrograms (1500
i.u.).
J2920 Injection, N
methylprednisolone sodium
succinate, up to 40 mg.
J2930 Injection, N
methylprednisolone sodium
succinate, up to 125 mg.
J3120 Injection, testosterone N
enanthate, up to 100 mg.
J3130 Injection, testosterone N
enanthate, up to 200 mg.
J3471 Injection, hyaluronidase, N
ovine, preservative free,
per 1 usp unit (up to 999
usp units).
J3472 Injection, hyaluronidase, N
ovine, preservative free,
per 1000 usp units.
J7050 Infusion, normal saline N
solution , 250 cc.
J7040 Infusion, normal saline N
solution, sterile (500
ml=1 unit).
J7030 Infusion, normal saline N
solution , 1000 cc.
J7515 Cyclosporine, oral, 25 mg.. N
J7502 Cyclosporine, oral, 100 mg. N
J8520 Capecitabine, oral, 150 mg. K
J8521 Capecitabine, oral, 500 mg. K
J9060 Cisplatin, powder or N
solution, per 10 mg.
J9070 Cyclophosphamide, 100 mg... N
J9100 Injection, cytarabine, 100 N
mg.
J9130 Injection, dacarbazine, 100 N
mg.

[[Page 71946]]

J9250 Methotrexate sodium, 5 mg.. N
J9260 Methotrexate sodium, 50 mg. N
J9280 Mitomycin, 5 mg............ K
J9370 Vincristine sulfate, 1 mg.. N
Q0164 Prochlorperazine maleate, 5 N
mg, oral, FDA approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an IV anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48-hour doseage regimen.
Q0165 Prochlorperazine maleate, N
10 mg, oral, FDA approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an IV anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48-hour doseage regimen.
Q0167 Dronabinol, 2.5 mg, oral, N
FDA approved prescription
anti-emetic, for use as a
complete therapeutic
substitute for an IV
anit0emetic at the time of
chemotherapy treatment,
not to exceed a 48-hour
dosage regimen.
Q0168 Dronabinol, 5 mg, oral, FDA N
approved prescription anti-
emetic, for use as a
complete therapeutic
substitute for an IV
anit0emetic at the time of
chemotherapy treatment,
not to exceed a 48-hour
dosage regimen.
Q0169 Promethazine hydrochloride, N
12.5 mg, oral, FDA
approved prescription anti-
emetic, for use as a
complete therapeutic
substitute for an IV
antiemetic at the time of
chemotherapy treatment,
not to exceed a 48-hour
dosage regimen.
Q0170 Promethazine hydrochloride, N
25 mg, oral, FDA approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an IV antiemetic at the
time of chemotherapy
treatment, not to exceed a
48-hour dosage regimen.
Q0171 Chlorpromazine N
hydrochloride, 10 mg,
oral, FDA approved
prescription antiemetic,
for use as a complete
therapeutic substitute for
an IV antiemetic at the
time of chemotherapy
treatment, not to exceed a
48-hour dosage regimen.
Q0172 Chlorpromazine N
hydrochloride, 25 mg,
oral, FDA approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an IV anti-emetic at the
time of chemotheapy
treatment, not to exceed a
48-hour dosage regimen.
Q0175 Perphenazine, 4 mg, oral, N
FDA approved prescription
anti-emetic, for use as a
complete therapeutic
substitute for an IV anti-
emetic at the time of
chemotherapy treatment,
not to exceed a 48-hour
dosage regimen.
Q0176 Perphenazine, 8 mg, oral, N
FDA approved prescription
anti-emetic, for use as a
complete therapeutic
substitute for an IV anti-
emetic at the time of
chemotherapy treatment,
not to exceed a 48-hour
dosage regimen.
Q0177 Hydroxyzine pamoate, 25 mg, N
oral, FDA approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an IV anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48-hour dosage regimen.
Q0178 Hydroxyzine pamoate, 50 mg, N
oral, FDA approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an IV anti-emetic at the
time of chemotherapy
treatment, not to exeed a
48-hour dosage regimen.
------------------------------------------------------------------------

d. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast
Agents, and Implantable Biologicals (``Policy-Packaged'' Drugs and
Devices)
Prior to CY 2008, the methodology of calculating a product's
estimated per day cost and comparing it to the annual OPPS drug
packaging threshold was used to determine the packaging status of
drugs, biologicals, and radiopharmaceuticals under the OPPS (except for
our CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as
established in the CY 2008 OPPS/ASC final rule with comment period (72
FR 66766 through 66768), we began packaging payment for all diagnostic
radiopharmaceuticals and contrast agents into the payment for the
associated procedure, regardless of their per day costs. In addition,
in CY 2009 we adopted a policy that packaged the payment for nonpass-
through implantable biologicals into payment for the associated
surgical procedure on the claim (73 FR 68633 through 68636). We refer
to diagnostic radiopharmaceuticals and contrast agents collectively as
``policy-packaged'' drugs and to implantable biologicals as devices
because, in CY 2010, we began to treat implantable biologicals as
devices for all OPPS payment purposes.
According to our regulations at Sec. 419.2(b), as a prospective
payment system, the OPPS establishes a national payment rate that
includes operating and capital-related costs that are directly related
and integral to performing a procedure or furnishing a service on an
outpatient basis including, but not limited to, implantable
prosthetics, implantable durable medical equipment, and medical and
surgical supplies. 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 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.
Prior to CY 2008, we noted that the proportion of drugs,
biologicals, and radiopharmaceuticals that were separately paid under
the OPPS had increased in recent years, a pattern that we also observed
for procedural services under the OPPS. Our final CY 2008 policy that
packaged payment for all nonpass-through diagnostic
radiopharmaceuticals and contrast agents, regardless of their per day
costs, contributed significantly to expanding the size of the OPPS
payment bundles and is consistent with the principles of a prospective
payment system.
We believe that packaging the payment for diagnostic
radiopharmaceuticals and contrast agents into the payment for their
associated procedures continues to be appropriate for CY 2011. As
discussed in more detail in the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68645 through 68649), we presented several
reasons supporting our initial policy to package payment of diagnostic
radiopharmaceuticals and contrast agents into their associated
procedures on a claim. Specifically, we stated that we believed
packaging was appropriate because: (1) The statutorily required OPPS
drug packaging threshold has expired; (2) we believe that diagnostic
radiopharmaceuticals and contrast agents function effectively as
supplies that enable the provision of an independent service; and (3)
section 1833(t)(14)(A)(iii) of the Act requires that payment for
specified covered outpatient drugs (SCODs) be set prospectively based
on a measure of average hospital acquisition cost. As we stated in the
CY 2011 OPPS/ASC proposed rule, for these reasons, we

[[Page 71947]]

believe it is appropriate to continue to treat diagnostic
radiopharmaceuticals and contrast agents differently from other SCODs
for CY 2011. Therefore, in the CY 2011 OPPS/ASC proposed rule (75 FR
46271), we proposed to continue packaging payment for all contrast
agents and diagnostic radiopharmaceuticals, collectively referred to as
``policy-packaged'' drugs, regardless of their per day costs, for CY
2011. We also proposed to continue to package the payment for
diagnostic radiopharmaceuticals into the payment for the associated
nuclear medicine procedure and to package the payment for contrast
agents into the payment of the associated echocardiography imaging
procedure, regardless of whether the contrast agent met the OPPS drug
packaging threshold. We refer readers to the CY 2010 OPPS/ASC final
rule with comment period for a detailed discussion of nuclear medicine
and echocardiography services (74 FR 35269 through 35277).
Comment: Several commenters expressed concerns about the
fluctuation in data for echocardiography APCs used with contrast codes,
particularly the reductions in median cost from CY 2010. The commenters
believed this fluctuation in the data is due to the lack of familiarity
among hospital coders on contrast codes and C-codes used for contrast
enhanced echocardiography. They pointed out that CY 2009 is only the
second year of claims data for the new echocardiography CPT codes and
associated C-codes. The commenters also cited a smaller number of
``days'' for contrast agents used with echocardiography, HCPCS codes
Q9956 (Injection, octafluoropropane microspheres, per ml) and Q9957
(Injection, perflutren lipid microspheres, per ml), in the published
``brachy-blood-drug'' median cost file that CMS published with the
proposed rule than total frequency of services for contrast enhanced
echocardiography. In addition, the commenters stated that the average
cost of HCPCS codes Q9957 and Q9956 for any given contrast enhanced
echocardiography is approximately $120, and that the observed
difference in median cost between APC 0128 (Echocardiogram with
Contrast) and APC 0269 (Level II Echocardiogram without Contrast) is
approximately $100, suggesting that the difference in cost for with and
without contrast is not sufficient to cover the cost of the contrast
agent. Therefore, these commenters concluded that the reduction in the
median cost for APC 0128 in the CY 2011 proposed rule is due to the
fact that the median cost for these codes do not contain the cost of
contrast agents. A few commenters suggested that CMS institute a claims
edit that would require a code for contrast on claims that contain a
procedure code specified as ``with'' contrast. Another commenter
suggested that CMS limit fluctuations that occur from year to year on
APC payment rates to no more than 10 percent for any unexplained and
substantial changes in cost data.
Response: We find no evidence that would suggest that the
fluctuations in cost data for echocardiography APCs are due to
incorrect hospital billing practices. Because some of the
echocardiography codes were new for CY 2009, we believe the observed
reduction in median cost for CY 2011 is due to the difference between
CMS' best estimate of a median cost for these echocardiography codes
based on simulated CY 2008 claims data for CY 2010 payment, and median
cost based on actual hospital billing for these echocardiography codes
in CY 2009 for CY 2011 payment. Specifically, while most
echocardiography codes and associated C-codes for contrast enhanced
echocardiography were implemented in CY 2008, the CPT code 93306
(Initial nursing facility care, per day, for the evaluation and
management of a patient, which requires these 3 key components) was not
implemented until CY 2009 and incorporated services previously
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). As we discussed
in our CY 2010 OPPS/ASC final rule with comment period (74 FR 60374),
we simulated a median cost for both CPT code 93306 and associated HCPCS
code C8929, which describe services billed with CPT code 93306 but
enhanced with contrast. For CY 2009 (73 FR 68542) and CY 2010 (74 FR
60374), we simulated a median cost for CPT code 93306 and HCPCS code
C8929 based on the long descriptor for the new code, indentifying
claims with CPT codes 93307, 93220, and 93225 as representing the costs
of CPT code 93306. We simulated the CY 2010 medians for 93306 and C8929
to provide the most accurate payment possible based on available cost
information in the CY 2008 claims without having actual charge data for
93306 and C8929 from hospitals.
CPT code 93306 and HCPCS code C8929 are the highest volume
echocardiography codes, and their median costs largely drive the median
cost of their respective APCs for CY 2011: APC 0269 (Level II
Echocardiogram without Contrast) and APC 0128 (Echocardiogram with
Contrast). Therefore, changes in the median cost of 93306 and C8929
will significantly impact the median cost for those APCs. Because CY
2011 OPPS ratesetting is based on CY 2009 claims data, as discussed in
section II.A. of this final rule with comment period, the CY 2011
median cost data for CPT code 93306 and HCPCS code C8929 represent the
first year of actual claims data for these services. For this reason,
we believe that our CY 2011 estimated cost for CPT code 93306 and HCPCS
code C8929 based on CY 2009 claim charges and the most recent cost
report data available is more accurate than CY 2010 and CY 2009
simulated median costs. We note that almost all of the median cost
estimates for all of the other contrast enhanced echocardiography
services in APC 0128, which did not rely on a simulated median cost in
CY 2010, increase between CY 2010 and CY 2011.
Commenters suggested that the discrepancy between observed
frequency of days for the two HCPCS for contrast agents used with
echocardiography, HCPCS codes Q9956 and Q9957, indicates that the
median costs for APC 0128 do not reflect the cost of contrast. We do
not observe a sizable discrepancy between observed frequency of days,
instead, we observe fairly comparable numbers of procedures for
contrast enhanced echocardiography and the number of days associated
with these contrast agents. Specifically, we observe approximately
53,000 procedures for contrast enhanced echocardiography and
approximately 48,000 days of administration for HCPCS codes Q9956 and
Q9957 in our final rule claims data. Finally, we believe that an
observed differential in payment of approximately $100 between the APC
median cost for APC 0128 of approximately $494 and APC 0269 of
approximately $398 in the final rule with comment period both
demonstrates that hospitals are including the cost of contrast in their
charges for HCPCS code C8929 and that this amount is sufficient to
capture the cost of contrast in a prospective payment system that
includes packaging and averaging. In summary, we have no reason to
believe that these first years of actual costs for

[[Page 71948]]

CPT code 93306 and HCPCS code C8929 are inaccurate. For this reason, we
do not believe there is any need to edit for contrast agents, nor do we
believe that we should moderate these observed reductions in median
cost, because, we believe, this year's cost estimate is more accurate
than the simulated median costs used in previous years.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68634), we began packaging the payment for all nonpass-through
implantable biologicals into payment for the associated surgical
procedure. Because implantable biologicals may sometimes substitute for
nonbiological devices, we noted that if we were to provide separate
payment for implantable biologicals without pass-through status, we
would potentially be providing duplicate device payment, both through
the packaged nonbiological device cost already included in the surgical
procedure's payment and the separate biological payment. We concluded
that we saw no basis for treating implantable biological and
nonbiological devices without pass-through status differently for OPPS
payment purposes, because both are integral to and supportive of the
separately paid surgical procedures in which either may be used.
Therefore, in CY 2009, we adopted a final policy to package payment for
all nonpass-through implantable biologicals that are surgically
inserted or implanted (through a surgical incision or a natural
orifice), similar to our longstanding policy that packages payment for
all implantable nonbiological devices without pass-through status. We
finalized a policy in CY 2010 to package payment for nonpass-through
implantable biologicals that are surgically inserted or implanted
(through a surgical incision or a natural orifice) into the body, known
as devices. In the CY 2011 OPPS/ASC proposed rule (75 FR 46271), for CY
2011, we proposed to continue to package payment for nonpass-through
implantable biologicals that are surgically inserted or implanted
(through a surgical incision or a natural orifice) into the body,
referred to as devices. In accordance with this proposal, two of the
products with expiring pass-through status for CY 2011 are biologicals
that are solely surgically implanted according to their FDA-approved
indications. These products are described by HCPCS codes C9356 (Tendon,
porous matrix of cross-linked collagen and glycosaminoglycan matrix
(TenoGlide Tendon Protector Sheet), per square centimeter) and C9359
(Porous purified collagen matrix bone void filler (Integra Mozaik
Osteoconductive Scaffold Putty, Integra OS Osteoconductive Scaffold
Putty), per 0.5 cc). Similar to the two implantable biologicals with
expiring pass-through status in CY 2010 that were discussed in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60459 through
60499), we believe that the two biologicals described by HCPCS codes
C9356 and C9359 with expiring pass-through status for CY 2011 differ
from other biologicals paid under the OPPS, in that they specifically
function as surgically implanted devices. As a result of the CY 2010
packaged payment methodology for all nonpass-through implantable
biologicals, we proposed to package payment for HCPCS codes C9356 and
C9359 and assign them status indicator ``N'' for CY 2011. In addition,
any new biologicals without pass-through status that are surgically
inserted or implanted (through a surgical incision or a natural
orifice) would be packaged in CY 2011. 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.
Comment: Several commenters objected to CMS' proposal to package
payment for all diagnostic radiopharmaceuticals and contrast agents in
CY 2011. A number of commenters stated that diagnostic
radiopharmaceuticals and contrast agents with per day costs over the
proposed OPPS drug packaging threshold are defined as SCODs and,
therefore, should be assigned separate APC payments. In particular, the
commenters questioned CMS' authority to classify groups of drugs, such
as diagnostic radiopharmaceuticals and contrast agents, and implement
packaging and payment policies that do not reflect their status as
SCODs. Several comments disagreed with CMS' labeling of
radiopharmaceuticals as supplies and stated instead that they should be
treated as other SCODs. The commenters recommended that diagnostic
radiopharmaceuticals should be subject to the same per day cost drug
packaging threshold that applies to other drugs, in order to determine
whether their payment would be packaged or made separately.
Response: As discussed in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66766), the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68645 and the CY 2010 OPPS/ASC final rule with
comment period (74 FR 35323), we continue to believe that diagnostic
radiopharmaceuticals and contrast agents are different from other drugs
and biologicals for several reasons. We note that the statutorily
required OPPS drug packaging threshold has expired, and we continue to
believe that diagnostic radiopharmaceuticals and contrast agents
function effectively as supplies that enable the provision of an
independent service and are always ancillary and supportive to an
independent service, rather than serving themselves as the therapeutic
modality. We packaged their payment in CYs 2008, 2009, and 2010 as
ancillary and supportive services in order to provide incentives for
greater efficiency and to provide hospitals with additional flexibility
in managing their resources. In order for payment to be packaged, it is
not necessary that all products be interchangeable in every case, and
we recognized that, in some cases, hospitals may utilize higher cost
products and, in some cases, lower cost products, taking into
consideration the clinical needs of the patient and efficiency
incentives. While we recognize this variability from case to case, on
average under a prospective payment system, we expect payment to pay
appropriately for the services furnished. In the past, we have
classified different groups of drugs for specific payment purposes, as
evidenced by our CY 2005 through CY 2009 policy regarding 5-HT3
antiemetics and their exemption from the drug packaging threshold. We
note that we treat diagnostic radiopharmaceuticals and contrast agents
as ``policy-packaged'' drugs because our policy is to package payment
for all of the products in the category.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68634), we also began packaging the payment for all nonpass-through
implantable biologicals into payment for the associated surgical
procedure because we consider these products to always be ancillary and
supportive to independent services, similar to implantable
nonbiological devices that are always packaged. Therefore, we currently
package payment for nonpass-through implantable biologicals, also known
as devices that are surgically inserted or implanted (through a
surgical incision or a natural orifice) into the body. As we stated in
the CY 2011 OPPS/ASC proposed rule (75 FR 46267), we

[[Page 71949]]

continue to believe that payment should be packaged for nonpass-through
implantable biologicals for CY 2011.
Although our final CY 2009 policy which we are continuing for CY
2011, as discussed below, packages payment for all diagnostic
radiopharmaceuticals, contrast agents, and nonpass-through implantable
biologicals into the payment for their associated procedures, we are
continuing to provide payment for these items in CY 2011 based on a
proxy for average acquisition cost, as we did in CY 2009. We continue
to believe that the line-item estimated cost for a diagnostic
radiopharmaceutical, contrast agent, or nonpass-through implantable
biologicals in our claims data is a reasonable approximation of average
acquisition and preparation and handling costs for diagnostic
radiopharmaceuticals, contrast agents, and nonpass-through implantable
biologicals, respectively. As we discussed in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68645), we believe that hospitals
have adapted to the CY 2006 coding changes for radiopharmaceuticals and
responded to our instructions to include charges for
radiopharmaceutical handling in their charges for the
radiopharmaceutical products. Further, because the standard OPPS
packaging methodology packages the total estimated cost of each
radiopharmaceutical, contrast agent, or nonimplantable biological on
each claim (including the full range of costs observed on the claims)
with the cost of associated procedures for ratesetting, this packaging
approach is consistent with considering the average cost for
radiopharmaceuticals, contrast agents, or nonpass-through implantable
biologicals, rather than the median cost. In addition, as we noted in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68646),
these drugs, biologicals, or radiopharmaceuticals for which we have not
established a separate APC and therefore, for which payment would be
packaged rather than separately provided under the OPPS, could be
considered to not be SCODs. Similarly, drugs and biologicals with per
day costs of less than $70 in CY 2011 that are packaged and for which a
separate APC has not been established also would not be SCODs.
Similarly, drugs and biologicals with per day costs of less than $70 in
CY 2011 that are packaged and for which a separate APC has not been
established also would not be SCODs. This reading is consistent with
our final payment policy whereby we package payment for diagnostic
radiopharmaceuticals, contrast agents, and nonpass-through implantable
biologicals and provide payment for these products through payment for
their associated procedures.
Comment: Several commenters disagreed with the proposal to
distinguish between diagnostic and therapeutic radiopharmaceuticals for
payment purposes under the OPPS. The commenters noted that CMS'
identification of HCPCS codes A9542 (Indium In-111 ibritumomabituxetan,
diagnostic, per study dose, up to 5 millicuries) and A9544 (Iodine I-
131 tositumomab, diagnostic, per study dose) as diagnostic
radiopharmaceuticals was inappropriate because these
radiopharmaceuticals function as dosimetric radiopharmaceuticals and
not as diagnostic radiopharmaceuticals. A few commenters explained that
these radiopharmaceutical products are used as part of a therapeutic
regimen and, therefore, should be considered therapeutic for OPPS
payment purposes.
Response: As discussed above and in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66641), the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68645), and the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60498), we classified each radiopharmaceutical
into one of the two groups according to whether its long descriptor
contained the term ``diagnostic'' or ``therapeutic''. HCPCS codes A9542
and A9544 both contain the term ``diagnostic'' in their long code
descriptors. Therefore, according to our established methodology, we
continue to classify them as diagnostic for the purposes of CY 2011
OPPS payment. While we understand that these items are provided in
conjunction with additional supplies, imaging tests, and therapeutic
radiopharmaceuticals for patients already diagnosed with cancer, we
continue to believe that the purpose of administering the products
described by HCPCS codes A0542 and A9544 is diagnostic in nature. As we
first stated in the CY 2008 OPPS/ASC final rule with comment period (72
FR 66641), we continue to believe that HCPCS codes A9542 and A9544 are
diagnostic radiopharmaceuticals. While they are not used to diagnose
diseases, they are used to determine whether future therapeutic
services would be beneficial to the patient and to determine how to
proceed with therapy. While a group of associated services may be
considered a therapeutic regimen by some commenters, HCPCS codes A9542
and A9544 are provided in conjunction with a series of nuclear medicine
imaging scans. Many nuclear medicine studies using diagnostic
radiopharmaceuticals are provided to patients who already have an
established diagnosis. We continue to consider HCPCS codes A9542 and
A9544 to be diagnostic because these items are provided for the purpose
of a diagnostic imaging procedure and are used to identify the proposed
dose of the therapeutic agent to be provided at a later time.
Comment: Some commenters recommended using the ASP methodology to
make payment for nonpass-through diagnostic radiopharmaceuticals,
noting that it would be inconsistent for CMS to treat diagnostic
radiopharmaceuticals as ``drugs'' for pass-through payment purposes,
provide payment for diagnostic radiopharmaceuticals that have pass-
through status based on the ASP methodology, and, then, after the
diagnostic radiopharmaceutical's pass-through payment status expires,
package the costs included in historical hospital claims data, rather
than use the ASP methodology to pay for the product and treat the drug
as a supply. A few commenters recommended that CMS pay for diagnostic
radiopharmaceuticals under the pass-through policy as we currently pay
for A9582 (Iodine I-123 iobenguane, diagnostic, per study dose, up to
15 millicuries) and thereby issue an offset amount and no coinsurance
amount. One commenter suggested that diagnostic radiopharmaceuticals
could be paid separately as therapeutic radiopharmaceuticals are paid,
which would allow manufacturers to voluntarily submit ASP data, and
then default to the mean unit cost when ASP data are unavailable.
Response: As we stated above, the statutorily required OPPS drug
packaging threshold has expired, and we continue to believe that
diagnostic radiopharmaceuticals and contrast agents are always
ancillary and supportive to an independent service, rather than
services themselves as the therapeutic modality. We disagree with
commenters who suggest that nonpass-through diagnostic
radiopharmaceuticals should be paid under the ASP methodology, that
nonpass-through diagnostic radiopharmaceuticals be paid as pass-through
drugs and biologicals, or that nonpass-through diagnostic
radiopharmaceuticals should be paid similarly to therapeutic
radiopharmaceuticals. We continue to believe that nonpass-through
diagnostic radiopharmaceuticals and contrast agents function
effectively as supplies that enable the provision of an independent
service. As we noted in the CY 2009 OPPS/ASC final rule with

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comment period (73 FR 68646), and restate above, drugs, biologicals, or
radiopharmaceuticals for which we have not established a separate APC,
and which will therefore receive packaged payment under the OPPS, could
be considered to not be SCODs. We are continuing to provide payment for
these items in CY 2011 based on a proxy for average acquisition cost.
We continue to believe that the line-item estimated cost for a
diagnostic radiopharmaceutical, contrast agent, or nonpass-through
implantable biologicals in our claims data is a reasonable
approximation of average acquisition and preparation and handling costs
for diagnostic radiopharmaceuticals, contrast agents and nonpass-
through implantable biologicals, respectively. Therefore, we do not
believe that diagnostic radiopharmaceuticals should be paid separately
under the OPPS. We believe they are appropriately packaged into a
single aggregate payment for the accompanying service provided.
Comment: A few commenters recommended that CMS provide separate
payment for all diagnostic radiopharmaceuticals with a median per day
cost greater than $200. The commenters believed that this
recommendation is most consistent with the APC Panel's recommendation
to CMS at the Panel's September 2007 meeting.
Response: As we stated in the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60499), at the September 2007 APC Panel meeting,
the APC Panel recommended that CMS package radiopharmaceuticals with a
median per day cost of less than $200 but pay separately for
radiopharmaceuticals with a median per day cost of $200 or more. In the
CY 2008 OPPS/ASC final rule with comment period (72 FR 66638), we did
not accept the APC Panel's recommendation, citing an inability to
determine an empirical basis for paying separately for
radiopharmaceuticals with a median per day cost in excess of $200.
Instead, as proposed, for CY 2008, we finalized the packaging of
payment for all diagnostic radiopharmaceuticals. Consistent with the CY
2011 OPPS/ASC proposed rule, for this final rule with comment period,
we continue to believe that diagnostic radiopharmaceuticals are
ancillary and supportive to the nuclear medicine procedures in which
they are used and that their costs should be packaged into the primary
procedures with which they are associated. We do not believe it would
be appropriate to set a cost threshold for packaging diagnostic
radiopharmaceuticals because, regardless of their per day cost, they
are always supportive of an independent procedure that is the basis for
administration of the diagnostic radiopharmaceutical.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposals, without modification, to continue to
package payment for all nonpass-through diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals that
are surgically inserted or implanted into the body through a surgical
incision or a natural orifice, regardless of their per day costs. Given
the inherent function of contrast agents and diagnostic
radiopharmaceuticals as ancillary and supportive to the performance of
an independent procedure and the similar functions of implantable
biologicals and nonbiological devices as integral to and supportive of
the separately paid surgical procedures in which either may be used we
continue to view the packaging of payment for contrast agents,
diagnostic radiopharmaceuticals, and implantable biologicals as a
logical expansion of packaging payment for drugs and biologicals. In
addition, as we initially established in the CY 2008 OPPS/ASC final
rule with comment period, (72 FR 66768), we will continue to identify
diagnostic radiopharmaceuticals specifically as those Level II HCPCS
codes that include the term ``diagnostic'' along with a
radiopharmaceutical in their long code descriptors, and therapeutic
radiopharmaceuticals as those Level II HCPCS codes that include the
term ``therapeutic'' along with a radiopharmaceutical in their long
code descriptors. Finally, we are finalizing our proposal to package
payment for HCPCS C9356 and C9359 and to assign status indicator ``N''
for CY 2011. In addition, any new biological lacking pass-through
status that is surgically inserted or implanted through a surgical
incision or natural orifice would be packaged in CY 2011. For more
information on how we set CY 2011 payment rates for nuclear medicine
procedures in which diagnostic radiopharmaceuticals are used and
echocardiography services provided with and without contrast agents, we
refer readers to the CY 2010 OPPS/ASC final rule with comment period
for a detailed discussion of nuclear medicine and echocardiography
services (74 FR 35269 through 35277).
3. Payment for Drugs and Biologicals Without Pass-Through Status That
Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other
Separately Payable and Packaged Drugs and Biologicals
Section 1833(t)(14) of the Act defines certain separately payable
radiopharmaceuticals, drugs, and biologicals and mandates specific
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a
``specified covered outpatient drug'' is a covered outpatient drug, as
defined in section 1927(k)(2) of the Act, for which a separate APC has
been established and that either is a radiopharmaceutical agent or is a
drug or biological for which payment was made on a pass-through basis
on or before December 31, 2002.
Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and
biologicals are designated as exceptions and are not included in the
definition of ``specified covered outpatient drugs,'' known as SCODs.
These exceptions are--
A drug or biological for which payment is first made on or
after January 1, 2003, under the transitional pass-through payment
provision in section 1833(t)(6) of the Act.
A drug or biological for which a temporary HCPCS code has
not been assigned.
During CYs 2004 and 2005, an orphan drug (as designated by
the Secretary).
Section 1833(t)(14)(A)(iii) of the Act requires that payment for
SCODs in CY 2006 and subsequent years be equal to the average
acquisition cost for the drug for that year as determined by the
Secretary, subject to any adjustment for overhead costs and taking into
account the hospital acquisition cost survey data collected by the
Government Accountability Office (GAO) in CYs 2004 and 2005. If
hospital acquisition cost data are not available, the law requires that
payment be equal to payment rates established under the methodology
described in section 1842(o), section 1847A, or section 1847B of the
Act, as calculated and adjusted by the Secretary as necessary. Most
physician Part B drugs are paid pursuant to ASP+6 percent pursuant to
section 1842(o) and section 1847A of the Act.
Section 1833(t)(14)(E) of the Act provides for an adjustment in
OPPS payment rates for overhead and related expenses, such as pharmacy
services and handling costs. Section 1833(t)(14)(E)(i) of the Act
required MedPAC to study pharmacy overhead and to make recommendations
to the

[[Page 71951]]

Secretary regarding whether, and if so how, a payment adjustment should
be made to compensate hospitals for them. Section 1833(t)(14)(E)(ii) of
the Act authorizes the Secretary to adjust the weights for ambulatory
procedure classifications for SCODs to take into account the findings
of the MedPAC study.
In the CY 2006 OPPS proposed rule (70 FR 42728), we discussed the
June 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs
and summarized the findings of that study:
Handling costs for drugs, biologicals, and
radiopharmaceuticals administered in the HOPD are not insignificant;
Little information is available about the magnitude of
pharmacy overhead costs;
Hospitals set charges for drugs, biologicals, and
radiopharmaceuticals at levels that reflect their respective handling
costs; and
Hospitals vary considerably in their likelihood of
providing services which utilize drugs, biologicals, or
radiopharmaceuticals with different handling costs.
As a result of these findings, MedPAC developed seven drug
categories for pharmacy and nuclear medicine handling costs based on
the estimated level of hospital resources used to prepare the products
(70 FR 42729). Associated with these categories were two
recommendations for accurate payment of pharmacy overhead under the
OPPS.
1. CMS should establish separate, budget neutral payments to cover
the costs hospitals incur for handling separately payable drugs,
biologicals, and radiopharmaceuticals.
2. CMS should define a set of handling fee APCs that group drugs,
biologicals, and radiopharmaceuticals based on attributes of the
products that affect handling costs; CMS should instruct hospitals to
submit charges for these APCs and base payment rates for the handling
fee APCs on submitted charges reduced to costs.
In response to the MedPAC findings, in the CY 2006 OPPS proposed
rule (70 FR 42729), we discussed our belief that, because of the varied
handling resources required to prepare different forms of drugs, it
would be impossible to exclusively and appropriately assign a drug to a
certain overhead category that would apply to all hospital outpatient
uses of the drug. Therefore, our CY 2006 OPPS proposal included a
proposal to establish three distinct Level II HCPCS C-codes and three
corresponding APCs for drug handling categories to differentiate
overhead costs for drugs and biologicals (70 FR 42730). We also
proposed: (1) To combine several overhead categories recommended by
MedPAC; (2) to establish three drug handling categories, as we believed
that larger groups would minimize the number of drugs that may fit into
more than one category and would lessen any undesirable payment policy
incentives to utilize particular forms of drugs or specific preparation
methods; (3) to collect hospital charges for these HCPCS C-codes for 2
years; and (4) to ultimately base payment for the corresponding drug
handling APCs on CY 2006 claims data available for the CY 2008 OPPS.
In the CY 2006 OPPS final rule with comment period (70 FR 68659
through 68665), we discussed the public comments we received on our
proposal regarding pharmacy overhead. The overwhelming majority of
commenters did not support our proposal regarding pharmacy overhead and
urged us not to finalize this policy, as it would be administratively
burdensome for hospitals to establish charges for HCPCS codes for
pharmacy overhead and to report them. Therefore, we did not finalize
this proposal for CY 2006. Instead, we established payment for
separately payable drugs and biologicals at ASP+6 percent, which we
calculated by comparing the estimated aggregate cost of separately
payable drugs and biologicals in our claims data to the estimated
aggregate ASP dollars for separately payable drugs and biologicals,
using the ASP as a proxy for average acquisition cost (70 FR 68642).
Hereinafter, we refer to this methodology as our standard drug payment
methodology. We concluded that payment for drugs and biologicals and
pharmacy overhead at a combined ASP+6 percent rate would serve as the
best proxy for the combined acquisition and overhead costs of each of
these products.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68091), we finalized our proposed policy to provide a single payment of
ASP+6 percent for the hospital's acquisition cost for the drug or
biological and all associated pharmacy overhead and handling costs. The
ASP+6 percent rate that we finalized was higher than the equivalent
average ASP-based amount calculated from claims of ASP+4 percent
according to our standard drug payment methodology, but we adopted
payment at ASP+6 percent for stability while we continued to examine
the issue of the costs of pharmacy overhead in the HOPD.
In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to
ongoing discussions with interested parties, we proposed to continue
our methodology of providing a combined payment rate for drug and
biological acquisition and pharmacy overhead costs. We also proposed to
instruct hospitals to remove the pharmacy overhead charge for both
packaged and separately payable drugs and biologicals from the charge
for the drug or biological and report the pharmacy overhead charge on
an uncoded revenue code line on the claim. We believed that this would
provide us with an avenue for collecting pharmacy handling cost data
specific to drugs in order to package the overhead costs of these items
into the associated procedures, most likely drug administration
services. Similar to the public response to our CY 2006 pharmacy
overhead proposal, the overwhelming majority of commenters did not
support our CY 2008 proposal and urged us to not finalize this policy
(72 FR 66761). At its September 2007 meeting, the APC Panel recommended
that hospitals not be required to separately report charges for
pharmacy overhead and handling and that payment for overhead be
included as part of drug payment. The APC Panel also recommended that
CMS continue to evaluate alternative methods to standardize the capture
of pharmacy overhead costs in a manner that is simple to implement at
the organizational level (72 FR 66761). Because of concerns expressed
by the APC Panel and public commenters, we did not finalize the
proposal to instruct hospitals to separately report pharmacy overhead
charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66763), we finalized a policy of providing
payment for separately payable drugs and biologicals and their pharmacy
overhead at ASP+5 percent as a transition from their CY 2007 payment of
ASP+6 percent to payment based on the equivalent average ASP-based
payment rate calculated from hospital claims according to our standard
drug payment methodology, which was ASP+3 percent for the CY 2008 OPPS/
ASC final rule with comment period. Hospitals continued to include
charges for pharmacy overhead costs in the line-item charges for the
associated drugs reported on claims.
For CY 2009, we proposed to pay separately payable drugs and
biologicals at ASP+4 percent, including both SCODs and other drugs
without CY 2009 OPPS pass-through status, based on our standard drug
payment methodology. We also proposed to split the ``Drugs Charged to
Patients'' cost center into two cost centers: One for

[[Page 71952]]

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 estimates by accounting for differential
hospital markup practices for drugs with high and low overhead costs.
After consideration of the public comments received and the APC Panel
recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide
payment for separately payable nonpass-through drugs and biologicals
based on costs calculated from hospital claims at a 1-year transitional
rate of ASP+4 percent, in the context of an equivalent average ASP-
based payment rate of ASP+2 percent calculated according to our
standard drug payment methodology from the final rule claims data and
cost report data. We did not finalize our proposal to split the single
standard ``Drugs Charged to Patients'' cost center into two cost
centers largely due to concerns raised to us by hospitals about the
associated administrative burden. Instead, we 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, thereby increasing payment accuracy for
separately payable drugs and biologicals.
In response to the CMS proposals for the CY 2008 and CY 2009 OPPS,
a group of pharmacy stakeholders (hereinafter referred to as the
pharmacy stakeholders), including some cancer hospitals, some
pharmaceutical manufacturers, and some hospital and professional
associations, commented that CMS should pay an acquisition cost of
ASP+6 percent for separately payable drugs, should substitute ASP+6
percent for the packaged cost of all packaged drugs and biologicals on
procedure claims, and should redistribute the difference between the
aggregate estimated packaged drug cost in claims and payment for all
drugs, including packaged drugs at ASP+6 percent, as separate pharmacy
overhead payments for separately payable drugs. They indicated that
this approach would preserve the aggregate drug cost observed in the
claims data, while significantly increasing payment accuracy for
individual drugs and procedures by redistributing drug cost from
packaged drugs. Their suggested approach would provide a separate
overhead payment for each separately payable drug or biological at one
of three different levels, depending on the pharmacy stakeholders'
assessment of the complexity of pharmacy handling associated with each
specific drug or biological (73 FR 68651 through 68652). Each
separately payable drug or biological HCPCS code would be assigned to
one of the three overhead categories, and the separate pharmacy
overhead payment applicable to the category would be made when each of
the separately payable drugs or biologicals was paid.
In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we proposed to
redistribute between one-third and one-half of the estimated overhead
cost associated with coded packaged drugs and biologicals with an ASP,
which resulted in our proposal to pay for the acquisition and pharmacy
overhead costs of separately payable drugs and biologicals that did not
have pass-through payment status at ASP+4 percent. We calculated
estimated overhead cost for coded packaged drugs and biologicals by
determining the difference between the aggregate claims cost for coded
packaged drugs and biologicals with an ASP and the ASP dollars (ASP
multiplied by the drug's or biological's units in the claims data) for
those same coded drugs and biologicals; this difference was our
estimated overhead cost for coded packaged drugs and biologicals. In
our rationale described in the CY 2010 OPPS/ASC proposed rule (74 FR
35326 through 35333), we stated that we believed that approximately
$150 million of the estimated $395 million total in pharmacy overhead
cost included in our claims data for coded packaged drugs and
biologicals with reported ASP data should be attributed to separately
payable drugs and biologicals and that the $150 million serves as the
adjustment for the pharmacy overhead costs of separately payable drugs
and biologicals. As a result, we also proposed to reduce the costs of
coded drugs and biologicals that are packaged into payment for
procedural APCs to offset the $150 million adjustment to payment for
separately payable drugs and biologicals. In addition, we proposed that
any redistribution of pharmacy overhead cost that may arise from CY
2010 final rule data would occur only from coded packaged drugs and
biologicals with an ASP to separately payable drugs and biologicals,
thereby maintaining the estimated total cost of drugs and biologicals.
Using our CY 2010 proposed rule data, and applying our longstanding
methodology for calculating the total cost of separately payable drugs
and biologicals in our claims compared to the ASP dollars for the same
drugs and biologicals, without applying the proposed overhead cost
redistribution, we determined that the estimated aggregate cost of
separately payable drugs and biologicals (status indicators ``K'' and
``G''), including acquisition and pharmacy overhead costs, was
equivalent to ASP-2 percent. Therefore, under the standard methodology
for establishing payment for separately payable drugs and biologicals,
we would have paid for those drugs and biologicals at ASP-2 percent for
CY 2010, their equivalent average ASP-based payment rate. We also
determined that the estimated aggregate cost of coded packaged drugs
and biologicals with an ASP (status indicator ``N''), including
acquisition and pharmacy overhead costs, was equivalent to ASP+247
percent.
While we had no way of assessing whether this current distribution
of overhead cost to coded packaged drugs and biologicals with an ASP
was appropriate, we acknowledged that the established method of
converting billed charges to costs had the potential to ``compress''
the calculated costs to some degree. Further, we recognized that the
attribution of pharmacy overhead costs to packaged or separately
payable drugs and biologicals through our standard drug payment
methodology of a combined payment for acquisition and pharmacy overhead
costs depends, in part, on the treatment of all drugs and biologicals
each year under our annual drug packaging threshold. Changes to the
packaging threshold may result in changes to payment for the overhead
cost of drugs and biologicals that do not reflect actual changes in
hospital pharmacy overhead cost for those products. For these reasons,
we stated that we believed some portion, but not all, of the total
overhead cost that is associated with coded packaged drugs and
biologicals (the difference between aggregate cost for those drugs on
the claims and ASP for the same drugs), based on our standard drug
payment methodology, should, at least for CY 2010, be attributed to
separately payable drugs and biologicals.
We acknowledged that the observed combined payment for acquisition
and pharmacy overhead costs of ASP-2 percent for separately payable
drugs and biologicals may be too low and ASP+247 percent for coded
packaged drugs and biologicals with reported ASP data in the CY 2010
claims data may be too high (74 FR 35328). We stated that a middle
ground of approximately one-third to one-half of the total pharmacy
overhead cost currently associated with

[[Page 71953]]

coded packaged drugs and biologicals in the CY 2008 claims data would
represent the most accurate redistribution of pharmacy overhead cost.
We included a discussion of indirect overhead costs, such as
administrative and general costs, capital costs, staff benefits, and
other facility costs that do not vary across drugs, and direct overhead
costs, including staff, supplies, and equipment that are directly
attributable only to the storage, handling, preparation, and
distribution of drugs and biologicals and which do vary, sometimes
considerably, depending upon the drug being furnished. We presented
analyses that modeled the redistribution of overhead costs in the
packaged drugs to all drugs and biologicals based on overhead relative
weights derived from industry and from MedPAC's recommended overhead
relative weights and by assigning each drug, both packaged and
separately paid, to a category of overhead complexity. Analyses relying
on both sets of relative weights suggested that indirect costs are a
sizable component of the overhead costs associated with all drugs and
biologicals (74 FR 60505 to 60508).
Within the one-third to one-half parameters, we proposed that
reallocating $150 million in drug and biological cost observed in the
claims data from coded packaged drugs and biologicals with an ASP to
separately payable drugs and biologicals for CY 2010 would more
appropriately distribute pharmacy overhead cost among packaged and
separately payable drugs and biologicals. Based on this redistribution,
we proposed a CY 2010 payment rate for separately payable drugs and
biologicals of ASP+4 percent. Redistributing $150 million represented a
reduction in cost of coded packaged drug and biologicals with reported
ASP data in the CY 2010 proposed rule claims data of 27 percent.
We also proposed that any redistribution of pharmacy overhead cost
that may arise from CY 2010 final rule data would occur only from some
drugs and biologicals to other drugs and biologicals, thereby
maintaining the estimated total cost of drugs and biologicals in our
claims data (no redistribution of cost would occur from other services
to drugs and biologicals or vice versa). We further proposed that the
claims data for 340B hospitals be included in the calculation of
payment for drugs and biologicals under the CY 2010 OPPS and that
hospitals which participate in the 340B program would be paid the same
amounts for separately payable drugs and biologicals as hospitals that
do not participate in the 340B program. Finally, we proposed that, in
accordance with our standard drug payment methodology, the estimated
payments for separately payable drugs and biologicals would be taken
into account in the calculation of the weight scaler that would apply
to the relative weights for all procedural services (but would not
apply to separately payable drugs and biologicals) paid under the OPPS,
as required by section 1833(t)(14)(H) of the Act.
In the CY 2010 OPPS final rule with comment period, we adopted a
transitional payment rate of ASP+4 percent based on a pharmacy overhead
adjustment methodology for CY 2010 that redistributed $200 million from
packaged drug cost to separately payable drug cost. This $200 million
included the proposed $150 million redistribution from the pharmacy
overhead cost of coded packaged drugs and biologicals for which an ASP
is reported and an additional $50 million dollars from the total
uncoded drug and biological cost to separately payable drugs and
biologicals as a conservative estimate of the pharmacy overhead cost of
uncoded packaged drugs and biologicals that should be appropriately
associated with the cost of separately payable drugs and biologicals
(74 FR 60517). We noted that our final CY 2010 payment policy for
separately payable drugs and biologicals at ASP+4 percent fell within
the range of ASP-3 percent, that would have resulted from no pharmacy
overhead cost redistribution from packaged to separately payable drugs
and biologicals, to ASP+7 percent, that would have resulted from
redistribution of pharmacy overhead cost based on expansive assumptions
about the nature of uncoded packaged drug and biological cost. We
acknowledged that, to some unknown extent, there are pharmacy overhead
costs being attributed to the items and services reported under the
pharmacy revenue code without HCPCS codes that are likely pharmacy
overhead for separately payable drugs. We redistributed $50 million in
uncoded packaged drug cost and stated that we could not know the amount
of overhead associated with these drugs without making significant
further assumptions about the amount of pharmacy overhead cost
associated with the drugs and biologicals captured by these uncoded
packaged drug costs. We finalized a policy of redistributing pharmacy
overhead cost from some drugs and biologicals to other drugs and
biologicals, thereby maintaining the estimated total cost of drugs and
biologicals in our claims data (no redistribution of cost would occur
from other services to drugs and biologicals or vice versa).
b. Payment Policy
Section 1833(t)(14)(A)(iii) of the Act, as described above,
continues to be applicable to determining payments for SCODs for CY
2011. This provision requires that payment for SCODs be equal to the
average acquisition cost for the drug for that year as determined by
the Secretary, subject to any adjustment for overhead costs and taking
into account the hospital acquisition cost survey data collected by the
GAO in CYs 2004 and 2005. If hospital acquisition cost data are not
available, section 1833(t)(14)(A)(iii)(II) of the Act requires that
payment be equal to payment rates established under the methodology
described in section 1842(o) of the Act, section 1847A of the Act
(ASP+6 percent as paid for physician Part B drugs), or section 1847B of
the Act (CAP), as the case may be, as calculated and adjusted by the
Secretary as necessary. In accordance with sections 1842(o) and 1847A
of the Act, payment for most Medicare Part B drugs furnished on or
after January 1, 2005, are paid based on the ASP methodology. Medicare
Part B drugs generally fall into three categories: physician drugs
(drugs furnished incident to a physician's service), DME drugs (drugs
furnished under the durable medical equipment benefit), and drugs
specifically covered by statute (certain oral anti-cancer and
immunosuppressive drugs). In addition, section 1833(t)(14)(E)(ii) of
the Act authorizes, but does not require, the Secretary to adjust APC
weights to take into account the 2005 MedPAC report relating to
overhead and related expenses, such as pharmacy services and handling
costs. As discussed in V.B.3.a. of this final rule with comment period,
since CY 2006, we have used ASP data and costs estimated from charges
on hospital claims data as a proxy for both the average hospital
acquisition cost that the statute requires for payment of SCODs and the
associated pharmacy overhead cost to establish a combined payment rate
for acquisition cost and pharmacy overhead. Until CY 2010, we applied
this methodology to payment for all separately payable drugs and
biologicals without pass-through status, including both SCODs and other
drugs and biologicals that do not meet the statutory definition of
SCODs.
However, for the CY 2010 OPPS, we revised the standard methodology
to include an adjustment for pharmacy

[[Page 71954]]

overhead. We acknowledged that the established method of converting
billed charges to costs had the potential to ``compress'' the
calculated costs to some degree. We recognized that the attribution of
pharmacy overhead costs to packaged or separately payable drugs and
biologicals through our standard drug payment methodology of a combined
payment for acquisition and pharmacy overhead costs depends, in part,
on the treatment of all drugs and biologicals each year under our
annual drug packaging threshold. To some unknown extent, we believe
that some pharmacy overhead costs are being attributed to packaged
drugs and biologicals that are likely pharmacy overhead costs for
separately payable drugs.
For the CY 2011 OPPS/ASC proposed rule, using our standard
methodology for determining the total cost of separately payable drugs
in our CY 2009 claims data and comparing these costs to the ASP dollars
(April 2010 ASP quarterly payment rates multiplied by units for the
separately payable drugs and biologicals in the claims data) for the
same drugs, we determined that the total payment for separately payable
drugs (status indicators ``K'' and ``G''), including acquisition and
pharmacy overhead costs, was ASP+0 percent, which also would be the
ASP-based payment rate under the standard methodology that we
established in CY 2006 (75 FR 46275). Additionally, we determined that
the total aggregate cost for packaged drugs with a HCPCS code for which
manufacturers report ASP data (status indicator ``N''), including
acquisition and pharmacy overhead costs, was equivalent to ASP+283
percent. Finally, we determined that the total cost for both packaged
drugs with a HCPCS code and separately payable drugs (status indicators
``N,'' ``K,'' and ``G'') for which we also have ASP data, including
acquisition and pharmacy overhead costs, was ASP+14 percent. Table 25
in the proposed rule displayed our findings with regard to the
percentage of ASP in comparison to the cost for packaged coded drugs
and for separately payable coded drugs before application of the
overhead adjustment methodology.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46276), we stated that
we believed that the combined payment for average acquisition and
pharmacy overhead costs under our standard methodology may understate
the cost of separately payable drugs and biologicals and related
pharmacy overhead for those drugs and biologicals. Specifically, we
stated that we believed payment at ASP+0 percent for such costs may not
be sufficient. We also acknowledged that ASP +283 percent may overstate
the combined acquisition and pharmacy overhead cost of packaged drugs
and biologicals. In the CY 2011 OPPS/ASC proposed rule (75 FR 46276
through 46279), for CY 2011, we proposed to continue our CY 2010
pharmacy overhead adjustment methodology (74 FR 60500 through 60512).
We proposed to redistribute $150 million from the pharmacy overhead
cost of coded packaged drugs and biologicals with reported ASP data and
to redistribute $50 million from the cost of uncoded packaged drugs and
biologicals without an ASP, for a total redistribution of $200 million
in drug cost from the cost of coded and uncoded packaged drugs to the
cost of separately payable drugs, as we did for the CY 2010 final rule.
We estimated the overhead cost for coded packaged drugs to be $438
million ($593 million in total cost for coded packaged drugs and
biologicals with a reported ASP less $155 million in total ASP dollars
for coded packaged drugs and biologicals with a reported ASP). Similar
to the CY 2010 proposal, we proposed for CY 2011 that any
redistribution of pharmacy overhead cost would occur only among drugs
and biologicals in our claims data, that no redistribution of cost
would occur from other services to drugs and biologicals or vice versa.
We continued to believe that redistributing $200 million from packaged
to separately payable drugs and biologicals was an appropriate
redistribution of pharmacy overhead costs to address any charge
compression in the standard methodology. This would have resulted in a
proposed CY 2011 payment rate for separately payable drugs and
biologicals of ASP+6 percent. We emphasized that we proposed a pharmacy
overhead adjustment methodology based on a redistribution of overhead
cost and that our proposal for payment at ASP+6 percent was a
coincidental outcome of the proposed methodology to redistribute $200
million from packaged drugs to separately payable drugs. We did not
propose payment of ASP+6 percent for separately payable drugs as an
alternative to payment of average acquisition costs based on a survey
under section 1833(t)(14)(A)(iii)(I) of the Act. We indicated that we
continue to believe that the ASP information collected under section
1847A(b)(1)(A) of the Act and our hospital claims data is a suitable
proxy for the acquisition cost data. For a full explanation of our
rationale for using ASP data and our hospital claims data as a suitable
proxy for acquisition cost data, we refer readers to the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60515). We further noted
that, in past years, the proposed ASP+X amount decreased by at least 1
percentage point when we updated the ASP data, claims data, and cost
report data between the proposed rule and the final rule with comment
period, from ASP+5 to ASP+4 for example. Therefore, we stated that it
was possible that the proposed methodology would result in an ASP+X
amount that is different from ASP+6.
As indicated in Table 25 of the proposed rule, if we had proposed
to establish payment for separately payable drugs and biologicals under
the standard methodology established in CY 2006 without applying a
pharmacy overhead adjustment, we would have proposed to pay for
separately payable drugs and biologicals at ASP+0 percent. However,
because we were concerned about underpaying separately payable drugs
and biologicals, we stated our belief that a pharmacy overhead
adjustment using a redistribution methodology for determining the
amount of payment for drugs and biologicals as we did for CY 2010 was
appropriate. We believed the observed ASP+0 percent reflected some
amount of charge compression and variability attributable to choice of
a packaging threshold.
We indicated in the proposed rule that we continue to believe that
the methodology to redistribute $200 million in drug overhead cost from
packaged coded and uncoded drugs to separately payable drugs, while
keeping the total cost of drugs in the claims data constant, continues
to be appropriate for the reasons set forth in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60501 through 60517). Therefore,
we proposed to redistribute $200 million in drug overhead costs from
coded and uncoded packaged drugs to separately payable drugs while
keeping the total cost of drugs in the claims data constant. Table 26
of the proposed rule presented the ASP+X amount after redistribution of
$150 million from the estimated overhead of $438 million for coded
packaged drugs with reported ASP data to separately payable drugs and
biologicals and $50 million from uncoded packaged drug cost for which
an estimate of overhead cannot be calculated, resulting in a total
redistribution of $200 million in cost from packaged drugs and
biologicals to separately payable drugs and biologicals.
We generally received positive comments on our CY 2010 proposal to
redistribute $150 million of drug cost

[[Page 71955]]

from packaged drugs and biologicals to separately payable drugs and
biologicals to establish their final combined payment level. The
general comment we received on our pharmacy overhead adjustment
methodology was that the amount of drug cost that should be
redistributed should be greater, a sentiment reiterated at the February
2010 APC Panel meeting and discussed in greater detail below.
Commenters and presenters to the APC Panel specifically argued that our
CY 2010 proposal had not fully acknowledged the potential overhead cost
available for redistribution in the uncoded packaged drugs.
We explain below our rationale for why we did not propose to
redistribute more cost from uncoded packaged drugs. Conversations with
stakeholders and hospitals over the past year suggest that hospitals do
not always report HCPCS codes for drugs for a variety of reasons,
including an internal practice not to code for packaged drugs, building
the cost of the drugs into the associated procedure charge, lack of an
HCPCS code for some drugs and biologicals, and purchased vendor billing
software functionality that removes codes. A key premise of our
pharmacy overhead adjustment redistribution methodology was our
assessment of the amount of drug cost in the claims data above
aggregate ASP available as ``overhead'' for redistribution. Knowing the
specific HCPCS codes for packaged drugs and their associated ASP allows
us to assess the differential between aggregate ASP and claim cost for
packaged drugs and to assess the intensity of pharmacy overhead
associated with these drugs. The inability to know which drugs are
captured by uncoded drug charges on a claim is challenging because we
cannot know what is being charged or what the overhead complexity might
be. Further, we understand that there is wide variation in how
hospitals set charges for items and services in their chargemasters,
sometimes charging separately for overhead (for example, paper cups,
gloves, transportation, staff consultations) and sometimes including
charges for those supplies in the charge for drugs. Therefore, we
cannot be certain that the amount of uncoded pharmacy overhead cost is
as high as the public has suggested or that hospitals mark up these
uncoded drugs and biologicals in the same way as packaged drugs and
biologicals with HCPCS codes.
In addition, at its February 2010 meeting, the APC Panel
recommended that CMS reallocate a larger portion of the pharmacy
overhead costs from packaged drugs to separately payable drugs for CY
2011. We did not accept the APC Panel's recommendation to redistribute
a larger portion of the pharmacy overhead costs from packaged drugs to
separately payable drugs because we did not find the analysis provided
by the presenters at the February 2010 APC Panel meeting to be
sufficient to determine that it is appropriate to propose to
redistribute more payment from uncoded packaged drugs and biologicals
to separately paid drugs and biologicals. Although presenters at the
APC Panel meeting acknowledged that CMS could not know the ASP for
these uncoded drug costs, they provided analyses examining the
proportion of estimated coded packaged drug cost relative to estimated
uncoded packaged drug cost out of all packaged drug cost (both coded
and uncoded) and concluded that uncoded and coded packaged drugs are
probably the same drugs because hospitals tend to have roughly the same
amount of estimated packaged drug cost in their claims data but wide
variation on the proportion of coded packaged drugs. They also
presented analyses stating that the relationship between pharmacy
overhead and handling costs and the cost of drugs in the cost report
data can be interpreted as providing a relationship between cost and
overhead comparable to the ASP+X calculated for all drug cost in the
claims data, if an aggregate ASP amount is assumed to be the same for
uncoded drugs and biologicals as it is for coded packaged drugs. The
presenters concluded that the uncoded packaged drug and biological cost
accounts for exactly the same drugs and biologicals as those in the
coded packaged drug and biological cost and that CMS could assume the
same proportional amount of overhead cost that appears in the uncoded
packaged drug and biological cost as observed in the coded packaged
drug cost. They asked that CMS assume that uncoded packaged drugs and
biologicals resemble coded packaged drugs and biologicals and treat
them comparably for purposes of estimating ``overhead.'' We reviewed
the presenters' analyses, but we believe the information they provided
is insufficient in order to enable us to isolate the portion of the
uncoded packaged drug and biological cost that is pharmacy overhead
cost. In order to isolate the portion of uncoded packaged drug and
biological cost that is pharmacy overhead cost, we believe that we
would need more drug-specific information reported to us by hospitals,
either through more reporting of packaged drugs on claims or through
more granular cost centers on the cost report. We noted that we
investigated uncoded drugs further. We evaluated the services, by
status indicator, with which uncoded packaged drug cost appears in the
claims data in an effort to assess how much uncoded drugs resemble
coded packaged drugs. We isolated this analysis to single and pseudo
single bills. We found that most uncoded packaged drug costs appear
with surgical services (status indicator ``T,'') and that most coded
packaged drug costs appear with medical services, (status indicators of
``S'' and ``X''). In light of this information, we were not confident
that the drugs captured by uncoded packaged drug cost were the same
drugs captured by coded packaged drug cost. Therefore, we did not
believe we could assume that they are the same drugs, with comparable
overhead and handling costs. Without being able to calculate an ASP for
these drugs and without being able to gauge the magnitude of the
overhead complexity associated with these drugs, we did not believe we
should assume that the same amount of proportional overhead would be
available for redistribution for the CY 2011 OPPS/ASC proposed rule. We
were not convinced that the same proportionate amount of overhead cost
should be redistributed from the packaged uncoded drugs as the amount
of overhead cost that is appropriate to redistribute for packaged coded
drugs. In addition, we stated in the proposed rule that we remain
committed to using hospital claims data reported to us by hospitals to
set the OPPS payment rates because it provides more specificity about
the provided drugs and biologicals and would allow us to assess an
overhead amount for those drugs and biologicals. Therefore, we proposed
to redistribute a conservative estimate, $50 million, in cost from
uncoded packaged drugs to separately payable drugs and biologicals.
Based on the reasons set forth above, and consistent with our
rationale outlined in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60511 through 60512), we cannot be certain that we know
what portion of the uncoded drugs and biologicals cost is acquisition
cost versus pharmacy overhead costs, and we have no compelling reason
to redistribute a greater amount of drug cost. Therefore, our proposal
to redistribute $200 million in drug cost from packaged drugs to
separately payable drugs, while maintaining the total cost of drugs in
our claims data, consisted of redistributing $150 million in
``overhead'' cost from packaged coded drugs and biologicals with
reported ASP

[[Page 71956]]

data to separately payable drugs and biologicals and redistributing $50
million in drug cost from uncoded packaged drugs and biologicals to
separately payable drugs and biologicals as a conservative estimate of
potential overhead cost appearing in uncoded packaged drugs that should
have been associated with separately payable drugs and biologicals.
We have indicated that the basis for our CY 2011 proposal to
redistribute $150 million dollars from packaged coded drugs and
biologicals to separately payable drugs and biologicals as a pharmacy
overhead adjustment was the same as our CY 2010 final policy. The CY
2010 final policy was based on our assessment that between one-third
and one-half of the overhead cost in coded packaged drugs could be
attributable to charge compression due to our cost estimation
methodology and our choice of a packaging threshold. We continue to
believe that a precise amount of drug cost attributable to charge
compression cannot be known, but that $150 million is an appropriate
adjustment. We stated in the CY 2011 OPS/ASC proposed rule that the CY
2011 proposal to redistribute $150 million fell within the approximate
one-third to one-half range established in CY 2010 OPPS/ASC final rule
with updated CY 2009 claim and cost report data, and that we
anticipated that the $150 million would continue to roughly approximate
one-third to one-half or thereabouts of overhead cost in the coded
packaged drugs with updated ASP data, and claim and cost report data
for the final rule. In order to redistribute the $150 million in
pharmacy overhead from packaged costs of drugs and biologicals for
which a HCPCS code was reported, we reduced the costs attributable to
these items and services by multiplying the costs derived from the
revenue center charges for packaged HCPCs codes by 0.75 (a 25-percent
reduction).
To redistribute the $50 million in total cost from packaged costs
of drugs and biologicals for which no HCPCS code was reported, we
reduced the costs attributable to these items and services by
multiplying the costs derived from revenue center charges for pharmacy
by 0.92 (an 8-percent reduction). We noted in the CY 2011 OPPS/ASC
proposed rule (75 FR 46279) that the $50 million in drug overhead cost
that we proposed to redistribute from packaged uncoded drugs and
biologicals to separately payable drugs and biologicals was 8 percent,
comparable to the amount in the CY 2010 OPPS/ASC final rule with
comment period. We noted that $50 million as a percent of uncoded drug
cost may be close to the 8 percent range, or thereabouts, of uncoded
drug and biological cost in the final rule with updated claim and cost
data. In addition, although we arrived at a proposed payment rate of
ASP+6 percent, we emphasized that the ASP+6 percent amount may change
when ASP+X is recalculated using updated ASP data and claims and cost
report data for the CY 2011 OPPS/ASC final rule with comment period.
We also note that although it is CMS' longstanding policy under the
OPPS to refrain from instructing hospitals on the appropriate revenue
code to use to charge for specific services, we continue to encourage
hospitals to bill all drugs and biologicals with HCPCS codes,
regardless of whether they are separately payable or packaged using
appropriate revenue codes. We noted that we make packaging
determinations for drugs annually based on cost information reported
under HCPCS codes, and the OPPS ratesetting is best served when
hospitals report charges for all items and services with HCPCS codes
when they are available, whether or not Medicare makes separate payment
for the items and services.
The APC Panel also recommended during its February 2010 public
meeting that CMS evaluate the impact of changes in its drug payment
policy on hospitals (categorized by type and size) of such a
reallocation and present this analysis to the APC Panel at its next
meeting. In the proposed rule, we indicated that we accepted this
recommendation and would present this analysis to the APC Panel at its
next meeting. We presented the analysis at the August 2010 APC Panel
meeting.
The APC Panel also recommended at its February 2010 public meeting
that CMS continue to evaluate the impact of CMS' drugs and biologicals
overhead payment policy on hospitals. We accepted this recommendation
in the proposed rule. We note that our regulatory impact analysis
presented in section XXIII. of the proposed rule and this final rule
with comment period include some of the analysis requested in these
last two recommendations.
In conclusion, we proposed for CY 2011 to continue our CY 2010
redistribution methodology (74 FR 60500 through 60512). We proposed to
redistribute $150 million from the pharmacy overhead cost of coded
packaged drugs and biologicals with an ASP and to redistribute $50
million from the cost of uncoded packaged drugs and biologicals, for a
total of $200 million from cost in coded and uncoded packaged drugs to
separately payable drugs. We proposed to redistribute pharmacy overhead
cost among drugs and biologicals, thereby maintaining the estimated
total cost of drugs and biologicals in our claims data (no
redistribution of cost would occur from other services to drugs and
biologicals or vice versa). The proposed methodology, when applied
using April 2010 ASPs, data for claims for services furnished during CY
2009 and processed through the common working file before January 1,
2010, and the most current submitted cost reports as of January 1,
2010, resulted in ASP+6 percent. We further proposed to continue to
include the claims data for 340B hospitals in the calculation of
payment for drugs and biologicals under the CY 2011 OPPS because
excluding data from hospitals that participate in the 340B program from
our ASP+X calculation, but paying those hospitals at that derived
payment amount, would effectively redistribute payment to drugs or
biologicals from payment for other services under the OPPS, and we do
not believe this redistribution would be appropriate (74 FR 35332). In
addition, we proposed that hospitals that participate in the 340B
program continue to be paid the same amounts for separately payable
drugs and biologicals as hospitals that do not participate in the 340B
program for CY 2011 because commenters have generally opposed
differential payment for hospitals based on their 340B participation
status. In addition, we proposed to include claims from 340B hospitals
in our assessment of average acquisition cost under section
1833(t)(14)(A)(iii) of the Act. We proposed that the estimated payments
for separately payable drugs and biologicals be taken into account in
the calculation of the weight scaler that would apply to the relative
weights for all procedural services (but would not apply to separately
payable drugs and biologicals) paid under the OPPS, as required by
section 1833(t)(14)(H) of the Act.
Comment: Most commenters supported ASP+6 percent as the appropriate
amount of payment to be made for separately paid drugs for CY 2011.
Many of those commenters recommended that payment for separately
payable drugs and biologicals be made at least at ASP+6 percent. A few
commenters expressed concern that CMS' established methodology is
arbitrary in nature, in part because CMS does not truly know the amount
of overhead to move for the proposed overhead adjustment. A few
commenters generally agreed with CMS' proposal to redistribute pharmacy

[[Page 71957]]

overhead cost from packaged drugs and biologicals to separately payable
drugs and biologicals. However, several commenters expressed concern
that, under this methodology, the projected CY 2011 ASP+X amount of
ASP+6 percent may decline to ASP+5 percent or ASP+4 percent in the
final rule with comment period. The commenters reasserted their belief
that payment at less than ASP+6 percent is insufficient for payment for
separately payable drugs and biologicals.
Several commenters supported the payment of ASP+6 percent for
separately paid drugs and biologicals and the redistribution
methodology on a whole, but did not support the proposed redistribution
amount of $200 million from packaged drugs and biologicals ($150
million from coded packaged drugs and biologicals and $50 million from
uncoded packaged drugs and biologicals). A majority of commenters
recommended that CMS increase the amount redistributed from coded and
uncoded packaged drugs and biologicals to separately payable drugs and
biologicals. A few of these commenters stated that a larger portion of
the overhead costs should be reallocated from packaged uncoded packaged
drugs and biologicals to separately payable drugs and biologicals,
noting that coded and uncoded drugs and biologicals have similar
overall charge mark-up and, therefore, warrant a similar redistribution
of costs. Several commenters recommended that an equal or close to
equal amount of cost should be redistributed from packaged coded and
uncoded drug and biological cost to separately payable drugs and
biologicals. A few commenters also disagreed with the results of CMS'
study on uncoded drugs, stating that pharmacy overhead and services
applies to all drugs, including surgical services, and that these
pharmacy services and overhead costs are similar to those costs
associated with coded packaged drugs. One commenter recommended that
CMS continue to monitor and reevaluate the claims data in the upcoming
years to determine whether a larger amount of cost should be
redistributed from packaged drugs and biologicals to separately payable
drugs and biologicals.
The APC Panel, at its August 2010 meeting, recommended that CMS pay
for the acquisition and pharmacy overhead costs of all separately
payable drugs at no less than ASP+6 percent for CY 2011 (APC Panel
Recommendation 21).
Response: We are not convinced by the commenters that we should
necessarily pay separately paid drugs and biologicals at ASP+6 percent
or higher for CY 2011, regardless of whether such payment amount
results from the methodology we proposed to use to set final payment
rates for separately paid drugs and biologicals for CY 2011 in this
final rule with public comment period. We believe that to pay for
separately paid drugs and biologicals at ASP+6 percent for CY 2011
would redistribute more pharmacy overhead than we believe is
appropriate because our application of the proposed methodology results
in ASP+5 percent for this final rule with comment period. Our analysis
in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60505
through 60512) indicated that a redistribution was appropriate to
address charge compression. In our modeling for this OPPS/ASC final
rule with comment period, the redistribution amount for CY 2011 of $150
million in overhead cost from coded packaged drugs and $50 million in
cost from uncoded packaged drugs that we are finalizing for the CY 2011
OPPS, remains within the parameters of roughly one-third to one-half of
overhead cost in coded packaged drugs and about 8 percent of drug cost
in uncoded packaged drugs that we finalized for CY 2010, and,
therefore, we believe that redistribution of these amounts remains
appropriate. Also, we were clear in the CY 2011 OPPS/ASC proposed rule
that we were proposing to continue the CY 2010 pharmacy overhead
adjustment methodology and that the projected result of ASP+6 percent
was coincidental (75 FR 46276).
In addition, we disagree that payment at less than ASP+6 percent
would be insufficient to adequately pay for the costs of separately
paid drugs and biologicals because our review of claims and cost report
data provides no evidence that supports that payment at less than ASP+6
percent is insufficient to pay adequately for the costs of separately
paid drugs and biologicals. To the contrary, the utilization of drugs
and biologicals continues to increase. In addition, we note that
payment for pharmacy overhead is not only paid through payment for
specifically identified drugs and biologicals, but pharmacy overhead
payment also is packaged into payment for the procedure in which the
cost of packaged drugs and biologicals is included. When a separately
paid drug or biological is furnished during a procedure, pharmacy
overhead is being paid both through the ASP+5 percent payment for the
separately paid drug and biological and, to some extent, in the payment
for the procedure, because the APC payment for any procedure includes
the cost of packaged drugs and the overhead cost associated with those
packaged drugs and biologicals.
Although several commenters, and the APC Panel at its February 2010
panel meeting, recommended that CMS reallocate a larger portion of the
pharmacy overhead costs from packaged drugs to separately payable drugs
for CY 2011 under the overhead adjustment methodology, and others have
argued that we should redistribute an equal or nearly equal amount of
cost from both packaged drugs and biologicals with HCPCS codes and
packaged drugs and biologicals without HCPCS codes, for the reasons set
forth below and consistent with our rationale outlined in the CY 2010
OPPS/ASC final rule with public comment period (74 FR 60501 through
60512), we do not believe that we should redistribute a higher portion
of drug cost from coded packaged drugs and biologicals, nor can we
assume that uncoded packaged drugs and biologicals have the same or
higher pharmacy overhead costs as coded packaged drugs and biologicals
and, therefore, we do not believe that we can treat them comparably for
purposes of estimating overhead. With regard to redistributing more
from uncoded packaged drugs and biologicals, first, as indicated in the
CY 2011 OPPS/ASC proposed rule (75 FR 46277 through 46278),
conversations with stakeholders and hospitals over the past year
suggest that hospitals do not always report HCPCS codes for drugs for a
variety of reasons. A key premise of the pharmacy overhead adjustment
redistribution methodology is our assessment of the amount of drug cost
in the claims data above aggregate ASP available as ``overhead'' for
redistribution. Knowing the specific HCPCS codes for packaged drugs and
their associated ASP allows us to assess the difference between the
aggregate ASP and claim cost for packaged drugs and to assess the
intensity of pharmacy overhead associated with these drugs. The
inability to know which drugs are captured by uncoded drug charges on a
claim is challenging because we cannot know the hospitals' charges for
the drug, which include overhead costs, or what the overhead complexity
may be. Therefore we cannot be certain that the amount of uncoded
pharmacy overhead costs is as high as the public has suggested or that
hospitals mark up these uncoded drugs and biologicals in the same way
as packaged drugs and biologicals with HCPCS codes. Second, we continue
to believe that the information presented by presenters at the February
2010 APC Panel meeting is

[[Page 71958]]

insufficient to enable us to isolate the portion of the uncoded
packaged drug and biological cost that is pharmacy overhead cost. In
order to isolate the portion of uncoded packaged drug and biological
cost that is pharmacy overhead cost, we believe that we would need more
drug specific information reported to us by hospitals, either through
more reporting of packaged drugs on claims or through more granular
cost centers on the cost report. As indicated in the CY 2011 OPPS/ASC
proposed rule we also evaluated claims data in an effort to assess how
much uncoded packaged drugs resemble coded packaged drugs (75 FR
46278). We found that most uncoded packaged drug costs appear with
surgical services and that most coded packaged drug costs appear with
medical services. In light of this information, we are not confident
that the drugs captured by uncoded drug costs are the same drugs
captured by the coded packaged drug cost. Therefore we do not agree
that we can assume that they are the same drugs, with comparable
overhead and handling costs. Without being able to calculate an ASP for
these drugs and without being able to gauge the magnitude of the
overhead complexity associated with these drugs, we do not believe we
should assume the same or a greater proportional overhead is
appropriate for redistribution. Third, we also do not believe the
commenter's assertions that pharmacy services and overhead costs for
all uncoded packaged drugs are similar to the costs associated with
coded packaged drugs and are a sufficient basis for redistributing
equal or close to equal amounts of dollars from uncoded packaged drugs
as from coded packaged drugs to separately paid drugs under this
overhead adjustment policy. As we have stated elsewhere, we remain
committed to using hospital data as reported to us by hospitals to set
OPPS payment rates. Therefore, we continue to believe that it would be
inappropriate to assume that the costs reported under uncoded pharmacy
revenue code lines are for the same drugs and biologicals with the same
ASPs, as the costs of packaged drugs and biologicals reported with
HCPCS codes. Therefore, for the reasons set forth above, we continue to
believe that we should not make broad assumptions that the same overall
charge markup exists for both coded and uncoded packaged drugs or that
we should redistribute a similar or greater amount of cost from both
coded and uncoded packaged cost to separately payable drugs and
biologicals.
We also do not agree that our pharmacy overhead adjustment
methodology is arbitrary. The basis for the proposed and final pharmacy
overhead adjustment methodology is the same as our CY 2010 final
policy. The CY 2010 policy for redistributing $150 million from coded
packaged drugs and biologicals to separately payable drugs and
biologicals was based on our assessments using both industry and MedPAC
data (74 FR 60505 through 60507). We believed and continue to believe
that between approximately one- third and one-half of the overhead cost
in coded packaged drugs could be attributable to charge compression due
to our cost estimation methodology and our choice of a packaging
threshold. We continue to believe that an amount of packaged drug cost
attributable to charge compression cannot be precisely known, but we do
not believe we should distribute more than $150 million from coded
packaged drugs. The proposed and final CY 2011 policy of redistributing
$150 million from coded packaged drugs and biologicals to separately
payable drugs and biologicals roughly approximates one-third to one-
half of overhead cost in the coded packaged drugs with updated ASP
data, and the CY 2009 claims and most current cost report data used in
this final rule with comment period.
The proposed and final CY 2011 policy of redistributing $50 million
of the total cost of uncoded packaged drugs and biologicals to
separately payable drugs and biologicals falls in the approximate 8
percent range of total uncoded drug and biological cost using the CY
2009 claims and most currently available cost report data used in this
final rule with comment period. As indicated in the CY 2010 OPPS/ASC
final rule with comment period, this is a conservative estimate, as
compared to the case of coded packaged drugs and biologicals with an
ASP and for which we have a specific pharmacy overhead cost estimate in
relationship to their known ASPs. As explained previously in this
response we remain unwilling to make sweeping assumptions that uncoded
packaged drug and biological cost included a pharmacy overhead amount
comparable to those of coded packaged drugs and biologicals with an
ASP. We continue to be confident that this conservative estimate of $50
million for redistribution from the cost of uncoded packaged drugs and
biologicals to separately payable drugs and biologicals is an
appropriate amount in light of our uncertainty about the relationship
between ASP and pharmacy overhead costs for the uncoded drugs and
biologicals. We also do not believe this policy is arbitrary because we
finalized our CY 2010 policy for an overhead adjustment methodology in
response to public commenter consensus that this approach was an
appropriate avenue for addressing charge compression in the drug and
biological payment rates for separately paid drugs. We believe that the
consensus among commenters on a redistribution methodology is further
evidence that the policy adopted last year and which we are continuing
for CY 2011 has a rational basis and is not arbitrary.
After careful consideration of the comments and reassessment of the
most current claims data, cost report data and ASP data, for the
reasons discussed above, we are finalizing our proposal to continue the
CY 2010 pharmacy overhead adjustment methodology as set forth at 74 FR
60500 through 60512. We are redistributing $150 million from the
pharmacy overhead cost of coded packaged drugs and biologicals with an
ASP and redistributing $50 million from the cost of uncoded packaged
drugs and biologicals, for a total redistribution of $200 million from
costs for coded and uncoded packaged drugs to separately payable drugs,
with the result that we will pay separately paid drugs and biologicals
at ASP+5 percent for CY 2011. For the reasons stated above, we also are
not accepting the APC Panel's recommendation to pay for acquisition and
pharmacy overhead costs of all separately payable drugs at no less than
average sales price plus 6 percent for CY 2011.
After applying our longstanding methodology for calculating the
total cost of separately payable drugs and biologicals in the claims on
which the CY 2011 final rule payment rates are based, compared to the
ASP dollars for the same drugs and biologicals and without applying the
proposed overhead cost redistribution using updated claims, cost
report, and ASP data, we determined that the estimated aggregate cost
of separately payable drugs and biologicals (status indicators ``K''
and ``'G''), including acquisition and pharmacy overhead costs, is
equivalent to ASP-1 percent (compared to ASP+0 percent in the proposed
rule). Therefore, under our standard drug payment methodology, if we
did not adopt our proposed redistribution of $200 million, we would pay
for separately payable drugs and biologicals at ASP-1 percent for CY
2011, their equivalent average ASP-based payment rate. During our
assessment of the final rule data, we also determined that the
estimated aggregate cost of coded packaged drugs

[[Page 71959]]

and biologicals with an ASP (status indicator ``N'') including
acquisition and pharmacy overhead costs, is equivalent to ASP+296
(compared to ASP+283 in the proposed rule). We found that the estimated
aggregate cost for all coded drugs and biologicals (status indicators
``N,'' ``K,'' and ``G''), including acquisition and pharmacy overhead
costs, is equivalent to ASP+13 percent (compared to ASP+14 in the
proposed rule). These values are shown in Table 32 below.

Table 32--CY 2011 Proposed and Final ASP+X Values for all Coded Drugs and Biologicals With an ASP, Coded
Packaged Drugs and Biologicals With an ASP, and Separately Payable Drugs and Biologicals Under the Standard
Methodology
----------------------------------------------------------------------------------------------------------------
ASP+X for all coded ASP+X for coded
drugs and packaged drugs and ASP+X for separately
biologicals with an biologicals with an payable drugs and
ASP ASP biologicals
----------------------------------------------------------------------------------------------------------------
CY 2011 Proposed Rule *....................... ASP+14 ASP+283 ASP+0
CY 2011 Final Rule **......................... ASP+13 ASP+296 ASP-1
----------------------------------------------------------------------------------------------------------------
* Based on CY 2011 proposed rule claims data and April 2010 ASPs.
** Based on CY 2011 final rule claims data and July 2010 ASPs.

We continue to believe that the combined payment for average
acquisition and pharmacy overhead costs under our standard methodology
may understate the cost of separately payable drugs and biologicals and
related pharmacy overhead for those drugs and biologicals.
Specifically, payment at ASP-1 percent for such costs may not be
sufficient to compensate hospitals for payment for both the acquisition
cost of separately paid drugs and biologicals and for the associated
pharmacy overhead.
In finalizing our proposed overhead adjustment methodology for CY
2011, we observed that, using updated 2009 claims data and ASPs from
July 2010, the overhead cost for coded packaged drugs and biologicals
is $457 million ($612 million in total cost for coded packaged drugs
and biologicals with a reported ASP less $155 million in total ASP
dollars as a proxy for acquisition cost for coded packaged drugs and
biological with a reported ASP). Table 33 below displays our final
findings with regard to the percentage of ASP in comparison to the cost
for packaged coded drugs and for separately payable coded drugs before
application of the overhead adjustment methodology.

Table 33--CY 2011 Final Rule Data: ASP+X Calculation Under Standard Methodology
----------------------------------------------------------------------------------------------------------------
Total cost of
Total ASP dollars for drugs and Ratio of cost to
drugs and biologicals biologicals in ASP (column C/ ASP+X percent
in claims data (in claims data (in column B)
millions)* millions)**
----------------------------------------------------------------------------------------------------------------
Uncoded packaged pharmacy revenue Unknown.............. $652 NA NA
code costs.
Coded Packaged Drugs and $155................. 612 3.96 ASP+296
Biologicals with a reported ASP.
Separately Payable Drugs and 3,334................ 3,316 0.99 ASP-1
Biologicals with a reported ASP.
All Coded Drugs and Biologicals 3,489................ 3,927 1.13 ASP+13
with a reported ASP.
----------------------------------------------------------------------------------------------------------------
* Total July 2010 ASP dollars (ASP multiplied by drug or biological units in CY 2009 claims) for drugs and
biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2009 claims data for drugs and biologicals.

When we redistribute $200 million in overhead cost from packaged
coded and uncoded drugs and biologicals to separately payable drugs and
biologicals, while keeping the total cost of drugs in the claims data
constant, the resulting final ASP+X payment rate for CY 2011 for
separately payable drugs and biologicals is ASP+5 percent. In order to
redistribute the $150 million in pharmacy overhead from packaged costs
of drugs and biologicals for which a HCPCS code was reported, we
reduced the costs attributable to these items and services by
multiplying the costs derived from the revenue center charges for
packaged HCPCs codes by 0.75 (a 25-percent reduction). To redistribute
the $50 million in total cost from packaged costs of drugs and
biologicals for which no HCPCS code was reported, we reduced the costs
attributable to these items and services by multiplying the costs
derived from revenue center charges for pharmacy by 0.92 (an 8-percent
reduction). We note that this is consistent with our CY 2011 proposal
and our CY 2010 final rule policy. Table 34 below displays our final
findings after the overhead adjustment methodology is applied.

[[Page 71960]]

Table 34--CY 2011 Pharmacy Overhead Adjustment Payment Methodology: ASP+X Calculation
----------------------------------------------------------------------------------------------------------------
Total cost of
Total ASP dollars for drugs and
drugs and biologicals biologicals in Ratio of cost to
in claims data (in claims data ASP (column C/ ASP+X percent
millions)* after adjustment column B)
(in millions)**
----------------------------------------------------------------------------------------------------------------
Uncoded packaged pharmacy revenue Unknown.............. $602 NA NA
code costs.
Coded Packaged Drugs and $155................. 462 2.98 ASP+198
Biologicals with a reported ASP.
Separately Payable Drugs and 3,334................ 3,516 1.05 ASP+5
Biologicals with a reported ASP.
All Coded Drugs and Biologicals 3,489................ 3,927 1.13 ASP+13
with a reported ASP.
----------------------------------------------------------------------------------------------------------------
* Total July 2010 ASP dollars (ASP multiplied by drug or biological units in CY 2009 claims) for drugs and
biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2009 claims data for drugs and biologicals.

In summary, therefore, for the reasons set forth above, we are
finalizing our proposal to continue our CY 2010 pharmacy overhead
redistribution methodology. For CY 2011, we are redistributing $150
million in overhead costs from coded packaged drugs and $50 million in
overhead costs from uncoded packaged drugs to result in $200 million in
costs redistributed from packaged coded and uncoded drugs to separately
payable drugs for CY 2011. The redistribution amount of $150 million in
overhead cost from coded packaged drugs and $50 million in cost from
uncoded packaged drugs are within the redistribution parameters
established in our CY 2010 final rule with comment period of roughly
one-third to one-half of overhead cost in coded packaged drugs and
biologicals and approximately 8 percent of drug cost in uncoded
packaged drugs and biologicals.
Adoption of this redistribution methodology results in payment for
separately paid drugs and biologicals at ASP+5 percent for CY 2011.
Comment: Some commenters stated that section 1833 (t)(14)(A) of the
Act requires CMS to pay for separately payable drugs at a rate that is
equal to the average acquisition cost for the drug for a year, as
determined by the GAO or CMS surveys of hospital acquisition cost. The
commenters stated that the most recent survey available is outdated, as
it was performed in CY 2004 by the GAO. In absence of hospital
acquisition cost data, the commenters urged CMS to pay for separately
payable drugs at ASP+6 percent or the rate applicable in the
physician's office setting. The commenters stated that CMS has the
authority to pay for separately payable drugs at ASP+6 percent under
the statute. Many of these commenters suggested that CMS discontinue
the use of the standard methodology altogether and use the default
payment rate of ASP+6 percent, as is given by Congress in statute.
Response: While the commenters are correct that the statute
provides for the use of the methodology described in section 1842(o),
section 1847A, or section 1847B of the Act, as the case may be, as
calculated and adjusted by the Secretary as necessary, payment under
these provisions for a SCOD is required only when the average hospital
acquisition cost for the drug for that year (which at the option of the
Secretary may vary by hospital group (as defined by the Secretary based
on the volume of covered OPD services or other relevant
characteristics)), as determined by the Secretary taking into account
the hospital acquisition cost survey data under subparagraph (D), are
unavailable. We continue to believe that we have established both our
hospital claims data and ASP data as an appropriate proxy for average
hospital acquisition cost, taking the GAO survey information into
account for the base year (70 FR 68641). Many of the drugs and
biologicals covered under the OPPS are provided a majority of the time
in the hospital setting, and we believe that the ASP information we
collect is an adequate proxy for hospital acquisition cost. Further,
the commenters have not disputed the accuracy of the total drug and
biological cost estimated in our claims data, only the estimated cost
of separately payable drugs and biologicals. As we stated in the CY
2006 OPPS final rule, we intend for the quarterly updates of the ASP
based payment rates for separately paid drugs and biologicals to
function as the surveys of hospital acquisition costs that are required
by section 1833(t)(14)(D)(ii) (70 FR 68641). We continue to believe
that average sales prices for separately paid drugs and biologicals
represent a generally appropriate source of hospital average
acquisition cost for drugs and biologicals. Not only are the prices
paid by hospitals (which purchase large quantities of drugs and
biologicals, often through group purchasers) included in the ASP but
also the prices paid by physician groups that furnish much smaller
quantities of these drugs and biologicals are included. In addition the
prices paid by hospitals that participate in the 340B discount program
are not included in the ASP and thus the cost savings to these
hospitals is not reflected in the ASP. For this reason, we believe that
the ASP is a generous proxy for hospitals' average acquisition cost for
separately paid drugs and biologicals. Therefore, we disagree that we
are not complying with the statute by not performing a survey and not
paying at the physician's office rate. For the reasons explained above,
we do not believe that it is appropriate at this time to provide
payment at an amount other than average acquisition cost, with a
redistribution for pharmacy overhead, based on the drug and biological
costs observed in hospital claims data and pricing information observed
in ASP data.
Comment: One commenter stated that the statute requires that CMS
make payment for SCODs at ASP+6 percent, citing that cost data derived
from claims data cannot accurately be said to equal average acquisition
cost. The commenter noted that CMS' methodology in using claims data
reduced by CCRs to derive proxies for hospital costs is a methodology
dependent on assumptions about the relationship between charges and
costs and, therefore, does not typify actual hospital costs for drugs
and biologicals. These cost data, the commenter argued, therefore
cannot equal average acquisition cost for drugs and biologicals.
Response: As we discuss in the response to the previous comment, we
believe that ASP is an appropriate proxy for the acquisition cost of
drugs. We use

[[Page 71961]]

hospital charges and cost report data to estimate the total cost of
drugs and biologicals, including both pharmacy overhead costs and the
acquisition cost of drugs and biologicals. We believe that our claims
data and cost report data provide the best estimate of the national
aggregate total cost of drugs and biologicals. We do not believe that
this methodology for estimating the total cost of drugs and
biologicals, including pharmacy overhead cost, is based on assumptions
about costs and charges, but the actual relationship between costs and
charges for the same hospital for the same services. We estimate costs
from charges submitted on claims for payment, using cost and charge
information from cost report data that are certified to be correct by
the hospital. We note that we view the ASP data, not the cost data, to
be the best proxy for hospital acquisition cost for drugs and
biologicals, without pharmacy overhead costs, while the cost of drugs
and biologicals that we estimate from claims and cost report data is
the only source of the total cost of drugs and biologicals, that
includes both pharmacy overhead and acquisition cost.
Comment: MedPAC remained concerned about our policy of setting
payment rates for drugs and biologicals as a percentage of ASP because
they stated that pharmacy overhead, as a percentage of total costs,
vary widely across individual drugs. MedPAC previously had recommended
that CMS collect data on hospital's pharmacy overhead costs separately
from drug acquisition costs and that these data could be used to create
separate payment to hospitals for pharmacy overhead and drug
acquisition costs.
Response: While we acknowledge that pharmacy overhead varies by the
drug to which it applies, we believe that as long as payment is
distributed among hospitals in a manner that, on average, reflects
relative costs of drugs and biologicals they furnish, including
pharmacy overhead, the goals of the OPPS are met as it is a system of
averages. With regard to the comment that CMS should collect data on
hospitals' pharmacy overhead costs separately from drug acquisition
costs and that these data could be used to create separate payment to
hospitals for pharmacy overhead and drug acquisition costs, as we
discuss in detail above, we proposed to create HCPCS codes for pharmacy
overhead services so that hospitals could charge for these services and
provide us a basis for making separate payments for pharmacy overhead.
However, hospitals strongly objected and provided convincing arguments
that to do so would impose an enormous burden on them and on other
payers that would not provide an offsetting benefit. We believe that
hospitals would find any option requiring them to identify the cost
associated with the overhead component of a drug or biological or a
class of drugs or biologicals burdensome and imprecise.
Comment: Several commenters cited methodological concerns about the
approach CMS used to calculate the proposed equivalent average ASP-
based payment amount for separately payable drugs and biologicals.
Specifically, several commenters noted that, for the proposed rule, CMS
used ASP data from the fourth quarter of CY 2009, which is the basis
for calculating payment rates for drugs and biologicals in the
physician's office setting using the ASP methodology effective April 1,
2009, along with hospital claims data from CY 2009 to determine the
relative ASP amount for CY 2011 under CMS' proposed payment
methodology. The commenters requested that CMS use an alternative ASP
file for the final rule calculation of ASP+X to better align ASP data
with hospital claims and cost report data. The commenters stated that
the CMS methodology, which they stated uses fourth quarter CY 2009 ASP
data as a proxy for drug acquisition costs, provides ASPs that are well
after the time hospitals would have purchased most of their drugs for
administration in CY 2009. As an alternative, the commenters requested
that CMS use an earlier ASP file that is more representative of the
costs to hospitals when they purchase drugs for the claims year.
Specifically, some commenters requested that CMS use the July 1, 2009
ASP file that represents sales from the first quarter of CY 2009 when
comparing CY 2009 hospital claims data to ASP data to determine an
ASP+X amount. One commenter requested that CMS clarify a statement made
in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60516)
that CMS would need to offset any increases in the relative ASP amount
resulting from the use of a different ASP file with a deflation
adjustment for each hospital's CCRs for cost center 5600 ``Drugs
Charges to Patients'' in order to simulate costs from claim charges in
the claim year.
One commenter suggested that CMS' standard methodology was
inappropriate because it utilizes estimated costs from claims data that
was part of the drug ratesetting methodology that the MMA (Pub. L. 108-
173) replaced with the requirement for payment for SCODs at average
acquisition cost. Another commenter suggested that CMS' estimated cost
from claims was not reliable and that CMS discontinue using the
standard methodology and substitute the ASPs for these drugs as the
starting point for the overhead adjustment methodology. One commenter
indicated that it would expect a fixed redistribution amount to
increase each year, similar to CMS' inflation of the packaging
threshold each year to reflect increases in the price of drugs and
biologicals.
Response: For our calculation of the per day costs for drugs and
biologicals in this CY 2011 OPPS/ASC final rule with comment period, we
use the ASP data from the first quarter of CY 2010 (which is used to
calculate payment rates for drugs and biologicals in the physician's
office setting for services furnished on and after July 1, 2010) and
with updated hospital claims data (that is, claims for services
furnished during CY 2009 which were processed through the Common
Working File on or before July 1, 2010). Payment rates for HCPCS codes
for separately payable drugs and biologicals included in Addenda A and
B to this final rule with comment period are based on ASP data from the
second quarter of CY 2010 (which is used to calculate payment rates for
drugs and biologicals in the physician's office setting for services
furnished on and after October 1, 2010).
Since implementing the ASP+X methodology in CY 2006, we have used
the most recently available data to establish our relative ASP payment
rate for the upcoming year, consistent with our overall policy of
updating the OPPS using the most recent claims and cost report data.
For this CY 2011 OPPS/ASC final rule with comment period, this results
in using July 2010 ASP payment rates (based on first quarter CY 2010
sales), CY 2009 hospital claims data, and the most recently available
hospital cost reports. For this final rule with comment period, the
majority of cost reports are from CY 2008, with good representation
from CY 2009 and some cost report periods from as early as CY 2004. As
we have noted in previous years, the relative ASP+X amount is likely to
change from the proposed rule to the final rule as a result of updated
ASP data, hospital claims data, and updated hospital cost reports. We
do not have evidence that we are introducing significant errors into
our ASP+X percent calculation by not aligning all pricing and cost data
to a single period of time. However, as we stated in the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60516), we believe that if we
were to use an ASP file from CY 2009, which the

[[Page 71962]]

commenters claimed would more accurately represent hospital costs
associated with procuring drugs and biologicals for that claims year,
we would need to offset any increases in the relative ASP amount
resulting from the use of a different ASP file with a deflation
adjustment for each hospital's CCR for cost center 5600 ``Drugs Charged
to Patient'' in order to simulate costs from claim charges in the
claims year. As discussed in section II.A. 1.c. of this final rule with
comment period, we calculated the APC median costs on which the final
CY 2011 APC payment rates are based by applying hospital-specific
overall ancillary CCRs and hospital-specific departmental CCRs for each
hospital for which we had CY 2009 claims data to charges on claims
data. These CCRs are calculated from the most recent available hospital
cost reports, in most cases, cost reports for CY 2008. If we follow the
commenters' suggestion to use the CY 2009 claims data (with estimated
cost on claims created by applying a CY 2008 CCR to CY 2009 charges)
with a July 2009 ASP file to calculate the ASP+X percent, we would
align two but not three of the data time periods for the majority of
hospitals: Cost report data for CY 2008, claims data for CY 2009, and
ASP data for July 2009. In general, CCRs typically decline over time.
Because of this, our estimated cost in the CY 2009 claims data that we
use to model this OPPS modestly overestimates actual cost by applying a
CY 2008 CCR to CY 2009 charges. Because CCRs decline each year, we
expect that, on balance, CY 2009 CCRs will be lower than CY 2008 CCRs.
Therefore, our current methodology applies a higher than actual CCR
from CY 2008 to the CY 2009 charges on claims.
Therefore, in order to bring all time periods for the various data
elements in the calculation (cost report data, claims data, and ASP
data) into alignment, we would need to estimate CCR deflation (the
differential in charge and cost inflation) for cost center 5600 between
CY 2008 and CY 2009 and apply this deflation factor to the CCRs we use
to estimate costs from claims for the majority of hospitals. To be
precise, we would need to consider making additional assumptions for
hospitals with cost reporting periods before CY 2008. We make
comparable CCR deflation estimates when we estimate our fixed dollar
eligibility threshold for outlier payments described in section II.F.
of this final rule with comment period. We base those estimates on an
established IPPS methodology for estimating charge and CCR inflation
for all hospital inputs, not just drugs and biologicals.
We have evaluated the impact of using dated CCRs in our estimation,
and we find that the slightly higher estimated cost created by using a
CCR from the year prior to the claim year (CY 2008 instead of CY 2009)
generally offsets the increases in prices in a more recent ASP file for
sales from first quarter 2010 for this final rule with comment period,
and we believe making assumptions about charge or cost inflation
specific to drug charges and costs captured in cost center 5600, which
we have not yet estimated, has the potential to introduce error into
this calculation. Therefore, we are continuing our current policy of
using the most recently available claims data, cost report data, and
ASP data when performing our ASP+X calculation under the final
redistribution methodology in order to set payment rates for separately
payable drugs and biologicals.
We disagree with the commenter who believed our standard ASP+X
methodology is inappropriate because it utilizes estimated costs from
claims data. We believe the commenter is suggesting that Congress does
not want the agency to use estimated costs from claims data in any part
of our drug ratesetting methodology for SCODs because the drug
ratesetting methodology that we used prior to the MMA (which utilized
estimated costs from claims) was replaced with the methodology set
forth in section 1833(t)(14) of the Act that was created by the MMA.
Section 1833(t)(14)(A)(iii) of the Act sets forth the payment
methodology for SCODs for years after 2005, and subjects that payment
methodology to section 1833(t)(14)(E) of the Act. Under section
1833(t)(14)(E)(i) of the Act, MedPAC was required to submit a report to
the Secretary on the adjustment of the APCs for SCODs to take into
account overhead and related expenses, such as pharmacy services and
handling costs. Further, section 1833(t)(14)(E)(ii) of the Act
authorizes the Secretary to adjust the weights for APCs for SCODs to
take into account the recommendations contained in the MedPAC report
referenced above. In their June 2005 report, MedPAC indicated that
charges for drugs and biologicals are based on both acquisition cost
and on the cost of overhead and handling. In order to adjust the
payment rates to appropriately account for those overhead and handling
costs, as is permitted under the statute, it is necessary for us to use
estimated costs from claims data because this information is not
available from ASP data. Consequently, we disagree with the commenter
that our use of the claims data in the standard ratesetting methodology
is inappropriate. Moreover, we continue to believe that we have
established our hospital claims data and ASP data as an appropriate
proxy for average acquisition cost, taking into account the GAO survey
information for the base year (70 FR 68641).
In addition, we note that we believe that we are using our
estimated cost on claims data in our ASP+X methodology in a very
different way than we did prior to the MMA. Prior to the MMA, we used
estimated cost on claims data to calculate a median cost estimate for
each drug or biological as we do for each APC, and we based payment on
that median cost. After the MMA, we have used ASP data and costs
estimated from charges on hospital claims as a proxy for both the
average hospital acquisition cost and the pharmacy overhead cost to
establish a combined payment rate for acquisition cost and pharmacy
overhead. Unlike our methodology prior to the MMA, we are using ASP
data in our drug payment calculation in addition to aggregate cost data
from claims. In addition, unlike our methodology prior to the MMA, we
are not estimating individual cost per drug, but aggregating that cost
data. By comparing total ASP dollars for separately paid drugs to total
estimated cost on claims data for separately paid drugs, we are
estimating an average cost of pharmacy overhead and handling associated
with the separately paid drugs and biologicals.
For reasons already discussed, we also do not believe it is
appropriate to exclude our claims data from our ASP+X calculation by
simply applying a $200 million assessment of overhead to total ASP
dollars to arrive at an average weighted ASP+X percent payment level as
suggested by one commenter. As noted above, in their June 2005 report,
MedPAC found that charges for drugs and biologicals are based both on
acquisition cost and on the cost of overhead. Estimating an appropriate
overhead amount requires using this data, and we continue to believe
that this data is accurate.
With regard to inflating the redistribution amount as we do for the
drug packaging threshold, as we discuss below, our proposed
redistribution amount of $150 million in overhead cost from coded
packaged drugs and $50 million in cost from uncoded packaged drugs
remained within the parameters of roughly one-third to one-half of
overhead cost in coded packaged drugs and approximately 8 percent of
drug

[[Page 71963]]

cost in uncoded packaged drugs. We will take the commenter's suggestion
into consideration for future years.
Comment: A few commenters expressed concern that when CMS applies a
single CCR to adjust charges to costs for drugs and biologicals, charge
compression leads to misallocation of pharmacy overhead costs
associated with high and low cost drugs and biologicals during
ratesetting. The commenters noted that hospitals disproportionately
mark up their charges for low cost drugs and biologicals to account for
pharmacy overhead costs. Therefore, some commenters suggested using the
costs of both packaged drugs and separately payable drugs when
calculating the equivalent average ASP-based payment amount for
separately payable drugs. They argued that this would provide a more
accurate ASP-based payment amount for separately payable drugs. As an
alternative, the commenters recommended that CMS eliminate the drug
packaging threshold and provide separate payment for all Part B drugs
under the OPPS at an ASP+X percent amount calculated from the cost for
all drugs with HCPCS codes.
Several commenters objected to the inclusion of data from hospitals
that receive Federal discounts on drug prices under the 340B program in
the ASP calculation for separately payable drugs and biologicals. The
commenters pointed out that hospital participation in the 340B program
had grown substantially over the past few years, will further increase
due to the provisions in the Affordable Care Act; they believed that
the costs from these hospitals now constituted a significant proportion
of hospital drug costs on CY 2009 OPPS claims. The commenters stated
that including 340B hospital claims data when comparing aggregate
hospital costs based on claims data to ASP rates contributed to an
artificially low equivalent average ASP-based payment rate because ASP
data specifically exclude drug sales under the 340B program.
In addition, MedPAC encouraged CMS to exclude data from 340B
hospitals from the ratesetting. MedPAC stated that analysis indicates
that exclusion of the 340B hospitals would increase CMS' estimates of
the cost of separately paid drugs by about 3.5 percent above the
estimate obtained when the 340B hospital claims data are included in
the ratesetting calculations and that excluding the 340B hospital
claims data would result in payment rates for separately paid drugs
that more accurately reflect the costs incurred by other hospitals.
One commenter supported the inclusion of claims data for 340B
hospitals in the calculation of the ASP+X payment for separately
payable drugs and biologicals and equal payment to 340B hospitals for
separately payable drugs and biologicals as hospitals that do not
participate in the 340B program. The commenter noted that continuing
this policy would maintain an important benefit of the 340B program.
Response: In proposing to continue our CY 2010 overhead adjustment
methodology for CY 2011, we attempted to address the issue of charge
compression by redistributing some portion of the estimated overhead
cost in coded packaged drugs ($150 million) and a conservative estimate
of overhead cost in the uncoded packaged drug cost ($50 million).
Further, we have made several proposals in the past to more precisely
identify pharmacy overhead costs and to address charge compression in
the pharmacy revenue center, which were not finalized in response to
public comments. As we note in our discussion of the MedPAC comment
above, for the CY 2006 OPPS, we proposed to establish three distinct
Level II HCPCS C-codes and three corresponding APCs for drug handling
categories to differentiate overhead costs for drugs and biological (70
FR 42730). In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), we
proposed to instruct hospitals to remove the pharmacy overhead charge
for both packaged and separately payable drugs and biologicals from the
charge for the drug or biological and report the pharmacy overhead
charge on an uncoded revenue code line on the claim. We believed that
this would provide us with an avenue for collecting pharmacy handling
cost data specific to drugs in order to package the overhead costs of
these items into the associated procedures, most likely drug
administration services. However, we did not finalize this proposal due
to strong objection from hospitals. For CY 2009, we proposed 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 note that we expected
that CCRs from the proposed new cost centers would be available in 2 to
3 years to refine OPPS drug cost estimates by accounting for
differential hospital markup practices for drugs with high and low
overhead costs. However, we did not finalize any of these proposals due
to concerns from the hospital community that these proposals would
create an overwhelming burden on hospitals and staff. By proposing to
continue our CY 2010 overhead adjustment methodology, we were once
again attempting to address the issue of charge compression without
requiring any changes to current hospital reporting practices.
It has been our policy since CY 2006 to only use separately payable
drugs and biologicals in the calculation of the equivalent average ASP-
based payment amount under the OPPS. We do not include packaged drugs
and biologicals in this standard analysis because cost data for these
items are already accounted for within the APC ratesetting process
through the median cost calculation methodology discussed in section
IIA.2 of this final rule with comment period. To include the costs of
coded packaged drugs and biologicals in both our APC ratesetting
process (for associated procedures present on the same claim) and in
our ratesetting process to establish an equivalent average ASP-based
payment amount for separately payable drugs and biologicals would give
these data disproportionate emphasis in the OPPS by skewing our
analyses, as the costs of these packaged items would be, in effect,
counted twice. Accordingly, we are not adopting the suggestion from
commenters that we include all packaged and separately payable drugs
and biologicals when establishing an equivalent average ASP-based rate
to provide payment for the hospital acquisition and pharmacy handling
costs of drugs and biologicals. However, we remind commenters that,
because the costs of packaged drugs and biologicals, including their
pharmacy overhead costs, are packaged into the payment for the
procedures in which they are administered, the OPPS provides payment
for both the drugs and the associated pharmacy overhead costs through
the applicable procedural APC payments.
Furthermore, we disagree with the commenters who recommended that
we should pay separately for all drugs and biologicals with HCPCS
codes. We continue to believe that packaging is a fundamental component
of a prospective payment system that contributes to important
flexibility and efficiency in the delivery of high quality hospital
outpatient services. Therefore, we believe it is appropriate to
maintain a modest drug packaging threshold that packages the costs of
inexpensive drugs into payment for the associated procedures.
With respect to the comment that we should not include data from
hospitals that receive discounts on outpatient drug prices under the
340B program in

[[Page 71964]]

our estimation of the total cost of separately paid drugs and
biologicals and pharmacy overhead, as we stated in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60517), we continue to believe
that excluding data from hospitals that participate in the 340B program
from our ASP+X calculation, and paying those hospitals at that derived
payment amount, would inappropriately redistribute payment to drugs and
biologicals from payment for other services under the OPPS. The ASP-
equivalent cost of drugs under the OPPS that would be calculated only
from claims data for hospitals that do not participate in the 340B
program would likely be higher than the cost of all drugs from our
aggregate claims from all hospitals. To set drug payment rates for all
hospitals based on a subset of hospital cost data, determined only from
claims data from hospitals that do not participate in the 340B program
would increase the final APC payment weights for drugs in a manner that
does not reflect the drug costs of all hospitals, although all
hospitals, including 340B hospitals, would be paid at these rates for
drugs. Furthermore, as a consequence of the statutory requirement for
budget neutrality, increasing the payment weights for drugs by
excluding 340B hospital claims would reduce the relative payment weight
for other services in a manner that does not reflect the procedural
costs of all hospitals relative to the drug costs of all hospitals,
thereby distorting the relativity of payment weights for services based
on hospital costs. Many commenters on the CY 2009 OPPS/ASC final rule
with comment period were generally opposed to differential payment for
hospitals based on their 340B participation status, and we do not
believe it would be appropriate to exclude claims from this subset of
hospitals in the context of a CY 2011 drug and biological payment
policy that is based on average acquisition cost and pays all hospitals
at the same rate for separately payable drugs and biologicals.
Comment: One commenter expressed concern over the proposed overhead
adjustment methodology, stating that ``policy packaged'' drugs, similar
to contrast agents and diagnostic radiopharmaceuticals, are subject to
charge compression and, therefore, should not be included in the
redistribution of packaged drug costs to avoid a potential
underestimation of costs. The commenter further suggested that CMS
remove contrast agents from the pool of ``policy packaged'' drugs that
are redistributed to separately payable drugs and instead redistribute
more costs from threshold packaged drugs, or those drugs with per day
costs less than the packaging threshold that the commenter attested are
not subject to charge compression, to arrive at a payment rate of ASP+6
percent.
Another commenter stated that CMS should not reduce the pharmacy
overhead costs for radiology procedures with packaged diagnostic
radiopharmaceuticals because of their ``policy packaged'' status and
because of special handling costs associated with radiology procedures.
The commenter further stated that CMS should consider using ASP data,
if available, to benchmark offset amounts in APCs and to account for
pharmacy and overhead costs.
A few commenters expressed concern regarding how CMS accounts for
radiopharmaceuticals in the overhead adjustment methodology to
redistribute pharmacy overhead costs from packaged drugs and
biologicals to separately paid drugs and biologicals and requested that
CMS provide details on how costs for radiopharmaceuticals are included
in the overhead adjustment methodology. The commenters also asked for
clarification on how hospitals are to code for radiopharmaceuticals,
citing that CMS' statement on not including the cost of
radiopharmaceuticals because they are not reported under pharmacy
revenue codes or under the pharmacy cost center on the hospital cost
report is contradictory to previous statements urging hospitals to
report pass-through diagnostic radiopharmaceutical cost under revenue
code 0636.
Response: As we stated in the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60513), we believe that contrast agents are
contributing to the overall charge compression for all drugs and
biologicals that are the specific target of our redistribution
methodology and that, in almost all cases, hospitals capture the costs
and charges for pharmacy revenue codes, including contrast agents, in
the cost center 5600 ``Drugs Charged to Patients.'' We stated that this
is the cost center that we used to estimate costs from charges for the
pharmacy revenue codes in our claims data each year. The proposed
methodology of redistributing pharmacy overhead cost from packaged
drugs and biologicals to separately payable drugs and biologicals was a
proposal to address charge compression observed within this specific
cost center that captures the vast majority of costs and charges for
drugs and biologicals billed on hospital claims. Therefore, as most
hospitals billing contrast agents with pharmacy revenue codes are
associating the contrast agent costs with the cost center 5600, we
believe it is appropriate to redistribute cost from contrast agents to
separately payable drugs and biologicals under our final CY 2011
pharmacy overhead cost redistribution methodology.
In response to the commenter's suggestion that the cost from
contrast agents should not be included in the pool of packaged
redistributed cost because it has been OPPS policy to package payment
for all contrast agents since CY 2008 (as discussed in V.B.2.d of this
final rule with comment period), as we stated in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60514), the proposed methodology
for redistributing pharmacy overhead cost from packaged drugs and
biologicals was not only a proposal to address charge compression, but
specifically a proposal to address charge compression in light of our
adoption of a specific drug packaged threshold, which is $70 for CY
2011. The argument that it would, therefore, be inappropriate to
redistribute cost from contrast agents could have merit if there was a
sizeable amount of aggregate cost for contrast agents with per day
costs greater than the drug packaging threshold of $70. In that case,
it could be argued that the compression in cost estimates for expensive
contrast agents (those with per day costs greater than the $70
packaging threshold) created by estimating costs for those agents by
applying the CCR for the single cost center 5600 to expensive contrast
agents' charges would be offset by the overestimation of costs for
inexpensive contrast agents (those with per day costs less than the $70
packaging threshold) created by application of the same single CCR to
inexpensive contrast agents' charges, assuming that hospitals apply a
lower markup to expensive contrast agents and a higher markup to
inexpensive contrast agents. If the mix of expensive and inexpensive
contrast agents resembled the mix of expensive and inexpensive drugs
generally captured in the cost center 5600, the use of a single CCR
would accurately estimate total cost of contrast agents in aggregate.
Because all contrast agents not receiving pass-through payment are
packaged, packaging an accurate aggregate cost estimate for contrast
agents could argue against redistributing cost from packaged contrast
agents to separately payable drugs and biologicals. However, we have
not observed any evidence of this in our CY 2011 final rule claims
data.

[[Page 71965]]

In conclusion, because contrast agents are billed under pharmacy
revenue codes and accounted for in the cost center 5600 and because the
per day cost of almost all contrast agents falls under the CY 2010
packaging threshold of $70, we believe the estimated cost of contrast
agents (which are packaged drugs with HCPCS codes and ASPs for which we
have found the estimated cost to be ASP+296 percent), along with all
other packaged drugs billed under pharmacy revenue codes and accounted
for in cost center 5600, contain a disproportionate amount of pharmacy
overhead cost, and that it is appropriate to include them in our final
CY 2011 redistribution methodology as this methodology is targeted to
packaged drugs and biologicals accounted for in cost center 5600.
While we believe that contrast agents are commonly billed under
pharmacy revenue codes and that hospitals largely account for the cost
of contrast agents under the cost center 5600 on their Medicare
hospital cost report, we did not observe that hospitals apply the same
practice for diagnostic radiopharmaceuticals. After reviewing our
claims data, we found that the majority of diagnostic
radiopharmaceuticals are billed under revenue code 0343 (Nuclear
medicine; Diagnostic Radiopharmaceuticals), which we believe is
appropriate. As specified in our revenue code-to-cost center crosswalk,
we believe hospitals largely account for the costs and charges
associated with revenue code 0343 in a nonstandard cost center for
Diagnostic Nuclear medicine or the cost center 4100 ``Radiology-
Diagnostic.'' Because the redistribution of pharmacy overhead cost from
packaged drugs and biologicals to separately payable drugs and
biologicals is intended to specifically address charge compression in
the pharmacy cost center, in light of the above information, we
excluded the costs of both diagnostic and therapeutic
radiopharmaceuticals from our estimate of total drug and biological
cost in the claims data from the final CY 2011 redistribution
methodology, as we proposed. As a result, the final payment rates for
nuclear medicine procedures that incorporate the costs of packaged
diagnostic radiopharmaceuticals are not impacted by the final
redistribution methodology. With regard to the comment that we should
use ASP data to benchmark offset amounts for APCs that require
radiopharmaceuticals, we note that we do not collect ASP data on
diagnostic radiopharmaceuticals. Moreover, the current process for
identifying the cost of a radiopharmaceutical for purposes of
offsetting the cost when a radiopharmaceutical with pass through status
is furnished is based on the historic costs for the radiopharmaceutical
being replaced by the pass-through radiopharmaceutical and therefore
represents the complete cost, including overhead costs. We believe that
the historic cost of radiopharmaceuticals that were supplied to furnish
the nuclear medicine procedure is a more complete and appropriate
offset amount than the ASP amount would be, if CMS gathered ASP data
for diagnostic radiopharmaceuticals, because the historic cost of the
radiopharmaceuticals includes the overhead cost as well as the
acquisition cost of the radiopharmaceuticals being replaced by the
pass-through radiopharmaceuticals.
With regard to the request for coding advice, we note that we
generally require hospitals to follow National Uniform Billing
Committee (NUBC) guidance for the choice of an appropriate revenue code
that also is appropriate for the hospital's internal accounting
processes. As we discuss below, we have encouraged hospitals to
consider reporting all drugs in revenue code 0636 (Pharmacy-Extension
of 025X; Drugs Requiring Detailed Coding) only to improve HCPCS coding
for packaged drugs and biologicals in our claims data to improve the
accuracy of our ASP+X calculation. We continue to believe that more
complete data from hospitals identifying the specific drugs that were
provided during an episode of care will improve payment accuracy for
separately payable drugs in the future. However, we believe hospitals
should report diagnostic radiopharmaceuticals with the most appropriate
revenue code, and we are confident that coding for diagnostic
radiopharmaceuticals will occur because of our claims edits for
radiolabeled products.
Comment: Several commenters were concerned with statements in the
CY 2011 OPPS/ASC proposed rule that all drugs and biologicals with
HCPCS codes should be billed under revenue code 0636. These commenters
stated that the statements may confuse hospitals and recommended that
CMS clarify that the original intent of revenue code 0636 was to
capture those drugs for which a health plan requires special tracking,
such as for costly cancer drugs. These commenters believed that
hospitals should continue to use other revenue code categories along
with their respective HCPCS codes, such as revenue codes 025x
(Pharmacy) or 062x (Pharmacy-Extension of 025x). In addition, the
commenters noted that there are drugs that do not have a specific
revenue code, such as aspirin, for which an ``unspecified drugs'' HCPCS
code could be used. One commenter requested that CMS clarify whether it
intended that a new revenue code for unspecified drugs should be
created and whether these codes should be captured on a different line
item on the cost report.
At its August 2010 meeting, the APC Panel recommended that CMS
require hospitals to report all drugs with a HCPCS code using revenue
code 0636, regardless of payment status (Recommendation 20). Some
commenters supported the APC Panel recommendation and requested that
CMS require all hospitals to report all drugs with a HCPCS code using
revenue code 0636, whether the drug was packaged or paid separately.
These commenters indicated that they believed that reporting all drugs
with HCPCS codes under revenue code 0636 would not only support better
ratesetting for drugs and biologicals but would also support the
implementation of section 9008 of the Affordable Care Act. Other
commenters asked that CMS require that hospitals report HCPCS codes for
all drugs that have them and report HCPCS code J3490 (Unclassified
biologics) for all drugs that do not have a HCPCS code that is specific
to the drug or biological. The commenters stated that to do so would
impose virtually no burden on hospitals, which must already report both
HCPCS codes and national drug codes (NDCs) for all drugs they furnish
when they bill Medicaid. Although the commenters asked that CMS require
mandatory reporting of all drugs using either specific HCPCS codes or
J3490, they believed that CMS should leave the choice of the revenue
code that must be reported on the line to the discretion of the
hospital.
Response: We did not intend to suggest in the proposed rule that
all drugs and biologicals with HCPCS codes should be billed under
revenue code 0636 solely. We cannot provide the original intent of the
creation of revenue code 0636 because the NUBC establishes revenue
codes. However, we agree with commenters that drugs and biologicals
with HCPCS codes may be appropriately reported in revenue code
categories other than revenue code 0636, including, but not limited to,
revenue codes 025x and 062x. Therefore, we are not accepting the APC
Panel recommendation and the recommendation of some commenters that we
require that all drugs and biologicals with HCPCS codes must be

[[Page 71966]]

reported with revenue code 0636. We recognize that hospitals may carry
the costs of drugs and biologicals in multiple cost centers and that it
may not be appropriate to report the cost of all drugs and biologicals
in one specified revenue code. Similarly, we are not accepting the
recommendation of some commenters that we require that hospitals report
all drugs and biologicals using HCPCS codes and report drugs and
biologicals that do not have specific HCPCS codes using HCPCS code
J3490 for the CY 2011 OPPS. We do not believe that it would be
appropriate to impose such a requirement without first proposing it and
considering the comments of the public.
However, we continue to believe that OPPS ratesetting is most
accurate when hospitals report charges for all items and services that
have HCPCS codes using those HCPCS codes, regardless of whether payment
for the items and services is packaged. As we state in this final rule
with comment period, it is our standard ratesetting methodology to rely
on hospital cost report and charge information as it is reported to us
through the claims data. We continue to believe that more complete data
from hospitals identifying the specific drugs that were provided during
an episode of care will improve payment accuracy for separately payable
drugs in the future. Therefore, we continue to encourage hospitals to
change their reporting practices if they are not already reporting
HCPCS codes for all drugs and biologicals furnished, where specific
HCPCS codes are available for those drugs and biologicals.
In response to the commenters' request that CMS address the need
for a new revenue code for drugs and biologicals without HCPCS codes
and whether the costs of these drugs and biologicals should be captured
on a different line on the cost report, we do not at this time see a
benefit in implementing a new revenue code for drugs and biologicals
nor do we see a need to require hospitals to capture these costs on a
specified line on the cost report at this time. Neither creation of a
new revenue code for drugs nor specifying that hospitals must capture
drug and biological costs on a specified line in the cost report are
necessary for us to redistribute pharmacy overhead from packaged drugs
to separately paid drugs and biologicals and we believe that they would
impose unnecessary burden on hospitals without improving payment for
drugs and biologicals.
Comment: One commenter requested that CMS release all details
pertaining to the study mentioned in the CY 2011 OPPS/ASC proposed rule
on uncoded drugs and biologicals.
Response: We make available to the public the claims data we use
for purposes of the establishment of the OPPS payment rates so that the
public may undertake studies of interest to them. Our Web site includes
information about purchasing the ``OPPS Limited Data Set,'' which now
includes the additional variables previously available only in the OPPS
Identifiable Data Set, including ICD-9-CMS diagnosis codes and revenue
code payment amounts. Information on acquiring these data is available
on the CMS Web site at: http://www.cms.gov/hospitalOutpatientPPS.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46278), we discuss our
analysis of uncoded packaged drug and biological cost and our
evaluation of the services with which uncoded packaged drug cost
appears in the claims data, in an effort to assess how much uncoded
drugs resemble coded packaged drugs. We found that most uncoded
packaged drug costs appear with surgical services (status indicator
``T''), and that most coded packaged drug costs appear with medical
services (status indicators ``S'', ``V'', ``X''). We stated that, in
light of this information, we were not confident that the drugs
captured by uncoded drug cost are the same drugs captured by coded
packaged drug cost. Therefore, we stated that we did not believe we
could assume that they are the same drugs, with comparable overhead and
handling costs. We continue to believe redistributing $150 million in
coded packaged drug cost and $50 million in uncoded packaged drug cost
to separately payable drugs is a fair and sufficient amount for
adequate payment for separately payable drugs. Because we cannot be
certain that we know what portion of the uncoded drugs and biologicals
cost is acquisition cost versus pharmacy overhead costs, we have no
compelling reason to redistribute a greater amount of drug cost.
Without being able to calculate an ASP for these drugs and biologcials
and without being able to gauge the magnitude of overhead complexity
associated with these drugs and biologicals, we do not believe that we
should assume that the same amount of proportional overhead should be
redistributed.
Comment: One commenter recommended that CMS implement a payment
rate floor of ASP+4 percent if the current methodology is not
discontinued.
Response: We do not see a need to implement a payment rate floor of
ASP+4 percent. We believe that the CY 2011 OPPS policy that combines
payment for average acquisition and pharmacy overhead costs under our
standard methodology appropriately captures the cost of separately
payable drugs and biologicals and related pharmacy overhead for those
drugs and biologicals and, therefore, a payment floor is unnecessary.
We proposed and are finalizaing an overhead adjustment methodology to
pay for separately payable drugs and biologicals at what we believed
was an appropriate ASP+X payment amount. We continue to believe that
this methodology is appropriate for CY 2011, as explained elsewhere in
this preamble. In addition, we disagree with commenters that a payment
floor of specifically ASP+4 percent should be implemented, as there is
no data or evidence to support that ASP+4 percent is an appropriate
amount to be used as a payment floor for the payment rate for
separately paid drugs and biologicals.
Comment: One commenter recommended that CMS pay for all separately
payable drugs and biologicals at ASP+14 percent or at the cost for all
coded drugs and biologicals as presented in the CY 2011 OPPS/ASC
proposed rule.
Response: We disagree with the commenter that all separately
payable drugs and biologicals should be paid at ASP+14 percent. The
commenter makes this recommendation, noting that ASP+14 percent was the
cost we found in the proposed rule data for packaged and separately
payable drugs and biologicals that have HCPCs codes. Paying for
separately payable drugs at this payment rate would deviate from our
proposed and final overhead adjustment methodology and our standard
methodology, as it would pay for separately payable drugs and
biologicals at the cost for all coded drugs. As we noted above, we do
not include packaged drugs and biologicals in the standard analysis
because cost data for these items are already accounted for within the
APC ratesetting process through the median cost calculation methodology
discussed in section IIA.2 of this final rule with comment period. To
include the costs of coded packaged drugs and biologicals in both our
APC ratesetting process (for associated procedures present on the same
claim) and in our ratesetting process to establish an equivalent
average ASP-based payment amount for separately payable drugs and
biologicals would give these data disproportionate emphasis in the OPPS
by skewing our analyses, as the costs of these packaged items would be,
in effect, counted twice.

[[Page 71967]]

Therefore, we find no basis to pay for separately payable drugs and
biologicals at ASP+14 percent under our overhead adjustment
methodology, which redistributes $200 million in cost from coded and
uncoded packaged drugs and biologicals to separately payable drugs and
biologicals. We continue to believe that redistributing $200 million
under our overhead adjustment methodology is appropriate for CY 2011.
Therefore, for CY 2011, we are finalizing our proposal to continue our
CY 2010 overhead adjustment methodology. This methodology results in a
redistribution of $200 million in cost from packaged drugs and
biologicals to separately payable biologicals, resulting in a payment
rate of ASP+5 percent for CY 2011.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue our CY 2010
redistribution methodology. Under this methodology, we will
redistribute $150 million from the pharmacy overhead cost of coded
packaged drugs and biologicals with an ASP and will redistribute $50
million from the cost of uncoded packaged drugs and biologicals for a
total of $200 million to be redistributed from cost in coded and
uncoded packaged drugs to payment for separately payable drugs for CY
2011. We will redistribute pharmacy overhead cost among drugs and
biologicals, thereby maintaining the estimated total cost of drugs and
biologicals in our claims data (no redistribution of cost would occur
from other services to drugs and biologicals or vice versa). The result
of the proposed methodology when applied using July 2010 ASP, data for
claims for services furnished during CY 2009 and processed through the
Common Working File before January 1, 2010, and the most recent
submitted cost reports as of January 1, 2010, is a final payment rate
for separately paid drugs and biologicals of ASP+5 percent for CY 2011.
We will continue to include the claims data for 340B hospital in our
assessment of the total cost of drugs and biologicals that we use to
calculate the amount above ASP that represents pharmacy overhead under
the CY 2011 OPPS for the reasons stated above. In addition, we are
finalizing our proposal to continue to pay hospitals that participate
in the 340B program at the same rate for separately payable drugs and
biologicals as we will pay hospitals that do not participate in the
340B programs for CY 2011 because we are continuing to include the cost
of drugs and biologicals furnished by 340B hospitals in our
methodology. In addition, we will include claims from 340B hospitals in
our calculation of the final payment rate for separately paid drugs and
biologicals. The estimated payment for separately payable drugs and
biologicals is taken into account in the calculation of the weight
scaler that will apply to the relative weights for all procedures
services (but will not apply to separately payable drugs and
biologicals) paid under the OPPS, as required by section 1833(t)(14)(H)
of the Act.
We note that we continue to pursue the most appropriate methodology
for establishing payment for drugs and biologicals under the OPPS and
that we will continue to evaluate the appropriateness of this
methodology when we establish each year's payment for drugs and
biologicals under the OPPS.
We note that separately payable drug and biological payment rates
listed in Addenda A and B to this final rule with comment period, which
illustrate the final CY 2011 payment of ASP+5 percent for separately
payable nonpass-through drugs and nonimplantable biologicals and ASP+6
percent for pass-through drugs and biologicals, reflect either ASP
information that is the basis for calculating payment rates for drugs
and biologicals in the physician's office setting effective October 1,
2010, or mean unit cost from CY 2009 claims data and updated cost
report information available for this final rule with comment period.
In general, these published payment rates are not reflective of actual
January 2011 payment rates. This is because payment rates for drugs and
biologicals with ASP information for January 2011 will be determined
through the standard quarterly process where ASP data submitted by
manufacturers for the third quarter of 2010 (July 1, 2010 through
September 30, 2010) are used to set the payment rates that are released
for the quarter beginning in January 2011 near the end of December
2010. In addition, payment rates for drugs and biologicals in Addendum
A and B to this final rule with comment period for which there was no
ASP information available for October 2010 are based on mean unit cost
in the available CY 2009 claims data. If ASP information becomes
available for payment for the quarter beginning in January 2011, we
will price payment for these drugs and biologicals based on their newly
available ASP information. Finally, there may be drugs and biologicals
that have ASP information available for this final rule with comment
period (reflecting October 2010 ASP data) that do not have ASP
information available for the quarter beginning in January 2011. These
drugs and biologicals will then be paid based on mean unit cost data
derived from CY 2009 hospital claims. Therefore, the payment rates
listed in Addenda A and B to this final rule with comment period are
not for January 2011 payment purposes and are only illustrative of the
CY 2011 OPPS payment methodology using the most recently available
information at the time of issuance of this final rule with comment
period.
c. Payment Policy for Therapeutic Radiopharmaceuticals
Beginning in the CY 2005 OPPS final rule with comment period, CMS
exempted radiopharmaceutical manufacturers from reporting ASP data for
all radiopharmaceuticals for payment purposes under the OPPS. (For more
information, we refer readers to the CY 2005 OPPS final rule with
comment period (69 FR 65811) and the CY 2006 OPPS final rule with
comment period (70 FR 68655).) Consequently, we did not have ASP data
for radiopharmaceuticals for consideration for OPPS ratesetting until
we began collecting ASP for nonpass-through separately paid therapeutic
radiopharmaceuticals for CY 2010. In accordance with section
1833(t)(14)(B)(i)(I) of the Act, we have classified
radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for
radiopharmaceuticals at average acquisition cost as determined by the
Secretary and subject to any adjustment for overhead costs. For CYs
2006 and 2007, we used mean unit cost data from hospital claims to
determine each radiopharmaceutical's packaging status and implemented a
temporary policy to pay for separately payable radiopharmaceuticals
based on the hospital's charge for each radiopharmaceutical adjusted to
cost using the hospital's overall CCR. The methodology of providing
separate radiopharmaceutical payment based on charges adjusted to cost
through application of an individual hospital's overall CCR for CYs
2006 and 2007 was finalized as an interim proxy for average acquisition
cost.
In CY 2008, we packaged payment for all diagnostic
radiopharmaceuticals and we proposed and finalized a methodology to
provide prospective payment for therapeutic radiopharmaceuticals
(defined as those Level II HCPCS codes that include the term
``therapeutic'' along with a radiopharmaceutical in their long code
descriptors) using mean costs derived from the CY 2006 claims data,
where the costs were determined using our

[[Page 71968]]

standard methodology of applying hospital-specific departmental CCRs to
radiopharmaceutical charges, defaulting to hospital-specific overall
CCRs only if appropriate departmental CCRs were unavailable (72 FR
66772). Following issuance of the CY 2009 OPPS/ASC proposed rule,
section 142 of the Medicare Improvements for Patients and Providers Act
of 2008 (Pub. L. 110-275) amended section 1833(t)(16)(C) of the Act, as
amended by section 106(a) of the Medicare, Medicaid, and SCHIP
Extension Act of 2007 (Pub. L. 110-173), to further extend the payment
period for therapeutic radiopharmaceuticals based on hospital's charges
adjusted to cost through December 31, 2009. Therefore, for CY 2009, we
finalized a policy to continue to pay hospitals for therapeutic
radiopharmaceuticals at charges adjusted to cost through the end of CY
2009.
For CY 2010, we proposed and finalized a policy to pay for
separately paid therapeutic radiopharmaceuticals under the ASP
methodology adopted for separately payable drugs and biologicals. We
allowed manufacturers to submit the ASP data in a patient-specific dose
or patient-ready form in order to properly calculate the ASP amount for
a given HCPCs code. This resulted in payment for nonpass-through
separately paid therapeutic radiopharmaceuticals at ASP+4 percent for
CY 2010 for products for which the manufacturer submitted ASP. We also
finalized a policy to base therapeutic radiopharmaceutical payment on
CY 2008 mean unit cost data derived from hospital claims if ASP
information was unavailable.
We believe that the rationale outlined in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60524 through 60525) continues to
be appropriate for nonpass-through separately payable therapeutic
radiopharmaceuticals in CY 2011. Therefore, in the CY 2011 OPPS/ASC
proposed rule (75 FR 46280), we proposed to continue to pay all
nonpass-through, separately payable therapeutic radiopharmaceuticals
under the ASP+X payment level established using the proposed pharmacy
overhead adjustment based on a redistribution methodology to set
payment for separately payable drugs and biologicals (as discussed in
section V.B.3.b.) based on ASP information, if available, for a
``patient ready'' dose and updated on a quarterly basis for products
for which manufacturers report ASP data. For a full discussion of how a
``patient ready'' dose is defined, we refer readers to the CY 2010
OPPS/ASC final rule with comment period, 74 FR 60520 through 60521. We
also proposed to rely on CY 2009 mean unit cost data derived from
hospital claims data for payment rates for therapeutic
radiopharmaceuticals for which ASP data are unavailable and to update
the payment rates for separately payable therapeutic
radiopharmaceuticals, according to our usual process for updating the
payment rates for separately payable drugs and biologicals, on a
quarterly basis if updated ASP information is available.
Comment: A majority of commenters supported CMS' proposal to
continue to pay for separately payable therapeutic radiopharmaceuticals
under the ASP+X payment level established using the proposed pharmacy
overhead adjustment based on a redistribution methodology to set
payment for separately payable drugs and biologicals based on ASP
information, if available, for a ``patient ready'' dose and updated on
a quarterly basis for products for which manufacturers report ASP data.
One commenter supported the proposed payment rate for nonpass-through
separately payable drugs, biologicals, and therapeutic
radiopharmaceuticals at ASP+6 percent.
Several commenters disagreed with CMS' proposal to rely on CY 2009
mean unit cost data derived from hospital claims data for payment rates
for therapeutic radiopharmaceuticals for which ASP data are
unavailable. The commenters suggested that CMS instead use hospital's
charges adjusted to cost when ASP data are unavailable for nonpass-
through separately payable therapeutic radiopharmaceuticals. Some
commenters also recommended that CMS provide cost-based payment to
hospitals when ASP is not available. A few commenters further noted
that CMS should require all manufacturers of therapeutic
radiopharmaceuticals to submit ASP data for all therapeutic
radiopharmaceuticals currently paid under the OPPS.
Response: We appreciate the commenters' support. We continue to
believe that providing payment for therapeutic radiopharmaceuticals
based on ASP or mean unit cost if ASP information is not available
would provide appropriate payment for these products. When ASP data are
not available, we believe that paying for therapeutic
radiopharmaceuticals using mean unit cost would appropriately pay for
the average hospital acquisition and associated handling costs of
nonpass-through separately payable therapeutic radiopharmaceuticals. As
we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60523), although using mean unit cost for payment for therapeutic
radiopharmaceuticals when ASP data are not available is not the usual
OPPS process (that relies on alternative data source, such as WAC or
AWP, when ASP information is temporarily unavailable, prior to
defaulting to the mean unit cost from hospital claims data), we
continue to believe that WAC or AWP is not an appropriate proxy to
provide OPPS payment for average therapeutic radiopharmaceutical
acquisition cost and associated handling costs when manufacturers are
not required to submit ASP data. In addition, we do not believe that we
should provide payment at charges reduced to cost or reasonable cost
when ASP data is not available. We have stated previously, in the CY
2008 OPPS/ASC final rule with comment period, that we continue to
believe that payment on a claim-specific basis is not consistent with
the payment of items and services on a prospective basis under the OPPS
and may lead to extremely high or low payments to hospitals for
radiopharmaceuticals, even when those products would be expected to
have relatively predictable and consistent acquisition and handling
costs across individual clinical cases and hospitals. For CY 2011,
Medicare pays for only a few outpatient services at reasonable cost,
which are not paid under the OPPS but through cost report settlement.
These include but are not limited to corneal tissue acquisition, and
influenza vaccines. Corneal tissue acquisition and influenza vaccines
are paid at reasonable cost because the input costs for future years
are hugely unpredictable and to set a prospective payment rate for them
may result in payment that is so deficient that hospitals would not be
able to provide the services and the general public could be denied the
benefits. In particular, it is not possible to forecast with confidence
what the cost of influenza vaccine would be a year in advance. In
contrast, however, the input costs of therapeutic radiopharmaceuticals
are not hugely unpredictable. Therefore, we do not believe that
therapeutic radiopharmaceuticals should be paid in the same manner as
outpatient services paid at reasonable cost. We continue to believe
that when ASP data are unavailable for therapeutic
radiopharmaceuticals, payment based upon mean-unit cost is an
appropriate proxy for hospital's acquisition and handling data.
We disagree with the commenters who suggested that CMS require all
manufacturers of therapeutic

[[Page 71969]]

radiopharmaceuticals to submit ASP data for all therapeutic
radiopharmaceuticals currently paid under the OPPS. We continue to
believe that requiring ASP data for all therapeutic
radiopharmaceuticals currently paid under the OPPS would potentially be
burdensome for manufacturers. As we stated in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60524), the challenges involved
in reporting ASP for a radiopharmaceutical, given the variety of
manufacturing processes, are significant in some cases and, therefore,
payment based on mean unit cost from historical hospital claims data
offers the best proxy for average hospital acquisition cost and
associated handling costs for a radiopharmaceutical in the absence of
ASP. We continue to believe that we should allow, but not require,
manufacturers to submit ASP information for therapeutic
radiopharmaceuticals. If ASP information is unavailable for a
therapeutic radiopharmaceutical, meaning that a manufacturer is not
willing or not able to submit ASP information, we will provide payment
based on the mean unit cost of the product that is applicable to
payment rates for the year the nonpass-through therapeutic
radiopharmaceutical is administered.
Comment: One commenter stated that while it supported paying
separately payable therapeutic radiopharmaceuticals under the ASP+X
payment methodology established in the CY 2011 proposed rule, it
believed that payment for radiopharmaceuticals should be made at a
higher level than other drugs and biologicals because of the unique
pharmacy handling and overhead costs association with
radiopharmaceuticals. The commenter therefore recommended that CMS pay
for radiopharmaceuticals at a payment rate of at least ASP+10 percent
while continuing to develop detailed data on the overhead and handling
costs associated with radiopharmaceuticals.
Response: We continue to believe that paying for therapeutic
radiopharmaceuticals under the ASP+X payment amount established for
separately payable drugs and biologicals, established at ASP+5 percent
for CY 2011, is the most appropriate proxy for acquisition and pharmacy
overhead and handling costs for separately payable therapeutic
radiopharmaceuticals. As we stated in the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60522), we established our interpretation of
``patient-ready'' for purposes of the OPPS to mean the ASP, reported in
terms that reflect the applicable HCPCS code descriptor, for all
component materials of the radiopharmaceutical and any additional
processing, including radiolabeling, that is reflected in the price the
manufacturer charges for the radiopharmaceutical so long as the fees
paid for such additional processing meet the ``bona fide service fee''
test under the regulations implementing section 1847A of the Act. We
explicitly noted that because radiopharmaceuticals uniquely require
radiolabeling of their component materials, we believe that, for
purposes of OPPS ASP reporting, radiolabeling could constitute a bona
fide service on behalf of the manufacturer and the fees could meet the
``bona fide service fee'' test. Given our position on radiolabeling, we
similarly believe that significant processing costs associated with
handling radiopharmaceuticals may be reflected in the prices used to
calculate the manufacturer's ASP data for OPPS purposes. Therefore, the
combined single payment for nonpass-through separately payable
therapeutic radiopharmaceutical acquisition and overhead costs embodied
in the ASP+5 percent payment rate for CY 2011 would address any other
processing after the sale by the manufacturer, and we continue to
believe this payment is sufficient for these additional handing costs
borne by the hospital. Under this interpretation of ``patient-ready''
dose, we do not believe that making an additional payment for more
intensive handling costs is necessary.
Comment: One commenter indicated that CMS did not publish a payment
rate that reflected the most recently available price for HCPCS code
A9545 (Iodine I-131 tositumomab, therapeutic, per treatment dose) in
the CY 2011 OPPS/ASC proposed rule. The commenter noted that the
payment rate published in the proposed rule reflected second quarter
ASP instead of the third quarter ASP. The commenter suggested that CMS
ensure that the CY 2011 final rule payment rate reflects the most
current ASP data for HCPCS code A9545.
Response: The proposed payment rate published in Addenda A and B to
the CY 2011 OPPS/ASC proposed rule for HCPCS code A9545 reflected
second quarter ASP payment rates as of April 1, 2010. We disagree with
the commenter's assertion that we should have published the ASP
released for the third quarter of 2010 or ASP payment rates as of July
1, 2010. We do not include payment rates in Addenda A and B reflecting
third quarter ASP payment rates (July payment rates) for proposed rules
because ASP pricing information for the third quarter of 2010 was not
available, at the time of the development of the proposed rule, As we
state above, separately payable drug and biological payment rates
listed in Addenda A and B of this final rule with comment period, which
illustrate the final CY 2011 payment of ASP+5 percent for separately
payable nonpass-through drugs, reflect either ASP information effective
October 1, 2010, or mean unit cost from CY 2009 claims data and updated
cost report information available for this final rule with comment
period. In general, these published payment rates are not reflective of
actual January 2011 payment rates. This is because payment rates for
drugs and biologicals with ASP information for January 2011 will be
determined through the standard quarterly process where ASP data
submitted by manufacturers for the third quarter of 2010 (July 1, 2010
through September 30, 2010) are used to set the payment rates that are
released for the quarter beginning in January 2011 near the end of
December 2010. The payment rate for HCPCS code A9545 is contained in
Addenda A and B of this final rule with comment period.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to pay all
nonpass-through, separately payable therapeutic radiopharmaceuticals
under the ASP+X payment level established using the pharmacy overhead
adjustment based on a redistribution methodology to set payment for
separately payable drugs and biologicals (as discussed in section
V.B.3.b. of this final rule with comment period) based on ASP
information, if available, for a ``patient ready'' dose and updated on
a quarterly basis for products for which manufacturers report ASP data.
For CY 2011, nonpass-through separately payable therapeutic
radiopharmaceuticals will be paid at ASP+5 percent under the ASP+X
payment methodology for nonpass-through separately payable drugs and
biologicals. We will base nonpass-through, separately payable
therapeutic radiopharmaceutical payment rates on mean unit cost derived
from CY 2009 claims data when ASP pricing is not available. The final
CY 2011 payment rates for nonpass-through separately payable
therapeutic radiopharmaceuticals are included in Addenda A and B to
this final rule with comment period.

[[Page 71970]]

4. Payment for Blood Clotting Factors
For CY 2010, we provided payment for blood clotting factors under
the same methodology as other nonpass-through separately payable drugs
and biologicals under the OPPS and continued paying an updated
furnishing fee. That is, for CY 2010, we provided payment for blood
clotting factors under the OPPS at ASP+4 percent, plus an additional
payment for the furnishing fee. We note that when blood clotting
factors are provided in physicians' offices under Medicare Part B and
in other Medicare settings, a furnishing fee is also applied to the
payment. The CY 2010 updated furnishing fee is $0.170 per unit.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46280), we proposed to
pay for blood clotting factors at ASP+6 percent, consistent with our
proposed payment policy for other nonpass-through separately payable
drugs and biologicals, and to continue our policy for payment of the
furnishing fee using an updated amount. The furnishing fee update is
based on the percentage increase in the Consumer Price Index (CPI) for
medical care for the 12-month period ending with June of the previous
year. Because the Bureau of Labor Statistics releases the applicable
CPI data after the MPFS and OPPS/ASC proposed rules are published, we
are not able to include the actual updated furnishing fee in the
proposed rules. Therefore, in accordance with our policy, as finalized
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765),
we proposed to announce the actual figure for the percent change in the
applicable CPI and the updated furnishing fee calculated based on that
figure through applicable program instructions and posting on the CMS
Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/.
Comment: A few commenters supported CMS' proposal to continue to
apply the furnishing fee for blood clotting factors provided in the
OPD. One commenter stated that the furnishing fee helps ensure patient
access to blood clotting factors by increasing the payment rate for
these items. Other commenters supported payment for blood clotting
factors at no less than ASP+6 percent for CY 2011 and stated that
payment at less than ASP+6 percent for all drugs and biologicals,
especially blood clotting factors and all drugs and biologicals, is
inappropriate. Finally, one commenter supported the payment of blood
clotting factors at the same rate that applies to other nonpass-through
separately payable drugs and biologicals in the OPD.
Response: We appreciate the commenters' support. We continue to
believe that applying the furnishing fee for blood clotting factors is
appropriate for CY 2011. However, we see no compelling reason to
provide payment for blood clotting factors under a different
methodology for OPPS purposes at this time. For CY 2011, under this
final rule with comment period, we will pay for blood clotting factors
under the same methodology as other separately payable drugs and
biologicals under the OPPS and to continue paying an updated furnishing
fee. For the reasons we discuss in section V.B.3. of this final rule
with comment period, we believe that the payment rate of ASP+5 percent
is appropriate payment for the acquisition cost and pharmacy overhead
related to drugs and biologicals that are not packaged, which includes
blood clotting factors. In addition, because we recognize that there is
additional work involved in acquiring the product, that is neither
acquisition cost nor pharmacy overhead, we believe that it continues to
be appropriate to pay a furnishing fee for blood clotting factors under
the OPPS as is done in the physician's office setting and the inpatient
hospital setting.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to provide
payment for blood clotting factors under the same methodology as other
separately payable drugs and biologicals under the OPPS and to continue
paying an updated furnishing fee. We will announce the actual figure
for the percent change in the applicable CPI and the updated furnishing
fee calculation based on that figure through the applicable program
instructions and postings on the CMS Web site.
5. Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims
Data
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173) does not address the OPPS payment in CY 2005
and after for drugs, biologicals, and radiopharmaceuticals that have
assigned HCPCS codes, but that do not have a reference AWP or approval
for payment as pass-through drugs or biologicals. Because there is no
statutory provision that dictated payment for such drugs, biologicals,
and radiopharmaceuticals in CY 2005, and because we had no hospital
claims data to use in establishing a payment rate for them, we
investigated several payment options for CY 2005 and discussed them in
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797
through 65799).
For CYs 2005 to 2007, we implemented a policy to provide separate
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS
codes (specifically those new drug, biological, and radiopharmaceutical
HCPCS codes in each of those calendar years that did not crosswalk to
predecessor HCPCS codes) but which did not have pass-through status, at
a rate that was equivalent to the payment they received in the
physician's office setting, established in accordance with the ASP
methodology for drugs and biologicals, and based on charges adjusted to
cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a
policy to provide payment for new drugs (excluding contrast agents and
diagnostic radiopharmaceuticals) and biologicals (excluding implantable
biologicals for CY 2009) with HCPCS codes, but which did not have pass-
through status and were without OPPS hospital claims data, at ASP+5
percent and ASP+4 percent, respectively, consistent with the final OPPS
payment methodology for other separately payable drugs and biologicals.
New therapeutic radiopharmaceuticals were paid at charges adjusted to
cost based on the statutory requirement for CY 2008 and CY 2009 and
payment for new diagnostic radiopharmaceuticals was packaged in both
years. For CY 2010, we continued to provide payment for new drugs
(excluding contrast agents), and nonimplantable biologicals with HCPCS
codes that do not have pass-through status and are without OPPS
hospital claims data, at ASP+4 percent, consistent with the CY 2010
payment methodology for other separately payable nonpass-through drugs,
and nonimplantable biologicals. We also finalized a policy to extend
the CY 2009 payment methodology to new therapeutic radiopharmaceutical
HCPCS codes, consistent with our final policy providing separate
payment for therapeutic radiopharmaceuticals in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60581 through 60526), that do not
crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and
are without OPPS hospital claims data, at ASP+4 percent.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46281), for CY 2011,
we proposed to continue the CY 2010 payment methodology for new drugs
(excluding contrast agents and

[[Page 71971]]

diagnostic radiopharmaceuticals), nonimplantable biologicals, and
therapeutic radiopharmaceuticals that meet the following conditions:
Those drugs, biologicals and therapeutic radiopharmaceuticals that have
HCPCS codes that do not crosswalk to CY 2010 HCPCS codes, those that do
not have pass-through status, and those that are without OPPS hospital
claims data. We proposed to provide payment for new CY 2011 drugs
(excluding contrast agents and diagnostic radiopharmaceuticals),
nonimplantable biologicals, and therapeutic radiopharmaceuticals, at
ASP+6 percent, consistent with the proposed CY 2011 payment methodology
for other separately payable nonpass-through drugs, nonimplantable
biologicals, and therapeutic radiopharmaceuticals. We indicated that we
believe this proposed policy would ensure that new nonpass-through
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals
would be treated like other drugs, nonimplantable biologicals, and
therapeutic radiopharmaceuticals under the OPPS, unless they are
granted pass-through status. Only if they are pass-through drugs,
nonimplantable biologicals, or therapeutic radiopharmaceuticals would
they receive a different payment for CY 2011, generally equivalent to
the payment these drug and biologicals would receive in the physician's
office setting, consistent with the requirements of the statute.
We proposed to continue our CY 2010 policy of packaging payment for
all new nonpass-through diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals with HCPCS codes but without claims
data (those new CY 2011 diagnostic radiopharmaceutical, contrast agent,
and implantable biological HCPCS codes that do not crosswalk to
predecessor HCPCS codes), consistent with the proposed packaging of all
existing nonpass-through diagnostic radiopharmaceuticals, contrast
agents and implantable biologicals (as discussed in more detail in
section V.B.2.d. and IV.A.2. of this final rule with comment period).
In accordance with the OPPS ASP methodology, in the absence of ASP
data, for CY 2011, we proposed to continue the policy we implemented
beginning in CY 2005 of using the WAC for the product to establish the
initial payment rate for new nonpass-through drugs and biologicals with
HCPCS codes, but which are without OPPS claims data. However, we noted
that if the WAC is also unavailable, we would make payment at 95
percent of the product's most recent AWP. We also proposed to assign
status indicator ``K'' to HCPCS codes for new drugs and nonimplantable
biologicals without OPPS claims data and for which we have not granted
pass-through status. We further noted that, with respect to new items
for which we do not have ASP data, once their ASP data become available
in later quarterly submissions, their payment rates under the OPPS
would be adjusted so that the rates would be based on the ASP
methodology and set to the finalized ASP-based amount (proposed for CY
2011 at ASP+6 percent) for items that have not been granted pass-
through status. We indicated that the proposed policy would ensure that
new nonpass-through drugs, nonimplantable biologicals, and therapeutic
radiopharmaceuticals would be treated like other drugs, nonimplantable
biologicals, and therapeutic radiopharmaceuticals under the OPPS,
unless they are granted pass-through status. Only if they are pass-
through drugs, nonimplantable biologicals, or therapeutic
radiopharmaceuticals would they receive a different payment for CY
2011, generally equivalent to the payment these drugs and biologicals
would receive in the physician's office setting, consistent with the
requirements of the statute.
We did not receive any public comments specific to these proposals.
While commenters generally supported our proposal to pay for separately
payable drugs at ASP+6 percent and recommended that we pay no less than
ASP+6 percent for separately payable drugs in CY 2011, these comments
were not specific to new drugs and biologicals with HCPCS codes but
without OPPS claims data. For more information regarding payment for
separately payable drugs, including general public comments and our
responses, we refer readers to section V.B.3.b of this final rule with
comment period. In addition, commenters on the CY 2011 OPPS/ASC
proposed rule objected to packaging payment for diagnostic
radiopharmaceuticals and contrast agents in general, but these comments
were not directed to new diagnostic radiopharmaceuticals or contrast
agents with HCPCS codes but without OPPS claims data. We summarize
these comments and provide our response in section V.A.2.d. of this
final rule with comment period.
We are finalizing our CY 2011 proposal, without modification, as
follows: Payment for new drugs (excluding contrast agents and
diagnostic radiopharmaceuticals), nonimplantable biologicals, and
therapeutic radiopharmaceuticals with HCPCS codes that do not crosswalk
to CY 2010 HCPCS codes, but which do not have pass-through status and
for which we do not have OPPS hospital claims data, will be made at
ASP+5 percent for CY 2011, consistent with the proposed CY 2011 payment
methodology for other new separately payable nonpass-through drugs,
nonimplantable biologicals and therapeutic radiopharmaceuticals, for
this final rule with comment period. In cases where ASP information is
not available, payment will be made using WAC, and, if WAC is also
unavailable, payment will be made at 95 percent of the product's most
recent AWP. Further, payment for all new nonpass-through diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals with
HCPCS codes but for which we do not have OPPS claims data will be
packaged for CY 2011. Finally, we are assigning status indicator ``K''
to HCPCS codes for new drugs and nonimplantable biologicals for which
we do not have OPPS claims data and for which we have not granted pass-
through status for CY 2011. With respect to new items for which we do
not have ASP data, once their ASP data becomes available in later
quarterly submissions, their payments will be adjusted so that the
rates will be based on the ASP methodology and set to the finalized ASP
amount of ASP+5 percent. This policy will ensure that they are paid for
actual acquisition cost and pharmacy overhead for these new products.
For CY 2011, we also proposed to continue our CY 2010 policy to
base payment for new therapeutic radiopharmaceuticals with HCPCS codes,
but which do not have pass-through status and for which we do not have
claims data, on the WACs for these products if ASP data for these
therapeutic radiopharmaceuticals are not available. If the WACs are
also unavailable, we proposed to make payment for a new therapeutic
radiopharmaceutical at 95 percent of the product's most recent AWP
because we would not have mean costs from hospital claims data upon
which to base payment. Analogous to new drugs and biologicals, we
proposed to continue our policy of assigning status indicator ``K'' to
HCPCS codes for new therapeutic radiopharmaceuticals without OPPS
claims data for which we have not granted pass-through status.
We did not receive any public comments specific to our proposal for
new therapeutic radiopharmaceuticals with HCPCS codes but without pass-
through status. However, commenters on the CY 2011 OPPS/ASC proposed

[[Page 71972]]

rule were generally supportive of the ASP methodology for payment for
therapeutic radiopharmaceuticals in the HOPD, and we are finalizing an
ASP payment methodology for separately payable therapeutic
radiopharmaceuticals for CY 2011, as discussed in section V.B.3.c. of
this final rule with comment period.
We are finalizing our CY 2011 proposals, without modification, to
provide payment for new therapeutic radiopharmaceuticals with HCPCS
codes but without pass-through status, if ASP information is not
available, based on WAC. If WAC information is also unavailable, we
will make payment for new therapeutic radiopharmaceuticals at 95
percent of the product's most recent AWP. In addition, we are assigning
status indicator ``K'' to HCPCS codes for new therapeutic
radiopharmaceuticals in CY 2010 that do not have pass-through status.
Consistent with other ASP-based payments, for CY 2011, we proposed
to announce any changes to the payment amounts for new drugs and
biologicals in the CY 2011 OPPS/ASC final rule with comment period and
also on a quarterly basis on the CMS Web site during CY 2011 if later
quarter ASP submissions (or more recent WACs or AWPs) indicate that
changes to the payment rates for these drugs and biologicals are
necessary. The payment rates for new therapeutic radiopharmaceuticals
will also be changed accordingly, based on later quarter ASP
submissions. We note that the new CY 2011 HCPCS codes for drugs,
biologicals, and therapeutic radiopharmaceuticals were not available at
the time of development of the proposed rule. However, they are
included in Addendum B to this CY 2011 OPPS/ASC final rule with comment
period. They are assigned comment indicator ``NI'' in Addendum B to
reflect that their interim final OPPS treatment is open to public
comment on this CY 2011 OPPS/ASC final rule with comment period.
We did not receive any public comments on our proposal to announce,
via the CMS Web site, any changes to the OPPS payment amounts for new
drugs and biologicals on a quarterly basis. Therefore, we are
finalizing our proposal and will update payment rates for new drugs,
biologicals, and therapeutic radiopharmaceuticals, as necessary, in
association with our quarterly update process and provide this
information on the CMS Web site.
There are several nonpass-through drugs and biologicals that were
payable in CY 2009 and/or CY 2010, for which we did not have CY 2009
hospital claims data available for the proposed rule and for which
there are no other HCPCS codes that describe different doses of the
same drug. These drugs and biologicals do have pricing information
available for the ASP methodology. In the CY 2011 OPPS/ASC proposed
rule (75 FR46281), we noted that there are currently no therapeutic
radiopharmaceuticals in this category. In order to determine the
packaging status of these products for CY 2011, we calculated an
estimate of the per day cost of each of these items by multiplying the
payment rate for each product based on ASP+6 percent, similar to other
nonpass-through drugs and biologicals paid separately under the OPPS,
by an estimated average number of units of each product that would
typically be furnished to a patient during one administration in the
hospital outpatient setting. We proposed to package items for which we
estimated the per administration cost to be less than or equal to $70,
which was the general packaging threshold that we proposed for drugs,
nonimplantable biologicals, and therapeutic radiopharmaceuticals in CY
2011. We proposed to pay separately for items with an estimated per day
cost greater than $70 (with the exception of diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals,
which we proposed to continue to package regardless of cost (as
discussed in more detail in section V.B.2.d. of this final rule with
comment period)) in CY 2011. We proposed that the CY 2011 payment for
separately payable items without CY 2009 claims data would be ASP+6
percent, similar to payment for other separately payable nonpass-
through drugs and biologicals under the OPPS. In accordance with the
ASP methodology used in the physician's office setting, in the absence
of ASP data, we proposed to use the WAC for the product to establish
the initial payment rate. However, we noted that if the WAC is also
unavailable, we would make payment at 95 percent of the most recent AWP
available.
We did not receive any public comments on our proposal to use
estimated per day costs for these drugs and biologicals or on the
resulting packaging status of these drugs and biologicals. However,
upon receiving updated CY 2009 claims data for HCPCS codes J1835
(Injection, itraconazole, 50 mg), J2724 (Injection, protein c
concentrate, intravenous, human 10 iu) and CPT code 90725 (Cholera
vaccine for injectable use), for this final rule with comment period,
we determined that we no longer needed to calculate an estimated
average number of units for these two items. Therefore, for CY 2011, we
calculated the packaging status for HCPCS codes J1835 and J2724 using
our standard methodology as described above. These codes and their
packaging status are discussed further in section V.B.2.b. of this
final rule with comment period. We discuss the CY 2011 final status
indicator for 90725 below. Therefore, we are finalizing our CY 2011
proposal, with modification, to use the estimated number of units per
day included in Table 35 below, excluding the estimated number of units
for HCPCS codes J1835, J2724 and CPT code 90725, to determine estimated
per day costs for the corresponding drugs and biologicals for CY 2011.
Further, we are finalizing our proposal to package those drugs with an
estimated per day cost less than or equal to $70 and to provide
separate payment for those drugs and biologicals (other than diagnostic
radiopharmaceuticals, contrast agents and implantable biologicals) with
estimated per day costs over $70 for CY 2011. For those drugs and
biologicals that we determined to be separately payable in CY 2011,
payment will be made at ASP+5 percent. If ASP information is not
available, payment will be based on WAC or 95 percent of the most
recently published AWP if WAC is not available. The final estimated
units per day and status indicators for these items are displayed in
Table 35 below.

Table 35--Drugs and Biologicals Without CY 2009 Claims Data
----------------------------------------------------------------------------------------------------------------
Estimated
average number
CY 2011 HCPCS code CY 2011 long descriptor of units per CY 2011 SI CY 2011 APC
administration
----------------------------------------------------------------------------------------------------------------
90681.......................... Rotavirus vaccine, human, 1 K 1239
attenuated, 2 dose schedule,
live, for oral use.
J0205.......................... injection, alglucerase, per 10 420 K 0900
units.

[[Page 71973]]

J0364.......................... Injection, apomorphine 12 N
hydrochloride, 1 mg.
J3355.......................... Injection, urofollitropin, 75 2 K 1741
IU.
J3485.......................... Injection, zidovudine, 10 mg.. 42 N
J7185.......................... Injection, factor viii 1750 K 1268
(antihemophilic factor,
recombinant) (xyntha), per
i.u.
J9215.......................... Injection, interferon, alfa- 5 K 0865
n3, (human leukocyte
derived), 250,000 iu.
J9226.......................... Histrelin implant (supprelin 1 K 1142
la), 50 mg.
J9357.......................... Injection, valrubicin, 4 K 1235
intravesical, 200 mg.
Q0515.......................... Injection, sermorelin acetate, 70 K 3050
1 microgram.
Q2017.......................... Injection, teniposide, 50 mg.. 9.35 K 7035
----------------------------------------------------------------------------------------------------------------

Finally, there were five drugs and biologicals, shown in Table 36
below, that were payable in CY 2009, but for which we lacked CY 2009
claims data and any other pricing information for the ASP methodology
for the CY 2011 OPPS/ASC proposed rule. In CY 2009, for similar items
without CY 2007 claims data and without pricing information for the ASP
methodology, we previously stated that we were unable to determine
their per day cost and we packaged these items for the year, assigning
these items status indicator ``N.''
For CY 2010, we finalized a policy to change the status indicator
for nine drugs and biologicals to status indicator ``E'' (Not paid by
Medicare when submitted on outpatient claims (any outpatient bill
type)) that we understood were not currently sold or had been
identified as obsolete. In addition, we noted that we would provide
separate payment for these drugs and biologicals if pricing information
reflecting recent sales becomes available mid-year in CY 2010 for the
ASP methodology. If pricing information became available, we would
assign the products status indicator ``K'' and pay for them separately
for the remainder of CY 2010. In the CY 2011 OPPS/ASC proposed rule (75
FR 46282), for CY 2011, we proposed to continue our CY 2010 policy to
assign status indicator ``E'' to drugs and biologicals that lack CY
2009 claims data and pricing information for the ASP methodology. We
also proposed that if pricing information were to become available, we
would assign the products status indicator ``K'' and would pay for them
separately for the remainder of CY 2011.
We did not receive any public comments on our proposal to change
the status indicators for drugs and biologicals without CY 2009 claims
data or pricing information for the ASP methodology. We are finalizing
our CY 2011 proposal, without modification, to assign status indicator
``E'' to these drugs and biologicals. As we have used updated claims
data and ASP pricing information for this final rule with comment
period, we have newly identified, for this final rule with comment
period, HCPCS codes Q4117 (Hyalomatrix, per square centimeter), Q4119
(Matristem wound matrix, per square centimeter), Q4120 (Matristem burn
matrix, per square centimeter), and CPT code 90725 (Cholera vaccine for
injectable use) as lacking CY 2009 claims data and any other pricing
information for the ASP methodology. Therefore, in addition to the
HCPCS codes we proposed to assign status indicator ``E'' for CY 2011 on
this basis in the proposed rule, we are assigning status indicator
``E'' to HCPCS codes Q4117, Q4119, and Q4120 and CPT code 90725 for CY
2011. All drugs and biologicals without CY 2009 hospital claims data
and data based on the ASP methodology that are assigned status
indicator ``E'' on this basis at the time of this final rule with
comment period for CY 2011 are displayed in Table 36 below.

Table 36--Drugs and Biologicals Without CY 2009 Claims Data and Without
Pricing Information for the ASP Methodology
------------------------------------------------------------------------
Final CY 2011
CY 2011 HCPCS code CY 2011 long descriptor SI
------------------------------------------------------------------------
90725...................... Cholera vaccine for E
injectable use.
J0190...................... Injection, biperiden E
lactate, per 5 mg.
J1435...................... Injection, estrone, per 1 E
mg.
J3320...................... Injection, spectinomycin E
dihydrochloride, up to 2
gm.
J3400...................... Injection, triflupromazine E
hcl, up to 20 mg.
Q0174...................... Thiethylperazine maleate, E
10 mg, oral, FDA approved
prescription anti-emetic,
for use as a compl.
Q4117...................... Hyalomatrix, per square E
centimeter.
Q4119...................... Matristem wound matrix, E
per square centimeter.
Q4120...................... Matristem burn matrix, per E
square centimeter.
------------------------------------------------------------------------

[[Page 71974]]

VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs,
Biologicals, Radiopharmaceuticals, and Devices

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payments (defined in sections IV.A.1. and
V.A.1. of this final rule with comment period) for drugs, biologicals,
radiopharmaceuticals, and categories of devices for a given year to an
``applicable percentage'' (defined below) of total program payments
estimated to be made for all covered services under the hospital OPPS
furnished for that year. For a year (or portion of a year) before CY
2004, the applicable percentage is 2.5 percent; for CY 2004 and
subsequent years, the applicable percentage is a percentage specified
by the Secretary up to (but not to exceed) 2.0 percent.
If we estimate before the beginning of the calendar year that the
total amount of pass-through payments in that year would exceed the
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a
uniform prospective reduction in the amount of each of the transitional
pass-through payments made in that year to ensure that the limit is not
exceeded. We make an estimate of pass-through spending to determine not
only whether payments exceed the applicable percentage, but also to
determine the appropriate prorata reduction to the conversion factor
for the projected level of pass-through spending in the following year
in order to ensure that total estimated pass-through spending for the
prospective payment year is budget neutral as required by section
1883(t)(6)(E) of the Act.
For devices, developing an estimate of pass-through spending in CY
2011 entails estimating spending for two groups of items. The first
group of items consists of device categories that were recently made
eligible for pass-through payment and that will continue to be eligible
for pass-through payment in CY 2011. The CY 2008 OPPS/ASC final rule
with comment period (72 FR 66778) describes the methodology we have
used in previous years to develop the pass-through spending estimate
for known device categories continuing into the applicable update year.
The second group contains items that we know are newly eligible, or
project would be newly eligible, for device pass-through payment in the
remaining quarters of CY 2010 or beginning in CY 2011. As discussed in
section V.A.4. of the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60476), beginning in CY 2010, the pass-through evaluation
process and pass-through payment for implantable biologicals newly
approved for pass-through payment beginning on or after January 1,
2010, that are surgically inserted or implanted (through a surgical
incision or a natural orifice) is the device pass-through process and
payment methodology only. As we proposed in the CY 2010 OPPS/ASC
proposed rule (75 FR 46283), for this final rule with comment period,
the estimate of pass-through spending for implantable biologicals newly
eligible for pass-through payment beginning in CY 2011 is included in
the pass-through spending estimate for this second group of device
categories. The sum of the CY 2011 pass-through estimates for these two
groups of device categories equals the total CY 2011 pass-through
spending estimate for device categories with pass-through status.
For devices eligible for pass-through payment, section
1833(t)(6)(D)(ii) of the Act establishes the pass-through payment
amount as the amount by which the hospital's charges for the device,
adjusted to cost, exceeds the portion of the otherwise applicable
Medicare OPD fee schedule that the Secretary determines is associated
with the device. As discussed in section IV.A.2. of this final rule
with comment period, we deduct from the pass-through payment for an
identified device category eligible for pass-through payment 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, when we believe that predecessor device costs for the
device category newly approved for pass-through payment are already
packaged into the existing APC structure. For each device category that
becomes newly eligible for device pass-through payment, including
implantable biologicals from CY 2010 forward, we estimate pass-through
spending to be the difference between payment for the device category
and the device APC offset amount, if applicable, for the procedures
that would use the device. If we determine that predecessor device
costs for the new device category are not already included in the
existing APC structure, the pass-through spending estimate for the
device category is the full payment at charges adjusted to cost.
For drugs and biologicals eligible for pass-through payment,
section 1833(t)(6)(D)(i) of the Act establishes the pass-through
payment amount as the amount by which the amount authorized under
section 1842(o) of the Act (or, if the drug or biological is covered
under a competitive acquisition contract under section 1847B of the
Act, an amount determined by the Secretary equal to the average price
for the drug or biological for all competitive acquisition areas and
year established under such section as calculated and adjusted by the
Secretary) exceeds the portion of the otherwise applicable fee schedule
amount that the Secretary determines is associated with the drug or
biological. Because we are paying for most nonpass-through separately
payable drugs and nonimplantable biologicals under the CY 2011 OPPS at
ASP+5 percent, which represents the otherwise applicable fee schedule
amount associated with most pass-through drugs and biologicals, and
because we are paying for CY 2011 pass-through drugs and nonimplantable
biologicals at ASP+6 percent or the Part B drug CAP rate, if
applicable, our estimate of drug and nonimplantable biological pass-
through payment for CY 2011 is not zero, as discussed below.
Furthermore, payment for certain drugs, specifically diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals
without pass-through status, will always be packaged into payment for
the associated procedures because these products will never be
separately paid. However, all pass-through diagnostic
radiopharmaceuticals, contrast agents, and those implantable
biologicals with pass-through status approved prior to CY 2010 will be
paid at ASP+6 percent or the Part B drug CAP rate, if applicable, like
other pass-through drugs and biologicals. Therefore, our estimate of
pass-through payment for all diagnostic radiopharmaceuticals and
contrast agents and those implantable biologicals with pass-through
status approved prior to CY 2010 is not zero.
In section V.A.4. of this final rule with comment period, we
discuss our policy to determine if the cost of certain ``policy-
packaged'' drugs, including diagnostic radiopharmaceuticals and
contrast agents, are already packaged into the existing APC structure.
If we determine that a ``policy-packaged'' drug approved for pass-
through payment resembles predecessor diagnostic radiopharmaceuticals
or contrast agents already included in the costs of the APCs that would
be associated with the drug receiving pass-through payment, we offset
the amount of pass-through payment for diagnostic radiopharmaceuticals
and contrast agents. For these drugs, the APC offset amount is the
portion of the APC payment for the specific procedure

[[Page 71975]]

performed with the pass-through diagnostic radiopharmaceutical or
contrast agent that is attributable to diagnostic radiopharmaceuticals
or contrast agents, which we refer to as the ``policy-packaged'' drug
APC offset amount. If we determine that an offset is appropriate for a
specific diagnostic radiopharmaceutical or contrast agent receiving
pass-through payment, we reduce our estimate of pass-through payment
for these drugs by this amount. We have not established a policy to
offset pass-through payment for implantable biologicals when approved
for pass-through payment as a drug or biological, that is, for CY 2009
and earlier, so we consider full payment at ASP+6 percent for these
implantable biologicals receiving biological pass-through payment as of
CY 2011 in our estimate of CY 2011 pass-through spending for drugs and
biologicals.
We note that the Part B drug CAP program has been postponed
beginning January 1, 2009. We refer readers to the Medicare Learning
Network (MLN) Matters Special Edition article SE0833 for more
information. As of the publication of this final rule with comment
period, the postponement of the Part B drug CAP program is still in
effect. As in past years, consistent with our proposal, for this final
rule with comment period, we do not have an effective Part B drug CAP
rate for pass-through drugs and biologicals.
Similar to pass-through estimates for devices, the first group of
drugs and biologicals requiring a pass-through payment estimate
consists of those products that were recently made eligible for pass-
through payment and that will continue to be eligible for pass-through
payment in CY 2011. The second group contains drugs and nonimplantable
biologicals that we know are newly eligible, or project will be newly
eligible, in the remaining quarters of CY 2010 or beginning in CY 2011.
The sum of the CY 2011 pass-through estimates for these two groups of
drugs and biologicals equals the total CY 2011 pass-through spending
estimate for drugs and biologicals with pass-through status.

B. Estimate of Pass-Through Spending

As we proposed in the CY 2011 OPPS/ASC proposed rule (75 FR 46284),
we are finalizing a policy of setting the applicable pass-through
payment percentage limit at 2.0 percent of the total projected OPPS
payments for CY 2011, consistent with our OPPS policy from CY 2004
through CY 2010 (74 FR 60530).
For the first group of devices for pass-through payment estimate
purposes, there currently are no device categories receiving pass-
through payment in CY 2010 that will continue for payment during CY
2011. Therefore, there is no device pass-through payment estimate for
the first group of pass-through device categories.
We proposed for CY 2011 to continue to employ the device pass-
through process and payment methodology for implantable biologicals
that are always surgically inserted or implanted (through a surgical
incision or a natural orifice) that we used for CY 2010. We proposed to
consider existing implantable biologicals approved for pass-through
payment under the drugs and biologicals pass-through provision prior to
CY 2010 as drugs and biologicals for pass-through payment estimate
purposes until they expire from pass-through status and, therefore, the
pass-through spending estimate for the first group of pass-through
devices did not include implantable biologicals that were granted pass-
through status prior to CY 2010. Finally, we proposed to continue to
provide payment for implantable biologicals newly eligible for pass-
through payment beginning in CY 2010 or CY 2011 based on hospital
charges adjusted to cost that is applicable for pass-through device
categories, rather than the ASP methodology that is applicable to pass-
through drugs and biologicals. Therefore, the proposed estimate of
pass-through spending for implantable biologicals first paid as pass-
through devices in CY 2011 was based on the payment methodology for
pass-through devices and was included in the device pass-through
spending estimate.
In estimating our proposed CY 2011 pass-through spending for device
categories in the second group, that is, device categories that we knew
at the time of the development of the CY 2011 OPPS/ASC proposed rule
would be newly eligible for pass-through payment in CY 2011 (of which
there were none), additional device categories (including categories
that describe implantable biologicals) that we estimated could be
approved for pass-through status subsequent to the development of the
proposed rule and before January 1, 2011, and contingent projections
for new categories (including categories that describe implantable
biologicals in the second through fourth quarters of CY 2011), we
proposed to use the general methodology described in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66778), while also taking
into account recent OPPS experience in approving new pass-through
device categories.
For this CY 2011 OPPS/ASC final rule with comment period, one new
device category, C1749 (Endoscope, retrograde imaging/illumination
colonoscope device (implantable)) became effective October 1, 2010, and
will continue for CY 2011. There also are possible new device
categories for pass-through payment based on current applications.
Therefore, the estimate of CY 2011 pass-through spending for this
second group of device categories is $42.3 million.
For this CY 2011 final rule with comment period, we are finalizing
our proposal to continue our established methodology. Employing our
established methodology that the estimate of pass-through device
spending in CY 2011 incorporates CY 2011 estimates of pass-through
spending for known device categories continuing in CY 2011, those known
or projected to be first effective January 1, 2011, and those device
categories projected to be approved during subsequent quarters of CY
2010 or CY 2011, we estimate for this CY 2011 OPPS/ASC final rule with
comment period the total pass-through spending for device categories
for CY 2011 to be $42.3 million.
We did not receive any public comments regarding our proposed
methodology for estimating transitional pass-through spending for
devices for CY 2011. Therefore we are adopting our final estimate of
$42.3 million for total pass-through spending for device categories for
CY 2011.
To estimate CY 2011 proposed pass-through spending for drugs and
biologicals in the first group, specifically those drugs (including
radiopharmaceuticals and contrast agents) and biologicals (including
implantable biologicals) recently made eligible for pass-through
payment and continuing on pass-through status for CY 2011, we proposed
to utilize the most recent Medicare physician's office data regarding
their utilization, information provided in the respective pass-through
applications, historical hospital claims data, pharmaceutical industry
information, and clinical information regarding those drugs or
biologicals, in order to project the CY 2011 OPPS utilization of the
products.
In the CY 2011 OPPS/ASC proposed rule, for the known drugs and
biologicals (excluding diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals) that would be continuing on pass-
through status in CY 2011, we estimated the proposed pass-through
payment amount as the difference between ASP+6 percent or the Part B
drug CAP rate, as applicable, and the proposed payment rate for non-
pass through drugs and nonimplantable

[[Page 71976]]

biologicals that are separately paid at ASP+6 percent, aggregated
across the projected CY 2011 OPPS utilization of these products, which
was zero for this group of drugs and biologicals for the proposed rule.
However, as discussed in V.B.3. of this final rule with comment period,
the final payment rate for nonpass-through drugs and nonimplantable
biologicals that receive separate payment will be ASP+5 percent for CY
2011. Therefore, for this final rule with comment period, we estimate
the pass-through payment amount for this group of drugs and biologicals
as the difference between ASP+6 percent or the Part B drug CAP rate, as
applicable, and the final CY 2011 payment rate for nonpass-through
drugs and nonimplantable biologicals of ASP+5 percent, which is not
zero. Because payment for a diagnostic radiopharmaceutical or contrast
agent would be packaged if the product were not paid separately due to
its pass-through status, as we proposed and are finalizing in the final
rule with comment period, we include in the final CY 2011 pass-through
estimate the difference between payment for the drug or biological at
ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP
information is not available) and the ``policy-packaged'' drug APC
offset amount, if we determined that the diagnostic radiopharmaceutical
or contrast agent approved for pass-through payment resembles
predecessor diagnostic radiopharmaceuticals or contrast agents already
included in the costs of the APCs that would be associated with the
drug receiving pass-through payment. Because payment for an implantable
biological eligible for pass-through payment in CY 2009 and continuing
on pass-through status in CY 2011 would be packaged if the product were
not paid separately due to its pass-through status and because we had
not established a pass-through payment offset policy for implantable
biologicals when approved for pass-through payment as biologicals, that
is, for CY 2009 and earlier, as we proposed, we include in the final CY
2011 pass-through spending estimate the full payment for these
implantable biologicals at ASP+6 percent (or WAC+6 percent or 95
percent of AWP, if ASP information is not available). For this final
rule with comment period, we are finalizing our proposed methodology
and, using that methodology, we calculated a final spending estimate
for this first group of drugs and biologicals to be $8.9 million and we
are finalizing our established methodology.
To estimate CY 2011 pass-through spending for drugs and
nonimplantable biologicals in the second group (that is, drugs and
nonimplantable biologicals that we knew at the time of development of
the proposed rule would be newly eligible for pass-through payment in
CY 2011, additional drugs and nonimplantable biologicals that we
estimated could be approved for pass-through status subsequent to the
development of the proposed rule and before January 1, 2011, and
projections for new drugs and nonimplantable biologicals that could be
initially eligible for pass-through payment in the second through
fourth quarters of CY 2011), we proposed to use utilization estimates
from pass-through applicants, pharmaceutical industry data, clinical
information, recent trends in the per unit ASPs of hospital outpatient
drugs, and projected annual changes in service volume and intensity as
our basis for making the CY 2011 proposed pass-through payment
estimate. We also considered the most recent OPPS experience in
approving new pass-through drugs and nonimplantable biologicals.
Consistent with our policy established in CY 2010 (74 FR 60531 through
60532), we also proposed to include new implantable biologicals that we
expect to be approved for pass-through status as devices beginning in
CY 2011 in the second group of items considered for device pass-through
estimate purposes. Therefore, we did not propose to include implantable
biologicals in the second group of items in the proposed drug and
biological pass-through spending estimate.
We are finalizing our proposed methodology for estimating CY 2011
pass-through payments for this second group of drugs, and for this
final rule with comment period, we calculated a final spending estimate
for this second group of drugs and biologicals to be $6.6 million.
As described in the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60476), under our current policy, beginning in CY 2010,
implantable biologicals that are surgically inserted or implanted
(through a surgical incision or a natural orifice) and that were not
receiving pass-through payment as biologicals prior to January 1, 2010,
will be evaluated under the device pass-through process and paid
according to the device payment methodology. We proposed to continue to
consider implantable biologicals approved for pass-through payment
under the drug and biological pass-through provision prior to CY 2010
as drugs and biologicals for pass-through payment estimate purposes.
These implantable biologicals that have been approved for pass-through
status prior to CY 2010 continue to be considered drugs and biologicals
for pass-through payment purposes until they expire from pass-through
status. Therefore, the pass-through spending estimate for the first
group of pass-through device categories does not include implantable
biologicals that have been granted pass-through status prior to CY
2010.
Consistent with the current policy established in the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60476), we proposed for CY
2011 to continue to provide that payment for implantable biologicals
newly eligible for pass-through payment beginning in CY 2011 be based
on hospital charges adjusted to cost, rather than on the ASP
methodology that is applicable to pass-through drugs and biologicals.
Therefore, we proposed that the estimate of pass-through spending for
implantable biologicals first paid as pass-through devices in CY 2011
would be based on the payment methodology for pass-through devices, and
would be included in the proposed CY 2011 device pass-through spending
estimate for the second group of pass-through device categories.
The final CY 2011 pass-through spending estimate for the first
group of pass-through device categories is $0. The final estimate for
this final rule with comment period for the second group of pass-
through device categories is $42.3 million. Therefore, our estimate for
total pass-through spending for device categories for this final rule
with comment period is $42.3 million.
The final estimate for pass-through spending for the first group of
drugs and biologicals is $8.9 million for CY 2011. The final estimate
for pass-through spending for the second group of drugs and biologicals
is $6.6 million for CY 2011. As discussed in section V.A. of this final
rule with comment period, radiopharmaceuticals are considered drugs for
pass-through purposes. Therefore, we included radiopharmaceuticals in
our final CY 2011 pass-through spending estimate for drugs and
biologicals. Our CY 2011 allocation in this final rule with comment
period for total pass-through spending for drugs and biologicals is
$15.5 million.
In summary, in accordance with the methodology described above in
this section, for this final rule with comment period, we estimate that
total pass-through spending for the device categories and the drugs and
biologicals that are continuing to receive pass-through payment in CY
2011 and those device categories, drugs, and

[[Page 71977]]

nonimplantable biologicals that first become eligible for pass-through
payment during CY 2011 will be approximately $57.7 million
(approximately $42.3 million for device categories and approximately
$15.5 million for drugs and biologicals), which represents 0.15 percent
of total OPPS projected total payments for CY 2011. We estimate that
pass-through spending in CY 2011 would not amount to 2.0 percent of
total projected OPPS CY 2011 program spending.
We did not receive any public comments on our proposed methodology
or estimates. Accordingly, we are finalizing our proposed methodology
for estimating CY 2011 OPPS pass-through spending for drugs,
biologicals, radiopharmaceuticals, and device categories without
modification. Our final pass-through estimate for CY 2011 is $57.7
million.

VII. OPPS Payment for Brachytherapy Sources

A. Background

Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C)
of Public Law 108-173 (MMA), mandated the creation of additional groups
of covered OPD services that classify devices of brachytherapy
consisting of a seed or seeds (or radioactive source) (``brachytherapy
sources'') separately from other services or groups of services. The
additional groups must reflect the number, isotope, and radioactive
intensity of the brachytherapy sources furnished and include separate
groups for palladium-103 and iodine-125 sources.
Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of
Public Law 108-173, established payment for brachytherapy sources
furnished from January 1, 2004 through December 31, 2006, based on a
hospital's charges for each brachytherapy source furnished adjusted to
cost. Under section 1833(t)(16)(C) of the Act, charges for the
brachytherapy sources may not be used in determining any outlier
payments under the OPPS for that period in which payment is based on
charges adjusted to cost. Consistent with our practice under the OPPS
to exclude items paid at cost from budget neutrality consideration,
these items were excluded from budget neutrality for that time period
as well.
In our CY 2007 annual OPPS rulemaking, we proposed and finalized a
policy of prospective payment based on median costs for the 11
brachytherapy sources for which we had claims data. We based the
prospective payment rates on median costs for each source from our CY
2005 claims data (71 FR 68102 through 71 FR 68115).
Subsequent to publication of the CY 2007 OPPS/ASC final rule with
comment period, section 107 of Public Law 109-432 (MIEA-TRHCA) amended
section 1833 of the Act. Specifically, section 107(a) of Public Law
109-432 amended section 1833(t)(16)(C) of the Act by extending the
payment period for brachytherapy sources based on a hospital's charges
adjusted to cost for one additional year, through December 31, 2007.
Therefore, we continued to pay for brachytherapy sources based on
charges adjusted to cost for CY 2007.
Section 107(b)(1) of Public Law 109-432 amended section
1833(t)(2)(H) of the Act by adding a requirement for the establishment
of separate payment groups for ``stranded and non-stranded''
brachytherapy sources furnished on or after July 1, 2007, in addition
to the existing requirements for separate payment groups based on the
number, isotope, and radioactive intensity of brachytherapy sources
under section 1833(t)(2)(H) of the Act. Section 107(b)(2) of Public Law
109-432 authorized the Secretary to implement this requirement by
``program instruction or otherwise.'' We note that public commenters
who responded to the CY 2007 OPPS/ASC proposed rule asserted that
stranded sources, which they described as embedded into the stranded
suture material and separated within the strand by material of an
absorbable nature at specified intervals, had greater production costs
than non-stranded sources (71 FR 68113 through 68114).
As a result of the statutory requirement to create separate groups
for stranded and non-stranded sources as of July 1, 2007, we
established several coding changes through a transmittal, effective
July 1, 2007 (Transmittal 1259, dated June 1, 2007). Based on public
comments received on the CY 2007 OPPS/ASC proposed rule and industry
input, we were aware of three sources available in stranded and non-
stranded forms at that time: Iodine-125; palladium-103; and cesium-131
(72 FR 42746). We created six new HCPCS codes to differentiate the
stranded and non-stranded versions of iodine, palladium, and cesium
sources.
In Transmittal 1259, we indicated that if we receive information
that any of the other sources now designated as non-stranded are also
FDA-approved and marketed as a stranded source, we would create a code
for the stranded source. We also established two ``Not Otherwise
Specified'' (NOS) codes for billing stranded and non-stranded sources
that are not yet known to us and for which we do not have source-
specific codes. We established HCPCS code C2698 (Brachytherapy source,
stranded, not otherwise specified, per source) for stranded NOS sources
and HCPCS code C2699 (Brachytherapy source, non-stranded, not otherwise
specified, per source) for non-stranded NOS sources.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66784), we again finalized prospective payment for brachytherapy
sources, beginning in CY 2008, with payment rates determined using the
CY 2006 claims-based costs per source for each brachytherapy source.
Consistent with our policy regarding APC payments made on a prospective
basis, we finalized the policy in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66686) to subject the cost of brachytherapy
sources to the outlier provision of section 1833(t)(5) of the Act, and
also to subject brachytherapy source payment weights to scaling for
purposes of budget neutrality. Therefore, brachytherapy sources could
receive outlier payments if the costs of furnishing brachytherapy
sources met the criteria for outlier payment, that is, if brachytherapy
sources are paid prospectively. In addition, as noted in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66683), implementation
of prospective payment for brachytherapy sources would provide
opportunities for hospitals to receive additional payments under
certain circumstances through the 7.1 percent rural SCH adjustment
(discussed in section II.E. of this final rule with comment period).
For CY 2008, we also proposed and finalized a policy regarding
payment for new brachytherapy sources for which we have no claims data
(72 FR 42749 and 72 FR 66786, respectively). We indicated we would
assign future new HCPCS codes for new brachytherapy sources to their
own APCs, with prospective payment rates set based on our consideration
of external data and other relevant information regarding the expected
costs of the sources to hospitals. Finally, we proposed and finalized
our policy to discontinue using status indicator ``H'' (Pass-Through
Device Categories. Separate cost based pass-through payment; not
subject to copayment) because we would not be paying charges adjusted
to costs after December 31, 2007, and instead adopted a policy of using
status indicator ``K'' (which includes, among others, ``Brachytherapy
Sources. Paid under OPPS; separate APC payment'') for CY 2008 (72 FR
42749 and 72 FR 66785, respectively).

[[Page 71978]]

After we finalized these policies for CY 2008, section 106(a) of
Public Law 110-173 (MMSEA) extended the charges-adjusted-to-cost
payment methodology for brachytherapy sources for an additional 6
months, through June 30, 2008. Because our final CY 2008 policies paid
for brachytherapy sources at prospective rates based on median costs,
we were unable to implement these policies during this extension.
In the CY 2009 OPPS/ASC proposed rule (73 FR 41502), we again
proposed prospective payment rates for brachytherapy sources for CY
2009. We proposed to pay for brachytherapy sources at prospective rates
based on their source-specific median costs as calculated from CY 2007
claims data available for CY 2009 ratesetting. Subsequent to issuance
of the CY 2009 OPPS/ASC proposed rule, Public Law 110-275 (MIPPA) was
enacted on July 15, 2008. Section 142 of Public Law 110-275 amended
section 1833(t)(16)(C) of the Act, as amended by section 106(a) of
Public Law 110-173 (MMSEA), to further extend the payment period for
brachytherapy sources based on a hospital's charges adjusted to cost
from July 1, 2008 through December 31, 2009. Therefore, we continued to
pay for brachytherapy sources at charges adjusted to cost in CY 2008
from July 1 through December 31, and we maintained the assignment of
status indicator ``H'' to brachytherapy sources for claims processing
purposes in CY 2008. For CY 2009, we continued to pay for all
separately payable brachytherapy sources based on a hospital's charges
adjusted to cost. Because brachytherapy sources are paid at charges
adjusted to cost, we did not subject them to outlier payments under
section 1833(t)(5) of the Act, or subject brachytherapy source payment
weights to scaling for purposes of budget neutrality. Moreover, during
the CY 2009 period of payment at charges adjusted to cost,
brachytherapy sources were not eligible for the 7.1 percent rural SCH
adjustment (as discussed in detail in section II.E. of this final rule
with comment period).
Furthermore, for CY 2009, we did not adopt the policy we
established in the CY 2008 OPPS/ASC final rule with comment period of
paying stranded and non-stranded NOS codes for brachytherapy sources,
HCPCS codes C2698 and C2699, based on a rate equal to the lowest
stranded or non-stranded prospective payment for such sources. Also,
for CY 2009, we did not adopt the policy we established in the CY 2008
OPPS/ASC final rule with comment period regarding payment for new
brachytherapy sources for which we have no claims data. Not Otherwise
Specified (NOS) HCPCS codes C2698 and C2699 and newly established
specific source codes were paid at charges adjusted to cost through
December 31, 2009, consistent with the provisions of section 142 of
Public Law 110-275.
For CY 2009, we finalized our proposal to create new status
indicator ``U'' (Brachytherapy Sources. Paid under OPPS; separate APC
payment) for brachytherapy source payment, instead of using status
indicator ``K'' as proposed and finalized for CY 2008 for prospective
payment, or status indicator ``H,'' used during the period of charges
adjusted to cost payment. As noted in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68670), assigning a status indicator, such
as status indicator ``K,'' to several types of items and services with
potentially differing payment policies added unnecessary complexity to
our operations. Status indicator ``U'' is used only for brachytherapy
sources, regardless of their specific payment methodology for any
period of time.
Under section 142 of Public Law 110-275, payment for brachytherapy
sources was mandated at charges adjusted to cost only through CY 2009.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533
through 60537), we adopted for CY 2010 the general OPPS prospective
payment methodology for brachytherapy sources, consistent with section
1833(t)(2)(C) of the Act.

B. OPPS Payment Policy

As we have previously stated (72 FR 66780, 73 FR 41502, and 74 FR
60533 and 60534), we believe that adopting the general OPPS prospective
payment methodology for brachytherapy sources is appropriate for a
number of reasons. The general OPPS payment methodology uses median
costs based on claims data to set the relative payment weights for
hospital outpatient services. This payment methodology results in more
consistent, predictable, and equitable payment amounts per source
across hospitals by eliminating some of the extremely high and low
payment amounts resulting from payment based on hospitals' charges
adjusted to cost. We believe the OPPS prospective payment methodology
would also provide hospitals with incentives for efficiency in the
provision of brachytherapy services to Medicare beneficiaries.
Moreover, this approach is consistent with our payment methodology for
the vast majority of items and services paid under the OPPS.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46287), we proposed to
use the median costs from CY 2009 claims data for setting the proposed
CY 2011 payment rates for brachytherapy sources, as we proposed for
most other items and services that will be paid under the CY 2011 OPPS.
We proposed to continue the other payment policies for brachytherapy
sources we finalized in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60537). We proposed to pay for the stranded and non-
stranded NOS codes, HCPCS codes C2698 and C2699, at a rate equal to the
lowest stranded or non-stranded prospective payment rate for such
sources, respectively, on a per source basis (as opposed, for example,
to a per mCi), which is based on the policy we established in the CY
2008 OPPS/ASC final rule with comment period (72 FR 66785). The
proposed payment methodology for NOS sources would provide payment to a
hospital for new sources, and at the same time encourage interested
parties to quickly bring new sources to our attention so that specific
coding and payment could be established.
We also proposed to continue the policy we implemented in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding
payment for new brachytherapy sources for which we have no claims data,
based on the same reasons we discussed in the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66786; which was superseded by section
142 of Pub. L. 110-275). That policy is intended to enable us to assign
future new HCPCS codes for new brachytherapy sources to their own APCs,
with prospective payment rates set based on our consideration of
external data and other relevant information regarding the expected
costs of the sources to hospitals.
Consistent with our policy regarding APC payments made on a
prospective basis, as we did for CY 2010, we proposed to subject
brachytherapy sources to outlier payments under section 1833(t)(5) of
the Act, and also to subject brachytherapy source payment weights to
scaling for purposes of budget neutrality. Therefore, brachytherapy
sources could receive outlier payments if the costs of furnishing
brachytherapy sources meet the criteria for outlier payment, that is,
if they are prospectively paid. In addition, as noted in the CY 2010
OPPS/ASC final rule with comment period (74 FR 60534), implementation
of prospective payments for brachytherapy sources would provide
opportunities for eligible hospitals to receive additional

[[Page 71979]]

payments in CY 2011 under certain circumstances through the 7.1 percent
rural adjustment, as described in section II.E. of this final rule with
comment period.
Comment: Several commenters recommended that brachytherapy sources
be paid at charges adjusted to cost for CY 2011. A few commenters
stated that some providers have decided to discontinue offering
brachytherapy services because the OPPS payment rates for sources were
too low. Several commenters noted several reasons why they recommend
that CMS revert to the charges-adjusted-to-cost methodology for
determining payment rates for brachytherapy sources. These commenters
contended that there are ongoing concerns regarding the claims data
used to establish the prospective payment. The commenters asserted that
CY 2009 brachytherapy source claims data show significant variations in
unit median cost, that there is continuation in the CY 2009 data of
longstanding instability and fluctuation of costs, and that one-half of
the sources have proposed payment rates based on 50 or fewer hospitals
(and a decline from CY 2010 to CY 2011). One commenter asserted that
some brachytherapy sources showed decreased frequencies for CY 2009,
and that decreased claims result in decreased payment.
One commenter gave an example of a rank order anomaly in median
cost of HCPCS code C2635, high activity palladium (proposed rule median
of $30.19 per unit), versus low activity palladium, HCPCS codes C2641
and C2640, non-stranded and stranded palladium sources, with proposed
rule medians of $63.59 and $64.98, respectively. This commenter also
opined that the number of Medicare beneficiaries treated with
brachytherapy may have declined from CY 2008 to CY 2009, claiming its
data analysis generated 17,681 brachytherapy source claims using 2008
data, and 16,456 claims using CY 2009 data. One commenter claimed that
Medicare program payment would be $9.5 million less using the charges-
adjusted-to-cost payment methodology than Medicare payment for
brachytherapy sources when made under the prospective payment system
based on median costs in CY 2011, as it claimed was the case for CY
2010.
One commenter noted its support for our proposed continuance of the
policy of assigning new brachytherapy sources for which we have no
claims data to their own APCs, and to consider external data for
establishing rates, and recommended that we finalize this proposal.
Response: As we stated previously (72 FR 66782 and 74 FR 60534), we
believe that median costs based on hospital claims data for
brachytherapy sources have produced reasonably consistent per-source
cost estimates over the past several years, comparable to the patterns
we have observed for many other OPPS services whose payments are set
based upon relative payment weights from claims data. We believe that
our per-source payment methodology specific to each source's
radioisotope, radioactive intensity, and stranded or non-stranded
configuration, supplemented by payment based on the number of sources
used in a specific clinical case, adequately accounts for the major
expected sources of variability across treatments. As we also explained
previously (72 FR 66782 and 74 FR 60535), a prospective payment system
such as the OPPS relies on the concept of averaging, where the payment
may be more or less than the estimated cost of providing a service for
a particular patient, but with the exception of outlier cases, it is
adequate to ensure access to appropriate care. In the case of
brachytherapy sources for which the law requires separate payment
groups, without packaging, the costs of these individual items could be
expected to show greater variation than some other APCs under the OPPS
because higher variability in costs for some component items and
services is not balanced with lower variability for others and because
relative weights are typically estimated using a smaller set of claims.
Nevertheless, we believe that prospective payment for brachytherapy
sources based on median costs from claims calculated according to the
standard OPPS methodology is appropriate and provides hospitals with
the greatest incentives for efficiency in furnishing brachytherapy
treatment.
Under the budget neutral provision for the OPPS, it is the
relativity of costs of services, not their absolute costs, that is
important, and we believe that brachytherapy sources are appropriately
paid according to the standard OPPS payment approach. Furthermore, we
are not concerned that some sources may have median costs and payment
rates based on 50 or fewer providers, because it is not uncommon for
OPPS prospective payment rates to be based on claims from a relatively
small number of hospitals that furnished the service in the year of
claims data available for the OPPS update year. Fifty hospitals may
report hundreds of brachytherapy source claims for many cases and
comprise the universe of providers using particular low volume sources,
for which we are required to pay separately by statute. Further, our
methodology for estimating median costs for brachytherapy sources
utilizes all line-item charges for those sources, which allows us to
use all hospital reported charge and estimated cost information to set
payment rates for these items. Therefore, no brachytherapy source
claims are lost. We have no reason to believe that prospective payment
rates based on claims from those providers furnishing a particular
source do not appropriately reflect the cost of that source to
hospitals. As for most other OPPS services, we note that the median
costs for brachytherapy sources are based upon the costs of those
providers that furnished the sources in CY 2009. Hospitals individually
determine their charge for an item or service, and one of Medicare's
primary requirements for setting a charge is that it be reasonably and
consistently related to the cost of the item or service for that
facility (Medicare Provider Reimbursement Manual, Part I, Section
2203). We then estimate a cost from that charge using the hospital's
most recent Medicare hospital cost report data in our standard OPPS
ratesetting process. In as much as we paid hospitals at charges
adjusted to cost for brachytherapy sources in CY 2009 based on these
exact charges, we believe a hospital's individual charges are accurate
for its institution.
In the case of high and low activity iodine-125 sources, our claims
data showed that the cost of the high activity source is greater than
the low activity sources. However, this relationship is reversed for
palladium-103 sources, as one commenter pointed out. We have no
information about the expected cost differential between high and low
activity sources of various isotopes other than what is available in
our claims and hospital cost report data. For high activity palladium-
103, only 11 hospitals reported this service in CY 2009, compared to
158 and 256 providers for low activity palladium sources described by
HCPCS codes C2640 and C2641, respectively. As we stated regarding this
issue in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60535), it is clear that fewer providers furnished high activity
palladium-103 sources than low activity palladium sources, and we
expect that the hospital cost distribution for those hospitals could be
different than the cost distribution of the large number of providers
reporting the low activity sources. These varied cost distributions
clearly contribute to the observed relationship in median

[[Page 71980]]

costs between the different types of sources. However, we see no reason
why our standard ratesetting methodology for brachytherapy sources that
relies on all claims from all hospitals furnishing brachytherapy
sources would not yield valid median costs for those hospitals
furnishing the different brachytherapy sources upon which CY 2011
prospective payments rates are based.
Prospective payment for brachytherapy sources based on their median
costs makes the source payment an integral part of the OPPS, rather
than a separate cost-based payment methodology within the OPPS. We
believe that consistent and predictable prospectively established
payment rates under the OPPS for brachytherapy sources are appropriate
because we do not believe that the hospital resource costs associated
with specific brachytherapy sources would vary greatly across hospitals
or clinical conditions under treatment, other than through differences
in the numbers of sources utilized that would be accounted for in the
standard OPPS payment methodology we are finalizing for CY 2011.
We agree that high dose rate (HDR) brachytherapy sources such as
HDR irirdium-192 have a fixed active life and must be replaced every 90
days; as a result, hospitals' per-treatment cost for the source would
be dependent on the number of treatments furnished per source. The
source cost must be amortized over the life of the source. Therefore,
in establishing their charges for HDR iridium, we expect hospitals to
project the number of treatments that would be provided over the life
of the source and establish their charges for the source accordingly,
as we have stated previously (72 FR 66783 and 74 FR 60535). For most
such OPPS services, our practice is to establish prospective payment
rates based on the median costs from hospitals' claims data, to provide
incentives for efficient and cost-effective delivery of these services.
We do not agree with the commenters that prospective brachytherapy
source payment based on median costs would increase aggregate Medicare
expenditures using the charges-adjusted-to-cost methodology compared to
the proposed prospective payment methodology. Our past studies, such as
that discussed in the CY 2010 final rule with comment period (74 FR
60535), have shown that payment at charges adjusted to cost results in
higher aggregate payment for brachytherapy sources than does
prospective payment. As we indicated in last year's final rule with
comment period (74 FR 60535), we have traditionally found that charge
inflation for brachytherapy sources appears to be higher than the
market basket inflation update applicable to prospective payments under
the OPPS. Therefore, we found that the estimated payments we calculated
for brachytherapy charges adjusted to cost were greater than the
estimated prospective payment rates because the hospital market basket
grows more slowly than the charges for brachytherapy sources. The
commenter did not provide its aggregate payments study, and we do not
know whether the commenter's study took into account factors such as
charge inflation. Moreover, the OPPS is a prospective payment system
that ensures equitable prospective payment of services across
providers, and efficient use of resources, including brachytherapy
sources, which since CY 2010 are part of OPPS prospective payment.
Concerning the comment that some providers have decided to
discontinue offering brachytherapy services because the OPPS payment
rates for sources were too low, there are many reasons why some
providers may discontinue services, such as brachytherapy. For example,
changes in medical technology or emphasis on different treatment forms
for a medical condition can influence whether a set of services are
continued. In addition, providers accept payment from a number of
payers in addition to Medicare, and we believe a global shift by a
provider to discontinue any services would be influenced by factors
other than our payment rates alone.
We believe that the comment that compared the frequency of
brachytherapy sources in the CY 2010 final rule data to the frequency
of brachytherapy sources in the CY 2011 proposed rule data and
concluded that there is a significant decrease between the frequency of
services is flawed because the volume of claims in a proposed rule data
set and the final rule data set will never be comparable for any given
year. Typically, the volume of claims in final rule data generally
increases in frequency between 10 and 15 percent above the volume in
the proposed rule data due to addition of claims processed between
January 1 and July 1 of the current year between the proposed and final
OPPS rules. For the CY 2011 proposed rule, we used CY 2009 claims
processed before January 1, 2010, but for this final rule, we used CY
2009 claims processed before July 1, 2010. Comparing the frequency of
brachytherapy sources in the CY 2010 final rule data (CY 2008 claims
processed before July 1, 2009) to the frequency of brachytherapy
sources in the CY 2011 final rule data (CY 2009 claims processed before
July 1, 2010), we do observe that the aggregate frequency of
brachytherapy sources used for setting the medians in this CY 2011
OPPS/ASC final rule with comment period (approximately 34,000 in the CY
2009 claims) is less than the frequency of brachytherapy sources in the
CY 2010 OPPS (slightly less than 36,000 in the CY 2008 claims).
However, we note that this reduction between CY 2008 and CY 2009 cannot
be attributed to the effects of prospective payment under the OPPS
because payment for brachytherapy sources in both CY 2008 and CY 2009
was made at charges adjusted to cost.
We appreciate the support for our proposed continuance of the
policy of assigning new brachytherapy sources for which we have no
claims data to their own APCs, with prospective payment rates set based
on our consideration of external data and other relevant information
regarding the expected costs of the sources to hospitals. We will
continue that policy.
After consideration of the public comments we received, we are
finalizing our proposal to pay for brachytherapy sources at prospective
payment rates based on their source-specific median costs for CY 2011.
The separately payable brachytherapy source HCPCS codes, long
descriptors, APCs, status indicators, and approximate APC median costs
for CY 2011 are presented in Table 37 below. We also are finalizing our
proposals to continue our policies regarding payment for NOS codes for
stranded and non-stranded sources and new brachytherapy sources for
which we have no claims data. Specifically, we are finalizing our
proposals to continue payment for stranded and non-stranded NOS codes,
HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or
non-stranded prospective payment for such sources, respectively, as
discussed in the CY 2008 OPPS/ASC final rule with commenter period (72
FR 66786); and our proposal to assign HCPCS codes for new brachytherapy
sources to their own APCs, with payment rates based on consideration of
external data and other relevant information, in the absence of claims
data. Once claims data are available, our standard ratesetting process
will be applied to the calculation of the median cost for the new
brachyhterapy source.
Consistent with our policy regarding APC payments made on a
prospective basis, we are finalizing our proposal to subject the cost
of brachytherapy

[[Page 71981]]

sources to the outlier provision of section 1833(t)(5) of the Act, and
also to subject brachytherapy source payment weights to scaling for
purposes of budget neutrality.

Table 37--Separately Payable Brachytherapy Sources for CY 2011
----------------------------------------------------------------------------------------------------------------
CY 2011
approximate
CY 2010 HCPCS code CY 2010 long descriptor CY 2011 APC CY 2011 SI APC median
cost
----------------------------------------------------------------------------------------------------------------
A9527........................ Iodine I-125, sodium iodide 2632 U $21
solution, therapeutic, per
millicurie.
C1716........................ Brachytherapy source, non- 1716 U 188
stranded, Gold-198, per source.
C1717........................ Brachytherapy source, non- 1717 U 217
stranded, High Dose Rate
Iridium-192, per source.
C1719........................ Brachytherapy source, non- 1719 U 28
stranded, Non-High Dose Rate
Iridium-192, per source.
C2616........................ Brachytherapy source, non- 2616 U 16,392
stranded, Yttrium-90, per
source.
C2634........................ Brachytherapy source, non- 2634 U 56
stranded, High Activity, Iodine-
125, greater than 1.01 mCi
(NIST), per source.
C2635........................ Brachytherapy source, non- 2635 U 28
stranded, High Activity,
Palladium-103, greater than 2.2
mCi (NIST), per source.
C2636........................ Brachytherapy linear source, non- 2636 U 37
stranded, Palladium-103, per
1MM.
C2638........................ Brachytherapy source, stranded, 2638 U 41
Iodine-125, per source.
C2639........................ Brachytherapy source, non- 2639 U 36
stranded, Iodine-125, per
source.
C2640........................ Brachytherapy source, stranded, 2640 U 72
Palladium-103, per source.
C2641........................ Brachytherapy source, non- 2641 U 65
stranded, Palladium-103, per
source.
C2642........................ Brachytherapy source, stranded, 2642 U 123
Cesium-131, per source.
C2643........................ Brachytherapy source, non- 2643 U 66
stranded, Cesium-131, per
source.
C2698........................ Brachytherapy source, stranded, 2698 U *41
not otherwise specified, per
source.
C2699........................ Brachytherapy source, non- 2699 U *28
stranded, not otherwise
specified, per source.
----------------------------------------------------------------------------------------------------------------
* Median cost is that of the lowest cost stranded or non-stranded source upon which proposed CY 2011 payment for
the NOS HCPCS code is based.

We continue to invite hospitals and other parties to submit
recommendations to us for new HCPCS codes to describe new brachytherapy
sources consisting of a radioactive isotope, including a detailed
rationale to support recommended new sources. Such recommendations
should be directed to the Division of Outpatient Care, Mail Stop C4-05-
17, Centers for Medicare and Medicaid Services, 7500 Security
Boulevard, Baltimore, MD 21244. We will continue to add new
brachytherapy source codes and descriptors to our systems for payment
on a quarterly basis.

VIII. OPPS Payment for Drug Administration Services

A. Background

In CY 2005, in response to the recommendations made by public
commenters and the hospital industry, OPPS transitioned from Level II
HCPCS Q-codes to the use of CPT codes for drug administration services.
These CPT codes allowed specific reporting of services regarding the
number of hours for an infusion and provided consistency in coding
between Medicare and other payers. (For a discussion regarding coding
and payment for drug administration services prior to CY 2005, we refer
readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR
66787).)
While hospitals began adopting CPT codes for outpatient drug
administration services in CY 2005, physicians paid under the MPFS were
using HCPCS G-codes in CY 2005 to report office-based drug
administration services. These HCPCS G-codes were developed in
anticipation of substantial revisions to the drug administration CPT
codes by the CPT Editorial Panel that were expected for CY 2006.
In CY 2006, as anticipated, the CPT Editorial Panel revised its
coding structure for drug administration services and incorporated new
concepts, such as initial, sequential, and concurrent services, into a
structure that previously distinguished services based on type of
administration (chemotherapy/nonchemotherapy), method of administration
(injection/infusion/push), and for infusion services, first hour and
additional hours. For CY 2006, we implemented the CY 2006 drug
administration CPT codes that did not reflect the concepts of initial,
sequential, and concurrent services under the OPPS, and we created
HCPCS C-codes that generally paralleled the CY 2005 CPT codes for
reporting these other services.
For CY 2007, as a result of public comments on the proposed rule
and feedback from the hospital community and the APC Panel, we
implemented the full set of CPT codes for drug administration services,
including codes that incorporated the concepts of initial, sequential,
and concurrent services. In addition, the CY 2007 update process
offered us the first opportunity to consider data gathered from the use
of CY 2005 CPT codes for purposes of ratesetting. For CY 2007, we used
CY 2005 claims data to implement a six-level APC structure for drug
administration services. In CY 2008, we continued to use the full set
of CPT codes for drug administration services and continued our
assignment of drug administration services to this six-level APC
structure.
For CY 2009, we continued to allow hospitals to use the full set of
CPT codes for drug administration services but moved from a six-level
APC structure to a five-level APC structure, as a result of a hospital
cost analysis and detailed clinical review. We note that, while there
were changes in the CPT numerical coding for nonchemotherapy drug
administration services in CY 2009, the existing CPT codes were only
renumbered, and there were no significant changes to the code
descriptors themselves. As we discussed in the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68672), the CY 2009 ratesetting process
afforded us the first opportunity to examine hospital claims data for
the full set of CPT codes that reflected the concepts of initial,

[[Page 71982]]

sequential, and concurrent services. For CY 2009, we performed our
standard annual OPPS review of the clinical and resource
characteristics of the drug administration CPT codes assigned to the
six-level CY 2008 APC structure based on the CY 2007 claims data
available for the CY 2009 OPPS/ASC proposed rule. As a result of our
hospital cost analysis and detailed clinical review, we adopted a five-
level APC structure for CY 2009 drug administration services to more
appropriately reflect their resource utilization in APCs that also
group clinically similar services. As we noted in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68671), these APCs generally
demonstrated the clinically expected and actually observed comparative
relationships between the median costs of different types of drug
administration services, including initial and additional services;
chemotherapy and other diagnostic, prophylactic, or therapeutic
services; injections and infusions; and simple and complex methods of
drug administration.
After analyzing the assignment of CPT codes for drug administration
into the five-level APC structure by utilizing our standard annual OPPS
review for clinical cohesiveness and resource homogeneity, we continued
our five-level APC structure for payment for drug administration
services in the HOPD for CY 2010. In addition, we used the full set of
CPT codes for drug administration and included all separately payable
drug administration add-on codes on the CY 2010 bypass list in order to
create ``pseudo'' single claims for these codes that would enable us to
use the claims data to set payment rates for them. As we stated in the
CY 2010 OPPS/ASC final rule with comment period (74 FR 60538) since CY
2007, we continued to update the bypass methodology to reflect the
changing drug administration HCPCS codes that are recognized under the
OPPS.

B. Coding and Payment for Drug Administration Services

In the CY 2011 OPPS/ASC proposed rule (75 FR 46290), for CY 2011,
we proposed to continue to use the full set of CPT codes for reporting
drug administration services and to continue to pay separately for the
same set of drug administration codes under the CY 2011 OPPS as were
paid separately in the CY 2010 OPPS. In addition, as a part of our
standard annual review, we analyzed the CY 2009 claims data that
reflect assignments of CPT codes for drug administration into the five-
level APC structure and found that the assignment of separately paid
drug administration codes to five APCs continued to appropriately
reflect the relative resources required to furnish these services. In
addition, as has been our standard policy since the CY 2007 OPPS (71 FR
68117), we proposed to continue to include all separately payable drug
administration add-on codes on the bypass list so that we can use the
cost data we derive from claims for these codes to establish payment
rates for them.
Since this approach was first adopted for CY 2007, we have updated
and expanded the bypass methodology to reflect the changing drug
administration HCPCS codes that are recognized under the OPPS. We
placed all of the separately payable add-on CPT codes for drug
administration services, including the sequential infusion and
intravenous push codes, on the bypass list in CY 2009 (73 FR 68513) in
order to continue this framework for transforming these otherwise
unusable multiple bills into ``pseudo'' single claims that can be used
for OPPS ratesetting purposes. We believe that this longstanding
methodology results in the appropriate payment rates for the add-on CPT
codes for drug administration. As such, in the CY 2011 OPPS/ASC
proposed rule (75 FR 46290), we proposed to continue to use this
methodology for the CY 2011 OPPS because we believe this takes into
account all of the packaging on claims for drug administration services
and, therefore, provides a reasonable framework for developing the
median costs for drug administration services that are often provided
in combination with one another (74 FR 60539).
At its February 2010 meeting, the APC Panel recommended that CMS
make CPT code 96368 (Intravenous infusion, for therapy, prophylaxis, or
diagnosis (specify substance or drug); concurrent infusion (List
separately in addition to code for primary procedure)) and CPT code
93676 (Therapeutic, prophylactic, or diagnostic injection (specify
substance or drug); each additional sequential intravenous push of the
same substance/drug provided in a facility (List separately in addition
to code for primary, separately payable procedure)) separately payable
for the CY 2011 OPPS at an appropriate payment rate as determined by
CMS. In the CY 2011 OPPS/ASC proposed rule (75 FR 46290), we proposed
to not accept this APC Panel recommendation because each of these two
codes describe services that, by definition, are always provided in
conjunction with an initial drug administration code and therefore are
appropriately packaged into the payment for the separately payable
services that they usually accompany. We stated that these services
have been packaged since the inception of the OPPS, and we continue to
believe they are appropriately packaged into the payment for the
separately payable services without which, under CPT guidelines and
definitions, they cannot be appropriately reported. We refer readers to
section II.A.3. of this final rule with comment period for a more
detailed discussion of payment for packaged services, including our
discussion of the comments we received and our responses to comments on
our proposal to continue to package payment for CPT codes 96368 and
96376 into the payment for the separately paid procedures with which
they are furnished.
Comment: Several commenters supported the proposed five-level APC
structure for drug administration services. Some commenters requested
that CMS continue to evaluate the five-level structure annually.
Response: We appreciate the commenters' support. As part of our
standard methodology, we expect to continue to annually review the
configuration of drug administration APCs in the future.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to continue to
use the five-level APC structure for drug administration services CY
2011. Table 38 below displays the final configurations of the five drug
administration APCs for CY 2011. We believe the updated CY 2009 claims
data and the most recent cost report data for the drug administration
CPT show that these codes share sufficiently similar clinical and
resource characteristics to justify their continued placement in the
five levels of drug administration APCs that were in effect in the CY
2010 OPPS. The median cost for each of the separately paid drug
administration CPT codes is contained in the CPT median cost file that
is provided as supporting documentation to this final rule with comment
period at the CMS Web site at: http://www.cms.hhs.gov/
HospitalOutpatientPPS/. The CY 2011 payment rate for each of the drug
administration APCs is contained in Addendum B of this final rule with
comment period.

[[Page 71983]]

Table 38--CY 2011 Drug Administration APCs
----------------------------------------------------------------------------------------------------------------
Final CY 2011
approximate
CY 2011 HCPCS Code Final CY 2011 APC APC median CY 2011 long descriptor
cost
----------------------------------------------------------------------------------------------------------------
90471........................... 0436 $26 Immunization administration (includes
percutaneous, intradermal, subcutaneous,
or intramuscular injections); one vaccine
(single or combination vaccine/toxoid).
90472........................... ................. .............. Immunization administration (includes
percutaneous, intradermal, subcutaneous,
or intramuscular injections); each
additional vaccine (single or combination
vaccine/toxoid) (List separately in
addition to code for primary procedure).
90473........................... ................. .............. Immunization administration by intranasal
or oral route; one vaccine (single or
combination vaccine/toxoid).
90474........................... ................. .............. Immunization administration by intranasal
or oral route; each additional vaccine
(single or combination vaccine/toxoid)
(List separately in addition to code for
primary procedure).
95115........................... ................. .............. Professional services for allergen
immunotherapy not including provision of
allergenic extracts; single injection.
95117........................... ................. .............. Professional services for allergen
immunotherapy not including provision of
allergenic extracts; 2 or more injections.
95165........................... ................. .............. Professional services for the supervision
of preparation and provision of antigens
for allergen immunotherapy; single or
multiple antigens (specify number of
doses).
96361........................... ................. .............. Intravenous infusion, hydration; each
additional hour (List separately in
addition to code for primary procedure).
96366........................... ................. .............. Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify
substance or drug); each additional hour
(List separately in addition to code for
primary procedure).
96371........................... ................. .............. Subcutaneous infusion for therapy or
prophylaxis (specify substance or drug);
additional pump set-up with establishment
of new subcutaneous infusion site(s) (List
separately in addition to code for primary
procedure).
96372........................... ................. .............. Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug);
subcutaneous or intramuscular.
96379........................... ................. .............. Unlisted therapeutic, prophylactic, or
diagnostic intravenous or intra-arterial
injection or infusion.
96549........................... ................. .............. Unlisted chemotherapy procedure.
95144........................... 0437 $36 Professional services for the supervision
of preparation and provision of antigens
for allergen immunotherapy, single dose
vial(s) (specify number of vials).
95145........................... ................. .............. Professional services for the supervision
of preparation and provision of antigens
for allergen immunotherapy (specify number
of doses); single stinging insect venom.
95148........................... ................. .............. Professional services for the supervision
of preparation and provision of antigens
for allergen immunotherapy (specify number
of doses); 4 single stinging insect
venoms.
95149........................... ................. .............. Professional services for the supervision
of preparation and provision of antigens
for allergen immunotherapy (specify number
of doses); 5 single stinging insect
venoms.
95170........................... ................. .............. Professional services for the supervision
of preparation and provision of antigens
for allergen immunotherapy; whole body
extract of biting insect or other
arthropod (specify number of doses).
96367........................... ................. .............. Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify
substance or drug); additional sequential
infusion, up to 1 hour (List separately in
addition to code for primary procedure).
96370........................... ................. .............. Subcutaneous infusion for therapy or
prophylaxis (specify substance or drug);
each additional hour (List separately in
addition to code for primary procedure).
96373........................... ................. .............. Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug);
intra-arterial.
96374........................... ................. .............. Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug);
intravenous push, single or initial
substance/drug.
96375........................... ................. .............. Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug);
each additional sequential intravenous
push of a new substance/drug (List
separately in additional to code for
primary procedure).
96401........................... ................. .............. Chemotherapy administration, subcutaneous
or intramuscular; non-hormonal anti-
neoplastic.
96402........................... ................. .............. Chemotherapy administration, subcutaneous
or intramuscular; hormonal anti-
neoplastic.
96405........................... ................. .............. Chemotherapy administration; intralesional,
up to and including 7 lesions.
96415........................... ................. .............. Chemotherapy administration, intravenous
infusion technique; each additional hour
(List separately in addition to code for
primary procedure).
95146........................... ................. .............. Professional services for the supervision
of preparation and provision of antigens
for allergen immunotherapy (specify number
of doses); 2 single stinging insect
venoms.
95147........................... ................. .............. Professional services for the supervision
of preparation and provision of antigens
for allergen immunotherapy (specify number
of doses); 3 single stinging insect
venoms.
96360........................... ................. .............. Intravenous infusion, hydration; initial,
31 minutes to 1 hour.
96411........................... ................. .............. Chemotherapy administration; intravenous,
push technique, each additional substance/
drug (List separately in addition to code
for primary procedure).
96417........................... 0438 $75 Chemotherapy administration, intravenous
infusion technique; each additional
sequential infusion (different substance/
drug), up to 1 hour (List separately in
addition to code for primary procedure).
96420........................... ................. .............. Chemotherapy administration, intra-
arterial; push technique.
96423........................... ................. .............. Chemotherapy administration, intra-
arterial; infusion technique, each
additional hour (List separately in
addition to code for primary procedure).
96542........................... ................. .............. Chemotherapy injection, subarachnoid or
intraventricular via subcutaneous
reservoir, single or multiple agents.

[[Page 71984]]

95990........................... 0439 $127 Refilling and maintenance of implantable
pump or reservoir for drug delivery,
spinal (intrathecal, epidural) or brain
(intraventricular).
95991........................... ................. .............. Refilling and maintenance of implantable
pump or reservoir for drug delivery,
spinal (intrathecal, epidural) or brain
(intraventricular); administered by
physician.
96365........................... ................. .............. Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify
substance or drug); initial, up to 1 hour.
96369........................... ................. .............. Subcutaneous infusion for therapy or
prophylaxis (specify substance or drug);
initial, up to 1 hour, including pump set-
up and establishment of subcutaneous
infusion site(s).
96406........................... ................. .............. Chemotherapy administration; intralesional,
more than 7 lesions.
96409........................... ................. .............. Chemotherapy administration; intravenous,
push technique, single or initial
substance/drug.
96440........................... ................. .............. Chemotherapy administration into pleural
cavity, requiring and including
thoracentesis.
96521........................... ................. .............. Refilling and maintenance of portable pump.
96522........................... ................. .............. Refilling and maintenance of implantable
pump or reservoir for drug delivery,
systemic (e.g., intravenous, intra-
arterial).
96413........................... 0440 $204 Chemotherapy administration; intravenous
infusion technique; up to 1 hour, single
or initial substance/drug.
96416........................... ................. .............. Chemotherapy administration, intravenous
infusion technique; initiation of
prolonged chemotherapy infusion (more than
8 hours), requiring use of a portable or
implantable pump.
96422........................... ................. .............. Chemotherapy administration, intra-
arterial; infusion technique, up to 1
hour.
96425........................... ................. .............. Chemotherapy administration, intra-
arterial; infusion technique, initiation
of prolonged infusion (more than 8 hours),
requiring the use of a portable or
implantable pump.
96445........................... ................. .............. Chemotherapy administration into peritoneal
cavity, requiring and including
peritoneocentesis.
96450........................... ................. .............. Chemotherapy administration, into CNS
(e.g., intrathecal), requiring and
including spinal puncture.
C8957........................... ................. .............. Intravenous infusion for therapy/diagnosis;
initiation of prolonged infusion (more
than eight hours), requiring use of
portable or implantable pump.
----------------------------------------------------------------------------------------------------------------

IX. OPPS Payment for Hospital Outpatient Visits

A. Background

Currently, hospitals report visit HCPCS codes to describe three
types of OPPS services: clinic visits; emergency department visits; and
critical care services. For OPPS purposes, we recognize clinic visit
codes as those codes defined in the CPT code book to report evaluation
and management (E/M) services provided in the physician's office or in
an outpatient or other ambulatory facility. We recognize emergency
department visit codes as those codes used to report E/M services
provided in the emergency department. Emergency department visit codes
consist of five CPT codes that apply to Type A emergency departments
and five Level II HCPCS codes that apply to Type B emergency
departments. For OPPS purposes, we recognize critical care codes as
those CPT codes used by hospitals to report critical care services that
involve the ``direct delivery by a physician(s) of medical care for a
critically ill or critically injured patient,'' as defined by the CPT
code book. In Transmittal 1139, Change Request 5438, dated December 22,
2006, we stated that, under the OPPS, the time that can be reported as
critical care is the time spent by a physician and/or hospital staff
engaged in active face-to-face critical care of a critically ill or
critically injured patient. Under the OPPS, we also recognize HCPCS
code G0390 (Trauma response team associated with hospital critical care
service) for the reporting of a trauma response in association with
critical care services.
As we proposed in the CY 2011 OPPS/ASC proposed rule (75 FR 46294),
we are continuing to recognize these CPT and HCPCS codes describing
clinic visits, Type A and Type B emergency department visits, critical
care services, and trauma team activation provided in association with
critical care services for CY 2011. These codes are listed below in
Table 39.

Table 39--HCPCS Codes Used to Report Clinic and Emergency Department
Visits and Critical Care Services
------------------------------------------------------------------------
CY 2011 HCPCS Code CY 2011 descriptor
------------------------------------------------------------------------
Clinic Visit HCPCS Codes
------------------------------------------------------------------------
99201........................ Office or other outpatient visit for the
evaluation and management of a new
patient (Level 1).
99202........................ Office or other outpatient visit for the
evaluation and management of a new
patient (Level 2).
99203........................ Office or other outpatient visit for the
evaluation and management of a new
patient (Level 3).
99204........................ Office or other outpatient visit for the
evaluation and management of a new
patient (Level 4).
99205........................ Office or other outpatient visit for the
evaluation and management of a new
patient (Level 5).
99211........................ Office or other outpatient visit for the
evaluation and management of an
established patient (Level 1).
99212........................ Office or other outpatient visit for the
evaluation and management of an
established patient (Level 2).
99213........................ Office or other outpatient visit for the
evaluation and management of an
established patient (Level 3).
99214........................ Office or other outpatient visit for the
evaluation and management of an
established patient (Level 4).

[[Page 71985]]

99215........................ Office or other outpatient visit for the
evaluation and management of an
established patient (Level 5).
------------------------------------------------------------------------
Emergency Department Visit HCPCS Codes
------------------------------------------------------------------------
99281........................ Emergency department visit for the
evaluation and management of a patient
(Level 1).
99282........................ Emergency department visit for the
evaluation and management of a patient
(Level 2).
99283........................ Emergency department visit for the
evaluation and management of a patient
(Level 3).
99284........................ Emergency department visit for the
evaluation and management of a patient
(Level 4).
99285........................ Emergency department visit for the
evaluation and management of a patient
(Level 5).
G0380........................ Type B emergency department visit (Level
1).
G0381........................ Type B emergency department visit (Level
2).
G0382........................ Type B emergency department visit (Level
3).
G0383........................ Type B emergency department visit (Level
4).
G0384........................ Type B emergency department visit (Level
5).
------------------------------------------------------------------------
Critical Care Services HCPCS Codes
------------------------------------------------------------------------
99291........................ Critical care, evaluation and management
of the critically ill or critically
injured patient; first 30-74 minutes.
99292........................ Critical care, evaluation and management
of the critically ill or critically
injured patient; each additional 30
minutes.
G0390........................ Trauma response associated with hospital
critical care service
------------------------------------------------------------------------

During the February 2010 APC Panel meeting, the APC Panel
recommended that CMS continue to report on clinic and emergency
department visits and observation services in the claims data, and that
if CMS identifies changes in patterns of utilization or cost, it bring
those issues before the Visits and Observation Subcommittee for future
consideration. The APC Panel also recommended that the work of the
Visits and Observation Subcommittee continue. In the CY 2011 OPPS/ASC
proposed rule (75 FR 46296), we indicated that we are adopting these
recommendations and plan to provide the requested data and analyses to
the APC Panel at an upcoming meeting.
At its August 2010 meeting, the APC Panel recommended that CMS
continue to report claims data for clinic and emergency department
visits and observation services, critical care, and trauma activation
services and, if CMS identifies changes in patterns of utilization or
cost, that it bring those issues before the APC Panel for future
consideration. The APC Panel also recommended that CMS provide
additional information about critical care patients with a primary
diagnosis of unspecified chest pain or other chest pain, such as the
three most common secondary diagnoses and patient disposition. The APC
Panel recommended that the work of the Visits and Observation
Subcommittee continue and that Randall Oyer, M.D., be named chair of
the Visits and Observation Subcommittee beginning at the next meeting.
We are accepting all of these recommendations and will present the
available requested data at an upcoming meeting of the APC Panel.

B. Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits
As reflected in Table 39, hospitals use different CPT codes for
clinic visits based on whether the patient being treated is a new
patient or an established patient. Beginning in CY 2009, we refined the
definitions of a new patient and an established patient to reflect
whether or not the patient has been registered as an inpatient or
outpatient of the hospital within the past 3 years. A patient who has
been registered as an inpatient or outpatient of the hospital within
the 3 years prior to a visit would be considered to be an established
patient for that visit, while a patient who has not been registered as
an inpatient or outpatient of the hospital within the 3 years prior to
a visit would be considered to be a new patient for that visit. We
refer readers to the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68677 through 68680) for a full discussion of the refined
definitions.
We stated in the CY 2010 OPPS/ASC proposed rule (75 FR 46296) that
we continue to believe that defining new or established patient status
based on whether the patient has been registered as an inpatient or
outpatient of the hospital within the 3 years prior to a visit will
reduce hospitals' administrative burden associated with reporting
appropriate clinic visit CPT codes. For CY 2011, we proposed to
continue recognizing the refined definitions of a new patient and an
established patient, and applying our policy of calculating median
costs for clinic visits under the OPPS using historical hospital claims
data. As discussed in section II.A.2.e.(1) of the proposed rule and
consistent with our CY 2010 policy, when calculating the median costs
for the clinic visit APCs (0604 through 0608), we proposed to continue
to utilize our methodology that excludes those claims for visits that
are eligible for payment through the extended assessment and management
composite APC 8002 (Level I Extended Assessment and Management
Composite). We stated in the proposed rule that we continue to believe
that this approach results in the most accurate cost estimates for APCs
0604 through 0608 for CY 2011.
Comment: Several commenters recommended that CMS remove the
distinction between new and established patient clinic visits, arguing
that facilities must expend the same level of resources regardless of
whether the patient was registered as an inpatient or an outpatient in
the hospital within the past 3 years. Some commenters also asserted
that a patient is still ``new'' the first time he or she receives
services at a particular hospital clinic even if the patient has been
seen elsewhere in the hospital within the last 3 years. In addition,
some commenters stated that there are significant operational issues
involved with

[[Page 71986]]

implementing the 3-year criterion for hospital clinic visit billing
purposes. Some commenters argued that any differences in costs that is
evident in claims data for new patient visits versus established
patient visits would be the result of hospitals' erroneous reporting of
these codes, rather than any real difference in the level of resources
expended treating a new versus an established patient.
Many commenters suggested that, as an alternative to the clinic
visit CPT codes for new and established patients, hospitals bill for
visits based on the resources expended in the visit at a level
determined by the hospitals' internal reporting guidelines, regardless
of whether the patient is new or established. Some commenters stated
that, if CMS chooses to continue to require hospitals to report both
new and established patient visit codes, the distinction should be
based upon whether the patient has a medical record.
Response: As we stated in the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60547), because hospital claims data continue to
show significant cost differences between new and established patient
visits, we continue to believe it is necessary and appropriate to
recognize the CPT codes for both new and established patient visits
and, in some cases, provide differential payment for new and
established patient visits of the same level. For example, the final CY
2011 median cost for the Level 3 new patient clinic visit, described by
CPT code 99203 and calculated using over 200,000 single claims from CY
2009, is approximately $101, while the final CY 2011 median cost for
the Level 3 established patient clinic visit, described by CPT code
99213 and calculated using over 4.8 million single claims from CY 2009,
is approximately $76. We believe this difference in median costs
warrants continued assignment of these CPT codes to different APCs for
CY 2011.
Given that we have a substantial volume of single claims from a
significant number of hospitals upon which to calculate the median
costs for all levels of clinic visits, we do not agree with the
commenters that the differences in costs for new versus established
patient visits are flawed. We expect hospitals to report all HCPCS
codes in accordance with correct coding principles, CPT code
descriptions, and relevant CMS guidance, which, in this case, specifies
that the meanings of ``new'' and ``established'' patients as included
in the clinic visit CPT code descriptors pertain to whether or not the
patient has been registered as an inpatient or an outpatient of the
hospital within the past 3 years (73 FR 68679). As we have stated in
the past (74 FR 60547), we have no reason to believe that hospitals are
systematically disregarding these principles to the extent that our
median costs for clinic visits, which are based on data from millions
of single claims, would be artificially skewed.
As we stated in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68678), with respect to a patient being new the first time he or
she receives services at a particular hospital clinic even if the
patient has been seen elsewhere in the hospital within the last 3
years, we believe this approach could be problematic because we do not
believe that every clinic has clear administrative boundaries that
define whether the patient was previously seen in that particular
clinic. We also note that, as we have stated in the past (73 FR 68678)
concerning commenters' request that the distinction between new and
established patients be based upon whether the patient has a medical
record, we continue to believe it is appropriate to include a time
limit when determining whether a patient is new or established because
we would expect that care of a patient who was not treated at the
hospital for several years prior to a visit could require significantly
greater hospital resources than care for a patient who was recently
treated at the hospital.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to continue to
define new or established patient status for the purpose of reporting
the clinic visit CPT codes, on the basis of whether or not the patient
has been registered as an inpatient or outpatient of the hospital
within the past 3 years. We also are finalizing our CY 2011 proposal,
without modification, to continue our policy of calculating median
costs for clinic visits under the OPPS using historical hospital claims
data. As discussed in detail in section II.A.2.e.(1) of this final rule
with comment period and consistent with our CY 2010 policy, when
calculating the median costs for the clinic visit APCs (0604 through
0608), we utilized our methodology that excludes those claims for
visits that are eligible for payment through the extended assessment
and management composite APC 8002 (Level I Extended Assessment and
Management Composite). We continue to believe that this approach
results in the most accurate cost estimates for APCs 0604 through 0608
for CY 2011.
2. Emergency Department Visits
Since CY 2007, we have recognized two different types of emergency
departments for payment purposes under the OPPS--Type A emergency
departments and Type B emergency departments. As described in greater
detail below, by providing payment for two types of emergency
departments, we recognize, for OPPS payment purposes, both the CPT
definition of an emergency department, which requires the facility to
be available 24 hours, and the requirements for emergency departments
specified in the provisions of the Emergency Medical Treatment and
Labor Act (EMTALA) (Pub. L. 99-272), which do not stipulate 24-hour
availability but do specify other obligations for hospitals that offer
emergency services. For more detailed information on the EMTALA
provisions, we refer readers to the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68680).
In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68132), we finalized the definition of a Type A emergency department to
distinguish it from a Type B emergency department. A Type A emergency
department must be available to provide services 24 hours a day, 7 days
a week, and meet one or both of the following requirements related to
the EMTALA definition of a dedicated emergency department specified at
42 CFR 489.24(b), specifically: (1) It is licensed by the State in
which it is located under the applicable State law as an emergency room
or emergency department; or (2) it is held out to the public (by name,
posted signs, advertising, or other means) as a place that provides
care for emergency medical conditions on an urgent basis without
requiring a previously scheduled appointment. For CY 2007 (71 FR
68140), we assigned the five CPT E/M emergency department visit codes
for services provided in Type A emergency departments to five created
Emergency Visit APCs, specifically APC 0609 (Level 1 Emergency Visits),
APC 0613 (Level 2 Emergency Visits), APC 0614 (Level 3 Emergency
Visits), APC 0615 (Level 4 Emergency Visits), and APC 0616 (Level 5
Emergency Visits). We defined a Type B emergency department as any
dedicated emergency department that incurred EMTALA obligations but did
not meet the CPT definition of an emergency department. For example, a
hospital department that may be characterized as a Type B emergency
department would meet the definition of a dedicated emergency
department but may not be available 24 hours a day,

[[Page 71987]]

7 days a week. Hospitals with such dedicated emergency departments
incur EMTALA obligations with respect to an individual who presents to
the department and requests, or has a request made on his or her
behalf, examination or treatment for a medical condition.
To determine whether visits to Type B emergency departments have
different resource costs than visits to either clinics or Type A
emergency departments, in the CY 2007 OPPS/ASC final rule with comment
period (71 FR 68132), we finalized a set of five HCPCS G-codes for use
by hospitals to report visits to all entities that meet the definition
of a dedicated emergency department under the EMTALA regulations but
that are not Type A emergency departments. These codes are called
``Type B emergency department visit codes.'' In the CY 2007 OPPS/ASC
final rule with comment period (71 FR 68132), we explained that these
new HCPCS G-codes would serve as a vehicle to capture median cost and
resource differences among visits provided by Type A emergency
departments, Type B emergency departments, and clinics. We stated that
the reporting of specific HCPCS G-codes for emergency department visits
provided in Type B emergency departments would permit us to
specifically collect and analyze the hospital resource costs of visits
to these facilities in order to determine if, in the future, a proposal
for an alternative payment policy might be warranted. We expected
hospitals to adjust their charges appropriately to reflect differences
in Type A and Type B emergency department visit costs.
As we noted in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68681), the CY 2007 claims data used for that rulemaking were
from the first year of claims data available for analysis that included
hospitals' cost data for these new Type B emergency department HCPCS
visit codes. Based on our analysis of the CY 2007 claims data, we
confirmed that the median costs of Type B emergency department visits
were less than the median costs of Type A emergency department visits
for all but the level 5 visit. In other words, the median costs from
the CY 2007 hospital claims represented real differences in the
hospital resource costs for the same level of visits in a Type A or
Type B emergency department. Therefore, for CY 2009, we adopted the
August 2008 APC Panel recommendation to assign Levels 1 through 4 Type
B emergency department visits to their own APCs and to assign the Level
5 Type B emergency department visit to the same APC as the Level 5 Type
A emergency department visit.
As discussed in the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60548 through 60551), analyses of CY 2008 hospitals' cost data
from claims data used for CY 2010 ratesetting for the emergency
department HCPCS G-codes demonstrated that the pattern of relative cost
differences between Type A and Type B emergency department visits was
largely consistent with the distributions we observed in the CY 2007
data, with the exception that, in the CY 2008 data, we observed a
relatively lower HCPCS code-specific median cost associated with Level
5 Type B emergency department visits compared to the HCPCS code-
specific median cost of Level 5 Type A emergency department visits. As
a result, for CY 2010, we finalized a policy to continue to pay Levels
1 through 4 Type B emergency department visits through four levels of
APCs, and to pay for Level 5 Type B emergency department visits through
new APC 0630 (Level 5 Type B Emergency Department Visit), to which the
Level 5 Type B emergency department visit HCPCS code is the only
service assigned.
As we noted in the CY 2011 OPPS/ASC proposed rule (75 FR 46297),
based on the CY 2009 claims data available for the proposed rule, we
note that the pattern of relative cost differences between Type A and
Type B emergency department visits is consistent with the distributions
we observed in the CY 2008 claims data, as demonstrated in Table 32 of
the proposed rule. Therefore, we proposed to continue to pay for Type B
emergency department visits in CY 2011 based on their median costs
through five levels of APCs: APC 0626 (Level 1 Type B Emergency
Department Visit), APC 0627 (Level 2 Type B Emergency Department
Visit), APC 0628 (Level 3 Type B Emergency Department Visit), APC 0629
(Level 4 Type B Emergency Department Visit), and APC 0630. We stated
that we continue to believe that this configuration pays appropriately
for each level of Type B emergency department visits based on estimated
resource costs from more recent claims data. We also noted that, as
discussed in section II.A.2.e.(1) of the proposed rule and consistent
with our CY 2010 policy, when calculating the median costs for the
emergency department visit and critical care APCs (0609 through 0617
and 0626 through 0630), we proposed to utilize our methodology that
excludes those claims for visits that are eligible for payment through
the extended assessment and management composite APC 8002. We stated
that we believe that this approach will result in the most accurate
cost estimates for APCs 0604 through 0608 for CY 2011.
Comment: One commenter requested clarification regarding ``triage
only'' visits in which a patient is seen by a nurse and triaged in the
hospital emergency department but leaves prior to a physician's
examination and treatment. The commenter asked if hospitals can bill
visit codes for such cases when facility resources are incurred if the
patient is not seen by a physician.
Response: As we have stated in the past (73 FR 68686 and 74 FR
60551), under the OPPS, unless indicated otherwise, we do not specify
the type of hospital staff (for example, nurses or pharmacists) who may
provide services in hospitals because the OPPS only makes payment for
services provided incident to physicians' services. Hospitals providing
services incident to physicians' services may choose a variety of
staffing configurations to provide those services, taking into account
other relevant factors, including State and local laws, hospital
policies, and other Federal requirements such as EMTALA and the
Medicare conditions of participation related to hospital staffing.
Billing a visit code in addition to another service merely because the
patient interacted with hospital staff or spent time in a room for that
service is inappropriate. A hospital may bill a visit code based on the
hospital's own coding guidelines which must reasonably relate the
intensity of hospital resources to different levels of HCPCS codes.
Services furnished must be medically necessary and documented.
After consideration of the public comments we received, we are
adopting our proposal, without modification, to continue paying for
Type B emergency department visits in CY 2011, consistent with their
median costs through 5 levels of Type B emergency department visit
APCs: APC 0626 (Level 1 Type B Emergency Visits), APC 0627 (Level 2
Type B Emergency Visits), APC 0628 (Level 3 Type B Emergency Visits),
APC 0629 (Level 4 Type B Emergency Visits), and APC 0630 (Level 5 Type
B Emergency Visits). We are assigning HCPCS codes G0380, G0381, G0382,
G0383, and G0384 (the levels 1, 2, 3, 4, and 5 Type B emergency
department visit Level II HCPCS codes) to APCs 0626, 0627, 0628, 0629,
and 0630, respectively, for CY 2011. We continue to believe that this
configuration pays appropriately for each level of Type B emergency
department visits based on

[[Page 71988]]

estimated resource costs from the most recent claims data.
We also note that, as discussed in section II.A.2.e.(1) of this
final rule with comment period and consistent with our CY 2010 policy,
when calculating the median costs for the emergency department visit
and critical care APCs (0609 through 0617 and 0626 through 0630), we
utilized our methodology that excludes those claims for visits that are
eligible for payment through the extended assessment and management
composite APC 8002 (Level I Extended Assessment and Management
Composite). We continue to believe that this approach will result in
the most accurate cost estimates for APCs 0604 through 0608 for CY
2011.
Table 40 below displays the median costs for each level of Type B
emergency department visit APCs under the final CY 2011 configuration,
compared to the final median costs for each level of clinic visit APCs
and each level of Type A emergency department visit APCs.

Table 40--Comparison of Median Costs for Clinic Visit APCs, TYPE B Emergency Department Visit APCs, and Type A
Emergency Department Visit APCs
----------------------------------------------------------------------------------------------------------------
CY 2011 type B CY 2011 type A
CY 2011 clinic visit emergency department emergency visit
Visit level approximate APC median approximate APC median approximate APC median
cost cost cost
----------------------------------------------------------------------------------------------------------------
Level 1.............................. $52 $41 $51
Level 2.............................. 74 59 86
Level 3.............................. 99 100 138
Level 4.............................. 127 164 220
Level 5.............................. 167 270 326
----------------------------------------------------------------------------------------------------------------

For CY 2010 and in prior years, The AMA CPT Editorial Panel has
defined critical care CPT codes 99291 (Critical care, evaluation and
management of the critically ill or critically injured patient; first
30-74 minutes) and 99292 (Critical care, evaluation and management of
the critically ill or critically injured patient; each additional 30
minutes (List separately in addition to code for primary service)) to
include a wide range of ancillary services such as electrocardiograms,
chest X-rays and pulse oximetry. As we have stated in manual
instruction, we expect hospitals to report in accordance with CPT
guidance unless we instruct otherwise. For critical care in particular,
we have instructed hospitals that any services that the CPT Editorial
Panel indicates are included in the reporting of CPT code 99291
(including those services that would otherwise be reported by and paid
to hospitals using any of the CPT codes specified by the CPT Editorial
Panel) should not be billed separately. Instead, hospitals should
report charges for any services provided as part of the critical care
services. In establishing payment rates for critical care services, and
other services, CMS packages the costs of certain items and services
separately reported by HCPCS codes into payment for critical care
services and other services, according to the standard OPPS methodology
for packaging costs (Medicare Claims Processing Manual (Pub. L. 100-
04), Chapter 4, Section 160.1).
For CY 2011, the AMA CPT Editorial Panel is revising its guidance
for the critical care codes to specifically state that, for hospital
reporting purposes, critical care codes do not include the specified
ancillary services. Beginning in CY 2011, hospitals that report in
accordance with the CPT guidelines will begin reporting all of the
ancillary services and their associated charges separately when they
are provided in conjunction with critical care. Because the CY 2011
payment rate for critical care services is based on hospital claims
data from CY 2009, during which time hospitals would have reported
charges for any ancillary services provided as part of the critical
care services, we believe it is inappropriate to pay separately in CY
2011 for the ancillary services that hospitals may now report in
addition to critical care services. Therefore, for CY 2011, we will
continue to recognize the existing CPT codes for critical care services
and are establishing a payment rate based on our historical data, into
which the cost of the ancillary services is intrinsically packaged, and
we will implement claims processing edits that will conditionally
package payment for the ancillary services that are reported on the
same date of service as critical care services in order to avoid
overpayment. The payment status of the ancillary services will not
change when they are not provided in conjunction with critical care
services.
Our treatment of the revised CY 2011 critical care codes is open to
public comment for 60 days following issuance of this final rule with
comment period, and we will respond to the comments in the CY 2012
final rule with comment period. We are assigning status indicator
``Q3'' (Codes That May Be Paid Through a Composite APC) to the
ancillary services to indicate that payment for them is packaged into a
single payment for specific combinations of services and made through a
separate APC payment or packaged in all other circumstances, in
accordance with the OPPS payment status indicated for status indicator
``Q3'' in Addendum D1 to this final rule with comment period. The
ancillary services that were included in the definition of critical
care prior to CY 2011 and that will be conditionally packaged into the
payment for critical care services when provided on the same date of
service as critical care services in CY 2011 are listed in Addendum M
to this final rule with comment period.
3. Visit Reporting Guidelines
Since April 7, 2000, we have instructed hospitals to report
facility resources for clinic and emergency department hospital
outpatient visits using the CPT E/M codes and to develop internal
hospital guidelines for reporting the appropriate visit level. Because
a national set of hospital-specific codes and guidelines do not
currently exist, we have advised hospitals that each hospital's
internal guidelines that determine the levels of clinic and emergency
department visits to be reported should follow the intent of the CPT
code descriptors, in that the guidelines should be designed to
reasonably relate the intensity of hospital resources to the different
levels of effort represented by the codes.
As noted in detail in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66802 through 66805), we observed a normal and stable
distribution of clinic and emergency department visit levels in
hospital claims over the past several years. The data indicated that
hospitals, on

[[Page 71989]]

average, were billing all five levels of visit codes with varying
frequency, in a consistent pattern over time. Overall, both the clinic
and emergency department visit distributions indicated that hospitals
were billing consistently over time and in a manner that distinguished
between visit levels, resulting in relatively normal distributions
nationally for the OPPS, as well as for specific classes of hospitals.
The results of these analyses were generally consistent with our
understanding of the clinical and resource characteristics of different
levels of hospital outpatient clinic and emergency department visits.
In the CY 2008 OPPS/ASC proposed rule (72 FR 42764 through 42765), we
specifically invited public comment as to whether a pressing need for
national guidelines continued at this point in the maturation of the
OPPS, or if the current system where hospitals create and apply their
own internal guidelines to report visits was currently more practical
and appropriately flexible for hospitals. We explained that, although
we have reiterated our goal since CY 2000 of creating national
guidelines, this complex undertaking for these important and common
hospital services was proving more challenging than we initially
anticipated as we received new and expanded information from the public
on current hospital reporting practices that led to appropriate payment
for the hospital resources associated with clinic and emergency
department visits. We stated our belief that many hospitals had worked
diligently and carefully to develop and implement their own internal
guidelines that reflected the scope and types of services they provided
throughout the hospital outpatient system. Based on public comments, as
well as our own knowledge of how clinics operate, it seemed unlikely
that one set of straightforward national guidelines could apply to the
reporting of visits in all hospitals and specialty clinics. In
addition, the stable distribution of clinic and emergency department
visits reported under the OPPS over the past several years indicated
that hospitals, both nationally in the aggregate and grouped by
specific hospital classes, were generally billing in an appropriate and
consistent manner as we would expect in a system that accurately
distinguished among different levels of service based on the associated
hospital resources.
Therefore, we did not propose to implement national visit
guidelines for clinic or emergency department visits for CY 2008. Since
publication of the CY 2008 OPPS/ASC final rule with comment period, we
have again examined the distribution of clinic and Type A emergency
department visit levels based upon updated CY 2009 claims data
available for the CY 2011 proposed rule and this final rule with
comment period and confirmed that we continue to observe a normal and
stable distribution of clinic and emergency department visit levels in
hospital claims. We continue to believe that, based on the use of their
own internal guidelines, hospitals are generally billing in an
appropriate and consistent manner that distinguishes among different
levels of visits based on their required hospital resources. As a
result of our updated analyses, we are encouraging hospitals to
continue to report visits during CY 2011 according to their own
internal hospital guidelines. In the absence of national guidelines, we
will continue to regularly reevaluate patterns of hospital outpatient
visit reporting at varying levels of disaggregation below the national
level to ensure that hospitals continue to bill appropriately and
differentially for these services. As originally noted in detail in the
CY 2008 OPPS/ASC final rule with comment period (72 FR 66648), we
continue to expect that hospitals will not purposely change their visit
guidelines or otherwise upcode clinic and emergency department visits
for purposes of extended assessment and management composite APC
payment.
In addition, we note our continued expectation that hospitals'
internal guidelines will comport with the principles listed in the CY
2008 OPPS/ASC final rule with comment period (72 FR 66805). We
encourage hospitals with more specific questions related to the
creation of internal guidelines to contact their servicing fiscal
intermediary or MAC.
Comment: Several commenters expressed appreciation for CMS'
approach of studying the challenges associated with national guidelines
prior to their implementation. One commenter indicated that, while a
standardized coding methodology adopted by CMS would be ideal, it would
be preferable for CMS to replace the existing visit CPT codes with
hospital-specific HCPCS codes rather than require hospitals to adapt to
national guidelines, because providers are now accustomed to using
their own guidelines.
Several commenters urged CMS to move forward with the
implementation of national guidelines for hospitals to report clinic
visits, citing a need for standardization and consistency in the
definition and reporting of facility resource utilization and the
challenges of having different guidelines in place by different payers.
Other commenters asserted that variations in hospitals' internal
guidelines may result in inconsistent cost data upon which payment
rates for visits are based, and that the use of hospital-specific
internal guidelines is contrary to government and industry goals of
data uniformity, consistency, and comparability. Some commenters noted
that some Medicare contractors use their own auditing methods rather
than reviewing each hospital's internal guidelines while conducting
medical reviews, putting hospitals at an increased risk during audits
or fraud investigations.
Several commenters also recommended that, in the absence of
national guidelines for hospital visit reporting, CMS support a request
to the American Medical Association CPT Editorial Panel to create
unique CPT codes for hospital reporting of ED and clinic visits based
on internally developed guidelines. Some commenters also recommended
that CMS take a fresh look at approaches for adopting national visit
guidelines by carefully reevaluating proposals that have been submitted
in the past, as well as evaluating different sets of hospital-developed
internal guidelines that appear to be working well. According to the
commenters, the national guidelines should be clear, concise, and
specific with little or no room for varying interpretations, and
hospitals should have at least 1 year to prepare for the transition.
One commenter recommended 12 to18 months lead time in the issuance of
national guidelines in order to allow facilities sufficient time for
education and the process of converting their existing system to the
national standard.
Response: As we have in the past (74 FR 60553), we acknowledge that
it would be desirable to many hospitals to have national guidelines.
However, we also understand that it would be disruptive and
administratively burdensome to other hospitals that have successfully
adopted internal guidelines to implement any new set of national
guidelines while we address the problems that would be inevitable in
the case of any new set of guidelines that would be applied by
thousands of hospitals. We will continue to regularly reevaluate
patterns of hospital outpatient visit reporting at varying levels of
disaggregation below the national level to ensure that hospitals
continue to bill appropriately and differentially for these services.
We

[[Page 71990]]

reiterate our expectation that hospitals' internal guidelines fully
comply with the principles listed in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 68805). As noted in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66806), we encourage fiscal
intermediaries and MACs to review a hospital's internal guidelines when
an audit occurs. While we also would encourage RACs to review a
hospital's internal guidelines when an audit occurs, we note that
currently there are no RAC activities involving visit services. RAC
audits may involve CMS-approved issues only and must be posted to each
RAC's Web site.
We agree with the commenters that national guidelines should be
clear, concise, and specific with little or no room for varying
interpretations, and that hospitals should have at least 1 year to
prepare for the transition. If the AMA were to create facility-specific
CPT codes for reporting visits provided in HOPDs, we would certainly
consider such codes for OPPS use.
We appreciate all of the comments we have received in the past from
the public on visit guidelines, and we encourage continued submission
of comments throughout the year that would assist us and other
stakeholders interested in the development of national guidelines.
Until national guidelines are established, hospitals should continue
using their own internal guidelines to determine the appropriate
reporting of different levels of clinic and emergency department
visits. While we understand the interest of some hospitals in having us
move quickly to promulgate national guidelines that would ensure
standardized reporting of hospital outpatient visit levels, we believe
that the issues and concerns identified both by us and others are
important and require serious consideration prior to the implementation
of national guidelines. Because of our commitment to provide hospitals
with 6 to 12 months notice prior to implementation of national
guidelines, we would not implement national guidelines prior to CY
2012. Our goal is to ensure that OPPS national or hospital-specific
visit guidelines continue to facilitate consistent and accurate
reporting of hospital outpatient visits in a manner that is resource-
based and supportive of appropriate OPPS payments for the efficient and
effective provision of visits in hospital outpatient settings.

X. Payment for Partial Hospitalization Services

A. Background

Partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients as an alternative to
inpatient psychiatric care for individuals who have an acute mental
illness. Sections 1861(ff)(1) and (ff)(2) of the Act specify the items
and services that are defined as partial hospitalization services and
the conditions under which Medicare payment for the items and services
will be made. Section 1861(ff)(3) of the Act specifies that a partial
hospitalization program (PHP) is one that is furnished by a hospital or
community mental health center (CMHC) that meets the requirements
specified under that subsection of the Act.
Section 1301(a) of the recently enacted Health Care and Education
Reconciliation Act of 2010 (HCERA 2010) (Pub. L. 111-152, enacted on
March 30, 2010) revised the definition of a CMHC set forth at section
1861(ff)(3)(B) of the Act by adding a provision that the CMHC,
effective on the first day of the first calendar quarter that begins at
least 12 months after the date of enactment (that is, April 1, 2011),
must provide at least 40 percent of its services to individuals who are
not eligible for benefits under Title XVIII of the Act (Medicare).
Section 1301(b) of HCERA 2010 amended the description of a PHP to
specify that the program must be a distinct and organized intensive
ambulatory treatment program offering less than 24-hour daily care
``other than in an individual's home or in an inpatient or residential
setting.'' We discuss our finalized policies that incorporate these two
provisions of HCERA 2010 in our regulations under section X.C. of this
final rule with comment period.
Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the
authority to designate the OPD services to be covered under the OPPS.
The existing Medicare regulations at 42 CFR 419.21 that implement this
provision specify that payments under the OPPS will be made for partial
hospitalization services furnished by CMHCs as well as those services
furnished by hospitals to their outpatients. Section 1833(t)(2)(C) of
the Act requires the Secretary to establish relative payment weights
for covered OPD services (and any APCs) based on median (or mean, at
the election of the Secretary) hospital costs using data on claims from
1996 and data from the most recent available cost reports. Section
1833(t)(9)(A) of the Act requires the Secretary to ``review not less
often than annually and revise the groups, the relative payment
weights, and the wage and other adjustments described in paragraph (2)
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.'' Because a day of care is the unit
that defines the structure and scheduling of partial hospitalization
services, we established a per diem payment methodology for the PHP
APCs, effective for services furnished on or after August 1, 2000 (65
FR 18452 through 18455).
From CY 2003 through CY 2006, the median per diem cost for CMHCs
fluctuated significantly from year to year, while the median per diem
cost for hospital-based PHPs remained relatively constant. We believe
that CMHCs may have increased and decreased their charges in response
to Medicare payment policies.
Due to these significant fluctuations and declines in CMHC PHP
median per diem costs, in developing the CY 2008 update, we began an
effort to strengthen the PHP benefit through extensive data analysis
and policy and payment changes (72 FR 66670 through 66676).
Specifically, we proposed and finalized two refinements to the
methodology for computing the PHP median. First, we remapped 10 revenue
codes that are common among hospital-based PHP claims to the most
appropriate cost centers. Secondly, we refined our methodology for
calculating PHP per diem costs by computing the median using a per day
methodology. A complete discussion of these refinements can be found in
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671
through 66672).
In CY 2009, we implemented several regulatory, policy, and payment
changes, including a two-tiered payment approach for PHP services under
which we pay one amount for days with 3 services (APC 0172 (Level I
Partial Hospitalization)) and a higher amount for days with 4 or more
services (APC 0173 (Level II Partial Hospitalization)). We refer
readers to section X.C.2. of the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68688 through 68693) for a full discussion of the
two-tiered payment system. In addition, for CY 2009, we finalized our
policy to deny payment for any PHP claims for days when fewer than 3
units of therapeutic services are provided. As noted in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68694), we believe that
3 services should be the minimum

[[Page 71991]]

number of services allowed in a PHP day because a day with 1 or 2
services does not meet the statutory intent of a PHP. We continue to
believe that the minimum threshold of three services is appropriate
because it takes into consideration unforeseen circumstances, such as
medical appointments, while maintaining the integrity of the PHP
benefit.
Furthermore, for CY 2009, we revised the regulations at 42 CFR
410.43 to codify existing basic PHP patient eligibility criteria and to
add a reference to current physician certification requirements at 42
CFR 424.24 to conform our regulations to our longstanding policy (73 FR
68694 through 68695). We believe these changes have helped to
strengthen the PHP benefit. We also revised the partial hospitalization
benefit to include several coding updates. We refer readers to section
X.C.2. of the CY 2009 OPPS/ASC final rule with comment period (73 FR
68694 through 68697) for a full discussion of these requirements.
For CY 2010, we retained the two-tiered payment approach for PHP
services and used only hospital-based PHP data in computing the per
diem payment rates. We used only hospital-based PHP data because we
were concerned about further reducing both PHP APC per diem payment
rates without knowing the impact of the policy and payment changes we
made in CY 2009. Because of the 2-year lag between data collection and
rulemaking, the changes we made in CY 2009 are reflected for the first
time in the claims data that we are using to determine payment rates
for this CY 2011 rulemaking.

B. PHP APC Update for CY 2011

To develop proposed payment rates for the CY 2011 OPPS/ASC proposed
rule (75 FR 46299), we used CY 2009 claims data and computed median per
diem costs in the following categories: (1) All days; (2) days with 3
services; and (3) days with 4 or more services. These proposed median
per diem costs were computed separately for CMHC PHPs and hospital-
based PHPs and are shown in Table 41 below.

Table 41--Proposed PHP Median Per Diem Costs for CMHC and Hospital-Based PHPs, by Category, Based on CY 2009
Claims Data
----------------------------------------------------------------------------------------------------------------
Hospital-based
Category CMHC PHPs PHPs Combined
----------------------------------------------------------------------------------------------------------------
All Days........................................................ $123.17 $235.58 $132.28
Days with 3 services............................................ 118.19 184.47 140.96
Days with 4 or more services.................................... 123.35 235.58 131.56
----------------------------------------------------------------------------------------------------------------

Using CY 2009 claims data and the refined methodology for computing
PHP per diem costs that we adopted in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66672), we computed a median per diem cost
from all claims for CY 2011 of $132.28. As stated in the CY 2011 OPPS/
ASC proposed rule (75 FR 46299), the data indicate that, although CMHCs
provided more days with 4 or more services in CY 2009 than in CY 2008,
their median per diem cost for 4 or more services ($123.35) is
substantially lower than the median per diem cost for the same units of
service provided in hospital-based PHPs ($235.58). The median per diem
cost for claims containing 4 or more services for all PHP claims,
regardless of site of service, is $131.56. The median per diem costs
for claims containing 3 services are $118.19 for CMHC PHPs and $184.47
for hospital-based PHPs, and $140.96 for all PHP service claims,
regardless of site of service.
We stated in the CY 2011 OPPS/ASC proposed rule that these data,
along with data from previous years, show the shift in cost and
utilization for CMHCs and hospital-based PHPs under the two-tiered
payment system (75 FR 46299 through 46300). Since CY 2009 (using 2007
data), we noted that CMHCs' costs decreased from $139 in CY 2009 to
$118 in CY 2011 for Level I services (3 services) and from $172 in CY
2009 to $123 in CY 2011 for Level II services (4 or more services). For
hospital-based PHPs, costs increased from $157 in CY 2009 (using 2007
data) to $184 in CY 2011 for Level I services (3 services) and from
$200 in CY 2009 to $236 in CY 2011 for Level II services (4 or more
services). We stated that, for the past 2 years, we have based the PHP
APC per diem payment rates on only hospital-based PHP data because
including the CMHC data would have lowered the PHP APC per diem rates
and raised concerns about appropriate payment for PHP services.
Specifically, we stated that we were concerned about paying hospital-
based PHP programs a rate that is lower than what their cost structure
reflects, which in turn could lead to hospital-based program closures
and possible access problems for Medicare beneficiaries. We also stated
that we were concerned about further reducing the payment rates without
knowing the impact of the policy and payment changes we made in CY
2009.
Because the CMHC cost data has significantly decreased again this
year, we stated that we believe that we can no longer ignore the
pattern and continue to base the PHP payment rates using only hospital-
based data. We noted that we are confident that the CY 2009 claims data
reflect that CMHCs continue to have a lower cost structure than
hospitals and not the impact of CY 2009 policies. We believe that CMHCs
have a lower cost structure than their hospital-based PHP counterparts
because the data show that CMHCs provide fewer PHP services in a day
and use less costly staff than hospital-based PHPs. Therefore, we
stated that we believe that it would be inappropriate to treat these
two provider types in the same manner regarding payment, particularly
because their cost differences continue to be so disparate. We also
stated that we believe that we need to continue to protect hospital-
based PHPs from receiving inadequate payments, given that they offer
the widest access to PHP services because they are located across the
country. Our analysis of the claims data indicate a need to establish
separate payment rates for each provider type based on its own unique
cost structures.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46300), we proposed to
compute four separate PHP APC per diem payment rates, two for CMHC PHPs
(for Level I and Level II services using only CMHC data) and two for
hospital-based PHPs (Level I and Level II services using only hospital-
based PHP data). Creating the four proposed payment rates (two for CMHC
PHPs and two for hospital-based PHPs) would support continued access to
the PHP benefit, including a more intensive level of care, while also
providing appropriate payment based on the unique cost structures of
CMHC PHPs and hospital-based PHPs. We proposed the following APC median
per diem costs for PHP services for CY 2011:

[[Page 71992]]

Table 42--Proposed CY 2011 Median Per Diem Costs for CMHC PHP Services
------------------------------------------------------------------------
Proposed median per
Proposed APC Group title diem costs
------------------------------------------------------------------------
0172.................. Level I Partial $118.19
Hospitalization (3
services) for CMHCs.
0173.................. Level II Partial 123.35
Hospitalization (4 or
more services) for CMHCs.
------------------------------------------------------------------------

Table 43--Proposed CY 2011 Median Per Diem Costs for Hospital-Based PHP
Services
------------------------------------------------------------------------
Proposed median per
Proposed APC Group title diem costs
------------------------------------------------------------------------
0175.................. Level I Partial $184.47
Hospitalization (3
services) for hospital-
based PHPs.
0176.................. Level II Partial 235.58
Hospitalization (4 or
more services) for
hospital-based PHPs.
------------------------------------------------------------------------

We noted in the CY 2011 OPPS/ASC proposed rule (75 FR 46300) that
this proposed policy is consistent with the recommendation made by
several commenters in the CY 2010 OPPS/ASC final rule with comment
period that urged CMS to adopt two additional payment rates that are
site-specific APCs for PHP services, where the hospital-based PHP APCs
for Level I services (3 services) and Level II services (4 or more
services) would be established using only hospital-based data and the
CMHC PHP APCs for Level I services (3 services) and Level II services
(4 or more services) would be established using only CMHC data (74 FR
60557).
We requested public comments on our proposal to provide four
separate PHP APC per diem payment rates, two for CMHC PHPs and two for
hospital-based PHPs. We received numerous public comments in response
to our proposal. A summary of the comments received and our responses
follow:
Comment: Several commenters representing hospital-based PHPs
supported CMS' proposal to establish four separate PHP APC per diem
payment rates, two for CMHCs (using CMHC data only) and two for
hospital-based PHPs (using hospital-based data only). However, these
commenters urged CMS to consider transitioning the CMHC reduction in
payment over 2 to 3 years to prevent possible CMHC closures.
Several commenters representing CMHCs also expressed their concern
that a single large reduction in payment, without a mitigating
transition, may result in CMHC closures and may limit access to mental
health services to an already vulnerable population. A few of the
commenters further stated that CMHC closures, especially in rural
areas, may result in mentally ill individuals ending up homeless, in
jail, or in emergency rooms. A couple of commenters also pointed out
that CMHCs located in the Gulf region are also dealing with the oil
spill and its devastating impact on communities.
Several commenters representing CMHCs also urged CMS to reconsider
its proposed exclusion of hospital costs from the calculation of APC
rates for partial hospitalization services furnished by CMHCs. The
commenters stated that excluding hospital costs from the calculation is
contrary to section 1833(t)(2)(C) of the Act and correlating regulation
42 CFR 419.31(b)(1).
A few commenters suggested that CMS freeze PHP rates for CMHCs at
the CY 2010 levels. These commenters stated that freezing the rates
would allow CMHCs time to assess the impact of the rate reduction and
section 1301(a) of HCERA 2010 on their operations. These commenters
also expressed concern that moving forward with the proposed rate
reduction could cause potential CMHC closures.
A couple of commenters also stated that the proposed changes in the
CY 2011 OPPS/ASC proposed rule do not support the Patient Protection
and Affordable Care Act and the Mental Health Parity and Addiction
Equity Act of 2008.
Response: We appreciate the commenters who supported our proposal
to create four separate PHP APC per diem payment rates, two for CMHC
PHPs (using only CMHC data) and two for hospital-based PHPs (using only
hospital-based PHP data). We understand commenters' concerns about the
proposed CMHC per diem rate reduction and the impact the reduction may
have on access to the PHP benefit in both provider settings. However,
we also believe that we can no longer ignore the different cost
structures of CMHCs and hospital-based PHPs. As we discussed earlier in
this section, CMHCs' costs have fluctuated significantly and then
declined over the years. Conversely, the hospital-based PHP costs have
been relatively stable since the inception of the OPPS. Furthermore, in
the past, we have provided different measures to control the CMHC cost
fluctuation in order to protect access to care and with the hope that
the cost structures for both provider types would eventually become
more consistent. However, after several years of generally paying CMHCs
relatively more than their cost data, while at times generally paying
hospital-based PHPs relatively less than their cost data, we conclude
that we need to create more appropriate payments that reflect the cost
structure of each provider type. Section 1833(t)(9)(A) of the Act
requires the Secretary to ``review not less often than annually and
revise the groups, the relative payment weights, and the wage and other
adjustments described in paragraph (2) 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.'' We believe
that we have authority to revise the groups and relative payment
weights and to make other adjustments to the payment rates for PHP
services, including basing rates on hospital-based PHP data only,
combined hospital-based PHP and CMHC data, or CMHC data only, to take
into account relevant information and factors that would allow us to
more appropriately pay providers for the resource costs associated with
providing PHP services. Therefore, we are finalizing the four separate
PHP APC per diem payment rates, two for CMHC PHPs (for Level I and
Level II services using only CMHC data) and two for hospital-based PHPs
(for Level I and Level II services using only hospital-based PHP data).
Although we are committed to paying providers appropriately, based
on cost data, we are just as concerned about protecting access to care.
The PHP benefit and mental health services are very important to us. We
understand the commenters' concerns that a single large reduction in
payment could potentially result in access to care issues in both CMHCs
and hospital-based PHPs

[[Page 71993]]

because the hospital-based PHPs potentially may need to provide
additional services to accommodate those individuals displaced by any
potential closures.
After consideration of the public comments we received and for
reasons we have discussed, we have decided to provide a 2-year
transition to CMHC rates based solely on CMHC data for the two CMHC PHP
APC per diem rates. For CY 2011, the CMHC PHP APC Level I and Level II
rates will be calculated by taking 50 percent of the difference between
the CY 2010 final hospital-based medians and the CY 2011 final CMHC
medians and adding that number to the CY 2011 final CMHC medians. We
believe a 2-year transition under this methodology will move us in the
direction of our goal, which is to pay appropriately for PHP services
based on each provider type's cost data, while at the same time
allowing providers time to adjust their business operations and to
protect access to care for beneficiaries. For CY 2011, the CMHC APC for
Level I Partial Hospitalization (3 services) will be calculated by
taking 50 percent of the difference between the CY 2010 final hospital-
based median for Level I Partial Hospitalization (3 services) and the
CY 2011 final CMHC median for Level I Partial Hospitalization (3
services) and adding that number to the CY 2011 final CMHC median for
Level I Partial Hospitalization (3 services) or in numerical terms:
$148.48 minus $108.01 equals $40.47, then take 50 percent of $40.47,
which equals $20.24. The $20.24 amount will be added to the CY 2011
CMHC final Level I Partial Hospitalization (3 services) median of
$108.01 to yield $128.25. The CMHC APC for Level II Partial
Hospitalization (4 or more services) will be calculated in the same
manner, by taking 50 percent of the difference between the CY 2010
final hospital-based median for Level II Partial Hospitalization (4 or
more services) and the CY 2011 final CMHC median for Level II Partial
Hospitalization (4 or more services) and adding that number to the CY
2011 final CMHC median for Level II Partial Hospitalization (4 or more
services) or in numerical terms: $208.96 minus $116.37 equals $92.59,
then take 50 percent of $92.59,which equals $46.30. The $46.30 amount
will be added to the CY 2011 final CMHC Level II Partial
Hospitalization (4 or more services) median of $116.37 to yield
$162.67. The CY 2011 CMHC PHP APC Level I (3 services) cost is $128 and
the Level II (4 or more services) cost is $163. The CY 2011 hospital-
based PHP Level I (3 services) median cost is $203 and the Level II (4
or more services) cost is $236.
For CY 2012, we plan to implement the CMHC per diem rate using only
CMHC data. However, we will review and analyze the data during the CY
2012 rulemaking cycle and may, based on these analyses, further refine
the payment mechanism.
Finally, in response to the request to freeze the PHP payment rates
at CY 2010 levels, we will not adopt this suggestion because we believe
that it is most appropriate to pay for PHP services based on the cost
data for each provider type, and the CY 2010 payment rates are
calculated using only hospital-based data. Further, in response to
concern from commenters' that we are not supporting the Patient
Protection and Affordable Care Act and the Mental Health Parity and
Addiction Equity Act of 2008, we believe that we are in compliance with
both Acts and, as discussed in this section and elsewhere, are
supportive of mental health.
Comment: Several commenters suggested alternative methodologies for
paying PHP providers, such as requesting that CMS form a study group
comprised of providers, CMS representatives and members of the APC
committee to determine a more accurate reimbursement methodology for
providers. One commenter offered to assist in analyzing the
methodology, suggesting a methodology based upon a percentage of base
rates for inpatient psychiatric daily rates or perhaps unbundling PHP
services and base payment on the individual HCPCS codes. One commenter
suggested removing PHP from the APC codes and, instead, establishing a
separate payment system similar to home health. Other commenters
believed that CMS should include non-Medicare reimbursable costs in the
ratesetting calculations, such as meals, transportation, 24-hour on
call service, community education and screenings for admission to State
facilities, operational costs for other outpatient services, as well as
case management. A few commenters pointed out that the methodology,
although mathematically correct, has not yielded reimbursement rates
satisfactory to providers. Several commenters expressed concern that
the methodology used reflects many variables that provide for an
incorrect cost per day forcing CMHCs to cut costs to stay in business,
and produces a lower CCR the following year. A couple of commenters
suggested perhaps a GAO true cost analysis to determine fair costing.
Response: Currently, the statute does not provide for a separate or
alternative payment system for partial hospitalization services, as
requested by commenters, and any significant change in payment
methodology would require a statutory change. Also, we would not
include non-Medicare reimbursable costs in our calculation of Medicare
PHP payments because we do not base Medicare PHP payments on non-
Medicare reimbursable costs. Further, section 1861(ff) of the Act,
which defines partial hospitalization services, explicitly excludes
meals and transportation from the items and services included in
partial hospitalization services.
In response to the commenters who find our methodology
mathematically correct, but resulting payments unsatisfactory, we
believe our methodology to be accurate and the resulting payments to be
appropriate. We determine median cost by computing a separate per diem
cost for each day rather than for each bill. Under this method, a cost
is computed separately for each day of PHP care. When there are
multiple days of care entered on a claim, a unique cost is computed for
each day of care. In this manner, we can accurately assess and
recognize the costs associated with each day of care. All of these
costs are then arrayed from lowest to highest and the middle value of
the array would be the median per diem cost. We adopted this method of
computing PHP per diem median cost because we believe it produces a
more accurate estimate because each day gets an equal weight towards
computing the median. This method for computing a PHP per diem median
cost more accurately reflects the costs of a PHP and uses all available
PHP data.
Furthermore, we disagree with the commenters who suggested that our
methodology reflects many variables that provide for an incorrect cost
per day. We believe that this comment reflects confusion about how the
CCRs influence the medians. We disagree that reduction in cost leads to
reduction in CCRs. This outcome only occurs if charges remain the same.
We welcome any input and information that the industry can provide
about the costs of their programs and encourage providers to submit
information on their costs. We also welcome reports on this issue,
including a GAO or other cost analyses. We note, however, that we do
not direct GAO activities.
Comment: A few commenters requested that CMHC cost report
information be included in the Healthcare Cost Report Information
System (HCRIS).

[[Page 71994]]

Response: We appreciate the commenters' request to make CMHC data
available through the HCRIS and starting in early 2011, CMHC cost
report information will begin to be available in the HCRIS. The
hospital-based PHP data are based on cost report information currently
in and accessible through the HCRIS.
Comment: A few commenters expressed their concern as to why CMS
continues to state that a day of partial hospitalization should not
equal the cost of the separate services provided in a non-PHP setting.
They stated that, for example, four individual group psychotherapy
services (APC 0325) add up to more than a proposed Level II day of PHP
for CMHCs.
Response: We do not believe that it is appropriate to compare the
partial hospitalization services to separate mental health services.
The payment rates for individual APC services cited by the commenter
(APC 0325) are not computed from PHP bills. As stated earlier, we used
data from PHPs to determine the median cost of a day of PHP service. A
PHP is a program of services where savings can be realized by hospitals
and CMHCs over delivering individual psychotherapy services.
We structured the PHP APCs (APCs 0172, 0173, 0175, and 0176) as a
per diem methodology in which the day of care is the unit that reflects
the structure and scheduling of PHPs and the composition of the PHP
APCs consist of the cost of all services provided each day. Although we
require that each PHP day include a psychotherapy service, we do not
specify the specific mix of other services provided, and our payment
methodology reflects the cost per day rather than the cost of each
service furnished within the day. We believe the data used for setting
the PHP payment appropriately reflect the typical PHP day and its costs
should not be compared to the costs of providing separate services. A
PHP is a complete program of services with efficiencies and economies
of scale provided in contrast to individual psychotherapy services.
In summary, after consideration of the public comments we received,
we are finalizing our CY 2011 proposal, with modification, to establish
four separate PHP APC per diem payment rates, two for CMHC PHPs and two
for hospital-based PHPs, based on each provider's own unique cost data.
As discussed above, we are instituting a 2-year transition to CMHC
rates based solely on CMHC data for the two CMHC PHP APC per diem
payments, which will help mitigate the rate reduction. Specifically,
for CY 2011, we are calculating the CMHC PHP APC Level I and Level II
rates by taking 50 percent of the difference between the CY 2010 final
hospital-based medians and the CY 2011 final CMHC medians and adding
that number to the CY 2011 final CMHC medians. The two hospital-based
PHP APCs per diem payments are finalized as proposed.
The updated PHP APCs median per diem costs that we are finalizing
for CY 2011 are shown in Tables 44 and 45 below:

Table 44--CY 2011 Median Per Diem Costs for CMHC PHP Services Plus
Transition
------------------------------------------------------------------------
Median per diem
APC Group title costs plus
transition
------------------------------------------------------------------------
0172.......................... Level I Partial $128.25
Hospitalization (3
services) for CMHCs.
0173.......................... Level II Partial 162.67
Hospitalization (4
or more services)
for CMHCs.
------------------------------------------------------------------------

Table 45--CY 2011 Median Per Diem Costs for Hospital-Based PHP Services
------------------------------------------------------------------------
Median per diem
APC Group title costs
------------------------------------------------------------------------
0175.......................... Level I Partial $202.71
Hospitalization (3
services) for
hospital-based PHPs.
0176.......................... Level II Partial 235.79
Hospitalization (4
or more services)
for hospital-based
PHPs.
------------------------------------------------------------------------

C. Changes to Regulations to Incorporate Provisions of HCERA 2010

As stated in section X.A. of this final rule with comment period,
section 1301 of HCERA 2010 made a change to the statutory definition of
a CMHC and a change to the description of what constitutes a PHP.
Specifically, section 1301(a) of HCERA 2010 revised the definition of a
CMHC set forth at section 1861(ff)(3)(B) of the Act by adding to the
existing provisions a new requirement under which a CMHC must provide
at least 40 percent of its services to individuals who are not eligible
for benefits under Title XVIII of the Act (Medicare), effective on the
first day of the first calendar quarter that begins at least 12 months
after the date of enactment (that is, April 1, 2011). Section 1301(b)
of HCERA 2010 amended the description of a PHP to specify that the
program must be a distinct and organized intensive ambulatory treatment
service offering less than 24-hour daily care ``other than in an
individual's home or in an inpatient or residential setting.'' This
revised description applies to both CMHC and hospital-based PHPs.
Our existing regulations at 42 CFR 410.2 incorporate the statutory
definitions of ``Community mental health center (CMHC)'' and ``Partial
hospitalization services.'' We proposed to revise the definition of a
CMHC in Sec. 410.2 to include the additional requirement provided for
under the amendment made by section 1301(a) of HCERA 2010. Under
existing Sec. 410.2, we define ``partial hospitalization services'' to
mean ``a distinct and organized intensive ambulatory treatment program
that offers less than 24-hour daily care and furnishes the services
described in Sec. 410.43.'' We proposed to revise this definition to
incorporate the amendment made by section 1301(b) of HCERA 2010 to
describe partial hospitalization services as a distinct and organized
intensive ambulatory treatment program that offers less than 24-hour
daily care ``other than in an individual's home or in an inpatient or
residential setting'' and furnishes the services described in Sec.
410.43.
Comment: Several of the commenters requested that CMS delay or
transition the implementation of the provisions of section 1301(a) of
HCERA2010, which amended the current definition for Community Mental
Health Centers to require that at least 40 percent of its services be
provided to individuals who are not eligible for benefits under this

[[Page 71995]]

title. Several commenters requested that CMS provide further guidance
on how this provision will be applied. Several commenters expressed
concern that a large reduction in Medicare payment, combined with the
40 percent threshold provision, will impact access to care and
potentially cause CMHC closures.
Response: We understand the commenters' concerns, but we do not
have discretion to provide a transition or to delay the effective date
of this provision. CMS' inclusion of the HCERA 2010 statutory language
in the CY 2011 OPPS proposed and final rules is to update our
regulations to reflect current law. Furthermore, Congress included in
this particular provision of the law the specific effective date: ``the
first day of the first calendar quarter that begins at least 12 months
after the date of enactment,'' that is April 1, 2011. The provision
also does not provide for any Secretarial discretion. Therefore,
effective April 1, 2011, a CMHC will be required ``to provide at least
40 percent of its services to individuals who are not eligible for
benefits under Title XVIII of the Act'' (Medicare). CMS will provide
further guidance on application of this provision in the coming months.
We did not receive any public comments related to section 1301(b)
of HCERA 2010 and, therefore, are finalizing the language as proposed
for Sec. 410.2. The revised definition for partial hospitalization
specifies that the program must be a distinct and organized intensive
ambulatory treatment program offering less than 24-hour daily care
``other than in an individual's home or in an inpatient or residential
setting.''

D. Separate Threshold for Outlier Payments to CMHCs

In the November 7, 2003 final rule with comment period (68 FR 63469
through 63470), we indicated that, given the difference in PHP charges
between hospitals and CMHCs, we did not believe it was appropriate to
make outlier payments to CMHCs using the outlier percentage target
amount and threshold established for hospitals. Prior to that time,
there was a significant difference in the amount of outlier payments
made to hospitals and CMHCs for PHP services. In addition, further
analysis indicated that using the same OPPS outlier threshold for both
hospitals and CMHCs did not limit outlier payments to high-cost cases
and resulted in excessive outlier payments to CMHCs. Therefore,
beginning in CY 2004, we established a separate outlier threshold for
CMHCs. The separate outlier threshold for CMHCs has resulted in more
commensurate outlier payments.
In CY 2004, the separate outlier threshold for CMHCs resulted in
$1.8 million in outlier payments to CMHCs. In CY 2005, the separate
outlier threshold for CMHCs resulted in $0.5 million in outlier
payments to CMHCs. In contrast, in CY 2003, more than $30 million was
paid to CMHCs in outlier payments. We believe this difference in
outlier payments indicates that the separate outlier threshold for
CMHCs has been successful in keeping outlier payments to CMHCs in line
with the percentage of OPPS payments made to CMHCs.
As noted in section II.F. of this final rule with comment period,
we proposed to continue our policy of identifying 1.0 percent of the
aggregate total payments under the OPPS for outlier payments for CY
2011. We proposed that a portion of that 1.0 percent, an amount equal
to 0.04 percent of outlier payments (or 0.0004) percent of total OPPS
payments, would be allocated to CMHCs for PHP outlier payments. As
discussed in section II.F. of this final rule with comment period, we
proposed to set a dollar threshold in addition to an APC multiplier
threshold for OPPS outlier payments. However, because the PHP APCs are
the only APC for which CMHCs may receive payment under the OPPS, we
would not expect to redirect outlier payments by imposing a dollar
threshold. Therefore, we did not propose to set a dollar threshold for
CMHC outlier payments. As noted in section II.F. of this final rule
with comment period, we proposed to set the outlier threshold for CMHCs
for CY 2011 at 3.40 times the APC payment amount and the CY 2011
outlier payment percentage applicable to costs in excess of the
threshold at 50 percent. Specifically, we proposed to establish that 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.
Comment: A couple of commenters stated that none of the programs
that they worked with receive outlier payments and have not for several
years. The commenters suggested that if outlier payments to CMHCs are
an issue that CMS discontinue the outlier payment policy.
Response: We are unsure what the commenters mean, but to the extent
that commenters suggest that we discontinue outlier payments for CMHCs,
we note that we are required to provide outlier payments in accordance
with the statute and regulations. In accordance with the requirements
set forth in section 1833(t)(5) of the Act and the applicable
regulations, the Secretary shall provide for outlier payments under
specific circumstances. Under Sec. 419.43(d) of the regulations,
subject to paragraph (d)(4) of this section, CMS provides for an
additional payment for a hospital outpatient service (or group of
services) not excluded under paragraph (f) of this section for which a
hospital's charges, adjusted to cost, exceed the following: (i) A fixed
multiple of the sum of the applicable Medicare hospital outpatient
payment amount determined under Sec. 419.32(c), as adjusted under
paragraph Sec. 419.43 (other than for adjustments under this paragraph
(d) or paragraph (e) of this section); and any transitional pass-
through payment under Sec. 419.66; and (ii) at the option of CMS, a
fixed dollar amount. Because CMHCs are a provider of PHP services,
which are a type of covered OPD service, outlier payments must be
provided for them in accordance with the statute and regulations.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to set a separate outlier threshold for
CMHCs. As discussed in section II.F. of this final rule with comment
period, using more recent data for this final rule with comment period,
we set the target for hospital outpatient outlier payments at 0.86
percent of total estimated OPPS payments. We allocated a portion of
that 0.86 percent, an amount equal to 0.02 percent of outlier payments
or 0.0002 percent of total estimated OPPS payments to CMHCs for PHP
outlier payments. For CY 2011, as proposed, we are setting the outlier
threshold at 3.40 multiplied by the APC payment amount and CY 2011
outlier percentage applicable to costs in excess of the threshold at 50
percent.

XI. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad
authority to determine the services to be covered and paid for under
the OPPS. Before implementation of the OPPS in August 2000, Medicare
paid reasonable costs for services provided in the HOPD. The claims
submitted were subject to medical review by the fiscal intermediaries
to determine the appropriateness of providing certain services in the
outpatient setting. We did not specify in our regulations those
services that were appropriate to

[[Page 71996]]

provide only in the inpatient setting and that, therefore, should be
payable only when provided in that setting.
In the April 7, 2000 final rule with comment period (65 FR 18455),
we identified procedures that are typically provided only in an
inpatient setting and, therefore, would not be paid by Medicare under
the OPPS. These procedures comprise what is referred to as the
``inpatient list.'' The inpatient list specifies those services for
which the hospital will be paid only when provided in the inpatient
setting because of the nature of the procedure, the underlying physical
condition of the patient, or the need for at least 24 hours of
postoperative recovery time or monitoring before the patient can be
safely discharged. As we discussed in that rule and in the November 30,
2001 final rule with comment period (66 FR 59856), we may use any of a
number of criteria we have specified when reviewing procedures to
determine whether or not they should be removed from the inpatient list
and assigned to an APC group for payment under the OPPS when provided
in the hospital outpatient setting. Those criteria include the
following:
Most outpatient departments are equipped to provide the
services to the Medicare population.
The simplest procedure described by the code may be
performed in most outpatient departments.
The procedure is related to codes that we have already
removed from the inpatient list.
In the November 1, 2002 final rule with comment period (67 FR
66741), we added the following criteria for use in reviewing procedures
to determine whether they should be removed from the inpatient list and
assigned to an APC group for payment under the OPPS:
A determination is made that the procedure is being
performed in numerous hospitals on an outpatient basis; or
A determination is made that the procedure can be
appropriately and safely performed in an ASC, and is on the list of
approved ASC procedures or has been proposed by us for addition to the
ASC list.
The list of codes that will be paid by Medicare in CY 2011 only as
inpatient procedures is included as Addendum E to this final rule with
comment period.

B. Changes to the Inpatient List

In the CY 2011 OPPS/ASC proposed rule (75 FR 46301), we proposed to
use the same methodology for the CY 2011 OPPS as described in the
November 15, 2004 final rule with comment period (69 FR 65835) to
identify a subset of procedures currently on the inpatient list that
are being performed a significant amount of the time on an outpatient
basis. Using this methodology, we identified three procedures that met
the criteria for potential removal from the inpatient list. We then
clinically reviewed these three potential procedures for possible
removal from the inpatient list and found them to be appropriate
candidates for removal from the inpatient list. During the February
2010 meeting of the APC Panel, we solicited the APC Panel's input on
the appropriateness of removing the following three procedures from the
CY 2011 inpatient list: CPT codes 21193 (reconstruction of mandibular
rami; horizontal, vertical, C, or L osteotomy; without bone graft);
21395 (open treatment of orbital floor blowout fracture; periorbital
approach with bone graft (includes obtaining graft)); and 25909
(amputation, forearm, through radius and ulna; reamputation). Following
the discussion at its February 2010 meeting, the APC Panel recommended
that CMS remove from the CY 2011 inpatient list the three CPT codes
that we had identified: CPT codes 21193, 21395, and 25909.
For the CY 2011 OPPS, we proposed to accept the APC Panel's
recommendations to remove the procedures described by CPT codes 21193,
21395, and 25909 from the inpatient list because we agree with the APC
Panel that the procedures may be appropriately provided as hospital
outpatient procedures for some Medicare beneficiaries.
Comment: Commenters supported the CMS proposal to accept the APC
recommendation to remove CPT procedures codes 21193, 21395, and 25909
from the inpatient list.
Response: We appreciated the commenters' support of our proposal.
Comment: Several commenters requested that CMS remove 25 additional
codes from the inpatient list based on their own experience, specialty
society recommendation, or designation of a procedure as safe in the
outpatient setting under one of the many clinical guidelines available,
such as Milliman Care Guidelines.
Response: We reevaluated the 25 additional procedure codes
requested by the commenters using more recent utilization data and
further clinical review by CMS medical advisors. These codes are listed
in Table 47 below. As a result of the reevaluation, we remain convinced
that these procedures could be safely performed only in the inpatient
setting.
One of the suggested procedures, CPT code 35045 (direct repair of
aneurysm, pseudoaneurysm, or excision (partial or total) and graft
insertion, with or without patch graft; for aneurysm, pseudoaneurysm,
and associated occlusive disease, radial or ulnar artery), appears to
have some volume in the outpatient hospital setting. Therefore, we will
present CPT code 35045 to the APC panel at the winter 2011 meeting for
the Panel's consideration for removal from the inpatient list.
One commenter provided clinical arguments for a second procedure,
CPT code 54650 (Orchiopexy, abdominal approach, for intra-abdominal
testis (e.g., Fowler-Stephens), that was low in volume but appeared to
be performed some of the time in the outpatient hospital setting. We
also will present CPT code 54650 to the APC Panel at the winter 2011
meeting for the panel's consideration for removal from the inpatient
list.
Comment: Many commenters suggested that regulations should not
supersede the physician's level of knowledge and assessment of the
patient's condition, and that the physician can appropriately determine
whether a procedure can be performed in a hospital outpatient setting.
Other commenters stated that physician's payment should be aligned with
the hospital payment; if the hospital is not paid, then the physician
payment should not be allowed. They further stated that physicians have
little incentive to ensure that inpatient only procedures are performed
in the correct setting because their payments are not impacted by an
incorrect site of service. One commenter believed that CMS and hospital
efforts to educate physicians have not been effective.
Many commenters suggested that the inpatient list be eliminated in
its entirety. They indicated that hospitals already meet minimum safety
standards through Joint Commission accreditation and the Medicare
hospital conditions of participation. Commenters suggested that, if the
inpatient list cannot be eliminated in its entirety, an appeals process
be developed. Commenters believed that an appeal process would give the
hospital the opportunity to submit documentation on the physician's
intent, the patient's clinical condition, and the circumstances that
enabled the patient to be sent home safely without an inpatient stay.
One commenter requested that CMS give its Medicare contractors
authority to pay for ancillary services performed with the procedure on
the inpatient list if the provider can demonstrate that it could

[[Page 71997]]

not have known the physician was going to perform that procedure.
Response: We appreciate these comments and thoughtful suggestions.
We continue to believe that the inpatient list is a valuable tool for
ensuring that the OPPS only pays for services that can safely be
performed in the hospital outpatient setting, and we will not eliminate
the inpatient list at this time. We believe that there are many
surgical procedures that are never safely performed for a Medicare
beneficiary in the hospital outpatient setting. Therefore, it would be
inappropriate for us to assign them separately payable status
indicators and establish payment rates in the OPPS. We recognize that
hospitals already meet minimum safety standards through accreditation
or State surveys which assure compliance with the Medicare hospital
conditions of participation. However, while accreditation or State
survey and certification of compliance with the hospital conditions of
participation ensure that a hospital is generally a safe and
appropriate environment for providing care, they do not determine
whether a particular service can be safely provided in the outpatient
setting to Medicare beneficiaries.
Although the commenters suggested that we apply the same payment
restrictions to physicians and hospitals when inpatient procedures are
performed inappropriately, payment for physicians'services are outside
of the scope of the OPPS payment policy and of this OPPS/ASC final rule
with comment period. Notwithstanding concern that education has not yet
been able to stop some physicians from performing a procedure on the
inpatient list in the hospital outpatient setting, we continue to
believe that education is critical to ensuring that physicians do not
inadvertently provide services in a hospital outpatient setting that
only are covered during an inpatient stay. We expect hospitals to be
aware of the services that are being provided in the outpatient
setting. Hence, we do not believe that it is appropriate to pay the
hospital for the ancillary services furnished when the patient receives
an inpatient-only service in the hospital outpatient setting. Further,
we expect hospitals to use this knowledge and to educate physicians
with regard to the appropriate setting for the procedures they furnish.
We recognize that there are cases in which the patient expires before
he or she can be admitted and has received an inpatient-only service
without being admitted. In these cases, we have long made payment for
the ancillary services under APC 0375.
As we have stated in the past, we also are concerned about the
impact of eliminating the inpatient list on Medicare beneficiary
liability. Elimination of the inpatient list might lead to longer time
in the hospital outpatient setting, during which Medicare beneficiaries
are responsible for copayments for a complex surgery and any individual
services supporting that surgery, as well as financial liability for
most self-administrable drugs and biological under Medicare Part B.
Cost sharing is very different between the hospital inpatient setting
and the hospital outpatient setting, and Medicare beneficiaries may
incur higher out-of-pocket costs in the hospital outpatient setting for
complex surgical procedures. We do not plan to adopt a specific appeals
process for claims related to inpatient list procedures performed in
the HOPD, and the existing processes established for a beneficiary or a
provider to appeal a specific claim remain in effect. We are committed
to reviewing the inpatient list timely to reflect changes in medical
practice, and we plan to continue our current practice of reviewing
procedures for removal from the inpatient list through the public
notice-and-comment process.
After consideration of the public comments we received, we are
finalizing our proposal without modification. The three procedures that
we are removing from the inpatient list for CY 2011 and their CPT
codes, long descriptors, and final APC assignments are displayed in
Table 46 below.
We are retaining the 25 procedures requested by commenters and
reviewed by CMS medical advisors for possible removal from the
inpatient list on the inpatient list for CY 2011. These procedures are
displayed in Table 47 below. However, two procedures that were
requested for removal from the inpatient list by commenters, CPT code
35045 and CPT code 54650, will be presented to the APC Panel at the
winter 2011 meeting for the Panel's consideration for removal from the
list.
For the complete listing of inpatient only procedures for CY 2011,
we refer readers to Addendum E to this final rule.

Table 46--Procedures Removed From the Inpatient List and Their Final APC Assignments for CY 2011
----------------------------------------------------------------------------------------------------------------
CY 2011 APC CY 2011 status
CPT code Long descriptor assignment indicator
----------------------------------------------------------------------------------------------------------------
21193........................................ Reconstruction of mandibular 0256 T
rami; horizontal, vertical, C,
or L osteotomy; without bone
graft.
21395........................................ Open treatment of orbital floor 0256 T
blowout fracture; periorbital
approach with bone graft
(includes obtaining graft).
25909........................................ Amputation, forearm, through 0049 T
radius and ulna; reamputation.
----------------------------------------------------------------------------------------------------------------

Table 47--Additional Procedures Requested by Commenters for Removal From
the Inpatient List for CY 2011
------------------------------------------------------------------------
CY 2011 status
CPT code Long descriptor indicator
------------------------------------------------------------------------
01214............................ Anesthesia for open C
procedures
involving hip
joint; total hip
arthroplasty.
01402............................ Anesthesia for open C
or surgical
arthroscopic
procedures on knee
joint; total knee
arthroplasty.
01638............................ Anesthesia for open C
or surgical
arthroscopic
procedures on
humeral head and
neck,
sternoclavicular
joint,
acromioclavicular
joint, and shoulder
joint; total
shoulder
replacement.

[[Page 71998]]

19305............................ Mastectomy, radical, C
including pectoral
muscles, axillary
lymph nodes.
19361............................ Breast C
reconstruction with
latissimus dorsi
flap, without
prosthetic implant.
20938............................ Autograft for spine C
surgery only
(includes
harvesting the
graft); structural,
bicortical or
tricortical
(through separate
skin or fascial
incision). (List
separately in
addition to code
for primary
procedure.)
21196............................ Reconstruction of C
mandibular rami and/
or body, sagittal
split; with
internal rigid
fixation.
21422............................ Open treatment of C
palatal or
maxillary fracture
(LeFort I type).
22554............................ Arthrodesis, C
anterior interbody
technique,
including minimal
discectomy to
prepare interspace
(other than for
decompression);
cervical below C2.
22585............................ Arthrodesis, C
anterior interbody
technique,
including minimal
discectomy to
prepare interspace
(other than for
decompression);
each additional
interspace. (List
separately in
addition to code
for primary
procedure.)
22845............................ Anterior C
instrumentation; 2
to 3 vertebral
segments. (List
separately in
addition to code
for primary
procedure.)
27557............................ Open treatment of C
knee dislocation,
includes internal
fixation, when
performed; with
primary ligamentous
repair.
28800............................ Amputation of C
midfoot--Amputation
, foot; midtarsal
(e.g., Chopart type
procedure).
35045............................ Direct repair of C
aneurysm,
pseudoaneurysm, or
excision (partial
or total) and graft
insertion, with or
without patch
graft; for
aneurysm,
pseudoaneurysm, and
associated
occlusive disease,
radial or ulnar
artery.
37182............................ Insertion of C
transvenous
intrahepatic
portosystemic
shunt(s) (TIPS)
(includes venous
access, hepatic and
portal vein
catheterization,
portography with
hemodynamic
evaluation,
intrahepatic tract
formation/
dilatation, stent
placement and all
associated imaging
guidance and
documentation).
38724............................ Cervical C
lymphadenectomy
(modified radical
neck dissection).
39000............................ Mediastinotomy with C
exploration,
drainage, removal
of foreign body, or
biopsy; cervical
approach.
43770............................ Laparoscopy, C
surgical, gastric
restrictive
procedure;
placement of
adjustable gastric
restrictive device
(e.g., gastric band
and subcutaneous
port components).
54650............................ Orchiopexy, C
abdominal approach,
for intra-abdominal
testis (e.g.,
Fowler-Stephens).
55845............................ Prostatectomy, C
retropubic radical,
with or without
nerve sparing; with
bilateral pelvic
lymphadenectomy,
including external
iliac, hypogastric,
and obturator nodes.
55866............................ Laparoscopy, C
surgical
prostatectomy,
retropubic radical,
including nerve
sparing.
58548............................ Laparoscopy, C
surgical, with
radical
hysterectomy, with
bilateral total
pelvic
lymphadenectomy and
para-aortic lymph
node sampling
(biopsy), with
removal of tube(s)
and ovary(s), if
performed.
59856............................ Induced abortion, by C
1 or more vaginal
suppositories
(e.g.,
prostaglandin) with
or without cervical
dilation (e.g.,
laminaria),
including hospital
admission and
visits, delivery of
fetus and
secundines; with
dilation and
curettage and/or
evacuation.
60270............................ Thyroidectomy, C
including
substernal thyroid;
sternal split of
transthoracic
approach.
63267............................ Laminectomy for C
excision or
evacuation of
intraspinal lesion
other than
neoplasm,
extradural; lumbar.
------------------------------------------------------------------------

XII. OPPS Nonrecurring Technical and Policy Changes and Clarifications

A. Physician Supervision

1. Background
In the CY 2000 OPPS final rule with comment period (65 FR 18524
through 18526), we amended our regulations to establish, as a condition
of payment, the requirements for physician supervision of diagnostic
and therapeutic services provided to hospital outpatients incident to a
physician's service. We adopted physician supervision policies as a
condition of payment to ensure that Medicare pays for high quality
hospital outpatient services provided to beneficiaries in a safe and
effective manner and consistent with Medicare requirements. In the CY
2009 OPPS/ASC proposed rule and final rule with comment period (73 FR
41518 through 41519 and 73 FR 68702 through 68704, respectively), we
clarified and restated the various payment requirements for physician
supervision of hospital outpatient therapeutic and diagnostic services.
In response to concerns about our policy restatement that were
expressed following the publication of the CY 2009 final rule with
comment period, we met with stakeholders and further delineated our
physician supervision policies for both therapeutic and diagnostic
services in the CY 2010 OPPS/ASC proposed rule and the final rule with
comment period (74 FR 35365 and 74 FR 60679 through 60680,
respectively).

[[Page 71999]]

While we received and responded to many comments in the course of
the CY 2010 rulemaking, addressing supervision for both diagnostic and
therapeutic services, it was not until after the publication of the CY
2010 OPPS/ASC final rule with comment period that we received
substantial comments from the CAH community in response to a technical
correction we made to codify our longstanding view that CAHs are
subject to the supervision policy for payment of therapeutic services
in the regulations at 42 CFR 410.27. In addition, the broader hospital
community continues to indicate that it would prefer that we modify the
current supervision policy to permit a lower level of supervision for
therapeutic services.
By way of introduction, we have defined supervision in the hospital
outpatient setting by drawing on the three levels of supervision that
were defined for the physician office setting at Sec. 410.32(b) prior
to the OPPS: General, direct, and personal supervision. Over time, we
have tailored these definitions to apply them in the hospital
outpatient setting, but to date we have maintained the following
premises. General supervision means that a service is furnished under
the overall direction and control of the physician, but his or her
physical presence is not required during the performance of the
procedure. Direct supervision means that the physician is physically
present on-site and is immediately available to furnish assistance and
direction throughout the performance of the procedure; however, the
physician does not have to be present in the same room when the
procedure is being performed. Personal supervision means the physician
is present in the room when the service is being performed.
a. Outpatient Therapeutic Services
As set forth in the CY 2000 OPPS final rule with comment period
establishing the hospital outpatient prospective payment system, direct
supervision is the current standard for supervision of hospital
outpatient therapeutic services covered and paid by Medicare in
hospitals and provider-based departments (PBDs) of hospitals. In that
rule, we defined ``direct supervision'' to mean that ``the physician
must be present and on the premises of the location and immediately
available to furnish assistance and direction throughout the
performance of the procedure. It does not mean that the physician must
be present in the room when the procedure is performed.'' The
requirement to be ``immediately available'' was a component of the
requirement for direct supervision but we did not define the term at
that time.
We clarified that our intention in defining direct supervision for
services furnished at a department of a hospital was that a physician
be present on the premises of the entity accorded status as a
department of the hospital for as long as patients are being treated at
that site (65 FR 18525). In that CY 2000 OPPS final rule with comment
period, we finalized regulation text in Sec. 410.27(f) specifying that
direct supervision is required in PBDs of hospitals, and in the
preamble discussion, we emphasized the importance of the direct
supervision requirement for off-campus PBDs. We also stated that the
language of Sec. 410.27(f) ``applies to services furnished at an
entity that is located off the campus of a hospital that we designate
as having provider-based status as a department of a hospital in
accordance with Sec. 413.65.'' We disagreed with commenters that the
requirement for direct supervision in the off-campus PBD was more
stringent than the standard we required on the hospital campus. We
noted that section 1861(s)(2)(B) of the Act authorizes payment for
hospital services provided incident to physicians' services furnished
to outpatients. We stated that ``we require that hospital services and
supplies furnished to outpatients that are incident to physician
services be furnished on a physician's order by hospital personnel and
under a physician's supervision'' (65 FR 18525). We further stated that
``we assume the physician supervision requirement is met on hospital
premises because staff physicians would always be nearby within the
hospital.''
In manual guidance, we have clarified that we expect outpatient
services incident to physicians' services to be performed under direct
supervision. We provide in Section 20.5.1, Chapter 6, of the Medicare
Benefit Policy Manual (Pub. L. 100-02) that outpatient services and
supplies must be furnished on a physician's order and delivered under
supervision. Section 20.5.1 indicates further that each occasion of a
service by a nonphysician does not need to also be the occasion of the
actual rendition of a personal professional service by the physician
responsible for the care of the patient. Nevertheless, as stipulated in
that same section of the Manual ``during any course of treatment
rendered by auxiliary personnel, the physician must personally see the
patient periodically and sufficiently often enough to assess the course
of treatment and the patient's progress and, where necessary, to change
the treatment regimen.''
In the CY 2009 OPPS/ASC final rule with comment period, we provided
a restatement and clarification of the requirements for physician
supervision of hospital outpatient diagnostic and therapeutic services
that were set forth in the CY 2000 OPPS final rule with comment period.
We chose to restate the existing physician supervision policy for
hospital outpatient therapeutic services in part because we were
concerned that some stakeholders may have misunderstood our use of the
term ``assume'' in the following statement: ``We assume the physician
requirement is met on hospital premises because staff physicians would
always be nearby within the hospital. The effect of the regulations in
this final rule is to extend this assumption to a department of a
hospital that is located on the campus of the hospital'' (65 FR 18525).
We were concerned that stakeholders might believe that this statement
meant that we do not require any supervision in the hospital or in an
on-campus PBD for hospital outpatient therapeutic services, or that we
only require general supervision for those services.
In our policy restatement in the CY 2009 OPPS/ASC final rule with
comment period, we reiterated that direct supervision is the standard
for physician supervision, as set forth in the CY 2000 OPPS final rule
with comment period, for supervision of hospital outpatient therapeutic
services covered and paid by Medicare in hospitals as well as in PBDs
of hospitals. We stated clearly that we expect direct physician
supervision of all hospital outpatient therapeutic services, regardless
of their on-campus or off-campus location, but indicated that we would
continue to emphasize the physician supervision requirements in off-
campus PBDs as we did in the CY 2000 OPPS final rule with comment
period. We noted that if there were problems with outpatient care in a
hospital or in an on-campus PBD where direct supervision was not in
place (that is, the expectation of direct supervision was not met), we
would consider that to be a quality concern.
After we published the CY 2009 OPPS/ASC final rule with comment
period, we received significantly more public feedback than during the
rulemaking cycle about our restatement of our supervision policy for
both diagnostic and therapeutic services. We met with stakeholders in
the early part of 2009 as we prepared for the CY 2010 rulemaking cycle,
as well as reviewed all public input that we received, to craft a
response to these concerns regarding the supervision requirements. For
therapeutic services, we considered the concerns of various
stakeholders

[[Page 72000]]

along with our position that direct supervision for therapeutic
services is appropriate and aligned with the statutory requirement that
Medicare only makes payment for therapeutic services in the hospital
outpatient setting that are ``incident to'' physician services.
In the CY 2010 OPPS/ASC final rule with comment period, we
finalized our proposal to allow, in addition to clinical psychologists,
certain other nonphysician practitioners to directly supervise services
that they may perform themselves under their State license and scope of
practice and hospital or CAH-granted privileges. The nonphysician
practitioners who were permitted to provide direct supervision of
therapeutic services under the CY 2010 OPPS/ASC final rule with comment
period are physician assistants, nurse practitioners, clinical nurse
specialists, certified nurse-midwives, and licensed clinical social
workers. These nonphysician practitioners may directly supervise
outpatient therapeutic services that they may personally furnish in
accordance with State law and all additional requirements, including
the Medicare coverage rules relating to their services specified in our
regulations at 42 CFR 410.71, 410.73, 410.74, 410.75, 410.76, and
410.77 (for example, requirements for collaboration with, or general
supervision by, a physician). In implementing the new benefits for
pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac
rehabilitation added by the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA, Pub. L. 110-275), we required that direct
supervision of services furnished in the hospital outpatient department
must be provided by a doctor of medicine or osteopathy as required by
statute. The statute does not permit general supervision or supervision
by a nonphysician practitioner of PR, CR, or ICR services.
For services furnished on a hospital's main campus, we finalized a
modification of our proposed definition of ``direct supervision'' in
new paragraph (a)(1)(iv)(A) of Sec. 410.27 that allowed for the
supervisory physician or nonphysician practitioner to be anywhere on
the hospital campus. Therefore, as of CY 2010, direct supervision on
the hospital or CAH campus or in an on-campus PBD meant that ``the
supervisory physician or nonphysician practitioner must be present on
the same campus and immediately available to furnish assistance and
direction throughout the performance of the procedure.'' In the CY 2010
OPPS/ASC final rule with comment period, we interpreted ``immediate
availability'' to mean ``immediate physical presence'' and
interruptible (74 FR 60580). We stated that while we had not previously
defined ``immediately available,'' we believed that, in the context of
the existing definitions of direct supervision in Sec. Sec. 410.27(f)
and 410.32(b)(3)(ii) of the regulations which indicated that the
physician must be physically present in PBDs of hospitals or
physicians' offices, we had previously established that direct
supervision requires immediate physical presence. While we had not
specifically defined the word ``immediate'' for direct supervision in
terms of time or distance, we noted that the general definition of the
word means ``without interval of time.'' Therefore, the supervisory
physician or nonphysician practitioner could not be immediately
available while, for example, performing another procedure or service
that he or she could not interrupt. In addition, we stated that we
understood that advances in medical technology, changes in the patterns
of health care delivery, and changes in the organizational structure of
hospitals have led to the development of extensive hospital campuses,
sometimes spanning several city blocks. However, in the context of
direct supervision, we believed that it would not be ``immediate'' for
the supervisory physician or nonphysician practitioner to be so
physically far away on the main campus from the location where hospital
outpatient services are being furnished that he or she could not
intervene right away. In sum, the requirement to be physically present
and ``immediately available,'' whether within the hospital or PBD,
ultimately determined how far away the supervisory practitioner could
be located.
Because the term ``in the hospital or CAH'' applies broadly to
``incident to'' requirements such as the site-of-service requirement
for therapeutic services provided by the hospital directly and under
arrangement, we also established a definition of ``in the hospital'' in
new paragraph Sec. 410.27(g) as meaning areas in the main building(s)
of a hospital or CAH that are under the ownership, financial, and
administrative control of the hospital or CAH; that are operated as
part of the hospital; and for which the hospital bills the services
furnished under the hospital's or CAH's CMS Certification Number (CCN).
In the preamble to the CY 2010 OPPS/ASC final rule with comment period,
as part of the discussion of various public comments on the definition
of the hospital campus, and on the supervision requirement
specifically, we stated that we would recognize other areas or
structures of the hospital's campus that are not part of the hospital,
such as physician offices, rural health centers, skilled nursing
facilities, or other entities that participate separately under
Medicare to be part of the hospital's campus.
In the CY 2010 OPPS/ASC final rule with comment period, we also
finalized our proposal to add paragraph (a)(1)(iv)(B) to Sec. 410.27.
This paragraph updated our previous regulation at Sec. 410.27(f) to
reflect that, for off-campus PBDs of hospitals, the physician or
nonphysician practitioner must be present in the off-campus PBD, as
defined in Sec. 413.65, and immediately available to furnish
assistance and direction throughout the performance of the procedure.
It does not mean that the physician or nonphysician practitioner must
be in the room when the procedure is performed. In addition, we
finalized the proposed technical change to clarify the language in
Sec. 410.27(f) by removing the phrase ``present and on the premises of
the location'' and replacing it with the phrase ``present in the off-
campus provider-based department.''
Finally, we finalized a technical correction to the title of Sec.
410.27 to read ``Outpatient hospital or CAH services and supplies
incident to a physician service: Conditions,'' to clarify in the title
that the requirements for payment of hospital outpatient therapeutic
services incident to a physician or nonphysician practitioner service
in that section apply to both hospitals and CAHs. Similarly, we
included the phrase ``hospital or CAH'' throughout the text of Sec.
410.27 wherever the text referred only to ``hospital.'' We viewed this
as a technical correction because the statute applies the same
regulations to hospitals and CAHs when appropriate. Specifically, the
definition of ``hospital'' in section 1861(e) of the Act expressly
excludes CAHs ``unless the context otherwise requires.'' Accordingly,
we do not believe it is necessary for a payment regulation to reference
specifically the applicability to CAHs for those regulations to be
appropriate given the ``context'' for CAHs. Although payment to CAHs is
authorized under section 1834(g) of the Act, many of the payment rules
applicable to hospitals paid under sections 1886(d) and 1833(t) of the
Act apply to CAHs.
We believe that the supervision requirements should apply in the
context of CAHs because they represent appropriate safety and quality

[[Page 72001]]

requirements for Medicare payment of outpatient services. In the early
part of this year, the CAH community asserted that the CAH conditions
of participation (CoPs) offer more flexibility in staffing requirements
than the rule requiring direct supervision, and that the CAH CoPs
address the general availability of physician and nonphysician
practitioners on the CAH campus. The hospital CoPs at 42 CFR 482.22
require hospital medical staff to be composed of doctors of medicine or
osteopathy and, in accordance with State law, may also be composed of
other practitioners appointed by the governing body. They also require
24-hour nursing services that are provided by or supervised by a
registered nurse. Under section 1820(c)(2)(B) of the Act, among other
criteria, a CAH must meet the same staffing requirements as would apply
under section 1861(e) of the Act to a hospital located in a rural area.
However, there are some exceptions to these staffing requirements.
Section 1820(c)(2)(B)(iv) of the Act specifies that a CAH need not meet
hospital staffing requirements under section 1861(e) of the Act
regarding the days and hours in which it is open and fully staffed; the
facility may provide certain services under arrangement at an off-site
location; that inpatient care may be provided by a physician assistant,
nurse practitioner, or clinical nurse specialist subject to the
oversight of a physician, who need not be present in the facility.
The CAH CoPs in 42 CFR 485.631 are specific in recognizing the
statutory authority to be staffed by nonphysician practitioners rather
than physicians, provided a doctor of medicine or osteopathy, nurse
practitioner, clinical nurse specialist, or physician assistant is
available to furnish patient care services at all times the CAH
operates. The requirement that the practitioner ``be available'' in
Sec. 485.631 has been interpreted to mean that the nonphysician
practitioner or physician is available by phone, but not necessarily
physically present on the CAH campus. The CAH CoPs also specify
standards for emergency personnel under Sec. 485.618, requiring that a
doctor of medicine or osteopathy, or a nonphysician practitioner such
as a physician assistant, a nurse practitioner, or a clinical nurse
specialist, with training or experience in emergency care, be on call
and immediately available by telephone or radio contact, and available
onsite within 30 minutes, on a 24-hour a day basis in most areas.
However, in the Medicare program, payment requirements are
frequently different from those identified in the CoPs because the two
sets of rules serve very separate and distinct purposes. CoPs apply
largely at the facility level, while payment regulations apply at the
service level. Payment regulations, such as requirements for how
contracted entities provide services to hospital patients, support
program goals of appropriate and accurate payment for quality services.
In contrast, for all providers including CAHs, the CoPs authorize
hospitals to participate in the Medicare program. We establish CoPs as
minimum standards for patient health and safety, and CoPs focus on
creating a foundation to ensure quality and safe care for beneficiaries
throughout a given facility, irrespective of the payment system or
service provided. As previously mentioned, CoPs generally do not apply
on the service level and do not ensure that payment is appropriate for
specific types of purchased services nor can they substitute for
payment requirements since that is not their function.
In summary, requirements established for purposes of payment
frequently differ from the requirements established by the CoPs for
many providers, including hospitals and CAHs. Whereas payment
regulations establish basic parameters defining the services being
purchased, CoPs (including both the hospital CoPs and the CAH CoPs)
establish standards to ensure a minimum level of quality and safety for
operating as a hospital or a CAH. The minimum standards established as
CoPs are not always adequate to address the particular quality, safety
and other requirements for payment for a service or group of services.
b. Outpatient Diagnostic Services
As we stated in the CY 2009 OPPS/ASC and CY 2000 OPPS proposed
rules and final rules with comment period, section 1861(s)(2)(C) of the
Act authorizes payment for diagnostic services that are furnished to a
hospital outpatient for the purpose of diagnostic study. We have
further defined the requirements for diagnostic services furnished to
hospital outpatients, including requirements for physician supervision
of diagnostic services, in Sec. Sec. 410.28 and 410.32 of our
regulations. In CY 2000, we established in Sec. 410.28(e) that in
order to receive payment, outpatient diagnostic services furnished in
PBDs of hospitals must be supervised according to the levels assigned
for the individual tests as listed in the MPFS Relative Value Unit
File. For these services, we also adopted the definitions of general,
direct and personal supervision used in the MPFS and delineated in
Sec. Sec. 410.32(b)(3)(i), (b)(3)(ii) and (b)(3)(iii). For CY 2010, we
finalized a proposal to extend the rules we had established for PBDs to
the hospital setting or any other location where diagnostic services
may be provided under arrangement (for example, a nonhospital location
such as an independent diagnostic testing facility or IDTF). Where
Sec. 410.28(e) had previously only referenced the MPFS supervision
requirements for services ``furnished at a facility * * * having
provider-based status,'' we broadened the reference to those
requirements for ``services furnished by or under arrangements made by
the participating hospital'' and we added further requirements for
direct supervision. In the CY 2010 OPPS/ASC rulemaking cycle, in
Sec. Sec. 410.28(e)(1) and (e)(2), we redefined direct supervision for
outpatient diagnostic services to mean (with the exception of services
provided under arrangement in nonhospital locations) the definition
that we adopted at this time for outpatient therapeutic services,
specifically that for services furnished directly or under arrangement
in the hospital or in the on-campus or off-campus PBD, ``direct
supervision'' means that the physician must be immediately available
and present on the same campus or in the off-campus PBD to furnish
assistance and direction throughout the performance of the procedure.
For purposes of defining direct supervision of diagnostic services, in
Sec. 410.28, we applied the definition of ``in the hospital'' as
incorporated in Sec. 410.27(g) for therapeutic services. For
diagnostic services furnished under arrangement in nonhospital
locations such as an IDTF, in Sec. 410.28(e)(3), we applied the
definition of direct supervision used in the MPFS and at Sec.
410.32(b)(3)(ii).
The MPFS Relative Value Unit File is updated quarterly and is
available on the CMS Web site at: http://www.cms.gov/
PhysicianFeeSched/. For diagnostic services not listed in the MPFS
Relative Value Unit File, we have indicated that Medicare contractors,
in consultation with their medical directors, would define appropriate
supervision levels in order to determine whether claims for these
services are reasonable and necessary.
We note that the existing requirement in Sec. Sec. 410.28(e)(1),
(e)(2), and (e)(3) that physician supervision of diagnostic services
provided by or under arrangements made by the participating hospital or
in any PBD follow the levels for diagnostic services established under
the MPFS explicitly applies to hospitals that are paid in accordance
with to section 1833(t) of the Act, which is the statutory authority
for the OPPS.

[[Page 72002]]

Because Medicare makes payments to CAHs in accordance with section
1834(g) of the Act, at this time, CAHs are not subject to this
supervision requirement.
2. Issues Regarding the Supervision of Hospital Outpatient Services
Raised by Hospitals and Other Stakeholders
Following the adoption of our policies in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60575 through 60591), beginning
in January 2010, we began to receive a sizable amount of
correspondence, as well as numerous phone calls, and questions through
other public avenues, including the regular open door forum calls, from
the rural hospital and CAH community indicating its belief that the
requirement for direct supervision for therapeutic services finalized
in that rule is at odds with longstanding and prevailing practice in
rural communities. These hospitals and their representatives stated
that they generally function with a reduced level of supervision for
the provision of therapeutic services and that while they furnish
services under a physician's or appropriate nonphysician practitioner's
order, frequently no physician or nonphysician practitioner is
physically present anywhere in the CAH or small rural hospital while
the therapeutic services are being furnished. CAHs, in particular,
noted that the provisions in their CoPs allow a CAH to operate under
reduced staffing requirements. Specifically, under Sec. Sec. 485.631
and 485.618 as described above, CAHs must have a physician or one of
several types of nonphysician practitioners available by phone at all
times, but not on campus. For emergencies, in most areas of the
country, the CAH must have a physician or certain other nonphysician
practitioners with training or experience in emergency care physically
available onsite within 30 minutes.
Both CAHs and rural hospitals have stated that the flexibility to
allow nonphysician practitioners to supervise services that we
authorized in the CY 2010 OPPS/ASC final rule with comment period is
helpful for meeting the direct supervision requirement for all
therapeutic services, but that a shortage of qualified practitioners in
rural areas continues to make it difficult to staff a physician or
nonphysician practitioner for supervision purposes. They also noted
that a practitioner retained on the campus of a small rural hospital or
CAH to meet supervision requirements may not have other patients or
medical activities to complete. In an urban or large urban hospital, a
practitioner would be able to see other patients or engage in other
activities so long as those activities could be interrupted, such that
they would be immediately available to supervise.
In a series of questions and answers about supervision on the CMS
Web site (http://www.cms.gov/HospitalOutpatientPPS/05_
OPPSGuidance.asp#TopOfPage), we provided additional guidance regarding
our regulations about who can supervise services in order to explain to
CAHs and small rural hospitals the flexibility we believe exists within
our requirement for direct supervision. For example, in that document,
we state that we believe the emergency physician or the nonphysician
practitioner, who would be the most likely practitioners staffing a
small rural hospital or CAH, can directly supervise outpatient services
so long as the emergency physician or nonphysician practitioner in the
emergency department of the campus meets the other requirements of
direct supervision. That is, the emergency physician or the
nonphysician practitioner needs to be immediately available, so that,
if needed, he or she could reasonably be interrupted to furnish
assistance and direction in the delivery of therapeutic services
provided elsewhere in the hospital. We believe that most emergency
physicians and appropriate nonphysician practitioners can supervise
many services within the scope of their knowledge, skills, licensure,
and hospital-granted privileges, including observation services. With
regard to whether an emergency physician or a nonphysician practitioner
could be interrupted, such that the individual could be immediately
available, we have stated that each hospital would need to assess the
level of activity in its emergency department and determine whether at
least one emergency physician or nonphysician practitioner could be
interrupted to furnish assistance and direction in the treatment of
outpatients.
In their correspondence and discussion in public forums, CAHs and
small rural hospitals explicitly have raised concerns about services
that extend after regular operating hours, especially observation
services. They also have asserted that direct supervision is not
clinically necessary for some services that have a significant
monitoring component that is typically performed by nursing or other
auxiliary staff, including IV hydration, blood transfusions, and
chemotherapy. They stated that their facilities have protocols to
safely deliver all of these services, relying on nursing or other
hospital staff to provide the service and having a physician or
nonphysician practitioner available by phone to furnish assistance and
direction throughout the duration of the therapeutic service.
In the early part of this year, small rural hospitals and CAHs
indicated that, regulations notwithstanding, many of them did not have
appropriate staff arrangements to provide the required supervision of
some services, particularly services being provided after hours or
consisting of a significant monitoring component that last for an
extended period of time. In response to rising concerns among the rural
community about these rules and the inability of some hospitals to meet
the direct supervision requirement, we issued a statement on March 15,
2010, indicating that we would not enforce the rules for supervision of
hospital outpatient therapeutic procedures furnished in CAHs in CY 2010
(http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp#TopOfPage).
We also stated that we would proactively revisit the rules surrounding
the supervision of services furnished by CAHs in the CY 2011 OPPS/ASC
proposed rule.
Compared to supervision of therapeutic services, we have had
relatively limited dialogue with stakeholders about our CY 2010 policy
to recognize the supervision levels for diagnostic services under the
MPFS for the provision of diagnostic services in the hospital.
Individual stakeholders have asked about supervision of specific
diagnostic services and have noted that our requirement that the
hospitals follow the supervision levels for diagnostic services in the
hospital identified in the MPFS Relative Value Unit File has required
some modest changes in hospital staffing practices. We also have
received questions requesting clarification about related supervision
requirements for nonphysician practitioners. We note that adopting the
supervision levels defined under the MPFS for diagnostic services in 42
CFR 410.32 means that nonphysician practitioners who are not
specifically excluded under Sec. 410.32(b) from the level of
supervision required by the MPFS are subject to supervision by a
physician at the level of supervision required by the diagnostic test.
We also discussed in our CY 2010 OPPS/ASC final rule with comment
period that diagnostic X-ray and other diagnostic tests must be
furnished under the appropriate level of supervision by a physician as
defined in section 1861(r) of the Act (74 FR 60588 through 60590).

[[Page 72003]]

3. Policies for Supervision of Outpatient Therapeutic Services in
Hospitals and CAHs
As indicated in our March 15, 2010 statement, we are revisiting the
issue of supervision of outpatient therapeutic services in CAHs to
ensure a robust public discussion about supervision requirements for
payment in hospital outpatient departments, including those located in
rural communities, and CAH outpatient departments. In the CY 2011 OPPS/
ASC proposed rule, we proposed modest changes to our supervision policy
for therapeutic services that reflect our continuing commitment to
require direct supervision for the provision of therapeutic services in
the hospital outpatient setting as a requirement for payment (75 FR
46303). We proposed these changes for all hospitals, including CAHs,
because we believe that Medicare should purchase a basic quality of
service for all Medicare beneficiaries. Specifically, we proposed to
identify a limited set of services with a significant monitoring
component that can extend for a sizable period of time, that are not
surgical, and that typically have a low risk of complication after
assessment at the beginning of the service, as ``nonsurgical extended
duration therapeutic services'' (also referred to as ``extended
duration services''). We listed these services in Table 37 of the
proposed rule (75 FR 46308). We proposed for these services that there
would be a requirement for direct supervision for the initiation of the
service followed by general supervision for the remainder of the
service. We proposed to adopt the definition of ``general supervision''
in existing Sec. 410.32(b)(3)(i), which is the same definition of
general supervision that we already recognize as appropriate for
diagnostic services with a general supervision level requirement under
the MPFS. Finally, at the end of the proposal, we included several
discussion points designed to focus public comments and generate
sufficient detail to assist us in crafting a final policy.
In considering the significant correspondence from CAHs and rural
communities, as well as public discussion on the issue of supervision
through the open door forum and calls with individual hospitals and
other hospital representatives, we sought to propose modifications to
the supervision standards that would balance several countervailing
interests. While we sought to identify some means of offering
flexibility within the direct supervision requirement and address
industry concerns about specific services, we also believed strongly
that Medicare should continue to purchase services that are delivered
with a basic level of quality and safety and that fulfill the statutory
requirement for payment of incident to services. We recognized the
concerns of CAHs and rural hospitals that it could be difficult to
staff a physician or nonphysician practitioner on the campus to
supervise services that have a significant monitoring component and
lack an active component being performed by the physician or
nonphysician practitioner, especially when these services extend into
after business hours or overnight. CAHs and rural hospitals explicitly
identified observation services, IV hydration, chemotherapy, and blood
transfusions as the services that are particularly challenging to
provide under direct supervision. Observation services, in particular,
can extend for a significant period of time. Data from the CAH
outpatient claims indicate that most observation care lasts longer than
12 hours and that it frequently lasts 24 to 48 hours, suggesting that
observation care often extends after business hours and through the
night.
We recognized that any service with an extended duration and a
significant monitoring component could challenge hospitals' ability to
ensure direct supervision, and we decided to concentrate on those
services. We set out to identify services with a significant monitoring
component extending after business hours as identified by the CAHs and
hospitals in rural communities and for which we could offer some
flexibility in meeting the requirement for direct supervision of
therapeutic services without compromising the quality and safety of
services for which Medicare makes payment. One way to provide
flexibility would be to allow a reduced level of supervision for part
of these services. We established a requirement for direct supervision
for all hospital outpatient services in our CY 2000 and CY 2010
rulemaking processes. However, we reasoned that, for certain extended
duration services, for CY 2011 we could adopt a general supervision
requirement for some portion of the service, as long as we believed
that such flexibility would not undermine the quality and safety of
purchased services. Therefore, we proposed to require, for a limited
set of nonsurgical extended duration therapeutic services, direct
supervision during the initiation of the service followed by general
supervision for the remainder of the service (75 FR 46306).
We proposed to define ``initiation of the service'' as the
beginning portion of a service ending when the patient is stable and
the supervising physician or appropriate nonphysician practitioner
believes the remainder of the service can be delivered safely under his
or her general direction and control without his or her physical
presence on the hospital campus or in the PBD of the hospital. We
listed our proposed definition of initiation of the service in proposed
Sec. 410.27(a)(1)(v)(B). We considered further defining the term
``stable'' in this definition as there is an established definition in
the Emergency Medical Treatment and Labor Act (EMTALA) regulations at
42 CFR 489.24(b). In those regulations, ``stabilized'' with respect to
an emergency medical condition means ``that no material deterioration
of the condition is likely, within reasonable medical probability, to
result from or occur during the transfer for the individual from a
facility * * *'' However, this language is set within the context of
emergency services, not hospital outpatient therapeutic services
generally, and we have been clear that supervision is more than
emergency response. Ultimately, we were not certain that this
definition would be appropriate for a payment requirement for
supervision of outpatient therapeutic services.
We also did not propose to further define the term ``initiation''
or to set time limits on this portion of the service because we believe
that the determination that a patient is sufficiently stable to
transfer from direct supervision to general supervision, and the timing
of that decision, are clinical judgments. We believed it would be best
to leave the determination of when to move from direct to general
supervision to the discretion of the supervising physician or
nonphysician practitioner. However, we considered whether the point of
transfer from direct supervision to general supervision should be
documented in the medical record or identified in a hospital protocol,
and we invited public comment on how CMS might review the physician or
nonphysician practitioner's decision to move from direct to general
supervision to monitor for proper billing should an adverse event
occur.
We considered four criteria when identifying the list of services
to which this new policy of direct supervision during the initiation of
the service followed by general supervision for the remainder of the
service would apply. We first accepted the two criteria identified in
correspondence and discussion with CAHs and rural hospitals, that the
service be of extended duration, frequently extending

[[Page 72004]]

beyond normal business hours, and that the service largely consist of a
significant monitoring component typically conducted by nursing or
other auxiliary staff. We added a third criterion that the service must
be of sufficiently low risk, such that the service typically would not
require direct supervision often during the service. We added this
criterion because, as we have previously discussed, our requirement for
direct supervision has been grounded in the statutory ``incident to''
payment authority as well as the need to ensure that Medicare purchases
services that represent a basic level of quality and safety. We have
noted that, unlike an inpatient admission, the provision of outpatient
services lacks certain safeguards such as a detailed medical history
and a plan of care (74 FR 60578 through 60588). Finally, we excluded
all surgical services including recovery time from potential inclusion
because we believed the surgeon should be immediately available during
the recovery period. We defined nonsurgical extended duration
therapeutic services in proposed regulation text for Sec.
410.27(a)(1)(v)(A).
Using these four criteria, we identified a list of nonsurgical
therapeutic services that have a tendency to last for a long period of
time, that largely consist of monitoring, and that have a low risk that
the physician's physical presence will be needed once the patient is
stable. To identify this list of potential services, we reviewed all
medical services, including the services and procedures specifically
identified by CAHs and rural hospitals in their correspondence and
public discussion. The proposed list of nonsurgical extended duration
therapeutic services appeared in Table 37 of the proposed rule. We
explicitly did not include chemotherapy or blood transfusions in our
proposed list of nonsurgical extended duration therapeutic services
because we believed that these services would require the physician's
or nonphysician practitioner's recurrent physical presence in order to
evaluate the patient's condition in the event it is necessary to
redirect the service.
We included observation services on the proposed list of
nonsurgical extended duration services. In Section 20.6 of Chapter 2 of
the Medicare Benefit Policy Manual (Pub. 100-02), we define observation
care as ``a well-defined set of specific, clinically appropriate
services, which include ongoing short term treatment, assessment, and
reassessment before a decision can be made regarding whether patients
will require further treatment as hospital inpatients or if they are
able to be discharged from the hospital.'' Therefore, the acuity of
patients receiving observation services and the amount of recurrent
supervisory review that may be necessary for these services can vary
significantly. Observation services can be of low acuity and can have a
low probability that the supervising physician or nonphysician
practitioner's physical presence would be needed to step in and perform
the service or otherwise furnish assistance. We noted in Section
290.5.1 of Chapter 4 of the Medicare Claims Processing Manual (Pub. No
100-04) that, among other requirements for observation services, ``(a)
the beneficiary must be in the care of a physician during the period of
observation, as documented in the medical record by outpatient
registration, discharge, and other appropriate progress notes that are
timed, written, and signed by the physician,'' and ``(b) the medical
record must include documentation that the physician explicitly
assessed patient risk to determine that the beneficiary would benefit
from observation care.'' We stated that we would continue to expect
hospitals and CAHs to fulfill these specific requirements associated
with observation care, so the supervising physician or appropriate
nonphysician practitioner must continue to evaluate the patient
periodically and include written notes in the medical record.
In crafting our policy for nonsurgical extended duration
therapeutic services, we considered other avenues to offer flexibility
within our requirement for direct supervision. We considered and
presented the following alternatives in the proposed rule in order to
focus public comments and generate sufficient detail to assist us in
developing the final policy. Although we reconsidered these
alternatives for this final rule, ultimately we did not adopt either of
them.
In addition to considering the proposed policy to permit general
supervision after an initial period of direct supervision for a limited
subset of services, we also considered offering hospitals the
flexibility to broaden the list to include chemotherapy and blood
transfusions, which some stakeholders also maintain do not require
direct supervision. Because we were concerned that these services had a
high probability of needing a physician or nonphysician practitioner to
redirect the service, we reasoned that under this option, we would have
to require hospitals to create internal guidelines specifying a
supervision level and protocols for staffing that supervision level for
every nonsurgical extended duration therapeutic service. We considered
proposing minimum requirements for these internal supervision
guidelines, including annual review and approval by a governing
committee, periodic internal evaluation of implementation, and the
ability to make these guidelines available to Medicare program auditors
if requested. Further, these guidelines would be reviewed thoroughly by
CMS should a quality issue arise. We did not propose this policy
because we believe that an independent entity should evaluate services
such as chemotherapy administration and blood transfusion to determine
whether or not general supervision is appropriate and safe. In our
deliberations on policies for the final rule, we were concerned that
this policy would not address many concerns that were brought to our
attention by the rural hospital community (shorter duration services
and supervision from locations in close proximity to the hospital). We
also rejected this alternative because a variable standard of
supervision could be administratively difficult for us to audit and
evaluate.
We also considered whether for payment purposes we should
explicitly or implicitly exclude outpatient therapeutic services
provided in CAHs from the requirements for direct supervision. We
considered limiting CAHs to their CoPs, which in effect only require
them to operate under general supervision. As we stated in the proposed
rule, we believe there are strong grounds for applying the same
supervision requirements to CAHs as to all other hospital types. One of
our grounds for applying the direct supervision requirement to CAHs is
that outpatient hospital services are furnished ``incident to''
physicians' services, and we believe that the incident to rules apply
equally to critical access and other types of hospitals. Outpatient
hospital services are furnished ``incident to'' physicians' services
under section 1861(s)(2)(B) of the Act and are paid under the OPPS in
accordance with section 1833(t) of the Act. In contrast, ``outpatient
critical access hospital services'' are defined under section
1861(mm)(3) of the Act, and CAHs are reimbursed for outpatient CAH
services based on their reasonable costs pursuant to section 1834(g) of
the Act. We believe that outpatient CAH services are correctly viewed
as being furnished ``incident to'' physicians' services. Section
1861(mm)(3) of the Act defines ``outpatient critical access hospital
services'' as ``medical and other

[[Page 72005]]

health services furnished by a critical access hospital on an
outpatient basis.'' The term ``medical and other health services'' is
defined at section 1861(s) of the Act as including ``hospital services
* * * incident to physicians' services rendered to outpatients.''
Furthermore, the same considerations regarding the need to ensure that
services furnished to Medicare beneficiaries represent a basic level of
quality and safety that apply to outpatient hospital services are
equally applicable to outpatient CAH services. As a result, we believe
it is appropriate to apply the same supervision requirements to
outpatient therapeutic services furnished in hospitals and CAHs.
We acknowledge that statutory provisions allow CAHs some
flexibility in their staffing requirements to operate with more nursing
staff and nonphysician practitioners rather than physicians if those
are the practitioners that are available, and that our regulations
recognize those reduced staffing requirements in the CoPs by
establishing that, at a minimum, the physician or nonphysician
practitioner must be available within 30 minutes of an emergency.
However, as discussed above, we believe that CAHs are subject to
payment rules independent of their CoPs. Moreover, some have suggested
that the regulations which establish only minimal requirements reduce
the quality and safety of CAH services and that CAHs should be required
to disclose their reduced staffing levels to patients prior to
providing services. We elected not to limit the CAHs to their
conditions of participation or to exclude them from direct supervision
requirements, because we believe that Medicare should purchase
outpatient services from CAHs and other hospitals that are of the same
basic level of safety and quality. Also, we believe that both small
rural hospitals paid under the OPPS through section 1833(t) of the Act
and CAHs paid at reasonable cost under section 1834(g) of the Act have
similar staffing and resource constraints. In fact, given that CAHs are
reimbursed based on their reasonable costs, in our proposal we reasoned
that CAHs might be better able than small rural PPS hospitals to hire
staff to provide direct supervision and we did not receive comments as
to why this would not be the case.
Comment: Many commenters asserted that there is no evidence of
compromised quality of care or patient safety that justifies the new
and burdensome change in supervision rules, and that commenters know of
no adverse events that have necessitated a change in CMS' supervision
policies from general supervision to direct supervision. One commenter
suggested that CMS commission an outcomes study to measure a need for
direct supervision compared to general supervision in the hospital
outpatient department. Many commenters requested that CMS continue to
study potential negative effects of enforcing its requirement for
direct supervision and that CMS extend the notice indicating that it
will not enforce the rules for supervision of hospital outpatient
therapeutic procedures furnished in CAHs through CY 2011. Commenters
also requested that CMS expand its decision not to enforce the
requirement for direct supervision of therapeutic outpatient services
in CAHs to other small and rural hospitals that are paid under the OPPS
and are located in areas experiencing workforce shortages.
Several commenters asserted that the Act does not prescribe a
specific level of supervision for ``incident to'' physician's services.
These commenters believed that CMS has discretion to select an
appropriate level of supervision for hospital outpatient ``incident
to'' physician's services other than direct supervision and that the
requirement for direct supervision of incident to physician services is
technologically outdated. They requested that CMS depart from its
historic interpretation of the incident to provision by allowing
general supervision for those services. They commented that, for some
low-risk and low-complexity services, a physician does not need to be
physically present. Many commenters requested that CMS set the minimum
standard as general supervision for all services and allow individual
facilities to establish other supervision levels for certain services
at their discretion. Many commenters also requested that CMS establish
an independent panel representative of geographic areas, particularly
rural areas, and provider types to identify the appropriate supervision
level for individual services.
Response: Our supervision policy is designed to preserve both
quality and safety of purchased hospital outpatient services for
Medicare beneficiaries. While our recent attention to supervision is
not being informed by a specific quality event, we received a
substantial number of inquiries from stakeholders prior to 2009 leading
us to believe that hospitals were practicing general supervision or no
supervision in the provision of services that are paid ``incident to''
physician's services in the outpatient setting and for which we had
established a policy of direct supervision. While literature or
clinical opinions may exist on the risk of adverse outcomes and
susceptibility to medical error associated with the provision of
specific hospital outpatient procedures when a physician is not
present, we do not know of any analyses that have directly examined
levels of supervision and patient outcomes in the hospital outpatient
setting. This may be an area for future study.
We disagree with commenters that our requirement for direct
supervision is new or a change from previous policy, and appreciate
that several commenters acknowledge that CMS' requirement for direct
supervision of hospital outpatient services is not new. One of our
longstanding interpretations of the statutory authorization for
hospital services ``incident to'' physicians' services under section
1861(s)(2)(B) of the Act is that these services should be provided
under direct supervision. As we have already discussed, we clearly
stated in the CY 2000 final rule our regulatory requirement for direct
supervision in the off-campus PBD and our presumption that the
requirement for direct supervision would be met in the hospital.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60580), we noted that, prior to 2000, we already required hospitals to
meet a direct supervision of ``incident to'' services requirement for
outpatient therapeutic services. That is, we required that hospital
services and supplies furnished to outpatients that are incident to
physicians' services ``must be furnished on a physician's order by
hospital personnel and under a physician's supervision'' (Section
3112.4 of the Medicare Intermediary Manual). In longstanding manual
guidance, we have expressed our historical belief that direct
supervision is required for hospital outpatient therapeutic services,
and we have suggested that this requirement stems from the ``incident
to'' nature of those services. We have stated in the Medicare Benefit
Policy Manual (Pub. No. 100-02), Chapter 6, Section 20.5.2 (revised May
28, 2010) and previously discussed in the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60576) that we require direct supervision
for the provision of therapeutic services to hospital outpatients:
``Therapeutic services and supplies which hospitals provide on an
outpatient basis are those services and supplies (including the use of
hospital facilities) which are incident to the services of physicians
and practitioners in the treatment of patients * * * The services and
supplies must be furnished under the order of a physician or other
practitioner

[[Page 72006]]

practicing within the extent of the Act, the Code of Federal
Regulations, and State law, and furnished by hospital personnel under
the direct supervision of a physician or nonphysician practitioner as
defined at 42 CFR 410.27(f) and 482.12. This does not mean that each
occasion of service by a nonphysician need also be the occasion of the
actual rendition of a personal professional service by the physician
responsible for care of the patient. However, during any course of
treatment rendered by auxiliary personnel, the physician must
personally see the patient periodically and sufficiently often to
assess the course of treatment and the patient's progress and, where
necessary, to change the treatment regimen. A hospital service or
supply would not be considered incident to a physician's service if the
attending physician merely wrote an order for the services or supplies
and referred the patient to the hospital without being involved in the
management of that course of treatment.''
With respect to whether CMS has the authority to recognize a
supervision level other than direct supervision for payment of
``incident to'' physician's services under section 1861(s)(2)(B) of the
Act, we agree that the statute does not explicitly mandate direct
supervision, but we continue to believe that direct supervision is the
most appropriate level of supervision for most hospital outpatient
services that are authorized for payment ``incident to'' physician's
services. While we believe that the ``incident to'' authorization
permits us to recognize specific circumstances appropriate for general
supervision, such as we proposed for extended duration services, we
also believe that our historical interpretation of section
1861(s)(2)(B) of the Act, specifically, that these services are
furnished under the order of a physician (or nonphysician
practitioner), the physician is involved in the management of the
patient, and the physician supervises the provision of those services
when he or she does not provide them directly, is reflected in a
requirement for direct supervision. Therefore, we do not believe it is
appropriate to authorize payment for ``incident to'' services to
hospitals with a default supervision level of ``general'' for all
services. In our proposed rule, we focused on extended duration
services both because CAHs and small rural hospitals had identified
these services as a primary source of their difficulty in complying
with our requirement for direct supervision and because we agreed that
the monitoring and low risk attributes of the services did not
necessarily dictate direct supervision for the entire performance of
those services. We also believed that our requirements for ``incident
to'' services (that the physician be involved in the management of the
patient and that the services be provided under the physician's
supervision) would be met when a period of general supervision followed
a period of direct supervision for the initiation of the service.
Comment: In addition to our proposed list of nonsurgical extended
duration services (which we are finalizing for this CY 2011 final rule
with comment period and discuss in greater detail later in this
section), commenters requested that CMS recognize general supervision
for many additional services that they considered to be of low risk and
low complexity, such as minor surgical procedures, immunization
administration, minor wound debridement, group psychotherapy, sleep
laboratory services, and patient-controlled anesthesia pumps. One
commenter indicated that the organization he represents had convened a
physician panel to assess appropriate supervision levels of outpatient
services and that the panel found 160 services eligible for general
supervision based on a low physician work RVU. Commenters argued that
technology has reduced the risk of needing a physician or nonphysician
practitioner to furnish assistance and direction during some services.
Response: We agree with commenters that there may be some
outpatient services that could be identified as appropriate for general
supervision among these and other identified services. However, we are
not confident that stakeholders would necessarily agree with our
assessment of appropriate supervision levels and we observed through
our review of comments that stakeholders did not always agree among
themselves about the appropriate supervision level for any given
service. For example, we received numerous requests from CAHs and small
rural hospitals that we recognize blood transfusions and chemotherapy
administration for general supervision, arguing that protocols were in
place to handle changes in treatment or emergency situations. However,
we also received opposing comments indicating that chemotherapy should
not be provided without direct supervision. We note that many of the
chemotherapy administration HCPCS codes, like many services, have
physician work relative value units associated with them, suggesting
that the physician typically would be involved in the provision of
these services.
In light of heightened stakeholder interest in supervision
requirements, CMS' continuing goal of purchasing safe, quality services
that are provided ``incident to'' a physician's service; and potential
disagreement among commenters regarding appropriate levels of
supervision, we agree with commenters that there should be a mechanism
for independent consideration of the most appropriate supervision level
for individual therapeutic services to ensure that CMS purchases safe,
quality outpatient care. Accordingly, while we are maintaining our
policy that, in general, direct supervision is required for all
outpatient therapeutic services, we will establish a process that
provides for independent evaluation of the appropriate level of
supervision for specific therapeutic services. We note that in
considering the appropriate level of supervision for individual
services, we may find that a higher level of supervision, (personal
supervision) is appropriate for certain services, as well as finding
that general supervision is appropriate for some services.
Therefore, in the CY 2012 OPPS rulemaking cycle, we will propose to
establish an independent review process that will allow for an
assessment of the appropriate supervision levels for individual
hospital outpatient therapeutic services. At this point, we believe
this process should include a committee with representation of many
types of providers including rural providers, and that it should
include a time frame for submitting requests for the assessment of
individual services and considering potential changes, criteria for
evaluating each service, and a means for documenting recommended
supervision levels. We are considering the possibility of using CMS'
Federal Advisory Panel on Ambulatory Classification Groups (the APC
Panel) as the independent technical committee that would review
requests for consideration of supervision levels other than direct for
individual services and make recommendations to CMS regarding the
appropriate levels. (http://www.cms.gov/FACA/05_
AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp). As described
previously in this final rule with comment period, the APC Panel is
chartered by statute and consists of up to 15 members, selected by the
HHS Secretary or CMS Administrator, who are full-time employees of
hospitals and other Medicare providers paid under the OPPS. The Panel
members are

[[Page 72007]]

representative of various geographic areas (rural and urban) and
hospital professions (administration and clinical). We request comments
regarding other potential entities that may serve as a technical panel
to consider supervision levels for individual services. We also request
comments on how this independent review process for an alternative
level of supervision might work, and on potential criteria for
evaluating a service for the appropriate level of supervision.
Because we believe that it would be best to develop such a process
through notice and comment rulemaking, for CY 2011, we are extending
our decision not to enforce the requirement for direct supervision of
therapeutic services provided to CAH outpatients. As we stated in our
proposed rule (75 FR 46309), we remain concerned about establishing
policies that apply only to CAHs, because that small and rural PPS
hospitals experience similar resource constraints. Therefore, for CY
2011 we are expanding the scope of our decision not to enforce the
requirement for direct supervision of therapeutic services to include
small rural hospitals having 100 or fewer beds. For purposes of this
provision, we are using the same definition of small rural hospitals as
Congress recognizes for Transitional Outpatient Payments (TOPs) under
section 1833(t)(7) of the Act. Our decision not to enforce the
requirement for direct supervision of therapeutic outpatient services
applies to rural hospitals with 100 or fewer beds for CY 2011. As we do
for TOPs, we will consider hospitals to be rural if they are either
geographically located in a rural area or are paid through the OPPS
with a wage index for a rural area (section 70, Chapter 4, of the
Medicare Claims Processing Manual (Pub. 100-04)).
Comment: Several commenters stated that the requirement for the
supervisory practitioner to have hospital privileges and State
licensure to perform the services they are supervising translates into
requiring licensure in the same specialty as those services. One
hospital expressed concern about the language regarding ``hospital
privileges,'' stating that it forced hospitals to modify their bylaws
and privileging documents to assure that a large majority of their
medical staff could supervise. They stated that, in the past,
supervision was carried out based on ``scope of practice'' and that
CMS' new language regarding privileges presents new requirements.
Response: We do not believe that we have made substantive changes
to the requirements regarding the supervisory practitioner's ability to
perform services that he or she is supervising since we issued the
first supervision rules in CY 2000. In the CY 2000 regulation text
requiring direct supervision for therapeutic outpatient services in a
PBD, we required that the supervisory physician be immediately
available to furnish assistance and direction throughout the
performance of the procedure. In order to furnish assistance and
direction, we believe that a physician would have to be State licensed
and possess hospital privileges to perform that procedure. As the
commenter noted, in our CY 2010 OPPS/ASC final rule with comment
period, we elaborated on this requirement when we stated that the
supervisory practitioner ``must have, within his or her State scope of
practice and hospital-granted privileges, the ability to perform the
service or procedure'' that he or she is supervising (74 FR 60580).
However, we also have stated since 2000 that, in many
circumstances, we believe that the supervising physician can furnish
assistance and direction within their State scope of practice and
hospital granted privileges without being of the same specialty as the
service that is being performed (65 FR 18525). For example, we believe
that blood transfusions do not require supervision by a hematologist
and that an internist would typically possess hospital privileges and
State licensure to provide and to supervise blood transfusion services.
On the other hand, we have been clear that we require the supervisory
practitioner to be knowledgeable enough about the service to be able to
furnish assistance and direction, and not merely manage an emergency.
Therefore, not all practitioners are qualified to supervise services of
any specialty. Nonetheless, for many common OPPS services, we believe
that hospitals can adjust their bylaws and privileging standards
sufficiently to cover practitioners whom they wish to act in a
supervisory capacity.
Comment: Commenters requested that CMS redefine direct supervision
to broaden the definition of ``immediate availability'' and to allow
the supervisory practitioner to be located in areas that are in close
proximity to the hospital or PBD, but not on the hospital campus (or
nonhospital space on the hospital campus) or in the PBD. With regard to
``immediate availability,'' some commenters stated that, in many cases,
the requirement to be immediately available (which we have described as
physically present, interruptible, and able to furnish assistance and
direction throughout the performance of the service) negates any
benefit of allowing the supervisory practitioner to be present anywhere
on campus. As discussed above, the commenters noted that the
requirement to be ``immediately available'' in CMS' current definition
of direct supervision in the hospital actually determines how far away
the supervisory practitioner can be located because he or she must use
their discretion to decide where they can be physically located within
the hospital campus, given other activities they may be involved in and
the amount of time it would take to reach the hospital nursing and
auxiliary staff that he or she is supervising. Commenters stated that,
practically speaking, emergency room physicians or nonphysician
practitioners cannot supervise because they would not be interruptible
if they were engaged in any other activity. With regard to being on the
hospital campus or in the PBD, commenters indicated that there are many
locations that would allow a physician to be immediately available that
are not on the hospital campus or in the PBD. Specifically, commenters
provided personal situations where a physician office or clinic is
located in buildings adjacent to a PBD or hospital campus. Commenters
noted that many of these locations are closer to the site of service
than are parts of the hospital campus. In a similar case, a
practitioner may perform services in two adjacent clinics within a
single building, but one clinic is provider based and the other is not.
We have received requests during the normal course of the year as well
in public comments to our proposed rule requesting that we allow
supervision from both locations.
Commenters also indicated that many CAHs and small or rural PPS
hospitals have particular difficulty staffing a hospital in the
situation where a primary care physician directly refers a patient
after normal business hours for chemotherapy, drug administration,
hydration, observation or other services from their office or from on-
call in a location that is very close to the hospital campus but not on
the campus. In general, these commenters believed that requiring any
physician or nonphysician practitioner to be available is excessively
burdensome and difficult to staff if there is no other activity to
occupy the physician in the hospital. In addition, several commenters
requested that CMS redefine direct supervision or immediate
availability to allow for availability in ways other than appearing in
person, and asked that CMS consider availability using technological
advances in telemedicine

[[Page 72008]]

and other remote mechanisms. Commenters also requested that CMS
consider redefining direct supervision to allow the supervising
physician to be in close proximity to the department or hospital.
Response: Having carefully considered the comments regarding the
challenges to providing direct supervision created by our requirement
that the physician or nonphysician practitioner be either ``in the
hospital or CAH'' or ``in the provider based department,'' we are
revising our definition of direct supervision for hospital outpatient
therapeutic services in Sec. 410.27(a)(1)(iv)(A) and (B) to remove the
reference to ``on the same campus'' or ``in the off-campus provider-
based department of the hospital'' and we are removing our definition
of ``in the hospital or CAH'' provided under Sec. 410.27(g) entirely.
The definition of direct supervision will be revised simply to require
immediate availability, meaning physically present, interruptible, and
able to furnish assistance and direction throughout the performance of
the procedure but without reference to any particular physical
boundary. Since the new definition will now apply equally in the
hospital or in on-campus or off-campus PBDs, we are removing paragraphs
(a)(1)(iv)(A) and (B) of Sec. 410.27 altogether. The new definition of
direct supervision under Sec. 410.27(a)(1)(iv) will now state, ``For
services furnished in the hospital or CAH or in an outpatient
department of the hospital or CAH, both on- and off-campus, as defined
in section 413.65 of this subchapter, `direct supervision' means that
the physician or nonphysician practitioner must be immediately
available to furnish assistance and direction throughout the
performance of the procedure. It does not mean that the physician or
nonphysician practitioner must be present in the room when the
procedure is performed. For pulmonary rehabilitation, cardiac
rehabilitation, and intensive cardiac rehabilitation services, direct
supervision must be furnished by a doctor or medicine or osteopathy as
specified in Sec. Sec. 410.47 and 410.49, respectively.'' This new
definition of direct supervision will apply to hospitals and CAHs
equally beginning in CY 2011. However, as already discussed, we are
extending our notice of nonenforcement to CAHs and small rural
hospitals with 100 or fewer beds through CY 2011. For purposes of this
provision, we are using the same definition of small rural hospitals as
Congress recognizes for TOPs under section 1833(t)(7) of the Act. Our
decision not to enforce the requirement for direct supervision of
therapeutic outpatient services applies to rural hospitals with 100 or
fewer beds for CY 2011. As we do for TOPs, we will consider hospitals
to be rural if they are either geographically located in a rural area
or are paid through the OPPS with a wage index for a rural area
(Section 70, Chapter 4, of the Medicare Claims Processing Manual (Pub.
No. 100-04)).
This extension will allow CAHs and small rural hospitals to prepare
to meet this definition of direct supervision in CY 2012.
Our goal in implementing this policy is twofold. First, we wish to
allow for flexibility in providing for direct supervision from a
location other than the hospital campus or PBD that still allows the
physician to be immediately available to furnish direction and
assistance. We wish to give CAHs and other hospitals more flexibility
to meet the direct supervision requirement by allowing physicians or
other practitioners in locations that are close to the hospital but not
in actual hospital space to directly supervise services that are within
their State scope of practice and hospital granted privileges, so long
as these individuals remain immediately available. This policy also
allows supervision from any location within a building off-campus that
houses multiple PBDs of a hospital as long as the supervising
practitioner is immediately available, rather than requiring a
supervising practitioner to be located within each PBD in that
building.
We note, however, that we are not relaxing the requirement that,
for direct supervision, the supervisory physician or nonphysician
practitioner must be immediately available, meaning that the
supervisory practitioner must be physically present and interruptible.
We wish to emphasize that once we remove reference to ``in the
hospital'' or ``in the provider based department,'' we continue to
expect the supervisory practitioner to be physically present for the
services he or she is supervising. As in the past, we are not defining
immediate availability in terms of time or distance. We believe that
removing specific boundaries provides reasonable flexibility but also
holds the practitioner accountable for determining, in individual
circumstances, how to be physically and immediately available when
supervising services provided ``incident to'' a physician's service in
the outpatient setting.
Although commenters again requested this year that we revise our
definition of immediately available to recognize availability by
telephone or modes other than in person, we believe that the
requirement for physical presence distinguishes direct supervision from
general supervision. Granting these requests would amount to revising
the definition of direct supervision to be, for all intents and
purposes, general supervision. Section 410.32(b)(3)(i) of the
regulations defines general supervision to mean that ``the procedure is
furnished under the physician's overall direction and control, but the
physician's presence is not required during the performance of the
procedure.'' Rather than further modify the definition of direct
supervision to accommodate more flexibility in the definition of
immediately available, as discussed above, we intend to establish an
independent review process to assess the appropriate supervision levels
for specific services. We are retaining all other current requirements
for direct supervision such as clinical appropriateness of the
supervisor and an ability to step in and perform as we discuss in
Section 20.5.2, Chapter 6, of the Medicare Benefit Policy Manual (Pub.
No. 100-02).
With respect to telecommunication, we note that direct supervision
requires the ability to be physically present immediately, and to be
able to furnish assistance and direction throughout the performance of
the procedure (74 FR 60580). We do not see how a practitioner who is
only remotely available by phone or other means of telecommunication
could fulfill these requirements and, therefore, we do not consider
availability by means of telecommunication to be an acceptable means of
providing direct supervision. However, this issue might potentially be
considered by the independent panel in future years.
Comment: Several commenters asked CMS to continue to allow nurse
practitioners and physician assistants to perform hospital outpatient
therapeutic services under general supervision.
Response: As we have delineated in prior rules (74 FR 60590 through
60591) and manual guidance (Medicare Benefit Policy Manual (Pub. No.
100-02), Chapter 6, Section 20.5.2), beginning January 1, 2010, in
accordance with 42 CFR 410.27(a)(1)(iv), in addition to physicians and
clinical psychologists, licensed clinical social workers, physician
assistants, nurse practitioners, clinical nurse specialists, and a
certified nurse-midwife may directly supervise therapeutic services
that they may personally furnish in accordance with State law and all
additional requirements, including those specified at 42 CFR 410.71,
410.73, 410.74, 410.75, 410.76, and 410.77. These

[[Page 72009]]

nonphysician practitioners are specified at 42 CFR 410.27(f). Under our
current policy, a physician assistant may perform hospital outpatient
therapeutic services under general supervision because, in accordance
with Sec. 410.74, a physician assistant must perform outpatient
therapeutic services under general supervision. Similarly, nurse
practitioners can perform hospital outpatient therapeutic services so
long as they furnish them ``in collaboration with'' a physician in
accordance with Sec. 410.75. The rules for provision of diagnostic
services by nurse practitioners and physician assistants are delineated
in Section 20.4.4 of the Medicare Benefit Policy Manual and we
summarize them below in our discussion of supervision of outpatient
diagnostic services.
Comment: Commenters made many of the same requests that were made
during the previous rulemaking period, specifically that CMS allow PR,
CR, and ICR services to be supervised by nonphysician practitioners.
Commenters also requested that CMS change the required level of
supervision for these services from direct to general supervision. One
commenter stated that services provided ``off-site,'' should not
require direct supervision because the staff is specially trained and
the patients are medically strong enough to participate in the
treatments. Another commenter expressed appreciation for the
clarification in the proposed rule that the outpatient departments of
CAHs are a covered setting for the provision of PR, CR, and ICR
services. However, the commenter asserted that the outpatient
departments of hospitals, including CAHs, are deemed to have met the
direct supervision requirement by the ``presumption'' language in
section 144(a)(2)(B) of Public Law 110-275 (MIPPA) and that
consequently these facilities are not required to provide direct
supervision.
Response: As we stated in the CY 2010 OPPS/ASC final rule with
comment period, we do not believe that the statute provides the
flexibility for us to permit anyone other than a physician to supervise
hospital outpatient PR, CR, and ICR services because nonphysician
practitioners are not physicians as defined in section 1861(r)(1) of
the Act. The statutory language of sections 1861(eee)(2)(B) and
(eee)(4)(A) and section 1861(fff)(1) of the Act (as added by section
144(a)(1) of Pub. L. 110-275) defines PR, CR, and ICR programs as
``physician-supervised.'' More specifically, section 1861(eee)(2)(B) of
the Act establishes that, for PR, CR and ICR programs, ``a physician is
immediately available and accessible for medical consultation and
medical emergencies at all times items and services are being furnished
under the program, except that, in the case of items and service
furnished under such a program in a hospital, such availability shall
be presumed.* * *'' The text of the statute uses the word ``physician''
and does not include nonphysician practitioners. Also, as we explained
in the CY 2009 OPPS/ASC proposed rule and final rule with comment
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704,
referencing the April 7, 2000 OPPS final rule (65 FR 18525)), the
``presumption'' or ``assumption'' that a physician is available to
provide direct supervision means that direct physician supervision is
the standard. We have assumed this requirement is met on hospital
premises (meaning we have expected that hospitals are meeting this
requirement) because staff physicians would always be nearby in the
hospital. In other words, the requirement is not negated by a
presumption that the requirement is being met. Hence, while we have
some flexibility to determine the type of practitioner who may
supervise other hospital outpatient therapeutic services, in the case
of PR, CR, and ICR services specifically, the statutory language does
not provide such flexibility. Instead, the statute imposes strict
requirements, describing the direct physician supervision standard for
PR, CR, and ICR services, and gives us no flexibility to modify the
requirement to allow for other supervisory practitioners or another
level of supervision. Nevertheless, we refer the commenters to our
revised definition of direct supervision, which requires only the
supervisory practitioner's immediate availability rather than any
particular geographic location in Sec. 410.27(a)(1)(iv) for CY 2011,
and note that this new definition applies to the direct physician
supervision of PR, CR, and ICR services.
Comment: Several commenters asserted that registered nurses (RNs)
are board-certified or otherwise qualified to provide all necessary
supervision of the extended duration services CMS proposed and of other
services, for example, observation, IV hydration, chemotherapy, blood
transfusions and patient-controlled anesthesia pumps. Commenters
provided many examples of nurses handling initial reactions to blood
transfusions, chemotherapy and other services by redirecting the
service according to protocol or specialized knowledge of the service
(for example, changing rate of infusion), or by referring emergencies
to medical response or ``code'' teams. One commenter stated that CMS
should add clinical experience as a qualification under ``clinical
appropriateness'' for direct supervision; the commenter asserted that
nurses are more qualified than physicians to supervise certain
procedures because they have more experience in performing them.
Response: We support all specific training nurses may receive to
administer safe and quality specialized services, such as chemotherapy,
under direct supervision. However, we believe there is an important
distinction between ability and training to administer a service, and
ability to supervise a service or to administer it without supervision.
The Act specifically recognizes certain professionals (nonphysician
practitioners) to furnish certain services that would be considered
physicians' services if furnished by a physician, and we have
recognized that it is appropriate to permit these individuals to
supervise or to perform the services themselves. In general, nurses are
not afforded this authority. For example, we received a comment
referencing safety standards for chemotherapy administration which
supported specialized training of nurses, mid-level practitioners or
physicians to administer chemotherapy, but these standards also
recommended that either a mid-level practitioner or a physician be on
site at all times to supervise the administration of those services. We
emphasize that Medicare's supervision rules do not govern who may
perform a service. Rather, they govern who must be available to furnish
assistance and direction through the procedure should developments
require a change in the course of treatment in order to ensure a
therapeutic outcome. For these reasons, we do not believe that RNs
should be permitted to provide all necessary supervision of outpatient
therapeutic services.
We are concerned with the number of comments we received suggesting
that protocols, processes, and procedures may substitute for evaluation
by a physician or nonphysician practitioner and orders for treatment.
As previously stated in this discussion, Sec. 410.27(a)(1)(ii) of the
regulations states that Medicare Part B pays for hospital services and
supplies furnished incident to a physician's service to outpatients if
they are provided ``as an integral though incidental part of
physician's services.'' In addition, we have stated in section 20.5.1,
Chapter 6 of the Medicare Benefit Policy Manual that ``during any
course of treatment rendered by auxiliary personnel, the physician must

[[Page 72010]]

personally see the patient periodically and sufficiently often enough
to assess the course of treatment and the patient's progress and, where
necessary, to change the treatment regimen.'' Well-developed protocols,
processes, and procedures can assist nurses in their management of a
particular patient, allowing them to assess the patient's reaction to a
course of treatment. We believe that quality and thoughtful nursing
staff are a key component in the delivery of safe and quality care.
However, protocols cannot address every possible development during a
course of treatment. We believe that a physician or nonphysician
practitioner who has had specific training and met further licensure
and qualification requirements permitting a broader scope of practice
must be available to evaluate the patient, provide assistance and
direction, and order additional services if needed. Protocols cannot
address all circumstances, nor can they substitute for the training and
authority to redirect the service or potentially order a different
course of treatment.
Comment: Many commenters continued to express the opinion that
supervision requirements in CAHs should be limited to the requirements
of their CoPs and that CAHs should be able to maintain a general
supervision standard for the provision of all hospital outpatient
therapeutic services. They asserted that CMS is promulgating two
conflicting rules in that the supervision requirements for payment
conflict with the supervision requirements delineated in the CAH CoPs.
They asserted that Medicare is ``forcing CAHs to provide life-saving
services'' for which they will not be reimbursed since they are not
able to provide direct supervision. Another commenter asked if Advanced
Beneficiary Notices (ABNs) could be distributed to patients who present
to the hospital for services requiring direct supervision when such
supervision is not available. On the other hand, several commenters
recommended that CMS require CAHs to operate under the same supervision
rules as all other types of hospitals. One commender recommended that
supervision levels should only vary by type of service and safety
requirements. One commenter, MedPAC, supported our recommendation to
treat CAHs and small rural hospitals equally, and suggested that we
better align the CAH CoPs with final payment requirements to better
clarify supervision requirements for hospitals.
Response: As we discussed above, we disagree that our payment
regulations requiring direct supervision for payment of outpatient
services conflict with CAH CoPs. The CoPs and payment rules are written
for different purposes. As we stated in our proposed rule (75 FR
46304), in order to participate in Medicare, CAHs must, at a minimum,
follow their CoPs which ensure a basic environment of safety in the
hospital. Under their CoPs, CAHs are permitted but not required to
provide a broad array of hospital outpatient services. However, in
order to bill and be paid for outpatient services, CAHs must meet
additional payment requirements for specific services, including
supervision requirements or, for example, the requirement for timed
notes in the medical record for observation services. We have
previously indicated why we believe supervision is an important
requirement to ensure that Medicare purchase safe, quality outpatient
care. We continue to believe that supervision is an important payment
requirement for CAHs as well as other hospitals, and that Medicare
should ensure the program is purchasing a minimum level of safe,
quality care, wherever that care is provided. We have stated that
unlike inpatients, outpatients do not have a plan of care, that a
treating physician in the community may not be aware that outpatient
services are being delivered, and that hospitals do not necessarily
have an established relationship with registered outpatients the way
they do for admitted inpatients (74 FR 60582).
We continue to disagree with commenters that we need to somehow
``reconcile'' the payment regulations for outpatient therapeutic
services with CAH CoPs establishing minimum institutional safety and
quality requirements for the services that CAHs provide. However, while
we expect to retain a default requirement of direct supervision for
outpatient therapeutic services, we believe that the issue of perceived
discrepancy may be resolved as we move forward with our plan to
establish a process that will lead to the assessment and adoption of an
appropriate level of supervision for individual services. Specifically,
as we begin to consider and adopt different levels of supervision for
individual services, the distinction between the CAH CoPs and payment
regulations should become more evident. We believe that recognizing a
modified supervision approach for the extended duration services for CY
2011, discussed in more detail below, is a step towards clarifying the
distinction between the payment rules that are applicable for specific
services from the CoPs that apply to the facility in general.
As described in our manual provisions (Medicare Claims Processing
Manual (IOM 100-04), Chapter 30, Sections 50.2.1 and 50.5), providers
may only issue ABNs when Medicare will deny an otherwise covered item
or service either as not reasonable and necessary under section
1862(a)(1) of the Act or because the item or service constitutes
custodial care under section 1862(a)(9) of the Act. If Medicare
withheld payment for a hospital outpatient service due to lack of
direct supervision as required in our rules and regulations, the
payment denial would not be for lack of medical necessity or because
the item or service constituted custodial care. Therefore, failure to
provide direct supervision is not a valid reason to issue a beneficiary
an ABN, and hospitals are not permitted to do so.
Comment: Many commenters appreciated our proposal for extended
duration services as an attempt to offer flexibility to CAHs and small
rural hospitals to meet supervision requirements when providing these
services. Many commenters favored the proposal overall, but offered
several recommended refinements or revisions. First, commenters
expressed concern that the requirement for direct supervision during
the initiation of an extended duration service would compromise patient
safety in small rural hospitals and CAHs because auxiliary staff would
have to wait for the supervisory practitioner to arrive before
initiating critical treatment. They recommended that CMS allow these
services to be provided under general supervision for the duration of
the service.
Many commenters did not believe that the list was long enough and
suggested that we add additional services, although many of these
services did not meet the stated criteria to be considered a
nonsurgical extended duration service. We note that we addressed other
services requested for general supervision in our first comment and
response in this section. Many commenters requested general supervision
of chemotherapy administration and blood transfusion. Several
commenters also believed that certain portions of the post-operative
recovery period did not need direct supervision and that after a
certain amount of time has passed, patients are typically stable enough
to be monitored by auxiliary personnel. They requested that CMS allow
general supervision for portions of the post-operative period or
designate the post-operative period as an extended duration service.
Several commenters agreed that CMS should not further define
``initiation'' or ``stable.'' They noted that these are new unfamiliar
terms in the context of extended duration services and were

[[Page 72011]]

concerned about liability. Commenters believed that they might be
subject to inspection and interpretation of their decision about the
transition of care by individuals who were not qualified to make a
medical judgment about the need for a practitioner, and that they would
be penalized for failures to adequately document the transition. The
commenters stated that the determination that a patient is stable
enough to transition to general supervision may create personal
liability. They indicated that it may be difficult to properly judge or
navigate the terms ``initiation'' and ``stable'' because they will vary
with different circumstances, for example the practitioner who
transfers the patient to a reduced level of supervision care may not be
the same practitioner who initiated care.
Finally, commenters expressed their views as to whether the point
of transition from direct supervision to general supervision should be
documented in the medical record or identified in a hospital protocol,
and on how CMS might review the supervisory practitioner's decision to
move from direct to general supervision to monitor for proper billing
should an adverse event occur. Several commenters favored documenting
the transition to general supervision in the medical record or in
progress notes, and one commenter specified that a physician order
should be used. One commenter suggested a system that would grade the
level of clinical decision making, similar to an existing system that
grades level of risk and patient stability with parameters such as
``Abrupt Change in Neurologic Status.'' However, many other commenters
expressed reservations about documentation, concerned that documenting
the point of transfer will provide ample opportunity for practitioner
audit and liability since carrying out the transition is an unfamiliar
arena involving clinical judgment and newly defined or undefined terms.
Some commenters expressed concern about increasing providers' paperwork
and administrative burden.
Response: We appreciate commenters support for our proposal to
require, for certain extended duration services, direct supervision at
the initiation of the service followed by general supervision for the
remainder of a service at the discretion of the supervising physician
or nonphysician practitioner once that physician has determined that
the patient is stable.
We do not believe that requiring direct supervision for the
initiation of the service for extended duration services will
compromise patient safety in CAHs and small rural hospitals when they
provide these services. We believe that many of the extended duration
services frequently are referred services, giving the hospital or CAH
time to arrange for a supervisory physician or nonphysician
practitioner to be available. Specifically with regard to observation
services, we noted in Section 290.5.1 of Chapter 4 of the Medicare
Claims Processing Manual (Pub. No. 100-04) that ``(a) the beneficiary
must be in the care of a physician during the period of observation, as
documented in the medical record by outpatient registration, discharge,
and other appropriate progress notes that are timed, written, and
signed by the physician,'' and ``(b) the medical record must include
documentation that the physician explicitly assessed patient risk to
determine that the beneficiary would benefit from observation
services.'' Because we require an evaluation of patient risk at the
beginning of observation services, except in cases of direct referral
we did not believe that the physician would not be available during the
initiation of the service.
We also believe that hospitals typically would not need to stop
delivery of extended duration services to a patient because a
supervisory physician or nonphysician practitioner is not yet
available. We note that the hospital frequently conducts diagnostic
tests for patients presenting to the emergency department, many of
which require a general level of supervision, which can allow time for
a supervising physician or nonphysician practitioner to become
available for the initiation of therapeutic services. Thus, in those
circumstances where the patient presents to the emergency department
and requires an extended duration service, we believe that the
supervising physician or nonphysician practitioner could be immediately
available for most, if not all, of the initiation period. We further
note that we have removed the physical boundary requirement in the
definition of direct supervision in order to allow for the supervising
practitioner greater flexibility in location while still meeting the
requirement to be immediately available.
We do not believe it would be appropriate without further
assessment to define chemotherapy, blood transfusion, and the recovery
period for surgical services as nonsurgical, extended duration
therapeutic services. After a preliminary review of literature on
chemotherapy administration, we believe that service-specific
assessment may be necessary to determine the level of supervision that
is safe. Adverse events can be severe, even fatal, and they seem to
vary by type of chemotherapy being administered as well as the
mechanism of administration. We also note that recent safety standards
seem to support the equivalent of direct supervision of chemotherapy
(http://www.asco.org/ASCOv2/Practice+%26+Guidelines/Quality+Care/Quality+Measurement+%26+Improvement/ASCO-ONS+Standards+for+Safe+Chemotherapy+Administration). We remain equally
concerned about the safety of blood transfusion should circumstances
require a physician to assess the situation and order a change in the
course of treatment. We also do not believe it would be appropriate,
without further assessment, to require general supervision for the
recovery period for surgical services. We excluded all surgical
services including recovery time from our proposal regarding extended
duration services because we believe the surgeon should evaluate his or
her patient during the recovery period. We believe that the best course
of action is to exclude these services from our list of nonsurgical
extended duration services and to include them in the list of services
to be evaluated early on through the independent review process for
service-specific supervision levels that we will establish for CY 2012.
We thank commenters who agreed with our proposal not to define the
term ``stable'' and not to further define the term ``initiation,'' and
as we proposed, we will not further define these terms. Thus, the
finalized definition of ``initiation'' in Sec. 410.27(a)(1)(v)(B) is
``the beginning portion of a service ending when the patient is stable
and the supervising physician or appropriate nonphysician practitioner
believes the remainder of the service can be delivered safely under
general supervision.''
With regard to documentation of transition from direct to general
supervision, we are sympathetic to commenter concerns regarding
potential liability and administrative burden. However, we also believe
that in order to assure adequate patient safety and communication among
hospital staff, the point of transition to general supervision should
be documented prominently in progress notes or in the medical record.
Therefore, we are finalizing our requirement that the transition from
direct to general supervision be documented in the progress notes or in
the medical record,

[[Page 72012]]

but we are otherwise leaving the manner of documentation to the
discretion of each supervising practitioner.
After review of the public comments, we are finalizing our proposed
nonsurgical extended duration services described in new Sec.
410.27(a)(1)(v).
Comment: During the past year, we were often questioned about
clinical requirements for practitioners supervising extremely
specialized services, notably radiation oncology services. One
commenter requested that CMS consider the direct supervision
requirement to be met for diagnostic or therapeutic radiation oncology
services if a non-specialist practitioner who can handle an emergency
provides the direct supervision and also has access by phone or other
telemedicine link to a specialist who is able to change the plan of
care should the need arise. One commenter asserted that one does not
have to posses the clinical skills to fully provide a service in order
to be an effective supervisor.
Response: As we have stated in the Medicare Benefit Policy Manual
(Pub. No. 100-02), Chapter 6, Section 20.5.24, ``the supervisory
physician or nonphysician practitioner must have, within his or her
State scope of practice and hospital-granted privileges, the knowledge,
skills, ability, and privileges to perform the service or procedure.
Specially trained ancillary staff and technicians are the primary
operators of some specialized diagnostic or therapeutic equipment, and
while in such cases CMS does not expect the supervisory practitioner to
operate this equipment instead of a technician, CMS does expect the
physician or nonphysician practitioner that supervises the provision of
the service must be knowledgeable about the test and clinically
appropriate to furnish the test. The supervisory responsibility is more
than the capacity to respond to an emergency, and includes furnishing
assistance and direction throughout the performance of a procedure and,
as appropriate to the supervisory physician or nonphysician
practitioner and the patient, to change a procedure or the course of
care for a particular patient. CMS would not expect that the
supervisory practitioner would make all decisions unilaterally without
informing or consulting the patient's treating physician or
nonphysician practitioner.'' We do not believe it is sufficient or
consistent with our rules for direct supervision for the individual on
site to be capable of only emergency management. The supervisory
practitioner or nonphysician practitioner who is physically present
should have the training and knowledge to clinically redirect the
service or provide additional orders.
Comment: Commenters remain concerned about the potential for
liability for services provided prior to CY 2009. They requested that
CMS prohibit enforcement of the direct supervision requirements applied
to services furnished since January 1, 2001. They also commented that
CMS' statement regarding enforcement in the CY 2010 final rule with
comment period (74 FR 60587) forces hospitals to assert and provide
supporting evidence that any divergence from CMS' rules during that
time period was a result of error or mistake.
Response: In the CY 2010 OPPS/ASC final rule with comment period,
we stated that in the case of services furnished in 2000 through 2008,
``we plan to exercise our discretion and decline to enforce in
situations involving claims where the hospital's noncompliance with the
direct physician supervision policy resulted from error or mistake.''
(74 FR 60587)
In summary, after consideration of the public comments we received,
we are maintaining our general requirement for direct supervision of
all outpatient therapeutic services. However, we are redefining our
definition of direct supervision in Sec. 410.27(a)(1)(iv) to remove
all references to physical boundaries and require only ``immediate
availability.'' We are removing Sec. 407.27(g), which defines ``in the
hospital'', because it is no longer necessary. In addition, through CY
2011 we will develop an independent review process for annual
consideration of requests for alternative service-specific supervision
levels, supported by an independent technical committee, potentially
the APC Panel. We are specifically seeking comment on what the process
should look like and the criteria that should be considered for
identifying services for which personal, direct, or general supervision
is appropriate. We will establish this process in the coming year
through the CY 2012 rulemaking cycle, selecting a specific independent
entity to assist in the process and establishing criteria for
determining that a given service should be furnished under general or
personal supervision rather than direct supervision. At least until the
independent entity is in place (likely through CY 2011), we are
establishing a new category of ``nonsurgical extended duration
therapeutic services'' that require direct supervision as defined in
Sec. 410.27(a)(1)(iv) during an initiation period, followed by a
minimum standard of general supervision as defined in Sec.
410.32(b)(3)(i) for the duration of the service. The extended duration
services will include the limited set of procedures identified in Table
48A of this final rule with comment period. We are adding a new
paragraph (a)(1)(v) to Sec. 410.27 to reflect this policy. In new
Sec. 410.27(a)(1)(v)(A), we are defining ``nonsurgical extended
duration therapeutic services'' as services that can last a significant
period of time, have a substantial monitoring component that is
typically performed by auxiliary personnel, have a low risk of
requiring the physician's or appropriate nonphysician practitioner's
immediate availability after the initiation of the service, and are not
primarily surgical in nature. In new Sec. 410.27(a)(1)(v)(B), we are
finalizing our definition of ``initiation of the service'' as the
beginning portion of a service ending when the patient is stable and
the supervising physician or appropriate nonphysician practitioner
believes the remainder of the service can be delivered safely under his
or her general direction and control without needing his or her
immediate availability. We believe that these policies will address
commenters' concerns while maintaining an adequate level of safety and
quality of care in the hospital outpatient services that Medicare
purchases.
As another interim measure, we are extending the nonenforcement
policy for direct supervision of therapeutic services provided in CAHs
for another year, through CY 2011, and we are expanding it during this
year to include small and rural hospitals that have 100 or fewer beds.
For purposes of this provision, we are using the same definition of
small rural hospitals as Congress recognizes for TOPs under section
1833(t)(7) of the Act. Our decision not to enforce the requirement for
direct supervision of therapeutic outpatient services applies to CAHs
and rural hospitals with 100 or fewer beds for CY 2011. As we do for
TOPs, we will consider hospitals to be rural if they are either
geographically located in a rural area or are paid through the OPPS
with a wage index for a rural area (Section 70, Chapter 4, of the
Medicare Claims Processing Manual (Pub. No. 100-04)). We believe this
nonenforcement policy will permit the CAHs and small and rural
hospitals that do not consistently meet our direct supervision standard
for outpatient therapeutic services to make appropriate adjustments
over the coming year.
Finally, in our proposal, we noted that in the CY 2010 OPPS/ASC
final rule with comment period, in presenting the regulation text
changes for Sec. 410.27, paragraph (a)(2) (relating to PHP

[[Page 72013]]

services) was inadvertently deleted from the Code of Federal
Regulations. We did not receive any comments on this proposal. We are
finalizing our proposal to restore paragraph (a)(2) as it originally
appeared in the regulations.

Table 48A--List of Nonsurgical Extended Duration Therapeutic Services
------------------------------------------------------------------------
HCPCS Code Long description
------------------------------------------------------------------------
C8957.................... Intravenous infusion for therapy/diagnosis;
initiation of prolonged infusion (more than
8 hours), requiring use of portable or
implantable pump.
G0378.................... Hospital observation service, per hour.
G0379.................... Direct admission of patient for hospital
observation care.
96360.................... Intravenous infusion, hydration; initial, 31
minutes to 1 hour.
96361.................... Intravenous infusion, hydration; each
additional hour (List separately in addition
to code for primary procedure).
96365.................... Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify substance
or drug); initial, up to 1 hour.
96366.................... Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify substance
or drug); each additional hour (List
separately in addition to code for primary
procedure).
96367.................... Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify substance
or drug); additional sequential infusion, up
to 1 hour (List separately in addition to
code for primary procedure).
96368.................... Intravenous infusion, for therapy,
prophylaxis, or diagnosis (specify substance
or drug); concurrent infusion (List
separately in addition to code for primary
procedure).
96369.................... Subcutaneous infusion for therapy or
prophylaxis (specify substance or drug);
initial, up to 1 hour, including pump set-up
and establishment of subcutaneous infusion
site(s).
96370.................... Subcutaneous infusion for therapy or
prophylaxis (specify substance or drug);
each additional hour (List separately in
addition to code for primary procedure).
96371.................... Subcutaneous infusion for therapy or
prophylaxis (specify substance or drug);
additional pump set-up with establishment of
new subcutaneous infusion site(s) (List
separately in addition to code for primary
procedure).
96372.................... Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug);
subcutaneous or intramuscular.
96374.................... Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug);
intravenous push, single or initial
substance/drug.
96375.................... Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug); each
additional sequential intravenous push of a
new substance/drug (List separately in
addition to code for primary procedure).
96376.................... Therapeutic, prophylactic, or diagnostic
injection (specify substance or drug); each
additional sequential intravenous push of
the same substance/drug provided in a
facility (List separately in addition to
code for primary procedure).
------------------------------------------------------------------------

In the CY 2010 OPPS/ASC final rule with comment period, we
requested comments on the issue of standardizing the levels of
supervision required for partial hospitalization services (PHP)
provided in CMHCs and in hospital outpatient departments. To date, we
require direct supervision for PHP services provided to hospital
outpatients as for all outpatient therapeutic services, and we require
only general supervision for PHP services provided at CMHCs. We
appreciate the comments we received in response to the final rule with
comment period and are taking them into consideration. In the CY 2010
OPPS/ASC final rule with comment period, we also requested comments on
supervision requirements for payment to ASCs. We have no payment-
related supervision requirement for ASCs. We appreciate the comments we
received in response to the final rule with comment period and are
taking them into consideration.
4. Supervision of Hospital Outpatient Diagnostic Services
We have received limited correspondence and questions on our policy
finalized in the CY 2010 OPPS/ASC final rule with comment period to
adopt for outpatient diagnostic services furnished in hospitals and in
non-hospital locations the physician supervision levels in Sec.
410.32(b)(3) established under the MPFS and indicated on the Practice
Expense Relative Value Unit file. We also applied a new definition of
direct supervision in new Sec. 410.28(e)(1) and (e)(2). As discussed
above, the CY 2010 policy applies to hospitals and not to CAHs. As we
discuss above, nonphysician practitioners previously performing
diagnostic tests without physician supervision, within their State
scope of practice and hospital-granted privileges, can continue to
perform those tests without physician supervision. The CY 2010 policy
now requires physician supervision of those services, unless the
nonphysician practitioner is specifically exempted under Sec.
410.32(b)(2) or there is some other provision addressing supervision
for that type of nonphysician practitioner.
In this final rule with comment period, in the interest of clarity
we are adopting the same change in definition of direct supervision and
immediate availability for outpatient diagnostic services as we are
adopting for outpatient therapeutic services, except for diagnostic
services performed under arrangement in non-hospital locations under
Sec. 410.28(e)(3). For diagnostic services furnished under arrangement
in non-hospital locations, direct supervision will continue to mean
physical presence in the office suite as defined in Sec.
410.32(b)(3)(ii) (``in the office suite and immediately available to
furnish assistance and direction throughout the performance of the
procedure''). For all other outpatient diagnostic services, direct
supervision will now mean immediately available, without reference to
any physical boundary. To this end, we are amending the definition of
direct supervision in Sec. Sec. 410.28(e)(1) and (2).

B. Payment for Preventive Services

1. Definition of ``Preventive Services''
Section 4104(a) of the Affordable Care Act revised section
1861(ddd) of the Act by adding a new paragraph (3), which defines the
term ``preventive services.'' Preventive services are defined as:
Screening and preventive services currently described in
section 1861(ww)(2) of the Act, except for electrocardiograms described
in section 1861(ww)(2)(M) of the Act;
An initial preventive physical examination (IPPE) as
defined in section 1861(ww) of the Act; and
Personalized prevention plan services (PPPS), also known
as the ``Annual Wellness Visit'' (AWV), as defined in section 1861(hhh)
of the Act (which was added by section 4103 of the Affordable Care
Act).
The services specified in the definition of ``preventive services''
at section 1861(ddd)(3)(A) of the Act, as

[[Page 72014]]

cross-referenced to section 1861(ww)(2) of the Act, excluding
electrocardiograms, include the following:
Pneumococcal, influenza, and hepatitis B vaccine and
administration;
Screening mammography;
Screening pap smear and screening pelvic examination;
Prostate cancer screening tests;
Colorectal cancer screening tests;
Diabetes outpatient self-management training (DSMT);
Bone mass measurement;
Screening for glaucoma;
Medical nutrition therapy (MNT) services;
Cardiovascular screening blood tests;
Diabetes screening tests;
Ultrasound screening for abdominal aortic aneurysm (AAA);
and
Additional preventive services identified for coverage
through the national coverage determination (NCD) process.
We note that, at the time of issuance of the CY 2011 OPPS/ASC
proposed rule, the only additional preventive service identified for
coverage through the NCD process was HIV testing. We released a
proposed national coverage determination for smoking cessation services
for asymptomatic patients (CAG-00420N, ``Proposed Coverage Decision
Memorandum for Counseling to Prevent Tobacco Use'') in May 2010 on the
CMS Web site at: http://www.cms.gov/mcd/index_list.asp?list--type=nca.
We indicated that we would address the applicability of section 4104 of
the Affordable Care Act to these services if an NCD establishing them
as additional preventive services was finalized before the CY 2011
OPPS/ASC final rule with comment period was issued (75 FR 46310). As of
August 25, 2010, CMS finalized an NCD for ``Counseling to Prevent
Tobacco Use,'' and established coverage of smoking cessation services
for asymptomatic patients, thus qualifying them as ``additional
preventive services'' as defined at section 1861(ddd)(3)(A) of the Act,
as cross-referenced to section 1861(ww)(2) of the Act.
We included our proposals to implement the coverage and payment
provisions for the AWV providing PPPS in the CY 2011 MPFS proposed rule
(75 FR 40128 through 40129). Therefore, individuals were instructed to
submit public comments on the proposed coverage of and payment for the
AWV providing PPPS under the provisions of the Affordable Care Act in
response to the CY 2011 MPFS proposed rule. The implementing
regulations regarding coverage of the IPPE are already established
under existing 42 CFR 410.16 and remain unchanged by the Affordable
Care Act. As discussed below in section XII.B.2. of this final rule
with comment period, we are presenting our proposed and final policies
for the application or waiver of coinsurance and the Part B deductible
for preventive services as required by sections 4104(b) and (c) of the
Affordable Care Act. While commenters were directed to submit public
comments on the proposed coverage of and payment for the AWV providing
PPPS under the provisions of the Affordable Care Act in response to the
CY 2011 MPFS proposed rule, we did receive some comments on hospital
payment for these services, which we address below.
2. Coinsurance and Deductible for Preventive Services
Sections 4104(b) and 10406 of the Affordable Care Act amended
section 1833(a)(1) of the Act to require 100 percent payment for the
IPPE and for those Medicare-covered preventive services that are
recommended by the United States Preventive Services Task Force
(USPSTF) with a grade of A or B for any indication or population and
that are appropriate for the individual. This requirement waives any
coinsurance or copayment that would otherwise apply under section
1833(a)(1) of the Act for the IPPE and for those items and services
listed in section 1861(ww)(2) of the Act (excluding electrocardiograms)
to which the USPSTF has given a grade of A or B. In addition, section
4103(c) of the Affordable Care Act waives the coinsurance or copayment
for the AWV providing PPPS. The coinsurance or copayment represents the
beneficiary's share of the payment to the provider or supplier for
furnished services. Coinsurance generally refers to a percentage (for
example, 20 percent) of the Medicare payment rate for which the
beneficiary is liable and is applicable under the MPFS and ASC payment
system, while copayment generally refers to an established amount that
the beneficiary must pay that is not necessarily related to a
particular percentage of the Medicare payment rate, and is applicable
under the OPPS. We refer readers to the CY 2011 MPFS final rule with
comment period for the provisions related to payment for preventive
services, including waiver of the deductible and copayment, under the
MPFS, and to section XV.D.1.d. of this final rule with comment period
for our proposed and final policies to implement the provisions related
to payment for preventive services under the ASC payment system.
Section 4104(c) of the Affordable Care Act amended section
1833(b)(1) of the Act to waive the Part B deductible for preventive
services described in section 1861(ddd)(3)(A) of the Act that have a
grade of A or B from the USPSTF for any indication or population and
are appropriate for the individual. In addition, section 4103(c)(4) of
the Affordable Care Act waives the Part B deductible for the AWV
providing PPPS. These provisions are effective for services furnished
on or after January 1, 2011. We note that section 101(b)(2) of the
MIPPA previously amended section 1833(b) of the Act to waive the Part B
deductible for the IPPE, effective January 1, 2009.
As we indicated in the CY 2011 OPPS/ASC proposed rule (75 FR 46310
through 46311), not all preventive services described in paragraph (A)
of section 1861(ddd)(3) of the Act are recommended by the USPSTF with a
grade of A or B, and therefore, some of the preventive services do not
meet the criteria in sections 1833(a)(1) and 1833(b)(1) of the Act for
the waiver of the deductible and coinsurance. However, the changes made
by section 4104 of the Affordable Care Act do not affect most of the
preexisting specific provisions listed in existing Sec. 410.160(b) and
Sec. 410.152 of the regulations (which reflect the provisions found in
sections 1833(a) and 1833(b) of the Act) that waive the deductible and
coinsurance for specific services. For example, section 1833(a)(1)(D)
of the Act waives the coinsurance and section 1833(b)(3) of the Act
waives the deductible for clinical laboratory tests (including those
furnished for screening purposes). Section 4104 of the Affordable Care
Act does not change these provisions and the waiver of both the
deductible and coinsurance remains in place for all laboratory tests,
regardless of whether the particular clinical laboratory test meets the
criteria of section 4104 for the waiver of the deductible and
coinsurance as a preventive service.
The following preventive services listed in section 1833(ddd)(3)(A)
of the Act are not recommended by the USPSTF with a grade of A or B for
any indication or population: (1) Digital rectal examination provided
as a prostate cancer screening service; (2) glaucoma screening; (3)
diabetes outpatient self-management training; and (4) barium enema
provided as a colorectal cancer screening service.
Specifically, HCPCS code G0102 (Prostate cancer screening; digital
rectal exam), which does not have a grade of

[[Page 72015]]

A or B from the USPSTF for any indication or population, will continue
to be subject to the deductible and coinsurance. However, the
deductible and coinsurance for HCPCS code G0103 (Prostate cancer
screening; prostate specific antigen test (PSA)) will continue to be
waived under sections 1833(a)(1)(D) and 1833(b)(3) of the Act as a
clinical laboratory test, even though it also does not have a grade of
A or B from the USPSTF.
Glaucoma screening services, described by HCPCS codes G0117
(Glaucoma screening for high risk patients furnished by an optometrist
or ophthalmologist) and G0118 (Glaucoma screening for high risk patient
furnished under the direct supervision of an optometrist or
ophthalmologist), will continue to be subject to the deductible and
coinsurance requirements because these services are not recommended
with a grade of A or B by the USPSTF for any indication or population.
Similarly, diabetes outpatient self-management training is currently
not rated by the USPSTF; therefore, the deductible and coinsurance
requirements will continue to apply.
Barium enemas provided as colorectal cancer screening tests,
described by HCPCS codes G0106 (Colorectal cancer screening;
alternative to G0104, screening sigmoidoscopy, barium enema) and G0120
(Colorectal cancer screening; alternative to G0105, screening
colonoscopy, barium enema) do not have a grade of A or B from the
USPSTF for any indication or population. However, the deductible does
not apply to barium enemas provided as colorectal cancer screening
tests because colorectal cancer screening tests are explicitly excluded
from the deductible under section 1833(b)(8) of the Act. However, there
is no specific exclusion of barium enemas from the coinsurance
requirement at section 1833(b)(1) of the Act. Therefore, this
requirement, as applicable, continues to apply to barium enemas. We
note that the USPSTF has given a grade of A to colonoscopy, flexible
sigmoidoscopy, and fecal occult blood screening tests, and, as a
result, these services qualify for the statutory waiver of both the
deductible and coinsurance.
We also note that the USPSTF ceased to make recommendations with
regard to vaccines and vaccine administration after CY 1996, so as not
to conflict with the recommendations of the CDC's Advisory Committee on
Immunization Practices. However, the USPSTF's most recent vaccine
recommendations, which were never withdrawn by the USPSTF, gave a grade
of B to the influenza and pneumococcal vaccines and their
administration and a grade of A to the hepatitis B vaccine and its
administration. While sections 1833(a)(1) and 1833(b)(1) of the Act (as
amended by section 4104 of the Affordable Care Act) require that the
preventive services receive a grade of A or B from the USPSTF for the
coinsurance and deductible to be waived, the statute does not specify
that the recommended grade must be furnished within any given
timeframe. The USPSTF's grades from 1996 for these preventive services
are the most current USPSTF grades and have never been withdrawn.
Therefore, we believe that these preventive services meet the
requirements of the statute for the waiver of the deductible and
coinsurance. We also note that the CDC's Advisory Committee on
Immunization Practices currently recommends influenza, pneumococcal,
and hepatitis B vaccines.
Table 38 of the CY 2011 OPPS/ASC proposed rule (75 FR 46312)
displayed the CPT/HCPCS codes (paid under the OPPS or at reasonable
cost) that we proposed as ``preventive services'' under section
1861(ddd)(3)(A) of the Act. Table 38 also provided the most recent
USPSTF grade, if any, that was the basis for our proposed policy with
regard to the waiver of the deductible and coinsurance, as applicable.
In the proposed rule, we noted that, in developing recommendations
regarding preventive services, we recognize that the USPSTF may make
recommendations that are specific to an indication or population, at
times including characteristics such as gender and age in its
recommendations. In accordance with section 4101 of the Affordable Care
Act, we proposed to waive the deductible and coinsurance for any
Medicare covered preventive service with no limits on the indication or
population as long as the USPSTF has recommended the preventive service
for at least one indication and/or population with a grade of A or B.
However, we noted in the CY 2011 OPPS/ASC proposed rule (75 FR 46311)
that all existing Medicare coverage policies for such services,
including any limitations based on indication or population, continue
to apply. In some cases, national coverage policies may currently limit
Medicare coverage based on the indication or population, consistent
with the USPSTF's recommendations with a grade of A or B for the
indication or population. In other cases where Medicare does not
explicitly noncover preventive services for a specific population or
indication, we would expect that, particularly in those cases where the
USPSTF recommendation grade is a D (that is, the USPSTF recommends
against the service because there is moderate or high certainty that
the service has no net benefit or that the harms outweigh the
benefits), practitioners would only order those preventive services
that are clinically appropriate for the beneficiary. We stated in the
proposed rule that if we have future concerns about the appropriateness
of preventive services for an indication or population in light of the
USPSTF's recommendations, we may consider using our authority under
section 1834(n)(1) of the Act (as added by section 4105 of the
Affordable Care Act) to modify Medicare coverage of any preventive
service consistent with the recommendations of the USPSTF (75 FR
46311).
We noted in the proposed rule that section 4103(c)(3)(A) of the
Affordable Care Act excludes the PPPS from payment under the OPPS and
establishes payment for the AWV providing PPPS when performed in a
hospital outpatient department under the MPFS. In the CY 2011 OPPS/ASC
proposed rule (75 FR 46311), we proposed to add a new paragraph (t)
under Sec. 419.22 of the regulations to specify that the AWV providing
PPPS is excluded from payment under the OPPS. In the process of
revising the regulations to reflect the exclusion of AWV providing PPPS
from the OPPS, we noticed the need for existing Sec. 419.21(e) to be
updated to reflect that an IPPE may be performed within 12 months after
the date of the individual's initial enrollment in Part B, effective
January 1, 2009. We also noticed that existing Sec. 419.22(m) of the
regulations needed to be updated to reflect that a revised payment
methodology for end-stage renal disease (ESRD) services will go into
effect on January 1, 2011. Therefore, we also proposed to revise
Sec. Sec. 419.21(e) and 419.22(m). We referred readers to the CY 2011
MPFS proposed rule for a discussion of the proposed changes to Sec.
410.160(b) and Sec. 410.152 of the regulations to implement the
provisions related to the definition of ``preventive services'' and the
waiver of the coinsurance and deductible for preventive services as
specified by sections 4103 and 4104 of the Affordable Care Act.
Comment: Several commenters supported CMS' proposed implementation
of the Affordable Care Act provision to waive beneficiary cost-sharing
for preventive services identified in section 1861(ddd)(3)(A) of the
Act, and recommended by the USPSTF with a grade of A or B for any

[[Page 72016]]

indication or population that are appropriate for the individual, and
urged CMS to finalize the proposed policy. Some commenters expressed
concern that CMS' proposed implementation of the Affordable Care Act
provision to waive beneficiary cost-sharing did not include an
extension of the waiver of the deductible and coinsurance for vaccines
recommended by CDC's Advisory Committee on Immunization Practices
(ACIP) that are covered under Medicare Part D and preventive services
which, while identified in section 1861(ddd)(3)(A) of the Affordable
Care Act, are not designated with a grade of A or B by the USPSTF
(specifically, prostate cancer screening including digital rectal
examinations; glaucoma screening for high risk patients furnished by,
or under direct supervision of, an optometrist or ophthalmologist;
diabetes outpatient self-management training; and barium enemas
provided as colorectal cancer screening tests).
Response: We appreciate the commenters' support of our proposal to
waive beneficiary cost-sharing for preventive services identified in
section 1861(ddd)(3)(A) of the Act, and recommended by the USPSTF with
a grade of A or B for any indication or population that are appropriate
for the individual. Services that are not recommended by the USPSTF
with a grade of A or B do not meet the criteria in sections 1833(a)(1)
and 1833(b)(1) of the Act for the waiver of the coinsurance and
deductible. We also cannot waive the deductible and coinsurance for
ACIP-recommended vaccines that are covered under Medicare Part D
because these services do not fall under the definition of ``preventive
services'' at section 1861(ddd)(3)(A) of the Act.
Comment: One commenter requested that CMS clarify that tobacco
cessation counseling will be available to Medicare beneficiaries
without application of cost-sharing or deductible requirements.
Response: As stated above, as of August 25, 2010, CMS finalized a
NCD for ``Counseling to Prevent Tobacco Use,'' and established coverage
of smoking cessation services for asymptomatic patients, thus
qualifying them as ``additional preventive services'' as defined at
section 1861(ddd)(3)(A) of the Act, as cross-referenced to section
1861(ww)(2) of the Act. As reflected in Table 48B below, the deductible
and coinsurance requirements will not apply to these services,
effective January 1, 2011.
Comment: A few commenters requested that CMS provide clarity on the
hospital billing method for the AWV providing PPPS performed in
hospital outpatient facilities and requested further explanation about
how hospitals may submit claims and receive payment for furnishing the
AWV providing PPPS in a facility setting.
Response: Hospital outpatient facilities may bill for the first and
subsequent AWVs providing PPPS, furnished to an eligible beneficiary
and in a hospital outpatient facility. As noted above, section
4103(c)(3)(A) of the Affordable Care Act specifically excludes the AWV
providing PPPS from payment under the OPPS and establishes payment for
the AWV providing PPPS when performed in a hospital outpatient
department under the MPFS. We will accept claims for payment from
facilities furnishing the AWV providing PPPS in a facility setting if
no physician claim for professional services has been submitted to CMS
for payment. That is, we will pay either the practitioner or the
facility for furnishing the AWV providing PPPS in a facility setting,
and only a single payment under the MPFS will be allowed. We refer
readers to section V.Q.2. of the MPFS final rule with comment period
for a full discussion of the final coverage and payment provisions
implemented for the AWV providing PPPS.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to waive the coinsurance
and Part B deductible for preventive services as specified by sections
4103 and 4104 of the Affordable Care Act. We also are finalizing our
proposals to add a new paragraph (t) to Sec. 419.22 of the regulations
to specify that the AWV providing PPPS is excluded from payment under
the OPPS, and to update Sec. 419.21(e) to reflect that an IPPE may be
performed within 12 months after the date of the individual's initial
enrollment in Part B, effective January 1, 2009. We also are finalizing
our proposals to update Sec. 419.22(m) to reflect that a revised
payment methodology for ESRD services will go into effect on January 1,
2011. We refer readers to the CY 2011 MPFS proposed rule for a
discussion of the changes to Sec. 410.160(b) and Sec. 410.152 of the
regulations to implement the provisions related to the definition of
``preventive services'' and the waiver of the Part B deductible and
coinsurance for preventive services as specified by sections 4103 and
4104 of the Affordable Care Act.
Table 48B below displays the HCPCS codes (paid under the OPPS or at
reasonable cost) that will be recognized as ``preventive services''
under section 1861(ddd)(3)(A) of the Act. Table 48B also provides the
most recent USPSTF grade, if any, that is the basis for our final
policy with regard to waiver of the Part B deductible and coinsurance,
as applicable. We note that, effective January 1, 2011, CPT code 90658
is no longer payable under OPPS and has been replaced by the following
HCPCS codes: Q2035 (Influenza virus vaccine, split virus, when
administered to individuals 3 years of age and older, for intramuscular
use (afluria)); Q2036 (Influenza virus vaccine, split virus, when
administered to individuals 3 years of age and older, for intramuscular
use (flulaval)); Q2037 (Influenza virus vaccine, split virus, when
administered to individuals 3 years of age and older, for intramuscular
use (fluvirin)); Q2038 (Influenza virus vaccine, split virus, when
administered to individuals 3 years of age and older, for intramuscular
use (fluzone)); and Q2039 (Influenza virus vaccine, split virus, when
administered to individuals 3 years of age and older, for intramuscular
use (not otherwise specified)).

Table 48B--CY 2011 Deductible and Coinsurance for OPPS Preventive Services Specified in Section 1861(ddd)(3)(A)
of the Act *
[includes the initial preventive physical examination (IPPE)]
----------------------------------------------------------------------------------------------------------------
CY 2010 CY 2011
Service CY 2011 CPT/ Long descriptor USPSTF ratings coinsurance coinsurance
HCPCS code \1\ deductible deductible
----------------------------------------------------------------------------------------------------------------
Initial Preventive Physical G0402 Initial Not Rated...... Coinsurance Waived.
Examination (IPPE). preventive applies and
physical deductible is
examination; waived.
face to face
visits,
services
limited to new
beneficiary
during the
first 12
months of
Medicare
enrollment.

[[Page 72017]]

G0404 Electrocardiogr ............... Not Waived..... Not Waived.
am, routine
ECG with 12
leads; tracing
only, without
interpretation
and report,
performed as a
screening for
the initial
preventive
physical
examination.
Ultrasound Screening for G0389 Ultrasound, B- B.............. Coinsurance Waived.
Abdominal Aortic Aneurysm scan and/or applies and
(AAA). real time with deductible is
image waived.
documentation;
for abdominal
aortic
aneurysm (AAA)
ultrasound
screening.
Screening Pap Test (Specimen Q0091 Screening A.............. Coinsurance Waived.
Collection). papanicolaou applies and
smear; deductible is
obtaining, waived.
preparing and
conveyance of
cervical or
vaginal smear
to laboratory.
Screening Pelvic Exam....... G0101 Cervical or A.............. Coinsurance Waived.
vaginal cancer applies and
screening; deductible is
pelvic and waived.
clinical
breast
examination.
Bone Mass Measurement....... G0130 Single energy x- B.............. Not Waived..... Waived.
ray
absorptiometry
(sexa) bone
density study,
one or more
sites;
appendicular
skeleton
(peripheral)
(e.g., radius,
wrist, heel).
77078 Computed ............... Not Waived..... Waived.
tomography,
bone mineral
density study,
1 or more
sites; axial
skeleton
(e.g., hips,
pelvis, spine).
77079 Computed ............... Not Waived..... Waived.
tomography,
bone mineral
density study,
1 or more
sites;
appendicular
skeleton
(peripheral)
(e.g., radius,
wrist, heel).
77080 Dual-energy x- ............... Not Waived..... Waived.
ray
absorptiometry
(dxa), bone
density study,
1 or more
sites; axial
skeleton
(e.g., hips,
pelvis, spine).
77081 Dual-energy x- ............... Not Waived..... Waived.
ray
absorptiometry
(dxa), bone
density study,
1 or more
sites;
appendicular
skeleton
(peripheral)
(e.g., radius,
wrist, heel).
77083 Radiographic ............... Not Waived..... Waived.
absorptiometry
(e.g.,
photodensitome
try,
radiogrammetry
), 1 or more
sites.
76977 Ultrasound bone ............... Not Waived..... Waived.
density
measurement
and
interpretation
, peripheral
site(s), any
method.
G0104 Colorectal ............... Coinsurance Waived.
cancer applies and
screening; deductible is
flexible waived.
sigmoidoscopy.
G0105 Colorectal A.............. Coinsurance Waived.
cancer applies and
screening; deductible is
colonoscopy on waived.
individual at
high risk.
Colorectal Cancer Screening. G0121 Colorectal ............... Coinsurance Waived.
cancer applies and
screening; deductible is
colonoscopy on waived.
individual not
meeting
criteria for
high risk.
G0106 Colorectal Not Rated...... Coinsurance Coinsurance
cancer applies and applies and
screening; deductible is deductible is
alternative to waived. waived.
G0104,
screening
sigmoidoscopy,
barium enema.
G0120 Colorectal ............... Coinsurance Coinsurance
cancer applies and applies and
screening; deductible is deductible is
alternative to waived. waived.
G0105,
screening
colonoscopy,
barium enema.
Prostate Cancer Screening... G0102 Prostate cancer D.............. Not Waived..... Not Waived.
screening;
digital rectal
examination.
Glaucoma Screening.......... G0117 Glaucoma I.............. Not Waived..... Not Waived.
screening for
high risk
patients
furnished by
an optometrist
or
ophthalmologis
t.

[[Page 72018]]

G0118 Glaucoma ............... Not Waived..... Not Waived.
screening for
high risk
patient
furnished
under the
direct
supervision of
an optometrist
or
ophthalmologis
t.
Influenza Virus Vaccine..... 90655 Influenza virus B.............. Waived......... Waived.
vaccine, split
virus,
preservative
free, when
administered
to children 6-
35 months of
age, for
intramuscular
use.
90656 Influenza virus ............... Waived......... Waived.
vaccine, split
virus,
preservative
free, when
administered
to individuals
3 years and
older, for
intramuscular
use.
90657 Influenza virus ............... Waived......... Waived.
vaccine, split
virus, when
administered
to children 6-
35 months of
age, for
intramuscular
use.
Q2035 Influenza virus ............... N/A............ Waived.
vaccine, split
virus, when
administered
to individuals
3 years of age
and older, for
intramuscular
use (afluria).
Q2036 Influenza virus ............... N/A............ Waived.
vaccine, split
virus, when
administered
to individuals
3 years of age
and older, for
intramuscular
use (flulaval).
Q2037 Influenza virus ............... N/A............ Waived.
vaccine, split
virus, when
administered
to individuals
3 years of age
and older, for
intramuscular
use (fluvirin).
Q2038 Influenza virus ............... N/A............ Waived.
vaccine, split
virus, when
administered
to individuals
3 years of age
and older, for
intramuscular
use (fluzone).
Q2039 Influenza virus ............... N/A............ Waived.
vaccine, split
virus, when
administered
to individuals
3 years of age
and older, for
intramuscular
use (not
otherwise
specified).
90660 Influenza virus ............... Waived......... Waived.
vaccine, live,
for intranasal
use.
90662 Influenza virus ............... Waived......... Waived.
vaccine, split
virus,
preservative
free, enhanced
immunogenicity
via increased
antigen
content, for
intramuscular
use.
G0008 Administration ............... Waived......... Waived.
of influenza
virus vaccine.
G9141 Influenza a ............... Waived......... Waived.
(h1n1)
immunization
administration
(includes the
physician
counseling the
patient/
family).
G9142 Influenza a ............... Waived......... Waived.
(h1n1)
vaccine, any
route of
administration.
90669 Pneumococcal ............... Waived......... Waived.
conjugate
vaccine,
polyvalent,
when
administered
to children
younger than 5
years, for
intramuscular
use.
Pneumococcal Vaccine........ 90670 Pneumococcal ............... Waived......... Waived.
vacc, 13 val
im.
90732 Pneumococcal B.............. Waived......... Waived.
polysaccharide
vaccine, 23-
valent, adult
or
immunosuppress
ed patient
dosage, when
administered
to individuals
2 years or
older, for
subcutaneous
or
intramuscular
use.
G0009 Administration ............... Waived......... Waived.
of
pneumococcal
vaccine.

[[Page 72019]]

Hepatitis B Vaccine......... 90740 Hepatitis B A.............. Not Waived..... Waived.
vaccine,
dialysis or
immunosuppress
ed patient
dosage (3 dose
schedule), for
intramuscular
use.
90743 Hepatitis B ............... Not Waived..... Waived.
vaccine,
adolescent (2
dose
schedule), for
intramuscular
use.
90744 Hepatitis B ............... Not Waived..... Waived.
vaccine,
pediatric/
adolescent
dosage (3 dose
schedule), for
intramuscular
use.
90746 Hepatitis B ............... Not Waived..... Waived.
vaccine, adult
dosage, for
intramuscular
use.
90747 Hepatitis B ............... Not Waived..... Waived.
vaccine,
dialysis or
immunosuppress
ed patient
dosage (4 dose
schedule), for
intramuscular
use.
Smoking and Tobacco G0436 Smoking and A.............. Not Waived..... Waived.
Cessation. tobacco
cessation
counseling
visit for the
asymptomatic
patient;
intermediate,
greater than 3
minutes, up to
10 minutes.
G0437 Smoking and ............... Not Waived..... Waived.
tobacco
cessation
counseling
visit for the
asymptomatic
patient;
intensive,
greater than
10 minutes.
----------------------------------------------------------------------------------------------------------------
* This table lists only the preventive services, as defined by the Affordable Care Act, that are paid under the
OPPS or at reasonable cost, and excludes preventive services such as screening mammography and cardiovascular
screening blood tests that are paid under another fee schedule such as the MPFS or the Clinical Laboratory Fee
Schedule. A listing of all services defined by the Affordable Care Act as preventive services can be found in
this preamble and in the CY 2011 MPFS final rule with comment period. We note that any preventive service must
meet the Medicare coverage guidelines for the service including being appropriate to the beneficiary to whom
it is being furnished.
\1\ U.S. Preventive Services Task Force Recommendations
A--The USPSTF strongly recommends that clinicians routinely provide [the service] to eligible patients. (The
USPSTF found good evidence that [the service] improves important health outcomes and concludes that benefits
substantially outweigh harms.)
B--The USPSTF recommends that clinicians routinely provide [the service] to eligible patients. (The USPSTF found
at least fair evidence that [the service] improves important health outcomes and concludes that benefits
outweigh harms.)
C--The USPSTF makes no recommendation for or against routine provision of [the service]. (The USPSTF found at
least fair evidence that [the service] can improve health outcomes but concludes that the balance of benefits
and harms is too close to justify a general recommendation.)
D--The USPSTF recommends against routinely providing [the service] to asymptomatic patients. (The USPSTF found
at least fair evidence that [the service] is ineffective or that harms outweigh benefits.)
I--The USPSTF concludes that the evidence is insufficient to recommend for or against routinely providing [the
service]. (Evidence that [the service] is effective is lacking, of poor quality, or conflicting and the
balance of benefits and harms cannot be determined.)

3. Extension of Waiver of Part B Deductible to Services Furnished in
Connection With or in Relation to a Colorectal Cancer Screening Test
That Becomes Diagnostic or Therapeutic
Section 4104(c) of the Affordable Care Act amended section 1833(b)
of the Act to waive the Part B deductible for colorectal cancer
screening tests that become diagnostic. Specifically, section
4104(c)(2) of the Affordable Care Act waives the Part B deductible with
respect to a colorectal cancer screening test regardless of the code
that is billed for the establishment of a diagnosis as a result of the
test, or for the removal of tissue or other matter or other procedure
that is furnished in connection with, as a result of, and in the same
clinical encounter as a screening test.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46317), we proposed
that all surgical services furnished on the same date as a planned
screening colonoscopy, planned flexible sigmoidoscopy, or barium enema
be viewed as being furnished in connection with, as a result of, and in
the same clinical encounter as the screening test. We stated in the
proposed rule that we believe this interpretation is appropriate
because we believe that it would be very rare for an unrelated surgery
to occur on the same date as one of these scheduled screening tests.
Moreover, we believe that the risk of improper expenditures would be
very small under this policy because it is the deductible, and not the
coinsurance, that is waived for the related procedures other than the
screening tests. In the event of a legislative change to this policy
(for example, a statutory change that would waive the coinsurance for
these related services in addition to the deductible), we stated that
we would reassess the appropriateness of the proposed definition of
services that are furnished in connection with, as a result of, and in
the same clinical encounter as the colorectal cancer screening test
that becomes diagnostic. We also noted that the annual deductible would
likely be met when any surgical procedure (related or not) is performed
on the same day as the scheduled screening test.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46317), we proposed to
implement this provision by creating a HCPCS modifier that providers
would append to the diagnostic procedure code that is reported instead
of the screening colonoscopy or screening flexible sigmoidoscopy HCPCS
code or as a result of the barium enema when the screening test becomes
a diagnostic

[[Page 72020]]

service. The claims processing system would respond to the modifier by
waiving the deductible for all surgical services on the same date as
the diagnostic test. Coinsurance or copayment would continue to apply
to the diagnostic test and to other services furnished in connection
with, as a result of, and in the same clinical encounter as the
screening test.
Comment: Several commenters supported CMS' proposal to extend the
waiver of the deductible to surgical services provided on the same date
as a colorectal cancer screening test, such as a planned screening
colonoscopy, planned flexible sigmoidoscopy, or barium enema, when
these become diagnostic. The commenters supported the proposed creation
of a HCPCS modifier that would be appended to the diagnostic procedure
code that is reported instead of the screening colonoscopy or screening
flexible sigmoidoscopy HCPCS code or as a result of the barium enema
when the screening test becomes a diagnostic service.
One commenter disagreed with CMS' proposal, arguing that CMS'
definition of services furnished in connection with or in relation to a
colorectal cancer screening test that becomes diagnostic or therapeutic
as any and all surgical procedures performed on the same date was too
broad, and asked that CMS clarify its policy to exclude the services
that are not directly linked to the colorectal cancer screening test.
Another commenter requested that CMS seek authority under section 4104
of the Affordable Care Act to waive coinsurance for a colorectal cancer
screening test, regardless of the code that is billed for the
establishment of a diagnosis as a result of the test, or for the
removal of tissue or other matter or other procedure that is furnished
in connection with, as a result of, and in the same clinical encounter
as a screening test, or at a minimum waive the coinsurance requirement
for the increment of the procedure that is screening in nature.
Response: We appreciate the commenters' support of our proposal to
extend the waiver of the deductible to surgical services provided on
the same date as a colorectal cancer screening test, such as a planned
screening colonoscopy, planned flexible sigmoidoscopy, or barium enema,
when these become diagnostic and to create a HCPCS modifier that would
be appended to the diagnostic procedure code that is reported instead
of the screening colonoscopy or screening flexible sigmoidoscopy HCPCS
code or as a result of the barium enema when the screening test becomes
a diagnostic service.
We do not agree with the commenter that recognizing all surgical
procedures performed on the same date as the colorectal cancer
screening that becomes diagnostic or therapeutic as being furnished in
connection with or in relation to the screening test is too broad,
because we believe it is highly unlikely that an unrelated surgery
would take place on the same day as a scheduled screening test. We note
that section 4104 of the Affordable Care Act only grants us the
authority to waive the deductible for a colorectal cancer screening
test when it is billed for the establishment of a diagnosis as a result
of the test, or for the removal of tissue or other matter or other
procedure that is furnished in connection with, as a result of, and in
the same clinical encounter as a screening test and does not grant us
the authority to waive the coinsurance in such cases. A statutory
change would be required to waive the Part B coinsurance for a
colorectal cancer screening test that becomes diagnostic or
therapeutic.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, that all surgical
services furnished on the same date as a planned screening colonoscopy,
planned flexible sigmoidoscopy, or barium enema be viewed as being
furnished in connection with, as a result of, and in the same clinical
encounter as the screening test for purposes of implementing section
4104(c)(2) of the Affordable Care Act. We are creating new HCPCS
modifier PT, effective January 1, 2011, that providers will append to
the diagnostic procedure code that is reported instead of the screening
colonoscopy or screening flexible sigmoidoscopy HCPCS code or as a
result of the barium enema when the screening test becomes a diagnostic
service.

C. Payment for Pulmonary Rehabilitation, Cardiac Rehabilitation, and
Intensive Cardiac Rehabilitation Services Furnished to Hospital
Outpatients

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60566
through 60574), we addressed the provisions of section 144(a) of the
Medicare Improvements for Patients and Providers Act (MIPPA, Pub. L.
110-275). Section 144(a) provided for Medicare Part B coverage and
payment for pulmonary and cardiac rehabilitation services, effective
January 1, 2010. Medicare Part B coverage is provided for items and
services under a cardiac rehabilitation (CR) program, a pulmonary
rehabilitation (PR) program, and an intensive cardiac rehabilitation
(ICR) program furnished in a physician's office, a hospital on an
outpatient basis, or in other settings as the Secretary determines
appropriate. We have received questions as to whether a CAH outpatient
department is a covered setting for services furnished under these
programs because the amendments made to the Act by section 144(a) of
the MMA do not specifically define CAHs as hospitals for this benefit.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46317), we clarified
that a CAH outpatient department is considered a covered setting for
PR, CR, and ICR programs, provided that the programs meet all of the
regulatory requirements including, but not limited to, direct
supervision of all services by a physician as specified in 42 CFR
410.27(a)(1)(iv)(A). We can establish that CAHs are a covered setting
because the law and implementing regulations specify that PR, CR, and
ICR services are covered in the hospital outpatient setting, and we
define a hospital outpatient in the regulations and program
instructions as ``a person * * * who * * * receives services * * *
directly from the hospital or CAH'' (42 CFR 410.2 and the Medicare
Benefit Policy Manual, Chapter 6, Section 20.2, available at the CMS
Web site at: http://www.cms.gov/manuals/Downloads/bp102c06.pdf ). We
also noted that under section 1861(e) of the Act, the context of the
term ``hospital'' as used in the coverage provisions for PR, CR, and
ICR reflects the inclusion of CAHs.
We did not receive any public comments on our clarification of this
policy as finalized in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60566 through 60574).

D. Expansion of Multiple Procedure Payment Reduction Under the Medicare
Physician Fee Schedule (MPFS) to Therapy Services

Hospitals are paid for outpatient physical therapy (which includes
speech language pathology services) and outpatient occupational therapy
under the Medicare Physician Fee Schedule (MPFS). Outpatient physical
therapy (which includes speech language pathology services) and
outpatient occupational therapy services, as described in section
1833(a)(8) of the Act, are excluded from the OPPS by section
1833(t)(1)(B)(iv) of the Act. Section 1833(a)(8) of the Act provides
that outpatient physical and occupational therapy are to be paid as
provided in section 1834(k) of the Act.

[[Page 72021]]

Section 1834(k)(3) of the Act specifies that these services are paid
under the fee schedule established under section 1848 of the Act, and
section 1848 of the Act establishes payment under the MPFS.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46317), we noted that
we proposed to revise the MPFS to apply a multiple procedure payment
reduction to payment for all outpatient physical and occupational
therapy services paid under the MPFS. We indicated that this proposal
was contained in the CY 2011 MPFS proposed rule (CMS-1503-P) (75 FR
40075). To be considered in the development of the final policy for CY
2011, individuals were instructed to submit public comments on this
issue in response to the CY 2011 MPFS proposed rule.
As we stated in the CY 2011 OPPS/ASC proposed rule, our proposal to
expand the multiple procedure payment reduction under the MPFS to
therapy services was included in the CY 2011 MPFS proposed rule because
payment to hospitals for outpatient therapy services is made under the
MPFS. We refer readers to the CY 2011 MPFS final rule with comment
period for our discussion of public comments we received and for the
statement of CMS policy in this regard for CY 2011.

XIII. OPPS Payment Status and Comment Indicators

A. OPPS Payment Status Indicator Definitions

Payment status indicators (SIs) that we assign to HCPCS codes and
APCs play an important role in determining payment for services under
the OPPS. They indicate whether a service represented by a HCPCS code
is payable under the OPPS or another payment system and also whether
particular OPPS policies apply to the code. The final CY 2011 status
indicator assignments for APCs and HCPCS codes are shown in Addendum A
and Addendum B, respectively, to this final rule with comment period.
As we proposed in the CY 2011 OPPS/ASC proposed rule (75 FR 46317
through 46321), for CY 2011, we are not making any changes to the
status indicators that were listed in Addendum D1 of the CY 2010 OPPS/
ASC final rule with comment period. The final status indicators are
listed in the tables under sections XIII.A.1., 2., 3., and 4. of this
final rule with comment period.
1. Payment Status Indicators to Designate Services That Are Paid Under
the OPPS

------------------------------------------------------------------------
Indicator Item/code/service OPPS payment status
------------------------------------------------------------------------
G....................... Pass-Through Drugs and Paid under OPPS;
Biologicals. separate APC payment.
H....................... Pass-Through Device Separate cost-based
Categories. pass-through payment;
not subject to
copayment.
K....................... Nonpass-Through Drugs Paid under OPPS;
and Nonimplantable separate APC payment.
Biologicals,
including Therapeutic
Radiopharmaceuticals.
N....................... Items and Services Paid under OPPS;
Packaged into APC payment is packaged
Rates. into payment for
other services.
Therefore, there is
no separate APC
payment.
P....................... Partial Paid under OPPS; per
Hospitalization. diem APC payment.
Q1...................... STVX-Packaged Codes... Paid under OPPS;
Addendum B displays
APC assignments when
services are
separately payable.
(1) Packaged APC
payment if billed on
the same date of
service as a HCPCS
code assigned status
indicator ``S,''
``T,'' ``V,'' or
``X.''
(2) In all other
circumstances,
payment is made
through a separate
APC payment.
Q2...................... T-Packaged Codes...... Paid under OPPS;
Addendum B displays
APC assignments when
services are
separately payable.
(1) Packaged APC
payment if billed on
the same date of
service as a HCPCS
code assigned status
indicator ``T.''
(2) In all other
circumstances,
payment is made
through a separate
APC payment.
Q3...................... Codes that may be paid Paid under OPPS;
through a composite Addendum B displays
APC. APC assignments when
services are
separately payable.
Addendum M displays
composite APC
assignments when
codes are paid
through a composite
APC.
(1) Composite APC
payment based on OPPS
composite-specific
payment criteria.
Payment is packaged
into a single payment
for specific
combinations of
service.
(2) In all other
circumstances,
payment is made
through a separate
APC payment or
packaged into payment
for other services.
R....................... Blood and Blood Paid under OPPS;
Products. separate APC payment.
S....................... Significant Procedure, Paid under OPPS;
Not Discounted When separate APC payment.
Multiple.
T....................... Significant Procedure, Paid under OPPS;
Multiple Reduction separate APC payment.
Applies.
U....................... Brachytherapy Sources. Paid under OPPS;
separate APC payment.
V....................... Clinic or Emergency Paid under OPPS;
Department Visit. separate APC payment.
X....................... Ancillary Services.... Paid under OPPS;
separate APC payment.
------------------------------------------------------------------------

Section 142 of Public Law 110-275 (MIPPA) required CMS to pay for
therapeutic radiopharmaceuticals for the period of July 1, 2008,
through December 31, 2009, at hospitals' charges adjusted to the costs.
The status indicator ``H'' was assigned to therapeutic
radiopharmaceuticals to indicate that an item was paid at charges
adjusted to cost during CY 2009. In the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60593), we changed our policy to pay
prospectively and separately for therapeutic radiopharmaceuticals with
average per day costs greater than the CY 2010 drug packaging threshold
of $65 under the OPPS. Therefore, we changed the status indicator for
HCPCS codes used to report separately payable therapeutic
radiopharmaceuticals from ``H'' to ``K,'' which indicated that an item
is separately paid under the OPPS at the APC payment rate established
for the item. We refer readers to section V.B.5. of the CY 2010 OPPS/
ASC final rule with comment period for discussion of

[[Page 72022]]

the final CY 2010 changes to our payment policy for therapeutic
radiopharmaceuticals (74 FR 60593). For CY 2011 OPPS, as we proposed,
we are continuing to pay for therapeutic radiopharmaceuticals under the
OPPS at the APC payment rate established for the item. (We refer
readers to our discussion of payment of therapeutic
radiopharmaceuticals in section V.B.3. of this final rule with comment
period.)
For CY 2010, we established a policy to consider implantable
biologicals that are not on pass-through status as a biological before
January 1, 2010, as devices for pass-through evaluation and payment
beginning in CY 2010. Therefore, pass-through implantable biologicals
were assigned a status indicator of ``H,'' while nonpass-through
implantable biologicals were assigned a status indicator of ``N''
beginning in CY 2010. Those implantable biologicals that have been
granted pass-through status under the drug and biological criteria
prior to January 1, 2010, continued to be assigned a status indicator
of ``G'' until they are proposed for expiration from pass-through
status during our annual rulemaking cycle. In the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60593), we assigned status
indicator ``K'' to nonimplantable biologicals and adjusted the
definition of status indicator ``K'' accordingly. As we proposed, for
CY 2011, we are not making any changes to current policy. We discuss
our treatment of drugs, biologicals, and radiopharmaceuticals with new
or continuing pass-through status in CY 2011 in section V.A.3. of this
final rule with comment period, and we discuss our treatment of drugs
and biologicals with expiring pass-through status in CY 2010 including
the specific implantable biologicals to which this policy applies for
CY 2011 OPPS in section V.A.2. of this final rule with comment period.
We did not receive any public comments regarding definitions of the
payment status indicators that designate services that are paid under
the OPPS. Therefore, for the reasons set forth in the proposed rule (75
FR 46318), we are finalizing our CY 2011 proposal to continue the
current definitions without modification.
The CY 2011 final status indicators are displayed in both the table
above and in Addendum D1 to this final rule with comment period.
2. Payment Status Indicators To Designate Services That Are Paid Under
a Payment System Other Than the OPPS
We did not propose to make any changes to the status indicators
listed below for the CY 2011 OPPS.

------------------------------------------------------------------------
Indicator Item/Code/Service OPPS payment status
------------------------------------------------------------------------
A...................... Services furnished to a Not paid under OPPS.
hospital outpatient Paid by fiscal
that are paid under a intermediaries/MACs
fee schedule or under a fee schedule
payment system other or payment system
than OPPS, for other than OPPS.
example:
Ambulance ......................
Services.
Clinical Not subject to
Diagnostic Laboratory deductible or
Services coinsurance.
Non- ......................
Implantable Prosthetic
and Orthotic Devices
EPO for ESRD ......................
Patients
Physical, ......................
Occupational, and
Speech Therapy
Routine ......................
Dialysis Services for
ESRD Patients Provided
in a Certified
Dialysis Unit of a
Hospital
Diagnostic ......................
Mammography
Screening Not subject to
Mammography deductible.
C...................... Inpatient Procedures... Not paid under OPPS.
Admit patient. Bill
as inpatient.
F...................... Corneal Tissue Not paid under OPPS.
Acquisition; Certain Paid at reasonable
CRNA Services; and cost.
Hepatitis B Vaccines.
L...................... Influenza Vaccine; Not paid under OPPS.
Pneumococcal Pneumonia Paid at reasonable
Vaccine. cost; not subject to
deductible or
coinsurance.
M...................... Items and Services Not Not paid under OPPS.
Billable to the Fiscal
Intermediary/MAC.
Y...................... Non-Implantable Durable Not paid under OPPS.
Medical Equipment. All institutional
providers other than
home health agencies
bill to DMERC.
------------------------------------------------------------------------

We did not receive any public comments related to payment status
indicators that designate services that are paid under a payment system
other than the OPPS. Therefore, for the reasons set forth in the
proposed rule (75 FR 46320), we are finalizing our CY 2011 proposal
without modification. The CY 2011 final status indicators displayed in
the table above are also displayed in Addendum D1 to this final rule
with comment period.
3. Payment Status Indicators to Designate Services That Are Not
Recognized under the OPPS But That May Be Recognized by Other
Institutional Providers
We did not propose changes to the status indicators listed below
for the CY 2011 OPPS.

[[Page 72023]]

We did not receive any public comments regarding payment status
indicators that designate services that are not recognized under the
OPPS but that may be recognized by other institutional providers.
Therefore, for the reasons set forth in the proposed rule (75 FR
46320), we are finalizing, without modification, our CY 2011 proposal.
The final status indicators listed in the table above are also
displayed in Addendum D1 to this final rule with comment period.
4. Payment Status Indicators To Designate Services That Are Not Payable
by Medicare on Outpatient Claims
We did not propose changes to the payment status indicators listed
below for the CY 2011 OPPS.

We did not receive any public comments related to payment status
indicators that designate services that are not payable by Medicare on
outpatient claims. Therefore, for the reasons set forth in the proposed
rule (75 FR 46320), we are finalizing, without modification, our
proposal for CY 2011. The final status indicators listed in the table
above are also displayed in Addendum D1 to this final rule with comment
period.
Addendum B, with a complete listing of HCPCS codes including final
payment status indicators for each code and final APC assignments for
CY 2011, is available electronically on the CMS Web site under
supporting documentation for this final rule with comment period at:
http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.

B. Comment Indicator Definitions

As we proposed in the CY 2011 OPPS/ASC proposed rule (75 FR 46321
and 46322), for the CY 2011 OPPS, we are using the same two comment
indicators that are in effect for the CY 2010 OPPS.
``CH''--Active HCPCS codes in current and next calendar
year; status indicator and/or APC assignment have changed or active
HCPCS code that will be discontinued at the end of the current calendar
year.
``NI''--New code for the next calendar year or existing
code with substantial revision to its code descriptor in the next
calendar year as compared to current calendar year, interim APC
assignment; comments will be accepted on the interim APC assignment for
the new code.
We proposed in the CY 2011 OPPS/ASC proposed rule (75 FR 46321), to
use the ``CH'' comment indicator in this CY 2011 OPPS/ASC final rule
with comment period to indicate HCPCS codes for which the status
indicator or APC assignment, or both, will change in CY 2011 compared
to their assignment in the current year.
We believe that using the ``CH'' indicator in this CY 2011 OPPS/ASC
final rule with comment period facilitates the public's review of the
changes that we are making for CY 2011. The use of the comment
indicator ``CH'' in association with a composite APC indicates that the
configuration of the composite APC is changed in this CY 2011 OPPS/ASC
final rule with comment period.
We did not propose any changes to our policy regarding the use of
comment indicator ``NI.''
Any existing HCPCS code numbers with substantial revisions to the
code descriptors for CY 2011, compared to the CY 2010 descriptors, such
that we consider them to describe a new service or procedures for which
their OPPS treatment may change, are labeled with comment indicator
``NI'' in Addendum B to this CY 2011 OPPS/ASC final rule with comment
period. We use comment indicator ``NI'' to indicate that these HCPCS
codes are open to comment on this final rule with comment period. Like
all codes labeled with comment indicator ``NI,'' we will respond to
public comments and finalize their OPPS treatment in the CY 2012 OPPS/
ASC final rule with comment period.
In accordance with our usual practice, CPT and Level II HCPCS code
numbers that are new for CY 2011 are also be labeled with comment
indicator ``NI'' in Addendum B to this CY 2011 OPPS/ASC final rule with
comment period.
Only HCPCS codes with comment indicator ``NI'' in this CY 2011
OPPS/ASC final rule with comment period are subject to comment. HCPCS
codes that do not appear with comment indicator ``NI'' in this CY 2011
OPPS/ASC final rule with comment period are not be open to public
comment, unless we specifically request additional comments elsewhere
in this final rule with comment period. The CY 2011 treatment of HCPCS
codes that appears in this CY 2011 OPPS/ASC final rule with comment
period to which comment indicator ``NI'' is not appended were opened to
public comment during the comment period for the proposed rule, and we
are responding to those comments in this final rule with comment
period.
We did not receive any public comments on the proposed comment
indicators. Therefore, for the reasons set forth in the proposed rule
(75 FR 46321 and 46322), we are finalizing, without modification, our
CY 2011 proposal and are continuing to use comment indicators ``CH''
and ``NI'' for CY 2011. Their definitions are listed in Addendum D2 to
this final rule with comment period.

XIV. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

MedPAC was established under section 1805 of the Act to advise the
U.S. Congress on issues affecting the Medicare program. As required
under the statute, MedPAC submits reports to Congress not later than
March and June of each year that contain its Medicare

[[Page 72024]]

payment policy recommendations. This section describes recent
recommendations relevant to the OPPS that have been made by MedPAC.
The March 1, 2010 MedPAC ``Report to Congress: Medicare Payment
Policy'' included the following recommendation relating specifically to
the Medicare hospital OPPS:
Recommendation 2A-1: The Congress should increase payment rates for
the acute inpatient and outpatient prospective payment systems in 2011
by the projected rate of increase in the hospital market basket index,
concurrent with implementation of a quality incentive payment program.
CMS Response: Subsequent to the issuance of the MedPAC report,
Congress enacted the Affordable Care Act. Section 1833(t)(3)(F) of the
Act, as added by section 3401 of the Affordable Care Act and as amended
by section 10319 of the Affordable Care Act and section 1105 of the
HCERA, provides that after determining the OPD fee schedule increase
factor, the Secretary shall reduce such increase factor by a 0.25
percentage point in 2011. As discussed in section II.B. of this final
rule with comment period, we are increasing the full CY 2011 conversion
factor by the projected rate of increase in the hospital market basket
less the mandated 0.25 percentage point reduction. Simultaneously, for
CY 2011, as proposed, we are reducing the annual update factor by 2.0
percentage points for hospitals that are defined under section
1886(d)(1)(B) of the Act and that do not meet the hospital outpatient
quality data reporting required by section 1833(t)(17) of the Act. We
are making this adjustment after the application of the 0.25 percentage
point reduction. For the adjustment under section 1833(t)(17) of the
Act, as proposed, for this final rule with commenter period, we
calculated two conversion factors: A full conversion factor based on
the annual update factor, adjusted by the 0.25 percentage point
reduction required by the Affordable Care Act for CY 2011; and a
reduced conversion factor that reflects the 2.0 percentage points
reduction to the annual update factor, as adjusted by the 0.25
percentage point reduction. CMS implemented the Hospital Outpatient
Quality Data Reporting Program (HOP QDRP) in CY 2008 and is continuing
this program in CY 2011 (as discussed in section XVI. of this final
rule with comment period).
The full March 1, 2010 MedPAC report can be downloaded from
MedPAC's Web site at: http://www.medpac.gov/documents/Mar10_EntireReport.pdf.
On June 15, 2010, MedPAC issued a report to Congress titled
``Aligning Incentives in Medicare.'' The June 15, 2010 MedPAC report
did not contain any recommendations that pertain to the OPPS. The June
15, 2010 MedPAC report can be downloaded from MedPAC's Web site at:
http://www.medpac.gov/documents/Jun10_EntireReport.pdf

B. APC Panel Recommendations

Recommendations made by the APC Panel at its February 2010 and
August 2010 meetings are discussed in the sections of this final rule
with comment period that correspond to topics addressed by the APC
Panel. The reports and recommendations from the APC Panel's February
and August 2010 meetings regarding payment under the OPPS for CY 2011
are available on the CMS Web site at: http://www.cms.gov/FACA/05_
AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

C. OIG Recommendations

The mission of the Office of the Inspector General (OIG), as
mandated by Public Law 95-452, as amended, is to protect the integrity
of the U.S. Department of Health and Human Services (HHS) programs, as
well as the health and welfare of beneficiaries served by those
programs. This statutory mission is carried out through a nationwide
network of audits, investigations, and inspections. On October 22,
2010, the OIG published memorandum report ``Payment for Drugs Under the
Hospital Outpatient Prospective Payment System,'' OIG-03-09-00420. The
report may be viewed at http://oig.hhs.gov/oei/reports/oei-03-09-00420.pdf. CMS has begun evaluating the recommendations contained in
this report.

XV. Updates to the Ambulatory Surgical Center (ASC) Payment System

A. Background

1. Legislative Authority for the ASC Payment System
Section 1832(a)(2)(F)(i) of the Act provides that benefits under
Medicare Part B include payment for facility services furnished in
connection with surgical procedures specified by the Secretary that are
performed in an Ambulatory Surgical Center (ASC). To participate in the
Medicare program as an ASC, a facility must meet the standards
specified in section 1832(a)(2)(F)(i) of the Act, which are set forth
in 42 CFR Part 416, Subpart B and Subpart C of our regulations. The
regulations at 42 CFR Part 416, Subpart B describe the general
conditions and requirements for ASCs, and the regulations at Subpart C
explain the specific conditions for coverage for ASCs.
Section 141(b) of the Social Security Act Amendments of 1994,
Public Law 103-432, required establishment of a process for reviewing
the appropriateness of the payment amount provided under section
1833(i)(2)(A)(iii) of the Act for intraocular lenses (IOLs) that belong
to a class of new technology intraocular lenses (NTIOLs). That process
was the subject of a final rule entitled ``Adjustment in Payment
Amounts for New Technology Intraocular Lenses Furnished by Ambulatory
Surgical Centers,'' published on June 16, 1999, in the Federal Register
(64 FR 32198).
Section 626(b) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), Public Law 108-173, added subparagraph
(D) to section 1833(i)(2) of the Act, which required the Secretary to
implement a revised ASC payment system to be effective not later than
January 1, 2008. Section 626(c) of the MMA amended section 1833(a)(1)
of the Act by adding new subparagraph (G), which requires that,
beginning with implementation of the revised ASC payment system,
payment for surgical procedures furnished in ASCs shall be 80 percent
of the lesser of the actual charge for the services or the amount
determined by the Secretary under the revised payment system.
Section 5103 of the Deficit Reduction Act of 2005 (DRA), Public Law
109-171, amended section 1833(i)(2) of the Act by adding new
subparagraph (E) to place a limitation on payment amounts for surgical
procedures furnished in ASCs on or after January 1, 2007, but before
the effective date of the revised ASC payment system (that is, January
1, 2008). Section 1833(i)(2)(E) of the Act provides that if the
standard overhead amount under section 1833(i)(2)(A) of the Act for an
ASC facility service for such surgical procedures, without application
of any geographic adjustment, exceeds the Medicare payment amount under
the hospital OPPS for the service for that year, without application of
any geographic adjustment, the Secretary shall substitute the OPPS
payment amount for the ASC standard overhead amount.
Section 109(b) of the Medicare Improvements and Extension Act of
2006 of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA), Public
Law 109-432, amended section 1833(i)(2)(D) of the Act, in part, by
redesignating clause (iv) as clause (v) and adding a new clause (iv)
and by

[[Page 72025]]

adding new section 1833(i)(7)(A). These amendments provide the
Secretary the authority to require ASCs to submit data on quality
measures and to reduce the annual update by 2 percentage points for an
ASC that fails to submit data as required by the Secretary on selected
quality measures. Section 109(b) of the MIEA-TRHCA also amended section
1833(i) of the Act by adding new section 1833(i)(7)(B), which requires
that, to the extent the Secretary establishes such an ASC quality
reporting program, certain quality of care reporting requirements
mandated for hospitals paid under the OPPS, under sections
1833(t)(17)(B), (C), (D) and (E) of the Act, as added by section 109(a)
of the MIEA-TRHCA, be applied in a similar manner to ASCs unless
otherwise specified by the Secretary.
Sections 4104 and 10406 of the Affordable Care Act, Public Law 111-
148, amend sections 1833(a)(1) and (b)(1) of the Act to waive the
coinsurance and the Part B deductible for those preventive services
under section 1861(ddd)(3)(A) of the Act as described in section
1861(ww)(2) of the Act (excluding electrocardiograms) that are
recommended by the United States Preventive Services Task Force
(USPSTF) with a grade of A or B for any indication or population and
that are appropriate for the individual. Section 4104(c) of the
Affordable Care Act amends section 1833(b)(1) of the Act to waive the
Part B deductible for colorectal cancer screening tests that become
diagnostic. These provisions apply to these items and services
furnished in an ASC on or after January 1, 2011.
Section 3401(k) of the Affordable Care Act amends section
1833(i)(2)(D) of the Act to require that, effective for CY 2011 and
subsequent years, any annual update under the ASC payment system be
reduced by a productivity adjustment, which is equal to the 10-year
moving average of changes in annual economy-wide private nonfarm
business multi-factor productivity (as projected by the Secretary for
the 10-year period ending with the applicable fiscal year, year, cost
reporting period, or other annual period). Application of this
productivity adjustment to the ASC payment system may result in the
update to the ASC payment system being less than zero for a year and
may result in payment rates under the ASC payment system for a year
being less than such payment rates for the preceding year.
For a detailed discussion of the legislative history related to
ASCs, we refer readers to the June 12, 1998 proposed rule (63 FR 32291
through 32292).
2. Prior Rulemaking
On August 2, 2007, we published in the Federal Register (72 FR
42470) the final rule for the revised ASC payment system, effective
January 1, 2008 (the ``August 2, 2007 final rule''). In that final
rule, we revised our criteria for identifying surgical procedures that
are eligible for Medicare payment when furnished in ASCs and adopted
the method we would use to set payment rates for ASC covered surgical
procedures and covered ancillary services furnished in association with
those covered surgical procedures beginning in CY 2008. We also
established a policy for treating new and revised HCPCS and CPT codes
(Physicians' Current Procedural Terminology) under the ASC payment
system. This policy is consistent with the OPPS to the extent possible
(72 FR 42533). Additionally, we established a standard ASC ratesetting
methodology that bases payment for most services on the list of ASC
covered surgical procedures on the OPPS relative payment weight
multiplied by an ASC conversion factor. We also established
modifications to this methodology for subsets of services, such as
device-intensive services (where the estimated device portion of the
ASC payment is the same as that paid under the OPPS) and services that
are predominantly performed in the office setting and covered ancillary
radiology services (where ASC payment may be based on the MPFS non-
facility practice expense (PE) Relative Value Units (RVUs)).
Additionally, we established a policy for updating the conversion
factor, the relative payment weights, and the ASC payment rates on an
annual basis. We also annually update the list of procedures for which
Medicare would not make an ASC payment.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66827), we updated and finalized the CY 2008 ASC rates and lists of
covered surgical procedures and covered ancillary services. We also
made regulatory changes to 42 CFR Parts 411, 414, and 416 related to
our final policies to provide payments to physicians who perform
noncovered ASC procedures in ASCs based on the facility PE RVUs, to
exclude covered ancillary radiology services and covered ancillary
drugs and biologicals from the categories of designated health services
(DHS) that are subject to the physician self-referral prohibition, and
to reduce ASC payments for surgical procedures when the ASC receives
full or partial credit toward the cost of the implantable device. In
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68722), we
updated and finalized the CY 2009 ASC rates and lists of covered
surgical procedures and covered ancillary services.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60596), we updated and finalized the CY 2010 ASC rates and lists of
covered surgical procedures and covered ancillary services. We also
corrected some of those ASC rates in a correction notice published in
the Federal Register on December 31, 2009 (74 FR 69502). In that
correction notice, we revised the ASC rates to reflect changes in the
MPFS conversion factor and PE RVUs listed for some CPT codes in
Addendum B to the CY 2010 MPFS final rule with comment period (74 FR
62017), which were incorrect due to methodological errors and,
consequently, were corrected in a correction notice to that final rule
with comment period (74 FR 65449). We also published a second
correction notice in the Federal Register, to address changes to the
ASC rates resulting from corrections to the PE RVUs identified
subsequent to publication of the December 31, 2009 correction notice
(75 FR 45700). Finally, we published a notice in the Federal Register,
to reflect changes to CY 2010 ASC payment rates for certain ASC
services due to changes to the OPPS and MPFS under the Affordable Care
Act and to reflect technical changes to the ASC payment rates announced
in prior correction notices (75 FR 45769).
3. Policies Governing Changes to the Lists of Codes and Payment Rates
for ASC Covered Surgical Procedures and Covered Ancillary Services
The August 2, 2007 final rule established our policies for
determining which procedures are ASC covered surgical procedures and
covered ancillary services. Under Sec. Sec. 416.2 and 416.166 of the
regulations, subject to certain exclusions, covered surgical procedures
are surgical procedures that are separately paid under the OPPS, that
would not be expected to pose a significant risk to beneficiary safety
when performed in an ASC, and that would not be expected to require
active medical monitoring and care at midnight following the procedure
(``overnight stay''). We adopted this standard for defining which
surgical procedures are covered surgical procedures under the ASC
payment system as an indicator of the complexity of the procedure and
its appropriateness for Medicare payment in ASCs. We use this standard
only for purposes of

[[Page 72026]]

evaluating procedures to determine whether or not they are appropriate
for Medicare beneficiaries in ASCs. We define surgical procedures as
those described by Category I Current Procedural Terminology (CPT)
codes in the surgical range from 10000 through 69999, as well as those
Category III CPT codes and Level II Healthcare Common Procedure Coding
System (HCPCS) codes that crosswalk or are clinically similar to ASC
covered surgical procedures (72 FR 42478). We note that we added over
800 surgical procedures to the list of covered surgical procedures for
ASC payment in CY 2008, the first year of the revised ASC payment
system, based on the criteria for payment that we adopted in the August
2, 2007 final rule as described above in this section. Patient safety
and health outcomes continue to be important to us as more health care
moves to the ambulatory care setting. Therefore, as we gain additional
experience with the ASC payment system, we are interested in any
information the public may have regarding the comparative patient
outcomes of surgical care provided in ambulatory settings, including
HOPDs, ASCs, and physicians' offices, particularly with regard to the
Medicare population.
In the August 2, 2007 final rule, we also established our policy to
make separate ASC payments for the following ancillary items and
services when they are provided integral to ASC covered surgical
procedures: Brachytherapy sources; certain implantable items that have
pass-through status under the OPPS; certain items and services that we
designate as contractor-priced, including, but not limited to,
procurement of corneal tissue; certain drugs and biologicals for which
separate payment is allowed under the OPPS; and certain radiology
services for which separate payment is allowed under the OPPS. These
covered ancillary services are specified in Sec. 416.164(b) and, as
stated previously, are eligible for separate ASC payment (72 FR 42495).
Payment for ancillary items and services that are not paid separately
under the ASC payment system is packaged into the ASC payment for the
covered surgical procedure.
We update the lists of, and payment rates for, covered surgical
procedures and covered ancillary services, in conjunction with the
annual proposed and final rulemaking process to update the OPPS and the
ASC payment system (Sec. 416.173; 72 FR 42535). In addition, as
discussed in detail below in section XV.B., because we base ASC payment
policies for covered surgical procedures, drugs, biologicals, and
certain other covered ancillary services on the OPPS payment policies,
we also provide quarterly updates for ASC services throughout the year
(January, April, July, and October), just as we do for the OPPS. The
updates are to implement newly created Level II HCPCS and Category III
CPT codes for ASC payment and to update the payment rates for
separately paid drugs and biologicals based on the most recently
submitted ASP data. New Category I CPT codes, except vaccine codes, are
released only once a year and, therefore, are implemented through the
January quarterly update. New Category I CPT vaccine codes are released
twice a year and thus are implemented through the January and July
quarterly updates.
In our annual updates to the ASC list of, and payment rates for,
covered surgical procedures and covered ancillary services, we
undertake a review of excluded surgical procedures (including all
procedures newly proposed for removal from the OPPS inpatient list),
new procedures, and procedures for which there is revised coding, to
identify any that we believe meet the criteria for designation as ASC
covered surgical procedures or covered ancillary services. Updating the
lists of covered surgical procedures and covered ancillary services, as
well as their payment rates, in association with the annual OPPS
rulemaking cycle is particularly important because the OPPS relative
payment weights and, in some cases, payment rates, are used as the
basis for the payment of covered surgical procedures and covered
ancillary services under the revised ASC payment system. This joint
update process ensures that the ASC updates occur in a regular,
predictable, and timely manner.
Comment: Several commenters provided a number of general
suggestions related to the ASC list of covered surgical procedures.
They contended that CMS should not restrict which procedures are
payable in ASCs any more than CMS restricts which procedures are
payable in HOPDs. According to the commenters, when CMS declines to add
a service to the ASC list that can be performed in hospitals and
physician offices, CMS should articulate a clinical rationale for why
the procedure should be excluded from the ASC setting. They also stated
that CMS should use as one of its evaluation measures for additions to
the ASC list the number of procedures performed in the office setting.
Some commenters urged CMS to eliminate unlisted codes from the
exclusionary criteria at Sec. 416.166(c), and other commenters
requested that ASCs be allowed to use unlisted codes to bill for
procedures that are from anatomic sites that could not possibly pose a
potential risk to beneficiary safety. The commenters reported that
unlisted codes enable surgeons to utilize innovative techniques or new
technologies and are paid under the OPPS and by commercial insurers.
They suggested that ASCs could provide documentation to the contractor
that explains and justifies the procedure reported by an unlisted code;
thus ensuring that Medicare does not make payment for a service that
would otherwise be excluded from payment.
Response: We appreciate the commenters' suggestions related to our
decisions about which procedures are excluded from the ASC list of
covered surgical procedures. However, as we explained in the August 2,
2007 final rule (72 FR 42479), we do not believe that all procedures
that are appropriate for performance in HOPDs are appropriate in ASCs.
HOPDs are able to provide much higher acuity care than ASCs. ASCs have
neither patient safety standards consistent with those in place for
hospitals, nor are they required to have the trained staff and
equipment needed to provide the breadth and intensity of care that
hospitals are required to maintain. Therefore, there are some
procedures that we believe may be appropriately provided in the HOPD
setting that are unsafe for performance in ASCs. Thus, we are not
modifying our policy and will continue to exclude certain procedures
for which payment is made in HOPDs from the ASC list of covered
surgical procedures.
We do not agree with the commenters' request that we provide
specific reasons for our decisions to exclude each procedure from the
ASC list of covered surgical procedures. Our decisions to exclude
procedures from the ASC list are based on a number of the criteria
listed at Sec. 416.166 of the regulations, and we believe that it
would be unnecessary and overly burdensome to list each reason for
those decisions. As we have stated in the past (74 FR 60598), we
continue to believe that these reasons are sufficiently specific to
enable the public to provide meaningful comments on our decisions to
exclude procedures from the list of covered surgical procedures. In
response to the commenter's request that we use as one of our
evaluation measures for additions to the ASC list the number of
procedures performed in the office setting, we note that the criteria
listed in Sec. 416.166 do not include the number of procedures done in
the office setting. We also do not agree with the

[[Page 72027]]

commenters' recommendation that we include certain unlisted codes on
the list of covered procedures. Even though it may be highly unlikely
that any procedures that would be expected to pose a significant risk
to beneficiary safety when performed in an ASC or expected to require
an overnight stay would be reported by an unlisted code from certain
anatomic sites, we cannot know what surgical procedure is being
reported by an unlisted code. Therefore, as we have explained in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60598), because we
cannot evaluate any such procedure, we continue to believe that we must
exclude unlisted codes as a group from the list of covered surgical
procedures. We also do not believe it is reasonable, or within the
scope of our contractors' work, to accept the commenters' suggestion
that ASCs could provide documentation to our Medicare contractors in
order for the contractors to make a determination about whether or not
a procedure that was billed using an unlisted code represented a
significant risk to beneficiary safety or would be expected to require
an overnight stay.
After consideration of the public comments we received, we are
continuing our established policies without modification for
determining which procedures are ASC covered surgical procedures and
covered ancillary services.

B. Treatment of New Codes

1. Process for Recognizing New Category I and Category III CPT Codes
and Level II HCPCS Codes
CPT and Level II HCPCS codes are used to report procedures,
services, items, and supplies under the ASC payment system.
Specifically, we recognize the following codes on ASC 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 American Medical Association (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 ASCs are addressed both through the ASC quarterly update
Change Requests (CRs) and through the annual rulemaking cycle. 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 are recognized on Medicare claims) outside of the
formal rulemaking process via ASC quarterly update CRs. This quarterly
process offers ASCs 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 we
waited for the annual rulemaking process. We solicit comments on the
new codes recognized for ASC payment and finalize our proposals related
to these codes through our annual rulemaking process.
We finalized a policy in the August 2, 2007 final rule to evaluate
each year all new Category I and Category III CPT codes and Level II
HCPCS codes that describe surgical procedures, and to make preliminary
determinations in the annual OPPS/ASC final rule with comment period
regarding whether or not they meet the criteria for payment in the ASC
setting as covered surgical procedures and, if so, whether they are
office-based procedures (72 FR 42533 through 42535). In addition, we
identify new codes as ASC covered ancillary services based upon the
final payment policies of the revised ASC payment system.
In Table 39 of the CY 2011 OPPS/ASC proposed rule (75 FR 46325), we
summarized our proposed process for updating the HCPCS codes recognized
under the ASC payment system.
This process is discussed in detail below and we have separated our
discussion based on whether we proposed to solicit public comments in
the CY 2011 proposed rule on a specific group of the CPT and Level II
HCPCS codes (and respond to those comments in this CY 2011 OPPS/ASC
final rule with comment period) or whether we proposed to solicit
public comments on another specific group of the codes in this CY 2011
final rule with comment period (and respond to those comments in the CY
2012 OPPS/ASC final rule with comment period). We sought public
comments in the CY 2010 OPPS/ASC final rule with comment period on the
new CPT and HCPCS codes that were effective January 1, 2010. These new
codes were flagged with comment indicator ``N1'' in Addendum AA and BB
to the CY 2010 OPPS/ASC final rule with comment period to indicate that
we were assigning them an interim payment status and payment rate, if
applicable, which were subject to public comment following publication
of the CY 2010 OPPS/ASC final rule with comment period. We stated that
we would respond to public comments and finalizing our proposed ASC
treatment of these codes in the CY 2011 OPPS/ASC final rule with
comment period.
We received no public comments regarding our process for
recognizing new HCPCS codes under the ASC payment system and are
implementing our proposed policy without modification.
2. Treatment of New Level II HCPCS Codes and Category III CPT Codes
Implemented in April and July 2010 for Which We Solicited Public
Comments in the CY 2011 OPPS/ASC Proposed Rule
In the April and July CRs, we made effective for April 1 or July 1,
2010, a total of 14 new Level II HCPCS codes and 7 new Category III CPT
codes that were not addressed in the CY 2010 OPPS/ASC final rule with
comment period. (We note that one Level II HCPCS code that was added in
the April 2010 CR, C9262, was deleted June 30, 2010, and replaced with
Q2025 effective July 1, 2010). The 13 new Level II HCPCS codes describe
covered ancillary services.
Through the April 2010 ASC quarterly update (Transmittal 1943, CR
6866, dated April 6, 2010), we added six new drug and biological Level
II HCPCS codes to the list of covered ancillary services. Specifically,
as displayed in Table 40 of the CY 2011 OPPS/ASC proposed rule (75 FR
46327), these included HCPCS codes C9258 (Injection, telavancin, 10
mg), C9259 (Injection, pralatrexate, 1 mg), C9260 (Injection,
ofatumumab, 10 mg), C9261 (Injection, ustekinumab, 1 mg), C9262
(Fludarabine phosphate, oral, 1 mg), and C9263 (Injection, ecallantide,
1 mg).
Through the July 2010 quarterly update (Transmittal 1984, Change
Request 7008, dated June 11, 2010), we added seven new drug and
biological Level II HCPCS codes to the list of covered ancillary
services. Specifically, as displayed in Table 41 of the CY 2011 OPPS/
ASC proposed rule (75 FR 46327), we provided separate payment for HCPCS
codes C9264 (Injection, tocilizumab, 1 mg), C9265 (Injection,
romidepsin, 1 mg), C9266 (Injection, collagenase clostridium
histolyticum, 0.1 mg), C9267 (Injection, von Willebrand factor complex
(human), Wilate, per 100 IU VWF: RCO), C9268 (Capsaicin, patch, 10cm2),
C9367 (Skin substitute, Endoform Dermal Template, per square
centimeter), and Q2025 (Fludarabine phosphate oral, 10 mg). As noted
above, HCPCS code C9262 was made effective April 1, 2010, and

[[Page 72028]]

deleted June 30, 2010, when it was replaced with HCPCS code Q2025.
We assigned payment indicator ``K2'' (Drugs and biologicals paid
separately when provided integral to a surgical procedure on the ASC
list; payment based on OPPS rate) to these 13 new Level II HCPCS codes
to indicate that they are separately paid when provided in ASCs. In the
CY 2011 OPPS/ASC proposed rule, we solicited public comment on the
proposed CY 2010 ASC payment indicators and payment rates for the drugs
and biologicals, as listed in Tables 40 and 41 of the CY 2011 OPPS/ASC
proposed rule (75 FR 46326 through 46327). Those HCPCS codes became
payable in ASCs, beginning in April or July 2010, and are paid at the
ASC rates posted for the appropriate calendar quarter on the CMS Web
site at http://www.cms.gov/ASCPayment/.
The HCPCS codes listed in Table 40 were included in Addendum BB to
the CY 2011 OPPS/ASC proposed rule. (We note that Level II HCPCS code
C9262 was deleted June 30, 2010, and replaced with Q2025 effective July
1, 2010, and therefore was not included in Addendum BB and was not open
to public comment. Instead, Level II HCPCS code Q2025 was open for
public comment.)
However, because HCPCS codes that became effective for July (listed
in Table 41 of the CY 2011 OPPS/ASC proposed rule) were not available
to us in time for incorporation into the Addenda to the OPPS/ASC
proposed rule, our policy is to include these HCPCS codes and their
proposed payment indicators and payment rates in the preamble to the
proposed rule but not in the Addenda to the proposed rule. These codes
and their final payment indicators and rates are included in the
appropriate Addendum to this CY 2011 OPPS/ASC final rule with comment
period. Thus, the codes implemented by the July 2010 ASC quarterly
update CR and their proposed CY 2011 payment rates (based on July 2010
ASP data) that were displayed in Table 41 of the CY 2011 OPPS/ASC
proposed rule were not included in Addendum BB to that proposed rule.
We proposed to include these services reported using the new Level II
HCPCS codes displayed in Tables 40 and 41 of the CY 2011 OPPS/ASC
proposed rule (75 FR 46327) as covered ancillary services for payment
to ASCs for CY 2011. The final list of covered ancillary services and
the associated payment weights and payment indicators is included in
Addendum BB to this CY 2011 OPPS/ASC final rule with comment period,
consistent with our annual update policy. We solicited public comments
on these proposed payment indicators and the payment rates, if any, for
the new Level II HCPCS codes that were newly recognized as ASC covered
ancillary services in April or July 2010 through the respective
quarterly update CRs, as listed in Tables 40 and 41 of the CY 2011
OPPS/ASC proposed rule (75 FR 46327, 46329). We proposed to finalize
their payment indicators and their payment rates, if applicable, in
this CY 2011 OPPS/ASC final rule with comment period.
We did not receive any public comments regarding our proposals. We
are adopting as final the ASC payment indicators for the covered
ancillary services described by the new Level II HCPCS codes
implemented in April and July 2010 through the respective quarterly
update CR as shown below, in Tables 49 and 50, respectively. We note
that after publication of the CY 2011 OPPS/ASC proposed rule, the CMS
HCPCS Workgroup created permanent HCPCS J-codes for CY 2011 to replace
certain temporary HCPCS C-codes made effective for CY 2010. These
permanent CY 2011 HCPCS J-codes are listed alongside the temporary CY
2010 HCPCS C-codes in Tables 49 and 50 below. The final payment
indicators and payment rates for these codes are displayed in Addendum
BB to this final rule with comment period.

Table 49--New Level II HCPCS Codes for Covered Ancillary Services
Implemented in April 2010
------------------------------------------------------------------------
Final CY 2011
CY 2011 HCPCS code CY 2010 HCPCS CY 2011 long payment
code descriptor indicator
------------------------------------------------------------------------
J3095.............. C92Injection, K2
telavancin, 10
mg.
J9307.............. C92Injection, K2
pralatrexate, 1
mg.
J9302.............. C92Injection, K2
ofatumumab, 10
mg.
J3357.............. C92Injection, K2
ustekinumab, 1
mg.
J8562.............. C92Fludarabine K2
phosphate, oral,
10 mg.
J1290.............. C92Injection, K2
ecallantide, 1
mg.
------------------------------------------------------------------------
* Level II HCPCS code C9262 was deleted June 30, 2010, and replaced with
Q2025 effective July 1, 2010.

Table 50--New Level II HCPCS Codes for Covered Ancillary Services
Implemented in July 2010
------------------------------------------------------------------------
Final CY 2011
CY 2011 HCPCS code CY 2010 HCPCS CY 2011 long payment
code descriptor indicator
------------------------------------------------------------------------
J3262.............. C92Injection, K2
tocilizumab, 1
mg.
J9315.............. C92Injection, K2
romidepsin, 1 mg.
J0775.............. C92Injection, K2
collagenase
clostridium
histolyticum,
0.01 mg.
J7184.............. C92Injection, von K2
Willebrand
factor complex
(human), Wilate,
per 100 IU VWF:
RCO.
J7335.............. C92Capsaicin, patch, K2
per 10 square
centimeters.
C9367.............. C93Skin substitute, K2
Endoform Dermal
Template, per
square
centimeter.
J8562.............. Q2025 Fludarabine K2
phosphate oral,
10 mg.
------------------------------------------------------------------------

Through the July 2010 quarterly update CR, we also implemented ASC
payment for seven new Category III CPT codes and one new Level II HCPCS
code as ASC covered surgical procedures, effective July 1, 2010. These
codes were listed in Table 42 of the CY 2011 OPPS/ASC proposed rule (75
FR 46328), along with their proposed payment indicators and proposed
payment rates for CY 2011. Because new Category III CPT and Level II
HCPCS codes that become

[[Page 72029]]

effective for July are not available to us in time for incorporation
into the Addenda to the OPPS/ASC proposed rule, our policy is to
include the codes, their proposed payment indicators, and proposed
payment rates in the preamble to the proposed rule but not in the
Addenda to the proposed rule. These codes and their final payment
indicators and rates are included in the Addenda to this CY 2011 OPPS/
ASC final rule with comment period. We solicited public comments on
these proposed payment indicators and the payment rates for the new
Level II HCPCS code and Category III CPT codes that were newly
recognized as ASC covered surgical procedures in the July 2010 through
the respective quarterly update CRs, as listed in Table 42 of the CY
2011 OPPS/ASC proposed rule (75 FR 46328 through 46329). We proposed to
finalize their payment indicators and their payment rates in this CY
2011 OPPS/ASC final rule with comment period.
Comment: Some commenters asserted that the procedures described by
CPT codes 0228T (Injection(s), anesthetic agent and/or steroid,
transforaminal epidural, with ultrasound guidance, cervical or
thoracic; single level), 0229T (Injection(s), anesthetic agent and/or
steroid, transforaminal epidural, with ultrasound guidance, cervical or
thoracic; each additional level (List separately in addition to code
for primary procedure)), 0230T (Injection(s), anesthetic agent and/or
steroid, transforaminal epidural, with ultrasound guidance, lumbar or
sacral; single level) and 0231T (Injection(s), anesthetic agent and/or
steroid, transforaminal epidural, with ultrasound guidance, lumbar or
sacral; each additional level (List separately in addition to code for
primary procedure)) are using ultrasound without fluoroscopy, which the
commenters believed is inappropriate because, according to the
commenters, there is no evidence of accurate needle placement or
effectiveness for these procedures. The commenters believed that
Medicare should not pay for these procedures when they are performed in
the ASC setting.
Response: In order for any procedure to be added to the ASC list of
covered surgical procedures, the procedure must meet the criteria set
forth at 42 CFR 416.166, including that it would not be expected to
pose a significant safety risk to a Medicare beneficiary when performed
in an ASC and it would not be expected to require an overnight stay.
After careful medical review of these procedures, our clinical staff
has determined that the procedures described by CPT codes 0228T, 0229T,
0230T, and 0213T meet these criteria and may be paid for by Medicare
when provided in the ASC setting. Therefore, we disagree with the
commenter and will continue to include these CPT codes on the ASC list
of covered surgical procedures.
After consideration of the public comments received, for CY 2011,
we are continuing our established policy for recognizing new mid-year
CPT and HCPCS codes. We also are adopting as final the ASC payment
indicators for the covered surgical procedures described by the new
Category III CPT codes and the new Level II HCPCS code implemented in
the July 2010 CR as shown in Table 51 below and Table 50. The new CPT
and HCPCS codes implemented in July 2010 are displayed in Addendum AA
to this final rule with comment period as well.

Table 51--New Category III CPT Codes and Level II HCPCS Code Implemented
in July 2010 as ASC Covered Surgical Procedures
------------------------------------------------------------------------
Final CY 2011
CY 2011 HCPCS code CY 2011 Long descriptor payment
indicator **
------------------------------------------------------------------------
0226T.................. Anoscopy, high resolution R2 *
(HRA) (with magnification and
chemical agent enhancement);
diagnostic, including
collection of specimen(s) by
brushing or washing when
performed.
0227T.................. Anoscopy, high resolution R2 *
(HRA) (with magnification and
chemical agent enhancement);
with biopsy(ies).
0228T.................. Injection(s), anesthetic agent G2
and/or steroid,
transforaminal epidural, with
ultrasound guidance, cervical
or thoracic; single level.
0229T.................. Injection(s), anesthetic agent G2
and/or steroid,
transforaminal epidural, with
ultrasound guidance, cervical
or thoracic; each additional
level (List separately in
addition to code for primary
procedure).
0230T.................. Injection(s), anesthetic agent G2
and/or steroid,
transforaminal epidural, with
ultrasound guidance, lumbar
or sacral; single level.
0231T.................. Injection(s), anesthetic agent G2
and/or steroid,
transforaminal epidural, with
ultrasound guidance, lumbar
or sacral; each additional
level (List separately in
addition to code for primary
procedure).
0232T.................. Injection(s), platelet rich R2*
plasma, any tissue, including
image guidance, harvesting
and preparation when
performed.
C9800.................. Dermal injection procedure(s) R2 *
for facial lipodystrophy
syndrome (LDS) and provision
of Radiesse or Sculptra
dermal filler, including all
items and supplies.
------------------------------------------------------------------------
* If designation is temporary.
** Payment indicators are based on a comparison of the rates according
to the ASC standard ratesetting methodology and the MPFS rates. At the
time this final rule with comment period is being finalized for
publication, current law authorizes a negative update to the MPFS
payment rates for CY 2011. Therefore, this final rule with comment
period reflects a negative update to the MPFS payment rates for CY
2011. If Congress revises the MPFS update for CY 2011, we will
recalculate the ASC payment rates using the revised update factor in
the January 2011 payment rate files issued to contractors and posted
to the ASC Web site at http://www.cms.gov/ASCPayment/.

3. Process for New Level II HCPCS Codes and Category I and III CPT
Codes for Which We Are Soliciting Public Comments in This CY 2011 OPPS/
ASC Final Rule With Comment Period
As has been our practice in the past, we incorporate those new
Category I and Category III CPT codes and new Level II HCPCS codes that
are effective January 1 in the final rule with comment period updating
the ASC payment system 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 ASC
quarterly update CRs. In the past, we also have released new Level II
HCPCS codes that are effective October 1 through the October ASC
quarterly update CRs and incorporated these new codes in the final rule
with comment period updating the ASC payment system for the following
calendar year. All of these codes are flagged with comment indicator
``NI'' in Addenda AA and BB to the OPPS/ASC

[[Page 72030]]

final rule with comment period to indicate that we are assigning them
an interim payment status which is subject to public comment.
Specifically, the payment indicator 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. In the CY 2011 OPPS/ASC proposed
rule (75 FR 46329), we proposed to continue this process for CY 2011.
For CY 2011, we also proposed to include in Addenda AA and BB to
the CY 2011 OPPS/ASC final rule with comment period the new Category I
and III CPT codes effective January 1, 2011 (including those Category
III CPT codes that were released by the AMA in July 2010) that would be
incorporated in the January 2011 ASC quarterly update CR and the new
Level II HCPCS codes, effective October 1, 2010 or January 1, 2011,
that would be released by CMS in its October 2010 and January 2011 ASC
quarterly update CRs. These codes would be flagged with comment
indicator ``NI'' in Addenda AA and BB to this CY 2011 OPPS/ASC final
rule with comment period to indicate that we have assigned them an
interim payment status. Their payment indicators and payment rates, if
applicable, would be open to public comment in the CY 2011 OPPS/ASC
final rule with comment period and would be finalized in the CY 2012
OPPS/ASC final rule with comment period.
We did not receive any comments regarding this proposed process.
For CY 2011, we are finalizing our proposal, without modification, to
continue our established process for recognizing and soliciting public
comments on new Level II HCPCS codes and Category I and III CPT codes
for the following calendar year, as described above.

C. Update to the Lists of ASC Covered Surgical Procedures and Covered
Ancillary Services

1. Covered Surgical Procedures
a. Additions to the List of ASC Covered Surgical Procedures
In the CY 2011 OPPS/ASC proposed rule (75 FR 46329 through 46330),
we proposed to update the list of ASC covered surgical procedures by
adding five procedures to the list. These five procedures were among
those excluded from the ASC list for CY 2010 because we believed they
did not meet the definition of a covered surgical procedure based on
our expectation that they would pose a significant safety risk to
Medicare beneficiaries or would require an overnight stay if performed
in ASCs. We conducted a review of all HCPCS codes that currently are
paid under the OPPS, but not included on the ASC list of covered
surgical procedures, to determine if changes in technology and/or
medical practice changed the clinical appropriateness of these
procedures for the ASC setting. We determined that these five
procedures could be safely performed in the ASC setting and therefore
proposed to include them on the list of ASC covered surgical procedures
for CY 2011.
The five procedures that we proposed to add to the ASC list of
covered surgical procedures, including their HCPCS code long
descriptors and proposed CY 2010 payment indicators, were displayed in
Table 43 of the CY 2011 OPPS/ASC proposed rule (75 FR 46330).
Subsequent to the release of the CY 2011 OPPS/ASC proposed rule, we
recognized that the long descriptors for CPT codes 37210 (Uterine
fibroid embolization (UFE, embolization of the uterine arteries to
treat uterine fibroids, leiomyomata), percutaneous approach inclusive
of vascular access, vessel selection, embolization, and all
radiological supervision and interpretation, intraprocedural
roadmapping, and imaging guidance necessary to complete the procedure)
and 50593 (Ablation, renal tumor(s), unilateral, percutaneous,
cryotherapy) in Table 43 were incorrect. We also realized that CPT code
52649 (Laser enucleation of the prostate with morcellation, including
control of postoperative bleeding, complete (vasectomy, meatotomy,
cystourethroscopy, urethral calibration and/or dilation, internal
urethrotomy and transurethral resection of prostate are included if
performed)) and its payment indicator were missing from Table 43 (the
descriptor for CPT code 52649 was listed incorrectly for CPT code
50593). We corrected Table 43 on the CMS Web site for the CY 2011 OPPS/
ASC proposed rule at http://www.cms.gov/ASCPayment/. Therefore, we
proposed to add six procedures (described by CPT codes 37204, 37205,
37206, 37210, 50593, and 52649) to the ASC list of covered surgical
procedures for CY 2011.
Since publication of the proposed rule, the CPT Editorial Panel
significantly changed the descriptors for two CPT codes we had proposed
to add to the list of ASC surgical procedures. The CPT code descriptors
previously read as follows: 37205 (Transcatheter placement of an
intravascular stent(s) (except coronary, carotid, and vertebral
vessel), percutaneous; initial vessel) and 37206 (Transcatheter
placement of an intravascular stent(s) (except coronary, carotid, and
vertebral vessel), percutaneous; each additional vessel (List
separately in addition to code for primary procedure)). After the CPT
Editorial Panel change, the CPT descriptors read as follows: 37205
(Transcatheter placement of an intravascular stent(s) (except coronary,
carotid, and vertebral vessel, and lower extremity arteries),
percutaneous; initial vessel) and 37206 (Transcatheter placement of an
intravascular stent(s) (except coronary, carotid, and vertebral vessel,
and lower extremity arteries), percutaneous; each additional vessel
(List separately in addition to code for primary procedure)). Because
the CPT Editorial Panel changes are effective January 1, 2011, we
reevaluated the appropriateness of these procedures in the ASC setting.
Based on the review of our clinical staff, we determined that the level
of care indicated by the new descriptors for CPT codes 37205 and 37206
make these codes ineligible for payment in the ASC setting because they
do not meet the criteria for ASC coverage listed at Sec. 416.166 of
the regulations. However, we will recognize as ASC covered surgical
procedures two new CY 2011 CPT codes that, prior to January 1, 2011,
would have been described in part under the CY 2010 CPT code
descriptors for 37205 and 37206. Specifically, we believe that the
procedures described by CPT codes 37221 (Revascularization, iliac
artery, unilateral, initial vessel; with transluminal stent
placement(s)) and 37223 (Revascularization, iliac artery, each
additional ipsilateral iliac vessel; with transluminal stent
placement(s) (List separately in addition to code for primary
procedure)) may be safely performed and would not require an overnight
stay in the ASC setting, and that the addition of these procedures to
the ASC list of covered surgical procedures in CY 2011 is consistent
with our proposal to add CPT codes 37205 and 37206 to the ASC list of
covered surgical procedures in CY 2011, because the CPT codes for 37221
and 37223 now describe services that would have been described by CPT
codes 37205 and 37206 had the CPT Editorial Panel not changed the
descriptors for these codes (as with all new HCPCS codes for the
upcoming year that are recognized for payment under the ASC payment
system, CPT codes 37221 and 37223 are listed in the Addenda to this
final rule with comment period with comment indicator ``NI'' to
indicate that

[[Page 72031]]

their payment assignments are interim and open to public comment).
Comment: One commenter reiterated a previous request to remove the
hand and cleft lip and palate reconstruction procedures described by
the following CPT codes from the ASC list of covered surgical
procedures because they believe these procedures are inappropriate for
an ASC setting: 21215 (Graft, bone; mandible (includes obtaining
graft)); 26037 (Decompressive fasciotomy, hand); 40700 (Plastic repair
of cleft lip/nasal deformity; primary, partial or complete,
unilateral); 40701 (Plastic repair of cleft lip/nasal deformity,
primary bilateral, one stage procedure); 42200 (Palatoplasty for cleft
palate, soft and/or hard palate only); 42205 (Palatoplasty for cleft
palate, with closure of alveolar ridge; soft tissue only); 42210
(Palatoplasty for cleft palate, with closure of alveolar ridge; with
bone graft to alveolar ridge includes obtaining graft); 42215
(Palatoplasty for cleft palate; major revision); 42220 (Palatoplasty
for cleft palate; secondary lengthening procedure); 42225 (Palatoplasty
for cleft palate; attachment pharyngeal flap); and 42227 (Lengthening
of palate, with island flap).
Response: As we have done in the past, our medical advisors
reviewed all these procedures and as a result of that review, we
continue to believe that they may be appropriately provided to a
Medicare beneficiary in an ASC. As we stated in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60603), we do not see a basis for
removing these procedures from the ASC list as requested by the
commenter. All of these procedures were on the list of covered surgical
procedures even before CY 2007 and, to our knowledge, have been
performed safely in ASCs for many years. We continue to believe that
these 11 procedures would not pose a significant safety risk to
Medicare beneficiaries and would not require an overnight stay if
performed in ASCs.
As established at Sec. 416.166(b), decisions regarding whether a
surgical procedure should be excluded from the Medicare ASC list of
covered surgical procedures are based on assessments of the needs of
Medicare beneficiaries and not all patient populations. We include on
the ASC list all procedures we believe are appropriate for some
Medicare beneficiaries in order to provide physicians and patients with
the greatest possible choice for sites-of-service. We expect that
physicians will consider for each individual patient which site-of-
service is most appropriate. We understand that the procedures on the
ASC list are sometimes more appropriately performed on an inpatient
basis due to the individual's age or other clinical considerations.
Comment: Many commenters supported the addition of the procedures
listed in Table 43 of the CY 2011 OPPS/ASC proposed rule to the list of
ASC covered surgical procedures, including the procedures described by
CPT codes 37205 and 37206. Commenters also requested that CMS add the
procedures described by the 48 CPT codes displayed in Table 52 below to
the list of ASC covered surgical procedures. Some commenters also
requested that a total of 9 specific CPT unlisted codes be added to the
ASC list, displayed in Table 53, below. The commenters argued that
these procedures are less complex and/or as safe as procedures already
paid for when performed in the ASC setting.

Table 52--Surgical Procedures Requested for Addition to the CY 2011 ASC
List of Covered Surgical Procedures
------------------------------------------------------------------------
CY 2011 CPT code CY 2011 long descriptor
------------------------------------------------------------------------
21141.................... Reconstruction midface, LeFort I; single
piece, segment movement in any direction
(e.g., for Long Face Syndrome), without bone
graft.
21142.................... Reconstruction midface, LeFort I; 2 pieces,
segment movement in any direction, without
bone graft.
21143.................... Reconstruction midface, LeFort I; 3 or more
pieces, segment movement in any direction,
without bone graft.
21145.................... Reconstruction midface, LeFort I; single
piece, segment movement in any direction,
requiring bone grafts (includes obtaining
autografts).
21146.................... Reconstruction midface, LeFort I; 2 pieces,
segment movement in any direction, requiring
bone grafts (includes obtaining autografts)
(e.g., ungrafted unilateral alveolar cleft).
21147.................... Reconstruction midface, LeFort I; 3 or more
pieces, segment movement in any direction,
requiring bone grafts (includes obtaining
autografts) (e.g., ungrafted bilateral
alveolar cleft or multiple osteotomies).
21151.................... Reconstruction midface, LeFort II; any
direction, requiring bone grafts (includes
obtaining autografts).
21188.................... Reconstruction midface, osteotomies (other
than LeFort type) and bone grafts (includes
obtaining autografts).
21193.................... Reconstruction of mandibular rami,
horizontal, vertical, C, or L osteotomy;
without bone graft.
21194.................... Reconstruction of mandibular rami,
horizontal, vertical, C, or L osteotomy;
with bone graft (includes obtaining graft).
21195.................... Reconstruction of mandibular rami and/or
body, sagittal split; without internal rigid
fixation.
21196.................... Reconstruction of mandibular rami and/or
body, sagittal split; with internal rigid
fixation.
21247.................... Reconstruction of mandibular condyle with
bone and cartilage autografts (includes
obtaining grafts) (e.g., for hemifacial
microsomia).
21343.................... Open treatment of depressed frontal sinus
fracture.
21346.................... Open treatment of nasomaxillary complex
fracture (LeFort II type); with wiring and/
or local fixation.
21365.................... Open treatment of complicated (e.g.,
comminuted or involving cranial nerve
foramina) fracture(s) of malar area,
including zygomatic arch and malar tripod;
with internal fixation and multiple surgical
approaches.
21385.................... Open treatment of orbital floor blowout
fracture; transantral approach (Caldwell-Luc
type operation).
21386.................... Open treatment of orbital floor blowout
fracture; periorbital approach.
21387.................... Open treatment of orbital floor blowout
fracture; combined approach.
21395.................... Open treatment of orbital floor blowout
fracture; periorbital approach with bone
graft (includes obtaining graft).
21408.................... Open treatment of fracture of orbit, except
blowout; with bone grafting (includes
obtaining graft).
21422.................... Open treatment of palatal or maxillary
fracture (LeFort I type);
21423.................... Open treatment of palatal or maxillary
fracture (LeFort I type); complicated
(comminuted or involving cranial nerve
foramina), multiple approaches.
21431.................... Closed treatment of craniofacial separation
(LeFort III type) using interdental wire
fixation of denture or splint.
21470.................... Open treatment of complicated mandibular
fracture by multiple surgical approaches
including internal fixation, interdental
fixation, and/or wiring of dentures or
splints.

[[Page 72032]]

22554.................... Arthrodesis, anterior interbody technique,
including minimal discectomy to prepare
interspace (other than for decompression);
cervical below C2.
22851.................... Application of intervertebral biomechanical
device(s) (e.g., synthetic cage(s), threaded
bone dowel(s), methylmethacrylate) to
vertebral defect or interspace (List
separately in addition to code for primary
procedure).
27415.................... Osteochondral allograft, knee, open.
29867.................... Arthroscopy, knee, surgical; osteochondral
allograft (e.g., mosaicplasty).
30999.................... Unlisted procedure, nose.
31292.................... Nasal/sinus endoscopy, surgical; with medial
or inferior orbital wall decompression.
31293.................... Nasal/sinus endoscopy, surgical; with medial
orbital wall and inferior orbital wall
decompression.
54332.................... 1-stage proximal penile or penoscrotal
hypospadias repair requiring extensive
dissection to correct chordee and
urethroplasty by use of skin graft tube and/
or island flap.
54336.................... 1-stage perineal hypospadias repair requiring
extensive dissection to correct chordee and
urethroplasty by use of skin graft tube and/
or island flap.
54535.................... Orchiectomy, radical, for tumor; with
abdominal exploration.
57310.................... Closure of urethrovaginal fistula;
60260.................... Thyroidectomy, removal of all remaining
thyroid tissue following previous removal of
a portion of thyroid.
63001.................... Laminectomy with exploration and/or
decompression of spinal cord and/or cauda
equina, without facetectomy, foraminotomy or
discectomy (e.g., spinal stenosis), 1 or 2
vertebral segments; cervical.
63020.................... Laminotomy (hemilaminectomy), with
decompression of nerve root(s), including
partial facetectomy, foraminotomy and/or
excision of herniated intervertebral disc,
including open and endoscopically-assisted
approaches; 1 interspace, cervical.
63030.................... Laminotomy (hemilaminectomy), with
decompression of nerve root(s), including
partial facetectomy, foraminotomy and/or
excision of herniated intervertebral disc,
including open and endoscopically-assisted
approaches; 1 interspace, lumbar.
63035.................... Laminotomy (hemilaminectomy), with
decompression of nerve root(s), including
partial facetectomy, foraminotomy and/or
excision of herniated intervertebral disc,
including open and endoscopically-assisted
approaches; each additional interspace,
cervical or lumbar (List separately in
addition to code for primary procedure).
63042.................... Laminotomy (hemilaminectomy), with
decompression of nerve root(s), including
partial facetectomy, foraminotomy and/or
excision of herniated intervertebral disc,
reexploration, single interspace; lumbar.
63045.................... Laminectomy, facetectomy and foraminotomy
(unilateral or bilateral with decompression
of spinal cord, cauda equina and/or nerve
root[s], [eg, spinal or lateral recess
stenosis]), single vertebral segment;
cervical.
63047.................... Laminectomy, facetectomy and foraminotomy
(unilateral or bilateral with decompression
of spinal cord, cauda equina and/or nerve
root[s], [eg, spinal or lateral recess
stenosis]), single vertebral segment;
lumbar.
63048.................... Laminectomy, facetectomy and foraminotomy
(unilateral or bilateral with decompression
of spinal cord, cauda equina and/or nerve
root[s], [eg, spinal or lateral recess
stenosis]), single vertebral segment; each
additional segment, cervical, thoracic, or
lumbar (List separately in addition to code
for primary procedure).
63056.................... Transpedicular approach with decompression of
spinal cord, equina and/or nerve root(s)
(e.g., herniated intervertebral disc),
single segment; lumbar (including
transfacet, or lateral extraforaminal
approach) (e.g., far lateral herniated
intervertebral disc).
63075.................... Discectomy, anterior, with decompression of
spinal cord and/or nerve root(s), including
osteophytectomy; cervical, single
interspace.
63076.................... Discectomy, anterior, with decompression of
spinal cord and/or nerve root(s), including
osteophytectomy; cervical, each additional
interspace (List separately in addition to
code for primary procedure).
------------------------------------------------------------------------

Table 53--CPT Unlisted Codes Requested for Addition to the CY 2011 ASC
List of Covered Surgical Procedures
------------------------------------------------------------------------
CY 2011 CPT code CY 2011 long descriptor
------------------------------------------------------------------------
21089............................. Unlisted maxillofacial prosthetic
procedure.
21299............................. Unlisted craniofacial and
maxillofacial procedure.
21499............................. Unlisted musculoskeletal procedure,
head.
30999............................. Unlisted procedure, nose.
40799............................. Unlisted procedure, lips.
40899............................. Unlisted procedure, dento alveolar
structures.
41599............................. Unlisted procedure, tongue, floor of
mouth.
41899............................. Unlisted procedure, dento alveolar
structures.
42299............................. Unlisted procedure, palate, uvula.
------------------------------------------------------------------------

Response: We appreciate commenters' support of the proposed
addition of the procedures listed in Table 43 of the CY 2011 OPPS/ASC
proposed rule to the ASC list of covered surgical procedures for CY
2011. As stated above, we note that the descriptors for CPT codes 37205
and 37206 are significantly changing effective January 1, 2011, which
required us to reevaluate their appropriateness in the ASC setting.
Based on the review of our clinical staff, we determined that the level
of care indicated by the new descriptors for CPT codes 37205 and 37206
make these codes ineligible for payment in the ASC setting. However, we
will recognize as ASC covered surgical procedures two new CY 2011 CPT
codes that, prior to January 1, 2011, would have been described in part
under the CY 2010 CPT code descriptors for 37205 and 37206.
Specifically, we believe that the procedures described by CPT codes
37221 and 37223 may be safely performed in the ASC setting, and that
the addition of these procedures to the ASC list of covered surgical
procedures in CY 2011 is consistent with our proposal to add CPT codes
37205 and 37206 to the ASC list of covered surgical procedures in CY
2011, because the CPT codes for 37221 and 37223 now describe services
that would have been described by CPT codes 37205 and 37206 had the CPT
Editorial Panel not changed the descriptors for these codes.
We reviewed all of the surgical procedures that commenters
requested be added to the ASC list of covered surgical procedures,
except the procedures that may be reported by the CPT unlisted codes
listed in Table 53, above, because those codes are not eligible for
addition to the ASC list, consistent with our final policy which is
discussed in detail in the August 2, 2007 final rule (72 FR 42484
through

[[Page 72033]]

42486). We do not agree that most of the procedures recommended by the
commenters are appropriate for provision to Medicare beneficiaries in
ASCs. Although the commenters asserted that the procedures they were
requesting for addition to the list are less complex than and as safe
as procedures already on the list, our review did not support those
assertions. We exclude from ASC payment any procedure for which
standard medical practice dictates that the beneficiary who undergoes
the procedure would typically be expected to require active medical
monitoring and care at midnight following the procedure (overnight
stay) as well as all surgical procedures that our medical advisors
determine may be expected to pose a significant safety risk to Medicare
beneficiaries when performed in an ASC. The criteria used under the
revised ASC payment system to identify procedures that would be
expected to pose a significant safety risk when performed in an ASC
include, but are not limited to, those procedures that: Generally
result in extensive blood loss; require major or prolonged invasion of
body cavities; directly involve major blood vessels; are emergent or
life threatening in nature; commonly require systemic thrombolytic
therapy; or are designated as requiring inpatient care (Sec. 416.166).
In our review of the procedures listed in Table 52, we determined that
most of the procedures either would be expected to pose a significant
risk to beneficiary safety or would be expected to require an overnight
stay. Specifically, we found that prevailing medical practice called
for inpatient hospital stays for beneficiaries undergoing many of the
procedures and that some of the procedures directly involve major blood
vessels and/or may result in extensive blood loss.
After consideration of the public comments we received, we are
finalizing the addition of four of the six proposed procedures to the
CY 2011 ASC list of covered surgical procedures. We are not finalizing
the proposed addition of CPT codes 37205 and 37206. The CPT Editorial
Panel changed the descriptors for these codes effective January 1,
2011. We reviewed these codes and, based on our review, determined that
the level of care indicated by the new descriptors for these codes make
these codes ineligible for payment in the ASC setting. However, we are
adding procedures described by CPT codes 37221 and 37223 to the list of
covered surgical procedures for CY 2011 because we believe that these
procedures may be safely performed in the ASC setting and that the
addition of these procedures is consistent with our proposal to add CPT
codes 37205 and 37206 to the ASC list of covered surgical procedures in
CY 2011, because the CPT codes for 37221 and 37223 now describe
services that would have been described by CPT codes 37205 and 37206
had the CPT Editorial Panel not changed the descriptors for these
codes. The six procedures that we are adding to the list of ASC covered
surgical procedures for CY 2011, their descriptors, and payment
indicators are displayed in Table 54 below.

Table 54--New ASC Covered Surgical Procedures for CY 2011
------------------------------------------------------------------------
CY 2011 ASC
CY 2011 CPT/HCPCS code CY 2011 long descriptor payment
indicator
------------------------------------------------------------------------
37204...................... Transcatheter occlusion or G2
embolization (e.g., for
tumor destruction, to
achieve hemostasis, to
occlude a vascular
malformation),
percutaneous, any method,
non-central nervous
system, non-head or neck.
37210...................... Uterine fibroid G2
embolization (ufe,
embolization of the
uterine arteries to treat
uterine fibroids,
leiomyomata),
percutaneous approach
inclusive of vascular
access, vessel selection,
embolization, and all
radiological supervision
and interpretation,
intraprocedural road
mapping, and imaging
guidance necessary to
complete the procedure.
37221...................... Revascularization, iliac G2
artery, unilateral,
initial vessel; with
transluminal stent
placement(s).
37223...................... Revascularization, iliac G2
artery, each additional
ipsilateral iliac vessel;
with transluminal stent
placement(s). (List
separately in addition to
code for primary
procedure).
50593...................... Ablation, renal tumor(s), G2
unilateral, percutaneous,
cryotherapy..
52649...................... Laser enucleation of the G2
prostate with
morcellation, including
control of postoperative
bleeding, complete
(vasectomy, meatotomy,
cystourethroscopy,
urethral calibration and/
or dilation, internal
urethrotomy and
transurethral resection
of prostate are included
if performed)
------------------------------------------------------------------------

b. Covered Surgical Procedures Designated as Office-Based
(1) Background
In the August 2, 2007 ASC final rule, we finalized our policy to
designate as ``office-based'' those procedures that are added to the
ASC list of covered surgical procedures in CY 2008 or later years that
we determine are performed predominantly (more than 50 percent of the
time) in physicians' offices based on consideration of the most recent
available volume and utilization data for each individual procedure
code and/or, if appropriate, the clinical characteristics, utilization,
and volume of related codes. In that rule, we also finalized our policy
to exempt all procedures on the CY 2007 ASC list from application of
the office-based classification (72 FR 42512). The procedures that were
added to the ASC list of covered surgical procedures beginning in CY
2008 that we determined were office-based were identified in Addendum
AA to that rule by payment indicator ``P2'' (Office-based surgical
procedure added to ASC list in CY 2008 or later with MPFS non-facility
PE RVUs; payment based on OPPS relative payment weight); ``P3''
(Office-based surgical procedures added to ASC list in CY 2008 or later
with MPFS non-facility PE RVUs; payment based on MPFS non-facility PE
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in
CY 2008 or later without MPFS non-facility PE RVUs; payment based on
OPPS relative payment weight), depending on whether we estimated it
would be paid according to the standard ASC payment methodology based
on its OPPS relative payment weight or at the MPFS non-facility PE RVU
amount.
Consistent with our final policy to annually review and update the
list of surgical procedures eligible for payment in ASCs, each year we
identify surgical procedures as either temporarily or permanently
office-based after taking into account updated volume and utilization
data.

[[Page 72034]]

(2) Changes to Covered Surgical Procedures Designated as Office-Based
for CY 2011
In developing the CY 2011 OPPS/ASC proposed rule (75 FR 46330), we
followed our policy to annually review and update the surgical
procedures for which ASC payment is made and to identify new procedures
that may be appropriate for ASC payment, including their potential
designation as office-based. We reviewed CY 2009 volume and utilization
data and the clinical characteristics for all surgical procedures that
are assigned payment indicator ``G2'' in CY 2010, as well as for those
procedures assigned one of the temporary office-based payment
indicators, specifically ``P2*,'' ``P3*,'' or ``R2*'' in the CY 2010
OPPS/ASC final rule with comment period (74 FR 60605 through 60608). We
also examined the data for the five procedures that we proposed to add
to the ASC list of covered surgical procedures for CY 2011 (listed in
Table 43 of the CY 2011 OPPS/ASC proposed rule (75 FR 46330)) to
determine if these procedures should be designated as office-based.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46331), we indicated
that our review of the CY 2009 volume and utilization data resulted in
our identification of six surgical procedures that we believed met the
criteria for designation as office-based. We stated that the data
indicated that the procedures are performed more than 50 percent of the
time in physicians' offices, and that our medical advisors believed the
services are of a level of complexity consistent with other procedures
performed routinely in physicians' offices. The six CPT codes we
proposed to permanently designate as office-based were listed in Table
44 of the CY 2011 OPPS/ASC proposed rule (75 FR 46332) and include the
following: 20697 (Application of multiplane (pins or wires in more than
one plane), unilateral, external fixation with stereotactic computer-
assisted adjustment (e.g., spatial frame), including imaging; exchange
(i.e., removal and replacement) of strut, each), 27767 (Closed
treatment of posterior malleolus fracture; without manipulation),
37205, 37206, 37210, and 50593. Subsequent to the release of the CY
2011 OPPS/ASC proposed rule, we recognized that the long descriptors
for CPT codes 50593 and 37210 in Table 44 were incorrect. We corrected
Table 44 on the CMS Web site for the CY 2011 OPPS/ASC proposed rule at
http://www.cms.gov/ASCPayment/. We noted in the proposed rule that four
of these six procedures are procedures that we also proposed to add to
the ASC list of covered surgical procedures for CY 2011: CPT codes
37205, 37206, 37210, and 50593. The other two procedures, described by
CPT codes 20697 and 27767, are already on the ASC list of covered
surgical procedures.
Comment: Some commenters expressed their continued disagreement
with the policy to make payment at the lower of the ASC rate or MPFS
nonfacility PE RVU payment amount for procedures we identify as office-
based and requested that CMS not finalize any of the proposed office-
based designations. They believed that, due to the payment limits
required by CMS' payment policy for providing these services in ASCs,
beneficiaries who require the level of care provided in ASCs instead
have to receive treatment in the more costly HOPD setting. They pointed
out that even when a procedure is frequently performed in an office,
there are circumstances when the office is an inappropriate or
unavailable setting, and that the site-of-service criterion fails to
recognize the variation in practice patterns across the country. The
commenters also stated that the continuation of this policy expands the
gap between the rates that ASCs should receive based upon the OPPS APC
relative weights and the actual payment they receive based on the
revised ASC payment system policies.
The commenters recommended that CMS establish a minimum volume
threshold before designating a procedure office-based in order to
ensure that the data used to apply this policy are reliable. They
asserted that unless CMS includes multiple years of data in its
calculation, services with low volume can reach the 50 percent
threshold with little change in the distribution of procedures across
sites of care. They also recommended that CMS raise the utilization
threshold above 50 percent for designating a procedure as office-based
and only use current data to make the office-based assessment.
Response: As we have stated in the past (74 FR 60605 through
60606), we continue to believe that our policy of identifying low
complexity procedures that are performed predominantly in physicians'
offices and limiting their payment in ASCs to the physician's office
payment amount is necessary and valid. We believe this is the most
appropriate approach to preventing the creation of payment incentives
for services to move from physicians' offices to ASCs for the many
newly covered low complexity procedures on the ASC list. We do not
agree with the commenter that this policy creates incentives for
patients to be treated in the HOPD, because we believe that paying for
these services that are typically performed in a physician office at
the lower of the ASC or the MPFS nonfacility PE RVU payment amount is
appropriate and adequate to ensure beneficiary access in the ASC
setting. We continue to believe that it is appropriate that ASCs be
paid no more for performing office-based procedures than those
procedures would be paid when performed in physicians' offices, in
order to deter inappropriate migration of these surgical procedures to
ASCs based on financial considerations rather than clinical needs.
Although our policy to pay for some services at the MPFS non-facility
PE RVU amount does introduce payment for a number of procedures at
rates not based on the ASC relative payment weights and, as such, may
be viewed as expanding the gap between the rates that ASCs should
receive based upon the OPPS APC relative weights and the actual payment
they receive based on the revised ASC payment system policies between
the OPPS and ASC payment system, we do not believe that the alternative
of making payments at the higher ASC rate is preferable. None of the
office-based procedures was eligible for ASC payment prior to
implementation of the revised payment system and we see no inherent
unfairness in limiting ASC payment to the rate for the lower-intensity
site-of-service (physician's office) that our data indicate is the care
setting for most Medicare cases. We expect physicians in all cases to
choose a care setting that is appropriate for the individual patient.
We do not agree with the commenters who asserted that we should
alter our established office-based payment methodology to establish a
minimum volume threshold or include multiple years of data. As we have
stated in the past (74 FR 60605 through 60606), we are confident that
the CY 2009 claims data, the most recent full year of volume and
utilization data, are an appropriate source to inform our decisions
regarding the site-of-service for procedures. Because this is national
data, it also reflects variation in practice patterns across the
Nation. In our review process, when we believe that the available data
are inadequate bases upon which to make a determination that a
procedure should be office-based, we either make no change to the
procedure's payment status or make the change temporary and reevaluate
our decision using data that become available for our next evaluation.
We believe that it is appropriate to continue using our judgment
regarding whether the volume

[[Page 72035]]

of cases and the proportion of cases that are provided in the
physicians' office setting indicate that the procedure is an office-
based procedure in addition to our medical advisors' clinical
judgments, utilization data for procedures that are closely related to
the procedures being evaluated, and any other information that is
available to us. Thus, we will continue to use our existing review and
decision processes.
Comment: Several commenters specifically addressed our proposals to
designate the procedures listed in Table 44 of the CY 2011 OPPS/ASC
proposed rule as office-based, and argued that the procedures described
by the following CPT codes are not performed more than 50 percent of
the time in a physician's office: 37205, 37206, 37210, and 50593.
Response: We appreciate commenters' assessment of the specific CPT
codes we proposed to newly designate as office-based for CY 2011. We
reviewed the most current utilization data and agree that the
procedures described by CPT codes 37205, 37206, 37210, and 50593 are
not performed more than 50 percent of the time in a physician's office.
Therefore, we are not designating these CPT codes as office-based
procedures for CY 2011 as we proposed. We also note that, as stated
previously, the descriptors for CPT codes 37205 and 37206 are
significantly changing for CY 2011 and will not be added to the ASC
list of covered surgical procedures.
The utilization data for the other procedures listed in Table 44 of
the proposed rule, described by CPT codes 20697 and 27767, continue to
indicate that these procedures are performed more than 50 percent of
the time in physicians' offices and did not change between the proposed
rule and this final rule with comment period. Therefore, we continue to
believe it is appropriate to designate these CPT codes as office-based
for CY 2011.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposals, with modification, to designate the
procedures displayed in Table 55 below as office-based for CY 2011. We
also examined the clinical characteristics and utilization data for
procedures related to the two new CY 2011 CPT codes we are adding to
the ASC list of covered surgical procedures, CPT codes 37221 and 37223,
as discussed in section XV.C. of this final rule with comment period,
and we determined that these codes should not be designated as office-
based for CY 2011.

Table 55--CY 2011 Final Designations of ASC Covered Surgical Procedures Newly Designated as Permanently Office-
Based
----------------------------------------------------------------------------------------------------------------
Proposed CY Final CY
CY 2010 ASC 2011 ASC 2011 ASC
CY 2011 CPT code CY 2010 long descriptor payment payment payment
indicator indicator * indicator
----------------------------------------------------------------------------------------------------------------
20697............................... Application of multiplane (pins or G2 P2 P2
wires in more than one plane),
unilateral, external fixation with
stereotactic computer-assisted
adjustment (e.g., spatial frame),
including imaging; exchange (i.e.,
removal and replacement of strut,
each).
27767............................... Closed treatment of posterior G2 P2 P2
malleolus fracture; without
manipulation.
----------------------------------------------------------------------------------------------------------------
* Payment indicators are based on a comparison of the rates according to the ASC standard ratesetting
methodology and the MPFS rates. At the time this final rule with comment period is being finalized for
publication, current law authorizes a negative update to the MPFS payment rates for CY 2011. Therefore, this
final rule with comment period reflects a negative update to the MPFS payment rates for CY 2011. If Congress
revises the MPFS update for CY 2011, we will recalculate the ASC payment rates using the revised update factor
in the January 2011 payment rate files issued to contractors and posted to the ASC Web site at http://www.cms.gov/ASCPayment/.

We also reviewed CY 2009 volume and utilization data and other
information for the six procedures proposed for temporary office-based
status in the CY 2010 OPPS/ASC proposed rule (74 FR 35382) and
finalized for temporary office-based status in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60607). Among these six
procedures, there were almost no claims data for three procedures: CPT
code 0099T (Implantation of intrastromal corneal ring segments); CPT
code 0124T (Conjunctival drug placement); and CPT code 67229 (Treatment
of extensive or progressive retinopathy, one or more sessions; preterm
infant (less than 37 weeks gestation at birth), performed from birth up
to 1 year of age (e.g., retinopathy of prematurity), photocoagulation
or cryotherapy). Consequently, we proposed to maintain their temporary
office-based designations for CY 2011. We also proposed to maintain in
CY 2011 the temporary office-based designation for the four codes that
became effective in the July 2010 ASC quarterly update: CPT code 0226T
(Angoscopy, high resolution (HRA) (with magnification and chemical
agent enhancement); diagnostic, including collection of specimen(s) by
brushing or washing when performed); CPT code 0227T (Angoscopy, high
resolution (HRA) (with magnification and chemical agent enhancement);
with biopsy(ies)); CPT code 0232T (Injection(s), platelet rich plasma,
any tissue, including image guidance, harvesting and preparation when
performed); and HCPCS code C9800 (Dermal injection procedure(s) for
facial lipodystrophy syndrome (LDS) and provision of Radiesse or
Sculptra dermal filler, including all items and supplies), because no
data were available for these codes at the time of the proposed rule.
As a result of our review of the remaining three procedures that
have temporary office-based designations for CY 2010 for which we do
have claims data, we proposed to make permanent the office-based
designations for all of them for CY 2011. The three surgical procedure
codes are: CPT code 46930 (Destruction of internal hemorrhoid(s) by
thermal energy (e.g., infrared coagulation, cautery, radiofrequency));
CPT code 64455 (Injection(s), anesthetic agent and/or steroid, plantar
common digital nerve(s) (e.g., Morton's neuroma)); and CPT code 64632
(Destruction by neurolytic agent; plantar common digital nerve). We
stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46333) that the
volume and utilization data for these CPT codes are sufficient to
support our determination that these procedures are performed
predominantly in physicians' offices. Therefore, we proposed to make
permanent the office-based designations for the three procedures for CY
2011.
The procedures that we proposed to permanently designate as office-
based for CY 2011 that were temporarily designated as office-based
procedures in CY 2010 were displayed in Table 45 of the CY 2011 OPPS/
ASC proposed rule

[[Page 72036]]

(75 FR 46334). The procedures that we proposed to temporarily designate
as office-based for CY 2011 were displayed in Table 46 of the CY 2011
OPPS/ASC proposed rule (75 FR 4635). The procedures for which the
proposed office-based designation for CY 2011 is temporary also were
indicated by an asterisk in Addendum AA to the proposed rule.
We did not receive any public comments that addressed our proposals
to designate the three procedures listed in Table 45 of the CY 2011
OPPS/ASC proposed rule (75 FR 46334), and restated in Table 56, below,
as permanently office-based for CY 2011. Therefore, we are finalizing
our proposal to designate the three procedures listed in Table 45 of
the CY 2011 OPPS/ASC proposed rule, which were designated as
temporarily office-based for CY 2010, as permanently office-based for
CY 2011. We list the codes, long descriptors, CY 2010 ASC payment
indicators, and CY 2011 ASC payment indicators for these three
procedures in Table 56 below. We also did not receive any public
comments on our proposal to temporarily designate as office-based for
CY 2011 the seven procedures listed in Table 46 of the CY 2011 OPPS/ASC
proposed rule (75 FR 46335) and restated in Table 57, below. We are
finalizing our proposal to designate the seven procedures listed in
Table 46 of the CY 2011 OPPS/ASC proposed rule, which were designated
as temporarily office-based for CY 2010, as temporarily office-based
for CY 2011. We list the codes, long descriptors, CY 2010 ASC payment
indicators, and CY 2011 ASC payment indicators for these seven
procedures in Table 57 below.

Table 56--CY 2010 Temporarily Designated Office-Based ASC Covered
Surgical Procedures That Are Designated as Permanently Office-Based for
CY 2011
------------------------------------------------------------------------
Final CY
CY 2011 long CY 2010 ASC 2011 ASC
CY 2011 CPT code descriptor payment payment
indicator indicator **
------------------------------------------------------------------------
46930................ Destruction of P3 * P3
internal
hemorrhoid(s) by
thermal energy
(e.g., infrared
coagulation,
cautery,
radiofrequency).
64455................ Injection(s), P3 * P3
anesthetic agent and/
or steroid, plantar
common digital
nerve(s) (e.g.,
Morton's neuroma).
64632................ Destruction by P3 * P3
neurolytic agent;
plantar common
digital nerve.
------------------------------------------------------------------------
* If designation is temporary.
** Payment indicators are based on a comparison of the rates according
to the ASC standard ratesetting methodology and the MPFS rates. At the
time this final rule with comment period is being finalized for
publication, current law authorizes a negative update to the MPFS
payment rates for CY 2011. Therefore, this final rule with comment
period reflects a negative update to the MPFS payment rates for CY
2011. If Congress revises the MPFS update for CY 2011, we will
recalculate the ASC payment rates using the revised update factor in
the January 2011 payment rate files issued to contractors and posted
to the ASC Web site at http://www.cms.gov/ASCPayment/.

Table 57--CY 2010 Temporarily Designated Office-Based ASC Covered Surgical Procedures That Are Designated as
Temporarily Office-Based for CY 2011
----------------------------------------------------------------------------------------------------------------
Final CY
CY 2010 ASC 2011 ASC
CY 2011 HCPCS code CY 2011 long descriptor payment payment
indicator indicator**
----------------------------------------------------------------------------------------------------------------
0099T........................................... Implantation of intrastromal R2* R2*
corneal ring segments.
0124T........................................... Conjunctival incision with R2* R2*
posterior extrascleral placement
of pharmacological agent (does
not include supply of medication).
0226T........................................... Angoscopy, high resolution (HRA) R2* R2*
(with magnification and chemical
agent enhancement); diagnostic,
including collection of
specimen(s) by brushing or
washing when performed.
0227T........................................... Angoscopy, high resolution (HRA) R2* R2*
(with magnification and chemical
agent enhancement); with
biopsy(ies).
0232T........................................... Injection(s), platelet rich R2* R2*
plasma, any tissue, including
image guidance, harvesting and
preparation when performed.
67229........................................... Treatment of extensive or R2* R2*
progressive retinopathy, one or
more sessions; preterm infant
(less than 37 weeks gestation at
birth), performed from birth up
to 1 year of age (e.g.,
retinopathy of prematurity),
photocoagulation or cryotherapy.
C9800........................................... Dermal injection procedure(s) for R2* R2*
facial lipodystrophy syndrome
(LDS) and provision of Radiesse
or Sculptra dermal filler,
including all items and supplies.
----------------------------------------------------------------------------------------------------------------
* If designation is temporary.
**Payment indicators are based on a comparison of the rates according to the ASC standard ratesetting
methodology and the MPFS rates. At the time this final rule with comment period is being finalized for
publication, current law authorizes a negative update to the MPFS payment rates for CY 2011. Therefore, this
final rule with comment period reflects a negative update to the MPFS payment rates for CY 2011. If Congress
revises the MPFS update for CY 2011, we will recalculate the ASC payment rates using the revised update factor
in the January 2011 payment rate files issued to contractors and posted to the ASC Web site at http://www.cms.gov/ASCPayment/.

[[Page 72037]]

Displayed in Table 47 of the CY 2011 OPPS/ASC proposed rule (75 FR
46337) were new (or substantially revised) CY 2010 CPT codes to which
we assigned temporary office-based payment indicators in the CY 2010
OPPS/ASC final rule with comment period (74 FR 60608). As explained in
section XV.B.1. of that final rule with comment period (74 FR 60599 and
60607), we reviewed all of the newly created HCPCS codes that became
available after the issuance of the CY 2009 OPPS/ASC proposed rule that
are used to report surgical procedures in CY 2010 to evaluate their
appropriateness for the ASC list of covered surgical procedures. Of the
procedures reported by new or substantially revised CY 2010 CPT codes
that we determined should not be excluded from the ASC list based on
our clinical review, including assessment of available utilization and
volume data for any closely related procedures and consideration of
other available information, we determined that 16 of the procedures
would predominantly be performed in physicians' offices. However,
because we had no utilization data for the procedures specifically
described by these new CPT codes, we made the office-based designations
temporary rather than permanent and stated that we would reevaluate the
procedures when data become available (74 FR 60607 through 60608). The
temporary payment indicators for the 16 office-based procedures
displayed in Table 47 were interim designations and were open to public
comment during the 60-day comment period following the release of the
CY 2010 OPPS/ASC final rule with comment period. We indicated that we
would respond to public comments received during that 60-day comment
period as well as the comment period following the CY 2011 OPPS/ASC
proposed rule in this CY 2011 OPPS/ASC final rule with comment period.
Comment: Some commenters to the CY 2010 OPPS/ASC final rule with
comment period and the CY 2011 OPPS/ASC proposed rule disagreed with
the designation of CPT code 21015 (Radical resection of tumor (e.g.,
malignant neoplasm, soft tissue of the face or scalp; less than 2 cm)
as temporarily office-based. According to the commenters, Medicare
claims data indicate that this procedure is not performed in the
physician office setting more than 50 percent of the time.
Response: We disagree with the commenters' assertion that CPT code
21015 should not be temporarily office-based. We also do not agree with
the commenters that we can use the Medicare claims data to assess
whether the procedure described by CPT code 21015 is predominantly
performed in the office or non-office setting. As we explained in the
CY 2010 OPPS/ASC final rule with comment period and in the CY 2011
OPPS/ASC proposed rule (74 FR 60599, 60607, and 60608 and 75 FR 46337),
the CPT code descriptor for CPT code 21015 was one of several HCPCS
codes with descriptors that were so substantially revised for CY 2010
that we consider them to be new for CY 2010. Therefore, the most
current available Medicare claims data from 2009 does not reflect the
procedure now described by CPT code 21015 and should not be used to
determine site-of-service. Our medical review team reviewed the
clinical characteristics of this procedure and the utilization data for
related procedures, and we continue to believe that it would
predominantly be performed in the physician office. Therefore, we are
maintaining its designation as temporarily office-based in CY 2011.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, without modification, to maintain the
temporary office-based payment indicators for the new CY 2010 CPT codes
as displayed in Table 58 below.

Table 58--Final CY 2011 Payment Indicators for New CY 2010 CPT Codes for
ASC Covered Surgical Procedures Designated as Temporarily Office-Based
on an Interim Basis in the CY 2010 OPPS/ASC Final Rule With Comment
Period
------------------------------------------------------------------------
Final CY
CY 2011 long CY 2010 ASC 2011 ASC
CY 2011 CPT code descriptor payment payment
indicator indicator**
------------------------------------------------------------------------
21015........................ Radical R2* R2*
resection of
tumor (e.g.,
malignant
neoplasm),
soft tissue of
face or scalp;
less than 2
cm).
21555........................ Excision, P3* P3*
tumor, soft
tissue of neck
or anterior
thorax,
subcutaneous;
less than 3 cm.
21930........................ Excision, P3* P3*
tumor, soft
tissue of back
or flank,
subcutaneous;
less than 3 cm.
23075........................ Excision, P3* P3*
tumor, soft
tissue of
shoulder area,
subcutaneous;
less than 3 cm.
24075........................ Excision, P3* P3*
tumor, soft
tissue of
upper arm or
elbow area,
subcutaneous;
less than 3 cm.
25075........................ Excision, P3* P3*
tumor, soft
tissue of
forearm and/or
wrist area,
subcutaneous;
less than 3 cm.
26115........................ Excision, tumor P3* P3*
or vascular
malformation,
soft tissue of
hand or
finger,
subcutaneous;
less than 1.5
cm.
27047........................ Excision, P3* P3*
tumor, soft
tissue of
pelvis and hip
area,
subcutaneous;
less than 3 cm.
27327........................ Excision, P3* P3*
tumor, soft
tissue of
thigh or knee
area,
subcutaneous;
less than 3 cm.
27618........................ Excision, P3* P3*
tumor, soft
tissue of leg
or ankle area,
subcutaneous;
less than 3 cm.
28039........................ Excision, P3* P3**
tumor, soft
tissue of foot
or toe,
subcutaneous;
1.5 cm or
greater.
28041........................ Excision, R2* R2*
tumor, soft
tissue of foot
or toe,
subfascial
(e.g.,
intramuscular)
; 1.5 cm or
greater.
28043........................ Excision, P3* P3*
tumor, soft
tissue of foot
or toe,
subcutaneous;
less than 1.5
cm.
28045........................ Excision, P3* P3*
tumor, soft
tissue of foot
or toe,
subfascial
(e.g.,
intramuscular)
; less than
1.5 cm.

[[Page 72038]]

28046........................ Radical R2* R2*
resection of
tumor (e.g.,
malignant
neoplasm),
soft tissue of
foot or toe;
less than 3 cm.
37761........................ Ligation of R2* R2*
perforator
vein(s),
subfascial,
open,
including
ultrasound
guidance, when
performed, 1
leg.
------------------------------------------------------------------------
* If designation is temporary.
**Payment indicators are based on a comparison of the rates according to
the ASC standard ratesetting methodology and the MPFS rates. At the
time this final rule with comment period is being finalized for
publication, current law authorizes a negative update to the MPFS
payment rates for CY 2011. Therefore, this final rule with comment
period reflects a negative update to the MPFS payment rates for CY
2011. If Congress revises the MPFS update for CY 2011, we will
recalculate the ASC payment rates using the revised update factor in
the January 2011 payment rate files issued to contractors and posted
to the ASC Web site at http://www.cms.gov/ASCPayment/.

In addition to the comments we received on the office-based
designations of procedures specifically discussed in the CY 2011 OPPS/
ASC proposed rule, we received the following comments on the proposed
office-based status of procedures as listed in Addendum AA of the
proposed rule.
Comment: One commenter requested that CMS not consider as office-
based CPT codes 21011 (Excision, tumor, soft tissue of face or scalp,
subcutaneous; less than 2 cm), 21012 (Excision, tumor, soft tissue of
face or scalp, subcutaneous; 2 cm or greater), 21013 (Excision, tumor,
soft tissue of face and scalp, subfascial (e.g., subgaleal,
intramuscular); less than 2 cm), 21014 (Excision, tumor, soft tissue of
face and scalp, subfascial (e.g., subgaleal, intramuscular); 2 cm or
greater), and 21016 (Radical resection of tumor (e.g., malignant
neoplasm), soft tissue of face or scalp; 2 cm or greater) until there
are significant data to show that these codes are performed over 50
percent of the time in physicians' offices.
Response: Because CPT codes 21011, 21012, 21013, 21014, and 21016
are new for CY 2010, we have no claims data showing in which setting
these codes are performed the majority of the time. As is our standard
process, we examined the available utilization and volume data for
closely related procedures and considered other relevant clinical
information to determine whether these procedures should be considered
office-based. We continue to believe that the procedures described by
CPT codes 21011, 21012, 21013, and 21014 would be performed
predominantly in the physician office-setting and are therefore
maintaining the office-based designations for these procedures in CY
2011 as proposed. We note that we did not propose, nor are we
finalizing, an office-based designation for the procedure described by
CPT code 21016.
Comment: Several commenters disagreed with the proposed assignment
of payment indicator ``P2'' to CPT codes 37765 (Stab phlebectomy of
varicose veins, 1 extremity; more than 20 incisions stab phlebectomy of
varicose veins, 1 extremity; 10-20 stab incisions) and 37766 (Stab
phlebectomy of varicose veins, 1 extremity; more than 20 incisions).
According to the commenters, the CY 2011 MPFS proposed rule included
nonfacility payment for these two procedures, but they requested that
we postpone changing the payment indicator for CPT codes 37765 and
37766 from ``R2'' to ``P3'' for one year and continue to base payment
on the OPPS rather than the MPFS despite the availability of MPFS non-
facility PE RVUs for these procedures.
Response: We do not agree with the commenter that it would be
appropriate to maintain payment indicator ``R2'' for the office-based
procedures described by CPT codes 37765 and 37766 for CY 2011. As the
commenter notes, there are now non-facility PE RVUs upon which to base
payment for these procedures, and we only assign payment indicator
``R2'' to those office-based surgical procedures added to the ASC list
in CY 2008 or later without MPFS non-facility PE RVUs. Therefore, we
are finalizing our proposal to assign payment indicator P3 to CPT codes
37765 and 37766 for CY 2011.
c. ASC Covered Surgical Procedures Designated as Device-Intensive
(1) Background
As discussed in the August 2, 2007 final rule (72 FR 42503 through
42508), we adopted a modified payment methodology for calculating the
ASC payment rates for covered surgical procedures that are assigned to
the subset of OPPS device-dependent APCs with a device offset
percentage greater than 50 percent of the APC cost under the OPPS, in
order to ensure that payment for the procedure is adequate to provide
packaged payment for the high-cost implantable devices used in those
procedures. We assigned payment indicators ``H8'' (Device-intensive
procedure on ASC list in CY 2007; paid at adjusted rate) and ``J8''
(Device-intensive procedure added to ASC list in CY 2008 or later; paid
at adjusted rate) to identify the procedures that were eligible for ASC
payment calculated according to the modified methodology, depending on
whether the procedure was included on the ASC list of covered surgical
procedures prior to CY 2008 and, therefore, subject to transitional
payment as discussed in the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68739 through 68742). The device-intensive procedures for
which the modified rate calculation methodology applies in CY 2010 were
displayed in Table 68 and in Addendum AA to the CY 2010 OPPS/ASC final
rule with comment period (74 FR 60610 through 60611, and 60692 through
60752).
(2) Changes to List of Covered Surgical Procedures Designated as Device
Intensive for CY 2011
In the CY 2011 OPPS/ASC proposed rule (75 FR 46338 through 46341),
we proposed to update the ASC list of covered surgical procedures that
are eligible for payment according to the device-intensive procedure
payment methodology for CY 2011, consistent with the proposed OPPS
device-dependent APC update, reflecting the proposed APC assignments of
procedures, designation of APCs as device-dependent, and APC device
offset percentages based on the CY 2009 OPPS claims and cost report
data

[[Page 72039]]

available for the proposed rule. The OPPS device-dependent APCs were
discussed further in section II.A.2.d.(1) of the proposed rule. The ASC
covered surgical procedures that we proposed to designate as device-
intensive and that would be subject to the device-intensive procedure
payment methodology for CY 2011 were listed in Table 48 in the CY 2011
OPPS/ASC proposed rule (75 FR 46339 through 46341).
Comment: Some commenters expressed general concerns regarding the
sufficiency of ASC payment for device-related services and recommended
modifications to the ASC device-intensive payment methodology. First,
the commenters argued that CMS should not adjust the device-related
portion of the ASC payment for device-intensive procedures by the wage
index. According to the commenters, the acquisition of devices occurs
on a national market, and the price is the same regardless of the
location of the ASC. Second, the commenters argued that CMS should not
apply the ASC conversion factor to the device-related portion of the
payment for all procedures for which CMS can establish a median device
cost, regardless of whether they meet the criteria to be designated as
device-intensive under the established methodology. The commenters
stated that, unlike ASCs' general abilities to achieve greater
operational efficiencies than HOPDs, ASCs are unable to extract greater
discounts on devices and expensive operative supplies than their
hospital counterparts.
Response: In the August 2, 2007 final rule (72 FR 42508), we
established that the modified payment methodology for calculating ASC
payment rates for device-intensive procedures shall apply to ASC
covered surgical procedures that are assigned to device-dependent APCs
under the OPPS for the same calendar year, where those APCs have a
device cost of greater than 50 percent of the APC cost (that is, the
device offset percentage is greater than 50). We continue to believe
these criteria ensure that ASC payment rates are adequate to provide
packaged payment for high cost implantable devices and ensure Medicare
beneficiaries have access to these procedures in all appropriate
settings of care. As we have stated in the past (74 FR 60609), we do
not agree that we should change our criteria and treat as device-
intensive those services that are assigned to APCs for which the device
offset percentage is less than 50 percent or ASC services that are not
assigned to device-dependent APCs. Under the modified payment
methodology for ASC covered surgical procedures designated as device-
intensive, we separately determine both the device payment and service
payment portions of the ASC payment rate, and apply the ASC conversion
factor only to the specifically calculated OPPS relative payment weight
for the service portion, while providing the same packaged payment for
the device portion as would be made under the OPPS. The 50-percent
device offset threshold is established to ensure that the ASC
conversion factor is not applied to the costs of high cost implantable
devices, which likely do not vary between ASCs and HOPDs in the same
manner service costs have been shown to vary. As we have stated in the
past (73 FR 68734 and 74 FR 60609), we continue to believe that when
device costs comprise less than 50 percent of total procedure costs,
those costs are less likely to be as predictable across sites-of-
service. Accordingly, we believe that it is possible for ASCs to
achieve efficiencies relative to HOPDs when providing those procedures,
and that the application of the ASC conversion factor to the entire ASC
payment weight is appropriate.
We also continue to believe it would not be appropriate to vary the
percentage of the national payment that is wage adjusted for different
services such as applying the wage index only to the service portion of
the ASC payment for device-intensive procedures as the commenters
request. Under the revised ASC payment system, we utilize 50 percent as
the labor-related share to adjust national ASC payment rates for
geographic wage differences. We apply to ASC payments the IPPS pre-
floor, pre-reclassification wage index values associated with the June
2003 OMB geographic localities, as recognized under the IPPS and OPPS,
in order to adjust the labor-related portion of the national ASC
payment rates for geographic wage differences. Consistent with the
OPPS, we apply the ASC geographic wage adjustment to the entire ASC
payment rate for device-intensive procedures. As we have noted in the
past (73 FR 68735 and 74 FR 60609), MedPAC has indicated its intent to
evaluate our method for adjusting payments for variations in labor
costs in light of differences in labor-related costs for device-
implantation services. We look forward to reviewing the results of its
evaluation, as well as any recommendations it may provide, regarding
the OPPS or ASC wage adjustment policy.
Comment: One commenter requested that CMS adjust the OPPS device
offset percentages for ASC device-intensive payment purposes to account
for the effects of charge compression, specifically for APCs 0385 and
0386. The commenter suggested that CMS ``decompress'' the supply median
costs to minimize any artificial reductions that charge compression
causes in the estimate of the OPPS device offset percentages.
Response: Charge compression is the practice of applying a lower
charge markup to higher-cost services and a higher charge markup to
lower-cost services. As a result of charge compression, the cost-based
OPPS 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. As discussed in the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68524), we did not adopt any short-term
statistical regression based adjustments under the OPPS that would
serve to ``decompress'' the median costs for procedures involving
devices, or for any other procedures. Rather, we chose to focus on
long-term changes to Medicare cost reporting to address the effects of
charge compression, including the creation of two new cost centers,
``Medical Supplies Charged to Patients'' and ``Implantable Devices
Charged to Patients,'' as discussed in more detail in the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60342 through 60346). As we
stated in that final rule with comment period, we believe that this
change to how hospitals report costs for devices and supplies will
improve our future estimates of costs related to high cost implantable
devices, including the device offset percentages upon which we base the
device portions of ASC payment rates for device-intensive procedures
(74 FR 60609).
Comment: Several commenters remarked on the adequacy of the
proposed payment rates calculated according to the ASC device-intensive
payment methodology for procedures involving auditory osseointegrated
devices, described by CPT codes 69714 (Implantation, osseointegrated
implant, temporal bone, with percutaneous attachment to external speech
processor/cochlear stimulator; without mastoidectomy); 69715
(Implantation, osseointegrated implant, temporal bone, with
percutaneous attachment to external speech processor/cochlear
stimulator; with mastoidectomy); 69717 (Replacement (including removal
of existing device), osseointegrated implant, temporal bone, with
percutaneous attachment to external speech processor/cochlear
stimulator;

[[Page 72040]]

without mastoidectomy); and 69718 (Replacement (including removal of
existing device), osseointegrated implant, temporal bone, with
percutaneous attachment to external speech processor/cochlear
stimulator; with mastoidectomy). The commenters expressed appreciation
for the proposed increase in payment for these procedures but indicated
that the proposed payment rates remain insufficient for covering ASCs'
costs for providing the procedures and requested that CMS further
increase these rates for CY 2011. They believed that the rates might
have a negative impact on the availability of these services in an ASC
setting and therefore might limit patient access. Other commenters
stated that paying ASCs a higher rate than hospital outpatient
departments would encourage movement of the procedures to the ``more
economical'' ASC environment.
Response: We appreciate commenters' support of the proposed payment
rates for procedures involving auditory osseointegrated devices, but we
disagree with the commenters' assertion that we should increase payment
rates for these procedures further in order to maintain beneficiary
access. We believe that the final CY 2011 ASC payment rates for these
procedures, calculated according to the ASC device-intensive
ratesetting methodology, are appropriate and adequate to ensure
beneficiaries have access to these procedures in the ASC setting.
Comment: Some commenters asked that CMS add to the ASC list of
device-intensive procedures those procedures that require items that
would have been separately payable under the Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule prior to the
implementation of the revised ASC payment system on January 1, 2008.
These commenters requested that specific procedures that were not
included in Table 48 of the CY 2011 OPPS/ASC proposed rule be
recognized as device-intensive for CY 2011, specifically those
procedures involving CPT codes 19325 (Mammaplasty, augmentation; with
prosthetic implant), 19340 (Immediate insertion of breast prosthesis
following mastopexy, mastectomy or in reconstruction), and 19357
(Breast reconstruction, immediate or delayed, with tissue expander,
including subsequent expansion). The commenters argued that the device
costs are inadequately covered in an ASC setting now that ASCs are no
longer paid separately under the DMEPOS fee schedule for the breast
prostheses used in these procedures.
Response: We appreciate commenters' recommendations on how we
should designate procedures as device-intensive under the revised ASC
payment system. In the August 2, 2007 revised ASC payment system final
rule (72 FR 42508), we established that the modified payment
methodology for calculating ASC payment rates for device-intensive
procedures shall apply to ASC covered surgical procedures that are
assigned to device-dependent APCs under the OPPS for the same calendar
year, where those APCs have a device cost of greater than 50 percent of
the APC cost (that is, the device offset percentage is greater than
50). We believe these criteria ensure that ASC payment rates are
adequate to provide packaged payment for high cost implantable devices
and ensure beneficiaries have access to these procedures in all
appropriate care settings. The procedure described by CPT code 19340 is
not assigned to a device-dependent APC under the OPPS, and while the
procedures described by CPT codes 19325 and 19357 are assigned to a
device-dependent APC under the OPPS (APC 0648 (Level IV Breast
Surgery)), the device offset percentage for this APC is less than 50
percent. Therefore, none of these procedures qualify as being
recognized as device-intensive for ASC payment purposes.
We do not agree that we should change our criteria and treat as
device-intensive all ASC services that map to OPPS device-dependent
APCs, or the subset of procedures that are assigned to OPPS device-
dependent APCs with device offset percentages less than 50 percent,
regardless of whether those procedures require items that would have
been separately payable under the DMEPOS fee schedule prior to the
implementation of the revised ASC payment system on January 1, 2008. We
continue to believe that our current criteria ensure that ASC payment
rates are adequate to provide packaged payment for high cost
implantable devices and ensure Medicare beneficiaries have access to
these procedures in all appropriate settings of care.
After consideration of the public comments we received, we are
designating the ASC covered surgical procedures displayed in Table 59
below as device-intensive for CY 2011. The CPT code, the CPT code short
descriptor, the CY 2011 ASC payment indicator, the CY 2011 OPPS APC
assignment, the OPPS APC Title, and the CY 2011 OPPS APC device offset
percentage are listed in Table 59. Each device-intensive procedure is
assigned payment indicator ``H8'' or ``J8,'' depending on whether it
was subject to transitional payment prior to CY 2011. All of these
procedures are included in Addendum AA to this final rule with comment
period. The OPPS device-dependent APCs are discussed further in section
II.A.2.d.(1) of this final rule with comment period. We note that, as
discussed in section II.A.2.d.9. of this final rule with comment
period, CPT code 64573 (incision for implantation of neurostimulator
electrodes; cranial nerve), which we had proposed to continue to
recognize as device-intensive for ASC payment purposes in CY 2011, is
being deleted effective January 1, 2011, and is being replaced by CPT
code 64568 (Incision for implantation of cranial nerve (e.g., vagus
nerve) neurostimulator electrode array and pulse generator). As we
discuss in that section, we are deleting APC 0225 (Implantation of
Neurostimulator Electrodes, Cranial Nerve), the APC to which CPT code
64573 was the only code assigned in CY 2010, and creating new APC 0318
(Implantation of Cranial Neurostimulator Pulse Generator and Electrode)
to which CPT code 64568 will be assigned. Because CPT code 64568 is
replacing CPT code 64573, we are recognizing CPT code 64568 as device-
intensive for ASC payment purposes for CY 2011. These CPT and APC
changes are reflected in Table 59, below.

[[Page 72041]]

Table 59--ASC Covered Surgical Procedures Designated as Device-Intensive for CY 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final CY 2011
Final CY 2011 device-
CY 2011 CPT code CY 2011 short descriptor ASC payment Final CY 2011 OPPS APC title dependent APC
indicator OPPS APC offset
percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
24361.................................... Reconstruct elbow joint.... H8 0425 Level II Arthroplasty or 59
Implantation with Prosthesis.
24363.................................... Replace elbow joint........ H8 0425 Level II Arthroplasty or 59
Implantation with Prosthesis.
24366.................................... Reconstruct head of radius. H8 0425 Level II Arthroplasty or 59
Implantation with Prosthesis.
25441.................................... Reconstruct wrist joint.... H8 0425 Level II Arthroplasty or 59
Implantation with Prosthesis.
25442.................................... Reconstruct wrist joint.... H8 0425 Level II Arthroplasty or 59
Implantation with Prosthesis.
25446.................................... Wrist replacement.......... H8 0425 Level II Arthroplasty or 59
Implantation with Prosthesis.
27446.................................... Revision of knee joint..... J8 0425 Level II Arthroplasty or 59
Implantation with Prosthesis.
33206.................................... Insertion of heart J8 0089 Insertion/Replacement of 71
pacemaker. Permanent Pacemaker and
Electrodes.
33207.................................... Insertion of heart J8 0089 Insertion/Replacement of 71
pacemaker. Permanent Pacemaker and
Electrodes.
33208.................................... Insertion of heart J8 0655 Insertion/Replacement/Conversion 74
pacemaker. of a permanent dual chamber
pacemaker.
33212.................................... Insertion of pulse H8 0090 Insertion/Replacement of 73
generator. Pacemaker Pulse Generator.
33213.................................... Insertion of pulse H8 0654 Insertion/Replacement of a 74
generator. permanent dual chamber
pacemaker.
33214.................................... Upgrade of pacemaker system J8 0655 Insertion/Replacement/Conversion 74
of a permanent dual chamber
pacemaker.
33224.................................... Insert pacing lead & J8 0418 Insertion of Left Ventricular 73
connect. Pacing Elect.
33225.................................... Lventric pacing lead add-on J8 0418 Insertion of Left Ventricular 73
Pacing Elect.
33240.................................... Insert pulse generator..... J8 0107 Insertion of Cardioverter- 88
Defibrillator.
33249.................................... Eltrd/insert pace-defib.... J8 0108 Insertion/Replacement/Repair of 87
Cardioverter-Defibrillator
Leads.
33282.................................... Implant pat-active ht J8 0680 Insertion of Patient Activated 71
record. Event Recorders.
53440.................................... Male sling procedure....... H8 0385 Level I Prosthetic Urological 61
Procedures.
53444.................................... Insert tandem cuff......... H8 0385 Level I Prosthetic Urological 61
Procedures.
53445.................................... Insert uro/ves nck H8 0386 Level II Prosthetic Urological 71
sphincter. Procedures.
53447.................................... Remove/replace ur sphincter H8 0386 Level II Prosthetic Urological 71
Procedures.
54400.................................... Insert semi-rigid H8 0385 Level I Prosthetic Urological 61
prosthesis. Procedures.
54401.................................... Insert self-contd H8 0386 Level II Prosthetic Urological 71
prosthesis. Procedures.
54405.................................... Insert multi-comp penis H8 0386 Level II Prosthetic Urological 71
pros. Procedures.
54410.................................... Remove/replace penis prosth H8 0386 Level II Prosthetic Urological 71
Procedures.
54416.................................... Remv/repl penis contain H8 0386 Level II Prosthetic Urological 71
pros. Procedures.
55873.................................... Cryoablate prostate........ H8 0674 Prostate Cryoablation........... 58
61885.................................... Insrt/redo neurostim 1 H8 0039 Level I Implantation of 86
array. Neurostimulator Generator.
61886.................................... Implant neurostim arrays... H8 0315 Level II Implantation of 88
Neurostimulator Generator.
62361.................................... Implant spine infusion pump H8 0227 Implantation of Drug Infusion 81
Device.
62362.................................... Implant spine infusion pump H8 0227 Implantation of Drug Infusion 81
Device.
63650.................................... Implant neuroelectrodes.... H8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
63655.................................... Implant neuroelectrodes.... J8 0061 Laminectomy, Laparoscopy, or 64
Incision for Implantation of
Neurostimulator Electr.
63685.................................... Insrt/redo spine n H8 0039 Level I Implantation of 86
generator. Neurostimulator Generator.
64553.................................... Implant neuroelectrodes.... H8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.

[[Page 72042]]

64555.................................... Implant neuroelectrodes.... J8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
64560.................................... Implant neuroelectrodes.... J8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
64561.................................... Implant neuroelectrodes.... H8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
64565.................................... Implant neuroelectrodes.... J8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
64568.................................... Implant neuroelectrodes.... J8 0318 Implantation of Neurostimulator 85
Electrodes, Cranial Nerve.
64575.................................... Implant neuroelectrodes.... H8 0061 Laminectomy, Laparoscopy, or 64
Incision for Implantation of
Neurostimulator Electr.
64577.................................... Implant neuroelectrodes.... H8 0061 Laminectomy, Laparoscopy, or 64
Incision for Implantation of
Neurostimulator Electr.
64580.................................... Implant neuroelectrodes.... H8 0061 Laminectomy, Laparoscopy, or 64
Incision for Implantation of
Neurostimulator Electr.
64581.................................... Implant neuroelectrodes.... H8 0061 Laminectomy, Laparoscopy, or 64
Incision for Implantation of
Neurostimulator Electr.
64590.................................... Insrt/redo pn/gastr stimul. H8 0039 Level I Implantation of 86
Neurostimulator Generator.
65770.................................... Revise cornea with implant. H8 0293 Level VI Anterior Segment Eye 56
Procedures.
69714.................................... Implant temple bone w/ H8 0425 Level II Arthroplasty or 59
stimul. Implantation with Prosthesis.
69715.................................... Temple bne implnt w/ H8 0425 Level II Arthroplasty or 59
stimulat. Implantation with Prosthesis.
69717.................................... Temple bone implant H8 0425 Level II Arthroplasty or 59
revision. Implantation with Prosthesis.
69718.................................... Revise temple bone implant. H8 0425 Level II Arthroplasty or 59
Implantation with Prosthesis.
69930.................................... Implant cochlear device.... H8 0259 Level VII ENT Procedures........ 85
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. ASC Treatment of Surgical Procedures Removed From the OPPS Inpatient
List for CY 2011
As we discussed in the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68724), we adopted a policy to include in our annual
evaluation procedures proposed for removal from the OPPS inpatient list
for possible inclusion on the ASC list of covered surgical procedures.
For the CY 2011 OPPS/ASC proposed rule, we evaluated each of the three
procedures we proposed to remove from the OPPS inpatient list for CY
2011 according to the criteria for exclusion from the list of covered
ASC surgical procedures (75 FR 46341). We stated in the CY 2011 OPPS/
ASC proposed rule (75 FR 46341) that we believe that all of these
procedures should continue to be excluded from the ASC list of covered
surgical procedures for CY 2011 because they would be expected to pose
a significant risk to beneficiary safety or to require an overnight
stay in ASCs. A full discussion about the APC Panel's recommendations
regarding the procedures we proposed to remove from the OPPS inpatient
list for CY 2011 may be found in section XI.B. of the CY 2011 OPPS/ASC
proposed rule (75 FR 46301 through 46302). The HCPCS codes for these
three procedures and their long descriptors were listed in Table 49 of
the CY 2011 OPPS/ASC proposed rule (75 FR 46342).
Comment: One commenter requested that we add CPT codes 21193
(reconstruction of mandibular rami, horizontal, vertical, C, or L
osteotomy; without bone graft) and 21395 (reconstruction of mandibular
rami and/or body, sagittal split; without internal rigid fixation) to
the ASC covered surgical procedure list.
Response: We do not agree with the commenter that we should add CPT
codes 21193 and 21395 to the ASC list of covered surgical procedures.
We continue to believe that these procedures should be excluded from
the ASC list of covered surgical procedures for CY 2011 because they
would be expected to pose a significant risk to beneficiary safety or
to require an overnight stay in ASCs.
After consideration of the public comment we received, we are
finalizing our proposal, without modification, to continue to exclude
the procedures described by the CPT codes listed in Table 49 of the CY
2011 OPPS/ASC proposed rule, and restated in Table 60 below, from the
ASC list of covered surgical procedures.

Table 60--Procedures Excluded From the ASC List of Covered Procedures
for CY 2011 That Were Removed From the CY 2011 OPPS Inpatient List
------------------------------------------------------------------------
CY 2011 CPT code CY 2011 long descriptor
------------------------------------------------------------------------
21193.................... Reconstruction of mandibular rami,
horizontal, vertical, C, or L osteotomy;
without bone graft.
21395.................... Open treatment of orbital floor blowout
fracture; periorbital approach with bone
graft (includes obtaining graft).

[[Page 72043]]

25909.................... Amputation, forearm, through radius and ulna;
re-amputation.
------------------------------------------------------------------------

2. Covered Ancillary Services
Consistent with the established ASC payment system policy, in the
CY 2011 OPPS/ASC proposed rule (75 FR 46342), we proposed to update the
ASC list of covered ancillary services to reflect the proposed payment
status for the services under the CY 2011 OPPS. Maintaining consistency
with the OPPS may result in proposed changes to ASC payment indicators
for some covered ancillary items and services because of changes that
are being proposed under the OPPS for CY 2011. For example, a covered
ancillary service that was separately paid under the revised ASC
payment system in CY 2010 may be proposed for packaged status under the
CY 2011 OPPS and, therefore, also under the ASC payment system for CY
2011. Comment indicator ``CH,'' discussed in section XV.F. of the CY
2011 OPPS/ASC proposed rule (75 FR 46356), was used in Addendum BB to
that proposed rule to indicate covered ancillary services for which we
proposed a change in the ASC payment indicator to reflect a proposed
change in the OPPS treatment of the service for CY 2011.
Except for the Level II HCPCS codes listed in Table 41 of the CY
2011 OPPS/ASC proposed rule (75 FR 46327), all ASC covered ancillary
services and their proposed payment indicators for CY 2011 were
included in Addendum BB to that proposed rule.
We did not receive any public comments on our proposal. Therefore,
we are finalizing, without modification, our proposal to update the ASC
list of covered ancillary services to reflect the payment status for
the services under the OPPS. All CY 2011 ASC covered ancillary services
and their final payment indicators are included in Addendum BB to this
final rule with comment period.

D. ASC Payment for Covered Surgical Procedures and Covered Ancillary
Services

1. Payment for Covered Surgical Procedures
a. Background
Our ASC payment policies for covered surgical procedures under the
revised ASC payment system are fully described in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66828 through 66831). Under our
established policy for the revised ASC payment system, the ASC standard
ratesetting methodology of multiplying the ASC relative payment weight
for the procedure by the ASC conversion factor for that same year is
used to calculate the national unadjusted payment rates for procedures
with payment indicator ``G2.'' For procedures assigned payment
indicator ``A2,'' our final policy established blended rates to be used
during the transitional period and, beginning in CY 2011, ASC rates
calculated according to the ASC standard ratesetting methodology. The
rate calculation established for device intensive procedures (payment
indicators ``H8'' and ``J8'') is structured so that the packaged device
payment amount is the same as under the OPPS, and only the service
portion of the rate is subject to the ASC standard ratesetting
methodology. In the CY 2010 OPPS/ASC final rule with comment period (74
FR 60596 through 60629), we updated the CY 2009 ASC payment rates for
ASC covered surgical procedures with payment indicators of ``A2,''
``G2,'' ``H8,'' and ``J8'' using CY 2008 data, consistent with the CY
2010 OPPS update. Payment rates for device-intensive procedures also
were updated to incorporate the CY 2010 OPPS device offset percentages.
Payment rates for office-based procedures (payment indicators
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS non-facility PE
RVU amount (we refer readers to the CY 2011 MPFS final rule with
comment period) or the amount calculated using the ASC standard
ratesetting methodology for the procedure. In the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60596 through 60629), we updated
the payment amounts for office-based procedures (payment indicators
``P2,'' ``P3,'' and ``R2'') using the most recent available MPFS and
OPPS data. We compared the estimated CY 2010 rate for each of the
office-based procedures, calculated according to the ASC standard
ratesetting methodology, to the MPFS nonfacility PE RVU amount
(multiplied by the conversion factor) to determine which was lower and,
therefore, would be the CY 2010 payment rate for the procedure
according to the final policy of the revised ASC payment system (Sec.
416.171(d)).
b. Update to ASC-Covered Surgical Procedure Payment Rates for CY 2011
In the CY 2011 OPPS/ASC proposed rule (75 FR 46342 through 46343),
we proposed to update ASC payment rates for CY 2011 using the
established rate calculation methodologies under Sec. 416.171. Under
Sec. 416.171(c)(4), the transitional payment rates are no longer used
for CY 2011 and subsequent calendar years for a covered surgical
procedure designated in accordance with Sec. 416.166. Thus, we
proposed to calculate CY 2011 payments for procedures formerly subject
to the transitional payment methodology (payment indicators ``A2'' and
``H8'') using the proposed CY 2011 ASC rate calculated according to the
ASC standard ratesetting methodology, incorporating the device-
intensive procedure methodology, as appropriate, for procedures
assigned ASC payment indicator ``H8.'' We did not propose to modify the
payment indicators for procedures that were subject to transitional
payment prior to CY 2011 but will consider doing so in future
rulemaking. We proposed to continue to use the amount calculated under
the ASC standard ratesetting methodology for procedures assigned
payment indicator ``G2.''
We proposed that payment rates for office-based procedures (payment
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures
that were not subject to transitional payment (payment indicator
``J8'') be calculated according to our established policies,
incorporating the device-intensive procedure methodology as
appropriate. Thus, we proposed to update the payment amounts for
device-intensive procedures based on the CY 2011 OPPS proposal that
reflects updated OPPS device offset percentages, and to make payment
for office-based procedures at the lesser of the CY 2011 proposed MPFS
non-facility PE RVU amount or the proposed CY 2011 ASC payment amount
calculated according to the standard ratesetting methodology.

[[Page 72044]]

Comment: One commenter did not understand the rationale for the
payment rate for the following CPT codes: (1) CPT code 62319
(injection, including catheter placement, continuous infusion or
intermittent bolus, not including neurolytic substances, with or
without contrast (for either localization or epidurography), of
diagnostic or therapeutic substance(s) (including anesthetic,
antispasmodic, opioid, steroid, other solution), epidural or
subarachnoid; lumbar, sacral (caudal)), which the commenter stated
should be paid at a rate similar to CPT codes 62318 (injection,
including catheter placement, continuous infusion or intermittent
bolus, not including neurolytic substances, with or without contrast
(for either localization or epidurography), of diagnostic or
therapeutic substance(s) (including anesthetic, antispasmodic, opioid,
steroid, other solution), epidural or subarachnoid; cervical or
thoracic), 62310 (injection, single (not via indwelling catheter), not
including neurolytic substances, with or without contrast (for either
localization or epidurography), of diagnostic or therapeutic
substance(s) (including anesthetic, antispasmodic, opioid, steroid,
other solution), epidural or subarachnoid; cervical or thoracic); or
62311 (injection, single (not via indwelling catheter), not including
neurolytic substances, with or without contrast (for either
localization or epidurography), of diagnostic or therapeutic
substance(s) (including anesthetic, antispasmodic, opioid, steroid,
other solution), epidural or subarachnoid; lumbar, sacral (caudal));
(2) CPT code 64410 (injection, anesthetic agent; phrenic nerve), which
the commenter stated should be paid at a rate similar to CPT codes
64415 (injection, anesthetic agent; brachial plexus, single), 64417
(injection, anesthetic agent; axillary nerve), or 64420 (injection,
anesthetic agent; intercostal nerve, single); and (3) CPT code 64626
(destruction by neurolytic agent, paravertebral facet joint nerve;
cervical or thoracic, single level), which the commenter stated should
be paid at rate similar to CPT code 64622 (destruction by neurolytic
agent, paravertebral facet joint nerve; lumbar or sacral, single
level).
Response: We reviewed the proposed payment rates, payment
indicators, and OPPS APC assignments for these three procedures and
found that they are all correct. Because these procedures are assigned
payment indicator ``A2'' under the revised ASC payment system, their
payment is calculated using the ASC standard ratesetting methodology of
multiplying the ASC relative payment weight for the procedure by the
ASC conversion factor for the same year. We do not agree with the
commenter that there is any basis to deviate from our standard
ratesetting methodology for these procedures under the revised ASC
payment system. The standard ASC methodology is based on OPPS APC
groups; since these codes are assigned to different APCs, different
payment rates are appropriate for these codes.
After consideration of the public comment we received, we are
finalizing our CY 2011 proposal, without modification, to calculate the
CY 2011 final ASC payment rates for ASC-covered surgical procedures
according to our established methodologies.
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial
Credit Devices
Our ASC policy with regard to payment for costly devices implanted
in ASCs at no cost or with full or partial credit as set forth in Sec.
416.179 is consistent with the OPPS policy. The CY 2011 OPPS APCs and
devices subject to the adjustment policy are discussed in section
IV.B.2. of this final rule with comment period. The established ASC
policy includes adoption of the OPPS policy for reduced payment to
providers when a specified device is furnished without cost or with
full or partial credit for the cost of the device for those ASC covered
surgical procedures that are assigned to APCs under the OPPS to which
this policy applies. We refer readers to the CY 2009 OPPS/ASC final
rule with comment period for a full discussion of the ASC payment
adjustment policy for no cost/full credit and partial credit devices
(73 FR 68742 through 68745).
In the CY 2011 OPPS/ASC proposed rule (75 FR 46343), consistent
with the OPPS, we proposed to update the list of ASC covered device
intensive procedures and devices that would be subject to the no cost/
full credit and partial credit device adjustment policy for CY 2011.
Table 50 of the CY 2011 OPPS/ASC proposed rule (75 FR 46344 through
46346) displayed the ASC covered device-intensive procedures that we
proposed would be subject to the no cost/full credit and partial credit
device adjustment policy for CY 2011. Specifically, when a procedure
that is listed in Table 50 is performed to implant a device that is
listed in Table 51 of the CY 2011 OPPS/ASC proposed rule (75 FR 46347),
where that device is furnished at no cost or with full credit from the
manufacturer, the ASC would append the HCPCS ``FB'' modifier on the
line with the procedure to implant the device. The contractor would
reduce payment to the ASC by the device offset amount that we estimate
represents the cost of the device when the necessary device is
furnished without cost to the ASC or with full credit. We would provide
the same amount of payment reduction based on the device offset amount
in ASCs that would apply under the OPPS under the same circumstances.
We stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46343) that we
continue to believe that the reduction of ASC payment in these
circumstances is necessary to pay appropriately for the covered
surgical procedure being furnished by the ASC.
We also proposed to reduce the payment for implantation procedures
listed in Table 50 of the CY 2011 OPPS/ASC proposed rule by one-half of
the device offset amount that would be applied if a device was provided
at no cost or with full credit, if the credit to the ASC is 50 percent
or more of the cost of the new device. The ASC would append the HCPCS
``FC'' modifier to the HCPCS code for a surgical procedure listed in
Table 50 of the CY 2011 OPPS/ASC proposed rule when the facility
receives a partial credit of 50 percent or more of the cost of a device
listed in Table 51 of the CY 2011 OPPS/ASC proposed rule. In order to
report that they received a partial credit of 50 percent or more of the
cost of a new device, ASCs would have the option of either: (1)
Submitting the claim for the device replacement procedure to their
Medicare contractor after the procedure's performance but prior to
manufacturer acknowledgment of credit for the device, and subsequently
contacting the contractor regarding a claim adjustment once the credit
determination is made; or (2) holding the claim for the device
implantation procedure until a determination is made by the
manufacturer on the partial credit and submitting the claim with the
``FC'' modifier appended to the implantation procedure HCPCS code if
the partial credit is 50 percent or more of the cost of the replacement
device. Beneficiary coinsurance would continue to be based on the
reduced payment amount.
We did not receive any comments on our CY 2011 proposal to continue
the no cost/full credit and partial credit device adjustment policy for
ASCs. For CY 2011, as we proposed, we will reduce the payment for the
device implantation procedures listed in Table 61, below, by the full
device offset amount for no cost/full credit cases. ASCs must append
the modifier ``FB'' to the HCPCS procedure code when the device
furnished without cost or with full credit is listed in Table

[[Page 72045]]

62, below, and the associated implantation procedure code is listed in
Table 61 In addition, for CY 2011, we will reduce the payment for
implantation procedures listed in Table 61 by one half of the device
offset amount that would be applied if a device were provided at no
cost or with full credit, if the credit to the ASC is 50 percent or
more of the device cost. If the ASC receives a partial credit of 50
percent or more of the cost of a device listed in Table 62, the ASC
must append the modifier ``FC'' to the associated implantation
procedure code if the procedure is listed in Table 61. We note that, as
discussed in section II.A.2.d.9. of this final rule with comment
period, CPT code 64573 (incision for implantation of neurostimulator
electrodes; cranial nerve), which we had proposed to continue to
recognize as subject to the no cost/full credit and partial credit
device adjustment for ASCs in CY 2011, is being deleted effective
January 1, 2011, and is being replaced by CPT code 64568 (incision for
implantation of cranial nerve (e.g., vagus nerve) neurostimulator
electrode array and pulse generator). As we discuss in that section, we
are deleting APC 0225 (Implantation of Neurostimulator Electrodes,
Cranial Nerve), the APC to which CPT code 64573 was the only code
assigned in CY 2010, and creating new APC 0318 (Implantation of Cranial
Neurostimulator Pulse Generator and Electrode) to which we are
assigning CPT code 64568. Because CPT code 64568 is replacing CPT code
64573, we are recognizing CPT code 64568 as subject to the no cost/full
credit and partial credit device adjustment for ASCs in CY 2011. These
CPT and APC changes are reflected in Table 61, below.

Table 61--CY 2011 Procedures To Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Applies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final CY Final CY
Final CY Final CY 2011 OPPS 2011 OPPS
CY 2011 CPT Code CY 2011 Short descriptor 2011 ASC 2011 OPPS OPPS APC Title full APC partial APC
payment APC offset offset
indicator percentage percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
24361.................................... Reconstruct elbow joint..... H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
24363.................................... Replace elbow joint......... H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
24366.................................... Reconstruct head of radius.. H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
25441.................................... Reconstruct wrist joint..... H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
25442.................................... Reconstruct wrist joint..... H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
25446.................................... Wrist replacement........... H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
27446.................................... Revision of knee joint...... J8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
33206.................................... Insertion of heart pacemaker J8 0089 Insertion/Replacement of 71 35
Permanent Pacemaker and
Electrodes.
33207.................................... Insertion of heart pacemaker J8 0089 Insertion/Replacement of 71 35
Permanent Pacemaker and
Electrodes.
33208.................................... Insertion of heart pacemaker J8 0655 Insertion/Replacement/ 74 37
Conversion of a permanent
dual chamber pacemaker.
33212.................................... Insertion of pulse generator H8 0090 Insertion/Replacement of 73 36
Pacemaker Pulse Generator.
33213.................................... Insertion of pulse generator H8 0654 Insertion/Replacement of a 74 37
permanent dual chamber
pacemaker.
33214.................................... Upgrade of pacemaker system. J8 0655 Insertion/Replacement/ 74 37
Conversion of a permanent
dual chamber pacemaker.
33224.................................... Insert pacing lead & connect J8 0418 Insertion of Left 73 36
Ventricular Pacing Elect.
33225.................................... Lventric pacing lead add-on. J8 0418 Insertion of Left 73 36
Ventricular Pacing Elect.
33240.................................... Insert pulse generator...... J8 0107 Insertion of Cardioverter- 88 44
Defibrillator.
33249.................................... Eltrd/insert pace-defib..... J8 0108 Insertion/Replacement/ 87 44
Repair of Cardioverter-
Defibrillator Leads.
33282.................................... Implant pat-active ht record J8 0680 Insertion of Patient 71 35
Activated Event Recorders.
53440.................................... Male sling procedure........ H8 0385 Level I Prosthetic 61 31
Urological Procedures.
53444.................................... Insert tandem cuff.......... H8 0385 Level I Prosthetic 61 31
Urological Procedures.

[[Page 72046]]

53445.................................... Insert uro/ves nck sphincter H8 0386 Level II Prosthetic 71 36
Urological Procedures.
53447.................................... Remove/replace ur sphincter. H8 0386 Level II Prosthetic 71 36
Urological Procedures.
54400.................................... Insert semi-rigid prosthesis H8 0385 Level I Prosthetic 61 31
Urological Procedures.
54401.................................... Insert self-contd prosthesis H8 0386 Level II Prosthetic 71 36
Urological Procedures.
54405.................................... Insert multi-comp penis pros H8 0386 Level II Prosthetic 71 36
Urological Procedures.
54410.................................... Remove/replace penis prosth. H8 0386 Level II Prosthetic 71 36
Urological Procedures.
54416.................................... Remv/repl penis contain pros H8 0386 Level II Prosthetic 71 36
Urological Procedures.
61885.................................... Insrt/redo neurostim 1 array H8 0039 Level I Implantation of 86 43
Neurostimulator Generator.
61886.................................... Implant neurostim arrays.... H8 0315 Level II Implantation of 88 44
Neurostimulator Generator.
62361.................................... Implant spine infusion pump. H8 0227 Implantation of Drug 81 41
Infusion Device.
62362.................................... Implant spine infusion pump. H8 0227 Implantation of Drug 81 41
Infusion Device.
63650.................................... Implant neuroelectrodes..... H8 0040 Percutaneous Implantation 58 29
of Neurostimulator
Electrodes.
63655.................................... Implant neuroelectrodes..... J8 0061 Laminectomy, Laparoscopy, 64 32
or Incision for
Implantation of
Neurostimulator Electr.
63685.................................... Insrt/redo spine n generator H8 0039 Level I Implantation of 86 43
Neurostimulator Generator.
64553.................................... Implant neuroelectrodes..... H8 0040 Percutaneous Implantation 58 29
of Neurostimulator
Electrodes.
64555.................................... Implant neuroelectrodes..... J8 0040 Percutaneous Implantation 58 29
of Neurostimulator
Electrodes.
64560.................................... Implant neuroelectrodes..... J8 0040 Percutaneous Implantation 58 29
of Neurostimulator
Electrodes.
64561.................................... Implant neuroelectrodes..... H8 0040 Percutaneous Implantation 58 29
of Neurostimulator
Electrodes.
64565.................................... Implant neuroelectrodes..... J8 0040 Percutaneous Implantation 58 29
of Neurostimulator
Electrodes.
64568.................................... Implant neuroelectrodes..... H8 0318 Implantation of 85 43
Neurostimulator
Electrodes, Cranial Nerve.
64575.................................... Implant neuroelectrodes..... H8 0061 Laminectomy, Laparoscopy, 64 32
or Incision for
Implantation of
Neurostimulator Electr.
64577.................................... Implant neuroelectrodes..... H8 0061 Laminectomy, Laparoscopy, 64 32
or Incision for
Implantation of
Neurostimulator Electr.
64580.................................... Implant neuroelectrodes..... H8 0061 Laminectomy, Laparoscopy, 64 32
or Incision for
Implantation of
Neurostimulator Electr.
64581.................................... Implant neuroelectrodes..... H8 0061 Laminectomy, Laparoscopy, 64 32
or Incision for
Implantation of
Neurostimulator Electr.
64590.................................... Insrt/redo pn/gastr stimul.. H8 0039 Level I Implantation of 86 43
Neurostimulator Generator.
69714.................................... Implant temple bone w/stimul H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
69715.................................... Temple bne implnt w/stimulat H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
69717.................................... Temple bone implant revision H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
69718.................................... Revise temple bone implant.. H8 0425 Level II Arthroplasty or 59 30
Implantation with
Prosthesis.
69930.................................... Implant cochlear device..... H8 0259 Level VII ENT Procedures... 85 43
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 72047]]

Table 62--Devices For Which the ``FB'' OR ``FC'' Modifier Must be
Reported With the Procedure Code in CY 2011 When Furnished at No Cost or
With Full or Partial Credit
------------------------------------------------------------------------
CY 2011 device HCPCS code CY 2011 short descriptor
------------------------------------------------------------------------
C1721.............................. AICD, dual chamber.
C1722.............................. AICD, single chamber.
C1764.............................. Event recorder, cardiac.
C1767.............................. Generator, neurostim, imp.
C1771.............................. Rep dev, urinary, w/sling.
C1772.............................. Infusion pump, programmable.
C1776.............................. Joint device (implantable).
C1778.............................. Lead, neurostimulator.
C1779.............................. Lead, pmkr, transvenous VDD.
C1785.............................. Pmkr, dual, rate-resp.
C1786.............................. Pmkr, single, rate-resp.
C1813.............................. Prosthesis, penile, inflatab.
C1815.............................. Pros, urinary sph, imp.
C1820.............................. Generator, neuro rechg bat sys.
C1881.............................. Dialysis access system.
C1882.............................. AICD, other than sing/dual.
C1891.............................. Infusion pump, non-prog, perm.
C1897.............................. Lead, neurostim, test kit.
C1898.............................. Lead, pmkr, other than trans.
C1900.............................. Lead coronary venous.
C2619.............................. Pmkr, dual, non rate-resp.
C2620.............................. Pmkr, single, non rate-resp.
C2621.............................. Pmkr, other than sing/dual.
C2622.............................. Prosthesis, penile, non-inf.
C2626.............................. Infusion pump, non-prog, temp.
C2631.............................. Rep dev, urinary, w/o sling.
L8614.............................. Cochlear device/system.
L8680.............................. Implt neurostim elctr each.
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.
------------------------------------------------------------------------

d. Waiver of Coinsurance and Deductible for Certain Preventive Services
As discussed in detail in section XII.B. of the CY 2011 OPPS/ASC
proposed rule (75 FR 46310 through 46316) and in the CY 2011 MPFS
proposed rule (75 FR 40129 through 40136), sections 4104(b) and 10406
of the Affordable Care Act amended section 1833(a)(1) of the Act, in
pertinent part, to waive the coinsurance for those preventive services
under section 1861(ddd)(3)(A) of the Act as described in section
1861(ww)(2) of the Act (excluding electrocardiograms) that are
recommended by the USPSTF with a grade of A or B for any indication or
population and that are appropriate for the individual. Section 4104(c)
of the Affordable Care Act amended section 1833(b)(1) of the Act to
waive the Part B deductible for these preventive services. These
provisions apply to these items and services furnished in ASCs on or
after January 1, 2011. In section XII.B. of the CY 2011 OPPS/ASC
proposed rule (75 FR 46310 through 46316) and in the CY 2011 MPFS
proposed rule (75 FR 40129 through 40136), we proposed to define the
preventive services to which this provision applies and to apply the
criteria specified in section 4104 of the Affordable Care Act for the
waiver of coinsurance and deductible.
Table 52 of the CY 2011 OPPS/ASC proposed rule (75 FR 46348 through
46350) identified the ASC covered surgical and ancillary services that
we proposed to include in the definition of preventive services in
section XII.B. of the proposed rule and in the CY 2011 MPFS proposed
rule. All of the ASC covered surgical and ancillary services that are
included in the chart below are preventive services that are
recommended by the USPSTF with a grade of A or B. Therefore, we
proposed to update Sec. 416.160(a)(4) and add new Sec. 416.160(a)(5)
on the scope and basis of the ASC regulations and to update Sec.
410.152(i) to reflect the waiver of coinsurance and deductible for
these services.
Comment: Several commenters supported CMS' proposed implementation
of the Affordable Care Act provision to waive beneficiary cost sharing
for preventive services identified in section 1861(ddd)(3)(A) of the
Act, and recommended by the USPSTF with a grade of A or B for any
indication or population that are appropriate for the individual, and
urged CMS to finalize the proposed policy.
Response: We appreciate commenters' support of our proposed
implementation of sections 4104 and 10406 of the Affordable Care Act.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to waive beneficiary
cost sharing for preventive services identified in section
1861(ddd)(3)(A) of the Act, and recommended by the USPSTF with a grade
of A or B for any indication or population that are appropriate for the
individual. Table 63, below, identifies the ASC covered surgical and
ancillary services that are included in the definition of preventive
services in section XII.B. of this final rule with comment period and
in the CY 2011 MPFS final rule with comment period. All of the ASC
covered surgical and ancillary services that are included in the chart
below are preventive services that are recommended by the USPSTF with a
grade of A or B. We note that, as reflected in Table 63, effective
January 1, 2011, CPT code 90658 is no longer payable under the ASC
payment system and has been replaced by the following HCPCS codes:
Q2035 (Influenza virus vaccine, split virus, when administered to
individuals 3 years of age and older, for intramuscular use (afluria)),
Q2036 (Influenza virus vaccine, split virus, when administered to
individuals 3 years of age and older, for intramuscular use
(flulaval)), Q2037 (Influenza virus vaccine, split virus, when
administered to individuals 3 years of age and older, for intramuscular
use (fluvirin)), Q2038 (Influenza virus vaccine, split virus, when
administered to individuals 3 years of age and older, for intramuscular
use (fluzone)), and Q2039 (Influenza virus vaccine, split virus, when
administered to individuals 3 years of age and older, for intramuscular
use (not otherwise specified)).
We also are implementing our proposal, without modification, to
update Sec. 416.160(a)(4) and add new Sec. 416.160(a)(5) on the scope
and basis of the ASC regulations and to update Sec. 410.152(i) to
reflect the waiver of coinsurance and deductible for these services.

Table 63--CY 2011 ASC Preventive Services For Which Coinsurance and Deductible Are Waived in CY 2011
----------------------------------------------------------------------------------------------------------------
CY 2011 CPT/
Service HCPCS code CY 2011 Long descriptor CY 2011 Coins./ deductible
----------------------------------------------------------------------------------------------------------------
Bone Mass Measurement.............. G0130 Single energy x-ray Waived.
absorptiometry (sexa)
bone density study, one
or more sites;
appendicular skeleton
(peripheral) (e.g.,
radius, wrist, heel).
77078 Computed tomography, bone Waived.
mineral density study, 1
or more sites; axial
skeleton (e.g., hips,
pelvis, spine).
77079 Computed tomography, bone Waived.
mineral density study, 1
or more sites;
appendicular skeleton
(peripheral) (e.g.,
radius, wrist, heel).
77080 Dual-energy x-ray Waived.
absorptiometry (dxa),
bone density study, 1 or
more sites; axial
skeleton (e.g., hips,
pelvis, spine).

[[Page 72048]]

77081 Dual-energy x-ray Waived.
absorptiometry (dxa),
bone density study, 1 or
more sites; appendicular
skeleton (peripheral)
(e.g., radius, wrist,
heel).
77083 Radiographic Waived.
absorptiometry (e.g.,
photodensitometry,
radiogrammetry), 1 or
more sites.
76977 Ultrasound bone density Waived.
measurement and
interpretation,
peripheral site(s), any
method.
Colorectal Cancer Screening........ G0104 Colorectal cancer Waived.
screening; flexible
sigmoidoscopy.
G0105 Colorectal cancer Waived.
screening; colonoscopy on
individual at high risk.
G0121 Colorectal cancer Waived.
screening; colonoscopy on
individual not meeting
criteria for high risk.
Influenza Virus Vaccine............ 90655 Influenza virus vaccine, Waived.
split virus, preservative
free, when administered
to children 6-35 months
of age, for intramuscular
use.
90656 Influenza virus vaccine, Waived.
split virus, preservative
free, when administered
to individuals 3 years
and older, for
intramuscular use.
90657 Influenza virus vaccine, Waived.
split virus, when
administered to children
6-35 months of age, for
intramuscular use.
Q2035 Influenza virus vaccine, Waived.
split virus, when
administered to
individuals 3 years of
age and older, for
intramuscular use
(afluria).
Q2036 Influenza virus vaccine, Waived.
split virus, when
administered to
individuals 3 years of
age and older, for
intramuscular use
(flulaval).
Q2037 Influenza virus vaccine, Waived.
split virus, when
administered to
individuals 3 years of
age and older, for
intramuscular use
(fluvirin).
Q2038 Influenza virus vaccine, Waived.
split virus, when
administered to
individuals 3 years of
age and older, for
intramuscular use
(fluzone).
Q2039 Influenza virus vaccine, Waived.
split virus, when
administered to
individuals 3 years of
age and older, for
intramuscular use (not
otherwise specified).
90660 Influenza virus vaccine, Waived.
live, for intranasal use.
90662 Influenza virus vaccine, Waived.
split virus, preservative
free, enhanced
immunogenicity via
increased antigen
content, for
intramuscular use.
G9141 Influenza a (h1n1) Waived.
immunization
administration (includes
the physician counseling
the patient/family).
G9142 Influenza a (h1n1) Waived.
vaccine, any route of
administration.
Pneumococcal Vaccine............... 90669 Pneumococcal conjugate Waived.
vaccine, polyvalent, when
administered to children
younger than 5 years, for
intramuscular use.
90670 Pneumococcal conjugate Waived.
vaccine, 13 valent, for
intramuscular use.
90732 Pneumococcal Waived.
polysaccharide vaccine,
23-valent, adult or
immunosuppressed patient
dosage, when administered
to individuals 2 years or
older, for subcutaneous
or intramuscular use.
Hepatitis B Vaccine................ 90740 Hepatitis B vaccine, Waived.
dialysis or
immunosuppressed patient
dosage (3 dose schedule),
for intramuscular use.
90743 Hepatitis B vaccine, Waived.
adolescent (2 dose
schedule), for
intramuscular use.
90744 Hepatitis B vaccine, Waived.
pediatric/adolescent
dosage (3 dose schedule),
for intramuscular use.
90746 Hepatitis B vaccine, adult Waived.
dosage, for intramuscular
use.
90747 Hepatitis B vaccine, Waived.
dialysis or
immunosuppressed patient
dosage (4 dose schedule),
for intramuscular use.
----------------------------------------------------------------------------------------------------------------

Section 4104(c) of the Affordable Care Act amended section 1833(b)
of the Act to waive the Part B deductible for colorectal cancer
screening tests that become diagnostic. Specifically, section
4104(c)(2) of the Affordable Care Act waives the deductible with
respect to a colorectal cancer screening test ``regardless of the code
that is billed for the establishment of a diagnosis as a result of the
test, or for the removal of tissue or other matter or other procedure
that is furnished in connection with, as a result of, and in the same
clinical encounter as a screening test.'' As discussed in section
XII.B.3. of the CY 2011 OPPS/ASC proposed rule (75 FR 46317) and in the
CY 2011 MPFS proposed rule (75 FR 40136), we proposed that all surgical
services furnished on the same date as a planned screening colonoscopy
or planned flexible sigmoidoscopy would be considered as being
``furnished in connection with, as a result of, and in the same
clinical encounter as the screening test.'' We stated that we believe
this interpretation is appropriate because we believe that it would be
very rare for an unrelated surgery to occur on the same date as one of
these scheduled screening tests. Moreover, we stated that we believe
that the risk of improper expenditures would be very small under this
policy because it is the deductible, and not the coinsurance, that is
waived for the related procedures other than the screening tests. In
the event of a legislative change to this policy (for example, a
statutory change that would waive the coinsurance for these related
services in addition to the deductible), we stated that we would
reassess the appropriateness of this proposed definition of services
that are furnished in connection with, as a result of, and in the same
clinical encounter as the colorectal cancer screening test that becomes
diagnostic. We also noted that the annual deductible would likely be
met when any surgical procedure (related or not) is performed on the
same day as the scheduled screening test.

[[Page 72049]]

We proposed to implement this provision by creating a HCPCS
modifier that ASCs would append to the diagnostic procedure code that
is reported instead of the screening colonoscopy or screening flexible
sigmoidoscopy HCPCS code. The claims processing system would respond to
the modifier by waiving the deductible for all surgical services on the
same date as the diagnostic test. Coinsurance or copayment would
continue to apply to the diagnostic test and to other services
furnished in connection with, as a result of, and in the same clinical
encounter as the screening test.
Comment: Several commenters supported CMS' proposal to extend the
waiver on the deductible to surgical services provided on the same date
as a colorectal cancer screening test, such as a planned screening
colonoscopy or planned flexible sigmoidoscopy, when these become
diagnostic. Commenters supported the proposed creation of a HCPCS
modifier that would be appended to the diagnostic procedure code that
is reported instead of the screening colonoscopy or screening flexible
sigmoidoscopy HCPCS code when the screening test becomes a diagnostic
service.
Response: We appreciate commenters' support of our proposed
implementation of section 4104(c) of the Affordable Care Act.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, that all surgical
services furnished on the same date as a planned screening colonoscopy
or planned flexible sigmoidoscopy be viewed as being furnished in
connection with, as a result of, and in the same clinical encounter as
the screening test for purposes of implementing section 4104(c)(2) of
the Affordable Care Act. We are creating new HCPCS modifier ``PT,''
effective January 1, 2011, that ASCs will append to the diagnostic
procedure code that is reported instead of the screening colonoscopy or
screening flexible sigmoidoscopy HCPCS code when the screening test
becomes a diagnostic service.
2. Payment for Covered Ancillary Services
a. Background
Our final payment policies under the revised ASC payment system for
covered ancillary services vary according to the particular type of
service and its payment policy under the OPPS. Our overall policy
provides separate ASC payment for certain ancillary items and services
integrally related to the provision of ASC covered surgical procedures
that are paid separately under the OPPS and provides packaged ASC
payment for other ancillary items and services that are packaged under
the OPPS. Thus, we established a final policy to align ASC payment
bundles with those under the OPPS (72 FR 42495).
Our ASC payment policies provide separate payment for drugs and
biologicals that are separately paid under the OPPS at the OPPS rates,
while we pay for separately payable radiology services at the lower of
the MPFS non-facility PE RVU (or technical component) amount or the
rate calculated according to the ASC standard ratesetting methodology
(72 FR 42497). In all cases, ancillary items and services must be
provided integral to the performance of ASC covered surgical procedures
for which the ASC bills Medicare, in order for those ancillary services
also to be paid.
ASC payment policy for brachytherapy sources generally mirrors the
payment policy under the OPPS. We finalized our policy in the CY 2008
OPPS/ASC final rule with comment period (72 FR 42499) to pay for
brachytherapy sources applied in ASCs at the same prospective rates
that were adopted under the OPPS or, if OPPS rates were unavailable, at
contractor-priced rates. Subsequent to publication of that rule,
section 106 of the Medicare, Medicaid, and SCHIP Extension Act of 2007
(Pub. L. 110-173) mandated that, for the period January 1, 2008 through
June 30, 2008, brachytherapy sources be paid under the OPPS at charges
adjusted to cost. Therefore, consistent with our final overall ASC
payment policy, we paid ASCs at contractor-priced rates for
brachytherapy sources provided in ASCs during that period of time.
Beginning July 1, 2008, brachytherapy sources applied in ASCs were to
be paid at the same prospectively set rates that were finalized in the
CY 2008 OPPS/ASC final rule with comment period (72 FR 67165 through
67188). Immediately prior to the publication of the CY 2009 OPPS/ASC
proposed rule, section 142 of the Medicare Improvements for Patients
and Providers Act of 2008 (Pub. L. 110-275) amended section
1833(t)(16)(C) of the Act (as amended by section 106 of the Medicare,
Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-173) to extend
the requirement that brachytherapy sources be paid under the OPPS at
charges adjusted to cost through December 31, 2009. Therefore,
consistent with final ASC payment policy, ASCs continued to be paid at
contractor-priced rates for brachytherapy sources provided integral to
ASC covered surgical procedures during that period of time.
Other separately paid covered ancillary services in ASCs,
specifically corneal tissue acquisition and device categories with OPPS
pass-through status, do not have prospectively established ASC payment
rates according to the final policies of the revised ASC payment system
(72 FR 42502 and 42509; Sec. 416.164(b)). Under the revised ASC
payment system, corneal tissue acquisition is paid based on the
invoiced costs for acquiring the corneal tissue for transplantation. As
discussed in section IV.A.1. of this final rule with comment period,
new pass-through device categories may be established on a quarterly
basis. One new device category eligible for pass-through payment under
the OPPS and, therefore, under the ASC payment system, described by
HCPCS code C1749 (Endoscope, retrograde imaging/illumination
colonoscope device (Implantable), was announced in the October 2010 ASC
CR (Transmittal 2045, Change Request 7147, dated September 10, 2010).
Payment for HCPCS code C1749 under the ASC payment system is contractor
priced.
b. Payment for Covered Ancillary Services for CY 2011
In the CY 2011 OPPS/ASC proposed rule (75 FR 46351), for CY 2011,
we proposed to update the ASC payment rates and make changes to ASC
payment indicators as necessary to maintain consistency between the
OPPS and ASC payment system regarding the packaged or separately
payable status of services and the proposed CY 2011 OPPS and ASC
payment rates. The proposed CY 2011 OPPS payment methodologies for
separately payable drugs and biologicals and brachytherapy sources were
discussed in sections V. and VII. of the CY 2011 OPPS/ASC proposed rule
(75 FR 46257 through 46283 and 46286 through 46289), respectively, and
we proposed to set the CY 2011 ASC payment rates for those services
equal to the proposed CY 2011 OPPS rates.
Consistent with established ASC payment policy (72 FR 42497), the
proposed CY 2011 payment for separately payable covered radiology
services was based on a comparison of the CY 2011 proposed MPFS non-
facility PE RVU amounts (we refer readers to the CY 2011 MPFS proposed
rule) and the proposed CY 2011 ASC payment rates calculated according
to the ASC standard ratesetting methodology and then set at the lower
of the two amounts. Alternatively, payment for a radiology service may
be packaged into the payment for the ASC

[[Page 72050]]

covered surgical procedure if the radiology service is packaged under
the OPPS. The payment indicators in Addendum BB of the CY 2011 OPPS/ASC
proposed rule indicated whether the proposed payment rates for
radiology services are based on the MPFS nonfacility PE RVU amount or
the ASC standard ratesetting methodology, or whether payment for a
radiology service is packaged into the payment for the covered surgical
procedure (payment indicator ``N1''). Radiology services that we
proposed to pay based on the ASC standard ratesetting methodology are
assigned payment indicator ``Z2'' (Radiology service paid separately
when provided integral to a surgical procedure on ASC list; payment
based on OPPS relative payment weight) and those for which the proposed
payment is based on the MPFS non-facility PE RVU amount are assigned
payment indicator ``Z3'' (Radiology service paid separately when
provided integral to a surgical procedure on ASC list; payment based on
MPFS non-facility PE RVUs).
All covered ancillary services and their proposed payment
indicators were listed in Addendum BB to the CY 2011 OPPS/ASC proposed
rule.
Comment: One commenter expressed continued disagreement with the
ASC packaging policy related to discography services. Although it is
not completely clear what the commenter was requesting, we infer that
the commenter questioned the appropriateness of packaging payment for
discography services. According to the commenter, the injection
procedures reported by CPT codes 62290 (Injection procedure for
discography, each level; lumbar) and 62291 (Injection procedure for
discography, each level; cervical or thoracic) are packaged into the
services reported by CPT codes 72285 (Discography, cervical or
thoracic, radiological supervision and interpretation) and 72295
(Discography, lumbar, radiological supervision and interpretation) and,
therefore, payment is made to an ASC only when the radiology service is
provided integral to a covered surgical procedure. The commenter
asserted that discography should be a separately payable service in an
ASC and that the ASC payment should be 62 percent of OPPS payments.
Response: As we explained fully in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68747) and the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60619), we continue to believe that our
packaging policy for discography services is appropriate and we do not
agree that packaging policies under the ASC payment system should vary
from those under the OPPS. Also, we continue to believe that
discography is a radiology service, even though a component of it may
be defined as surgical, and that radiology services are not appropriate
for performance and separate payment in ASCs unless they are integral
to covered surgical procedures.
Comment: One commenter argued that it is inappropriate to use the
MPFS-based payment methodology for nuclear medicine procedures in the
ASC setting without providing separate payment for diagnostic
radiopharmaceuticals. According to the commenter, under the MPFS, a
separate payment is made for the radiopharmaceutical used with the
nuclear medicine procedure, while under the ASC payment system, payment
for the radiopharmaceutical is currently packaged. The commenter
asserted that, therefore, basing ASC payment on the MPFS non-facility
PE RVU without separate payment for the radiopharmaceutical leaves the
ASC uncompensated for the diagnostic radiopharmaceutical cost. The
commenter recommended that CMS establish a separate payment methodology
for diagnostic radiopharmaceuticals in the ASC setting.
Response: We do not agree with the commenter that we should
establish separate payment for diagnostic radiopharmaceuticals under
the ASC payment system, because we follow the OPPS packaging policies
which require that payment for these items is always packaged. However,
we understand the commenter's concern about the MPFS non-facility PE
RVU amounts not reflecting the diagnostic radiopharmaceutical costs.
Therefore, for CY 2011, we are setting the payment indicators for all
nuclear medicine procedures (defined as CPT codes in the range of 78000
through 78999) that are designated as radiology services that are paid
separately when provided integral to a surgical procedure on the ASC
list to ``Z2'' so that payment for these procedures will be made based
on the OPPS relative payment weight rather than the MPFS non-facility
PE RVU amount, regardless of which is lower. We will consider whether
and how we should change the payment policy for nuclear medicine
procedures under the ASC payment system in future rulemaking.
After consideration of the public comments we received, we are
providing CY 2011 payment for covered ancillary services in accordance
with the final policies of the revised ASC payment system as described
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 42493
through 42508), with one modification. As described above, we are
setting the payment indicators for all nuclear medicine procedures
(defined as CPT codes in the range of 78000 through 78999) that are
designated as radiology services that are paid separately when provided
integral to a surgical procedure on the ASC list to ``Z2'' for CY 2011
so that payment for these procedures will be made based on the OPPS
relative payment weight rather than the MPFS non-facility PE RVU
amount, regardless of which is lower. Covered ancillary services and
their final CY 2011 payment indicators are listed in Addendum BB to
this final rule with comment period.

E. New Technology Intraocular Lenses (NTIOLs)

1. Background
In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68176), we finalized our current process for reviewing applications to
establish new active classes of new technology intraocular lenses
(NTIOLs) and for recognizing new candidate intraocular lenses (IOLs)
inserted during or subsequent to cataract extraction as belonging to a
NTIOL class that is qualified for a payment adjustment. Specifically,
we established the following process:
We announce annually in the Federal Register a document
that proposes the update of ASC payment rates for the following
calendar year, a list of all requests to establish new NTIOL classes
accepted for review during the calendar year in which the proposal is
published and the deadline for submission of public comments regarding
those requests. In accordance with section 141(b)(3) of Public Law 103-
432 and our regulations at Sec. 416.185(b), the deadline for receipt
of public comments is 30 days following publication of the list of
requests.
In the Federal Register document that finalizes the update
of ASC payment rates for the following calendar year, we--
[cir] Provide a list of determinations made as a result of our
review of all new class requests and public comments; and
[cir] Announce the deadline for submitting requests for review of
an application for a new NTIOL class for the following calendar year.
In determining whether a lens belongs to a new class of NTIOLs and
whether the ASC payment amount for insertion of that lens in
conjunction with cataract surgery is appropriate, we expect that

[[Page 72051]]

the insertion of the candidate IOL would result in significantly
improved clinical outcomes compared to currently available IOLs. In
addition, to establish a new NTIOL class, the candidate lens must be
distinguishable from lenses already approved as members of active or
expired classes of NTIOLs that share a predominant characteristic
associated with improved clinical outcomes that was identified for each
class. Furthermore, in the CY 2007 OPPS/ASC final rule with comment
period (71 FR 68227), we finalized our proposal to base our
determinations on consideration of the following factors set out at
Sec. 416.195:
The IOL must have been approved by the FDA and claims of
specific clinical benefits and/or lens characteristics with established
clinical relevance in comparison with currently available IOLs must
have been approved by the FDA for use in labeling and advertising;
The IOL is not described by an active or expired NTIOL
class; that is, it does not share the predominant, class-defining
characteristic associated with improved clinical outcomes with
designated members of an active or expired NTIOL class; and
Evidence demonstrates that use of the IOL results in
measurable, clinically meaningful, improved outcomes in comparison with
use of currently available IOLs. According to the statute, and
consistent with previous examples provided by CMS, superior outcomes
that we consider include the following:
[cir] Reduced risk of intraoperative or postoperative complication
or trauma;
[cir] Accelerated postoperative recovery;
[cir] Reduced induced astigmatism;
[cir] Improved postoperative visual acuity;
[cir] More stable postoperative vision; and/or
[cir] Other comparable clinical advantages, such as--
[squ] Reduced dependence on other eyewear (for example, spectacles,
contact lenses, and reading glasses);
[squ] Decreased rate of subsequent diagnostic or therapeutic
interventions, such as the need for YAG laser treatment;
[squ] Decreased incidence of subsequent IOL exchange; and
[squ] Decreased blurred vision, glare, other quantifiable symptom
or vision deficiency.
For a request to be considered complete, we require submission of
the information that is found in the guidance document entitled
``Application Process and Information Requirements for Requests for a
New Class of New Technology Intraocular Lens (NTIOL)'' posted on the
CMS Web site at: http://www.cms.gov/ASCPayment/08_
NTIOLs.asp#TopOfPage.
As we stated in the CY 2007 OPPS/ASC final rule with comment period
(71 FR 68180), there are three possible outcomes from our review of a
request for establishment of a new NTIOL class. As appropriate, for
each completed request for consideration of a candidate IOL into a new
class that is received by the established deadline, one of the
following determinations is announced annually in the final rule
updating the ASC payment rates for the next calendar year:
The request for a payment adjustment is approved for the
candidate IOL for 5 full years as a member of a new NTIOL class
described by a new HCPCS code;
The request for a payment adjustment is approved for the
candidate IOL for the balance of time remaining as a member of an
active NTIOL class; or
The request for a payment adjustment is not approved.
We also discussed our plan to summarize briefly in the final rule
with comment period the evidence that we reviewed, the public comments,
and the basis for our determinations in consideration of applications
for establishment of a new NTIOL class. We established that when a new
NTIOL class is created, we identify the predominant characteristic of
NTIOLs in that class that sets them apart from other IOLs (including
those previously approved as members of other expired or active NTIOL
classes) and that is associated with improved clinical outcomes. The
date of implementation of a payment adjustment in the case of approval
of an IOL as a member of a new NTIOL class would be set prospectively
as of 30 days after publication of the ASC payment update final rule,
consistent with the statutory requirement.
2. NTIOL Application Process for Payment Adjustment
In CY 2007, we posted an updated guidance document to the CMS Web
site to provide process and information requirements for applications
requesting a review of the appropriateness of the payment amount for
insertion of an IOL to ensure that the ASC payment for covered surgical
procedures includes payment that is reasonable and related to the cost
of acquiring a lens that is approved as belonging to a new class of
NTIOLs. This guidance document can be accessed on the CMS Web site at:
http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf.
We note that we have also issued a guidance document entitled
``Revised Process for Recognizing Intraocular Lenses Furnished by
Ambulatory Surgery Centers (ASCs) as Belonging to an Active Subset of
New Technology Intraocular Lenses (NTIOLs).'' This guidance document
can be accessed on the CMS Web site at: http://www.cms.gov/ASCPayment/
Downloads/Request_for_inclusion_in_current_NTIOL_subset.pdf.
This second guidance document provides specific details regarding
requests for recognition of IOLs as belonging to an existing, active
NTIOL class, the review process, and information required for a request
to review. Currently, there is one active NTIOL class whose defining
characteristic is the reduction of spherical aberration. We accept
requests throughout the year to review the appropriateness of
recognizing an IOL as a member of an active class of NTIOLs. That is,
review of candidate lenses for membership in an existing, active NTIOL
class is ongoing and not limited to the annual review process that
applies to the establishment of new NTIOL classes. We ordinarily
complete the review of such a request within 90 days of receipt of all
information that we consider pertinent to our review, and upon
completion of our review, we notify the requestor of our determination
and post on the CMS Web site notification of a lens newly approved for
a payment adjustment as an NTIOL belonging to an active NTIOL class
when furnished in an ASC.
3. Classes of NTIOLs Approved and New Requests for Payment Adjustment
a. Background
Since implementation of the process for adjustment of payment
amounts for NTIOLs that was established in the June 16, 1999 Federal
Register, we have approved three classes of NTIOLs, as shown in the
following table, with the associated qualifying IOLs to date:

[[Page 72052]]

----------------------------------------------------------------------------------------------------------------
$50 Approved for
NTIOL Class HCPCS Code services furnished NTIOL IOLs Eligible for
on or after Characteristic adjustment
----------------------------------------------------------------------------------------------------------------
1................................ Q1001 May 18, 2000, Multifocal......... Allergan AMO Array
through May 18, Multifocal lens,
2005. model SA40N.
2................................ Q1002 May 18, 2000, Reduction in STAAR Surgical
through May 18, Preexisting Elastic
2005. Astigmatism. Ultraviolet-
Absorbing Silicone
Posterior Chamber
IOL with Toric
Optic, models
AA4203T, AA4203TF,
and AA4203TL.
3................................ Q1003 February 27, 2006, Reduced Spherical Abbott Medical
through February Aberration. Optics (AMO)
26, 2011. Tecnis[reg] IOL
models Z9000,
Z9001, Z9002,
ZA9003, and
AR40xEM and
Tecnis[reg] 1-
Piece model ZCB00;
Alcon Acrysof[reg]
IQ Model SN60WF,
Acrysert Delivery
System model
SN60WS and
Acrysof[reg] IQ
Toric model
SN6ATT; Bausch &
Lomb Sofport AO
models LI61AO and
LI61AOV and Akreos
AO models AO60 and
MI60,
Crystalens[reg] AT-
50AO and AT-52AO;
STAAR Affinity
Collamer model
CQ2015A and
CC4204A and
Elastimide model
AQ2015A; Hoya
model FY-60AD, FC-
60AD, PY-60AD, and
PC-60AD; Lenstec
HD IOL.
----------------------------------------------------------------------------------------------------------------

b. Request To Establish New NTIOL Class for CY 2011
As explained in the guidance document on the CMS Web site, the
deadline for each year's requests for review of the appropriateness of
the ASC payment amount for insertion of a candidate IOL as a member of
a new class of NTIOLs is announced in the final rule updating the ASC
and OPPS payment rates for that calendar year. Therefore, a request for
review for a new class of NTIOLs for CY 2011 must have been submitted
to CMS by March 8, 2010, the due date published in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60621). We received one request
for review to establish a new NTIOL class for CY 2011 by the March 8,
2010 due date. A summary of this request follows.
Requestor/Manufacturer: Alcon Laboratories, Inc.
Lens Model Number: Acrysof[reg] Natural IOLs, Models: SN60WF,
SN60AT, MN60MA, and MN60AC.
Summary of the Request: Alcon Laboratories, Inc. (Alcon) submitted
a request for CMS to determine that its Acrysof[reg] Natural
intraocular lenses meet the criteria for recognition as NTIOL and to
concurrently establish a new class of NTIOLs for blue light filtering
to improve driving safety under glare conditions, with these lenses as
members. As part of its request, Alcon submitted descriptive
information about the candidate IOLs as outlined in the guidance
document that we make available on the CMS Web site for the
establishment of a new class of NTIOLs, as well as information
regarding approval of the candidate IOL by the U.S Food and Drug
Administration (FDA). This information included the approved labeling
for the candidate lenses, a summary of the IOLs' safety and
effectiveness, a copy of the FDA's approval notification, and
instructions for their use. In addition, Alcon also submitted a number
of studies in support of its claim that the blue light filtering design
features of the candidate lenses would improve driving safety under
glare conditions. We note that we have previously considered another
candidate IOL for which ASC payment review was requested on the basis
of blue light filtering properties. We discussed these lenses in the
July 23, 2004 and March 25, 2005 NTIOL proposed and final rules
published in the Federal Register (69 FR 44029 and 70 FR 15337,
respectively).
In its CY 2011 request, Alcon asserts that its request is based on
new research and measurement technologies that demonstrate that the
Acrysof[reg] Natural IOLs with a blue light filtering chromophore
filters light in a manner that approximates the human crystalline lens
in the 400-475 nm blue light wavelength range to reduce glare that
impairs the ability of the eye to differentiate objects from the
background. Alcon further states that glare reduction can help
beneficiaries avoid hazards that can be caused by glare. Alcon also
states that at present, there are no active or expired NTIOL classes
that describe IOLs similar to its IOL.
We established in the CY 2007 OPPS/ASC final rule with comment
period that when reviewing a request for recognition of an IOL as an
NTIOL and a concurrent request to establish a new class of NTIOLs, we
would base our determination on consideration of the three major
criteria that are outlined in the discussion above. In the CY 2011
proposed rule we noted that we had begun our review of Alcon's request
to recognize its Acrysof[reg] Natural IOLs as NTIOLs and concurrently
establish a new class of NTIOLs. In the CY 2011 proposed rule we
solicited comment on these candidate IOLs with respect to the
established NTIOL criteria as discussed above (75 FR 46354).
First, for an IOL to be recognized as an NTIOL we require that the
IOL must have been approved by the FDA and claims of specific clinical
benefits and/or lens characteristics with established clinical
relevance in comparison with currently available IOLs must have been
approved by the FDA for use in labeling and advertising. We note that
FDA approval for the candidate lens was granted in May 2007 and that
Alcon provided FDA approval documentation, including a copy of the
FDA's approval notification, the FDA's summary of the IOL's safety and
effectiveness, and the labeling approved by the FDA in its request for
a new class of NTIOLs. The approved labels for the Alcon IOLs all
state, ``Alcon's proprietary blue light filtering chromophore filters
light in a manner that approximates the human crystalline lens in the
400-475 nm blue light wavelength range.'' The FDA label

[[Page 72053]]

does not otherwise reference specific clinical benefits or lens
characteristics of blue light filtering on glare. In the CY 2011 OPPS/
ASC proposed rule (75 FR 46354) we noted that we were interested in
public comments on the specific clinical benefits or lens
characteristics with established clinical relevance for the blue light
filter effects on glare. We specifically noted that we were interested
in public comments regarding the assertion that the specific blue light
filter properties associated with the candidate IOLs improve driving
safety via the reduction of glare.
Second, we also require that the candidate IOL not be described by
an active or expired NTIOL class; that is, it does not share the
predominant, class-defining characteristic associated with improved
clinical outcomes with designated members of an active or expired NTIOL
class. As noted in the table above regarding active and expired NTIOL
classes, since implementation of the NTIOL review process that was
established in the June 16, 1999 Federal Register, we have approved
three classes of NTIOLs: Multifocal and Reduction in Preexisting
Astigmatism classes, both of which were created in 2000 and expired in
2005, and the currently active Reduced Spherical Aberration class,
which was created in 2006 and will expire in 2011. The class-defining
characteristic specific to IOLs that are members of these classes is
evident in the name assigned to the class. For example, IOLs recognized
as members of the reduced spherical aberration class are characterized
by their aspheric design that results in reduced spherical aberration.
We refer readers to the table above for information about the NTIOL
classes that have been created since the implementation of the review
process. Based on this information, the candidate lens may not be
described by an active or expired NTIOL class. Its proposed class-
defining characteristic and associated clinical benefits that were
described in the submitted request, specifically the blue light
filtering properties, may not be similar to the class-defining
characteristics and associated benefits of the two expired NTIOL
classes, the Multifocal and Reduction in Preexisting Astigmatism
classes, or to the class-defining characteristic and associated
benefits of the currently active Reduced Spherical Aberration class. In
the CY 2011 OPPS/ASC proposed rule we noted that we welcomed public
comments that address whether the proposed class-defining
characteristic and associated clinical benefits of the candidate Alcon
IOLs are described by the expired or currently active NTIOL classes (75
FR 46354).
Third, our NTIOL evaluation criteria also require that an applicant
submit evidence demonstrating that use of the IOL results in
measurable, clinically meaningful, improved outcomes in comparison to
use of currently available IOLs. We note that in the CY 2007 OPPS/ASC
final rule with comment period, we sought comments as to what
constitutes currently available IOLs for purposes of such comparisons,
and we received several comments in response to our solicitation (71 FR
68178). We agreed with commenters that we should remain flexible with
respect to our view of ``currently available lenses'' for purposes of
reviewing NTIOL requests, in order to allow for consideration of
technological advances in lenses over time. For purposes of reviewing
this request to establish a new NTIOL class for CY 2011, we believe
that foldable, spherical, monofocal IOLs made of acrylic, silicone, or
polymethylmethacrylate materials represent the currently available
lenses against which the candidate NTIOL to establish a new class
should be compared. The Alcon request asserts that the proprietary blue
light filtering chromophore incorporated into the design of the
candidate lenses and its associated benefits makes them different from
IOLs that are currently available in the U.S. market. In the CY 2011
OPPS/ASC proposed rule we again sought public comment on our view of
``currently available lenses'' for the purposes of this CY 2011 review
(75 FR 46354).
We reviewed the evidence submitted as part of the request,
including two peer-reviewed articles and two related clinical studies.
The first of the submitted articles discussed the effect of the
candidate lenses on glare disability, while the second article
discussed the effects of glare on driving in simulated driving
conditions. The requestor also submitted data from two clinical studies
directly related to the submitted articles discussed above. One cross
sectional study with a planned sample size of 70 subjects evaluated
glare disability by comparing the candidate lenses against control
lenses which did not include the blue light filtering chromophore.
Results from this study suggest that subjects implanted with the
applicant IOLs had significantly faster photostress recovery times than
subjects who had control IOLs implanted without the blue light
filtering chromophore. We noted in the CY 2011 OPPS/ASC proposed rule
that this cross sectional study was ongoing; consequently the
preliminary results submitted with the request only reflected 40
subjects from the planned total sample size. The requestor also
submitted data from a second clinical study with a total sample size of
34 that evaluated the benefit of the blue light filtering chromophore
on driving performance in patients implanted with the candidate IOLs
compared to patients implanted with non blue light filtering IOLs. The
results from this study suggested that incorporation of the yellow
chromophore into the design of the candidate lenses reduce glare
disability and thereby improve the ability of older drivers implanted
with the candidate lenses to drive safely. Overall, the evidence
submitted provided us with important information critical to our review
of this request. However, in making our decision as to whether to
establish a new class of NTIOL based on the primary characteristic of
the candidate lenses, we indicated in the CY 2011 OPPS/ASC proposed
rule (75 FR 46355) that we were also interested in what other
information the public could contribute related to the asserted
benefits of the blue light filtering optic. Specifically, we sought
public comment and relevant data on the following:
Are there other peer-reviewed data that would support or
disprove the claims of clinical benefit made by the applicant?
The presented studies compare the blue filtering optic to
clear IOLs, are there other IOLs or other clinical alternatives for
reducing glare?
Is the sample size used in both studies sufficient
considering all confounding variables including, but not limited to
age, sex, race, time from surgery, status of eyes (which eye received
the IOL or both eyes, for example) to conclude that a blue light
filtering optic would reduce glare in the Medicare population?
What kind of study design would be appropriate to prove
the claim of significant clinical benefit due to glare reduction on
which the new class would be based?
Are the submitted data enough to clarify that the blue
filtering optic is responsible for reduction in glare disability as
asserted by applicant?
In the CY 2011 OPPS/ASC proposed rule (75 FR 46355), we welcomed
public comments and relevant data specifically addressing whether use
of the Alcon Acrysof[reg] Natural IOLs result in measurable, clinically
meaningful, improved outcomes in comparison with use of currently
available IOLs. Additionally, in accordance with our established NTIOL
review process, we sought public comments on all of the

[[Page 72054]]

review criteria for establishing a new NTIOL class that would be based
on the ability of the Acrysof[reg] Natural IOLs to filter blue light
and subsequently help beneficiaries avoid hazards that can be caused by
glare while driving. All comments on this request must have been
received by September 2, 2010. In the proposed rule, we stated that the
announcement of CMS' determination regarding this request will appear
in this CY 2011 OPPS/ASC final rule with comment period. If a
determination of membership of the candidate lens in a new or currently
active NTIOL class is made, this determination would be effective 30
days following the date that this final rule with comment period is
published in the Federal Register.
We thank the public for their comments concerning our review of the
request from Alcon Laboratories, Inc. (Alcon) to establish a new class
of NTIOL based on the characteristics of its Acrysof[reg] Natural
intraocular lenses. Some of the comments we received raised additional
questions about the proven effectiveness of the Acrysof[reg] Natural
intraocular lenses, especially when compared to other currently
available lenses. These comments and our responses to them are
summarized below.
Comment: A few commenters presented several arguments suggesting
that CMS recognize the Acrysof[reg] natural IOLs as belonging to a new
class of NTIOLS. With regard to our requirement that the IOL must have
been approved by the FDA and that claims of specific clinical benefits
and/or lens characteristics with established clinical relevance in
comparison with currently available IOLs must have been approved by the
FDA for use in labeling and advertising, one commenter disagreed with
the statement in the proposed rule that ``the FDA label does not
otherwise reference specific clinical benefits or lens characteristics
of blue light filtering on glare'' (75 FR 46354). The commenter
asserted that the submitted studies established the clinical relevance
of the blue-light filter in the AcrySof[reg] Natural intraocular lens
models and that the blue-light filter is described in the FDA-approved
label. This same commenter indicated that no current or expired NTIOL
class exists for IOLs that offer this characteristic.
This same commenter also provided feedback on CMS' request for
comment on our definition of ``currently available lenses,''
specifically with regards to this review. The commenter questioned
whether polymethylmethacrylate (PMMA) IOLs should be deemed
``conventional'', and stated that less than 1 percent of cataract
surgeries in the United States are performed with lenses made of PMMA.
The commenters suggested that, after expiration of the currently active
NTIOL class for aspheric-optic IOLs that reduce spherical aberration,
CMS consider updating the description of conventional lenses from
``spherical'' to ``spheric and aspheric.''
With regard to establishing substantial clinical benefit, one
commenter asserted that the study design utilized to assess driving
performance allowed specifically for the observation of the effect of
the yellow chromophore used in the design of the candidate lenses on
glare disability in the absence of any other confounding factors. The
commenter argued that the sample sizes used in each of the clinical
studies presented were adequate to demonstrate the benefit of the blue
light filtering technology to Medicare beneficiaries, and were
determined such that they were sufficiently powerful to detect
clinically significant differences. Specifically, the commenter noted
that for one of the studies, which was based on a contralateral design,
the sample size was specified for up to 70 subjects and ultimately was
based on data from 52 subjects. The commenter claimed that the subjects
enrolled in this study were an average age of 75.6 years old, with 53.8
percent females and were typical for patients in the Medicare
population, and further asserted that subject-descriptive variables
such as age, sex, and race did not impact the treatment comparison as
the study was conducted using a contralateral design. The commenter
asserted that the sample size for the second study was determined to be
in the safety margin with a statistical power of 80 percent.
Another commenter also provided comments in support of the blue
light filtering IOLS. This commenter asserted that the requestor had
provided sufficient evidence to support the claims of real-world
benefit alluded to in the request to establish a new class of NTIOL for
the blue light filtering IOLs. This commenter offered to provide
additional evidence to substantiate the requestors' claims with data
gathered from an assessment of its own blue light filtering IOLs. Both
of these commenters claimed that the Acrysof[reg] Natural IOLs
application to open a new NTIOL category meets the specific CMS NTIOL
review criteria and that the applicant lenses are not described by
current or prior subsets of NTIOLs.
Response: With regard to FDA labeling, we are not certain that the
blue light filtering characteristic of the applicant IOLs specifically
results in the reduction of glare in comparison with use of currently
available IOLs in order to fulfill our requirement that the FDA approve
the lens for characteristics with established clinical relevance in
comparison with currently available IOLs for use in labeling and
advertising. We discuss in more detail below our thorough review of the
application and submitted studies on the applicant's lenses, as well as
comments that we received. We appreciate the commenters' clarification.
We agree that the applicant lens is not described by current or
prior subsets of NTIOLs. However, we note that these lenses are not
unique with respect to the blue light filtering optic. As stated above,
we have previously considered another candidate IOL for which ASC
payment review was requested on the basis of blue light filtering
properties.
With respect to our definition of ``currently available IOLs,'' we
thank the commenters for their feedback on this matter and we will
carefully consider and evaluate this particular definition of
``currently available lenses'' for use in future reviews of NTIOL
applications. As discussed in the CY 2007 OPS/ASC final rule with
comment period (71 FR 68178), we continue to believe that flexibility
is critical when identifying what the public considers ``currently
available lenses,'' in order to allow for consideration of
technological advances in lenses over time.
Comment: Other commenters argued that NTIOL status has been a
valuable resource to allow practicing physicians to attain access to
IOLs that can provide additional benefits for their patients at the
time of cataract surgery and that CMS should establish the new class to
allow beneficiaries to gain access to technology that improves driving
conditions.
Some commenters provided anecdotal information citing their
clinical experiences with the applicant lenses, and asserted that
elimination/reduction of glare disability with the chromophore lens is
of such value to patients as to make it deserving of NTIOL status in
order to encourage the utilization of this extremely important
technology. One commenter asserted that the basis for the NTIOL
application is unique, and that the Natural chromophore was designed to
filter potentially harmful blue light, to reduce the amount of harmful
light reaching the retina, without appreciable reduction in visual
quality (that is, night vision, color vision, contrast sensitivity).
This commenter further stated that the vast majority of the published
research to date indicated that this goal had been

[[Page 72055]]

achieved, but did not provide specific citations.
Generally, these commenters urged that CMS establish a new class of
NTIOL based on the blue light filtering characteristic for the primary
purpose of offering beneficiaries access to an intraocular lens that
the applicant argued offers the real world benefit of improving driving
in glare conditions.
Response: We thank these commenters for their feedback and agree
that Medicare beneficiaries should be allowed access to new
technologies that offer substantial clinical improvement over existing
technologies. However, as discussed further below, in our review of
studies submitted to CMS as part of the NTIOL request and additional
data submitted by commenters, we are not certain that the blue light
filtering characteristic of the applicant IOLs specifically results in
the reduction of glare in comparison with use of currently available
IOLs. Moreover, in our review of other references submitted by
commenters regarding the blue light filtering optic, we found evidence
suggesting that the blue-filtering lenses could decrease best possible
vision.
Comment: We also received several comments requesting that CMS
disapprove this request to establish a new class of NTIOL based on the
blue light characteristic. These commenters argued that there is
insufficient clinical and scientific evidence to support the claim of a
clinical benefit for a blue-light filtering optic. Several of these
commenters asserted that the requestor's claim that use of the IOL
results in substantial clinical benefit in comparison to use of
currently available IOLs is not based in sound science and will
increase the cost to Medicare without providing any significant
additional benefit to patients. With regard to the requirement that the
IOL must have been approved by the FDA and claims of specific clinical
benefits and/or lens characteristics with established clinical
relevance in comparison with currently available IOLs must have been
approved by the FDA for use in labeling and advertising, these
commenters pointed out that the claim of clinical benefit--reduction of
glare--is not included in the FDA label, as required by CMS. These
commenters also pointed out that the use of a blue filter is not
unique, further stating that another IOL manufacturer also creates IOLs
with a blue light filter.
Other commenters also opposed the creation of a new NTIOL class
based on the blue light filtering characteristic. With regard to the
requirement that the NTIOL result in a substantial clinical benefit
through measurable, clinically meaningful, improved outcomes,
commenters argued that they were relatively few articles potentially
related to blue light filtration and reduction of glare, and of these
identified articles, only one directly addressed the specific topic.
They argued that the one study, funded by the requestor, has numerous
flaws in the study protocol and night driving simulator testing
methodology. They asserted that it is impossible to tell whether the
beneficial results associated with one of the applicant IOLs,
specifically model SN60WF are due to the lens' blue light filtering
optic or its aspheric optic, given that aspheric lenses have been shown
to improve contrast sensitivity in mesopic conditions with and without
glare. These commenters questioned the mean postoperative time for the
blue light filtering IOLs (10.4 months) versus the same measure for the
control IOL (4.7 years). They asserted that the disparity between the
measures makes it nearly impossible to account for the clarity of the
posterior capsule or the impact of progressive glistenings on light
scatter. They further stated that in any IOL study one would expect
visual performance to be superior at 10 months post-op versus 4 years
post-op. These commenters suggested that the study uses a biased
experimental glare tester, where the visual target has a different
light spectrum (color) to the glare source. They explained that in
almost all real-world situations, the spectrum of the glare source is
similar or identical to that of the visual target. Thus, heavily
weighting the glare source with short wavelength blue light does not
represent real-world glare situations and would favor a performance
benefit for a blue-light filtering IOL. They asserted that in a real
world situation where the visual target and the glare source have the
same light spectrum, a blue blocking IOL cannot reduce glare disability
because it will decrease stray light in exactly the same proportion as
the target brightness.
Some commenters suggested that CMS and the FDA consider mandating
the withdrawal of the applicant and other similarly designed lenses
from the market, or at least require that a clear lens alternative be
offered for each model that the company produces so that the surgeon
may take advantage of the other features of the lenses that are
available without having to be forced into using yellow chromophore
permeated lenses.
Another commenter provided a number of citations of studies in peer
reviewed journals that supported the fact that there are no differences
in the disability glare performance of pseudophakes (people who had
cataract surgery with IOL replacement) with colorless versus blue-
filtering IOLs. This commenter also stated that glare disability is not
a scientifically proven predictor of older driver's safety and
moreover, that yellow tinted, blue filtering design of the Acrysof[reg]
Natural IOL chromophores permanently limits the blue light part of the
visible spectrum that aids older adults to see as well as possible. The
commenter further pointed out that this type of lens undesirably
restricts pseudophakic scotopic (night vision), mesopic (a combination
of photopic vision and scotopic vision in low but not quite dark
lighting situations), and S-cone and retinal ganglion photoreception.
Finally, this commenter stated that the glistening associated with
Acrysof[reg] Natural lenses that develops overtime causes disability
glare rather than reduces it. The commenter described glistenings as
fluid-filled microvacuoles that form within the IOL optic when the IOL
is in an aqueous environment, and noted that glistenings are observed
in all types of IOLs, but have been mainly associated with hydrophobic
acrylic IOLs, similar to the requestor's IOL.
Response: We appreciate all of the feedback regarding the issues
posed in our proposed rule, and regarding our review of this applicant
IOL. These comments have been very helpful in pointing us to additional
resources relevant to the asserted connection between the blue light
filtering characteristic of the applicant IOLs and the proposed benefit
of glare reduction.
With regards to those comments questioning whether the FDA approved
labels for the applicant IOLs included claims of clinical benefit, we
note that our specific criteria asks that the FDA approved label
include ``[c]laims of specific clinical benefits and/or lens
characteristics with established clinical relevance in comparison to
currently available IOLs.'' While the FDA label does not include any
claims regarding the asserted reduction in glare properties of the
applicant lens, it does mention the blue light filtering optic which
the applicant asserts is proven to have established clinical relevance.
We note that having two manufacturers create an IOL with a blue-light
filter or other optic is not sufficient to disqualify a request for a
new class of IOL.
We have reviewed the public comments received and the available
data. Although the requestor submitted several supporting studies with
its application, as discussed above, commenters provided compelling
evidence arguing against CMS establishing a new class of IOL for blue-

[[Page 72056]]

filtering. We conclude that the Acrysof[reg] Natural IOLs do not
demonstrate substantial clinical benefit in comparison with currently
available IOLs. Therefore, we are disapproving Alcon's request to
recognize its Acrysof[reg] Natural IOLs as NTIOLs, and subsequently to
establish a new class of NTIOL for payment in CY 2011.
4. Payment Adjustment
The current payment adjustment for a 5-year period from the
implementation date of a new NTIOL class is $50. In the CY 2007 OPPS/
ASC final rule with comment period, we revised Sec. 416.200(a) through
(c) to clarify how the IOL payment adjustment is made and how an NTIOL
is paid after expiration of the payment adjustment, and made minor
editorial changes to Sec. 416.200(d). For CY 2008, CY 2009, and CY
2010, we did not revise the payment adjustment amount, and we did not
propose to revise the payment adjustment amount for CY 2011 in light of
our limited experience with the revised ASC payment system, implemented
initially on January 1, 2008.
5. ASC Payment for Insertion of IOLs
In accordance with the final policies of the revised ASC payment
system, for CY 2011, payment for IOL insertion procedures is
established according to the standard payment methodology of the
revised payment system, which multiplies the ASC conversion factor by
the ASC payment weight for the surgical procedure to implant the IOL.
The CY 2011 ASC payment for the cost of a conventional lens is packaged
into the payment for the associated covered surgical procedures
performed by the ASC. The HCPCS codes for IOL insertion procedures were
included in Table 53 of the CY 2011 OPPS/ASC proposed rule (75 FR
46355), and their proposed CY 2011 payment rates were found in Addendum
AA to the proposed rule.
We did not receive any public comments concerning the proposed CY
2011 payment rates for the insertion of IOL procedures. Therefore, we
are finalizing the payment rates for the insertion of IOL procedures,
calculated according to the standard methodology of the revised ASC
payment system. The HCPCS codes for IOL insertion procedures are
displayed in Table 64 below, and their final CY 2011 payment rates may
be found in Addendum AA to this final rule with comment period.

Table 64--Insertion of IOL Procedures
------------------------------------------------------------------------
CY 2010 HCPCS code CY 2010 Long descriptor
------------------------------------------------------------------------
66983............................. Intracapsular cataract extraction
with insertion of intraocular lens
prosthesis (one stage procedure).
66984............................. Extracapsular cataract removal with
insertion of intraocular lens
prosthesis (one stage procedure),
manual or mechanical technique
(e.g., irrigation and aspiration or
phacoemulsification).
66985............................. Insertion of intraocular lens
prosthesis (secondary implant), not
associated with concurrent cataract
removal.
66986............................. Exchange of intraocular lens.
------------------------------------------------------------------------

6. Announcement of CY 2011 Deadline for Submitting Requests for CMS
Review of Appropriateness of ASC Payment for Insertion of an NTIOL
Following Cataract Surgery
In accordance with Sec. 416.185(a) of our regulations as revised
by the CY 2007 OPPS/ASC final rule with comment period, CMS announces
that in order to be considered for payment effective January 1, 2012,
requests for review of applications for a new class of new technology,
IOLs must be received at CMS by 5 p.m. EST, on March 5, 2011. Send
requests to ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17,
Centers for Medicare and Medicaid, 7500 Security Boulevard, Baltimore,
MD 21244-1850.
To be considered, requests for NTIOL reviews must include the
information on the CMS Web site at: http://www.cms.gov/ASCPayment/
downloads/NTIOLprocess.pdf.

F. ASC Payment and Comment Indicators

1. Background
In addition to the payment indicators that we introduced in the
August 2, 2007 final rule, we also created final comment indicators for
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66855). We created Addendum DD1 to define ASC payment
indicators that we use in Addenda AA and BB to provide payment
information regarding covered surgical procedures and covered ancillary
services, respectively, under the revised ASC payment system. The ASC
payment indicators in Addendum DD1 are intended to capture policy
relevant characteristics of HCPCS codes that may receive packaged or
separate payment in ASCs, such as whether they were on the ASC list of
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment
methodology; and their classification as separately payable ancillary
services including radiology services, brachytherapy sources, OPPS
pass-through devices, corneal tissue acquisition services, drugs or
biologicals, or NTIOLs.
We also created Addendum DD2 that lists the ASC comment indicators.
The ASC comment indicators used in Addenda AA and BB to the proposed
rules and final rules with comment period serve to identify, for the
revised ASC payment system, the status of a specific HCPCS code and its
payment indicator with respect to the timeframe when comments will be
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final
rule with comment period to indicate new HCPCS codes for the next
calendar year for which the interim payment indicator assigned is
subject to comment. The comment indicator ``NI'' is also assigned to
existing codes with substantial revisions to their descriptors such
that we consider them to be describing new services, as discussed in
the CY 2010 OPPS/ASC final rule with comment period (74 FR 60622). We
stated in the CY 2011 OPPS/ASC proposed rule that will respond to
public comments and finalize the ASC treatment of all codes labeled
with comment indicator ``NI'' in the CY 2011 OPPS/ASC final rule with
comment period (75 FR 46356).
The ``CH'' comment indicator is used in Addenda AA and BB to this
CY 2011 proposed rule to indicate that a new payment indicator (in
comparison with the indicator for the CY 2010 ASC April quarterly
update) is proposed for assignment to an active HCPCS code for the next
calendar year; an active HCPCS code is proposed for addition to the
list of procedures or services payable in ASCs; or an active HCPCS code
is proposed for deletion at the end of the current calendar year. The
``CH'' comment indicators that are published in the final rule with
comment period are provided to alert readers that a change has been
made from one calendar year to the next, but do not indicate that the
change is subject to comment. The full definitions of the payment
indicators and comment indicators are provided in Addenda DD1 and DD2
to this final rule with comment period.

[[Page 72057]]

2. ASC Payment and Comment Indicators
In the CY 2011 OPPS/ASC proposed rule (75 FR 46356), we did not
propose any changes to the definitions of the ASC payment and comment
indicators for CY 2011. We stated that we will consider proposing to
modify the payment indicators for procedures that were subject to
transitional payment prior to CY 2011 in future rulemaking.
We did not receive any public comments on the ASC payment and
comment indicators. We are finalizing our proposed CY 2011 payment and
comment indicators, without modification, in Addenda DD1 and DD2 to
this final rule with comment period.

G. ASC Policy and Payment Recommendations

MedPAC was established under section 1805 of the Act to advise
Congress on issues affecting the Medicare program. Subparagraphs (B)
and (D) of section 1805(b)(1) of the Act require MedPAC to submit
reports to Congress not later than March 1 and June 15 of each year
that present its Medicare payment policy reviews and recommendations
and its examination of issues affecting the Medicare program,
respectively. The following section describes a recent MedPAC
recommendation that is relevant to the ASC payment system.
The March 2010 MedPAC ``Report to the Congress: Medicare Payment
Policy'' included the following recommendation relating specifically to
the ASC payment system for CY 2011:
Recommendation 2C: The Congress should implement a 0.6 percent
increase in payment rates for ambulatory surgical center services in
calendar year 2011 concurrent with requiring ambulatory surgical
centers to submit cost and quality data.
CMS Response: In the August 2, 2007 final rule (72 FR 42518 through
42519), we adopted a policy to update the ASC conversion factor for
consistency with section 1833(i)(2)(C) of the Act, which requires that,
if the Secretary has not updated the ASC payment amounts in a calendar
year, the payment amounts shall be increased by the percentage increase
in the Consumer Price Index for All Urban Consumers (CPI-U) as
estimated by the Secretary for the 12-month period ending with the
midpoint of the year involved. The statute set the update at zero for
CY 2008 and CY 2009. We indicated that we planned to implement the
annual updates through an adjustment to the conversion factor under the
ASC payment system beginning in CY 2010 when the statutory requirement
for a zero update no longer applies. Further, we noted that that we
would update the conversion factor for the CY 2010 ASC payment system
by the percentage increase in the CPI-U, consistent with our policy as
codified under Sec. 416.171(a)(2).
As we indicated in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60622), we did not require ASCs to submit cost data to
the Secretary for CY 2010. We explained that the 2006 GAO report,
``Medicare: Payment for Ambulatory Surgical Centers Should Be Based on
the Hospital Outpatient Payment System'' (GAO-07-86), concluded that
the APC groups in the OPPS reflect the relative costs of surgical
procedures performed in ASCs in the same way they reflect the relative
costs of the same procedures when they are performed in HOPDs.
Consistent with the GAO findings, CMS is using the OPPS as the basis
for the ASC payment system, which provides for an annual revision of
the ASC payment rates under the budget neutral ASC payment system. In
addition, we noted that, under the methodology of the revised ASC
payment system, we do not utilize ASC cost information to set and
revise the payment rates for ASCs but, instead, rely on the relativity
of hospital outpatient costs developed for the OPPS, consistent with
the recommendation of the GAO. Furthermore, we explained that we have
never required ASCs to routinely submit cost data and expressed our
concern that a new Medicare requirement for ASCs to do so could be
administratively burdensome for ASCs. In 2009, MedPAC made a similar
recommendation to that made in Recommendation 2C above. In light of
that MedPAC recommendation, in the CY 2010 OPPS/ASC proposed rule (74
FR 35391), we solicited public comment on the feasibility of ASCs
submitting cost information to CMS, including whether costs should be
collected from a sample or the universe of ASCs, the administrative
burden associated with such an activity, the form that such a
submission could take considering existing Medicare requirements for
other types of facilities and the scope of ASC services, the expected
accuracy of such cost information, and any other issues or concerns of
interest to the public on this topic.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60623), we summarized and responded to these comments. As noted in that
final rule with comment period, commenters' expressed varied opinions
regarding the feasibility of requiring ASCs to submit cost data to the
Secretary. Some commenters believed that requiring ASC to submit such
data would not be an insurmountable obstacle and pointed out that other
small facilities submit cost reports to CMS. They stated that ASC cost
reports are necessary to assess the adequacy of Medicare payments and
evaluate the ASC update. Other commenters, however, opposed the
requirement that ASCs submit cost data to CMS because they believed
such a requirement would be unnecessary and administratively
burdensome. Commenters generally supported a requirement that ASCs
report quality data. We refer readers to the CY 2010 OPPS/ASC final
rule with comment period for a full discussion of the comments we
received on the feasibility of requiring ASCs to report cost and
quality data (74 FR 60623). We responded that we would keep the
commenters' perspectives in mind as we further consider the adequacy of
the Medicare ASC payment rates and move toward implementation of ASC
quality reporting.
Consistent with our CY 2010 policy, in the CY 2011 OPPS/ASC
proposed rule (75 FR 46357), we proposed not to require ASCs to submit
cost data to the Secretary for CY 2011. We stated that we continue to
believe that our established methodology results in appropriate payment
rates for ASCs. As noted in the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60623), section 109(b) of the MIEA-TRHCA (Pub. L.
109-432) gives the Secretary the authority to implement ASC quality
measure reporting and to reduce the payment update for ASCs that fail
to report those required measures. We restated our belief that
promoting high quality care in the ASC setting through quality
reporting is highly desirable and fully in line with our efforts under
other payment systems. As discussed in section XVI.F. of the CY 2011
OPPS/ASC proposed rule (75 FR 46382 through 46383), we proposed not to
require ASC quality data reporting for CY 2011, but stated our
intention to implement ASC quality reporting in a future rulemaking.
We noted in the proposed rule that section 3006(f) of the
Affordable Care Act, as added by section 10301(a) of the Affordable
Care Act, requires CMS to develop a plan on implementing a value-based
purchasing program for ASCs that will consider measures of quality and
efficiency in ASCs, among other requirements. The Secretary must submit
a report to Congress containing this plan not later than January 1,
2011.
Comment: Many commenters urged CMS to require ASCs to routinely
report

[[Page 72058]]

cost data to allow for future validation of the relative
appropriateness of ASC payment weights and rates. MedPAC commented that
ASCs should be required to submit cost and quality data, concurrent
with a 0.6 percent increase in ASC payment rates for CY 2011, arguing
that ASC cost data are needed to examine whether an existing input
price index is an appropriate proxy for the costs of ASCs or whether an
ASC-specific market basket should be developed. MedPAC pointed out that
businesses such as ASCs typically keep records of their costs for
filing taxes and other purposes, and those other small providers such
as home health agencies and hospices submit cost data to CMS. MedPAC
stated that CMS should create a streamlined process for ASCs to submit
cost data in order to minimize the burden on ASCs and CMS.
Other commenters, however, supported CMS' proposal not to require
ASCs to routinely submit cost data, a process that the commenters
characterized as administratively burdensome. The commenters stated
that the quality of such data, if required, would be questionable
because of the varying types of services and cost structures among ASCs
and would not be suitable for ratesetting.
Many commenters, including MedPAC, urged CMS to require ASCs to
report quality measures, while others supported CMS' proposal to defer
quality reporting for ASCs while they adjust to the revised ASC payment
system. Commenters also supported the implementation of a value-based
purchasing program for ASCs.
Response: We did not propose to require ASCs to submit cost data to
the Secretary for CY 2011 because, as noted previously in this section
and in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60622), we continue to believe that our established methodology results
in appropriate payment rates for ASCs. Therefore, we are finalizing our
proposal not to require cost reporting in this final rule with comment
period. We thank all of the commenters for their thoughts regarding the
feasibility and value of requiring ASCs to submit cost data that could
be used to evaluate the adequacy of the Medicare ASC payment rates. We
will keep the commenters' perspectives about collecting cost
information from ASCs in mind as we further consider the adequacy of
the Medicare ASC payment rates. We also appreciate the commenters'
perspectives' regarding ASC quality reporting and refer readers to
section XVI.F. of this final rule with comment period for more detailed
discussion of ASC quality data reporting. As mentioned in the proposed
rule, a plan to implement an ASC value based purchasing program will be
prepared for Congress by January 1, 2011, as required by the Affordable
Care Act.

H. Calculation of the ASC Conversion Factor and ASC Payment Rates

1. Background
In the August 2, 2007 final rule (72 FR 42493), we established our
policy to base ASC relative payment weights and payment rates under the
revised ASC payment system on APC groups and relative payment weights.
Consistent with that policy and the requirement at section
1833(i)(2)(D)(ii) of the Act that the revised payment system be
implemented so that it would be budget neutral, the initial ASC
conversion factor (CY 2008) was calculated so that estimated total
Medicare payments under the revised ASC payment system in the first
year would be budget neutral to estimated total Medicare payments under
the prior (CY 2007) ASC payment system (the ASC conversion factor is
multiplied by the relative payment weights calculated for many ASC
services in order to establish payment rates). That is, application of
the ASC conversion factor was designed to result in aggregate Medicare
expenditures under the revised ASC payment system in CY 2008 equal to
aggregate Medicare expenditures that would have occurred in CY 2008 in
the absence of the revised system, taking into consideration the cap on
ASC payments in CY 2007 as required under section 1833(i)(2)(E) of the
Act (72 FR 42522).
We note that we consider the term ``expenditures'' in the context
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of
the Act to mean expenditures from the Medicare Part B Trust Fund. We do
not consider expenditures to include beneficiary coinsurance and
copayments. This distinction was important for the CY 2008 ASC budget
neutrality model that considered payments across hospital outpatient,
ASC, and MPFS payment systems. However, because coinsurance is almost
always 20 percent for ASC services, this interpretation of expenditures
has minimal impact for subsequent budget neutrality adjustments
calculated within the revised ASC payment system.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857
through 66858), we set out a step-by-step illustration of the final
budget neutrality adjustment calculation based on the methodology
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531)
and as applied to updated data available for the CY 2008 OPPS/ASC final
rule with comment period. The application of that methodology to the
data available for the CY 2008 OPPS/ASC final rule with comment period
resulted in a budget neutrality adjustment of 0.65.
For CY 2008, we adopted the OPPS relative payment weights as the
ASC relative payment weights for most services and, consistent with the
final policy, we calculated the CY 2008 ASC payment rates by
multiplying the ASC relative payment weights by the final CY 2008 ASC
conversion factor of $41.401. For covered office-based surgical
procedures and covered ancillary radiology services, the established
policy is to set the relative payment weights so that the national
unadjusted ASC payment rate does not exceed the MPFS unadjusted non-
facility PE RVU amount. Further, as discussed in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66841 through 66843), we also
adopted alternative ratesetting methodologies for specific types of
services (for example, device-intensive procedures).
As discussed in the August 2, 2007 final rule (72 FR 42518) and as
codified under Sec. 416.172(c) of the regulations, the revised ASC
payment system accounts for geographic wage variation when calculating
individual ASC payments by applying the pre-floor and pre-reclassified
hospital wage indices to the labor-related share, which is 50 percent
of the ASC payment amount. Beginning in CY 2008, CMS accounted for
geographic wage variation in labor cost when calculating individual ASC
payments by applying the pre-floor and pre-reclassified hospital wage
index values that CMS calculates for payment, using updated Core-Based
Statistical Areas (CBSAs) issued by the Office of Management and Budget
in June 2003. The reclassification provision provided at section
1886(d)(10) of the Act is specific to hospitals. We believe the use of
the most recent available raw pre-floor and pre-reclassified hospital
wage indices results in the most appropriate adjustment to the labor
portion of ASC costs. In addition, use of the unadjusted hospital wage
data avoids further reductions in certain rural statewide wage index
values that result from reclassification. We continue to believe that
the unadjusted hospital wage indices, which are updated yearly and are
used by many other Medicare payment systems, appropriately account for
geographic variation in labor costs for ASCs.
We noted that in certain instances there might be urban or rural
areas for

[[Page 72059]]

which there is no IPPS hospital whose wage index data would be used to
set the wage index for that area. For these areas, our policy has been
to use the average of the wage indices for CBSAs (or metropolitan
divisions as applicable) that are contiguous to the area that has no
wage index (where ``contiguous'' is defined as sharing a border). We
have applied a proxy wage index based on this methodology to ASCs
located in CBSA 25980 Hinesville-Fort Stewart, GA, and CBSA 22 Rural
Massachusetts. For CY 2011, we have identified another area,
specifically, CBSA 11340 Anderson, SC for which there is no IPPS
hospital whose wage index data would be used to set the wage index for
that area. Generally, we would use the methodology described above;
however in this situation all of the areas contiguous to CBSA 11340
Anderson, SC are rural. Therefore, for this type of unique situation,
in the CY 2011 OPPS/ASC proposed rule (75 FR 46358), we proposed to set
the ASC wage index by calculating the average of all wage indices for
urban areas in the State. In other situations, where there are no IPPS
hospitals located in a relevant labor market area, we would continue
our current policy of calculating an urban or rural area's wage index
by calculating the average of the wage indices for CBSAs (or
metropolitan divisions where applicable) that are contiguous to the
area with no wage index.
Comment: Several commenters recommended that CMS adopt for the ASC
payment system the same wage index values used for hospital payment
under the OPPS. They believe that applying different wage indices in
the ASC payment system than are used in the OPPS is inequitable
because, in many market areas, ASCs compete directly with hospitals for
employees with skills and functions that are applicable in both
settings. The commenters also argued that applying different wage index
values for ASCs and hospitals causes rates between the two systems to
diverge at the local level, and that using the pre-floor and pre-
reclassified hospital wage indices for ASCs is inconsistent with the
principle of aligning the OPPS and ASC payment systems. They asserted
that the ASC payment system is subordinate to the OPPS--the ASC
conversion factor having been derived from the OPPS conversion factor
and the OPPS relative weights being the annual starting point for ASC
relative weights--and thus policies applicable under the OPPS should
apply to the ASC setting.
The commenters believed that, in all but a few instances, the
adjusted wage index values used in the OPPS would be higher than the
current wage index values used in the ASC payment system. Specifically,
the commenters believe the adjustments that are applied to the wage
indices used in the OPPS system also should be applied to the ASC wage
indices. The adjustments that commenters requested be applied to the
wage index values used in the ASC payment system are: Application of
the ``frontier States'' wage index floor of 1.0 for providers in
Montana, Nevada, Wyoming, North Dakota, and South Dakota; an imputed
statewide rural wage index for States with no counties outside of an
urban area; a mechanism to prevent urban areas from having indices
below the statewide rural wage index; a mechanism to prevent the wage
index of urban areas that cross State lines from falling below the
State-specific rural floor; and an adjustment for counties where a
significant proportion of residents commute to other counties for work.
Response: As we have stated in the past (74 FR 60625), we continue
to believe that the unadjusted hospital wage indices, which are updated
yearly and are used by almost all Medicare payment systems,
appropriately account for geographic variance in labor costs for ASCs.
The post-reclassification wage indices for hospitals that fall under
section 1886(d) of the Act (``section 1886(d) hospitals'') include many
statutory adjustments specific to section 1886(d) hospitals and some
regulatory adjustments for section 1886(d) hospitals including, but not
limited to, the areas requested by commenters: application of the
``frontier States'' wage index floor of 1.0 for providers in Montana,
Nevada, Wyoming, North Dakota, and South Dakota; an imputed Statewide
rural wage index for States with no counties outside of an urban area;
a ``rural floor'' mechanism to prevent urban areas from having indices
below the Statewide rural wage index; a mechanism to prevent the wage
index of urban areas that cross State lines from falling below the
State-specific rural floor; and an adjustment for counties where a
significant proportion of residents commute to other counties. Because
many of these adjustments are specified in statute for section 1886(d)
hospitals, we believe it is appropriate to apply these adjustments only
to section 1886(d) hospitals. The OPPS adopts the post-reclassification
wage indices (adjusted hospital wage indices) because the majority of
participating hospitals are section 1886(d) hospitals and, in these
hospitals, the exact same personnel staff the ancillary departments of
the hospital that simultaneously treat both inpatients and outpatients.
For payment systems for other providers and suppliers for which there
is no specific statutory provision for adjustments to the wage index
values, we calculate and apply unadjusted hospital wage indices that
reflect the reported cost of hospital labor in each area. Specifically,
we use some form of the unadjusted hospital wage indices to pay long-
term care, psychiatric, and inpatient rehabilitation hospitals for
inpatient care, as well as skilled nursing facilities, hospice
programs, home health agencies, and ESRD facilities. Historically, we
have only applied the adjusted, post-reclassification hospital wage
indices to pay section 1886(d) hospitals for both inpatient and
outpatient services for the reasons noted above. It is our policy to
treat ASCs as we do all other providers and suppliers using hospital
wage index values.
Further, adopting the post-reclassification hospital wage indices
with rural floor and associated statewide budget neutrality adjustment
would not increase overall ASC payment because we apply a budget
neutrality adjustment for changes in the wage indices to the conversion
factor. Therefore, any anticipated increases in aggregate ASC payment
created by adopting the post-reclassification wage indices would lead
to a comparable downward adjustment to the conversion factor to ensure
that the only increase in payments to ASCs are those allowed by the
update factor. We discuss our budget neutrality adjustment for changes
to the wage indices below in section XV.H.2.b. of this final rule with
comment period.
After consideration of the public comments we received, we are
continuing our established policy to account for geographic wage
variation in labor cost when calculating individual ASC payments by
applying the pre-floor and pre-reclassified hospital wage index values
that CMS calculates for payment, using updated CBSAs. We also are
implementing our proposal, without modification, to set the ASC wage
index by calculating the average of all wage indices for urban areas in
the State when all contiguous areas to a CBSA are rural and there is no
IPPS hospital whose wage index data could be used to set the wage index
for that area.
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2011 and Future
Years
We update the ASC relative payment weights each year using the
national

[[Page 72060]]

OPPS relative payment weights (and MPFS non-facility PE RVU amounts, as
applicable) for that same calendar year and uniformly scale the ASC
relative payment weights for each update year to make them budget
neutral (72 FR 42531 through 42532). Consistent with our established
policy, in the CY 2011 OPPS/ASC proposed rule (75 FR 46358), we
proposed to scale the CY 2011 relative payment weights for ASCs
according to the following method. Holding ASC utilization and the mix
of services constant from CY 2008 for CY 2011, we proposed to compare
the total payment weight using the CY 2010 ASC relative payment weights
under the 75/25 blend (of the CY 2007 payment rate and the ASC payment
rate calculated under the ASC standard methodology) with the total
payment weight using the CY 2011 ASC relative payment weights
(calculated under the ASC standard ratesetting methodology) to take
into account the changes in the OPPS relative payment weights between
CY 2010 and CY 2011. We would use the ratio of CY 2010 to CY 2011 total
payment weight (the weight scaler) to scale the ASC relative payment
weights for CY 2011. The proposed CY 2011 ASC scaler was 0.9090 (75 FR
46358) and scaling would apply to the ASC relative payment weights of
the covered surgical procedures and covered ancillary radiology
services for which the ASC payment rates are based on OPPS relative
payment weights.
Scaling would not apply in the case of ASC payment for separately
payable covered ancillary services that have a predetermined national
payment amount (that is, their national ASC payment amounts are not
based on OPPS relative payment weights), such as drugs and biologicals
that are separately paid or services that are contractor-priced or paid
at reasonable cost in ASCs. Any service with a predetermined national
payment amount would be included in the ASC budget neutrality
comparison, but scaling of the ASC relative payment weights would not
apply to those services. The ASC payment weights for those services
without predetermined national payment amounts (that is, those services
with national payment amounts that would be based on OPPS relative
payment weights if a payment limitation did not apply) would be scaled
to eliminate any difference in the total payment weight between the
current year and the update year.
For any given year's ratesetting, we typically use the most recent
full calendar year of claims data to model budget neutrality
adjustments. At the time of the proposed rule, we had available 98
percent of CY 2009 ASC claims data. For this final rule with comment
period, we have approximately 99 percent of all ASC claims data for CY
2009.
To create an analytic file to support calculation of the weight
scaler and budget neutrality adjustment for the wage index (discussed
below), we summarized available CY 2009 ASC claims by provider and by
HCPCS code. We created a unique supplier identifier solely for the
purpose of identifying unique ASCs within the CY 2009 claims data. We
used the supplier zip code reported on the claim to associate State,
county, and CBSA with each ASC. This file, available to the public as a
supporting data file for the proposed rule, is posted on the CMS Web
site at: http://www.cms.gov/ASCPayment/01_Overview.asp#TopOfPage.
Comment: Many commenters again expressed their opposition to
scaling the ASC relative payment weights. Many of the commenters on the
CY 2011 OPPS/ASC proposed rule offered the same views as the public
commenters on the CY 2010 OPPS/ASC final rule with comment period and
the CY 2009 OPPS/ASC final rule with comment period, the year when CMS
first applied the scaling policy that was finalized in the August 2,
2007 final rule. The commenters expressed many concerns, including that
scaling is contrary to the intent of using the cost-based OPPS relative
payment weights as the basis for determining the relative payments for
the same services in ASCs and that scaling would continue to erode the
payment relationship between the OPPS and ASC payment system. They
asserted that, although scaling is intended to maintain budget
neutrality within the ASC payment system, it is instead creating
increasingly large payment differentials between the ASC and OPPS
payments for the same services without evidence of growing differences
in capital and operating costs between the two settings, and depriving
ASCs of real increases in the relative costs of procedures. The
commenters believed that the CY 2011 OPPS relative payment weights
reflected real growth in the relative costs of surgical services
provided in HOPDs and that the ASC scaler should not reclaim dollars
from the ASC payment system because there also has been real cost
growth for the surgical services provided in ASCs. The commenters
argued that only the difference in the conversion factor should drive
differences in the payment for ASC and HOPD services from year to year,
and that because CMS bases the ASC payment system on the OPPS relative
weights, the weights should be the same in both payment systems.
The commenters also pointed out that while CMS has suggested that
scaling of the relative weights is a design element that will protect
ASCs from changes in the OPPS relative weights that could significantly
decrease payments for certain procedures, the trend in the OPPS
relative weights suggests that the scaling factor for ASCs will rarely
result in an increase in ASC relative weights. According to the
commenters, ASCs would have received a negative adjustment to their
weights in seven of the last nine years, indicating that the
application of scaling in the ASC setting will continue to hurt, rather
than protect, ASCs in the future. The commenters estimated that scaling
of the ASC relative payment weights will reduce ASC weights by 9
percent in CY 2011.
The commenters argued that CMS is not required to scale the ASC
relative weights and that it should use its authority to suspend the
application of scaling the ASC relative weights for CY 2011. They noted
that the regulations establishing the revised ASC payment system give
CMS the flexibility to scale ``as needed.'' In addition, some
commenters stated that Congress imposed a budget neutrality requirement
on the ASC payment system only during the CY 2008 implementation year,
and that CMS is under no legal obligation to continue to apply a
scaling factor.
The commenters also expressed their continuing disagreement with
aspects of the budget neutrality adjustment methodology used by CMS to
establish the conversion factor. Specifically, they stated that CMS
estimated that ASCs would grow significantly in the volume and
diversity of services offered. According to the commenters, in addition
to overestimating volume growth, CMS likewise overestimated the level
and distribution of spending. They provided 2008 and 2009 spending data
and indicated that volume has grown at the lowest rate in program
history and that the diversity of services provided is largely
unchanged. They believe that these findings provide a further basis for
CMS not to scale the ASC relative payment weights for CY 2011 after the
weights are scaled under the OPPS.
Response: Many of these comments are similar to public comments on
the proposal for the revised ASC payment system that we responded to in
the August 2, 2007 final rule (72 FR 42531 through 42533). For example,
with regard to scaling, we addressed these same concerns raised by
commenters that annual rescaling would cause

[[Page 72061]]

divergence of the relative weights between the OPPS and the revised ASC
payment system for individual procedures in the August 2, 2007 final
rule (72 FR 42532). We refer the commenters to that discussion for our
detailed response in promulgating the scaling policy that was initially
applied in CY 2009 (72 FR 42531 through 42533).
As we have stated in the past (74 FR 60627), the ASC weight scaling
methodology is entirely consistent with the OPPS methodology for
scaling the relative payment weights and, for the most part, the
increasing payment differentials between the ASC and OPPS payments for
the same services are not attributable to scaling ASC relative payment
weights. Considerations of differences between the capital and
operating costs of ASCs and HOPDs are not part of the ASC standard
ratesetting methodology, which relies only on maintaining the same
relativity of payments for services under the two payment systems, as
well as budget neutrality within each payment system. Furthermore,
unlike HOPDs, we do not have information about the costs of ASC
services in order to assess differences in capital and operating costs
over time between the two settings. In order to maintain budget
neutrality of the ASC payment system, we need to adjust for the effects
of changes in relative weights. The ASC payment system adopts the OPPS
relative weights as the mechanism for apportioning total payments,
after application of the update factor, among all of the services
covered by the ASC payment system. The OPPS relative weights serve the
same purpose in the OPPS. The OPPS relative weights do not represent an
estimate of absolute cost of any given procedure; rather, they reflect
our estimate of the cost of the procedure within the context of our
cost estimation methodology for the OPPS. With the exception of
services with a predetermined national payment amount, the use of a
uniform scaling factor for changes in total weight between years in the
ASC payment system does not alter the relativity of the OPPS payment
weights as used in the ASC payment system. Differences in the
relativity between the ASC relative payment weights and the OPPS
relative payment weights are not driven by the application of the
uniform scaling factor. The ASC weight scaling methodology is entirely
consistent with the OPPS weight scaling methodology and the weights
serve the same purpose in both systems, to apportion total budget
neutral payment allowed under the update.
We do not agree with commenters' assertion that we should alter or
eliminate the scaling methodology because the scaling factor will
rarely result in an increase in ASC relative weights, therefore
continuing to hurt rather than protect ASCs in the future. As we stated
in the August 2, 2007 final rule (72 FR 42532), aggregate payments to
ASCs could, in the absence of rescaling, be affected by changes in the
cost structure of HOPDs that ought to be relevant only under the OPPS.
A sudden increase in the costs of hospital outpatient emergency
department or clinical visits due, for instance, to an increase in the
volume of cases, would have the effect of increasing the weights for
these services relative to the weights for surgical procedures in the
hospital outpatient setting. In the absence of scaling the ASC payment
weights, this change in the relative weights under the OPPS would
result in a decrease in the relative weights for surgical procedures
under the ASC payment system, and, therefore, a decrease in aggregate
ASC payments for these same procedures. We continue to believe that
changes in relative weights each year under the OPPS should not, in and
of themselves, cause aggregate payments under the revised ASC payment
system to increase or decrease. It is important to note that the
specific adjustment factor applied in the scaling process could be
positive or negative in any particular year; the fact that the scaler
has not resulted in an increase to the ASC payment weights in any given
year or series of years does not mean the same trend will continue, nor
does it mean that the principle of preventing the ASC payment weights
from being affected by fluctuations in the OPPS payment weights is
inherently flawed.
As stated in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68754), with respect to the use of ``as needed'' in the text of
Sec. 416.171(e)(2) that commenters have interpreted to mean that CMS
has the authority to suspend scaling the relative payment weights if it
determines there is not a need to do so, the phrase does not mean that
CMS will determine whether or not to adjust for budget neutrality.
Rather, it means that CMS adjusts the relative payment weights as
needed to ensure budget neutrality. Therefore, we do not agree with the
commenters' assertion that we are under no legal obligation to continue
to apply a scaling factor. If we were not to scale the ASC relative
payment weights, we estimate that the CY 2011 revisions would not be
budget neutral.
We agree that there are differences between the service volume
estimates CMS used to establish budget neutrality based on CY 2006
claims data and those reflected in the CY 2009 claims data. In the
final regulations implementing the revised ASC payment system, we made
our best actuarial estimate to ensure budget neutrality. We did not
intend to revisit the actuarial budget neutrality regardless of whether
it could be determined that there was a difference between actual
experience and our underlying data assumptions and regardless of
whether or not any difference that could be determined resulted in
increased or decreased expenditures under the revised ASC payment
system.
Establishing budget neutrality under the OPPS does not result in
budget neutrality under the revised ASC payment system; it is only to
maintain budget neutrality under the OPPS. Scaling the ASC relative
payment weights is an integral and separate process for maintaining
budget neutrality under the ASC prospective payment system. Scaling is
the budget neutrality adjustment that ensures that changes in the
relative weights do not, in and of themselves, change aggregate payment
to ASCs. It ensures a specific amount of payment for ASCs in any given
year. Without scaling, total ASC payment could increase or decrease
relative to changes in hospital outpatient payment.
We do not agree with the commenters' assertion that the ASC scaler
should not reclaim dollars from the ASC payment system because,
according to the commenters, there also has been real cost growth for
the surgical services provided in ASCs. Although the commenters believe
that scaling prevents increases in ASC spending that may be appropriate
because ASC costs have increased over time, increases in cost in a
prospective payment system are handled by the update factor. In a
budget neutral system, we remove the independent effects of increases
or decreases in payments as a result of changes in the relative payment
weights or the wage indices and constrain increases to the allowed
update factor. Therefore, changes in aggregate ASC expenditures related
to payment rates should be determined by the update to the ASC
conversion factor, the CPI-U.
For this final rule with comment period, we used our proposed
methodology described above to calculate the scaler adjustment using
updated ASC claims data. The final CY 2011 scaler adjustment for the
first fully implemented year of the revised ASC payment system is
0.9238. This scaler

[[Page 72062]]

adjustment is necessary to budget neutralize the difference in
aggregate ASC payments calculated using the CY 2010 ASC transitional
(75/25 blend) relative payment weights and the CY 2011 fully
implemented relative payment weights. We calculated the difference in
aggregate payments due to the change in relative payment weights
(including drugs and biologicals) holding constant the ASC conversion
factor, the most recent CY 2009 ASC utilization from our claims data,
and the CY 2010 wage index values. For this final CY 2011 calculation,
we used the CY 2010 ASC conversion factor updated by the CY 2011 CPI-U,
which is estimated as 1.5 percent, less the multifactor productivity
adjustment of 1.3 percent, as discussed in section XV.H.2.b. of this
final rule with comment period.
After consideration of the public comments we received, we are
finalizing our CY 2010 ASC relative payment weight scaling methodology,
without modification. The final CY 2011 ASC payment weight scaler is
0.9238.
b. Updating the ASC Conversion Factor
Under the OPPS, we typically apply a budget neutrality adjustment
for provider level changes, most notably a change in the wage index
values for the upcoming year, to the conversion factor. Consistent with
our final ASC payment policy, for the CY 2011 ASC payment system, in
the CY 2011 OPPS/ASC proposed rule (75 FR 46358), we proposed to
calculate and apply the pre-floor and pre-reclassified hospital wage
indices that are used for ASC payment adjustment to the ASC conversion
factor, just as the OPPS wage index adjustment is calculated and
applied to the OPPS conversion factor (73 FR 41539). For CY 2011, we
calculated this proposed adjustment for the ASC payment system by using
the most recent CY 2009 claims data available and estimating the
difference in total payment that would be created by introducing the CY
2011 pre-floor and pre-reclassified hospital wage indices.
Specifically, holding CY 2009 ASC utilization and service-mix and CY
2010 national payment rates after application of the weight scaler
constant, we calculated the total adjusted payment using the CY 2011
pre-floor and pre-reclassified hospital wage indices and the total
adjusted payment using the proposed CY 2011 pre-floor and pre-
reclassified hospital wage indices. We used the 50-percent labor-
related share for both total adjusted payment calculations. We then
compared the total adjusted payment calculated with the CY 2010 pre-
floor and pre-reclassified hospital wage indices to the total adjusted
payment calculated with the proposed CY 2011 pre-floor and pre-
reclassified hospital wage indices and applied the resulting ratio of
1.0006 (the proposed CY 2011 ASC wage index budget neutrality
adjustment) to the CY 2010 ASC conversion factor to calculate the
proposed CY 2011 ASC conversion factor.
Section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary
has not updated the ASC payment amounts in a calendar year, the payment
amounts ``shall be increased by the percentage increase in the Consumer
Price Index for all urban consumers (U.S. city average) as estimated by
the Secretary for the 12-month period ending with the midpoint of the
year involved.'' Because the Secretary does update the ASC payment
amounts annually, we adopted a policy, which we codified at Sec.
416.171(a)(2)(ii), to update the ASC conversion factor using the CPI-U
for CY 2010 and subsequent calendar years. Therefore, the annual update
to the ASC payment system is the CPI-U (referred to as the CPI-U update
factor). Section 3401(k) of the Affordable Care Act amends section
1833(i)(2)(D) of the Act by adding a new clause (v) which requires that
``any annual update under [the ASC payment] system for the year [after
application of any reduction in any update for failure to report on
quality measures, if the Secretary implements a quality reporting
program for ASCs] shall be reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)'' (which we refer to as the
MFP adjustment) effective with the calendar year beginning January 1,
2011. Section 3401(k) of the Affordable Care Act states that
application of the MFP adjustment to the ASC payment system may result
in the update to the ASC payment system being less than zero for a year
and may result in payment rates under the ASC payment system for a year
being less than such payment rates for the preceding year. In the CY
2011 OPPS/ASC proposed rule (75 FR 46359), we proposed to revise Sec.
416.160 and Sec. 416.171 to reflect this provision of the Affordable
Care Act.
In accordance with section 1833(i)(2)(C)(i) of the Act, before
applying the MFP adjustment, the Secretary first determines the
``percentage increase'' in the CPI-U, which we interpret cannot be a
negative number. Thus, in the instance where the percentage change in
the CPI-U for a year is negative, in the CY 2011 OPPS/ASC proposed rule
(75 FR 46359), we proposed to hold the CPI-U update factor for the ASC
payment system to zero. Section 1833(i)(2)(D)(v) of the Act, as added
by section 3401(k) of the Affordable Care Act, then requires that the
Secretary reduce the CPI-U update factor (which would be held to zero
if the CPI-U percentage change is negative) by the MFP adjustment, and
states that application of the MFP adjustment may reduce this
percentage change below zero. If the application of the MFP adjustment
to the CPI-U percentage increase would result in a MFP-adjusted CPI-U
update factor that is less than zero, then the annual update to the ASC
payment rates would be negative and payments would decrease relative to
the prior year.
Table 54 in the CY 2011 OPPS/ASC proposed rule (75 FR 46359), set
out again as Table 65 below, provides illustrative examples of how the
MFP adjustment would be applied to the ASC payment system. These
examples show the implication of a positive CPI-U update factor with a
small MFP adjustment, a positive CPI-U update factor with a large MFP
adjustment, and a CPI-U update factor of zero. We discussed in greater
detail the methodology for calculating the MFP adjustment for the ASC
payment system and the other payment systems affected by the MFP
adjustment (found in section 1886(b)(3)(B)(xi)(II) of the Act, as added
by section 3401(a) of the Affordable Care Act), in the CY 2011 MPFS
proposed rule. We stated that comments on the specific mathematical
calculation of the MFP adjustment should be made to that proposed rule,
while comments on the application of the MFP adjustment to the CPI-U
update factor under the ASC payment system should be made to the CY
2011 OPPS/ASC proposed rule.

[[Page 72063]]

Table 65--Multifactor Productivity Adjusted Payment Update: Illustrative
Examples
------------------------------------------------------------------------
MFP--Adjusted
MFP CPI-U update
CPI-U (percent) Adjustment factor
(percent) (percent)
------------------------------------------------------------------------
4.0..................................... 1.3 2.7
4.0..................................... 4.7 -0.7
0.0..................................... 0.2 -0.2
------------------------------------------------------------------------
Note: Numbers may not sum due to rounding.

In the CY 2011 OPPS/ASC proposed rule (75 FR 46359), for the 12-
month period ending with the midpoint of CY 2011, the Secretary
estimated that the CPI-U is 1.6 percent. The Secretary estimated that
the MFP adjustment is 1.6 percent. As discussed in the CY 2011 MPFS
proposed rule, we proposed to reduce the CPI-U of 1.6 percent by the
MFP adjustment specific to this CPI-U, resulting in an MFP-adjusted
CPI-U update factor of 0 percent. Therefore, we proposed to apply to
the ASC conversion factor a 0 percent MFP-adjusted update.
For CY 2011, we also proposed to adjust the CY 2010 ASC conversion
factor ($41.873) by the wage adjustment for budget neutrality of 1.0006
in addition to the MFP-adjusted update factor of zero discussed above,
which resulted in a proposed CY 2011 ASC conversion factor of $41.898.
Comment: As in prior years, many commenters requested that CMS
adopt the hospital market basket to update the ASC payment system. They
explained that not only is the CPI-U lower than the hospital market
basket but it is not appropriate for updating health care providers
because, unlike the hospital market basket which analyzes hospital
spending, the CPI-U is designed to capture household spending. The
commenters stated that, in the most recent years, the CPI-U has been
dominated by energy and housing costs rather than healthcare provider
spending, and that the goods and services provided by ASCs are very
similar to those provided by hospitals. Further, the commenters stated
CMS uses different proxies for price increases for most of the
categories of goods and services in the market basket, and provided the
example of the hospital market basket being assigned a combined weight
of 2.84 percent to food products, while the CPI-U assigns a weight of
14.914 percent to all food and beverages. According to commenters, the
disparity in weights illustrates the inherently different cost
pressures faced by the typical U.S. household and the hospital sector.
The commenters also argued that the CPI-U is a poor proxy of ASC cost
inflation, noting that the CPI-U has faced criticism from independent
researchers and economists, who indicate, according to the commenters,
that the CPI-U consistently underestimates the rate of inflation. One
commenter noted that several sources forecast different CPI-U rates,
suggesting that it does not make sense to use the CPI-U as the ASC
update factor. The commenters argued that the difference between the
ASC and OPPS conversion factors is not due to real differences in the
growth of costs of goods and services furnished by ASCs and HOPDs and
should not be perpetuated if the ASC payment system is to remain tied
to the OPPS. The commenters asserted that CMS has the authority to use
an alternative update mechanism, and believe CMS should adopt the
hospital market basket as the update for the ASC payment system. The
commenters stated that adopting the hospital market basket would
minimize the divergence in CY 2011 payment between the ASC payment
system and the OPPS and prevent the update from causing further
divergence when the productivity adjustment is applied to both settings
in the future.
As mentioned previously in section XV.G. of this final rule with
comment period, MedPAC commented that ASCs should be required to submit
cost and quality data, concurrent with a 0.6 percent increase in ASC
payment rates for CY 2011, arguing that ASC cost data are needed to
examine whether an existing input price index is an appropriate proxy
for the costs of ASCs or whether an ASC-specific market basket should
be developed.
Response: We understand the commenters' concerns regarding the
update to the conversion factor for CY 2011, but note that we did not
propose to change the conversion factor update methodology. We refer
readers to the discussion in the August 2, 2007 final rule on this
issue (72 FR 42518 through 42519).
After consideration of the public comments we received, we are
generally applying our established methodology for determining the
final CY 2011 ASC conversion factor. However, the methodology for
determining the conversion factor now includes the MFP adjustment and
we are finalizing the methodology for applying the MFP adjustment to
the CPI-U update factor as proposed and discussed above. (In the CY
2011 MPFS final rule with comment period, we responded to public
comments and finalized the methodology for calculating the MFP
adjustment. For CY 2011, the MFP adjustment is 1.3 percent.) Using more
complete CY 2009 data for this final rule with comment period than was
available for the proposed rule, we calculated a wage index budget
neutrality adjustment of 0.9996. Based on updated data, the CPI-U for
the 12-month period ending with the midpoint of CY 2011 is now
estimated to be 1.5 percent, while the MFP adjustment is 1.3 percent,
resulting in an MFP-adjusted CPI update factor of 0.2 percent. The
final ASC conversion factor of $41.939 is the product of the CY 2010
conversion factor of $41.873 multiplied by the wage index budget
neutrality adjustment of 0.9996 and the MFP-adjusted CPI-U payment
update of 0.2 percent. We note that we have factored into our budget
neutrality calculations the price change resulting from the expiration
of the current NTIOL class in February 2011, as discussed in section
XV.E. of this final rule with comment period. As a result of the
expiration of this NTIOL class, the $50 add-on payment will no longer
apply in CY 2011 after February. We also note that we have not factored
in the budget neutrality calculations increased spending for the new
pass-through device category described by HCPCS code C1749, because it
is unclear how quickly this new technology will be adopted by ASCs. We
will closely monitor utilization of this device and the financial
impact during CY 2011 in order to propose any appropriate budget
neutrality adjustment for CY 2012.
We also are finalizing our proposal, without modification, to
revise Sec. 416.160 and Sec. 416.171 of the

[[Page 72064]]

regulations to reflect section 3401(k) of the Affordable Care Act.
3. Display of CY 2011 ASC Payment Rates
Addenda AA and BB to this CY 2011 final rule with comment period
display the updated ASC payment rates for CY 2011 for covered surgical
procedures and covered ancillary services, respectively. These addenda
contain several types of information related to the CY 2011 payment
rates. Specifically, in Addendum AA, a ``Y'' in the column titled
``Subject to Multiple Procedure Discounting'' indicates that the
surgical procedure will be subject to the multiple procedure payment
reduction policy. As discussed in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66829 through 66830), most covered surgical
procedures are subject to a 50-percent reduction in the ASC payment for
the lower-paying procedure when more than one procedure is performed in
a single operative session. Display of the comment indicator ``CH'' in
the column titled ``Comment Indicator'' indicates a change in payment
policy for the item or service, including identifying discontinued
HCPCS codes, designating items or services newly payable under the ASC
payment system, and identifying items or services with changes in the
ASC payment indicator for CY 2011. Display of the comment indicator
``NI'' in the column titled ``Comment Indicator'' indicates that the
code is new (or substantially revised) and that the payment indicator
assignment is an interim assignment that is open to comment on the
final rule with comment period.
The values displayed in the column titled ``CY 2011 Payment
Weight'' are the relative payment weights for each of the listed
services for CY 2011. The payment weights for all covered surgical
procedures and covered ancillary services whose ASC payment rates are
based on OPPS relative payment weights are scaled for budget
neutrality. Thus, scaling was not applied to the device portion of the
device intensive procedures, services that are paid at the MPFS
nonfacility PE RVU amount, separately payable covered ancillary
services that have a predetermined national payment amount, such as
drugs and biologicals that are separately paid under the OPPS, or
services that are contractor-priced or paid at reasonable cost in ASCs.
To derive the CY 2011 payment rate displayed in the ``CY 2011
Payment'' column, each ASC payment weight in the ``CY 2011 Payment
Weight'' column is multiplied by the CY 2011 conversion factor of
$41.939. The conversion factor includes a budget neutrality adjustment
for changes in the wage index values and the CPI-U update factor as
reduced by the productivity adjustment (as discussed in section
XV.H.2.b. of this final rule with comment period).
In Addendum BB, there are no relative payment weights displayed in
the ``CY 2011 Payment Weight'' column for items and services with
predetermined national payment amounts, such as separately payable
drugs and biologicals. The ``CY 2011 Payment'' column displays the CY
2011 national unadjusted ASC payment rates for all items and services.
The CY 2011 ASC payment rates listed in Addendum AA for separately
payable drugs and biologicals are based on ASP data used for payment in
physicians' offices in October 2010.
We did not receive any public comments regarding the continuation
of our policy to provide CY 2011 ASC payment information as detailed in
Addenda AA and BB. Therefore, Addenda AA and BB to this final rule with
comment period display the updated ASC payment rates for CY 2011 for
covered surgical procedures and covered ancillary services,
respectively, and provide additional information related to the CY 2011
rates.

XVI. Reporting Quality Data for Annual Payment Rate Updates

A. Background

1. Overview
CMS has implemented quality measure reporting programs for multiple
settings of care. These programs promote higher quality, more efficient
health care for Medicare beneficiaries. The quality data reporting
program for hospital outpatient care, known as the Hospital Outpatient
Quality Data Reporting Program (HOP QDRP), has been generally modeled
after the quality data reporting program for hospital inpatient
services (referred to as the Reporting Hospital Quality Data for Annual
Payment Update (RHQDAPU) program in the proposed rule and now referred
to as the Hospital Inpatient Quality Reporting Program). Both of these
quality reporting programs for hospital services, as well as the
program for physicians and other eligible professionals, known as the
Physician Quality Reporting Initiative (PQRI), have financial
incentives for the reporting of quality data to CMS. CMS also has
implemented quality reporting programs for home health agencies and
skilled nursing facilities that are based on conditions of
participation, and an end-stage renal disease quality reporting program
that is based on conditions for coverage.
2. Hospital Outpatient Quality Data Reporting Under Section 109(a) of
MIEA-TRHCA
Section 109(a) of the MIEA-TRHCA (Pub. L. 109-432) amended section
1833(t) of the Act by adding a new paragraph (17) which affects the
annual payment update factor applicable to OPPS payments for services
furnished by hospitals in outpatient settings on or after January 1,
2009. Section 1833(t)(17)(A) of the Act states that subsection (d)
hospitals (as defined under section 1886(d)(1)(B) of the Act) that fail
to report data required for the quality measures selected by the
Secretary in the form and manner required by the Secretary under
section 1833(t)(17)(B) of the Act will incur a 2.0 percentage point
reduction to their annual payment update factor. Section 1833(t)(17)(B)
of the Act requires that hospitals submit quality data in a form and
manner, and at a time, that the Secretary specifies. Section
1833(t)(17)(A)(ii) of the Act specifies that any reduction would apply
only to the payment year involved and would not be taken into account
in computing the applicable annual payment update factor for a
subsequent payment year.
Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
(including medication errors) furnished by hospitals in outpatient
settings, that these measures reflect consensus among affected parties
and, to the extent feasible and practicable, that these measures
include measures set forth by one or more national consensus building
entities. The National Quality Forum (NQF) is a voluntary consensus
standard setting organization that is composed of a diverse
representation of consumer, purchaser, provider, academic, clinical,
and other health care stakeholder organizations. NQF was established to
standardize health care quality measurement and reporting through its
consensus development process. We generally prefer to adopt NQF-
endorsed measures for CMS quality reporting programs. However, we
believe that consensus among affected parties also can be reflected by
other means, including: Consensus achieved during the measure
development process; consensus shown through broad acceptance and use
of measures; and consensus through public comment. We also note that
section 1833(t)(17) of the Act does not require that each measure we
adopt for the HOP QDRP be endorsed by a national

[[Page 72065]]

consensus building entity, or by the NQF specifically.
Section 1833(t)(17)(C)(ii) of the Act allows the Secretary to
``[select] measures that are the same as (or a subset of) the measures
for which data are required to be submitted under section
1886(b)(3)(B)(viii)'' of the Act (the Hospital Inpatient Quality
Reporting Program). As we stated in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68758 through 68759), we do not believe that
we should, without further analysis, adopt the Hospital Inpatient
Quality Reporting Program measures as the measures for the HOP QDRP. We
continue to believe that it is most appropriate and desirable to adopt
measures that specifically apply to the hospital outpatient setting for
the HOP QDRP.
Section 1833(t)(17)(D) of the Act gives the Secretary the authority
to replace measures or indicators as appropriate, such as when all
hospitals are effectively in compliance or when the measures or
indicators have been subsequently shown not to represent the best
clinical practice. Section 1833(t)(17)(E) of the Act requires the
Secretary to establish procedures for making data submitted under the
HOP QDRP available to the public. Such procedures include providing
hospitals with the opportunity to review their data before these data
are released to the public.
Comment: A few commenters appreciated CMS's acknowledgement of the
consensus-based process and supported CMS's movement toward a
consistent goal in using consensus-based measures that are endorsed by
the NQF or other entities. Some commenters recommended that CMS only
adopt measures that are NQF-endorsed and HQA-adopted in order to
maintain consistency in the selection processes for quality measures
across physician and hospital services. Commenters encouraged CMS to
continue to work with the NQF to harmonize measures and measure
specifications. Commenters believed that both the HQA and the NQF can
help to identify and prioritize measures that have an important linkage
to improved clinical outcomes with minimal unintended consequences.
Many commenters indicated that they prefer that measures adopted for
the HOP QDRP go through the rigorous, consensus-based assessment
processes of both the NQF and HQA. Other commenters indicated that
although a consensus-based process may have been used by CMS to develop
measures, that process is not parallel to the rigorous process that
precedes an NQF endorsement or an HQA adoption of a measure. One
commenter was very pleased that all of the measures that were
conditionally approved by the HQA Principals in March 2010 are being
considered for future implementation.
Response: We thank the commenters for their support and
suggestions. Section 1833(t)(17)(C)(i) of the Act requires the
Secretary to ``develop measures that the Secretary determines to be
appropriate for the measurement of the quality of care (including
medication errors) furnished by hospitals in outpatient settings and
that reflect consensus among affected parties and, to the extent
feasible and practicable, shall include measures set forth by one or
more national consensus building entities.'' This provision does not
require that the measures we adopt for the HOP QDRP be endorsed by any
particular entity, and we believe that consensus among affected parties
can be achieved by means other than endorsement by a national consensus
building entity, including through the measure development process,
through broad acceptance and use of the measure(s), and through public
comment. Nevertheless, we have stated on numerous occasions that we
prefer to adopt quality measures that have been endorsed by the NQF
because the NQF uses a formal consensus development process and has
been recognized as a voluntary consensus standards-setting organization
as defined by the National Technology Transfer and Advancement Act of
1995 (NTTAA) and Office of Management and Budget Circular A 119 (see
http://www.qualityforum.org/Measuring_Performance/Consensus_Development_Process.aspx). Moreover, when we propose and adopt quality
measures, we take into consideration the measures adopted by the HQA as
well as an array of input from the public. The HQA is a public-private
collaboration that works to improve the quality of care provided by the
nation's hospitals by measuring and publicly reporting on that care. We
appreciate HQA's integral efforts to improve hospital quality of care
by supporting our public reporting programs.
Comment: One commenter applauded the decision to not automatically
adopt the Hospital Inpatient Quality Reporting Program measures for the
HOP QDRP without analysis for appropriateness. One commenter stated
that some of the proposed chart-abstracted measures for CYs 2012 and
2013 are found in both the Hospital Inpatient Quality Reporting Program
and the HOP QDRP and requested limiting the implementation to either
the hospital inpatient or outpatient setting only.
Response: We thank the commenters for the support and
recommendations. Some of the inpatient quality measures (for example,
Aspirin at Arrival for AMI patients, Timing of Antibiotic Prophylaxis
for Surgical Patients, and Antibiotic Selection for Surgical Patients)
are also appropriate for the hospital outpatient setting because they
address important care processes that are provided in both settings and
allow us to compare the quality of care a patient is receiving in both
settings. However, we continue to believe that it is also appropriate
and desirable to adopt for the HOP QDRP measures that have been
specifically developed for application only in the hospital outpatient
setting because hospital outpatient settings present unique challenges
in the operational and clinical aspects of care (for example,
differences in the types of interventions, treatments, services and
clinical level of care).
Comment: One commenter urged CMS to consider in its measure
selection process for the HOP QDRP whether valid clinical studies
support the use of the measure.
Response: In section XVI.B.1. of the proposed rule and this final
rule with comment period, we describe the considerations we take into
account when selecting measures to add to the HOP QDRP measure set. As
part of this process, we review current science and clinical guidelines
to determine whether the measure is appropriate for data collection
under the HOP QDRP.
3. ASC Quality Data Reporting Under Section 109(b) of MIEA-TRHCA
Section 109(b) of the MIEA-TRHCA amended section 1833(i) of the Act
by redesignating clause (iv) as clause (v) and adding new clause (iv)
to paragraph (2)(D) and by adding new paragraph (7). Section
1833(i)(2)(D)(iv) of the Act authorizes, but does not require, the
Secretary to implement the revised ASC payment system ``so as to
provide for a reduction in any annual update for failure to report on
quality measures'' beginning with payment for ASC services furnished on
or after January 1, 2009.
Section 1833(i)(7)(A) of the Act states that the Secretary may
provide that any ASC that fails to report data required for the quality
measures selected by the Secretary in the form and manner required by
the Secretary under section 1833(i)(7) of the Act will incur a
reduction in any annual payment update of 2.0 percentage points.
Section 1833(i)(7)(A) of the Act also specifies

[[Page 72066]]

that a reduction for one year cannot be taken into account in computing
the annual ASC payment update for a subsequent year.
Section 1833(i)(7)(B) of the Act provides that, ``[e]xcept as the
Secretary may otherwise provide,'' the hospital outpatient quality data
provisions of subparagraphs (B) through (E) of section 1833(t)(17) of
the Act, summarized above, shall apply to ASCs in a similar manner to
the manner in which they apply under these paragraphs to hospitals
under the HOP QDRP. We did not implement an ASC quality reporting
program for CY 2008 (72 FR 66875), for CY 2009 (73 FR 68780), or for CY
2010 (74 FR 60656).
We refer readers to section XVI.F. of this final rule with comment
period for further discussion of ASC quality data reporting.
4. HOP QDRP Quality Measures for the CY 2009 Payment Determination
For the CY 2009 annual payment update, we required HOP QDRP
reporting using seven quality measures--five Emergency Department (ED)
Acute Myocardial Infarction (AMI) Cardiac Care measures and two
Surgical Care measures. These measures address care provided to a large
number of adult patients in hospital outpatient settings across a
diverse set of conditions, and were selected for the initial set of HOP
QDRP measures based on their relevance as a set to all HOPDs.
Specifically, for hospitals to receive their full OPPS annual
payment update for services furnished in CY 2009, in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66865 and 66871), we required
that subsection (d) hospitals paid under the OPPS submit data on the
following seven measures for hospital outpatient services furnished on
or after April 1, 2008: (1) ED-AMI-1: Aspirin at Arrival; (2) ED-AMI-2:
Median Time to Fibrinolysis; (3) ED-AMI-3: Fibrinolytic Therapy
Received within 30 Minutes of Arrival; (4) ED-AMI-4: Median Time to
Electrocardiogram (ECG); (5) ED-AMI-5: Median Time to Transfer for
Primary PCI; (6) PQRI 20: Surgical Care--Timing of Antibiotic
Prophylaxis; and (7) PQRI 21: Surgical Care--Selection of
Antibiotic.
5. HOP QDRP Quality Measures for the CY 2010 Payment Determination
For the CY 2010 payment update, we required continued submission of
data on the existing seven measures discussed above (73 FR 68761), and
adopted four new imaging measures (73 FR 68766). For CY 2010, we also
changed the measure designations for the existing seven measures to an
``OP-'' format. For example, the designations of ED-AMI-2 and
ED-AMI-3 were changed to OP-1 and OP-2 so that the eleven measures for
the CY 2010 payment update were designated as OP-1 through OP-11. This
change allowed us to maintain a consistent sequential designation
system that we could expand as we add additional measures.
The four imaging measures that we adopted beginning with the CY
2010 payment determination (OP-8: MRI Lumbar Spine for Low Back Pain,
OP-9: Mammography Follow-up Rates, OP-10: Abdomen CT--Use of Contrast
Material, and OP-11: Thorax CT--Use of Contrast Material) are claims-
based measures that CMS will calculate using Medicare Part B claims
data without imposing upon hospitals the burden of additional chart
abstraction. For purposes of the CY 2010 payment determination, we
calculated these measures using CY 2008 Medicare administrative claims
data.
In the CY 2009 OPPS/ASC proposed rule, OP-10 had two submeasures
listed: OP-10a: CT Abdomen--Use of contrast material excluding calculi
of the kidneys, ureter, and/or urinary tract, and OP-10b: CT Abdomen--
Use of contrast material for diagnosis of calculi in the kidneys,
ureter, and or urinary tract. In the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68766), we finalized OP-10 (previously known as
OP-10a): Abdomen CT--Use of Contrast Material. In the CY 2010 OPPS/ASC
proposed rule and final rule with comment period (74 FR 35396 and
60631, respectively), we clarified that we are calculating OP-10
excluding patients with impaired renal functions because they are not
candidates for an abdominal CT with contrast. This exclusion is
described in greater detail in the Specifications Manual for Hospital
Outpatient Department Quality Measures (HOPD Specifications Manual)
located at the QualityNet Web site (http://www.QualityNet.org).
The complete set of 11 measures that we used for the CY 2010
payment determination is listed at 73 FR 68766.
6. HOP QDRP Quality Measures, Technical Specification Updates, and Data
Publication for the CY 2011 Payment Determination
a. Quality Measures
For the CY 2011 payment determination, we required hospitals to
continue to submit data on the existing 11 HOP QDRP measures. These
measures continue to address areas of clinical importance regarding the
quality of care provided in HOPDs, and reflect consensus among affected
parties. Seven of these 11 measures are chart-abstracted measures in
two areas of importance that are also measured for the inpatient
setting--AMI cardiac care and surgical care. The remaining four
measures address imaging efficiency in HOPDs.
For the CY 2011 payment determination, we did not add any new HOP
QDRP measures. We indicated our sensitivity to the burden upon HOPDs
associated with chart abstraction and stated that we seek to minimize
the collection burden associated with quality measurement. We also
stated that we will continue to assess whether we can collect data on
additional quality measures through mechanisms other than chart
abstraction, such as from Medicare administrative claims data and EHRs.
The complete set of 11 measures that will be used for the CY 2011
payment determination is listed at 74 FR 60637.
Comment: One commenter expressed appreciation for CMS's sensitivity
to the burden associated with chart abstraction and CMS's desire to
minimize the collection burden associated with quality reporting by not
proposing new measures for the CY 2011 payment determination. Another
commenter believed it is inappropriate to use measures based solely on
claims data without the use of clinical records. This commenter was
concerned that claims data may not portray an accurate picture of the
care provided to a patient.
Response: We thank the commenter for the support of our efforts to
minimize the data collection burden under the HOP QDRP. We intend to
limit the burden associated with chart abstraction by proposing in the
future to adopt measures for the HOP QDRP for which data can be
collected via EHRs. We disagree that measures for which data are
collected via Medicare FFS claims cannot provide an accurate picture of
hospital quality. We believe that claims data are an appropriate source
of data for the HOP QDRP. We also note that the NQF has endorsed many
evidence-based quality measures that are calculated using claims and
other administrative data. Furthermore, the use of claims-based
measures reduces the burden on hospitals associated with chart
abstraction.
We also received specific comments, discussed below, on the
measures we proposed to use for the CY 2011 payment determination.

[[Page 72067]]

OP-3: Median Time To Transfer to Another Facility for Acute
Coronary Intervention
Comment: One commenter recommended that CMS consider measuring the
overall median time to PCI in transferred patients since this captures
the entire process of care and will encourage collaboration between
transferring and receiving ST-segment elevation myocardial infarction
(STEMI) centers.
Response: We thank the commenter for this suggestion. The current
OP-3 measure assesses the quality of care provided at the initial
(transferring) facility rather than at both the transferring and
receiving facility. Thus, this measure focuses on how long a patient
spent at hospital outpatient department from the time of he/she arrived
to the time he/she departed, which is an important component of the
total time to reperfusion (reperfusion in acute myocardial infarction
is the process by which blocked arteries are opened to restore blood
flow to the tissues). A modification to the measure as suggested would
not currently be feasible to implement as it would require capturing
information from medical records at two separate facilities. However,
in the future, we may consider linking the required data collection on
the transfer of patients for PCI including arrival time at the
transferring hospital and PCI time at the receiving hospital.
OP-4: Aspirin at Arrival & OP-5: Median Time to ECG
Comment: One commenter noted that the OP-4: Aspirin at Arrival
measure has the potential to become ``topped out'' as the program
matures. The commenter encouraged CMS to work with the measure
developer to determine at which point it may be appropriate for this
measure to be retired. One commenter requested that CMS consider adding
patient exclusion criteria to the OP-4 and OP-5 AMI/Chest Pain measures
(ASA at arrival and Median Time to EKG). The commenter noted that
patients with chest pain Not Elsewhere Classified (NEC) are not
probable cardiac cases and recommended that patients in the observation
units should be excluded as well.
Response: We thank the commenters for the input and we will
evaluate the continued utility of OP-4 over time as we do with all
measures that we have adopted for the HOP QDRP. We disagree with the
commenter's suggestion that we exclude patients with chest pain NEC in
the measure population because the diagnosis codes assigned after
evaluation of the patient may not reflect the unknown nature of chest
pain when a patient initially presents at the ED. However, patients are
excluded from the measure population if there is sufficient
documentation that the focus of care was non-cardiac. Additionally,
patients placed in observation units and later transferred to a
facility are included in the measure population to assess how timely
they are receiving care.
OP-6: Timing of Antibiotic Prophylaxis & OP-7: Prophylactic
Antibiotic Selection for Surgical Patients
Comment: One commenter disagreed with the patient inclusion and
exclusion criteria of the OP-6 measure in the HOP QDRP measure set, and
noted that it is inappropriate and burdensome to implement the OP-6
measure, and urged CMS to reassess the utility of this measure. The
commenter recommended replacing the current OP-6 and OP-7 measures with
the ``Timing of Antibiotic Prophylaxis and Prophylactic Antibiotic
Selection for Surgical Patient'' measures developed by the ASC Quality
Collaboration.
One commenter requested that CMS consider including in the measure
specifications one or more oral alternatives to ciprofloxacin for
transrectal prostate biopsy antibiotic prophylaxis. This commenter
believed that second generation oral cephalosporins offer the adequate
bioavailability and pathogen spectrum in situations where ciprofloxacin
may not be optimal or if local epidemiology indicates that there is an
increased rate of ciprofloxacin-resistant enteric gram-negative
pathogens in the community. The commenter stated that third generation
oral cephalosporins would be reasonable as well.
One commenter believed that OP-7 is appropriate only for physician
reporting.
Response: The OP-6 measure is designed to assess whether hospital
outpatient departments administer prophylactic antibiotics immediately
before the surgical incision takes place which has been shown to
decrease the likelihood of surgical site infections, rather than hours
before (which has been shown to increase the likelihood of surgical
site infections). We do not believe that it is overly burdensome for
hospital outpatient departments to report data on this measure because
the measure only applies to operations for which antibiotics are always
recommended in various clinical guidelines. We also note that the OP-6
measure has been used in the inpatient setting for quality reporting
since July 2006. While there may be controversy about whether an
antibiotic should be started, at most, 30 minutes before the incision
is made, or from 30-59 minutes before the incision is made, there is
little controversy in multiple published studies that the rate of
surgical site infections increases for each hour that an antibiotic is
not administered before a surgical incision is made. We thank the
commenters for their suggested alternative measures and alternative
antibiotics to include in the measure. We believe that optimal
antibiotic prophylaxis with respect to timing and selection ensures
that there will be adequate concentrations of an antimicrobial in the
serum, tissue, and wound while the incision is open and, therefore,
affects the quality of care. With respect to the commenter's suggestion
regarding oral alternatives to ciprofloxacin, we note that we have
examined this issue, including raising it with a technical expert panel
that we convened for the purpose of advising CMS on the development and
maintenance of quality measures. This panel is comprised of interested
stakeholders, including hospital representatives, payers, practitioners
from various medical specialties, consumers, and clinical, scientific,
and performance measurement experts. After examining the issue, we
concluded that fluoroquinolones should be the only oral antibiotics
included in the measure specifications. The infections that occur after
prostate biopsy are soft tissue infections (not urinary tract
infections) and, therefore, urinary concentrations of antibiotics are
not relevant. Hospitals may report their use of first and second
generation cephalosporins under the measure specifications, but the
specifications say that these antibiotics must be administered
intravenously as there are no studies of sufficient validity showing
the efficacy of these agents orally for prostate biopsy.
With regard to the comment on the appropriateness of reporting OP-7
at only a physician level, we note that this quality measure assesses
the appropriate selection of antibiotics for patients having surgery
performed in a hospital outpatient department and mirrors the SCIP
Infection 2 quality measure that we have adopted for the Hospital
Inpatient Quality Reporting program. We also note that the measure is
based on published guidelines for surgical antimicrobial prophylaxis,
and we believe that it is appropriate for a hospital outpatient
department to report

[[Page 72068]]

whether its patients are receiving care consistent with these
guidelines.
Imaging Efficiency Measures
We received the following comments on the imaging efficiency
measures that we are including in the HOP QDRP measure set for CY 2011:
Comment: Many commenters objected to our adoption of the four
imaging efficiency measures into the HOP QDRP CY 2011 measure set. Many
of these commenters objected because none of the four measures have
been adopted by the HQA and only two are NQF-endorsed. Commenters
stated that the two non-NQF-endorsed measures: ``OP-10 Use of Contrast:
Abdomen CT'' and ``OP-9 Mammography Follow-up Rates'' are particularly
inappropriate for the HOP QDRP and believed that they could also cause
harm to patients. Additionally, the commenters noted that CMS' own
consumer testing of the Web site display of the imaging efficiency
measures suggests that healthcare consumers do not understand how to
interpret these measures, and that their confusion has grown since CMS
published the measure data on Hospital Compare in July 2010.
Response: Many of the concerns raised by the commenters about the
imaging efficiency measures we adopted for the CY 2011 payment
determination were also raised at the time these measures were first
proposed for the CY 2010 payment determination. We responded to these
concerns when we adopted the measures (73 FR 68762 through 68766). We
stated that the measures meet the statutory requirement of reflecting
consensus among affected parties because of their consensus-based
development, and that the measures address important patient safety
concerns related to exposure to unnecessary radiation and contrast
materials. We also stated that the Secretary is not required to limit
measures considered for HOP QDRP adoption only to those adopted by the
HQA or endorsed by the NQF. Regarding whether there is consumer
understanding of the measures, we engage in extensive consumer testing
to ensure that each measure is meaningful to and understandable by
consumers. If we are made aware that the way a measure is publicly
reported is confusing to consumers, we work to revise the descriptive
information made available on the measure. Experience has also shown
that as the public becomes more familiar with measure reporting, their
understanding regarding how to interpret and use the information
improves. Additionally, on the Hospital Compare Web site, in the
``Learn more * * * '' section of the Compare page, we explain that
consumers should ``Talk with your doctor about the results shown here
and what a facility's results mean for you and your care.''
Comment: Two commenters stated that the terminology used on
Hospital Compare to explain the quality data to the public may be
misleading or have negative connotations, which could have unintended
consequences such as potentially alarming patients and the public. As
an example, the commenters stated that the use of the term ``double
scan'' to explain OP-10 (Abdomen CT--Use of Contrast Material) and OP-
11 (Thorax CT--Use of Contrast Material) to the public may create a
false impression that these exams are always unnecessarily duplicative.
The commenters supported these measures and believed that they have the
potential to reduce unnecessary imaging, however they stated that there
are instances when combination with and without contrast exams provide
necessary and valuable information about abnormalities, many of which
are cancers, and many of which could not be adequately diagnosed
without pre- and post-contrast scanning.
Response: We recognize the commenters' concerns and agree that the
terminology used on the Hospital Compare Web site should convey enough
information so that the public can make informed decisions regarding
their healthcares. We also appreciate the commenters' drawing
particular attention to the use of the term ``double scan,'' and we
will revisit whether the use of this term on the Hospital Compare Web
site is appropriate.
We further agree that there are instances when combination CT
studies may be appropriate for the diagnosis of certain conditions, and
that such studies may provide essential medical information. The
imaging efficiency measures we have adopted for the CY 2011 payment
determination use three specific CPT codes that indicate that the study
is a combined study: without contrast, with contrast, and with and
without contrast (combined study). In developing these imaging
efficiency measures, we completed an extensive review of the relevant
literature and medical guidelines and criteria, and worked closely with
a technical expert panel we convened for the purposes of making
recommendations regarding which conditions, for example certain cancers
in the case of CT abdomen, should be excluded from the calculation of
these measures. We will revisit whether such exclusions should be
explained on the Web site in order to provide more context to consumers
about appropriateness of combined studies in these instances. We note
that on the Hospital Compare Web site there is a specific link, ``Learn
more about the use of medical imaging tests and why these measures are
important.'' This section provides information about the use of
contrast material, and the use of studies with and without contrast.
The information provided indicates that for some parts of the body and
some medical conditions, combination scans are appropriate. In
addition, where the Hospital Compare Web site compares a hospital's
ratio calculation to State and national averages, as well as to the
ratio calculations of other hospitals, the purpose is not to suggest
that we expect hospitals not to perform any combination studies, but
rather to make hospitals that perform a high number of combination
studies aware of their outlier imaging patterns.
OP-8: MRI Lumbar Spine for Lower Back Pain
Comment: One commenter noted that the OP-8: MRI Lumbar Spine for
Lower Back Pain measure is inappropriate as a hospital outpatient
quality measure because it is highly likely that the information
relating to services performed on a patient in the previous 60 days
would not be readily available at the point of service. The commenter
recommended that the measure focus on the practice of the ordering
physician and not on the facility's utilization of imaging services.
Response: Hospitals routinely deal with patients for whom they may
not have prior history information readily available. We are aware that
there are commonly used approaches for obtaining this prior history
information, such as through the use of initial forms that patients
complete or quick assessment questions asked by clinical staff. For
this reason, we believe that the measure is appropriate in the hospital
outpatient setting.
OP-9 Mammography Follow-Up Rates
Comment: Commenters noted that the NQF did not endorse OP-9 because
of its concern that the reporting of the measure will motivate
hospitals to lower their follow-up rates and, as a result, will lead to
a higher number of missed cancers.
Response: We believe that this measure meets the requirement in
section 1833(t)(17)(C)(i) of the Act that the Secretary develop
measures appropriate for measurement of quality of care furnished by
hospitals in outpatient settings that reflect

[[Page 72069]]

consensus among affected parties, and, to the extent feasible and
practicable, that the measures include measures set forth by one or
more national consensus building entities. Specifically, we convened a
technical expert panel for the purpose of making recommendations to CMS
regarding the development and maintenance of the imaging efficiency
measures, including OP-9, which we adopted for the HOP QDRP CY 2011
payment determination. This technical expert panel was comprised of
interested stakeholders, including hospital representatives, payers,
practitioners from various medical specialties, consumers, and
clinical, scientific, and performance measurement experts. In addition,
we solicited informal public comment on the measures and measure
specifications, which was used to refine the measures. We are very
interested in continuing its work on mammography imaging measures and
intend to pursue the feasibility of also developing a cancer detection
rate measure.
We do not believe that the measure encourages HOPDs to reduce
appropriate mammography follow-up study. The mammography follow-up rate
measure was developed through an extensive process that included review
by a technical expert panel convened by CMS. The measure assesses an
HOPD's rate of ``call-backs'' from indeterminate or inadequate
mammography screening studies.
We want to emphasize that the measure looks at the entire spectrum
in terms of call-backs. Specifically, we are concerned not only with
rates that seem higher than the majority of HOPDs, but also with rates
that seem too low, which could possibly be indicative of inadequate
cancer detection processes. We emphasize that we are concerned with
both of these considerations.
b. Maintenance of Technical Specifications for Quality Measures
Technical specifications for each HOP QDRP measure are listed in
the HOPD Specifications Manual, which is posted on the CMS QualityNet
Web site at http://www.QualityNet.org. We maintain the technical
specifications for the measures by updating this HOPD Specifications
Manual and including detailed instructions and calculation algorithms.
In some cases where the specifications are available elsewhere, we may
include links to Web sites hosting technical specifications. These
resources are for hospitals to use when collecting and submitting data
on required measures.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766
through 68767), we established a subregulatory process for updates to
the technical specifications that we use to calculate HOP QDRP
measures. This process is used when changes to the measure
specifications are necessary due to changes in scientific evidence or
in the measure as endorsed by the consensus entity. Changes of this
nature may not coincide with the timing of our regulatory actions, but
nevertheless require inclusion in the measure specifications so that
the HOP QDRP measures are calculated based on the most up-to-date
scientific and consensus standards. We indicated that notification of
changes to the measure specifications on the QualityNet Web site,
http://www.QualityNet.org, and in the HOPD Specifications Manual that
occurred as a result of changes in scientific evidence or national
consensus would occur no less than 3 months before any changes become
effective for purposes of reporting under the HOP QDRP.
The HOPD Specifications Manual is released every 6 months and
addenda are released as necessary providing at least 3 months of
advance notice for insubstantial changes such as changes to ICD-9, CPT,
NUBC, and HCPCS codes, and at least 6 months notice for substantive
changes to data elements that would require significant systems
changes.
Comment: One commenter stated that frequently, there are
significant differences in the technical specifications for measures
endorsed by the NQF and the technical specifications for the same
measures when published in the HOPD Specifications Manual. Two
commenters recommended that CMS post measure specifications on
QualityNet at the same time that the OPPS/ASC proposed rule is
published, in order to ensure that at the time CMS proposes to adopt
measures, their exact specifications and methodologies for calculation
are completely publicly available. This would provide more time for
hospitals to align the measure specifications with EHRs. The commenters
also suggested that subsequent changes to data specifications be posted
on QualityNet and notices go to providers through the QualityNet.org
listserv notification. One commenter was pleased with the biannual
(twice a year) release of the HOPD Specifications Manual update as it
provided hospitals more lead time to prepare for compliance.
Response: We strive to make the measure specifications publicly
available at the time the measures are proposed for the HOP QDRP.
However, at the time many measures are proposed, the specifications are
still in draft form, and we believe that posting them before they have
been finalized could cause confusion. Where this is the case, we strive
to provide detailed descriptions of the proposed measures so that the
public can submit informed comments. As soon as the specifications are
finalized, we post them on QualityNet.org. Revisions to data
specifications are also posted on QualityNet along with a Release Notes
document that provides each change along with the rationale for the
change.
We recognize that measure maintenance is a continuous and dynamic
process. Therefore, to the extent that we want to modify the technical
specifications for an NQF-endorsed measure that we have adopted for the
HOP QDRP, we cannot always secure a completed NQF review of the
modifications prior to the times we need to make them. However, we
submit any modifications we choose to make to an NQF-endorsed measure
to the NQF for review as part of the regular measure re-evaluation
process conducted by the NQF. We welcome specific information that
would identify where significant differences exist in measure
specifications between CMS and the NQF for what is meant to be the same
measure. This would permit CMS and the NQF to reconcile significant
inconsistencies that should not exist.
c. Publication of HOP QDRP Data
Section 1833(t)(17)(E) of the Act requires that the Secretary
establish procedures to make data collected under the HOP QDRP program
available to the public. It also states that such procedures must
ensure that a hospital has the opportunity to review the data that are
to be made public with respect to the hospital prior to such data being
made public. To meet these requirements, data that a hospital has
submitted for the HOP QDRP are typically displayed on CMS Web sites
such as the Hospital Compare Web site, http://www.hospitalcompare.hhs.gov after a preview period. The Hospital
Compare Web site is an interactive Web tool that assists beneficiaries
by providing information on hospital quality of care. This information
encourages beneficiaries to work with their doctors and hospitals to
discuss the quality of care hospitals provide to patients, thereby
providing an additional incentive to hospitals to improve the quality
of care that they furnish.
In general, we strive to display hospital quality measures on the
Hospital Compare Web site as soon as

[[Page 72070]]

possible after they have been adopted and are available to CMS for
reporting. However, if there are unresolved display issues or pending
design considerations, we may make the data available on other non-
interactive CMS Web sites such as http://www.cms.hhs.gov/
HospitalQualityInits/. Publicly reporting the information in this
manner, though not on the Hospital Compare Web site, allows CMS to meet
the requirement under section 1833(t)(17)(E) of the Act for
establishing procedures to make quality data submitted available to the
public following a preview period. We proposed that, under
circumstances when we display hospital quality information on non-
interactive CMS Web sites for reasons discussed earlier, affected
parties would be notified via CMS listservs, CMS e-mail blasts,
national provider calls, and QualityNet announcements regarding the
release of preview reports followed by the posting of data on a Web
site other than Hospital Compare (75 FR 46362). The release of preview
reports allows CMS to meet the requirement under section 1833(t)(17)(E)
of the Act for establishing procedures to make submitted quality data
available to the public following a preview period. CMS also requires
hospitals to complete and submit a registration form (``participation
form'') in order to participate in the HOP QDRP. With submission of
this form, participating hospitals agree that they will allow CMS to
publicly report the quality measures, including those that CMS
calculates using Medicare claims, as required by the Act and the HOP
QDRP.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68778), we established that, for CY 2010, hospitals sharing the same
CMS Certification Number (CCN, previously known as the Medicare
Provider Number (MPN)) must combine data collection and submission
across their multiple campuses for the clinical measures for public
reporting purposes. We finalized the policy that, under the HOP QDRP,
we will publish quality data by the corresponding CCN. This approach is
consistent with the approach taken under the Hospital Inpatient Quality
Reporting Program. In the CY 2009 OPPS/ASC final rule with comment
period, we also stated that we intend to indicate instances where data
from two or more hospitals are combined to form the publicly reported
measures on the Web site.
In the CY 2010 OPPS/ASC final rule with comment period, we
finalized our CY 2010 policy regarding publication of HOP QDRP data (74
FR 60652 through 60654). Section 1833(t)(17)(E) of the Act requires
that the Secretary establish procedures to make data collected under
the HOP QDRP available to the public; however, this section does not
require that such data be validated before it is made public. We
explained that, initially, we decided not to post ``[i]nformation from
non-validated data, including the initial reporting period (April-June
2008)'' as discussed in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66874). We noted, however, that data submitted by
hospitals are publicly reported regardless of whether those data are
successfully validated for payment determination purposes under
existing procedures for the Hospital Inpatient Quality Reporting
Program. We also noted that, in the CY 2009 OPPS/ASC final rule with
comment period, we stated that we intended to make the information
collected under the HOP QDRP available to the public in 2010 (73 FR
68778).
In the CY 2010 OPPS/ASC proposed rule (74 FR 35404), we proposed to
make data collected for quarters beginning with the third quarter of CY
2008 (July-September 2008) under the HOP QDRP publicly available,
regardless of whether those data have been validated for payment
determination purposes. In the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60654), we finalized our proposal to publicly report HOP
QDRP data on Hospital Compare in 2010 with some modifications in the
periods of time to be reported.
Comment: Some commenters recognized and supported CMS's efforts to
publicly report hospital outpatient measures on Hospital Compare. Other
commenters argued that the data presented in the Hospital Compare Web
site are vague and confusing to providers and beneficiaries. As an
example, these commenters noted that there is no explanation of what
``not available'' means.
Response: We strive to make complex quality data submitted by
hospitals under the HOP QDRP comprehensible and useful to a wide range
of audiences including patients and providers. We agree that there is
room for improvement and will continue to work toward improving the
Hospital Compare Web site. We employ `Not Available' to indicate that
measure data for a particular hospital or hospital outpatient
department is not available. CMS does not generally indicate the reason
that data are not available. Situations in which measure data might not
be available include:
A hospital outpatient department has voluntarily submitted
data but has chosen not to have that data made publicly available
either because it opted out of the HOP QDRP program or is not a
subsection (d) hospital paid under the OPPS;
No data were reported because the hospital outpatient
department does not provide the services to which the measure applies;
and
No data were reported because the hospital outpatient
department provides the services to which the measure applies but had
no cases.
Comment: One commenter suggested allowing the public to comment on
the format of public reporting of data on Hospital Compare, and on
proposed measures for the future prior to their implementation.
Response: We provide the public with many opportunities to submit
comments on the format for the public reporting of data on Hospital
Compare, including during the measure development process (if the
measure is developed by CMS), during preliminary national ``dry runs''
for hospitals held prior to implementation of the measure in formal
public reporting, in which we issue confidential reports with
calculations and methodological information, as well as during the
rulemaking process.
Comment: Commenters made several suggestions that they believed
would enhance the public reporting of HOP QDRP data:
Add a narrative to explain the impact of reporting
individual measures on hospital quality of care;
Group like measures by condition or disease, and
distinguish them by care setting;
Display volume-related measures in a manner that makes
clear that they should not be equated with quality of care measures;
Conduct consumer testing and allow multi-stakeholders to
comment on changes in the Hospital Compare architecture, navigation,
display and language that would make it more user friendly; and
Add more notations to the terminology used.
Response: We thank the commenters for these suggestions and will
consider them as we further develop our procedures for the public
reporting of HOP QDRP quality data.
After consideration of the public comments we received, we have
decided to finalize our proposal to use other non interactive CMS Web
sites such as http://www.cms.hhs.gov/HospitalQualityInits/ to publicly
report HOP QDRP data for which there are unresolved display issues or
pending design considerations. We will provide hospitals with an
opportunity to

[[Page 72071]]

preview the data to be posted in this manner prior to doing so.

B. Expansion of HOP QDRP Quality Measures for the CY 2012, CY 2013, and
CY 2014 Payment Determinations

1. Considerations in Expanding and Updating Quality Measures Under the
HOP QDRP
In general, when selecting measures for the HOP QDRP program, we
take into account several considerations and goals. These include: (a)
Expanding the types of measures beyond process of care measures to
include an increased number of outcome measures, efficiency measures,
and patients' experience-of-care measures; (b) expanding the scope of
hospital services to which the measures apply; (c) considering the
burden on hospitals in collecting chart-abstracted data; (d)
harmonizing the measures used in the HOP QDRP program with other CMS
quality programs to align incentives and promote coordinated efforts to
improve quality; (e) seeking to use measures based on alternative
sources of data that do not require chart abstraction or that utilize
data already being reported by many hospitals, such as data that
hospitals report to clinical data registries, or all-payer claims data
bases; and (f) weighing the relevance and utility of the measures
compared to the burden on hospitals in submitting data under the HOP
QDRP program.
Specifically, we assign priority to quality measures that assess
performance on: (a) Conditions that result in the greatest mortality
and morbidity in the Medicare population; (b) conditions that are high
volume and high cost for the Medicare program; and (c) conditions for
which wide cost and treatment variations have been reported, despite
established clinical guidelines. We have used and continue to use these
criteria to guide our decisions regarding what measures to add to the
HOP QDRP measure set.
In the CY 2009 OPPS/ASC final rule with comment period, we adopted
four claims-based quality measures that do not require a hospital to
submit chart-abstracted clinical data (73 FR 68766). This supports our
goal of expanding the measures for the HOP QDRP while minimizing the
burden upon hospitals and, in particular, without significantly
increasing the chart abstraction burden. In addition to claims-based
measures, we are considering registries \1\ and EHRs as alternative
ways to collect data from hospitals. Many hospitals submit data to and
participate in existing registries. In addition, registries often
capture outcome information and provide ongoing quality improvement
feedback to registry participants. Instead of requiring hospitals to
submit the same data to CMS that they are already submitting to
registries, we could collect the data directly from the registries with
the permission of the hospital, thereby enabling us to expand the HOP
QDRP measure set without increasing the burden of data collection for
those hospitals participating in the registries. The data that we would
receive from registries would be used to calculate quality measures
required under the HOP QDRP, and would be publicly reported like other
HOP QDRP quality measures, encouraging improvements in the quality of
care. In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60633), we responded to public comments on such an approach.
---------------------------------------------------------------------------

\1\ A registry is a collection of clinical data for purposes of
assessing clinical performance, quality of care, and opportunities
for quality improvement.
---------------------------------------------------------------------------

In the CY 2009 OPPS/ASC final rule with comment period, we also
stated our intention to explore mechanisms for data submission using
EHRs (73 FR 68769). We have adopted the definition of Qualified EHR set
forth by the Office of the National Coordinator for Health Information
Technology (ONC) (45 CFR 170.102) which has adopted the statutory
definition of Qualified EHR found in section 3000(13) of the Public
Health Service Act. That section defines a Qualified EHR as ``an
electronic record of health-related information on an individual that--
(A) includes patient demographic and clinical health information, such
as medical history and problem lists; and (B) has the capacity--(i) to
provide clinical decision support; (ii) to support physician order
entry; (iii) to capture and query information relevant to health care
quality; and (iv) to exchange electronic health information with, and
integrate such information from other sources.''
We also have adopted the definition of Certified EHR Technology set
forth by the ONC at 45 CFR 170.102 as follows: ``Certified EHR
Technology'' means (1) a complete EHR that meets the requirements
included in the definition of a Qualified EHR and has been tested and
certified in accordance with the certification program established by
the National Coordinator as having met all applicable certification
criteria adopted by the Secretary; or (2) a combination of EHR Modules
in which each constituent EHR Module of the combination has been tested
and certified in accordance with the certification program established
by the National Coordinator as having met all applicable certification
criteria adopted by the Secretary, and the resultant combination also
meets the requirements included in the definition of a Qualified EHR.
Establishing a data submission mechanism using EHRs system will
require interoperability between EHRs and our data collection systems,
additional infrastructure development on the part of hospitals and CMS,
and the adoption of standards for the capturing, formatting, and
transmission of data elements that make up the measures. However, once
these activities are accomplished, the adoption of measures that rely
on data obtained directly from EHRs would enable us to expand the HOP
QDRP measure set with less cost and burden to hospitals. In the CY 2010
OPPS/ASC final rule with comment period (74 FR 60633 through 60634), we
responded to public comments on such an approach.
In prior years, we have proposed measures for one payment
determination in a given rulemaking cycle. In prior rules, we have
identified measures for future consideration, but have not proposed or
finalized measures beyond those to be collected and used for the next
sequential payment determination. In the CY 2011 OPPS/ASC proposed rule
(75 FR 46363), we proposed to adopt new measures over a three-year
period of time for the CY 2012, CY 2013, and CY 2014 payment
determinations. We believe this proposed process will assist hospitals
in planning, meeting future reporting requirements, and implementing
quality improvement efforts. We will also have more time to develop,
align, and implement the infrastructure necessary to collect data on
the measures and make payment determinations. To the extent that we
finalize some or all of these measures for the CY 2012, CY 2013 and CY
2014 payment determinations, this would not preclude us from proposing
to adopt additional measures or changing the list of measures for
future payment determinations through subsequent rulemaking cycles that
affect these future payment determinations. We invited comments on our
intention to propose measures for more than one payment determination
in a single rulemaking.
Comment: Several commenters were very pleased to see that some of
the proposed measures have a strong focus on overuse, efficiency, care
coordination and transitions, and process linking to outcomes. Several
commenters stated their belief that the HOP QDRP has a positive impact
on the quality of care. A commenter stated that all of the proposed
quality measures reflect the National Priorities Partnership-

[[Page 72072]]

identified goal for these areas and that these measures will provide
meaningful information to consumers, purchasers, and providers.
Some commenters stated that they did not believe CMS follows a
methodical framework and a clear set of criteria to prioritize and
integrate measures into the HOP QDRP.
Response: We thank the commenters for the recognition of our
efforts. We agree that the proposed HOP QDRP measures are important to
the quality of care patients receive in the HOPD.
The National Priorities Partnership is a 28-member organization
convened by the NQF for the purpose of identifying improvement goals
and action steps for the U.S. healthcare system. CMS is a member of the
National Priorities Partnership and participates in its framework-
setting activity. Our measure selection activities and measure
development activities take into account the priorities established by
this organization as well as other criteria described earlier.
We strive to ensure that the HOP QDRP measure set reflects HHS
priorities as well as changes in legislation. One of our goals is to
align the quality measures for which hospitals submit data under
various HHS programs, including the HITECH EHR Incentive Program, in
order to reduce the burden on hospitals that report data to multiple
programs. We also try to adopt measures for the HOP QDRP program that
are broadly applicable to hospitals paid under the OPPS, because HOP
QDRP measures are made publicly available in comparative reporting
tools. The measures that we are adopting for the HOP QDRP in this final
rule with comment period represent established HHS priorities, which
include some of the priorities selected by the NQF National Priorities
Partners process. These include patient safety, population health, and
care coordination.
With regard to the comments about using a methodical framework and
a clear set of criteria to prioritize and integrate measures into the
HOP QDRP, we have set out explicit criteria that we use to guide our
decisions regarding what measures to add to the HOP QDRP measure set in
section XVI.B.1. of this final rule with comment period.
Comment: A few commenters felt that the burden on hospitals
stemming from a simultaneous implementation of new quality reporting
and pay for performance programs would be too great, and requested that
CMS limit the adoption of new measures to one program at a time. In
addition, commenters recommended that CMS ease the burden on hospitals
by putting a moratorium on the adoption of new quality measures until
hospitals have transitioned into ICD-10 codes and adopted EHRs to meet
the meaningful use objectives under the HITECH EHR Incentive Program.
Some commenters were very concerned about the burden of the proposed
chart-abstracted measures and doubted whether the codes used in chart-
abstraction will be consistently accurate.
Response: We understand the burden faced by hospitals stemming from
implementing multiple technological changes including the ICD-10 coding
system, as well as meeting the requirements of various quality
reporting programs. We will continue to weigh the burden associated
with adding chart-abstracted measures to the HOP QDRP against the
benefit of adding such measures while exploring other alternative data
collection mechanisms for the HOP QDRP. Nonetheless, we are committed
to broadening the scope of the HOP QDRP and, therefore, are adopting
additional measures in this final rule with comment period. We also
have solicited comments on measures being considered for adoption in
future years.
Comment: Commenters submitted some suggestions to make the HOP QDRP
measure development process more transparent in the future:
Analysis for the need of the measure
Risk-adjustment methodology
Name of the developer of the measure
Name of the organization that field-tested the measure
Field testing status of the measure and its readiness for
inclusion in a quality reporting program
Identification of unintended consequences
HQA adoption and NQF-endorsed status
CMS collaboration with the Centers for Disease Control and
Prevention (CDC) and the Agency for Healthcare Research and Quality
(AHRQ)
Adopt related evidence-based practice guidelines
Clearly define the patient population for which the
measure would apply
Detailed measure specifications
Describe clearly the impact of the measure on hospital
quality
A robust feedback loop to ascertain issues identified
during implementation that would necessitate a change to a measure
Describe the time-frame for any time-based measures
Provide the rationale for inclusion of a proposed measure
in the HOP QDRP instead of as an meaningful use objective under the
HITECH rule
Location of the measure data elements in an EHR
Response: We thank the commenters for these suggestions. We provide
detailed information on each measure we adopt for the HOP QDRP at the
time that we propose it or as soon as it becomes available. However,
some of the suggested information, including the identification of
unintended consequences and the measure's impact on hospital quality,
may not be available until after we have adopted the measure. We also
believe that our measure development process is transparent as it
includes an extensive review of current guidelines and peer-reviewed
literature, as well as collaboration with a technical expert panel.
Additionally, in instances when there is uncertainty about the
appropriateness of a measure for a particular patient population, the
patients are treated as ``exclusions'' (that is, they are not included
in the measurement calculation). The public has the opportunity to
comment on measures that we develop during the measure development
process. Additionally, the measure specifications, including the
methodology used to calculate the measures, are made publicly available
as soon as they are finalized either in the HOPD Specifications Manual
on an ``informational'' basis, or on a separate Web site such as http://www.imagingmeasures.com.
Comment: One commenter recommended that CMS adopt a strong set of
outcome, patient experience, and care transition measures for the next
three-year payment determination periods. Many commenters suggested
that CMS consider the following measure selection criteria for the HOP
QDRP:
Whether the measures are associated with better outcomes;
The adoption of measures for one disease or condition at a
time, thereby limiting the number of measures for a disease or
condition;
The collection of data via alternative mechanisms such as
electronic health records (EHRs), registries, and claims;
The operational burden on hospitals presented by data
collection;
Develop new measures with e-specifications;
The harmonization of HOP QDRP measures with measures used
by the Joint Commission, which are based on large patient volumes,
evidence-based care, and patient outcomes;

[[Page 72073]]

The harmonization of HOP QDRP measures with measures
adopted for other quality reporting programs involving similar
settings;
The testing of measures in a variety of outpatient
settings;
The alignment of HOP QDRP measures with measures used by
private payers; and
The alignment of HOP QDRP measures with the national
priority strategy as described in the NQF NPP project.
Response: We thank the commenters for the suggestions and for
sharing their views regarding HOP QDRP measure selection. In section
XVI.B.1. of this final rule with comment period, we have set out the
criteria that we use to guide our decisions regarding what measures to
add to the HOP QDRP measure set. As indicated in section XVI.B.1, we
agree that quality measures should be associated with better outcomes
for patients, that quality measures should be harmonized across care
settings, and that measures selected for HOP QDRP should be aligned
with national quality measurement and improvement priorities. We take
these criteria into consideration when selecting measures for the HOP
QDRP and we also consider the burden of data collection on hospitals
relative to benefit that would result from public reporting and quality
improvement.
Comment: Some commenters noted that none of the measures proposed
through CY 2014 uses registry data and suggested that CMS explore
outpatient registries as data sources for quality measure data.
Commenters noted that data collection through registries is less
burdensome as many hospitals are already reporting to registries. One
commenter recommended that CMS use data submitted to established
registries by hospitals. Commenters believed that registries impose and
create readily-available reporting benchmarks which may be absent in
EHRs. Commenters stated that if registries are used, clear criteria for
participating registries must be defined and CMS should give adequate
time for hospitals to prepare for registry participation. One commenter
inquired whether CMS plans to propose that registries directly submit
raw data to CMS with facility and patient identifiers.
Response: We thank the commenters for their support for registries
as a vehicle for data collection. Although we agree that registries may
have readily-available reporting benchmarks, we believe that EHR
technology also has merits as an alternative data collection tool.
Despite the fact that we did not propose any registry-based measures in
the proposed rule, we remain interested in minimizing the burden
associated with quality reporting and are continuing to explore
registries as an alternative data collection vehicle for the future. If
hospitals are participating in registries and submit the same data to
those registries that they would otherwise have to submit for measures
that are part of the HOP QDRP, we believe that the registry-based data
would be an efficient alternative data source, and that this would
prevent the hospital from having to report the same data twice. As the
commenters stated, many hospitals are currently participating in a
number of registries that collect data on quality measures on topics of
interest to us. With respect to the comments on registry criteria and
registry data submission, we thank the commenters for these suggestions
and will consider them as we consider registry-based measures for the
HOP QDRP. Should CMS propose to receive data from registries in the
future, facility-level identifiers would be required for any hospital-
level calculations that would be required by CMS, and patient-level
identifiers may be required for any patient-level data required by CMS
for validation purposes.
Comment: One commenter believed that using a registry as the sole
source of data collection would place undue burden on hospitals. One
commenter believed it is short-sighted to impose registry participation
on hospitals when hospitals may soon be able to submit data using EHRs.
One commenter suggested that registries that do not provide feedback to
hospitals should be excluded from a qualified registry database should
registries become an alternative data submission mechanism.
Response: We thank the commenters for sharing their views about
registries and we will take them into consideration as we consider
using registries in the collection and public reporting of HOP QDRP
quality data.
Comment: Commenters commended CMS for encouraging the development
and adoption of information technology standards across the health care
industry that will support automated data collection and the reporting
of clinical data from EHR systems. These commenters believed that such
efforts will streamline hospital data submission procedures.
Response: We thank the commenters for their support of the adoption
of information technology standards, such as EHRs, as a data collection
vehicle. We envision that the EHRs will become an important data source
as we develop electronic measures for the HOP QDRP. Initially, we
expect that the finalized measure OP-18: Median Time from ED Arrival to
ED Departure for Discharged ED Patients (discussed below) will be
electronically specified by December 31, 2010.
Comment: Many commenters strongly supported CMS's proposal to adopt
quality measures 3 years in advance to enable hospitals to better
prepare for the impending reporting requirements, amid implementation
of meaningful use objectives set forth in the HITECH EHR Incentive
Program final rule and the transition into the ICD-10-CM/PCS code sets.
Some commenters appreciated CMS's intention of providing greater
predictability about the measures to be used in future years. Some
commenters believed that proposing measures for more than one payment
determination in a single rulemaking cycle provides more time for
providers to study the measures and formulate comments while enabling
CMS to more effectively develop comprehensive quality reporting
programs.
Response: We thank the commenters for their support of our
proposals. In proposing quality measures for three payment
determinations, our goal is to assist hospitals in planning, meeting
future reporting requirements, and implementing quality improvement
efforts. The adoption of quality measures far in advance also enables
CMS to create the infrastructure necessary to collect data on the
measures.
Comment: Some commenters supported CMS's statement that the
requirements for the future HOP QDRP payment determinations may change
due to changing priorities and new legislative requirements. A few
commenters suggested that instead of finalizing all the proposed
measures for the next 3 years, CMS should ask for comments in the
annual OPPS proposed rule for each year and only finalize measures
pertaining to the year in which the measures are to be implemented.
Some commenters requested that CMS provide an overall strategic
perspective for the HOP QDRP 3-year expansion plan, the objectives set
forth in the HITECH Act and the Affordable Care Act which promotes more
integration of care across the health care delivery system. One
commenter suggested setting a timeline in the three-year expansion plan
for the NQF to review current HOP QDRP measures as rapidly as possible
through its maintenance process, so that the HOP QDRP measures align
with the NQF standards for endorsement and so

[[Page 72074]]

that their potential for quality improvement can be evaluated.
Response: We thank the commenters for supporting our
acknowledgement that while we may finalize measures for multiple years,
the measures are subject to change should we need to adapt in light of
changing priorities and new legislation. Given the support we received
on our proposal to propose new measures for three payment
determinations, we will proceed in this direction for future measure
proposal and finalization. With regard to our overall strategic
perspective for the HOP QDRP 3 year expansion plan, we intend where
feasible to propose to integrate into the HOP QDRP applicable
meaningful use objectives set forth under the HITECH EHR Incentive
Program as well as applicable quality priorities set forth in the
Affordable Care Act.
While the NQF regularly reviews measures that it has endorsed as
part of its regular 3-year measure reevaluation cycle (2-years for
measures with time-limited endorsement), not all of the HOP QDRP
measures are NQF endorsed.
Comment: Some commenters noted that under the HOP QDRP, hospitals
must submit data on measures, whereas under the PQRI, individual
eligible professionals or group practices submit the data. Commenters
encouraged CMS to harmonize the two programs.
Response: We understand the commenters' desire for harmonization of
our various quality reporting programs and we attempt to do so when
feasible and practical. For example, we include the same AMI and
Surgical Care measures in both the Hospital Inpatient Quality Reporting
Program and the HOP QDRP. We note that the PQRI is a quality data
reporting program for individual professional or group practices, while
the HOP QDRP is a quality data reporting program that applies to
hospital outpatient departments. A particular eligible professional or
group practice generally provides a relatively specialized set of
services with their patient population generally being much smaller
than that enrolled in hospital outpatient departments. Given the
different focus of these two programs, there are different
considerations that are taken into account when establishing reporting
requirements for each of these programs.
2. Retirement of HOP QDRP Quality Measures
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we finalized a
process for immediate retirement of Hospital Inpatient Quality
Reporting Program measures based on evidence that the continued use of
the measure as specified raises patient safety concerns (74 FR 43864
through 43865). In circumstances such as those prompting immediate
retirement of the AMI-6 measure from the Hospital Inpatient Quality
Reporting Program in December 2008 (as discussed in the FY 2010 IPPS/RY
LTCH PPS final rule (74 FR 43864 through 43865)), we do not believe
that it would be appropriate to wait for the annual rulemaking cycle to
retire a measure. We adopted this same immediate retirement policy for
the HOP QDRP in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60635).
Specifically, we stated that if we receive evidence that continued
collection of a measure that has been adopted for the HOP QDRP raises
patient safety concerns, we would promptly retire the measure and
notify hospitals and the public of the retirement of the measure and
the reasons for its retirement through the usual means by which we
communicate with hospitals, including but not limited to hospital e-
mail blasts and the QualityNet Web site. We also stated that we would
confirm the retirement of a measure retired in this manner in the next
OPPS rulemaking cycle. However, for other circumstances in which we do
not believe that continued use of a measure raises specific patient
safety concerns, we stated that we intend to use the regular rulemaking
process to retire a measure.
Comment: Several commenters encouraged CMS to establish consistent
and transparent processes that address changes in evidence-based
guidelines more quickly and to establish channels to exchange this type
of information between CMS and measure developers. Commenters supported
the measure retirement criteria and also encouraged CMS to retire
measures under the following additional conditions:
Another indicator exists that is better, or more
accurately assesses good quality of care;
A measure is no longer consistent with the standard of
care or evidence-based guidelines; and
When an outcome measure is available.
Response: We thank the commenters for their suggestions for measure
retirement and will take them into consideration when evaluating
whether to retire a measure in the HOP QDRP. At this time, we have not
proposed to retire any measures from the HOP QDRP.
3. HOP QDRP Quality Measures for the CY 2012 Payment Determination
a. Retention of Existing HOP QDRP Measures for the CY 2012 Payment
Determination
In the CY 2011 OPPS/ASC proposed rule (75 FR 46363), for the CY
2012 payment determination, we proposed to retain the existing 11 HOP
QDRP measures. These measures continue to address areas of topical
importance regarding the quality of care provided in HOPDs, and reflect
consensus among affected parties. Seven of these 11 measures are chart-
abstracted measures in two areas of importance that are also measured
for the inpatient setting--AMI cardiac care and surgical care. The
remaining four measures are claims-based measures that address imaging
efficiency in HOPDs.
We invited public comment on our proposal to retain the existing 11
HOP QDRP measures for the CY 2012 payment determination.
Comment: Some commenters supported the retention of CY 2012
measures, specifically the prophylactic antibiotic measures.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we have
decided to adopt as final our proposal to retain the existing 11 HOP
QDRP measures for the CY 2012 payment determination.
b. New Structural Measure for the CY 2012 Payment Determination
In the CY 2011 OPPS/ASC proposed rule (75 FR 46363), for the CY
2012 payment determination, we proposed to add one structural measure:
``Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data'' (NQF 0489). Structural measures
allow the assessment of the conduciveness of the provider environment
to processes and technologies that enable delivery of high quality
care. This particular structural measure assesses the extent to which a
provider uses a certified/qualified EHR system that incorporates an
electronic data interchange with one or more laboratories allowing for
direct electronic transmission of laboratory data into the EHR as
discrete searchable data elements. We believe that electronic
transmission of laboratory data into EHRs would enable greater
timeliness of results reporting, because the results of the reports
would be transmitted to the HOPD as soon as the laboratory data are
available which

[[Page 72075]]

allows for the merger with clinical information to provide laboratory
value alerts and more timely clinical assessments. Electronic
transmission of laboratory data can lead to cost efficiency, expedite
the clinical decision process, reduce redundancy of laboratory orders,
and reduce human errors.
Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
structural measure is appropriate for measuring quality of care in the
hospital outpatient department setting. This measure also meets the
consensus requirement because it was endorsed in 2008 as part of an NQF
project entitled ``National Voluntary Consensus Standards for Health
Information Technology: Structural Measures.'' Additionally, this
measure was conditionally adopted by the HQA in 2010.
We proposed that this structural measure would be submitted by
HOPDs beginning with January 1, 2011 discharges via a Web-based tool
available on the QualityNet Web site that is currently employed for the
collection of structural measures for the Hospital Inpatient Quality
Reporting Program. For this structural measure, HOPDs would submit the
number of encounters out of all encounters for which laboratory results
were documented in the EHR. We invited comments on our proposal to add
this new structural measure to the HOP QDRP measurement set and the
submission process for the CY 2012 payment determination.
Comment: Some commenters appreciated that the proposed structural
measure relates to an issue that is meaningful to consumers and
purchasers, and believed that it is important for both public reporting
and payment policy. One commenter noted that with timely receipt of
results and a rapid diagnosis, patients can be treated while they are
being seen and do not need to return or wait for a follow-up phone
call. This fast turnaround time improves the quality of care and
reduces medical costs. Furthermore, some commenters stated their belief
that the addition of this measure to the HOP QDRP will raise hospital
outpatient departments' electronic awareness, and motivate hospitals to
adopt EHRs to improve care coordination, patient safety, and outcomes.
Response: We appreciate the commenters' support and encouragement
and agree with commenters that this measure will improve the quality of
care and promote the adoption of EHR technology.
Comment: One commenter stated that CMS will be better able to
assess the EHR functionality of hospitals by adopting a similar measure
for the HITECH EHR Incentive Program. One commenter was concerned about
the duplication of this measure with the meaningful use objectives set
forth in the HITECH EHR Incentive Program final rule. Many commenters
did not support this measure and stated that the measure is not
evidence-based and has not been field-tested. Some commenters did not
support the measure because they believed the measure only assesses HIT
functionality and does not assess the quality of care provided.
Commenters recommended maintaining this measure solely as a meaningful
use HIT functionality objective under the HITECH EHR Incentive Program.
Response: We strongly believe that the adoption of this measure in
the two programs would have a complementary effect rather than a
duplicative effect. Since hospital outpatient departments provide
clinical laboratory testing services, we believe that this measure is
appropriate for the HOP QDRP. The meaningful use objective set forth in
the HITECH EHR Incentive Program requires the incorporation of clinical
lab test results into EHR as structured data while the measure we are
finalizing in this final rule with comment period assesses whether
hospital outpatient departments are capable of receiving laboratory
data directly into a qualified/certified EHR system as discrete
searchable data.
Comment: Some commenters stated that this measure is too burdensome
for providers, especially for providers with limited EHR capability or
that are transitioning to EHR technology. The commenters stated that
EHR vendors are still developing qualified/certified technology to
accommodate this EHR capability. The commenters suggested that CMS
delay the adoption of this measure until all hospitals have adopted
qualified/certified EHRs. Commenters indicated this measure would be
more appropriate for CY 2013 or CY 2014. Otherwise, it is
counterproductive to penalize hospitals for lacking the type of EHR
capability for which they have been given flexibility in adopting under
the HITECH EHR Incentive Program.
A few commenters urged CMS not to impose this CY 2012 structural
measure until providers have gained experience with Stage 1--Meaningful
Use and demonstrated widespread participation in the Incentive Program.
Commenters stated the proposed data submission date for this measure
beginning with January 1, 2011 discharges may compromise a HOPD's
flexibility derived from the HITECH EHR Incentive Program final rule
(75 FR 44314), under which hospitals potentially have until CY 2014 to
adopt qualified/certified EHRs for the purpose of participating in the
incentive program to demonstrate meaningful use of EHR technology for
any given payment year. Furthermore, for Stage 1 of meaningful use, the
objective of ``Incorporate clinical lab-test results into qualified/
certified EHR technology'' is a menu-set measure, and may be deferred.
The commenters expected that many hospitals would choose to implement
this measure early to avoid foregoing their full annual payment update.
One commenter expressed concern that hospitals without qualified EHR
systems that are capable of receiving lab data would be effectively
precluded from receiving the full payment update for CY 2012.
Response: We understand the commenters' concerns. We note that many
certified/qualified EHRs already have the capability to receive
laboratory data directly into their systems as discrete searchable
data. Since the hospital would satisfy the reporting requirement for
the measure under the HOP QDRP by reporting ``yes'' or ``no,'' we do
not believe the adoption of this measure in the HOP QDRP will impede
hospitals from receiving their full annual payment update in CY 2012 or
beyond.
Comment: One commenter recommended that the measure focus only on
the progress of implementing this EHR functionality by requiring
hospitals to report quarterly updates on the progress of EHR technology
adoption. Many commenters strongly recommended that CMS adopt a ``yes/
no'' structural measure format as the measure indicator in order to
minimize burden. Some commenters claimed that otherwise, it will be a
huge burden to sort out the data. Specifically, these commenters
requested clarifications on:
The numerator and denominator definitions (for instance,
what lab tests are to be included or excluded);
The distinction between encounters where laboratory data
are ordered as part of the encounter, and encounters where lab data are
ordered as a standalone encounter;
Issues for hospital-based clinics where patients choose to
receive

[[Page 72076]]

laboratory services outside the hospital outpatient setting;
The type of laboratories to which this measure applies,
that is, if it is applicable to both external/reference lab interfaces
and hospital internal facility laboratories;
The definition of EHR versus qualified/certified EHR;
The data collection frequency, for example, monthly,
quarterly, or yearly; and,
Whether the data collection includes all electronically
submitted laboratory data from a physician's office or electronic
submission of the number of tests out of all encounters including
laboratory data not ordered in a physician's office.
Response: We thank the commenters for their input. To minimize the
burden on hospitals in connection with this measure, we have adopted
the commenters' suggestion and will only require hospital outpatient
departments to disclose whether they have HIT with the capability to
receive laboratory data electronically directly into a certified/
qualified EHR as discrete searchable data. A ``yes/no'' format will be
used for this structural measure.
After consideration of the public comments we received, we are
finalizing this measure ``Ability for Providers with HIT to Receive
Laboratory Data Electronically Directly into their Qualified/Certified
EHR System as Discrete Searchable Data'' for the CY 2012 annual payment
update. Hospitals will be required to submit the information needed to
calculate this measure via a Web-based collection tool beginning in
July 2011 and HOPDs will report on the period from January 1, 2011
through June 30, 2011. The Web-based tool will be made available on the
QualityNet Web site that we currently use to collect structural
measures that we have adopted for the Hospital Inpatient Quality
Reporting Program.
c. New Claims-Based Measures for the CY 2012 Payment Determination
In the CY 2011 OPPS/ASC proposed rule (75 FR 46364), for the CY
2012 payment determination, we proposed to add four new claims-based
imaging efficiency measures to the HOP QDRP measurement set, all of
which were listed as under consideration for CY 2012 and subsequent
years in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60637 through 60641). Imaging efficiency is a new area of measurement
that we first implemented in the HOP QDRP for the CY 2010 payment
determination and subsequently retained for the CY 2011 payment
determination. There are currently four claims-based imaging efficiency
measures in the HOP QDRP measurement set (OP-8 through OP-11). The four
new proposed imaging efficiency measures for the CY 2012 payment
determination are: (1) Pre-Operative Evaluation for Low-Risk Non-
Cardiac Surgery Risk Assessment, (2) Use of Stress Echocardiography,
SPECT MPI, and Cardiac Stress MRI post CABG, (3) Simultaneous Use of
Brain Computed Tomography (CT) and Sinus Computed Tomography (CT), and
(4) Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache.
The first new proposed imaging efficiency measure for the CY 2012
payment determination seeks to calculate relative use of stress
echocardiography, stress MRI, and SPECT MPI prior to low-risk non-
cardiac surgical procedures in the 30 days preceding the surgery. The
second new proposed claim-based imaging efficiency measure for the CY
2012 payment determination seeks to estimate relative use of stress
echocardiography and SPECT MPI in asymptomatic patients less than five
years after a coronary artery bypass graft (CABG) procedure.
Cardiac imaging is an area that was not addressed in CMS' first set
of outpatient Imaging Efficiency measures. It is among the most common
imaging services in the Medicare population. In the hospital outpatient
setting, 762,419 SPECT MPI, Stress MRI and Stress Echocardiography
procedures were performed in 2008 alone.\2\ Further, between 1998 and
2006, the rate of myocardial perfusion imaging (MPI) use in Medicare
beneficiaries increased 51 percent among cardiologists in the hospital
setting, and by 215 percent in private offices. During the same time
period, total Medicare Part B payments for MPI across all settings of
care increased by 227 percent.\3\
---------------------------------------------------------------------------

\2\ The Lewin Group analysis of Medicare Calendar Year 2007
claims data prepared for the Centers for Medicare & Medicaid
Services, HHS Contract No: HHSM-500-2005-0024I, Order No. 0002.
\3\ Levin DC, Rao VM, Parker L, et al. Recent payment and
utilization trends in radionuclide myocardial perfusion imaging:
Comparison between self-referral and referral to radiologists. J Am
Coll Radiol 2009;6:437-441.
---------------------------------------------------------------------------

SPECT MPI, Stress MRI, and Stress Echocardiography are specific
procedures that must be ordered by a physician to be performed.
Therefore, there is a distinct opportunity for the physician to order
this procedure prudently based on best practices. While SPECT MPI,
Stress MRI, and Stress Echocardiography enhance the quality of care
when used appropriately, inappropriate usage of imaging would cause
unnecessary waste of services, contribute no benefit to the quality of
care, and could increase the patient's risk of cancer. An analysis by
Gibbons et al.\4\ found that, of all SPECT MPI procedures performed at
the Mayo Clinic Rochester in May 2005, 14 percent were considered
inappropriate using criteria published by the American College of
Cardiology Foundation and the American Society of Nuclear Cardiology,
and an additional 11 percent were of indeterminate appropriateness.\5\
This study also found that during the same time period, 18 percent of
all stress echocardiograms performed were inappropriate, and an
additional 9 percent were indeterminate.
---------------------------------------------------------------------------

\4\ Gibbons RJ, Miller TD, Hodge D, et al. Application of
appropriateness criteria to stress single-photon emission computed
tomography sestamibi studies and stress echocardiograms in an
academic medical center. J Am Coll Cardiology 2008;51:1283-9.
\5\ Brenner DJ, Hall EJ. November 29, 2007. Computer
Tomography--An Increasing Source of Radiation Exposure. New England
J of Medicine 2007:357(22): 2277-84.
---------------------------------------------------------------------------

The third and fourth new proposed imaging efficiency measures for
the CY 2012 payment determination pertain to appropriate use of Brain
CT imaging in HOPDs. These are ``Simultaneous Use of Brain Computed
Tomography (CT) and Sinus Computed Tomography (CT),'' and ``Use of
Brain Computed Tomography (CT) in the Emergency Department for
Atraumatic Headache.''
A report in the New England Journal of Medicine \5\ raised serious
concerns about the use and overuse of CT scanning, stating that for an
estimated 62 million CT scans being performed per year, a third are
unnecessary, resulting in patient safety issues including unnecessary
radiation and contrast material exposure, and the danger associated
with ``false positive'' findings. A CT scan exposes the patient to
higher doses of radiation than a conventional x-ray and increases the
patient's risk of cancer.
Brain CTs are often ordered in addition to a sinus CT for patients
with sinusitis because headache is a common symptom related to
sinusitis. However, simultaneous CT sinus and brain imaging for
headache without suspected complications is generally considered
inappropriate, as the standard anatomic coverage of a CT of the head
includes large portions of the paranasal sinuses; thus, ordering both
procedures is duplicative and inefficient.^{5 6} The third

[[Page 72077]]

new proposed imaging efficiency measure for the CY 2012 payment
determination ``Simultaneous Use of Brain CT and Sinus CT'' assesses
the extent to which patients with a headache who have a brain CT also
have a sinus CT performed on the same date at the same facility. The
measure excludes patients with trauma diagnoses, tumors or orbital
cellulitis.
---------------------------------------------------------------------------

\6\ Appropriateness Criteria--Headache. Reston, VA: American
College of Radiology, 2009. Accessed November 25, 2009 at http://www.acr.org/SecondaryMainMenuCategories/quality_safety/app_criteria.aspx
---------------------------------------------------------------------------

The fourth new proposed imaging efficiency measure for the CY 2012
payment determination, ``Use of Brain Computed Tomography (CT) in the
Emergency Department for Atraumatic Headache,'' assesses the extent to
which patients presenting with a headache receive brain CT studies. The
measure excludes patients admitted or transferred to an acute care
hospital, patients with lumbar punctures, dizziness, paresthesia, lack
of coordination, subarachnoid hemorrhage or thunderclap headaches. The
lifetime prevalence of headache is over 90 percent for men and women
and according to some studies, headache accounts for 16 million
physician visits annually in the U.S.\7\ According to Goldstein et al.
(2006) for U.S. emergency departments (EDs) from 1992 to 2001,
headaches represented approximately 2 percent of U.S. ED visits.\8\ An
analysis of 2007 Medicare claims data found that approximately 200,000
Medicare beneficiaries had a visit to an ED with a primary diagnosis of
headache with about half of these patients (not taking into account the
previously mentioned exclusion of lumbar punctures, dizziness,
paresthesia, lack of coordination, subarachnoid hemorrhage or
thunderclap headaches) receiving a Brain CT coincident with the ED
visit.\9\ Unnecessary or duplicative studies are inefficient and
detrimental to the patient because CT exposes the patient to higher
doses of radiation than conventional x-ray and increases the patient's
risk for cancer.\10\
---------------------------------------------------------------------------

\7\ Mellion ML, Jayaraman MV. August 2007. Use of neuroimaging
in the workup of headache. Med Health RI.; 90(8):249-50.
\8\ Goldstein JN, CA Camargo, AJ Pelletier, JA Edlow. 2006.
Headache in the United States Emergency Departments: demographics,
work-up and frequency of pathological diagnoses. Cephalalgia; 26(6)
684.
\9\ The Lewin Group analysis of Medicare Calendar Year 2007
claims data prepared for the Centers for Medicare & Medicaid
Services, HHS Contract No: HHSM-500-2005-00241, Order No. 0002.
\10\ Brenner DJ and Hall EJ. November 29, 2007. Computed
Tomography--An Increasing Source of Radiation Exposure. N Engl J
Med; 357(22):2277-84.
---------------------------------------------------------------------------

Concern over the inappropriate use of CT Imaging in the ED setting
has been driven by three major factors: False positive interpretations,
radiation exposure, and cost. There is generally a lower threshold for
ordering neuro-imaging for headache in the ED because of physician time
constraints and lack of ED physician familiarity with headache
presentation.\11\ Because of this lower threshold, the measurement of
the use of CT Brain in the ED for patients with a diagnosis of a
traumatic headache can raise awareness of the need for appropriate use
of CT brain imaging in the ED and, as a result improve patient safety
through reduction in unnecessary radiation exposure.
---------------------------------------------------------------------------

\11\ Ward TN, Leven M, Phillips JM. Evaluation and management of
headache in the emergency department. Med Clin N Am 2001;85(4) 971-
85.
---------------------------------------------------------------------------

Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, these
measures are appropriate for measuring quality of care in the hospital
outpatient department setting. These measures also meet the consensus
requirement because these measures were developed through a consensus-
based process involving stakeholder input. For the CY 2012 payment
determination, we proposed to calculate these four measures using
Medicare claims from CY 2010. We invited comments on our proposal to
add these four new imaging efficiency measures to the HOP QDRP
measurement set based on Medicare claims from CY 2010 for the CY 2012
payment determination.
Like the current imaging efficiency measures in the HOP QDRP
measurement set, these four measures are based on Medicare claims and
will not require additional data submission on the part of hospitals.
All four of these proposed measures are currently undergoing NQF
review, and specifications for these measures are available at http://www.imagingmeasures.com.
Imaging Efficiency Measures
We received several general comments on the proposed new imaging
efficiency measures.
Comment: Some commenters agreed that the 4 proposed new claim-based
imaging efficiency measures will enhance patient safety in the hospital
outpatient setting, based on the evidence of the potential harmful
effects of excessive radiation exposure associated with the use of
imaging services. One commenter encouraged CMS to publish analysis
findings, and seek public comments before making policy decisions to
adopt these four measures. This commenter believed that the analysis of
utilization of the four proposed imaging procedures should be performed
separately.
Response: We thank the commenters for the support and suggestions.
We developed the proposed Imaging Efficiency measures by means of a
rigorous process that included reviewing current literature and
clinical guidelines, and seeking the recommendations of a technical
expert panel. Also, prior to proposing to adopt these measures for the
HOP QDRP, we asked for public comment on them and considered the
comments as we refined the measure specifications. The rulemaking
process provided another opportunity for the public to provide input
and voice support and concerns regarding the proposed measures. We will
work on publishing findings for the imaging efficiency measures.
Comment: One commenter noted that the American College of
Cardiology (ACC) and the American Society of Nuclear Cardiology (ASNC)
guidelines for imaging are conservative and that their guidelines tend
to be based on expert opinion rather than on evidence data. The
commenter stated that when the clinical conditions for some patients do
not fall within the scope of these guidelines, providers are compelled
to perform the imaging study. According to the commenter, imaging
studies performed under such circumstances should not be automatically
considered inappropriate or medically unnecessary. Another commenter
requested that before CMS adopts the proposed imaging measures, it
should conduct a comprehensive assessment of the impact of the existing
imaging measures and the appropriateness of preoperative use of
cardiovascular imaging using the ACC and the American College of
Radiology (ACR) Appropriateness Criteria as references. One commenter
suggested that CMS adopt the quality data measures used by the the ACC
registry for purposes of consistency with the cardiovascular
community's appropriateness criteria and in order to reduce burden.
Response: Our measure development process includes an extensive
review of available imaging guidelines, including the ACC and the ACR
Appropriateness Criteria and peer-reviewed literature, as well as
collaboration with a technical expert panel. Additionally, in instances

[[Page 72078]]

when there is uncertainty about the appropriateness of an imaging
study, they are treated as ``exclusions'' in the measurement (that is,
they are not included in the measurement calculation). Regarding the
ACC registry measures; we will consider this suggestion and will
evaluate the feasibility of including these measures in the HOP QDRP
program.
Comment: One commenter strongly believed that the proposed imaging
efficiency measures are in fact ``gross unadjusted utilization rates''
measures and stated that they should be named as such to avoid
confusion to the public and the payers.
Response: We do not believe that the proposed imaging efficiency
measures should be named differently. We have undertaken work on
imaging efficiency as an educational effort, aimed at educating the
public about the appropriate use of and risks associated with imaging
services and respective optimal imaging treatment guidelines. We
recognize that imaging services may be essential in the diagnosis and
treatment of certain conditions; however, we also recognize that both
the over- and underutilization of these services may affect both the
safety and quality of care an individual receives. The proposed
outpatient imaging efficiency measures address important patient safety
concerns related to exposure to unnecessary radiation and/or contrast
materials, and promote the efficient use of imaging procedures. For
this reason, we do not believe that they are simply ``gross unadjusted
utilization rates'' as the commenter suggests.
Comment: Some commenters did not support the measures for the
following reasons: (1) The absence of NQF-endorsement; (2) the lack of
evidence-based correlation between the number of imaging studies
performed and the quality of care provided; (3) absence of field-
testing; and (4) absence of benchmarks.
Response: The area of imaging efficiency quality measures is
relatively new and challenging. In conjunction with our rigorous
consensus-based measure development process, we also reviewed Medicare
data which indicates that there are HOPDs that have imaging practice
patterns that are very different than the majority of hospitals. We
anticipate that the public reporting process will heighten provider
awareness of patient safety and encourage hospitals to proactively
improve their quality of care.
By way of illustration, our analysis of 2008 Medicare claims data
found that for OP-10 Abdomen CT Use of Contrast Material, the national
average ratio was 0.191, with half of the hospitals at or below 0.107.
However, 5 percent of the hospitals had measure ratios at or above
0.685, and 1 percent of the hospitals had ratios at or above 0.811.
Radiation exposure from a single CT scan of the abdomen is about 11
times higher than it is for an ordinary x-ray of the abdomen. For a
combination CT scan, radiation exposure is 22 times higher than it is
for an x-ray of the abdomen because the patient is given two scans. We
continue to believe that the act of quality measure reporting and its
impact can be powerful catalysts for improvement.
As we stated in a response to a previous comment, we have
undertaken the work on imaging measures as an educational effort, aimed
at educating the public about the appropriate use of and risks
associated with imaging services and the best practices for utilizing
them. We believe that identifying imaging practice patterns is
consistent with educational and quality improvement efforts for
hospitals, and public reporting related to these practice patterns can
play an important role in the quality improvement process.
Additionally, the collection of data on the proposed imaging
efficiency measures is a foundation building exercise that will help us
determine the distribution of provider experiences and results across a
national data set. With regard to the commenters' concern that there
has been no field-testing of these measures, we do not believe that
field-testing is necessary for these claims-based measures because we
can calculate them for all OPPS hospitals based on claims. Outpatient
imaging is a common and frequently performed diagnostic and therapeutic
procedure. With respect to commenters' concern about the lack of
benchmarks, we recognize that while the quality and safety of
outpatient imaging services are critically important, few national
standards exist to address the variations in the delivery of outpatient
imaging services. However, analysis of Medicare outpatient hospital
claims data indicates that some hospital outpatient departments have
patterns of care in their use of imaging services that are
significantly different than the patterns of care seen in most other
hospital outpatient departments. We believe that identifying these
practice patterns is consistent with educational and quality
improvement efforts for these providers, and that public reporting
related to these patterns can play an important role in the quality
improvement process.
We intend to publicly report average rates and ratios of imaging
study utilization, so that a hospital may compare its values with
national and State values. We note that there are currently no
benchmarks or CMS definitions of appropriate usage rates associated
with these measures. However, as HOPDs become more familiar with these
measures, we are hopeful that such benchmarks can be developed.
Comment: A commenter believed that the inclusion of risk-adjustment
and a ``within range'' in imaging measures are crucial for a fair and
unbiased comparison of different facility use rates.
Response: As stated above, the outpatient imaging efficiency
measures were developed after an extensive review of literature and
medical society guidelines, such as those published by the ACR, the ACC
Foundation and the American College of Physicians, and after
consultation with a technical expert panel. As a result of this
process, we were able to identify medical conditions for which imaging
services are considered appropriate, and these conditions will be
treated as ``exclusions'' and will not be included in the measure
calculations. We were also able to conclude, based on this process,
that we do not need to risk adjust the measures once the exclusion
criteria have been applied. Accordingly, the outpatient imaging
efficiency measures will not be risk adjusted but instead will be
calculated as raw/observed rates after the exclusion and inclusion
criteria are applied.
Comment: Some commenters stated that patient variables coupled with
a lack of clinical information in the chart make it difficult for a
physician to gauge if an imaging test is appropriate for a patient.
Some commenters were concerned that the proposed claims-based imaging
efficiency measures do not capture all of the medical reasons why a
physician would order a particular imaging study. Several commenters
were concerned that they may not have the opportunity to review the
claims data and to provide CMS with additional clinical information for
appropriate exclusions to be made.
Response: During the development of the proposed outpatient imaging
efficiency measures, we completed extensive literature reviews and
analyzed appropriate medical guidelines to determine the
appropriateness of imaging studies for various medical conditions, such
as cancer and trauma. In addition, we looked to see whether patient
variables, such as age, needed to be taken into account based on the
medical guidelines. As a result of this research, certain diagnoses
will be excluded from

[[Page 72079]]

the measure calculations for each of the proposed imaging measures
because we have concluded that an imaging study would be appropriate
for those diagnoses.
We have developed the specifications for the proposed imaging
efficiency measures by looking at Medicare claims data, which we will
also use to calculate the measures. We believe that the use of claims
data is a non-burdensome data collection approach for hospitals. During
the measure development process, we have determined that additional
clinical information beyond what is present on claims is not necessary
in order to identify exclusions. However, we regularly review whether
additional codes should be added in order to determine exclusions.
Additionally, as we do for all HOP QDRP measures, we will make
various resources available to hospitals, including measure
specifications and literature, and will send a hospital specific report
to each hospital prior to the time we publicly report the measures. The
hospital specific reports will contain average State and National
measure calculations, as well as measure specific data for the
hospital, so that the hospital may review the measure calculations.
This allows hospitals to review the ordering behavior of physicians.
The intent of the proposed imaging efficiency measures is to encourage
hospital outpatient departments to improve their quality of care and to
equip consumers with quality of care information to help them make more
informed decisions about their health care.
Comment: A few commenters were concerned about the potential
perception that lower imaging usage rate is better or that certain uses
of imaging technologies results in inferior care being provided to
patients.
Response: The goal of the imaging efficiency measures is not to
suggest that lower rates of imaging services are necessarily better or
that certain types of imaging studies are better than the others, but
to promote the efficient use of imaging procedures in hospital
outpatient departments. Our analysis of Medicare claims data indicates
that there are hospital outpatient departments that use imaging
services significantly more or less than most other hospital outpatient
departments. The proposed imaging measures are intended to identify
outlier practice patterns, which we believe is consistent with our
educational and quality improvement efforts, and for which public
reporting can play an important role in the quality improvement
process.
Comment: One commenter noted that different hospitals have
different preoperative checklists for surgery and that the
documentation of imaging studies will differ accordingly.
Response: The proposed imaging efficiency measures are claims-based
measures, which means that hospitals do not need to submit any
additional data in order for us to calculate them under the HOP QDRP.
We also received comments on individual imaging measures.
Cardiac Imaging Preoperative Risk Assessment for Non-Cardiac
Low-risk Surgery
(This measure was labeled Pre-operative Evaluation for Low-Risk
Non-Cardiac Surgery Risk Assessment in the proposed rule (75 FR 46364).
However, we are changing the title in order to make explicit reference
to the type of preoperative evaluation for risk assessment and the type
of imaging that was performed.)
Comment: A few commenters supported the proposed measure and noted
that the metric is reasonable to monitor unnecessary imaging testing
and expenses.
Response: We thank the commenters for their support and their
recognition of the importance of this proposed measure.
Comment: Two commenters believe that because the imaging study must
be ordered by a physician, the proposed measure is focused on a
physician service, rather than on the quality of care performed by a
hospital outpatient department. Commenters requested clarification on
the accountability for the imaging procedure when it is ordered by a
physician outside the hospital in which the study is performed. One
commenter recommended that the proposed measure be included in the PQRI
so that physicians who order the study will also be held accountable.
Response: We thank the commenters for the suggestions. The intent
of the Cardiac Imaging Preoperative Risk Assessment for Non-Cardiac
Low-risk Surgery measure is to encourage both hospitals and clinicians
to improve their quality of care and to equip consumers with quality of
care information to help them make more informed decisions about their
health care. We strongly believe that this measure will provide
hospitals with an opportunity to look for areas of improvement. Because
hospitals submit claims to Medicare for the services they furnish both
to inpatients and outpatients, they have a responsibility to ensure
that the services they furnish and that are paid by Medicare are
appropriate and necessary.
Comment: Some commenters cited the Appropriateness Criteria,
established by the ACC and endorsed by the American Society of
Echocardiography (ASE), which state that a stress echocardiogram may be
appropriate for low-risk non-cardiac surgery patients if they
experienced cardiac symptoms within 30 days prior to surgery.
Commenters also stated that, in other instances, the imaging study may
be ordered 30 days prior to the surgery for reasons not tied to pre-
operative evaluation. Therefore, the commenters believed that the
measure numerator should exclude patients who underwent stress imaging
within 30 days of low-risk surgery for unrelated, acceptable
indications.
Response: Clinical guidelines, including those published by or in
collaboration with the ACC, ASE, ASNC, AHA, ACP, ACEP, SCAI, and SCMR,
generally indicate that cardiac imaging is not needed prior to low-risk
surgery in low-risk patients; however, it is not possible to determine
high-risk patients from claims data. For this reason, we do not expect
the measure ratio to be zero.
Comment: Some commenters remarked that given the infrequent
occurrence of low risk non-cardiac surgeries, this measure may not
actually assess whether there are significant differences in the
provision of the imaging tests and their impact on the quality of care
provided.
Response: We understand the commenters' point of view. The number
of imaging studies that the measure assesses may not be large, however
for the reasons we discussed above, we believe this measure can satisfy
our goal to identify outlier practice patterns and encourage HOPDs to
improve their quality of care.
Comment: Two commenters asked for clarifications on data
collection, the potential need for separate codes, and the criteria for
determining overuse of echocardiography for the proposed ``Pre
Operative Evaluation for Low-Risk Non-Cardiac Surgery Risk Assessment''
measure.
Response: The specifications for this measure are available online
through QualityNet for HOP QDRP-adopted measures and through http://www.imagingmeasures.com. These specifications include the diagnostic
and procedural codes included in the measure, as well as any exclusion
criteria that will be applied.
Comment: A commenter inquired if a stress test can be ordered for a
patient having low risk surgery if chest pain or

[[Page 72080]]

dyspnea on exertion (DOE) are documented in the history and physical,
provided the surgery diagnosis is listed on the order form or the care
plan as well.
Response: The goal of the measure is not to dictate how to practice
medicine or under what circumstances imaging studies should be ordered.
We refer the commenter to the measure specifications on Preoperative
Risk Assessment at http://www.imagingmeasures.com for detailed
information about the measure. We also refer readers to our previous
discussion about exclusion criteria for the quality measures.
Comment: A commenter was concerned about the potential absence of
documentation by a referring physician regarding which low-risk surgery
would be performed.
Response: The specifications for the measure include a list of the
applicable low-risk surgeries. We expect that the referring physician
would document which low-risk surgery was going to be performed.
Comment: Some commenters suggested that CMS delay adopting this
measure until meaningful differentiation of quality is provided by the
imaging efficiency measure.
Response: This measure shows substantial variation among hospitals,
and thus presents an opportunity for hospitals to engage in quality
improvement efforts. We believe that preoperative risk assessment for
low-risk surgeries is an important clinical topic for quality
improvement.
Comment: Commenters requested that CMS define the term ``low-risk''
and provide the sources used to make the determination and identify
what is the appropriate usage rate.
Response: For the Cardiac Imaging for Preoperative Risk Assessment
for Non-Cardiac Low-Risk Surgery measure, low-risk surgery is defined
in the measure specifications as ``cardiac death or myocardial
infarction'' in less than 1 percent of performed procedures. This
definition was chosen after a literature review including Auerbach A.,
Goldman L., Assessing and reducing the cardiac risk of noncardiac
surgery. Circulation. 2006 Mar 14;113(10):1361-76; Schouten O., Bax J.,
Poldermans D., Assessment of cardiac risk before non-cardiac general
surgery. Heart. 2006 Dec 92 (12): 1866-1872. Doi: 10.1136/
hrt.2005.073627; Gregoratos G., Current guideline-based preoperative
evaluation provides the best management of patients undergoing
noncardiac surgery. Circulation. 2008 Jun 17;117(24):3145-51;
discussion 3151; Wijeysundera DN, Austin PC, Beattie WS, Hux JE,
Laupacis A., A population-based study of anesthesia consultation before
major noncardiac surgery. Arch Intern Med. 2009 Mar 23;169(6):595-602.
PMID: 19307523; and Fleisher LA, et al, ACC/AHA 2006 Guidelines update
on perioperative cardiovascular evaluation for noncardiac surgery:
focused update on perioperative beta-blocker therapy: a report of the
ACC/AHA Task Force on Practice Guidelines. Circulation. 2006 Jun
6;113(22):2662-74. The categories for low-risk surgery are also
identified in the measure specifications, and CMS consulted with the
ACC to harmonize the list of low-risk surgeries that are included in
the measure. ACC Appropriateness Criteria for SPECT MPI, include low-
risk categories such as endoscopic procedures, superficial procedure,
cataract surgery, and breast biopsy. Using these categories, we
identified what CPT procedure codes would apply for purposes of the
measure. With regard to the comment about usage rate, medical specialty
society guidelines generally indicate that cardiac imaging is not
needed prior to low-risk surgery in regular- and low-risk patients. As
noted above, we do not expect the measure ratio to be zero. The purpose
of the measure is to identify HOPD practice patterns and to alert HOPDs
if their imaging patterns appear to be significantly different than the
imaging patterns of the majority of HOPDs.
After consideration of the public comments we received, we are
finalizing the Cardiac Imaging Preoperative Risk Assessment for Non-
Cardiac Low-risk Surgery measure for the CY 2012 payment determination.
Use of Stress Echocardiography, SPECT MPI, and Cardiac Stress
MRI Post-CABG
Comment: A few commenters stated that the measure is consistent
with currently published guidelines. Furthermore, commenters believed
the measure has a reasonable metric to monitor unnecessary testing and
expenses, and addresses the appropriate use of SPECT to detect graft
occlusions and progressive disease in native arteries, especially if
the denominator population is asymptomatic patients who are free of
both signs and symptoms.
Response: We appreciate the commenters' recognition of the benefits
of this measure. However, as we describe more fully below, we are
opting to not finalize it at this time.
Comment: A commenter stated that there is no clinical consensus on
the appropriateness of the performance of stress imaging within 5 years
of CABG. The commenter was unclear about the purpose of tracking
utilization of stress imaging post-CABG.
Response: This measure was developed through a consensus-based
process that included consultation with a technical expert panel, an
analysis of available and appropriate medical guidelines, and a review
of peer-reviewed literature. Guidelines consulted in the development of
this measure were issued by numerous medical societies, including the
ACC Foundation, American Heart Association, American Society of
Echocardiography, American College of Emergency Physicians, American
College of Radiology, Society of Cardiovascular Computed Tomography,
and American Society of Nuclear Cardiology.
Cardiac imaging is among the most common imaging services in the
Medicare population, and has experienced significant growth in the past
decade. Nuclear imaging has been one of the major contributors to the
growth in radiation exposure in the Medicare population. SPECT MPI,
Stress MRI, and Stress Echocardiography are specific procedures that
must be ordered by a physician to be performed. We believe that the
adoption of this measure would provide an opportunity for HOPDs to
evaluate their practice patterns and reduce the incidence of
unnecessary imaging studies without compromising the quality of care
that they provide to their patients. However, for reasons discussed
below, we are not finalizing this proposed measure at this time.
Comment: Some commenters noted that the proposed measure, with the
exclusions as written, may result in insufficient denominators and
numerators, and this could lead to statistically invalid comparisons of
hospital care. Commenters were concerned that the exclusions may not
include asymptomatic patients (such as in some diabetic patients or
women), or all of the postoperative issues that could appropriately
trigger the use of stress perfusion testing, for example, new onset or
other indications of heart failure, new left ventricular enlargement
and ventricular arrhythmias, chest pain, and dyspnea on exertion.
Additionally, commenters noted that providers may not have access to
all of the clinical information required to consider and fully evaluate
such issues. One commenter was concerned that the measure may not
correctly identify the symptomatic status of the patients based on the
ICD-9 codes obtained from claims data. Commenters suggested that CMS
not adopt the measure until it has

[[Page 72081]]

been endorsed by the NQF, has undergone more refinement to allow for
differentiation of quality and been appropriately structured to avoid
unintended consequences.
Response: The NQF Steering Committee has suggested a number of
changes to this measure, including expanding it to include Percutaneous
Coronary Intervention (PCI). The Steering Committee encouraged us to
consider the recommended changes and to submit a revised measure to NQF
at a later date. While we are not required to adopt only NQF-endorsed
measures, we want to take the opportunity to consider the suggestions
made by the Steering Committee for potential improvements to the
measure and further examine some of the technical issues raised during
the Committee's discussion. Therefore, we are not finalizing this
measure for the CY 2012 payment determination.
Comment: One commenter asked for clarification on data validation
for this measure. The commenter was concerned by the fact that
physicians do not routinely indicate a diagnosis of ``Post-CABG'' on
orders for the diagnostic services and this may hamper CMS's efforts to
identify these cases through claim submission.
Response: As noted above, we have opted to not finalize this
measure at this time. However, should we decide to finalize it in the
future, we would calculate it using Medicare FFS claims data.
Comment: Some commenters believe that the measure is inconsistent
with the ACC Appropriate Use Criteria, which state that the
determination of SPECT imaging appropriateness for patients who are
less than 5 years post-CABG includes consideration of physician
judgment and patient condition. Two commenters were concerned that the
adoption of this measure will suggest to the public that there is
consensus that post-CABG use of the imaging studies is inefficient and
is not high quality care.
Response: We do not agree that the measure is inconsistent with the
ACC Appropriate Use Criteria, or that its adoption into the HOP QDRP
will suggest to the public that post-CABG use of imaging studies is
always inefficient. However, as explained above, in light of the NQF
Steering Committee's recent recommendations to expand the measure to
include PCI, we have decided to not finalize the measure at this time.
After considering the public comments we received, we are not
finalizing the Use of Stress Echocardiography, SPECT MPI, and Cardiac
Stress MRI post-CABG measure for the CY 2012 payment determination. We
will, however, consider proposing this measure for the HOP QDRP in the
future.
Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT)
Comment: Some commenters believed that the percentage of patients
who receive both a brain CT and a sinus CT on the same day is so small
(only 5 percent) that it would be hard to pinpoint how many of the
scans would be considered inappropriate or over-utilized.
Alternatively, commenters recommended that CMS adopt the ``CT dose
reduction'' measure developed by the AMA Consortium and the ACR.
Commenters believed that this measure would apply to a larger number of
patients and that it could be used to track larger critical organ
doses.
Response: The intent of the Simultaneous Use of Brain CT and Sinus
CT measure is to assess whether potentially unnecessary sinus CTs are
being performed on patients who have already undergone brain CTs. We do
not intend for the rate to be reduced to zero. Despite the fact that a
small proportion of claims indicate same day combined studies, we have
substantial concerns regarding radiation exposure from the simultaneous
use of these two imaging modalities. Our analysis of Medicare data for
2008 found that over 68,000 Medicare patients received this dual
radiation exposure. Although we agree that the relative incidence of
dual imaging would be low, we believe that the measure establishes a
clear opportunity for improvement by heightening providers' awareness
of patient safety in imaging studies.
Comment: One commenter felt that there was an accountability issue
because a physician orders the study and the hospital outpatient
department follows the order and provides the imaging service.
Response: The intent of this imaging efficiency measure is to
encourage hospitals to improve their quality of care. Although we
recognize that these studies are ordered by physicians, we believe that
hospitals have a responsibility to ensure that the services they
furnish and for which they are paid by Medicare are appropriate and
necessary. This measure will provide hospitals with an opportunity to
look for areas of improvement and, we hope, reduce the incidence of
unnecessary radiation exposure.
Comment: One commenter supported the measure's focus on patient
safety and unnecessary radiation exposure.
Response: We thank the commenter for the support.
After considering the public comments we received, we are
finalizing the Simultaneous Use of Brain Computed Tomography (CT) and
Sinus Computed Tomography (CT) measure for the CY 2012 payment
determination.
Use of Brain Computed Tomography (CT) in the Emergency
Department for Atraumatic Headache
Comment: Some commenters supported the measure because (1) It
targets an area of known overuse, (2) it is consistent with ACR
Appropriateness Criteria which indicates that CT of the head is usually
appropriate in a wide range of clinical circumstances (for example,
sudden onset of severe headache, sudden onset of unilateral headache,
suspected carotid or vertebral dissection, ipsilateral Horner's
syndrome, new headache in a patient older than 60 with a sedimentation
rate high than 55, etc.), but is not appropriate for patients who
present with a headache but do not have other neurological symptoms,
and (3) it serves a public health need. Commenters noted that headache
imaging performed in the ED on patients with non-focal neurologic exams
yields a low percentage of positive studies, and they believed that
cumulative population radiation dose is a valid concern. Commenters
believed the measure's exclusion criteria are well thought out.
Response: We appreciate the commenters' recognition of our efforts
and thank them for the support.
Comment: Some commenters opposed this measure because they believed
the measure is a flawed utilization measure rather than a true
efficiency measure. Commenters stated that the measure does not follow
published guidelines for care and will not produce reliable and valid
results about the quality of care. A commenter was concerned that ED
physicians may face a liability issue if they do not order a CT in
these circumstances.
Response: We disagree with the commenters. As we explained earlier,
our consensus-based measure development process for this imaging
measure was rigorous and included an extensive review of available
imaging guidelines and peer-reviewed literature, as well as
collaboration with a technical expert panel. The guidelines used in the
development of this measure included those from the U.S. Headache
Consortium in collaboration with the American Academy of Neurology, the
Singapore Ministry of Health, the American College of Emergency
Physicians, and the American College of

[[Page 72082]]

Radiology. We note that the imaging efficiency measures are designed to
look at practice patterns in the aggregate instead of individual case
decisions. We believe that patient safety concerns should play a role
in medical decision making in addition to other concerns (such as
malpractice liability).
After considering the public comments we received, we are
finalizing the Use of Brain Computed Tomography (CT) in the Emergency
Department for Atraumatic Headache measure for the CY 2012 payment
determination.
In summary, after consideration of the public comments we received,
we are finalizing three imaging efficiency measures: ``Cardiac Imaging
for Preoperative Risk Assessment for Non-Cardiac Low-Risk Surgery'';
``Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed
Tomography (CT)''; and ``Use of Brain Computed Tomography (CT) in the
Emergency Department for Atraumatic Headache'' for the CY 2012 payment
determination and subsequent payment determinations.
d. New Chart-Abstracted Measures for the CY 2012 Payment Determination
In the CY 2011 OPPS/ASC proposed rule (75 FR 46365), we proposed to
add one new chart-abstracted measure to the HOP QDRP measurement set
for the CY 2012 payment determination: ``Troponin Results for Emergency
Department acute myocardial infarction (AMI) patients or chest pain
patients (with Probable Cardiac Chest Pain) Received within 60 minutes
of arrival.'' Troponin is used to help diagnose a heart attack, to
detect and evaluate mild to severe heart injury, and to distinguish
chest pain that may be due to other causes.
This measure is based upon the existing ED-AMI/Chest Pain
populations for which we have adopted five measures in the current HOP
QDRP measurement set. In the proposed rule, we noted that this measure
was undergoing NQF review.
Both patients and clinicians are affected by the timeliness of
laboratory reporting.\12\ Decreasing laboratory turnaround times
increases ED efficiency, specifically by decreasing diversion time from
treatment of patients and decreasing length of stay.\13\ Decreasing the
number of hours a day on diversion as well as decreasing patients'
lengths of stay in EDs allows for the treatment of a greater number of
patients. In addition, the length of hospital stays and mean turnaround
times have been found to be correlated.\14\ Efficiencies in throughput
with tasks can lead to less diversion, less overcrowding, fewer
elopements and less financial loss.\15\
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\12\ Howanitz JH, and Howanitz PJ. Laboratory results:
Timeliness as a quality attribute and strategy. Am J Clin Pathol.
2002 Sep;116(3):311-5.
\13\ Storrow AB, Zhou C, Gaddis G, Han JH, Miller K, Klubert D,
Laidig A, and Aronsky D. Decreasing lab turnaround time improves
emergency department throughput and decreases emergency medical
services diversion: A simulation model. Acad Emerg Med. 2008
Nov;15(11):1130-5.
\14\ Holland LL, Smith LL, and Blick KE. Reducing laboratory
turnaround time outliers can reduce emergency department length of
stay: An 11-hospital study. Am J Clin Pathol. 2005 Nov;124(5):672-4.
\15\ Falvo T, Grove L, Stachura R, and Zirkin W. The financial
impact of ambulance diversions and patient elopements. Acad Emerg
Med. 2007 Jan;14(1):58-62.
---------------------------------------------------------------------------

Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
measure is appropriate for measuring quality of care in the hospital
outpatient department setting. This measure also meets the consensus
requirement because this measure underwent development through a
consensus-based measure development process involving stakeholder
input. We noted in the proposed rule that we anticipated that this
measure would be endorsed by the NQF.
In the proposed rule we stated that if adopted, data collection for
this measure would begin with January 1, 2011 discharges, and data
would be submitted quarterly.
We invited public comment on our proposal to add this new chart-
abstracted measure to the HOP QDRP measure set and the submission
process for the CY 2012 payment determination.
Comment: Many commenters supported this measure because it
supplements the existing measures on the topic of heart attack/chest
pain care for ED patients who are transferred to other hospitals for
advanced cardiac care. Commenters noted that the proposed time frame is
reasonable and the measure is a useful quality metric. Commenters
commended CMS for proposing to adopt the measure because it relates to
an issue that is meaningful to the public, and they recognized that the
measure is important for both public reporting and payment policy. One
commenter appreciated that only one chart-abstracted measure was
proposed for the CY 2012 payment determination as this would lessen the
burden on hospital outpatient departments.
Response: We thank the commenters for their support and
appreciation of our efforts to limit the reporting burden for
hospitals.
Comment: A few commenters were very concerned about the burden
generated from chart-abstraction for this measure and recommended that
CMS first assess whether HOPDs have the ability to collect and report
additional chart-abstracted measures before proceeding to adopt this
measure. Commenters suggested a ``yes/no'' measure format to minimize
the reporting burden. One commenter requested delaying the
implementation of this measure until there is NQF-endorsement.
Response: We thank the commenters for their suggestions. We
recognize the additional burden of collection of data via chart
abstraction. However, we anticipate that the additional data that
hospitals will need to submit for this measure will be minimal because
there are only two chart abstracted data elements required, and the
measure applies to a patient population for which charts are already
being abstracted for other measures (ED-AMI). This measure is currently
under NQF review and is expected to be endorsed in the fall of 2010.
However, as we have previously stated, NQF endorsement is not a
requirement for adopting measures for the HOP QDRP.
Comment: Many commenters were concerned that the measure may have
an unintended consequence of inadvertently encouraging hospitals to
hold patients in the EDs longer than necessary in order to run the
Troponin test and comply with the measure requirement. A commenter was
concerned that the Troponin test may hold up lab slots and prolong the
lab waiting time for other patients. Other commenters were concerned
about the applicability of the measure to smaller hospitals which have
less resources and less technology and, thus, may not be able to meet
the requirement in a timely manner. One commenter recommended field
testing the measure at small hospitals to determine its feasibility in
those facilities.
Response: The measure does not require HOPDs to run a Troponin test
on patients for management of acute myocardial infarction in the ED.
However, we believe that use of the test facilitates decision making in
the treatment of time sensitive conditions such as AMI and, for that
reason, believe that results of the test should be

[[Page 72083]]

available on a timely basis. The denominator of the measure will only
consist of those cases for which a Troponin test is ordered. We use
field-testing to the extent it is feasible and practical in order to
assess the completeness of the measure specifications in capturing
numerators, denominators, and exclusions for chart abstracted measures.
We will consider whether to field test of this measure in small
hospitals as suggested by the commenter.
Comment: One commenter did not see the evidence linking the
reporting of this measure with improved patient outcomes.
Response: The use of a Troponin test is important in the triage of
patients with chest pain that do not have ST elevation. Use of the test
facilitates decision making in the treatment of time sensitive
conditions such as AMI. A timely report of Troponin results is crucial
to being able to provide the most optimal care for the patient. The
measure focuses on the timeliness of care as well as delays in ED
management of this type of patients caused by delays in the
availability of laboratory data.
Comment: Some commenters believed that Troponin is not an effective
marker for the diagnosis of AMI, and for patients with a positive ST-
elevation myocardial infarction (STEMI), their Troponin level will not
affect physicians' decisions to transfer patients to bigger hospitals.
Commenters indicated that the proposed 60-minute timeframe is
unrealistic in the event that the Troponin test has to be repeated for
verification. Commenters requested that CMS not adopt this measure due
to concerns about the inconsistencies surrounding the use and
interpretation of Troponin testing. Other commenters indicated that the
lack of standardization in Troponin assays may yield different Troponin
test results. One commenter cautioned that a Troponin test should not
be the only criterion used to diagnose a patient with an AMI, and noted
that other diagnostic criteria such as EKG results should be considered
as well.
Response: We agree that the Troponin test is not necessary in the
evaluation of a patient with an ST-elevation MI and clinical decision
making in those cases is usually based on the electrocardiogram and
clinical history. We agree with the commenter that other diagnostic
measures should be performed in conjunction with Troponin which is only
one piece of the diagnostic workup of patients with chest pain.
Troponin assays may be negative for the first time or results may vary
due to different calibrations. As mentioned earlier, Troponin
assessment is not a requirement for management of acute myocardial
infarction, and the measure we proposed, and are adopting in this final
rule with comment period, does not implement a requirement to perform
the test. The focus of this measure is on the timeliness of the receipt
of the Troponin results and not on its use or interpretation.
Comment: Some commenters recommended the exclusion of patients who
spend less than an hour in the hospital ED prior to transfer.
Commenters also asked for clarification regarding the measurement of
the 60-minute timeframe.
Response: We thank the commenters for the recommendation. We note
that only patients who are transferred after one hour will be included
in the denominator in the event the test is ordered.
Comment: A commenter asked for clarification of the target
population to which this measure would apply. One commenter inquired if
it is acceptable to give patients Point of Care Troponin instead of
Troponin.
Response: The target population of this measure is ED patients with
a diagnosis of AMI, and Angina, Acute Coronary Syndrome, or Chest Pain
patients presumed to be cardiac in nature and have been prescribed a
Troponin test. Point of Care Troponin is acceptable.
Comment: Some commenters urged CMS to delay the data collection
start date from January 1, 2011 to July 1, 2011 discharges because
otherwise, hospitals would only have 60 days from the publication of
this final rule comment period to begin reporting data to CMS.
Response: We agree that the proposed collection start date may not
allow sufficient time for hospitals to begin submitting data to CMS.
Therefore, we have decided not to finalize the Troponin measure for the
CY 2012 payment determination. Instead, we are adopting the measure for
the CY 2013 annual payment update, which we believe will give hospitals
sufficient time to prepare for the reporting of this measure. Hospitals
will begin submitting data on the measure beginning with first quarter
CY 2012 discharges, and hospitals will be required to submit data
quarterly thereafter.
After consideration of the public comments we received, we are
finalizing the ``Troponin Results for Emergency Department Acute
Myocardial Infarction (AMI) Patients or Chest Pain Patients (with
Probable Cardiac Chest Pain) Received within 60 minutes of arrival''
measure for the CY 2013 payment determination rather than the CY 2012
payment determination. Collection for the Troponin measure will begin
with January 1, 2012 discharges.
In summary, for the CY 2012 payment determination, we are retaining
the 11 existing HOP QDRP measures from the CY 2011 payment
determination, adding one new structural measure, and adding 3 new
claims-based imaging efficiency measures for a total of 15 measures. We
will calculate the three imaging measures using Medicare claims from CY
2010. Submission of data regarding the new structural measure will
begin in July 2011, with a reference period beginning January 1, 2011.
Collection will occur using a Web-based collection tool available on
the QualityNet Web site.
The complete list of 15 measures for the CY 2012 payment
determination is shown below.

HOP QDRP Measurement Set To Be Used for the CY 2012 Payment
Determination
------------------------------------------------------------------------

-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.

[[Page 72084]]

OP-12: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data *.
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non-Cardiac
Low-Risk Surgery *.
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT) *.
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache *.
------------------------------------------------------------------------
* New measure for the CY 2012 payment determination.

4. HOP QDRP Quality Measures for the CY 2013 Payment Determination
a. Retention of CY 2012 HOP QDRP Measures for the CY 2013 Payment
Determination
In general, unless otherwise specified in the retirement section of
a rule, we retain measures from one payment determination to another.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46366), for the CY 2013
payment determination, we proposed to retain all of the measures
adopted for the CY 2012 payment determination. We invited public
comment on this proposal for the CY 2013 payment determination.
Comment: One commenter strongly supported the proposed retention of
CY 2012 HOP QDRP Measures for the CY 2013 payment determination.
Response: We thank the commenter for the support.
After consideration of the public comments we received, we have
decided to adopt as final our proposal to retain the 15 HOP QDRP
measures adopted for the CY 2012 payment determination, for the CY 2013
payment determination.
b. New Structural Measure for the CY 2013 Payment Determination
In the CY 2011 OPPS/ASC proposed rule (75 FR 46366), we proposed to
add one structural measure to the HOP QDRP measurement set for the CY
2013 payment determination: Tracking Clinical Results Between Visits.
EHRs enable providers to issue reminders when clinical results are not
received within a predefined timeframe. This measure assesses the
extent to which a provider uses a certified/qualified EHR system to
track pending laboratory tests, diagnostic studies (including common
preventive screenings) or patient referrals.
Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
structural measure is appropriate for measuring quality of care in the
hospital outpatient department setting. This measure also meets the
consensus requirement because it was endorsed as part of an NQF Project
entitled ``National Voluntary Consensus Standards for Health IT'' (NQF
0491). Additionally, this measure was conditionally approved
by the HQA in March of 2010.
Submission of this measure would begin with first quarter CY 2012
discharges to be submitted via the Web-based tool used to collect other
structural measures, such as the registry participation structural
measures for the Hospital Inpatient Quality Reporting Program. We
invited comments on this proposal to add this new structural measure to
the HOP QDRP measurement set and the submission process for the CY 2013
payment determination.
Comment: Some commenters noted that the proposed structural measure
relates to an issue that is meaningful to the public, and that is
important for both public reporting and payment policy. One commenter
stated the measure is a useful quality metric, and asserted that the
tracking of clinical results between visits improves the quality of
care and reduces medical costs. Furthermore, some commenters recognized
that the addition of this measure to the outpatient pay-for-reporting
program and subsequent public reporting on the Hospital Compare Web
site will accelerate hospitals' efforts to adopt EHRs to improve care
coordination, patient safety, and outcomes.
Response: We appreciate the commenters' support and encouragement
and agree with commenters that this measure would promote the adoption
of EHR technology which will ultimately enhance the quality of care.
Comment: One commenter was concerned about the duplication of this
measure with the meaningful use objectives set forth in the HITECH EHR
Incentive Program final rule. Some commenters recommended maintaining
this measure as a meaningful use HIT functionality objective under the
HITECH EHR Incentive Program, and requested that CMS not adopt it for
the HOP QDRP. Many commenters did not support this measure and stated
that the measure is not evidence-based and has not been field-tested.
Some commenters recommended using a ``yes/no'' format for the measure
to reduce provider burden. Some commenters did not support this measure
which they believed assesses HIT functionality rather than the quality
of care provided. One commenter indicated that this measure is only
warranted when EHRs are fully functional across hospital outpatient
settings. Commenters suggested that this measure would be better suited
as a physician office-based measure since physicians, not the
hospitals, are the ones that order and track pending laboratory tests,
diagnostic studies and patient referrals.
Response: We thank the commenters for the recommendations. We note
that this measure does not duplicate any of the Stage 1 meaningful use
objectives set forth in the HITECH EHR Incentive Program final rule. We
note that this measure has NQF-time-limited endorsement and we plan to
seek extension for the endorsement. The measure was also conditionally
adopted by HQA in 2010. As suggested, we will adopt a ``yes/no'' format
in the final specifications for this measure. This measure is a HIT
functionality measure that can enhance the quality of care by helping
providers to track clinical results between visits. The structural
measure will provide CMS with information regarding the number of HOPDs
that have acquired this HIT functionality. It will not penalize
hospitals that do not have this capability.
Comment: Some commenters requested clarifications on the measure's
targeted patient population. Commenters also asked for definitions of
the numerator, denominator, inclusions, and exclusions, and the
frequency of data collection.
Response: This measure population includes all patients who receive
care at an HOPD. We will further clarify the requirements for this
measure in the adaptation of the measure specifications for the HOPD
setting.
After consideration of the public comments we received, we are
finalizing this measure: Tracking

[[Page 72085]]

Clinical Results between Visits Using Certified/Qualified EHRs as
Discrete Searchable Data for the CY 2013 annual payment update. HOPDs
will be required to begin submitting data on this measure beginning in
July 2012 with a reference period beginning January 1, 2012 via a Web-
based tool available on the QualityNet Web site that is currently
employed for the collection of structural measures for the Hospital
Inpatient Quality Reporting Program.
c. New Chart-Abstracted Measures for the CY 2013 Payment Determination
In the CY 2011 OPPS/ASC proposed rule (75 FR 46367), we proposed to
add six new chart-abstracted measures to the HOP QDRP measurement set
for the CY 2013 payment determination.
The six new chart-abstracted measures we proposed for the CY 2013
payment determination are: (1) Median Time from ED Arrival to ED
Departure for Discharged ED Patients, (2) Transition Record with
Specified Elements Received by Discharged Patients, (3) Door to
Diagnostic Evaluation by a Qualified Medical Professional, (4) ED-
Median Time to Pain Management for Long Bone Fracture, (5) ED-Patient
Left Before Being Seen, and (6) ED-Head CT Scan Results for Acute
Ischemic Stroke or Hemorrhagic Stroke Who Received Head CT Scan
Interpretation Within 45 minutes of Arrival. The topics addressed by
these measures include ED efficiency, Imaging Efficiency, and care
coordination/transition for hospital outpatient departments. Many of
these measures would expand the chart-abstraction population for the
HOP QDRP measurement set beyond the current ED-AMI/Chest Pain, and
Surgical Care patients for which we have currently adopted seven
measures in the HOP QDRP measurement set. However, this population
expansion would be occurring at a time when subsection (d) hospitals
would begin collection of more global ED population measures for the
Hospital Inpatient Quality Reporting Program. Thus, we have timed the
expansion of the chart-abstracted measures for HOP QDRP to coincide
with expansions that will be occurring for the Hospital Inpatient
Quality Reporting Program in order to reduce the burden associated with
expansion. We also anticipate that, in the future, these measures could
be captured and submitted via EHRs, eliminating the chart abstraction
burden associated with these measures.
ED Measures
We received several general comments on the proposed ED measures.
Comment: Some commenters supported all the proposed chart-
abstracted measures for the CY 2013 payment determination. Commenters
believed the reporting of the ED measures would provide data needed to
develop solutions to ED overcrowding and heavy emergency resource
demand.
Response: We appreciate the commenters' support and we strive to
develop measures to improve ED efficiency and quality of care.
Comment: Commenters suggested the chart-abstraction burden could be
reduced if the patient population to which the measures apply is well-
defined.
Response: We appreciate the suggestions. The ED measures apply to
patients who present in and are treated at a hospital emergency
department.
Comment: Commenters commended CMS' intent to align the time-
sensitive ED measures with the meaningful use ED-focus quality measures
under the HITECH EHR Incentive Program. Commenters recommended using
EHR-compatible metrics to capture data for burden reduction. Several
commenters recommended delaying the adoption of this measure until EHRs
are fully functional in all hospital ED settings so that the data can
be tracked electronically.
Response: We are committed to aligning ED quality measures in the
HOP QDRP and in the HITECH EHR Incentive Program. As we stated, we
anticipate that data on the proposed ED throughput measures will be
able to be captured via an EHR-based collection tool in the future, and
we expect that once the electronic data submission is possible, it will
greatly reduce the burden on hospitals to submit data on these
measures. However, we do not believe we should wait until EHR-
specification has occurred and widespread adoption of EHRs has occurred
in order to adopt these measures for the HOP QDRP.
Comment: Some commenters did not support the proposed ED measures
as they did not believe the measures relate to clinical outcomes. One
commenter believed that ED wait time is a process indicator rather than
a quality indicator. Commenters believed that the proposed ED measures
are simply arbitrary numbers that only measure how busy the ED is or
how fast the care is delivered. Commenters stated that the proposed ED
measures do not reflect the actual quality of care rendered; rather,
the commenters believed that they reflect issues that are outside of
the ED's control. Commenters voiced concerns that the measures may have
unintended consequences resulting in hospitals providing faster care
but not better care. Commenters were concerned that the introduction of
the proposed ED measures will indirectly support the continued
inappropriate use of EDs.
Response: We disagree with these comments. We believe that the
proposed ED measures target the quality of care provided in the ED
setting. Reducing the time patients spend in the ED can impact quality
by increasing access to the ED for other patients needing emergent
care. Reduced throughput time also increases the facility's capability
to provide appropriate treatment and, as a result, contributes to
better patient outcomes. Studies have already demonstrated that for a
number of conditions, prolonged ED waiting times and delays results in
patient harm and poor patient satisfaction. We intend to monitor the
literature for evidence of any unintended consequences associated with
these measures.
Comment: Commenters noted that the proposed ED measures did not
take into consideration the ED's location, seasonal variations in ED
use, the different socio-economic backgrounds of the ED patient
population served by different hospitals, the misuse of EDs for primary
care service, as well as other variables that are out of the ED's
control. One commenter recommended that CMS use a risk-adjustment
methodology for the ED measures to accommodate the multiple factors
that can lead to ED overcrowding.
Response: Currently, we do not intend to risk-adjust the ED
throughput measures. It is our belief that the public desires
meaningful information about usual ED wait times, delays, and
expectations for transition to inpatient care when needed. However, we
will examine the data submitted on these measures to determine if
stratification of the results based on hospital characteristics (such
as ED volume, bed size, geographic location, or other factors) is
needed.
Comment: A few commenters objected to the ED measures because they
have not been field-tested, and commenters stated that field-testing is
necessary to identify the potential challenges in data collection of
the time elements.
Response: Many of these ED measures have undergone field testing in
a project funded by the Robert Wood Johnson Foundation. A report can be
found at http://urgentmatters.org/media/file/

[[Page 72086]]

UM%20LN%20II%20-%202nd%20IB%20-%20FINAL.pdf.
Comment: Commenters noted that data collection will be challenging
as the time elements that the proposed measures assess are generally
not part of a patient's health record, but instead are more often part
of a patient tracking system used by the ED. Some commenters questioned
if random sampling is acceptable. Other commenters noted that random
sampling may miss some ``mean time'' and ``median time'' outliers.
Response: We are aware of the amount of chart-abstraction burden
for the ED measures which target all patients seen in the ED. While the
electronic specification for these measures is under development,
specification for sampling is being developed to assist hospital EDs in
chart-abstraction in the interim.
Commenters also made specific comments on the proposed ED measures.
Median Time From ED Arrival to ED Departure for Discharged ED
Patients
This measure, which was listed as under consideration for CY 2012
and subsequent years in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60637 through 60641), addresses ED efficiency in the form
of the median time from ED arrival to time of departure from the ED for
patients discharged from the ED (also known as ED throughput). Reducing
the time patients spend in the ED can improve the quality of care.
Reducing this time potentially improves access for other patients
needing emergency care and increases hospitals' capability to provide
additional treatment as necessary. Overcrowding and heavy emergency
resource demand have led to a number of problems, including ambulance
refusals, prolonged patient waiting times, increased suffering for
those who wait, rushed and unpleasant treatment environments, and
potentially poor patient outcomes. ED crowding may result in delays in
the administration of medication such as antibiotics for pneumonia and
has been associated with perceptions of delayed emergency care. When
EDs are overwhelmed, their ability to respond to community emergencies
and disasters may be compromised.
Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
chart-abstracted measure is appropriate for measuring quality of care
in the hospital outpatient department setting. This measure also meets
the consensus requirement because it was endorsed in 2009 (NQF
0496) as part of an NQF project entitled ``National Voluntary
Consensus Standards for Emergency Care.'' Additionally, this measure
was conditionally approved by the HQA in March of 2010.
Comment: Some commenters expressed strong support for this ED
throughput measure and recommended its inclusion in the HOP QDRP. Some
commenters stated that a measure assessing delays in patient care is
important as providers experience a growth in demand for ED services.
Commenters believed that public reporting of the measure will encourage
HOPDs to make improvements, such as reducing overcrowding and improving
patient access to EDs, and, as a result, will increase the quality of
care they deliver.
Some commenters stated that based on their experience, the
information provided by the measure was very important and useful to a
hospital's quality improvement program. Commenters also stated that
they were aware of hospitals that already collected this information
and that, to their knowledge, these hospitals had no difficulty in
collecting it.
Response: We thank the commenters for their supportive statements.
We also appreciate the commenters' insightful experience, and we are
pleased to learn that commenters believe this measure addresses the
issue of timely emergency department care and the role it plays in
reducing ED overcrowding.
Comment: A few commenters indicated it will be overly burdensome
for hospitals to collect data on a patient's arrival time in the ED
because they will have to note the arrival time for each patient. Many
commenters indicated that, as currently structured, the measure
includes the time spent receiving care in the ED in addition to the
time spent waiting in the ED. These commenters indicated that the time
spent receiving care in the ED should not be counted against the
hospital, as it does not represent a delay in care. The commenters
suggested that CMS modify the measure so that it reflects only the time
spent waiting in the ED to receive care.
Response: We do not agree that it will be overly burdensome for
hospitals to submit data on this measure because hospitals routinely
collect the key information needed to calculate the median time (ED
arrival date and time and ED departure date and time) for each
emergency department patient. We also note that ED arrival times must
already be reported by hospitals under the Hospital Inpatient Quality
Reporting Program for conditions such as acute myocardial infarction
and pneumonia. We believe that revising the measure as suggested by the
commenters to exclude active treatment times would actually increase
the burden on hospitals because they would be required to accurately
track and collect all the wait time that a patient spent in the ED not
receiving care.
Comment: A few commenters stated that the proposed ED throughput
measure does not take into consideration typical ED operating
principles such as serving patients with the most urgent needs first,
or other factors that are out of an ED's control, such as the fact that
teaching hospitals usually treat sicker patients. One commenter
recommended stratifying the reporting results by type of hospital so as
to obtain a more appropriate comparison among institutions. Another
commenter requested exclusions for psychiatric or placement issues, age
and co-morbidities. Alternatively, some commenters suggested that the
proposed ``Door to Diagnostic Evaluation by a Qualified Medical
Professional'' measure is a more appropriate measure to determine ED
efficiency and throughput.
Response: We agree that the Door to Diagnostic Evaluation is an
appropriate measurement of time to assessment. Nonetheless, we also
believe that the proposed median time from arrival to departure measure
provides valuable information regarding the total time a patient spent
in the ED, starting from arrival time at the ED to the time the patient
is discharged. The public desires meaningful information about usual
wait times, delays, and expectations for transition time to inpatient
care. As we have stated, we believe that prolonged ED visits and
waiting times could cause patient harm and increase the likelihood that
the hospital's ED will need to divert potential patients elsewhere for
care. We will, however, examine the measure results to determine
whether alternative stratification reporting based on hospital
characteristics (ED volume, bed size, geographic location, etc.) is
necessary.
After consideration of the public comments we received, we are
finalizing the Median Time from ED Arrival to ED Departure for
Discharged ED Patients measure for the CY 2013 payment determination.

[[Page 72087]]

Transition Record With Specified Elements Received by
Discharged Patients
This chart-abstracted measure assesses the percentage of patients,
regardless of age, discharged from an ED to ambulatory care or home
healthcare, or their caregiver(s) at home, who received a transition
record at the time of ED discharge including at a minimum, the
following elements: Major procedures and tests performed during the ED
visit; principal diagnosis at discharge or chief complaint; patient
instructions; plan for follow-up care (or statement that none is
required)--including primary physician, other health care professional,
or site designated for follow-up care; and list of new medications and
changes to continued medications that patient should take after ED
discharge, with the quantity prescribed and/or dispensed (or intended
duration) and instructions for each. Transitions of care are a weakness
in maintaining continuity of care and proper adherence/compliance with
follow-up instructions. Hand-offs between settings should be
accompanied by clear instructions for medications and follow-up care.
Information should be provided about the care delivered while in each
setting, and for what reasons, not only for the benefit of the patient
and their caregivers, but for practitioners that will be following up
with the patient after they leave an acute care setting.
Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
measure is appropriate for measuring quality of care in the hospital
outpatient department setting. This measure also meets the consensus
requirement because it was endorsed by the NQF as part of a Project
entitled ``Endorsing Preferred Practices and Performance Measures for
Measuring and Reporting Care Coordination'' (NQF 0649). This
measure was conditionally approved by the HQA in March of 2010.
Comment: Some commenters strongly supported this measure and noted
that the measure is scientifically valid and well-specified, and will
fill a significant gap in the current health-care system which does not
have standardized data elements in patient's health records.
Response: We thank the commenters for their support.
Comment: Some commenters noted that the measure is purely a
documentation measure rather than a measure for accountability and the
true quality of care. Commenters asked for clarification of the target
patient population for this measure.
Response: Although the measure assesses whether certain
documentation was provided to discharged patients, its purpose is to
facilitate a continuity of care and a seamless transition when a
patient is discharged from an ED to home or home care setting. The
target patient population for this measure is the discharged patients
from a hospital ED to home or a home care setting.
Comment: Several commenters stated their belief that this measure
is overly burdensome as new data elements may have to be included in
patients' ED transition records, and ED patient transfer procedures may
have to be modified. One commenter suggested that CMS use a consensus-
based process to develop standardized data elements for this measure.
One commenter recommended that CMS field-test the measure for
feasibility.
Response: Standardized data elements have been developed and field-
tested for this measure. We believe that the use of standardized
transition records and data elements across hospital outpatient
department settings actually increase the efficiency of the transition
and discharge process and allow hospitals to pre-plan transition
procedures. We also believe that the use of standardized transition
records will make it easier for hospitals to find the information when
conducting chart abstraction, therefore minimizing the burden.
Comment: Some commenters were concerned that HOPDs may be held
accountable for the omission of data elements in a transition record
that they have no control over, for instance, a physician's medication
instructions for medication changes (this information may not be
available to the ED), a patient's adherence to discharge instructions,
and whether a patient followed up with doctor's appointments. The
commenter recommended removing the data elements of ``(medications)
quantity prescribed and/or dispensed'' from the measure specifications.
Response: We hope that documentation practices will improve so that
complete information will be available in patients' discharge records.
We believe that documentation of medications prescribed as well as
dosages are important parameters for transitional care and we do not
agree that the documentation of this element should be removed. We
encourage hospitals to examine their ED discharge procedures to ensure
that discharged patients receive a copy of the transition records with
the specific data elements required under the measure.
After consideration of the public comments we received, we are
finalizing the Transition Record with Specified Elements Received by
Discharged Patients measure for the CY 2013 payment determination.
Door to Diagnostic Evaluation by a Qualified Medical
Professional (Door to Provider)
This measure assesses mean time between patient presentation to the
ED and the first moment the patient is seen by a person who can
initiate a diagnostic evaluation or therapeutic plan (for example,
medical student, resident, or nurse practitioner; not including triage
personnel). Long wait times in the ED before diagnosis increases the
likelihood that someone will leave the ED without treatment for a
serious condition, and can worsen the severity of the condition with
which they presented.
Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
measure is appropriate for measuring quality of care in the hospital
outpatient department setting. This measure also meets the consensus
requirement because it gained NQF endorsement as part of the project
entitled ``National Voluntary Consensus Standards for Emergency Care''
(NQF 0498). This measure was conditionally approved by the HQA
in March of 2010.
Comment: A few commenters supported this measure and believed the
measure helps to expedite the triage, evaluation, and discharge process
especially for patients who present with non-emergent conditions.
Response: We thank the commenters for the supportive statements.
Comment: Some commenters noted that current technical
specifications for this measure exclude registered nurses as qualified
medical professionals. These commenters supported the adoption of this
measure if the definition of ``qualified medical professional' is
expanded to include a

[[Page 72088]]

registered nurse, advanced practice nurse, resident or medical student.
Response: We thank the commenters for the suggestions and will take
them into consideration.
Comment: Some commenters recommended CMS risk-adjust this measure
to distinguish the average wait time spent by urgent versus non-urgent
patients, based on the belief that non-urgent patients who present in
hospital EDs or trauma centers usually have longer wait times for
evaluation than critically ill or injured patients. One commenter
recommended tracking the patient's triage level to distinguish urgent
care from non-urgent care.
Response: We thank the commenters for the recommendation. There are
no plans for risk-adjustment for this measure at the time because we
expect the measure metric will provide valuable information regarding
the timeliness of assessment regardless of what condition the patient
presents.
Comment: One commenter noted that the door to evaluation time is
rarely captured electronically in the ED and there are still many EDs
that do not use EHR technology.
Response: We believe that many EDs routinely electronically
document door to evaluation time. For facilities that have not done so,
we encourage them to start documenting it. There are no requirements
for EDs to use EHR technology. However, because of the efficiency
benefit from EHR technology, we anticipate there will be a widespread
utilization of EHR technology in the future.
Comment: One commenter expressed concerns that the structure of the
measure may stifle innovation in ED staffing by measuring hospitals on
the time it takes for a patient to reach only a subset of all the staff
that provide care to patients in EDs.
Response: We acknowledge that ED care is a well-defined set of
specific, clinically appropriate services, which include ongoing short-
term treatment, assessment, and reassessment, before a decision can be
made regarding whether a patient will require further treatment as a
hospital inpatient. We also acknowledge that this measure assesses one
aspect of ED quality. However, we do not believe that implementation of
this measure stifles innovation in ED staffing, because the level of
coordination and efficiency of the aforementioned processes impacts
performance on this measure.
After consideration of the public comments we received, we are
finalizing the Door to Diagnostic Evaluation by a Qualified Medical
Professional (Door to Provider) measure for the CY 2013 payment
determination.
ED-Median Time to Pain Management for Long Bone Fracture
This chart-abstracted measure addresses the topic of efficient pain
management in the ED, and is currently being reviewed by NQF. Pain
management in patients with long bone fractures is currently
undertreated in emergency departments.\16\ Patients with bone fractures
are many times not given pain medication as part of treatment
regimens.\17\ When standards are implemented for pain management of
these patients, treatment for pain improves.\18\
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\16\ Ritsema, T.S., Kelen, G.D., Pronovost, R.J., and Pham,
J.C.: The national trend in quality of emergency department pain
management of long bone fractures. Acad Emerg Med. 2007 Feb 14;
14(2):163-9.
\17\ Brown, J.C., Klein, E.J., Lewis, C.W., Johnston, B.D., and
Cummings, P.: Emergency department analgesia for fracture pain. Ann
Emerg Med. 2003 Aug;42(2):197-205.
\18\ Titler, M.G., Herr, K., Brooks, J.M., Xie, X.J., Ardery,
G., Schilling, M.L., Marsh, J.L., Everett, L.Q., Clark, W.R:
Translating research into practice intervention improves management
of acute pain in older hip fracture patients. Health Serv Res.
2009;44(1),264-87.
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Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
measure is appropriate for measuring quality of care in the hospital
outpatient department setting. This measure also meets the consensus
requirement because it underwent development through a consensus-based
measure development process involving stakeholder input. In the
proposed rule we stated that we anticipated that this measure would be
endorsed by the NQF.
Comment: A few commenters supported the adoption of this measure
because it measures a process that affects quality of care and is
patient centered. Some commenters requested that we adopt more pain
management measures for long bone fracture as part of a larger
framework for pain management in the ED setting. One commenter
requested guidelines for the ``median time'' (when the patient arrives
at the facility or when the diagnosis of a long bone fracture is made).
Response: We thank the commenters for the support and suggestions
and we will consider them in future measure development. Currently the
``median time'' calculation is based on arrival time and time to
administration of medication.
Comment: Several commenters did not support this measure because it
is not NQF-endorsed. Commenters requested the evidence that prompted
the need for this measure. One commenter stated this measure did not
rise to the top in significance as a singular measure and stated that
it is not appropriate for public reporting.
Response: Although we generally prefer to adopt NQF-endorsed
measures for CMS quality reporting programs, we have stated that
consensus among affected parties can be achieved in other ways
including consensus achieved during the measure development process;
consensus shown through broad acceptance and use of measures; and
consensus through public comment. We also note that section 1833(t)(17)
of the Act does not require that each measure we adopt for the HOP QDRP
be endorsed by a national consensus building entity, or by the NQF
specifically. Over the years, we have recognized that pain management
in ED patients with long bone fracture is inadequate and that treatment
disparities for this condition exist among EDs. We anticipate the
measure will serve to facilitate improvements in pain management for
this patient population in EDs. This measure is recommended for
endorsement by the NQF Steering Committee, and we believe that it meets
the requirement that the measure reflect consensus among affected
parties.
Comment: One commenter noted the measure does not take into account
whether the level of pain warrants pain medication, or whether the pain
is relieved with the medication given.
Response: The measure is calculated based solely on the timeliness
of pain medication administration and not on the level of pain. The
final measure specifications for the numerator will exclude patients
who are offered medication but refuse it.
After consideration of the public comments we received, we are
finalizing the ED--Median Time to Pain Management for Long Bone
Fracture measure for the CY 2013 payment determination.
ED-Patient Left Without Being Seen
This measure is the percentage of all patients leaving an ED who
were not seen by a provider (for example, medical student, resident,
nurse practitioner). Although we stated in the CY 2011 OPPS/ASC
proposed rule (75

[[Page 72089]]

FR 46368) that ``this measure is the sum of all patients leaving an ED
who were not seen by a provider,'' the technical specifications for the
measure, which were publicly available at the time we issued the
proposed rule, state that this measure is calculated based on a
percentage. Therefore, we are clarifying that this measure looks at
percentages. A patient leaving before being seen is an indicator of
emergency department overcrowding.\19\ Patients who leave before being
seen may not receive appropriate medical care and this lack of care may
result in adverse outcomes.\20\ National estimates for patients who
leave before being seen by a provider average 1.9 percent.\21\
---------------------------------------------------------------------------

\19\ United States General Accounting Office. Hospital emergency
departments: Crowded conditions vary among hospitals and
communities. Publication GAO-03-460, 2003.
\20\ Rowe, B.H., Channan, P., Bullard, M., Blitz, S., Saunders,
L.D., Rosychuk, R.J., Lari, H., Craig, W.R., Holroyd, B.R.:
Characteristics of patients who leave emergency departments without
being seen. Acad Emerg Med. 2006 Aug;13(8):848-52.
\21\ McCaig, L.F., Nawar, E.W.: National hospital ambulatory
medical care survey: 2004 Emergency department summary. Adv Data.
2006 Jun 23;(372):1-29.
---------------------------------------------------------------------------

Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
measure is appropriate for measuring quality of care in the hospital
outpatient department setting. This measure also meets the consensus
requirement because it was endorsed by the NQF (NQF 0499) as
part of the National Voluntary Consensus Standards for Emergency Care.
Comment: Some commenters supported this measure because it is an
indicator of efficiency in the ED and they noted the measure appears to
be scientifically valid in providing valuable information to hospitals
to assess their ability to provide quality care to all patients in
their EDs in a timely manner.
Some commenters shared that these measure metrics are very
important and useful to a hospital's quality improvement program.
Commenters stated that hospitals participating in the field test
reported no difficulty in collecting the data for the measure.
Response: We thank the commenters for their supportive statements.
We also appreciate the commenters' insightful experience and we are
pleased to learn that hospitals acknowledged this measure addresses the
issue of timely emergency department care and the role it plays in
reducing ED overcrowding.
Comment: Some commenters noted that hospitals have had difficulty
collecting the relevant information needed for this measure due to
insufficient record-keeping, such as the lack of documentation noting
the patient departure time from the ED. Commenters requested more
explicit, standardized definitions for time-sensitive terms like ``left
without being seen'' (before or after triage). One commenter noted that
generally, only a very small percentage of patients leave without being
seen by ED staff and these patients may have been overly impatient. At
many facilities, no medical record is created when a patient leaves
prior to registration, and commenters stated that ED staff must be
educated regarding what documentation is necessary to comply with this
measure.
Response: We will provide detailed specifications of the measure in
the HOPD Specifications Manual to facilitate hospital data collection.
We agree that hospitals need to educate ED staff to ensure that patient
arrival and departure times are recorded correctly.
After consideration of the public comments we received, we are
finalizing the ED-Patient Left Without Being Seen measure for the CY
2013 payment determination.
ED-Head CT Scan Results for Acute Ischemic Stroke or
Hemorrhagic Stroke Who Received Head CT Scan Interpretation Within 45
Minutes of Arrival
This measure assesses whether head CT scan results for acute
ischemic stroke or hemorrhagic stroke patients who received head CT
scans in the ED were interpreted within 45 minutes of arrival. This
chart-abstracted measure is currently under NQF review. Improved access
to diagnostics assists clinicians in decision making. Delayed
diagnostic imaging and laboratory reports are expected to slow down the
clinical decision making process and subsequently increase the length
of stay in the ED. In addition to helping reduce the length of stay in
the ED, decreasing radiology report turnaround times can improve care
throughout the facility. Timely diagnostic imaging can enhance decision
making capabilities for patient treatment plans because timely
diagnostic imaging is available.\22\ The Food and Drug Administration
(FDA) approved the use of tissue plasminogen activator (t-PA) for
treatment of acute ischemic strokes, which comprise 87 percent of
stokes, when given within three hours of stroke symptom
onset.^{23 24} Because of the therapeutic time window for
treatment possibilities, timely completion and results of the CT scan
are imperative for timely clinical decision making and favorable
outcomes. Section 1833(t)(17)(C)(i) of the Act requires the Secretary
to develop measures appropriate for the measurement of the quality of
care furnished by hospitals in outpatient settings, that these measures
reflect consensus among affected parties and, to the extent feasible
and practicable, that these measures include measures set forth by one
or more national consensus building entities. As discussed above, this
measure is appropriate for measuring the quality of care in the
hospital outpatient department setting. This measure also meets the
consensus requirement because this measure underwent development
through a consensus-based measure development process involving
stakeholder input. We anticipate that this measure will be endorsed by
the NQF.
---------------------------------------------------------------------------

\22\ Marquez L.O. Improving medical imaging report turnaround
times. Radiol Mange. 2005 Jan.-Feb;27(1):34-7.
\23\ National Stroke Association. STROKE the First Hours
Guidelines for Acute Treatment, 2000.
\24\ The ATLANTIS, ECASS, and NINDS rt-PA Study Group
Investigators. Association of Outcome with early stroke treatment:
pooled analysis of ATLANTIS, ECASS, and NINDS rt-PA stroke Trials.
Lancet 2004;363:768-774.
---------------------------------------------------------------------------

We proposed that the submission of the new chart-abstracted
measures for the CY 2013 payment determination would begin with first
quarter 2012 discharges, and data would be submitted quarterly, as with
all other chart-abstracted measures. We invited comments on our
proposal to add these new measures to the HOP QDRP measurement set and
on the submission process for the CY 2013 payment determination.
Comment: Some commenters supported the measure and agreed with CMS
that timely completion of CT scan results are imperative for the
treating neurologist to make timely clinical decisions. One commenter
noted that the measure has been modified by the measure developer to
include MRI in addition to CT.
Response: We thank the commenters for the supportive comments and
for the suggestion. We will consider whether MRI should be added to the
measure in

[[Page 72090]]

our process for ongoing maintenance of the measure.
Comment: Many commenters requested clarifications on: (1) Whether
the measure requires the actual CT scan report to be present in the
medical record within 45 minutes of arrival (or will verbal
communication between caregivers that is documented in the medical
record suffice); and (2) the definition of arrival time (is it the time
the patient was registered, the time of first clinical staff
discussion, or the time the physician first saw the patient). Some
commenters were concerned about the challenge for hospitals to
consistently collect the information necessary to determine whether
patients are arriving at the ED within two hours of the onset of
symptoms, as well as collect information on the timing of when the scan
was interpreted. One commenter expressed concerns that this measure may
inadvertently encourage patient referral to a CT scan even before a
full clinical evaluation occurs. The commenter noted that frequently,
the Neurology Stroke Team reviews and makes decisions upon CT scans
before the scan is officially read and documented by the radiologist.
Response: Current specifications require the earliest documented
time, which include verbal documentation of interpretation. We intend
to provide detailed specifications regarding the collection of arrival
time for the measure in the HOPD Specifications Manual.
Comment: One commenter suggested that a measure that assesses the
time from decision (order) to interpretation (preliminary result) would
be a better marker of quality of care in the ED. A few commenters
recommended harmonizing the measure with the set of NQF-endorsed stroke
care measures.
Response: We considered the option suggested by the commenter, but
ultimately made the decision to align the measure with the existing ED
measures that have been endorsed by the NQF so that all of the measures
for the ED utilize consistent definitions. We thank the commenters for
the recommendation.
After consideration of the public comments we received, we are
finalizing the ED-Head CT Scan Results for Acute Ischemic Stroke or
Hemorrhagic Stroke Who Received Head CT Scan Interpretation within 45
minutes of Arrival measure for the CY 2013 payment determination.
In summary, after consideration of the public comments we received,
we are finalizing for the CY 2013 payment determination: (1) The 15
quality measures that we are adopting in this final rule with comment
period for the CY 2012 payment determination; (2) one new structural
measure (Tracking Clinical Results Between Visits); (3) six new chart-
abstracted measures on the topics of HOPD care transitions and ED
efficiency; and (4) one new chart-abstracted measure that we originally
proposed to adopt for the CY 2012 payment determination (Troponin
Results for Emergency Department AMI Patients or Chest Pain Patients
(with probable cardiac chest pain) Received Within 60 Minutes of
Arrival), for a total of 23 measures for the CY 2013 payment
determination. As stated above, hospitals will be required to begin
submitting data on the new structural measure via a Web-based tool on
the QualityNet Web site in July 2012 for the period January 1, 2012
through June 2012. The submission of data for the new chart-abstracted
measures for the CY 2013 payment determination will be due in August
2012.
The complete list of 23 measures for the CY 2013 payment
determination is shown below.

HOP QDRP Measurement Set To Be Used for the CY 2013 Payment
Determination
------------------------------------------------------------------------

-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
Intervention
OP-4: Aspirin at Arrival
OP-5: Median Time to ECG
OP-6: Timing of Antibiotic Prophylaxis
OP-7: Prophylactic Antibiotic Selection for Surgical Patients
OP-8: MRI Lumbar Spine for Low Back Pain
OP-9: Mammography Follow-up Rates
OP-10: Abdomen CT--Use of Contrast Material
OP-11: Thorax CT--Use of Contrast Material
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
Low Risk Surgery*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT)*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache*
OP-16: Troponin Results for Emergency Department acute myocardial
infarction (AMI) patients or chest pain patients (with Probable Cardiac
Chest Pain) Received Within 60 minutes of Arrival**
OP-17: Tracking Clinical Results between Visits**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients**
OP-19: Transition Record with Specified Elements Received by Discharged
Patients**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
Professional**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture **
OP-22: ED-Patient Left Before Being Seen**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
Stroke who Received Head CT Scan Interpretation Within 45 minutes of
Arrival **
------------------------------------------------------------------------
* New measure for the CY 2012 payment determination.
** New measure for the CY 2013 payment determination.

[[Page 72091]]

5. HOP QDRP Quality Measures for the CY 2014 Payment Determination
a. Retention of CY 2013 HOP QDRP Measures for the CY 2014 Payment
Determination
In general, unless otherwise specified in the retirement section of
a rule, we retain measures from one payment determination to another.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46370), for the CY 2014
payment determination, we proposed to retain all of the measures
adopted for the CY 2013 payment determination. We invited comment on
this proposal.
We did not receive any comments. Accordingly, we are finalizing our
proposal to retain the 23 CY 2013 HOP QDRP measures for the CY 2014
payment determination.
b. New Chart-Abstracted Measures for the CY 2014 Payment Determination
In the CY 2011 OPPS/ASC proposed rule (75 FR 46370 through 46372),
we proposed to adopt six new chart-abstracted measures for the CY 2014
payment determination. Five of the six measures are Diabetes Care
measures for HOPDs, and one measure is an additional imaging efficiency
measure. The six measures we proposed for the CY 2014 payment
determination are: (1) Hemoglobin A1c Poor Control in Diabetic
Patients; (2) Low Density Lipoprotein (LDL-C) Control in Diabetic
Patients; (3) High Blood Pressure Control in Diabetic Patients; (4)
Dilated Eye Exam in Diabetic Patients; (5) Urine Screening for
Microalbumin or Medical Attention for Nephropathy in Diabetic Patients;
and (6) Exposure Time Reported for Procedures Using Fluoroscopy. We
proposed that submission of these measures for the CY 2014 payment
determination begin with the first quarter CY 2013 discharges. These
measures are discussed below.
Diabetes Care Measures
Comment: A few commenters appreciated CMS' proposal to add diabetes
care measures to the HOP QDRP because they will enhance the quality of
care provided to the growing diabetic patient population in the
hospital outpatient setting. One commenter suggested reporting the
diabetes care measures as a single composite measure of quality of
diabetes care so that hospitals can identify improvement opportunities.
Some commenters requested clarification on the diabetes care measure
specifications in terms of chart-abstracted data elements and current
physician CPT-II coding requirements. Commenters noted that the PQRI
program is already collecting data for similar measures. Commenters
provided recommendations to reduce the chart-abstraction burden
including harmonizing the measures for the physician and HOPD settings,
developing EHR-compatible metrics, and collecting data from diabetes
registries. Many commenters believed that the five diabetes care
measures do not assess the quality of care provided by HOPDs, because
the care furnished in that setting is fragmented and episodic, and
stated that the measures more appropriately assessed the care provided
by physician practices. Some commenters suggested that CMS should limit
the targeted patient population to ambulatory care clinics only so that
hospitals would not be unduly burdened with chart-abstraction.
Several commenters expressed concerns about the administrative and
financial burden associated with chart-abstracted quality measures
while the industry is transitioning into ICD-10 codes, adopting EHRs to
meet the meaningful use objectives under the EHR Incentive Program, and
preparing to comply with the quality provisions in the Affordable Care
Act. Commenters indicated that CMS should delay the adoption of the
chart-abstracted diabetes care measures.
Response: We appreciate the commenters' recognition of the value of
the diabetes care measures. The diabetes care measures apply to
hospital outpatient departments that provide primary care services, and
we are aware that many hospital outpatient departments provide ongoing
primary care for patients. Thus, we disagree with the comments
questioning the appropriateness of applying the diabetes measures to
hospital outpatient departments. However, we acknowledge the challenges
faced by hospitals amid implementation of various programs.
We are currently refining the chart abstracted numerator
definitions for these measures and expect to include them in an
upcoming HOPD Specification Manual release. For this reason, we are
deferring our finalization of these 5 diabetes care measures in this
final rule with comment period, but intend to propose these measures
again in the CY 2012 OPPS/ASC proposed rule for the CY 2014 payment
determination. We also intend to develop electronic specifications for
these measures so that they can be captured and reported by EHRs, which
we believe will reduce the burden associated with chart abstraction. We
thank the commenters for the suggestions and input on the measures and
we will take them into consideration as we further refine the
specifications for these 5 measures.
Diabetes Mellitus: Hemoglobin A1c Poor Control in Diabetic
Patients
This NQF-endorsed measure (NQF 0059) measures the
percentage of adult patients with diabetes aged 18-75 years with most
recent HgA1c level greater than 9 percent (poor control). Glycosylated
hemoglobin (HgA1c) assay measures average blood glucose over the
preceding two to three months, rather than just one point in time.
HgA1c values vary less than fasting glucose values and give clinicians
a better integrated view of the patient's average blood sugar over
time. High HgA1c is a more reliable indicator of chronic high blood
sugar. Lowered HgA1c levels are associated with reduced microvascular
and neuropathic complications of diabetes.
In general, diabetes mellitus is a chronic disease that impacts the
lives of a large portion of the population and consumes a significant
amount of U.S. healthcare dollars. With the prevalence of diabetes in
the Medicare-eligible population expected to double, costs are expected
to increase almost fourfold to $171 million.\25\ Uncontrolled diabetes
often leads to biochemical imbalances that can lead to acute life-
threatening events, such as diabetic ketoacidosis and hyperosmolar, or
nonketotic, coma. In patients with insulin-dependent diabetes, the risk
of development or progression of retinopathy, nephropathy, and
neuropathy can be reduced by 50 to 75 percent by intensive outpatient
treatment of hyperglycemia compared to conventional treatment. Early
treatment may help slow or halt the progression of diabetic
complications, and following the guidelines for screening may assist
those patients with no outward sign of diabetic complications to be
identified earlier through regular screening tests. HgA1c should be
performed during an initial assessment and during follow-up
assessments, which should occur at no longer than three-month
intervals.\26\ Section 1833(t)(17)(C)(i) of the Act requires the
Secretary to develop measures appropriate for the measurement of the
quality of care furnished by hospitals in outpatient settings, that
these measures reflect

[[Page 72092]]

consensus among affected parties and, to the extent feasible and
practicable, that these measures include measures set forth by one or
more national consensus building entities. As discussed above, this
measure is appropriate for measuring quality of care in the hospital
outpatient department setting. This measure also meets the consensus
requirement because, as noted above, it has been endorsed by the NQF.
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\25\ Huang, E.S., Basu, A., O'Grady, M., Capretta, J.C.:
Projecting the future diabetes population size and related costs for
the U.S. Diabetes Care. 2009;32(12):2225-29.
\26\ The American Association of Clinical Endocrinologists
Medical Guidelines for the Management of Diabetes Mellitus: The AACE
System of Intensive Diabetes Self-Management--2002 Update.
---------------------------------------------------------------------------

Comment: One commenter agreed that this is a good measure for
patients with diabetes but recommended the threshold for poor control
of diabetes be lowered to mean a most recent HgA1c level of greater
than 7 percent.
Response: We will take the recommendation into consideration in our
measure refinement process.
As we stated above, we are not finalizing the Diabetes Mellitus:
Hemoglobin A1c Poor Control in Diabetic Patients measure in this final
rule with comment period, but we intend to propose this measure again
in the CY 2012 OPPS/ASC proposed rule for the CY 2014 payment
determination.
Diabetes Mellitus: Low Density Lipoprotein (LDL-C) Control in
Diabetic Patients
This NQF-endorsed measure (NQF 0064) measures the
percentage of adult patients with diabetes aged 18-75 years whose most
recent LDL-C test result during the measurement year was < 100 mg/dl.
LDL-C measures the development of atherosclerotic plague which
increases cardiac events risks for diabetic patients whose heart
disease death rates are about two to four times higher than non-
diabetics.\27\ Improved dyslipidemia management helps to mitigate the
risk for cardiovascular disease. Lipid-lowering therapy for diabetics
has been a consistent recommendation in several guidelines, prompted by
randomized trials supporting statin therapy to lower the risk of
cardiovascular involvement for this population. Despite the evidence
basis and guideline support, only a minority of patients with diabetes
are prescribed statin treatment or achieve target LDL-C goals.\28\
Early treatment may help slow or halt the progression of cardiovascular
disease and impact the quality of the life of the diabetic patient,
affecting the patient's life expectancy and decreasing costs involved
in treating diabetic complications. Section 1833(t)(17)(C)(i) of the
Act requires the Secretary to develop measures appropriate for the
measurement of the quality of care furnished by hospitals in outpatient
settings, that these measures reflect consensus among affected parties
and, to the extent feasible and practicable, that these measures
include measures set forth by one or more national consensus building
entities. As discussed above, this measure is appropriate for measuring
quality of care in the hospital outpatient department setting. This
measure also meets the consensus requirement because, as noted above,
it has been endorsed by the NQF. We also note that this measure was
listed as under consideration for CY 2012 and subsequent years in the
CY 2010 OPPS/ASC final rule with comment period (74 FR 60637 through
60641).
---------------------------------------------------------------------------

\27\ American Diabetes Association. Standards of medical care in
diabetes. Diabetes Care. 2007 Jan;30 (Suppl 1):S8-15.
\28\ Das, S.R., Vaeth, P.A., Stanek, H.G., de Lemos, J.A.,
Dobbins, R.L., McGuire, D.K.: Increased cardiovascular risk
associated with diabetes in Dallas County. Am Heart J 2006;151:1087-
93.
---------------------------------------------------------------------------

Comment: One commenter supported this measure.
Response: We thank the commenter for the support.
After consideration of the public comments we received, we are not
finalizing the Diabetes Mellitus: Low Density Lipoprotein (LDL-C)
Control in Diabetic Patients measure in this final rule with comment
period, but intend to propose this measure again in the CY 2012 OPPS/
ASC proposed rule for the CY 2014 payment determination.
Diabetes Mellitus: High Blood Pressure Control in Diabetic
Patients
This NQF-endorsed measure (NQF 0061) measures the
percentage of patients visits with blood pressure measurement recorded
among all patients visits aged > 18 years with diagnosed hypertension.
Blood pressure control reduces the risk of cardiovascular disease and
microvascular complications in patients with diabetes. Most
importantly, early treatment of high blood pressure may help slow or
halt the progression of kidney involvement and damage.\29\ Well-
controlled blood pressure impacts the quality of the life of the
diabetic patient, affects the patient's life expectancy, and decreases
the costs involved in treating diabetic complications. Section
1833(t)(17)(C)(i) of the Act requires the Secretary to develop measures
appropriate for the measurement of the quality of care furnished by
hospitals in outpatient settings, that these measures reflect consensus
among affected parties and, to the extent feasible and practicable,
that these measures include measures set forth by one or more national
consensus building entities. As discussed above, this measure is
appropriate for measuring quality of care in the hospital outpatient
department setting. This measure also meets the consensus requirement
because, as noted above, it has been endorsed by the NQF.
---------------------------------------------------------------------------

\29\ Centers for Disease Control and Prevention. National
diabetes fact sheet: general information and national estimates on
diabetes in the United States, 2007. Atlanta, GA: U.S. Department of
Health and Human Services, Centers for Disease Control and
Prevention, 2008.
---------------------------------------------------------------------------

Comment: A few commenters supported the measure and noted that the
target blood pressure has become controversial based on the recent
ACCORD trials. One commenter suggested lowering the threshold to 130/80
mm/Hg as recommended by the American Diabetes Association and the
American Association of Clinical Endocrinologists. Another commenter
recommended a target blood pressure of 140/80 mm/Hg.
Response: We thank the commenters for the support and input and
will take it into consideration in the measure refinement process.
After consideration of the public comments we received, we are not
finalizing the Diabetes Mellitus: High Blood Pressure Control in
Diabetic Patients measure in this final rule with comment period, but
intend to propose this measure again in the CY 2012 OPPS/ASC proposed
rule for the CY 2014 payment determination.
Diabetes Mellitus: Dilated Eye Exam in Diabetic Patients
This NQF-endorsed measure (NQF 0055) measures the
percentage of adult patients with diabetes age 18 to 75 years who
received a dilated eye exam or seven standard field stereoscopic photos
with interpretation by an ophthalmologist or optometrist, or imaging to
verify diagnosis from stereoscopic photos during the reporting year, or
during the prior year, if the patient is at low risk for retinopathy. A
patient is considered low risk if the patient has no evidence of
retinopathy in the prior year. A dilated eye exam helps to detect the
risk for vision-threatening diabetic retinopathy which is prevalent
among people with diabetes. Data from the 2007 National Diabetes Fact
Sheet (using the most recent year of available data) shows that
diabetic retinopathy causes up to 24,000 new cases of blindness each
year.\30\ However, dilated eye exams for diabetic

[[Page 72093]]

patients can prevent retinopathy through early detection.\31\
---------------------------------------------------------------------------

\30\ Centers for Disease Control and Prevention. National
diabetes fact sheet: general information and national estimates on
diabetes in the United States, 2007. Atlanta, GA: U.S. Department of
Health and Human Services, Centers for Disease Control and
Prevention, 2008.
\31\ American Diabetes Association. Standards of medical care in
diabetes. Diabetes Care. 2007 Jan;30 (Suppl 1):S8-15.
---------------------------------------------------------------------------

\32\ Centers for Disease Control and Prevention. National
diabetes fact sheet: general information and national estimates on
diabetes in the United States, 2007. Atlanta, GA: U.S. Department of
Health and Human Services, Centers for Disease Control and
Prevention, 2008.
\33\ MedPAC. Outpatient dialysis service: assessing payment
adequacy and updating payments. Report to the Congress: Medicare
payment policy. 2009 Mar;131-56.
---------------------------------------------------------------------------

[[Page 72094]]

that these measures include measures set forth by one or more national
consensus building entities. As discussed above, this measure is
appropriate for measuring quality of care in the hospital outpatient
department setting. This measure also meets the consensus requirement
because it is NQF-endorsed (NQF 0510). Additionally, this
measure was conditionally approved by the HQA for the hospital
outpatient setting in March of 2010.
---------------------------------------------------------------------------

\34\ National Cancer Institute (NCI), The Society for Pediatric
Radiology (SPR). Brochure: Radiation & pediatric computed
tomography. A guide for health care providers. 2002. Available at;
http://www/cancer.gov/cancertopics/cause/radiation-risks-pediatric-CT.pdf.
\35\ Amis E Jr, Butler P, Applegate K, Birnbaum S, Brateman L,
Hevezi J, Mettler F, Morin R, Pentecost M, Smith G. American College
of radiology white paper on radiation dose in medicine. Journal of
American College of Radiology, 2007:4:272-284.
\36\ National Cancer Institute. Interventional fluoroscopy:
Reducing radiation risks for patients and staff. 2005. Available at:
http://www.cancer.gov/cancertopics/interventionalfluoroscopy.
\37\ National Cancer Institute. Interventional fluoroscopy:
reducing radiation risks for patients and staff. 2005 available at:
http://www.cancer.gov/cancertopics/interventionalfluoroscopy.
---------------------------------------------------------------------------

Comment: Many commenters supported this measure. Commenters
believed it is an important measure for monitoring radiation safety,
and stated that the measure is in line with NCI recommendations.
Response: We appreciate the commenters' support.
Comment: Several commenters did not support this measure for
several reasons. One commenter stated that fluoroscopy time is a
relatively poor proxy for the measurement of radiation as it does not
take into account the dose received. One commenter noted that the
exposure to fluoroscopy time is impossible to measure since the service
is bundled into the primary procedure (the time-based fluoroscopy CPT
codes 76000/76001 are infrequently used), and noted that radiologists
and physicians seldom document the time and codes. Commenters were
concerned about the administrative and financial burdens associated
with the measure. Two commenters suggested field-testing the measure
and developing electronic specifications for data collection. One
commenter supported the inclusion of this measure in the PQRI program
only.
Response: The chart-abstracted numerator definition for this
measure is currently being refined. For this reason, we are not
finalizing this measure in this final rule with comment period. We
appreciate the input from the commenters and will take the input into
consideration in the measure refinement process.
After consideration of the public comments we received, we are not
finalizing the Exposure Time Reported for Procedures Using Fluoroscopy
measure at this time.
In summary, for the reasons discussed above, we have decided to not
finalize at this time the 6 chart-abstracted measures we proposed to
adopt for the CY 2014 payment determination. However, we still intend
to propose them for inclusion in the HOP QDRP CY 2014 measure set and
intend to do so in the CY 2012 OPPS/ASC proposed rule.
After consideration of the public comments we received, we are
finalizing the retention of the 23 measures adopted for the CY 2013
payment determination, but are not at this time adopting any of the new
measures proposed for the CY 2014 payment determination. As of now, a
total of 23 measures will be used for the CY 2014 payment
determination. These measures are shown below.

HOP QDRP Measurement Set To Be Used for the CY 2014 Payment
Determination
------------------------------------------------------------------------

-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
Intervention
OP-4: Aspirin at Arrival
OP-5: Median Time to ECG
OP-6: Timing of Antibiotic Prophylaxis
OP-7: Prophylactic Antibiotic Selection for Surgical Patients
OP-8: MRI Lumbar Spine for Low Back Pain
OP-9: Mammography Follow-up Rates
OP-10: Abdomen CT--Use of Contrast Material
OP-11: Thorax CT--Use of Contrast Material
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
Low Risk Surgery*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT)*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache*
OP-16: Troponin Results for Emergency Department acute myocardial
infarction (AMI) patients or chest pain patients (with Probable Cardiac
Chest Pain) Received Within 60 minutes of Arrival**
OP-17: Tracking Clinical Results between Visits**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients**
OP-19: Transition Record with Specified Elements Received by Discharged
Patients**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
Professional**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture**
OP-22: ED-Patient Left Before Being Seen**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
Stroke who Received Head CT Scan Interpretation Within 45 minutes of
Arrival**
------------------------------------------------------------------------
* New measure for the CY 2012 payment determination.
** New measure for the CY 2013 payment determination.

6. Possible Quality Measures Under Consideration for Future Inclusion
in the HOP QDRP
In previous years' rulemakings, we have provided lists of quality
measures that are under consideration for future adoption into the HOP
QDRP measurement set. In the CY 2011 OPPS/ASC proposed rule (75 FR
46373), we set out the following list of measures under consideration
for future rulemaking cycles.

Measures and Measurement Topics Under Consideration for Future Payment
Determinations Beginning With CY 2013
------------------------------------------------------------------------

-------------------------------------------------------------------------
Measures for future development:
Adjuvant Chemotherapy is Considered or Administered within 4 Months
of Surgery to Patients Under Age 80 with AJCC III Colon Cancer.
Adjuvant Hormonal Therapy for Patients with Breast Cancer

[[Page 72095]]

Needle Biopsy to Establish Diagnosis of Cancer Precedes Surgical
Excision/Resection.
Pneumococcal Vaccination Status
Influenza Vaccination Status
Cardiac Rehabilitation Referral
Medication Reconciliation
Appropriate surgical site hair removal
Heart Failure: Angiotensin-Converting Enzyme (ACE) Inhibitor or
Angiotensin Receptor Blocker (ARB) Therapy for Left Ventricular
Systolic Dysfunction (LVSD)
Heart Failure: Left Ventricular Ejection Fraction Assessment
Heart Failure: Combination Medical Therapy for Left Ventricular
Systolic Dysfunction
Heart Failure: Beta-Blocker Therapy for Left Ventricular Systolic
Dysfunction
Heart Failure: Counseling regarding Implantable Cardioverter-
Defibrillator (ICD) Implantation for Patients with Left Ventricular
Systolic Dysfunction on Combination Medical Therapy
Heart Failure: Patients with Left Ventricular Systolic Dysfunction
on Combination Medical Therapy
Heart Failure: Symptom Management
Heart Failure: Symptom and Activity Assessment
Heart Failure: Patient Education
Heart Failure: End of Life Care Plan
Heart Failure: Overuse of Echocardiography
Heart Failure: Post-Discharge Appointment for Heart Failure Patients
Emergency Department Transfer Communication: Administrative
Communications
Emergency Department Transfer Communication: Medication Information
Emergency Department Transfer Communication: Nursing Information
Emergency Department Transfer Communication: Patient Information
Emergency Department Transfer Communication: Physician Information
Emergency Department Transfer Communication: Procedures and Tests
Emergency Department Transfer Communication: Vital Signs
Measurement Topics for future development:
Chemotherapy
Unplanned Reintubation
Unplanned Inpatient Transfer
Post-discharge follow up
Post-discharge ED visit within 72 hours
Safe Surgery Checklist
Immunization Refusal rate
Breast cancer detection rate
------------------------------------------------------------------------

We invited public comment on these quality measures and topics so
that we may consider proposing to adopt them beginning with the CY 2013
payment determination. We also sought suggestions and rationales to
support the adoption of measures and topics for the HOP QDRP which do
not appear in the table above.
We received general comments on the measure topics under
consideration or targeted for future development.
Comment: One commenter urged CMS to not adopt measures for the HOP
QDRP that are duplicative of measures adopted for the Hospital
Inpatient Quality Reporting Program. One commenter opposed the adoption
of any of these future measures because they will impose an additional
burden on HOPDs that will increase patient wait times and decrease
their satisfaction.
Response: As we have previously stated, our goal is to align the
HOP QDRP and the Hospital Inpatient Quality Reporting Program measures
to reduce the burden for hospitals. Nonetheless, there are instances
when the inclusion of the same measures is appropriate for both
settings because the measures assess important aspects of care that are
furnished in both settings, and because adopting them for both settings
allows us to make comparisons across care settings. Although we
understand the commenter's concerns regarding the increased burden that
may accompany the adoption of additional quality measures for the HOP
QDRP, we believe that expanding the scope of the HOP QDRP is an
important tool that will heighten hospitals' awareness of the quality
of care they provide and highlight opportunities for quality
improvement.
Comment: One commenter encouraged CMS to require mammogram
providers to track individual rates or use the ACR national mammography
database registry.
Response: We thank the commenter for the input and will take it
into consideration as we engage in future measure development.
Comment: One commenter requested that CMS avoid using vague
language and instead provide more details on proposed measures. One
commenter requested that CMS focus on issues that are identified as
national concerns and are supported by evidence-based practice
guidelines. Another commenter recommended that CMS adopt more claim-
based measures and less chart-abstracted measures. The commenter also
suggested that CMS minimize the number of measures it adopts on certain
topics, such as documentation-based universal protocol measures like
the ``Safety Surgery Checklist'' measure, which the commenter believed
has little correlation to patient outcomes, and the heart failure
measures listed in the table of measures under consideration for the
future, which the commenter believed have no impact on reducing
readmission rates.
Response: We thank the commenters for the suggestions and will take
them into consideration as we consider what measures to adopt for the
HOP QDRP.
Comment: We also received recommendations for new measure topics
for the HOP QDRP:
Healthcare Associated Infections
Interactions between hospital EDs and ambulances
Day-to-day treatment of cancer patients (adopt the Quality
Oncology Practice Initiative measure)
EHR-based measure to track to send reminders to patients
with chronic

[[Page 72096]]

conditions about using preventive services
Vital signs frequency
Medication errors
Diagnostic Mammography Positive Predictive Value 2 (PPV2--
Biopsy recommended)
Screening Mammography Positive Predictive Value 2 (PPV2--
Biopsy Recommended)
Cancer Detection Rate
Abnormal Interpretation Rate (Recall Rate)
Patient Experience survey (reporting the data as a Heart
Failure Quality of Care composite)
ED AMI Mortality measure and ED Non-Mortality Outcome
measures
Appropriate use of Vancomycin to reduce MRSA
Appropriate nursing staffing ratios
Patient seen in the ED with a STEMI who did not receive a
fibrinolytic or PCI or transfer for further coronary care
Care transition
PET Myocardial Perfusion Imaging
Response: We thank the commenters for their input regarding future
quality measures for the HOP QDRP.
We also received comments on individual measure topics under
consideration or targeted for future development.
Needle Biopsy To Establish Diagnosis of Cancer Precedes
Surgical Excision/Resection
Comment: One commenter supported this measure because it is a
standard practice.
Response: We thank the commenter for the support and will take the
comment into consideration as we consider additional measures to adopt
for the HOP QDRP.
Pneumococcal Vaccination Status
Comment: Two commenters supported this measure and one commenter
did not support this measure.
Response: We thank the commenters for their input and will take the
comments into consideration as we consider additional measures to adopt
for the HOP QDRP.
Influenza Vaccination Status
Comment: One commenter supported the measure and one commenter did
not support this measure.
Response: We thank the commenters for their input and will take the
comments into consideration as we consider additional measures to adopt
for the HOP QDRP.
Cardiac Rehabilitation Referral
Comment: One commenter supported this measure. One commenter
recommended that CMS adopt the NQF-endorsed Cardiac Rehabilitation
Referral performance measure as published by the ACC and the American
Heart Association as a quality indicator in the acute myocardial
infarction measure set.
Response: We thank the commenters for their input and will take the
comments into consideration as we consider additional measures to adopt
for the HOP QDRP.
Medication Reconciliation
Comment: One commenter supported this measure.
Response: We thank the commenter for supporting the measure and
will take the comment into consideration as we consider additional
measures to adopt for the HOP QDRP.
Appropriate Surgical Site Hair Removal
Comment: Two commenters did not support this measure because they
believed that it is not meaningful for consumers and purchasers.
Response: We thank the commenters for their input and we will take
the comments into consideration as we consider additional measures to
adopt for the HOP QDRP.
Heart Failure Measures
Comment: Two commenters supported the Heart Failure measures. One
commenter supported the use of a registry while another commenter was
concerned about the potential cost burden due to the potential
requirement for registry participation. Commenters also recommended
harmonizing 7 of the 14 heart failure measures that are duplicative of
the Hospital Inpatient Quality Reporting Program measures.
Response: We thank the commenters for their input and will take the
comments into consideration as we consider additional measures to adopt
for the HOP QDRP.
Heart Failure: Patient Education
Comment: One commenter supported this measure.
Response: We thank the commenter for the support and will take the
comments into consideration as we consider additional measures to adopt
for the HOP QDRP.
Heart Failure: End of Life Care Plan
Comment: One commenter supported this measure.
Response: We thank the commenter for the support and will take the
comments into consideration as we consider additional measures to adopt
for the HOP QDRP.
Heart Failure: Overuse of Echocardiography
Comment: One commenter supported this measure.
Response: We thank the commenter for the support and will take it
into consideration as we consider additional measures to adopt for the
HOP QDRP.
Heart Failure: Post-Discharge Appointment for Heart Failure
Patients
Comment: One commenter supported this measure.
Response: We thank the commenter for the support and will take it
into consideration as we consider additional measures to adopt for the
HOP QDRP.
Emergency Department Transfer Communication
Comment: Many commenters supported this NQF-endorsed measure.
Commenters believed this measure is relevant for measuring the
performance of CAHs and rural hospitals which handle a large volume of
patient transfers. Commenters stated that the measure will facilitate
the standardized transfer of information provided by EDs, rural, and
critical access hospitals. Commenters also encouraged CMS to consider
adopting more quality measures for rural facilities. Some commenters
raised concerns about medical staff documentation and patient
communication issues associated with this measure. One commenter
cautioned that CMS needs to ensure that the measure is in conformity
with current EMTALA regulations and guidelines.
Response: We thank the commenters for their input and will take the
comments into consideration as we consider additional measures to adopt
for the HOP QDRP.
Unplanned Reintubation
Comment: One commenter did not believe the measure is linked to
quality of care and stated that there is no evidence-based standard of
practice.
Response: We thank the commenter for the input and will take it
into consideration as we consider additional measures to adopt for the
HOP QDRP.
Post-Discharge Emergency Visits Within 72 Hours
Comment: One commenter suggested that CMS consider whether an ED
patient previously received care at another hospital ED when
attributing responsibility for performance on a measure like this to an
individual hospital.
Response: We thank the commenter for the input and will take it
into

[[Page 72097]]

consideration as we consider additional measures to adopt for the HOP
QDRP.
Immunization Refusal Rate Measure
Comment: One commenter did not support the measure based on the
notion that a patient's right to refuse immunization should not be
construed as a reflection of hospital quality. The commenter requested
that CMS provide evidence that supports the correlation between the
immunization refusal rate and the quality of care furnished by an HOP
QDRP.
Response: We thank the commenter for the input and will take it
into consideration as we consider additional measures to adopt for the
HOP QDRP.
Breast Cancer Detection Rate
Comment: One commenter was pleased with this measure, but was
concerned about how the measure would be specified, collected and
reported. The commenter recommended that at a minimum, the Breast
Cancer Detection Rate measure should be calculated in concert with the
Mammography Follow-Up Rate measure.
Response: This measure is currently under development, and this
input will be taken under consideration.
In addition, we expressed concern about the lack of progress in
reducing the rates of healthcare associated infections (HAIs) that was
recently reported in the 2009 National Healthcare Quality Report
(http://www.ahrq.gov/qual/nhqr09/nhqr09.pdf). For example, the report
found that rates of postoperative sepsis increased by 8 percent. We
view healthcare associated infections as a significant priority for
quality measurement in order to ensure that health care does not result
in avoidable harm and to inform the public about hospitals' performance
with respect to these infections. We invited public comment on the
option to include among our prioritization criteria quality measures
that assess performance on healthcare associated infections. Also,
while some HOP QDRP measures cover aspects of healthcare associated
infections, we invited suggestions on additional measures that could be
added to those that hospitals would report and that we would make
available to the public in order to promote improvement in healthcare
associated infection rates.
Comment: A few commenters were very pleased with CMS' concerns
regarding the issue of HAIs and believed they should be ranked high
priority. Commenters encouraged CMS to continue to explore whether it
would be feasible to adopt more HAIs in the HOP QDRP and hospital-
value-based purchasing program (HVBP), specifically the ``never
events.'' A few commenters expressed support for evidence-based HAI
measures.
Response: We appreciate the commenters' strong support and
encouragement. We will look for opportunities to include such measures
in our quality reporting and pay for performance programs in the
future.
Comment: Many commenters made suggestions with respect to the HAI
selection criteria CMS should use in the HOP QDRP. Some commenters
recommended using the metrics/targets that will be specified in the
National Strategy for Quality Improvement that the Secretary
establishes under the Affordable Care Act as guidance to develop new
HAI measures. Some commenters favored the HHS HAI Action Plan. One
commenter believed the HAI quality measures that are currently reported
to the CDC's National Healthcare Safety Network (NHSN) will provide
more robust data (compared to administrative data) for HAI tracking and
assessment. The commenter stated that the adoption of CDC-NHSN measures
will increase harmonization of State and Federal HAI reporting
requirements while minimizing the additional reporting effort required
of hospitals. One commenter suggested developing HAIs based on sentinel
events reported to the Joint Commission, and using the Joint
Commission--Hospital Accreditation Program: Infection Preventions
Standards as a guide. One commenter recommended the adoption of the
guidelines developed by the Association for Professionals in Infection
Control & Epidemiology.
Response: We thank the commenters for making suggestions regarding
t HAI measure selection criteria and guidelines. The HHS HAI Action
Plan to reduce Healthcare Associated Infections is a Department-wide
action plan to reduce healthcare associated infections. It was released
in 2009 and is currently undergoing revision. It contains a set of
seven metrics selected by HHS that are meant to be used for nationwide
quality improvement, and also contains national improvement goals for
these metrics. We contribute to the HHS Action Plan to reduce
Healthcare Associated Infections, and we also are collaborating closely
with the CDC to incorporate the NHSN measures for infection rate
reporting into our hospital quality reporting and pay for performance
programs. Measures of process of care for sepsis will be considered in
the future.
Comment: Many commenters indicated their preferences with respect
to the types of HAI measures that should be included in the HOP QDRP.
One commenter recommended Surgical Care Improvement Project (SCIP)
Infection, and the Surgical Site Infection measures (NQF 0299)
that NHSN reports. Specifically, the commenter recommended the
inclusion of this measure in conjunction with the ``Ability for
Providers with HIT to Receive Laboratory Data Electronically Directly
into Their Qualified/Certified EHR System as Discrete Searchable Data''
measure (NQF 0489). The commenter strongly believed the two
measures would make a difference between life and death for patients
with sepsis, deep wound or surgical site infections. With rapid
diagnosis and timely receipt of lab results, healthcare providers are
able to treat patients while they are being seen rather than
necessitating a return visit or follow-up phone call. For HAI measure
topics, one commenter recommended MRSA colonization prior to invasive
surgery or at admission to an acute care facility, hand-hygiene
adherence, and use of barrier precautions. One commenter opposed the
inclusion of the catheter-associated urinary tract infections (UTIs)
HAI because the commenter believed that UTIs are not fully preventable
and stated that they are hard to diagnose at the time of admission
without urine screening and cultures. Furthermore, the commenter was
concerned with the high cost for screening all patients undergoing
surgery in HOPDs and added that the practice is inconsistent with the
``Diagnosis, Prevention and Treatment of Catheter-Associated Urinary
Tract Infection in Adults: 2009 International Clinical Practice
Guidelines from the Infectious Diseases Society of America'', which
recommended that catheter-associated asymptomatic bacteriuria should
not be screened.
Response: We thank the commenters for their suggestions for HAI
measure topics. We disagree with the statement that UTIs are not
preventable. In fact, the majority of CAUTIs are preventable by
avoiding unnecessary catheterization, and by limiting the duration of
catheterization. In our view, it is unnecessary to screen all patients
on arrival because the vast majority of patients do not have a urinary
tract infection at arrival. Catheters are used too commonly, often
without appropriate justification. Very often, many catheters are left
in far too long and most hospitals do not have good systems to identify
patients that need to

[[Page 72098]]

have the catheter removed. We are working with CDC to develop metrics
of infection control and outcomes.
Comment: One commenter was very concerned about the outdated
infection control data used by CMS to make policy decisions.
Response: We agree that there is a need for more current data on
the actual rates of healthcare-associated infections and we are working
closely with the CDC to obtain this information and performance
metrics.
We thank the commenters for their input regarding the adoption of
HAI quality measures in the HOP QDRP measure set.

C. Payment Reduction for Hospitals That Fail To Meet the HOP QDRP
Requirements for the CY 2011 Payment Update

1. Background
Section 1833(t)(17)(A) of the Act, which applies to subsection (d)
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 section 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. Section 1833(t)(17)(A)(ii)
of the Act specifies that any reduction would apply only to the payment
year involved and would not be taken into account in computing the
applicable OPD fee schedule increase factor for a subsequent payment
year.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769
through 68772), we discussed how the payment reduction for failure to
meet the administrative, data collection, and data submission
requirements of the HOP QDRP affected the CY 2009 payment update
applicable to OPPS payments for HOPD services furnished by the
hospitals defined under section 1886(d)(1)(B) of the Act to which the
program applies. 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
HOP QDRP requirements. All other hospitals paid under the OPPS receive
the full OPPS payment update without the reduction.
The national unadjusted payment rates for many services paid under
the OPPS equal the product of the OPPS conversion factor and the scaled
relative weight for the APC to which the service is assigned. The OPPS
conversion factor, which is updated annually by the OPD fee schedule
increase factor, is used to calculate the OPPS payment rate for
services with the following status indicators (listed in Addendum B to
this final rule with comment period): ``P,'' ``Q1,'' ``Q2,'' ``Q3,''
``R,'' ``S,'' ``T,'' ``V,'' ``U,'' or ``X.'' In the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68770), we adopted a policy that
payment for all services assigned these status indicators would be
subject to the reduction of the national unadjusted payment rates for
applicable hospitals, with the exception of services assigned to New
Technology APCs with assigned status indicator ``S'' or ``T,'' and
brachytherapy sources with assigned status indicator ``U,'' which were
paid at charges adjusted to cost in CY 2009. We excluded services
assigned to New Technology APCs from the list of services subject to
the reduced national unadjusted payment rates because the OPD fee
schedule increase factor is not used to update the payment rates for
these APCs.
In addition, section 1833(t)(16)(C) of the Act, as amended by
section 142 of the Medicare Improvements for Patients and Providers Act
of 2008 (MIPPA) (Pub. L. 110-275), specifically required that
brachytherapy sources be paid during CY 2009 on the basis of charges
adjusted to cost, rather than under the standard OPPS methodology.
Therefore, the reduced conversion factor also was not applicable to CY
2009 payment for brachytherapy sources because payment would not be
based on the OPPS conversion factor and, consequently, the payment
rates for these services were not updated by the OPD fee schedule
increase factor. However, in accordance with section 1833(t)(16)(C) of
the Act, as amended by section 142 of the MIPPA, payment for
brachytherapy sources at charges adjusted to cost expired on January 1,
2010. Therefore, in the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60641), we finalized our CY 2010 proposal, without modification,
to apply the reduction to payment for brachytherapy sources to
hospitals that fail to meet the quality data reporting requirements of
the HOP QDRP for the CY 2010 OPD fee schedule increase factor.
The OPD fee schedule increase factor, or market basket update, is
an input into the OPPS conversion factor, which is used to calculate
OPPS payment rates. To implement the requirement to reduce the market
basket update for hospitals that fail to meet reporting requirements,
we calculate two conversion factors: A full market basket conversion
factor (that is, the full conversion factor), and a reduced market
basket conversion factor (that is, the reduced conversion factor). We
then calculate a reduction ratio by dividing the reduced conversion
factor by the full conversion factor. We refer to this reduction ratio
as the ``reporting ratio'' to indicate that it applies to payment for
hospitals that fail to meet their reporting requirements. Applying this
reporting ratio to the OPPS payment amounts results in reduced national
unadjusted payment rates that are mathematically equivalent to the
reduced national unadjusted payment rates that would result if we
multiplied the scaled OPPS relative weights by the reduced conversion
factor. To determine the reduced national unadjusted payment rates that
applied to hospitals that failed to meet their quality reporting
requirements for the CY 2010 OPPS, we multiply the final full national
unadjusted payment rate in Addendum B to the CY 2010 OPPS/ASC final
rule with comment period by the CY 2010 OPPS final reporting ratio of
0.980 (74 FR 60642).
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771
through 68772), we established a policy that the Medicare beneficiary's
minimum unadjusted copayment and national unadjusted copayment for a
service to which a reduced national unadjusted payment rate applies
would each equal the product of the reporting ratio and the national
unadjusted copayment or the minimum unadjusted copayment, as
applicable, for the service. Under this policy, we apply the reporting
ratio to both the minimum unadjusted copayment and national unadjusted
copayment for those hospitals that receive the payment reduction for
failure to meet the HOP QDRP reporting requirements. This application
of the reporting ratio to the national unadjusted and minimum
unadjusted copayments is calculated according to Sec. 419.41 of our
regulations, prior to any adjustment for hospitals' failure to meet the
quality reporting standards according to Sec. 419.43(h). Beneficiaries
and secondary payers thereby share in the reduction of payments to
these hospitals.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68772), we established the policy that all other applicable adjustments
to the OPPS national unadjusted payment rates apply in those cases when
the OPD fee schedule increase factor is reduced for hospitals that fail
to meet the requirements of the HOP QDRP. For example, the following
standard adjustments apply to the reduced national unadjusted payment
rates: The

[[Page 72099]]

wage index adjustment; the multiple procedure adjustment; the
interrupted procedure adjustment; the rural sole community hospital
adjustment; and the adjustment for devices furnished with full or
partial credit or without cost. We believe that these adjustments
continue to be equally applicable to payments for hospitals that do not
meet the HOP QDRP requirements. Similarly, outlier payments will
continue to be made when the criteria are met. For hospitals that fail
to meet the quality data reporting requirements, the hospitals' costs
are compared to the reduced payments for purposes of outlier
eligibility and payment calculation. This policy conforms to current
practice under the IPPS. In the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60642), we continued this policy. For a complete
discussion of the OPPS outlier calculation and eligibility criteria, we
refer readers to section II.G. of this CY 2011 OPPS/ASC final rule with
comment period.
2. Reporting Ratio Application and Associated Adjustment Policy for CY
2011
In the CY 2011 OPPS/ASC proposed rule (75 FR 46376), we proposed to
continue our established policy of applying the reduction of the OPD
fee schedule increase factor through the use of a reporting ratio for
those hospitals that fail to meet the HOP QDRP requirements for the
full CY 2011 annual payment update factor. For the CY 2011 OPPS, the
proposed reporting ratio was 0.980, calculated by dividing the reduced
conversion factor of $66.930 by the full conversion factor of $68.267.
The final CY 2011 OPPS reporting ratio is 0.980, calculated by dividing
the reduced conversion factor of $67.530 by the full conversion factor
of $68.876. We proposed to continue to apply the reporting ratio to all
services calculated using the OPPS conversion factor. For the CY 2011
OPPS, we proposed to apply the reporting ratio, when applicable, to all
HCPCS codes to which we have assigned status indicators ``P,'' ``Q1,''
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``V,'' ``U,'' and ``X'' (other
than new technology APCs to which we have assigned status indicators
``S'' and ``T''). We proposed to continue to exclude services paid
under New Technology APCs. We proposed to continue to apply the
reporting ratio to the national unadjusted payment rates and the
minimum unadjusted and national unadjusted copayment rates of all
applicable services for those hospitals that fail to meet the HOP QDRP
reporting requirements. We also proposed to continue to apply all other
applicable standard adjustments to the OPPS national unadjusted payment
rates for hospitals that fail to meet the requirements of the HOP QDRP.
Similarly, we proposed to continue to calculate OPPS outlier
eligibility and outlier payment based on the reduced payment rates for
those hospitals that fail to meet the reporting requirements.
We did not receive any public comments on our CY 2011 proposal to
apply the HOP QDRP reduction in the manner described in the paragraph
above and, therefore, are finalizing our proposal, without
modification. For the CY 2011 OPPS, we are applying a reporting ratio
of 0.980 to the national unadjusted payments, minimum unadjusted
copayments, and national unadjusted copayments for all applicable
services for those hospitals failing to meet the HOP QDRP reporting
requirements. This reporting ratio applies to HCPCS codes assigned
status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,''
``U,'' ``V,'' or ``X,'' excluding services paid under New Technology
APCs. All other applicable standard adjustments to the OPPS national
unadjusted payment rates for hospitals that fail to meet the
requirements of the HOP QDRP will continue to apply. We continue to
calculate OPPS outlier eligibility and outlier payment based on the
reduced rates for those hospitals that fail to meet the reporting
requirements.

D. Requirements for HOPD Quality Data Reporting for CY 2012 and
Subsequent Years

In order to participate in the HOP QDRP, hospitals must meet
administrative, data collection and submission, and data validation
requirements (if applicable). Hospitals that do not meet the
requirements of the HOP QDRP, as well as hospitals not participating in
the program and hospitals that withdraw from the program, will not
receive the full OPPS payment rate update. Instead, in accordance with
section 1833(t)(17)(A) of the Act, those hospitals will receive a
reduction of 2.0 percentage points in their annual payment update
factor for the applicable payment year. We established the payment
determination requirements for the CY 2011 payment update in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60642 through
60652).
In the CY 2011 OPPS/ASC proposed rule (75 FR 46376 through 46381),
for payment determinations affecting the CY 2012 payment update, we
proposed to implement the requirements listed below. Most of these
requirements are the same as the requirements we implemented for the CY
2011 payment determination, with some proposed modifications.
1. Administrative Requirements
To participate in the HOP QDRP, we proposed that several
administrative steps be completed. These steps would require the
hospital to:
Identify a QualityNet security administrator who follows
the registration process located on the QualityNet Web site (http://www.QualityNet.org) and submits the information to the appropriate CMS-
designated contractor. All CMS-designated contractors would be
identified on the QualityNet Web site. The same person may be the
QualityNet security administrator for both the Hospital Inpatient
Quality Reporting Program and the HOP QDRP. From our experience, we
believe that the QualityNet security administrator typically fulfills a
variety of tasks related to the hospital's ability to participate in
the HOP QDRP, such as: Creating, approving, editing and/or terminating
QualityNet user accounts within the organization; monitoring QualityNet
usage to maintain proper security and confidentiality measures; and
serving as a point of contact for information regarding QualityNet and
the HOP QDRP. The hospital would be required to maintain a current
QualityNet security administrator for as long as the hospital
participates in the program due to CMS information systems security
requirements. While only a single QualityNet security administrator
would be required for program purposes, we suggest to hospitals that it
may be beneficial to have more than one QualityNet security
administrator for back-up purposes.
Register with QualityNet, regardless of the method used
for data submission.
Complete and submit an online participation form if this
form (or a paper Notice of Participation form) has not been previously
completed, if a hospital has previously withdrawn, or if the hospital
acquires a new CCN. For HOP QDRP decisions affecting the CY 2012
payment determination, hospitals that share the same CCN would be
required to complete a single online participation form. In the CY 2009
OPPS/ASC final rule with comment period (73 FR 68772), we implemented
an online registration form and eliminated the paper form. At this
time, the participation form for the HOP QDRP is separate from the
Hospital Inpatient Quality Reporting Program and completing a form for
each program is required. Agreeing to participate includes
acknowledging that the data submitted to the CMS-designated

[[Page 72100]]

contractor would be submitted to CMS, shared with one or more other CMS
contractors that support the implementation of the HOP QDRP and be
publicly reported.
We proposed to update and retain the following deadlines, which we
established in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60643), for submitting the participation form:
Hospitals with Medicare acceptance dates on or after January 1,
2011: For the CY 2012 payment update, we proposed that any hospital
that has a Medicare acceptance date on or after January 1, 2011
(including a new hospital and hospitals that have merged) must submit a
completed participation form no later than 180 days from the date
identified as its Medicare acceptance date on the CMS Online System
Certification and Reporting (OSCAR) system. Hospitals typically receive
a package notifying them of their new CCN after they receive their
Medicare acceptance date. The Medicare acceptance date is the earliest
date that a hospital can receive Medicare payment for the services that
it furnishes. Completing the participation form would include supplying
the name and address of each hospital campus that shares the same CCN.
The use of the Medicare acceptance date as beginning the timeline
for HOP QDRP participation allows CMS to monitor more effectively
hospital compliance with the requirement to complete a participation
form because a hospital's Medicare acceptance date is readily available
to CMS through its data systems. In addition, providing an extended
time period to register for the program would allow newly functioning
hospitals sufficient time to get their operations fully functional
before having to collect and submit quality data. We invited public
comment on this proposed policy.
Hospitals with Medicare acceptance dates before January 1, 2011:
For the CY 2012 payment update, we proposed that any hospital that has
a Medicare acceptance date on or before December 31, 2010 that is not
currently participating in the HOP QDRP and wishes to participate in
the CY 2012 HOP QDRP must submit a participation form by March 31,
2011. We proposed a deadline of March 31, 2011, because we believe it
would give hospitals sufficient time to decide whether they wish to
participate in the HOP QDRP, as well as put into place the necessary
staff and resources to timely report data for first quarter CY 2011
services. This requirement would apply to all hospitals whether or not
the hospital billed for payment under the OPPS.
Under our current requirements, hospitals that want to withdraw
from participation must follow the same deadlines as hospitals that
want to participate. We proposed to change this requirement. We
proposed to lengthen the time during which hospitals may withdraw from
participation because we believe that hospitals should be allowed more
time to consider this decision. In addition, this increased time to
withdraw is comparable programmatically to our approach under the
Hospital Inpatient Quality Reporting Program (75 FR 23996 and 50231).
Specifically, for the CY 2012 payment update, we proposed that any HOP
QDRP participating hospital that wants to withdraw may do so at any
time from January 1, 2011 to November 1, 2011. Hospitals that withdraw
during this time period for the CY 2012 payment update would not be
able to sign up to participate for the CY 2012 payment update, would
have a 2.0 percentage point reduction in their CY 2012 payment update,
and would be required to resubmit a participation form in order to
participate for purposes of any future payment updates. We note that
once a hospital has submitted a participation form, it is considered to
be an active HOP QDRP participant until such time as the hospital
submits a withdrawal form to CMS or the facility is designated as
closed in the CMS OSCAR system. We invited public comment on this
proposed policy.
We did not receive any public comments on our CY 2011 proposals for
HOP QDRP administrative requirements for the CY 2012 payment
determination; therefore, we are finalizing our proposals without
modification.
2. Data Collection and Submission Requirements
a. General Data Collection and Submission Requirements
In the CY 2011 OPPS/ASC proposed rule (75 FR 46377 through 46379),
we proposed that, to be eligible for the full CY 2012 OPPS payment
update, hospitals would be required to:
Submit data: Hospitals that would be participating in the
HOP QDRP would be required to submit data for each applicable quarter
by the deadline posted on the QualityNet Web site; there must be no
lapse in data submission. For the CY 2012 annual payment update, the
applicable quarters would be as follows: 3rd quarter CY 2010, 4th
quarter CY 2010, 1st quarter CY 2011, and 2nd quarter CY 2011.
Hospitals that did not participate in the CY 2011 HOP QDRP, but would
like to participate in the CY 2012 HOP QDRP, and that have a Medicare
acceptance date on the OSCAR system before January 1, 2011, would begin
data submission for 1st quarter CY 2011 services using the CY 2012
measure set that would be finalized in the CY 2011 OPPS/ASC final rule
with comment period. For those hospitals with Medicare acceptance dates
on or after January 1, 2011, data submission must begin with the first
full quarter following the submission of a completed online
participation form. For the claims-based measures, we would calculate
the measures using the hospital's Medicare claims data. For the CY 2012
payment update, we would utilize paid Medicare FFS claims submitted
prior to January 1, 2011, to calculate these measures. For the
structural measure to be used for the CY 2012 payment determination,
hospitals would be required to submit data beginning with January 1,
2011 discharges using a Web-based tool available on QualityNet
beginning in 2011.
Sampling and Case Thresholds: It would not be necessary for a
hospital to submit data for all eligible cases for some measures if
sufficient eligible case thresholds are met. Instead, for those
measures where a hospital has a sufficiently large number of cases, the
hospital would sample cases and submit data for these sampled cases
rather than submitting data from all eligible cases. This sampling
scheme, which includes the minimum number of cases based upon case
volume, would be set out in the HOPD Specifications Manual at least 3
months in advance of the required data collection. We proposed to
change this notification timeframe for this sampling scheme to at least
3 months from at least 4 months to be consistent with the HOPD
Specifications Manual release schedule. Hospitals would be required to
meet the sampling requirements for required quality measures each
reporting quarter.
In addition, in order to reduce the burden on hospitals that treat
a low number of patients but otherwise meet the submission requirements
for a particular quality measure, hospitals that have five or fewer
claims (both Medicare and non-Medicare) for any measure included in a
measure topic in a quarter would not be required to submit patient
level data for the entire measure topic for that quarter. Even if
hospitals would not be required to submit patient level data because
they have five or fewer claims (both Medicare and non-Medicare) for any
measure included in a measure topic in

[[Page 72101]]

a quarter, we proposed that they may voluntarily do so.
Hospitals would be required to submit all required data according
to the data submission schedule that will be available on the
QualityNet Web site (https://www.QualityNet.org). This Web site meets
or exceeds all current HIPAA requirements. Submission deadlines would,
in general, be 4 months after the last day of each calendar quarter.
Thus, for example, the submission deadline for data for services
furnished during the first quarter of CY 2011 (January-March 2011)
would be on or around August 1, 2011. The actual submission deadlines
would be posted on the http://www.QualityNet.org Web site.
Hospitals would be required to submit data to the OPPS Clinical
Warehouse using either the CMS Abstraction and Reporting Tool for
Outpatient Department (CART-OPD) measures or the tool of a third-party
vendor that meets the measure specification requirements for data
transmission to QualityNet.
Hospitals would be required to submit quality data through My
QualityNet, the secure portion of the QualityNet Web site, to the OPPS
Clinical Warehouse. The OPPS Clinical Warehouse, which is maintained by
a CMS-designated contractor, would submit the OPPS Clinical Warehouse
data to CMS. OPPS Clinical Warehouse data are not currently considered
to be Quality Improvement Organization (QIO) data; rather, we consider
such data to be CMS data. However, it is possible that the information
in the OPPS Clinical Warehouse may at some point become QIO
information. If this occurs, these data would also become protected
under the stringent QIO confidentiality regulations in 42 CFR part 480.
Hospitals would be required to collect HOP QDRP data from
outpatient episodes of care to which the required measures apply. For
the purposes of the HOP QDRP, an outpatient ``episode of care'' is
defined as care provided to a patient who has not been admitted as an
inpatient, but who is registered on the hospital's medical records as
an outpatient and receives services (rather than supplies alone)
directly from the hospital. Every effort would be made to ensure that
data elements common to both inpatient and outpatient settings are
defined consistently for purposes of quality reporting (such as ``time
of arrival'').
Hospitals would be required to submit quality data using the CCN
under which the care was furnished.
To be accepted into the OPPS Clinical Warehouse, data submissions,
at a minimum, would be required to be timely, complete, and accurate.
Data submissions are considered to be ``timely'' when data are
successfully accepted into the OPPS Clinical Warehouse on or before the
reporting deadline. A ``complete'' submission would be determined based
on whether the data satisfy the sampling criteria that are published
and maintained in the HOPD Specifications Manual, and must correspond
to both the aggregate number of cases submitted by a hospital and the
number of Medicare claims the hospital submits for payment. We are
aware of ``data lags'' that occur when hospitals submit claims, then
cancel and correct those claims; efforts would be made to take such
events into account that can change the aggregate Medicare case counts.
To be considered ``accurate,'' submissions would be required to pass
validation, if applicable.
We strongly recommend that hospitals review OPPS Clinical Warehouse
feedback reports and the HOP QDRP Provider Participation Reports that
are accessible through their QualityNet accounts. These reports enable
hospitals to verify whether the data they or their vendors submitted
were accepted into the OPPS Clinical Warehouse and the date/time that
such acceptance occurred. We also note that irrespective of whether a
hospital submits data to the OPPS Clinical Warehouse itself or uses a
vendor to complete the submissions, the hospital would be responsible
for ensuring that HOP QDRP requirements are met.
Finally, during the past two years of the HOP QDRP, the submission
of population and sampling data was not required, though hospitals
could submit, on a voluntary basis, the aggregate numbers of outpatient
episodes of care which are eligible for submission under the HOP QDRP
and sample size counts. These aggregated numbers of outpatient episodes
represent the number of outpatient episodes of care in the universe of
all possible cases eligible for data reporting under the HOP QDRP. For
the CY 2012 payment update, we proposed to require submission of this
population and sample size data. Specifically, we proposed that
hospitals must submit on a quarterly basis, aggregate population and
sample size counts for Medicare and non-Medicare encounters for the
measure populations for which chart-abstracted data must be submitted.
Under this proposal, hospitals would submit aggregate population and
sample size counts for measure populations even if the hospital had not
treated patients in a specific measure population; that is, if a
hospital has not treated any patients in a specific HOP QDRP measure
population, the hospital would still be required to submit a zero for
its quarterly aggregate population and sample counts to meet the
requirement.
We believe that hospitals have had sufficient time to become
familiar with HOP QDRP data and to develop data systems necessary to
support this requirement. We view it as vital for quality data
reporting for hospitals to be able to determine accurately their
aggregate population and appropriate sampling size data to assess their
completeness of data reporting. We rely on hospitals to properly sample
cases where sampling occurs so that representative data are submitted;
for hospitals to correctly sample, it is necessary for them to be able
to determine their aggregate population sizes. In addition, we believe
it is beneficial for hospitals to develop systems that can determine
whether or not they have furnished services or billed for five or fewer
cases for a particular measure topic on a quarterly basis.
We proposed that the deadlines for the reporting of aggregate
numbers of outpatient episodes of care and sample size counts would be
the same as those for the reporting of data for the measures requiring
chart abstraction, and these deadlines would be posted on the data
submission schedule that would be available on the QualityNet Web site.
Hospitals would be permitted to submit this information prior to the
deadline; this would allow CMS to advise hospitals regarding their
incomplete submission status as appropriate and give hospitals
sufficient time to make appropriate revisions before the data
submission deadline.
We plan to use the aggregate population and sample size data to
assess data submission completeness and adherence to sampling
requirements for Medicare and non-Medicare patients.
We invited public comment on these proposed requirements. The
public comments we received and our responses are outlined below.
Comment: One commenter supported the requirement that hospital
outpatient departments report quality data under the HOP QDRP. This
commenter stated a belief that payment incentives to increase the
reporting of data by hospital outpatient departments represent a useful
tool in promoting transparency.
Response: We thank the commenter for supporting hospital outpatient
quality data reporting under the HOP QDRP, the use of the 2.0
percentage

[[Page 72102]]

point reduction for hospitals that do not successfully report quality
data, and the use of payment incentives to promote transparency.
Comment: One commenter stated that frontline workers are important
in data collection and reporting for the HOP QDRP and that the best
interests of patients would be served if frontline healthcare workers
are guaranteed a voice in the development and implementation of
mechanisms to collect quality data.
Response: We agree with the commenter that those that perform the
work for data collection and reporting for the HOP QDRP should have a
voice in the development and implementation of mechanisms to collect
quality data. To that end, we encourage these workers as well as other
members of the public to participate in the comment process for the
OPPS/ASC proposed rule with comment period. In addition, CMS offers
educational programs, including programs that include discussions of
proposed and final HOP QDRP requirements and encourages the public to
submit input directly to the HOP QDRP support contractor or via a
question and answer tool located at https://cms-ocsq.custhelp.com/cgi-bin/cms_ocsq.cfg/php/enduser/home.php?p_sid=_*crJryj&p_accessibility=0&p_redirect=.
Comment: One commenter asked for the definition of an outpatient
and whether this definition would include patients obtaining testing
only or must patients be in an outpatient bed.
Response: The term ``outpatient'' is defined in the Medicare Claims
Processing Manual, Chapter 1, Section 50.3.1. This section states that
``outpatient'' means a person who has not been admitted as an inpatient
but who is registered on the hospital or critical access hospital (CAH)
records as an outpatient and receives services (rather than supplies
alone) directly from the hospital or CAH.'' Therefore, ``outpatients''
could include patients solely obtaining diagnostic services, as well as
those patients who have been placed in a bed, provided they meet the
applicable definition of ``outpatient.''
Comment: Some commenters agreed that hospitals with five or fewer
claims for a specific measure should not be required to submit patient-
level data for the entire measure topic for that quarter, but should be
allowed to submit data voluntarily. These commenters stated their
belief that this exception should apply to hospitals with less than six
Medicare claims, not less than six claims across all payers.
Response: We thank the commenters for supporting our policy to not
require hospitals with five or fewer claims for a specific measure for
a quarter to submit data while allowing these hospitals to report data
voluntarily. With respect to the commenters' suggestion that we modify
our policy to apply to five or fewer Medicare claims (rather than five
or fewer Medicare and non-Medicare claims), we selected more than 5
cases per quarter (more than 20 cases per year) as the minimum
threshold to ensure that the vast majority of hospitals with sufficient
caseload would be required to submit data, while easing the burden on
hospitals whose patient counts were too small to reliably report
hospital measure results. Because we collect data on both Medicare and
non-Medicare patients, we believe it is appropriate to set our case
thresholds using the population for which we are collecting data, which
includes both Medicare and non-Medicare patients.
Comment: One commenter stated that the term ``encounter'' is not
defined in the outpatient setting, and it is not so clear cut. This
commenter questioned for what purpose does the CMS need population and
sampling data as the proposed rule was not clear about the ultimate
purpose for these data collections.
Response: We disagree with the commenter that the term
``encounter'' is not defined in the outpatient setting. We refer the
commenter to the definition of hospital outpatient ``encounter'' in the
CMS Medicare Benefit Policy Manual, Chapter 6, Section 20.3, which
states the following: ``A hospital outpatient `encounter' is a direct
personal contact between a patient and a physician, or other person who
is authorized by State licensure law and, if applicable, by hospital or
CAH staff bylaws, to order or furnish hospital services for diagnosis
or treatment of the patient.'' Regarding the ultimate purpose of
reported population and sampling data, as we have stated previously,
(74 FR 60645), and in this proposed rule with comment period, we plan
to use the aggregate population and sample size data to assess data
submission completeness and adherence to sampling requirements for
Medicare and non-Medicare patients. Further, as we stated in our
proposal, we view it as vital for quality data reporting that hospitals
be able to determine accurately their aggregate population and
appropriate sampling size data to assess their completeness of data
reporting.
Comment: Many commenters stated their belief that collecting
population and sampling data for outpatient measures is burdensome and
time-consuming for hospitals. These commenters urged CMS to not
finalize this provision to collect such data as the challenges to do so
are particularly great for both larger hospitals and smaller hospitals.
Some of these commenters cited specific underlying factors for
hospitals of certain size; that larger hospitals have very large
patient populations and smaller hospitals have less integrated HIT
systems. Some commenters expressed concern that identifying outpatient
populations is difficult and that it may not be possible for an all-
payer patient population because outpatient billing is more varied and
less defined than inpatient billing. One commenter stated that unlike
inpatient information which is located in a single facility, outpatient
population and sample size data may be located in diverse outpatient
settings and a hospital's ability to manage this data from diverse
sources could be problematic because of the time, cost, and resource
commitment for this requirement. One commenter stated that in some
cases hospital charges are written off or not billed in favor of
physician charges so querying the UB-04 data for such cases would
retrieve an incomplete patient population and would exclude non-
Medicare patients. One commenter suggested that CMS wait until the
meaningful use implementation of EHRs is completed before requiring the
reporting of population and sampling data because this would eliminate
the burden on hospital staff to pull data from multiple sources to
obtain population size. One commenter stated that it foresaw the
implementation of the population and sample data reporting requirement
as extremely problematic.
Response: We understand the commenters' concerns that outpatient
billing could be more varied and less defined than inpatient billing
and that there could be issues with charge write-offs and other billing
factors that could complicate a hospital's determination of outpatient
population sizes. We acknowledge that the adoption of EHRs could
facilitate the determination of outpatient population sizes. We also
acknowledge that we have seen evidence that some hospitals would not be
able to meet the reporting of population and sampling size requirement
due to issues such as the information being located in multiple areas.
We have noted this issue in previous rulemaking (74 FR 60645). We note
that the HOP QDRP is entering its third year of quality data reporting
and believe that it would be beneficial for hospitals to develop
systems that can determine their population sizes for

[[Page 72103]]

outpatient quality measures so they can assess their completeness of
reporting and accuracy of their sample size selections.
However, after consideration of the public comments we received, we
have decided to not finalize our proposal to require the reporting of
population and sample size data and instead continue our policy of
accepting the submission of this information on a voluntary basis for
the CY 2012 payment determination. In the past we have recognized that
collecting this information can be burdensome and time consuming for
some hospitals for their outpatient populations. Based upon the
comments we received, we are convinced that these issues remain for a
significant number of hospitals.
For all other CY 2011 proposals for general data collection and
submission requirements (that is, those proposals aside from the
population and sampling data reporting requirement), we did not receive
any comments and we are finalizing these proposals without
modification.
b. Extraordinary Circumstance Extension or Waiver for Reporting Quality
Data
In our experience, there have been times when hospitals have been
unable to submit required quality data due to extraordinary
circumstances that are not within their control. It is our goal to not
penalize hospitals for such circumstances and we do not want to unduly
increase their burden during these times. Therefore, in the CY 2010
OPPS/ASC final rule with comment period (74 FR 60046 through 600647),
we adopted a process for hospitals to request and for CMS to grant
extensions or waivers with respect to the reporting of required quality
data when there are extraordinary circumstances beyond the control of
the hospital. In the CY 2011 OPPS/ASC proposed rule (75 FR 46379), we
proposed to retain these procedures with some proposed modifications.
Under the process, in the event of extraordinary circumstances,
such as a natural disaster, not within the control of the hospital, for
the hospital to receive consideration for an extension or waiver of the
requirement to submit quality data for one or more quarters, a hospital
would submit to CMS a request form that would be made available on the
QualityNet Web site. The following information should be noted on the
form:
Hospital CCN;
Hospital Name;
CEO and any other designated personnel contact
information, including name, e-mail address, telephone number, and
mailing address (must include a physical address; a post office box
address is not acceptable);
Hospital's reason for requesting an extension or waiver;
Evidence of the impact of the extraordinary circumstances,
including but not limited to photographs, newspaper and other media
articles; and
A date when the hospital would again be able to submit HOP
QDRP data, and a justification for the proposed date.
The request form would be signed by the hospital's CEO. A request
form would be required to be submitted within 45 days of the date that
the extraordinary circumstance occurred. We proposed to remove the
requirement found in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60646) that the hospital include an identified reason for
requesting an extension or waiver in addition to the hospital's reason
for requesting an extension or waiver as a requirement. We believe that
this requirement is redundant and removing it will reduce unnecessary
hospital burden.
Following receipt of such a request, CMS would--
(1) Provide a written acknowledgement using the contact information
provided in the request, to the CEO and any additional designated
hospital personnel, notifying them that the hospital's request has been
received;
(2) Provide a formal response to the CEO and any additional
designated hospital personnel using the contact information provided in
the request notifying them of our decision; and
(3) Complete any CY 2011 request for Extraordinary Circumstance
Extension or Waiver for Reporting Quality Data requests reviews and
communicate the results of these determinations within 90 days
following our receipt of such a request. We proposed to add a deadline
for a CMS response so that hospitals can have a designated timeline for
when they should receive such a response.
This proposal would not preclude us from granting waivers or
extensions to hospitals that have not requested them when we determine
that an extraordinary circumstance, such as an act of nature (for
example, hurricane) affects an entire region or locale. If we make the
determination to grant a waiver or extension to hospitals in a region
or locale, we would communicate this decision to hospitals and vendors
through routine communication channels, including but not limited to e-
mails and notices on the QualityNet Web site. We invited public comment
on these proposals.
We did not receive any public comments on our CY 2011 proposals for
extraordinary circumstance extensions or waivers for the reporting of
quality data under the HOP QDRP; therefore, we are finalizing our
proposals without modification.
3. HOP QDRP Validation Requirements for Chart-Abstracted Data: Data
Validation Approach for CY 2012 and Subsequent Years
a. Background
In the CY 2010 OPPS/ASC proposed rule, we solicited public comments
on our proposed validation methodology (74 FR 35403 through 35404). We
stated that we are considering building upon what we proposed as a
validation approach for CY 2012 and subsequent years by, in addition to
selecting a random sample of hospitals for validation purposes,
selecting targeted hospitals based on criteria designed to measure
whether the data they have reported raises a concern regarding data
accuracy. These possible targeting criteria included identified
abnormal data patterns, whether a hospital had previously failed
validation, whether a hospital had not been previously selected for
validation for 2 or more consecutive years, and some combination of
some or all of the criteria.
We solicited public comments on whether such criteria, or another
approach, should be applied in future years. We especially solicited
suggestions for additional criteria that could be used to target
hospitals for validation. We greatly appreciate all the public comments
we received regarding the validation process proposed for CY 2012 and
subsequent years. We responded to public comments on our proposed
methodology for CY 2012 and subsequent years but did not finalize a
validation process in the CY 2010 OPPS/ASC final rule with comment
period 74 FR 60650 through 60652). We noted that we would take all of
the comments we received into account when we develop our validation
proposals for CY 2012.
b. Data Validation Requirements for CY 2012
In the CY 2011 OPPS/ASC proposed rule (75 FR 46379 through 46381),
similar to our proposed and adopted validation plan for the FY 2012
Hospital Inpatient Quality Reporting Program, we proposed to validate
data from 800 randomly selected hospitals (approximately 20 percent of
all participating HOP QDRP hospitals) each year, beginning with CY 2012
payment determination. We proposed to sample 800 hospitals because we
believe, based

[[Page 72104]]

upon sampling simulation studies using HOP QDRP data, that sampling
this number would provide a sufficient number for a representative
sample of hospitals on various strata (for example, urban, rural, bed-
size) while significantly reducing overall hospital burden. For the CY
2012 payment determination, we would select only from hospitals
participating for the CY 2012 payment update, so if a hospital
submitted data for the CY 2011, but withdrew, this hospital would not
be deemed as eligible for selection. We noted that because 800
hospitals would be selected randomly, every HOP QDRP-participating
hospital would be eligible each year for validation selection.
For each selected hospital, we proposed to randomly select up to a
total of 48 self-reported cases from the total number of cases (12 per
quarter) that the hospital successfully submitted to the OPPS Clinical
Warehouse. However, if a selected hospital has submitted less than 12
cases in any quarter, only those cases available would be validated. We
believe that validating a larger number of cases per hospital, but only
for 800 randomly selected hospitals, and validating these cases at the
measure level (rather than the data element level) has several
benefits. We proposed up to a total of 48 cases per hospital because a
sample size of about 50 is considered sufficient for detecting
relationships and correlations, so a larger sample size is not deemed
necessary (for reference, see Wilson Van Voohis, Carmen R. and Morgan,
Betsey L., (2007), Understanding Power and Rules of Thumb for
Determining Sample Sizes, Tutorials in Quantitative Methods for
Psychology, Volume 3(2), Pages 43-50). We believe that this approach is
suitable for HOP QDRP data because it will: Produce a more reliable
estimate of whether a hospital's submitted data have been abstracted
accurately; provide more statistically reliable estimates of the
quality of care delivered in each selected hospital as well as at a
national level; and reduce overall hospital burden because most
hospitals will not be selected to undergo validation each year.
We would not be selecting cases stratified by measure or topic; our
interest is whether the data submitted by hospitals accurately reflect
the care delivered and documented in the medical record, not what the
accuracy is by measure or whether there are differences by topic.
Additionally, we note that, due to the distribution of HOP QDRP data
submitted to date by hospital size, the data do not lend themselves to
sampling by topic area. Specifically, small hospitals tend to have more
AMI Cardiac Care cases and fewer Surgical Care cases, whereas, larger
hospitals tend to have few if any AMI Cardiac Care cases and more
Surgical Care cases.
Analysis of submitted HOP QDRP data indicate that this sampling
design would provide sufficient number of denominator cases per measure
for determination of national and individual hospital measure estimates
with acceptable levels of statistical certainty.
We proposed to sample data for April 1, 2010 to March 31, 2011
services because this would provide a full year of the most recent data
possible to use for the purpose of completing the validation in
sufficient time for us to make the CY 2012 payment determinations.
A designated CMS contractor would, each quarter that applies to the
validation, ask each of the 800 selected hospitals to submit medical
documentation for up to 12 randomly selected cases submitted to and
accepted by the HOP QDRP Clinical Warehouse. The CMS contractor would
request paper copies of medical documentation corresponding to selected
cases from each hospital via certified mail or other trackable method
that requires a hospital representative to sign for the request letter;
a trackable method would be utilized so that CMS would be assured that
the hospital received the request. The hospital would have 45 calendar
days from the date of the request as documented in the request letter
to submit the requested documentation and have the documentation
received by the CMS contractor. If the hospital does not comply within
30 calendar days of receipt of the initial medical documentation
request, the CMS contractor would send a second letter by certified
mail or other trackable method to the hospital, reminding the hospital
that paper copies of the requested documentation must be submitted and
received within 45 calendar days following the date of the initial CMS
contractor request. If the hospital does not submit the requested
documentation and the documentation is not received by the CMS
contractor within the 45 calendar days, then the CMS contractor would
assign a ``zero'' score to each data element for each selected case and
the case would fail for all measures in the same topic (for example,
OP-6 and OP-7 measures for a Surgical Care case).
We proposed that the letter from the designated CMS contractor
would be addressed to the hospital's medical record staff identified by
the hospital for the submission of records under the Hospital Inpatient
Quality Reporting Program (that is, the hospital's medical records
staff identified by the hospital to their State QIO). If CMS has
evidence that the hospital received both letters requesting medical
records, the hospital would be deemed responsible for not returning the
requested medical record documentation and the hospital would not be
allowed to submit such medical documentation as part of its
reconsideration request so that information not utilized in making a
payment determination is not included in any reconsideration request.
Once the CMS contractor receives the requested medical
documentation, the contractor would independently reabstract the same
quality measure data elements that the hospital previously abstracted
and submitted, and the contractor would then compare the two sets of
data to determine whether the two sets of data match. Specifically, the
contractor would conduct a measures level validation by calculating
each measure within a submitted case using the independently
reabstracted data and then comparing this to the measure reported by
the hospital; a percent agreement would then be calculated.
Specifically, the validation score for a hospital would equal the total
number of measure matches divided by the total number of measures
multiplied by 100 percent.
This method is the same as recommended in the CMS Hospital Value-
Based Purchasing Report to Congress and is illustrated more fully on
pages 83-84 of this report which can be found on our Web site at:
http://www.cms.hhs.gov/AcuteInpatientPPS/downloads/
HospitalVBPPlanRTCFINALSUBMITTED2007.pdf. We believe that this approach
is appropriate and it was supported by many commenters when we
requested comment on HOP QDRP validation requirements outlined in the
CY 2010 OPPS/ASC proposed rule (74 FR 35402 through 35403; 74 FR 60647
through 60652).
To receive the full OPPS payment update, we proposed that hospitals
must attain at least a 75 percent validation score, based upon our
validation process, for the designated time period. We have selected 75
percent as the threshold for the validation score because we believe
this level is reasonable for hospitals to achieve while still ensuring
accuracy of the data. Additionally, this level is consistent with what
we proposed and adopted for the Hospital Inpatient Quality Reporting
Program (75 FR 23993 and 75 FR 50226). Since we are not validating all
hospital measures submitted, it is necessary to calculate a confidence

[[Page 72105]]

interval that incorporates sampling error. We would use the upper bound
of a one-tailed 95 percent confidence interval to estimate the
validation score. We proposed to use a one-tail confidence interval to
calculate the validation score because it appropriately reflects our
concern of whether the confidence interval for the calculated
validation score includes or is above the 75 percent validation
threshold for a hospital to be considered as submitting accurate data.
If the calculated upper limit is above the required 75 percent
validation score threshold, we would consider a hospital's data to be
``validated'' for payment purposes. The use of a one-tailed confidence
interval and the 75 percent and threshold level are the same as those
finalized for the Hospital Inpatient Quality Reporting Program for FY
2012 payment determinations (75 FR 23991 through 23993).
For derivation of the upper bound of a one-tailed 95 percent
confidence interval we proposed to use a binomial distribution approach
as we are looking at the percentage of measures submitted by a hospital
matching what is calculated from the reabstracted data. Since the
measure match rate for each hospital is a proportion, a binomial
approach is appropriate, see Pagano, Robert R., (1990), Understanding
Statistics in the Behavioral Sciences, 3rd Edition, Pages 175-188.
Thus, we proposed the following formula which includes a finite
population correction factor and a continuity correction factor for
calculating the upper bound of the one-tailed 95 percent confidence
interval:
[GRAPHIC] [TIFF OMITTED] TR24NO10.313

In this formula, N represents the population for the reporting
year, n represents the sample size for the reporting year, p
(calculated as a percentage) represents the validation score for the
reporting year (that is, the percentage of measures matching), and 1-p
represents the percentage of measures not matching. It should be noted
that a confidence interval would not need to be calculated for
hospitals that did not have enough cases to sample as the confidence
interval is equal to zero (when the value of N is equal to n, N minus n
equals zero and the upper confidence limit is equal to the validation
score in the above formula). In addition, a confidence interval would
not need to be calculated for those hospitals that have a validation
score, p, that is greater than or equal to 75 percent because the
hospital has attained the minimum threshold; the upper bound of any
calculated confidence interval would be 75 percent or greater.
For further information on the proposed methodology for calculation
of a 95 percent confidence interval for a binomial distribution
utilizing a finite population correction, see http://itl.nist.gov/div898/handbook/prc/section2/prc24.htm and http://courses.wcupa.edu/rbove/Berenson/10th%20ed%20CD-ROM%20topics/section7_3.pdf.
We solicited public comments on this proposed validation
methodology. The public comments we received and our responses are
outlined below.
Comment: Several commenters supported the proposal to validate the
accuracy of a hospital's measurement rate rather than on individual
data elements and stated that by focusing on the hospital's measure
rate, CMS is focusing on the information most important to patient
care.
Response: We thank the commenters and appreciate their support. We
agree that by utilizing a match rate at the measure level, we are
focusing on the information most relevant to measuring the accuracy of
this data which is important to patient care.
Comment: Several commenters supported the proposed validation
approach of reviewing 48 medical charts (12 per quarter) from 800
randomly selected hospitals each year with the review assessing the
accuracy of each hospital's measure rate, reflecting whether or not the
hospital classified patients appropriately into the measure
denominators and numerators. Some of these commenters stated their
belief that this approach holds promise as a reasonable approach to
ensure the accuracy of the data.
Response: We thank the commenters and appreciate their support. We
agree with the commenters that the proposed validation process
beginning with CY 2012 is an improved and reasonable approach for
ensuring data accuracy. We also agree that a validation process is
important in public reporting of quality data and believe that
consistency between quality data reporting programs is important.
Regarding the commenters who stated that our proposed validation method
for assessing accuracy reflects whether or not the hospital classified
patients appropriately into the measure denominators and numerators, we
want to clarify that what we are assessing is whether, for each
selected hospital-reported measure, the data that the hospital reported
matches what is determined by independent abstraction. We are not
assessing whether the hospital classified patients appropriately into
the measure denominators and numerators.
Comment: One commenter disagreed with the random sampling of
hospitals methodology and believed that all hospitals should be held
accountable equally via a valid sample based on local practice
patterns. This commenter also urged CMS to delegate targeted reviews to
the State QIOs on a more proactive basis so that they are addressed in
a more immediate timeframe, not leaving it to chance that a hospital
with poor data quality will be identified randomly.
Response: Under the HOP QDRP, all hospitals are responsible for
submitting accurate data. Because all reporting hospitals will be
subject to selection for validation each payment determination year, we
believe that all hospitals will have incentive to maintain data
quality. Regarding the use of State QIOs in performing targeted
reviews, the HOP QDRP was implemented separately from the QIO program
and State QIOs have not been involved with the HOP QDRP to date. We
note that we intend to provide support for data quality issues to
individual hospitals through existing support mechanisms, including
QualityNet reports and existing support contractors. In addition, we
have included criteria aimed at data quality concerns among our
targeting criteria for data validation conditions under consideration
for CY 2013 and subsequent years.
Comment: Several commenters agreed with having a minimum of 75
percent reliability from chart abstraction for hospitals to pass
validation. These commenters stated their view that adopting the same
approach regarding validation for the inpatient and

[[Page 72106]]

outpatient quality measure programs enhanced consistency between the
two programs. One commenter supported the proposed validation program
for outpatient data reporting as it is harmonized with the inpatient
program. One commenter stated its recognition of the important role of
validation in the public reporting process and because the proposed
process mirrors some of the current validation processes they supported
the proposed approach.
Response: We thank the commenters and appreciate their support. We
agree that consistency between quality data reporting programs is
important. We note that we strive to maintain consistency between the
inpatient and outpatient data reporting programs, with differences
occurring due to differences in data or data systems between the
programs.
Comment: One commenter stated that the proposed validation
requirements are reasonable and would be acceptable to providers if it
were the only Federal data submission requirement. This commenter was
concerned that the record requests for validation would supplement
those already established as part of Federal integrity audit processes
(for example, RAC, Medicaid Integrity, ZPIC, and MAC) and facilities
would receive multiple requests from each contracted entity
significantly increasing hospital provider's labor investment and
costs. This commenter urged CMS to review the validation process with
respect to other data requirements rather than seeing it as a single
request, and to consider the operational impact that receiving multiple
audit entity requests will have on any single provider.
Response: We understand the commenter's concern regarding multiple
Federal medical record requests. For HOP QDRP validation, we have
worked to limit overall burden by reducing the number of hospitals
participating annually in validation through our random sampling of
hospitals. In addition, hospitals will be reimbursed for photocopying
and mailing costs as they are under the Hospital Inpatient Quality
Reporting Program, thus, reducing the burden in submitting medical
record documentation for HOP QDRP validation purposes. We agree that
efforts should be made to keep record requests for validation purposes
at the minimum necessary to ensure accuracy of submitted data and will
consider ways to do so in future rulemaking.
Comment: Some commenters asked if their assumption that validation
of the Imaging Efficiency measures would not be required as part of the
data validation process since the analysis is done through claims data
is correct.
Response: The commenters' assumption is correct. Validation of the
Imaging Efficiency measures would not be required as part of the data
validation process because that process, at the present time, only
applies to chart-abstracted measures.
Comment: One commenter recommended a phased-in approach, with the
first year being a ``test run'' to allow hospitals the opportunity to
become familiar with the HOP QDRP validation program.
Response: We believe the commenter is asking CMS to allow hospitals
to first receive experience with the validation process without their
payment being affected. We also believe that our validation process for
the CY 2011 payment determination (74 FR 60647 through 60648) fulfills
this recommendation.
After consideration of the public comments we received we are
adopting as final, without modification, our proposals regarding
validation for the CY 2012 payment determination.
c. Additional Data Validation Conditions under Consideration for CY
2013 and Subsequent Years
In the CY 2011 OPPS/ASC proposed rule (75 FR 46381), we stated that
we are considering building upon what we proposed as a validation
approach for the HOP QDRP. We are considering, in addition to selecting
a random sample of hospitals for validation purposes, selecting
targeted hospitals based on criteria designed to measure whether the
data they have reported raises a concern regarding data accuracy.
Because hospitals have gained little experience with validation under
the HOP QDRP, we are considering this approach for possible use
beginning with the CY 2013 payment determination. Examples of targeting
criteria could include:
Abnormal data patterns identified such as consistently
high HOP QDRP measure denominator exclusion rates resulting in
unexpectedly low denominator counts;
Whether a hospital had previously failed validation;
Whether a hospital had not been previously selected for
validation for 2 or more consecutive years;
Whether a hospital had low submitted case numbers relative
to population sizes; and/or
Whether a hospital had any extreme outlier values for
submitted data elements.
We invited comment on whether, in addition to random sampling for
validation, we should use targeted validation and, if so, what criteria
for targeting we should adopt.
Comment: One commenter believed that no single hospital should be
at risk for being selected for validation for multiple years and that
targeting criteria should be used to ensure that hospitals are not
over-selected.
Response: We understand the commenter's concern that hospitals
could be selected for validation in multiple years due to the use of
targeting criteria. We will take this comment into consideration as we
consider whether to propose targeting criteria that could result in a
hospital being selected for validation for multiple years as a part of
the validation process.
We thank the commenters for their views on these issues and will
take them into account when considering further criteria for the
validation process for CY 2013 and subsequent years. We note that for
the CY 2013 payment determination, HOP QDRP quality data reporting will
have been completed for four payment determinations: CYs 2009, 2010,
2011, and 2012. Further, hospitals will have had the opportunity to
learn from the validation process for the CY 2011 and CY 2012 payment
determinations. We also believe that all of the targeting criteria we
discuss above are reasonable. We intend to propose targeting criteria
in the validation process for CY 2013 and subsequent years in our CY
2012 OPPS/ASC proposed rule.

E. HOP QDRP Reconsideration and Appeals Procedures

When the Hospital Inpatient Quality Reporting Program was initially
implemented, it did not include a reconsideration process for
hospitals. Subsequently, we received many requests for reconsideration
of those payment decisions and, as a result, established a process by
which participating hospitals would submit requests for
reconsideration. We anticipated similar concerns with the HOP QDRP and,
therefore, in the CY 2008 OPPS/ASC final rule with comment period (72
FR 66875), we stated our intent to implement for the HOP QDRP a
reconsideration process modeled after the reconsideration process we
implemented for the Hospital Inpatient Quality Reporting Program. In
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779), we
adopted a mandatory reconsideration process that applied to the CY 2010
payment decisions. In the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60654 through

[[Page 72107]]

60655), we continued this process for the CY 2011 payment update. In
the CY 2011 OPPS/ASC proposed rule (75 FR 46381 through 46382), we
proposed to continue this process for the CY 2012 payment update with
some modification. Under this proposed process, the hospitals must--
Submit to CMS, via QualityNet, a Reconsideration Request
form that would be made available on the QualityNet Web site; this form
would be submitted by February 3, 2012, and would contain the following
information:
oo Hospital CCN.
oo Hospital Name.
oo CMS-identified reason for failure (as provided in any CMS
notification of failure to the hospital).
oo Hospital basis for requesting reconsideration. This would
identify the hospital's specific reason(s) for believing it met the HOP
QDRP requirements and should receive a full annual payment update.
oo CEO and any additional designated hospital personnel contact
information, including name, e-mail address, telephone number, and
mailing address (must include physical address, not just a post office
box).
oo A copy of all materials that the hospital submitted in order to
receive the full payment update for CY 2012. Such material would
include, but may not be limited to, the applicable Notice of
Participation form or completed online registration form, and quality
measure data that the hospital submitted via QualityNet.
Submit paper copies of all the medical record
documentation that it submitted for the initial validation. Hospitals
would submit this documentation to a designated CMS contractor which
would have authority to review patient level information. We would post
the address where hospitals are to ship this documentation on the
QualityNet Web site. Final review of all mismatched data under a
reconsideration request would be done by CMS.
Provide a written justification for each appealed data
element classified during the validation process as a mismatch. Only
data elements that affect a hospital's validation score would be
subject to reconsideration. We would review the data elements that were
labeled as mismatched as well as the written justifications provided by
the hospitals, and make a decision on the reconsideration request.
For CY 2011 reconsiderations, we required that a reconsideration
request must be signed by the hospital CEO (74 FR 60654). However, we
have found that this requirement increases the burden for hospitals as
it hampers the electronic submission of the HOP QDRP reconsideration
request form. Thus, we did not propose to include this requirement; for
CY 2012 reconsiderations, reconsideration request forms would not need
to be signed by the hospital's CEO.
Following receipt of a request for reconsideration, CMS would--
Provide an e-mail acknowledgement, using the contact
information provided in the reconsideration request, to the CEO and any
additional designated hospital personnel notifying them that the
hospital's request has been received.
Provide a formal response to the hospital CEO and any
additional designated hospital personnel, using the contact information
provided in the reconsideration request, notifying the hospital of the
outcome of the reconsideration process.
We intend to complete any CY 2012 reconsideration reviews and
communicate the results of these determinations within 90 days
following the deadline for submitting requests for reconsideration. In
the CY 2010 OPPS/ASC final rule with comment period 74 FR 60654 through
60655), in response to a comment, we indicated that we would ``complete
any reconsideration reviews and communicate the results of these
determinations within 60 to 90 days following the date we receive the
request for reconsideration.'' In the CY 2011 OPPS/ASC proposed rule
(75 FR 46382), we proposed to refine how we describe the time frame for
CY 2011 from ``60 to 90 days'' to within ``90 days'' because
designating a range of dates is unnecessary for this provision.
If a hospital is dissatisfied with the result of a HOP QDRP
reconsideration decision, we proposed that the hospital may file an
appeal under 42 CFR Part 405, Subpart R (PRRB appeal).
Similar to what we proposed and finalized for the Hospital
Inpatient Quality Reporting Program, the scope of our review when a
hospital requests reconsideration because it failed our validation
requirement would be as follows:
Hospital requests reconsideration for CMS contractor-
abstracted data elements classified as mismatches affecting validation
scores. Hospitals would be required to have timely submitted requested
medical record documentation to the CMS contractor during the quarterly
validation process for the requested case to be eligible to be
reconsidered on the basis of mismatched data elements.
Hospital requests reconsideration for medical records
submitted during the quarterly validation process and classified as
invalid record selection. Invalid record selections would be defined as
medical records submitted by hospitals during the quarterly validation
process that do not match the patient's episode of care information as
determined by the designated re-abstracting CMS contractor. In other
words, the contractor determines that the hospital returned medical
documentation that is different from that which was requested. If this
designated contractor determines that the hospital submitted invalid or
incorrect medical documentation, it would award a zero validation score
for the case. During the reconsideration process, our review of invalid
record selection would initially be limited to determining whether the
medical documentation submitted initially to the designated CMS
contractor was for the designated episode of care. If we determine
during reconsideration that the hospital did submit medical
documentation corresponding to the designated episode of care, then we
would abstract data elements from the medical record documentation
submitted by the hospital; otherwise, the case would not be abstracted.
Hospital requests reconsideration for medical records not
submitted to the CMS contractor within the 45 calendar day deadline.
Our review would initially be limited to determining whether the CMS
contractor received the requested medical record documentation within
45 calendar days, and whether the hospital received the initial medical
record request and reminder notice. If we determine during
reconsideration that the CMS contractor did receive the paper copy of
the requested, supporting medical record documentation within 45
calendar days, then we would abstract data elements from the medical
record documentation submitted by the hospital. If we determine that
the hospital received two letters requesting medical documentation and
still did not submit the requested documentation within the 45 calendar
day period, CMS would not accept this documentation as part of the
reconsideration and CMS would not abstract data from this
documentation.
In sum, we proposed to initially limit the scope of our
reconsideration reviews involving validation to information already
submitted by the hospital during the quarterly validation process, and
we would not abstract submitted medical record documentation that was
not submitted to the CMS contractor during the quarterly validation
process.

[[Page 72108]]

We would expand the scope of our reconsideration reviews involving
validation only if we find during the initial review that the hospital
correctly and timely submitted the requested medical record
documentation; only then would we abstract data elements from the
medical record documentation submitted by the hospital as part of our
reconsideration review.
If a hospital is dissatisfied with the result of a HOP QDRP
reconsideration decision, the hospital would be able to file an appeal
under 42 CFR Part 405, Subpart R (PRRB appeal).
We did not receive any public comments on our CY 2012 proposals for
HOP QDRP reconsideration and appeals procedures; therefore, we are
finalizing our proposals without modification.

F. Reporting of ASC Quality Data

As discussed above, section 109(b) of the MIEA-TRHCA amended
section 1833(i) of the Act by redesignating clause (iv) as clause (v)
and adding new clause (iv) to paragraph (2)(D) and by adding new
paragraph (7). These amendments authorize the Secretary to require ASCs
to submit data on quality measures and to reduce the annual payment
update in a year by 2.0 percentage points for ASCs that fail to do so.
However, these provisions permit, but do not require, the Secretary to
take such action.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66875), the CY 2009 OPPS/ASC final rule with comment period (73 FR
68780), and the CY 2010 OPPS/ASC final rule with comment period (74 FR
60656), we indicated that we intend to implement the provisions of
section 109(b) of the MIEA-TRHCA in a future rulemaking. While
promoting high quality care in the ASC setting through quality
reporting is highly desirable and fully in line with our efforts under
other payment systems, the transition to the revised payment system in
CY 2008 posed significant challenges to ASCs, and we determined that it
would be most appropriate to allow time for ASCs to gain some
experience with the revised payment system before introducing other new
requirements. Further, by implementing quality reporting under the OPPS
prior to establishing quality reporting for ASCs, CMS would gain
experience with quality measurement in the ambulatory setting in order
to identify the most appropriate measures for quality reporting in ASCs
prior to the introduction of the requirement for ASCs. Finally, we are
sensitive to the potential burden on ASCs associated with chart
abstraction and believe that adopting such measures at this time is in
contrast with our desire to minimize collection burden, particularly
when measures may be reported via EHRs in the future.
We continue to believe that promoting high quality care in the ASC
setting through quality reporting is highly desirable and fully in line
with our efforts under other payment systems. However, we continue to
have the concerns outlined above for CY 2011. In the CY 2011 OPPS/ASC
proposed rule (75 FR 46383), we stated that we intend to implement the
provisions of section 109(b) of the MIEA-TRHCA in a future rulemaking.
We invited public comment on: (1) The deferral of quality data
reporting for ASCs; (2) suggestions for quality measures geared toward
the services provided by ASCs; and (3) potential reporting mechanisms
for ASC quality data, including electronic submission of these data. In
addition, we invited public comment on the following measures under
future consideration for ASC quality data reporting:
Patient Fall in the ASC;
Patient Burn;
Hospital Transfer/Admission;
Wrong Site, Side, Patient, Procedure, Implant;
Prophylactic IV Antibiotic Timing;
Appropriate Surgical Site Hair Removal;
Surgical site infection (SSI);
Medication administration variance (MAV);
Medication reconciliation; and
VTE measures: Outcome/assessment/prophylaxis.
In the CY 2011 OPPS/ASC proposed rule (75 FR 46383), we note that
section 3006(f) of the Affordable Care Act, added by section 10301(a)
of the Affordable Care Act, requires CMS to develop a plan to implement
a value-based purchasing program for ASCs; this plan is due to Congress
by January 1, 2011. We stated that we intend to align implementation of
ASC quality reporting to be consistent with the value-based purchasing
plan that will be developed and that we intend to propose implementing
the provisions of section 109(b) of the MIEA-TRHCA in CY 2012
rulemaking. We invited public comment on: (1) The timing of
implementing quality data reporting for ASCs; (2) suggestions for
quality measures for services provided by ASCs; and (3) potential
reporting mechanisms for ASC quality data, including electronic
submission of these data.
Comment: Several commenters agreed with CMS' intention to defer
quality data reporting for ASCs. Some commenters supported CMS's
rationale for the approach, that is, enabling ASCs to gain experience
with the recently launched payment system and permitting CMS to gain
experience in the HOPD setting before implementing quality data
reporting requirements for ASCs. Several commenters supported CMS'
decision to move with caution in expanding quality data reporting to
the ASC setting and appreciated CMS' sensitivity to administrative
burdens faced by ASCs. Commenters stated that it would be beneficial to
allow extra time in planning a quality data reporting program for ASCs
in order to assess implementation challenges and identify appropriate
measures.
Response: We thank the commenters for their support for delaying
quality data reporting for ASCs and their agreement with our reasons
for doing so.
Comment: Numerous commenters urged CMS to begin the ASC quality
data reporting program as soon as possible. Many commenters indicated
that the collection and reporting of quality data is a common practice
for ASC facilities, as 35 States are currently collecting ASC quality
data. The industry is eager to make quality data available to consumers
in a manner that facilitates direct comparisons between equivalent
surgical care delivered in HOPDs and ASCs. Some commenters urged CMS to
implement a quality data reporting system for ASCs, out of concern that
data has shown there are common occurrences of lapses in infection
control in ASCs in three States. One commenter was concerned about the
continued delay in a quality measurement and reporting program for the
rapidly growing ASC setting and indicated that, by now, it should be
technically feasible for ASCs to report on quality measures. One
commenter recommended the adoption of NQF-endorsed electronic measures
and limiting implementation to no more than three measures in the first
reporting year. The commenter also urged CMS to keep the results of ASC
quality reporting confidential for the first year.
Response: We recognize that it is beneficial for consumers to be
able to compare the quality of surgical care across HOPDs and ASCs. We
intend to begin this reporting program as soon as it is feasible. We
thank the commenters for these suggestions. We will take them into
consideration in the planning process for ASC quality measure data
reporting.
Comment: One commenter stated that the use of EHRs in ASCs is still
not widespread, so CMS should consider alternative reporting mechanisms
such as registry-based reporting.

[[Page 72109]]

Response: We thank the commenter for the suggestion and we will
evaluate the feasibility of alternative reporting mechanisms, such as
registry-based reporting, for ASCs in conjunction with using EHR
technology.
Comment: One commenter encouraged CMS to align potential ASC
quality measure metrics with State and Federal legislative requirements
as well as consider some inpatient measure collection process for
applicability. One commenter recommended that a future ASC quality
reporting program should: (1) Provide a mechanism for providers to
raise concerns prior to public display of information; (2) include a
provider narrative section to inform consumers of the reliability or
accuracy of the information presented; and (3) include facility
accreditation status, state licensure and Medicare certification.
Response: We thank the commenters for their input. We will take the
comments into consideration in the planning process for ASC quality
measure data reporting.
As stated previously, we invited public comment on 10 quality
measures under future consideration for ASC quality data reporting (75
FR 46383). We received the following comments on these quality
measures:
Comment: One commenter supported the Patient Fall measure.
Response: We thank the commenter for the support. We will consider
it in the planning process for ASC quality measure data reporting.
Comment: One commenter supported the Patient Burn measure.
Response: We thank the commenter for the support. We will consider
it in the planning process for ASC quality measure data reporting.
Comment: One commenter supported the Hospital Transfer/Admission
measure. Another commenter stated that this measure only measures
transfer/admission status which is controlled by insurance companies
and not by ASCs. The commenter recommended the exclusion of this
measure in ASC reporting program.
Response: We thank the commenters for the input. We will consider
it in the planning process for ASC quality measure data reporting.
Comment: Two commenters supported the Prophylactic IV Antibiotic
Timing measure.
Response: We thank the commenters for the support. We will consider
it in the planning process for ASC quality measure data reporting.
Comment: Two commenters supported the Appropriate Surgical Site
Hair Removal measure.
Response: We thank the commenters for the support. We will consider
it in the planning process for ASC quality measure data reporting.
Comment: One commenter supported the Surgical Site Infection (SSI)
measure. Two commenters stated the tracking of surgical complications
is resource intensive and the accuracy of reporting of post-operative
surgical site infections is resource-dependent. One commenter stated
the measure involves many procedures and variables. The commenter
recommended that CMS learn from the implementation of SSI measures in
the Hospital Inpatient Quality Reporting Program, with respect to
definition standardization, data collection and data validation. One
commenter suggested using one single set of SSI measures to track SSI
continuum across hospital inpatient, hospital outpatient and ASC
settings. The commenter also indicated the review of diagnosis/services
on claim data, antibiotic prescribed within 30 days of a surgical
procedure, and post-surgical visits could be used for ASC pay-for-
performance metrics. One commenter recommended the exclusion of this
measure in ASCs.
Response: We thank the commenters for the support and suggestions.
We will consider them in the planning process for ASC quality measure
data reporting.
Comment: One commenter supported the VTE measures: Outcome/
assessment/prophylaxis. Two commenters recommended postponing the VTE
measures until there is more evidence to support the measure.
Response: We thank the commenters for the support and suggestions.
We will consider them in the planning process for ASC quality measure
data reporting.
Comment: Two commenters suggested the adoption of hospital measures
that are applicable in the ASC settings: (1) Selection of prophylactic
antibiotic; and (2) presence of physician during entire recovery
period.
Response: We thank the commenters for the suggestions. We will
consider them in the planning process for ASC quality measure data
reporting.
Comment: Some commenters recommended additional measures and
measure topics for ASCs:
Sedation safety (rescue required, delayed recovery)
Patient experience/satisfaction
6 NQF-endorsed, ASC QC-developed, facility-level measures
Wrong Site/wrong side/wrong patient/wrong procedure/wrong
implant
Timing of the administration of intravenous antibiotics
for prophylaxis of surgical site infection
Infection control
HAC
Response: We thank the commenters for the recommendations. We will
consider them in the planning process for ASC quality measure data
reporting.
Comment: Several comments supporting the implementation of a value-
based purchasing program for ASCs. One commenter stated that CMS should
engage all stakeholders to preview the ASC value-based purchasing
report prior to its submission to Congress on January 1, 2011. One
commenter recommended that CMS start ASC quality reporting in the HOP
QDRP in CY 2012 to prepare for ASC value-based purchasing for ASCs.
Response: Section 3006(f) of the Affordable Care Act, added by
section 10301(a) of the Affordable Care Act, requires the Secretary to
develop a plan to implement a value-based purchasing program for ASCs.
In developing the plan, the Secretary must consult with relevant
affected parties. We are aware that, in order to implement any such
plan, a quality reporting program must be initiated. We thank the
commenters for their support and recommendations.
After consideration of the public comments we received, we are
restating our intent to propose implementing an ASC quality measure
reporting program in the CY 2012 proposed rule. We continue to believe
that promoting high quality care in the ASC setting through quality
data reporting is highly desirable and fully in line with our efforts
under other payment systems.

G. Electronic Health Records

As we stated in the CY 2010 OPPS/ASC final rule (74 FR 60656), we
are actively seeking alternatives to manual chart abstraction for the
collection of quality measures for our quality data reporting programs.
Among these alternatives are claims-based measure calculations,
collection of data from systematic registries widely used by hospitals,
and electronic submission of quality measures using EHRs. In response
to the CY 2009 OPPS/ASC final rule (73 FR 68769), we received
suggestions during the public comment period that we adopt measures
that can be collected via EHRs. We agree with the commenters about the
importance of actively working to move to a system of data collection
based on submission from EHRs. In section XVI.B.5.b. of this final rule
with comment period, for the CY 2014 payment determination we stated
that we were considering for the future several chart-abstracted
quality measures for diabetes mellitus, some of which have already been
specified for EHR-based capture and submission, and

[[Page 72110]]

others for which EHR-based submission is planned. We have been engaged
with health IT standard-setting organizations to promote the
development of the necessary standards regarding data capture to
facilitate data collection via EHRs, and have been collaborating with
such organizations on standards for a number of quality measures. We
encourage hospitals to take steps toward the adoption of EHRs that will
allow for reporting of clinical quality data from the EHR directly to a
CMS data repository. We also encourage hospitals that are implementing,
upgrading, or developing EHR systems to ensure that such systems
conform to standards adopted by HHS. We invited public comment on the
future direction of EHR-based quality measurement submission.
Comment: Some commenters strongly urged CMS to adopt quality
measures that have electronic specifications. Commenters supported the
use of EHRs and other health information technology (IT) and encouraged
CMS to collaborate with the HHS Office of the National Coordinator on
Health IT (ONC) to further advance such efforts. The commenters
recognized the capability and the huge benefits from such technology.
Commenters commended CMS for encouraging the development and adoption
of uniform data content and information technology standards across the
health care industry that will support automated data collection and
reporting of clinical data from EHR systems. The commenters believed
that such efforts would streamline hospital data submission procedures
and significantly reduce the burden for hospitals.
One commenter noted that the availability of e-measures is still
limited. For instance, the commenter believes that it is difficult to
find EHR systems that can easily interface with disease registries.
Some commenters encouraged CMS to consider postponing the adoption of
new quality measures for the HOP QDRP for CY 2012 until those measures
can be collected via EHRs. The commenters noted that delaying the
adoption of new measures for this reason was also warranted given the
challenges hospitals will face in implementing ICD-10 coding system and
complying with the Affordable Care Act.
Response: We appreciate the supportive comments we received
regarding EHR-based data collection as an alternative data source for
quality measures. We agree that EHR-based data submission may provide
an alternative means of submitting quality data that would reduce the
burden of chart abstraction for hospitals. Although we encourage
hospitals to adopt EHRs, we acknowledge the challenges that must be met
both by hospitals and CMS to establish the infrastructure and
interoperability necessary to collect data on quality measures via
EHRs. We also recognize the burden faced by hospitals in making
multiple technological changes, including the ICD-10 coding system, and
complying with the Affordable Care Act. We will carefully consider any
additional burden that may be imposed on hospitals as a result of
adopting additional measures for the HOP QDRP and will continue to
consider other feasible alternatives to data collection such as
registries. We will also continue to work collaboratively with health
IT voluntary consensus standards organizations to ensure that quality
measures can be collected in a standardized manner.
We have worked with the Healthcare Information Technology Standards
Panel (HITSP), a public private partnership whose purpose was to
recommend ways to harmonize health IT interoperability standards,
including the specifications of data elements used in several measure
sets so that they may be collected and reported via EHRs. We are
currently working with the HIT Standards Committee and the HIT Policy
Committee established by HITECH to continue this standardization work.
Standardization of the specifications allows software to convert
clinical data of different types into a form that can be analyzed for
quality measurement. We encourage collaboration among standard-setting
organizations and measure developers, on the creation of standards for
electronic collection of data elements for other quality measures as
well, particularly those used in our quality data reporting programs.
Comment: One commenter did not support a policy that would allow
CMS to have access to clinical information via an EHR for purposes of
quality measure reporting because it believed that CMS would be
invading the privacy of patients.
Response: We will take these concerns into consideration when
developing a system to collect information from EHRs in the future.
Comment: Some commenters recommended that CMS harmonize the HOP
QDRP quality measures with the meaningful use objectives under the
HITECH EHR Incentive Program, as well as with other quality programs
that have been authorized under the Affordable Care Act. Commenters
also suggested that CMS test, adopt, and validate EHR specifications.
Commenters recommended that CMS initially adopt for EHR data collection
under the HOP QDRP quality measures that apply to the Emergency
Department and delay adopting measures that apply to the broader
outpatient setting until both hospital and CMS' technical capabilities
mature. Commenters were strongly opposed to a policy under which
providers would be required to submit data on the same measure multiple
times under different reporting programs, but instead supported a
policy under which providers could report data on a measure one time
for use in multiple reporting programs.
Response: One of our important objectives is to align the quality
measures used in the various existing quality data reporting programs,
and to align these measures with the measures we are developing for use
in new programs authorized under the Affordable Care Act. However, when
considering whether particular measures can be aligned, we must take
into account the needs and requirements of the various individual
quality reporting programs.
We thank the commenters and will take these comments into
consideration as we consider the future direction of EHR-based quality
measure submission with respect to the HOP QDRP.

XVII. Files Available to the Public Via the Internet

A. Information in Addenda Related to the CY 2011 Hospital OPPS

Addenda A and B to this final rule with comment period provide
various data pertaining to the CY 2011 payment for items and services
under the OPPS. Addendum A, which includes a list of all APCs payable
under the OPPS, and Addendum B, which includes a list of all active
HCPCS codes with their CY 2011 OPPS payment status and comment
indicators, are available to the public by clicking ``Hospital
Outpatient Regulations and Notices'' on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/.
For the convenience of the public, we also are including on the CMS
Web site a table that displays the HCPCS code data in Addendum B sorted
by APC assignment, identified as Addendum C.
Addendum D1 defines the payment status indicators that are used in
Addenda A and B. Addendum D2 defines the comment indicators that are
used in Addendum B. Addendum E lists the HCPCS codes that are only
payable to hospitals as inpatient procedures and are not payable under
the OPPS. Addendum L contains the out-migration wage adjustment for CY
2011.

[[Page 72111]]

Addendum M lists the HCPCS codes that are members of a composite APC
and identifies the composite APC to which each is assigned. This
addendum also identifies the status indicator for the HCPCS code and a
comment indicator if there is a change in the code's status with regard
to its membership in the composite APC. Each of the HCPCS codes
included in Addendum M has a single procedure payment APC, listed in
Addendum B, to which it is assigned when the criteria for assignment to
the composite APC are not met. When the criteria for payment of the
code through the composite APC are met, one unit of the composite APC
payment is paid, thereby providing packaged payment for all services
that are assigned to the composite APC according to the specific I/OCE
logic that applies to the APC. We refer readers to the discussion of
composite APCs in section II.A.2.e. of this final rule with comment
period for a complete description of the composite APCs.
These addenda and other supporting OPPS data files are available on
the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/.

B. Information in Addenda Related to the CY 2011 ASC Payment System

Addenda AA and BB to this final rule with comment period provide
various data pertaining to the CY 2011 payment for the covered surgical
procedures and covered ancillary services for which ASCs may receive
separate payment. Addendum AA lists, for CY 2011, the ASC covered
surgical procedures, whether the procedure is subject to multiple
procedure discounting, the comment and payment indicators for each
procedure, and the payment weights and rates for each procedure.
Addendum BB displays, for CY 2011, the ASC covered ancillary services,
the comment and payment indicators for each service and the payment
weights and rates for each service. All ASC relative payment weights
and payment rates for CY 2011 are a result of applying the revised ASC
payment system methodology established in the final rule for the
revised ASC payment system published in the Federal Register on August
2, 2007 (72 FR 42470 through 42548) to the CY 2011 OPPS and MPFS
ratesetting information.
Addendum DD1 defines the payment indicators that are used in
Addenda AA and BB. Addendum DD2 defines the comment indicators that are
used in Addenda AA and BB.
Addendum EE (available only on the CMS Web site) lists the surgical
procedures that are excluded from Medicare payment if furnished in
ASCs. The excluded procedures listed in Addendum EE are surgical
procedures that are assigned to the OPPS inpatient list, are not
covered by Medicare, are reported using a CPT unlisted code, or have
been determined to pose a significant safety risk to a Medicare
beneficiary when performed in an ASC or for which standard medical
practice dictates that the beneficiary typically requires active
medical monitoring and care at midnight following the procedure.
These addenda and other supporting ASC data files are included on
the CMS Web site at: http://www.cms.gov/ASCPayment/. The MPFS data
files are located at: http://www.cms.gov/PhysicianFeeSched/.
The links to all of the FY 2011 IPPS wage index-related tables
(that are used for the CY 2011 OPPS) that were published in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50450 through 50456) are accessible on
the CMS Web site at: http://www.cms.gov/AcuteInpatientPPS/WIFN.

XVIII. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

B. Associated Information Collections Not Specified in Regulatory Text

In the CY 2011 OPPS/ASC proposed rule, we made reference to
proposed associated information collection requirements that were not
discussed in the regulation text contained in this document. The
following is a discussion of those requirements.
1. Hospital Outpatient Quality Data Reporting Program (HOP QDRP)
As previously stated in section XVI. of the proposed rule and this
final rule with comment period, the quality data reporting program for
hospital outpatient care, known as the Hospital Outpatient Quality Data
Reporting Program (HOP QDRP), has been generally modeled after the
quality data reporting program for hospital inpatient services, the
Hospital Inpatient Quality Reporting Program. Section 109(a) of the
MIEA-TRHCA (Pub. L. 109-432) amended section 1833(t) of the Act by
adding a new subsection (17) which affects the annual payment update
factor applicable to OPPS payments for services furnished by hospitals
in outpatient settings on or after January 1, 2009. Section
1833(t)(17)(A) of the Act states that subsection (d) hospitals (as
defined under section 1886(d)(1)(B) of the Act) that fail to report
data required for the quality measures selected by the Secretary in the
form and manner required by the Secretary under section 1833(t)(17)(B)
of the Act will incur a 2.0 percentage point reduction to their annual
payment update factor. Section 1833(t)(17)(B) of the Act requires that
hospitals submit quality data in a form and manner, and at a time, that
the Secretary specifies. Section 1833(t)(17)(A)(ii) of the Act
specifies that any reduction would apply only to the payment year
involved and would not be taken into account in computing the
applicable annual payment update factor for a subsequent payment year.
Section 1833(t)(17)(C)(i) of the Act requires the Secretary to develop
measures appropriate for the measurement of the quality of care
(including medication errors) furnished by hospitals in outpatient
settings, that these measures reflect consensus among affected parties
and, to the extent feasible and practicable, that these measures
include measures set forth by one or more national consensus building
entities.
We did not receive any public comments on these information
collection requirements.

[[Page 72112]]

2. HOP QDRP Quality Measures for the CY 2012, CY 2013 and CY 2014
Payment Determinations
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68766), we retained the 7 chart-abstracted quality measures we used in
CY 2009 and adopted 4 new claims-based imaging measures for the CY 2010
payment determination, bringing the total number of quality measures
for which hospitals must submit data to 11 measures. In the CY 2010
OPPS/ASC final rule with comment period (74 FR 60637), we required
hospitals to continue to submit data on the same 11 measures for the CY
2011 payment determination. The burden associated with the
aforementioned data submission requirements is currently approved under
OCN: 0938-1109 and expires October 31, 2013.
We are finalizing our proposal to retain for the CY 2012 payment
determination the 7 chart-abstracted quality measures and the 4 claims-
based imaging measures we used for the CY 2011 payment determinations.
For the CY 2012 payment determination, we are also adopting 1
structural HIT measure that tracks HOPDs' capacity to receive
laboratory results electronically, and 3 claims-based imaging
efficiency measures, bringing the total number of quality measures for
which hospitals must submit data to 15 measures. We will calculate the
claims-based measures using Medicare FFS claims data and do not require
additional hospital data submissions, and we are using the same data
submission requirements related to the seven data abstracted measures
that we used for the CY 2011 payment determination. For the structural
measure, hospitals will enter data into a Web-based collection tool
during a specified collection period once annually.
For the CY 2013 payment update, we are requiring that hospitals
continue to submit data for all of the quality measures that we adopted
for the CY 2012 payment determination. We are also adopting 1
structural HIT measure assessing the ability to track clinical results
between visits, 6 new chart-abstracted measures on the topics of HOPD
care transitions and ED efficiency, as well as 1 chart-abstracted ED-
AMI measure that was proposed for the CY 2012 payment determination but
which we decided to finalize for the CY 2013 payment determination,
bringing the total number of quality measures for which hospitals must
submit data to 23 measures. We are requiring hospitals to submit data
related to the 14 chart-abstracted measures. We will calculate the 7
claims-based measures using Medicare FFS claims data and do not require
additional hospital data submission for these measures. For the 2
structural measures, hospitals will enter data into a Web-based
collection tool during a specified collection period once annually.
For the CY 2014 payment determination, we are not adopting any new
measures at this time. These measures that, as of now, will be used for
the CY 2012 through CY 2014 payment determinations are listed in the
table below.

HOP QDRP Measurement Set To Be Used for the CY 2012, CY 2013, and Cy
2014 Payment Determinations
------------------------------------------------------------------------

-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
Intervention
OP-4: Aspirin at Arrival
OP-5: Median Time to ECG
OP-6: Timing of Antibiotic Prophylaxis
OP-7: Prophylactic Antibiotic Selection for Surgical Patients
OP-8: MRI Lumbar Spine for Low Back Pain
OP-9: Mammography Follow-up Rates
OP-10: Abdomen CT--Use of Contrast Material
OP-11: Thorax CT--Use of Contrast Material
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data *
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
Low Risk Surgery *
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT) *
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache *
OP-16: Troponin Results for Emergency Department acute myocardial
infarction (AMI) patients or chest pain patients (with Probable Cardiac
Chest Pain) Received Within 60 minutes of Arrival **
OP-17: Tracking Clinical Results between Visits **
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients **
OP-19: Transition Record with Specified Elements Received by Discharged
Patients **
OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional
**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture **
OP-22: ED-Patient Left Before Being Seen **
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
Stroke who Received Head CT Scan Interpretation Within 45 minutes of
Arrival **
------------------------------------------------------------------------
* New measure for CY 2012 payment determination.
** New measure for CY 2013 payment determination.

As part of the data submission process pertaining to the quality
measures we are finalizing for the CY 2012 payment determination,
hospitals must complete and submit a notice of participation form for
the HOP QDRP. By submitting this document, hospitals agree that they
will allow CMS to publicly report the quality measures as required by
the HOP QDRP.
For the CY 2012 payment determination, the burden associated with
this requirement is the time and effort associated with completing the
notice of participation form as well as collecting and submitting the
data on the required quality measures. We estimate that there will be
approximately 3,200 respondents per year. For hospitals to collect and
submit the information on the required measures, we estimate it will
take 35 minutes per sampled case. We estimate there will be a total of
930,000 cases per year, approximately 290 cases per year per
respondent. The estimated annual burden associated with the

[[Page 72113]]

aforementioned submission requirements for the chart-abstracted data is
542,500 hours (930,000 cases per year x 0.583 hours/case). For the
structural measure, we estimate that each participating hospital will
spend 10 minutes per year to collect and submit the required data,
making the estimated annual burden associated with this measure 533
hours (3,200 hospitals x 0.167 hours per hospital).
For the CY 2013 payment determination, the burden associated with
this requirement is the time and effort associated with completing the
notice of participation form as well as collecting and submitting the
data on the required quality measures. We estimate that there will be
approximately 3,200 respondents per year. For hospitals to collect and
submit the information on the required measures, we estimate it will
take 35 minutes per sampled case. We estimate there will be a total of
1,860,000 cases per year, approximately 580 cases per year per
respondent. The estimated annual burden associated with the
aforementioned submission requirements for the chart-abstracted data is
1,084,380 hours (1,860,000 cases per year x 0.583 hours/case). For the
structural measures, we estimate that each participating hospital will
spend 20 minutes per year to collect and submit the required data,
making the estimated annual burden associated with this measure 1,066
hours (3,200 hospitals x 0.334 hours per hospital).
In the proposed rule, we invited public comment on the burden
associated with these information collection requirements. We did not
receive any public comments on these information collection
requirements.
3. HOP QDRP Validation Requirements
In addition to finalizing requirements related to the submission of
quality data, in this final rule with comment period we are finalizing
requirements related to data validation for CY 2012. Similar to our
proposed and final policy for the FY 2012 Hospital Inpatient Quality
Reporting Program (75 FR 23991 through 23993 and 50225 through 50227),
we will validate data from 800 randomly selected hospitals each year
under the HOP QDRP, beginning with the CY 2012 payment determination.
We note that, because the 800 hospitals would be selected randomly,
every HOP QDRP-participating hospital would be eligible each year for
validation selection. For each selected hospital, we would randomly
select up to 48 patient episodes of care per year (12 per quarter) for
validation purposes from the total number of cases that the hospital
successfully submitted to the OPPS Clinical Warehouse during the
applicable time period. However, if a selected hospital submitted less
than 12 cases in one or more quarters, only those cases available would
be validated.
The burden associated with the CY 2012 requirement is the time and
effort necessary to submit validation data to a CMS contractor. We
estimate that it will take each of the 800 sampled hospitals
approximately 12 hours to comply with these data submission
requirements. To comply with the requirements, we estimate each
hospital must submit 48 cases for the affected year for review. We are
requiring that 800 hospitals comply with these requirements per year,
which will result in a total of 38,400 charts being submitted by the
sampled hospitals. The estimated annual burden associated with the data
validation process for CY 2012 and subsequent years is 9,600 hours.
While these requirements are subject to the PRA, they are currently
approved under OCN: 0938-1109 and expire October 31, 2013.
In the proposed rule, we invited public comment on the burden
associated with these information collection requirements.
Comment: One commenter stated that the proposed validation
requirements are reasonable and would be acceptable to providers if
they were the only Federal data submission requirements. The commenter
stated its concern that the record requests for validation would
supplement those already established as part of Federal integrity audit
processes (for example, RAC, Medicaid Integrity, ZPIC, and MAC) and
facilities would receive multiple requests from each contracted entity,
significantly increasing a hospital provider's labor investment and
costs. The commenter urged CMS to review the validation process with
respect to other data requirements rather than seeing it as a single
request, and to consider the operational impact that receiving multiple
audit entity requests will have on any single provider.
Response: We understand the commenter's concern regarding multiple
Federal medical record requests. For HOP QDRP validation, we have
worked to limit overall burden by reducing the number of hospitals
participating annually in validation through our random sampling of
hospitals. In addition, hospitals will be reimbursed for photocopying
and mailing costs as they are under the Hospital Inpatient Quality
Reporting Program, thus reducing the burden in submitting medical
record documentation for HOP QDRP validation purposes. We agree that
efforts should be made to keep record requests for validation purposes
at the minimum necessary to ensure the accuracy of submitted data and
will consider ways to do so in future rulemaking.
4. HOP QDRP Reconsideration and Appeals Procedures
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68779), we adopted a mandatory reconsideration process that applied to
the CY 2010 payment decisions. In the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60654 through 60655), we continued this process
for the CY 2011 payment update. In the CY 2011 OPPS/ASC proposed rule
(75 FR 46381 through 46382), we proposed to continue this process for
the CY 2012 payment update with some modifications. We proposed to
eliminate a requirement that the reconsideration request form be signed
by the hospital CEO to facilitate electronic submission of the form and
reduce hospital burden. Under this proposed process, the hospitals
would be required to meet all of the requirements specified in section
XVI.E. of the CY 2011 OPPS/ASC proposed rule. We are finalizing this
proposal in this final rule with comment period. While there is burden
associated with filing a reconsideration request, section 5 CFR 1320.4
of the Paperwork Reduction Act of 1995 regulations excludes collection
activities during the conduct of administrative actions such as re-
determinations, reconsiderations, and/or appeals.
We did not receive any public comments on these information
collection requirements.
5. Additional Topics
In addition to seeking OMB approval for the information collection
requirements associated with the HOP QDRP and the data validation
processes, we sought public comment on several issues that may
ultimately affect the burden associated with the HOP QDRP and
associated data validation processes. Specifically, in the proposed
rule we proposed to adopt quality measures for the CY 2012 through CY
2014 payment determinations, as well as sought comments on other
possible quality measures under consideration for adoption into the HOP
QDRP. We also solicited public comments on the use of registries to
comply with the HOP QDRP submission requirements, the use of EHRs as a
data submission tool, the use of a standardized process for the
retirement of HOP QDRP quality

[[Page 72114]]

measures, the continued use of an extraordinary circumstance extension
or waiver for reporting quality data, and additional data validation
conditions that we are considering adopting beginning with the CY 2013
payment determination.
Comments and responses for the issues of registries, EHRs, quality
measure retirements, the continued use of an extraordinary circumstance
extension or waiver for reporting quality data, and additional data
validation conditions are addressed in section XVI. of this final rule
with comment period.

XIX. Response to Comments

Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this final rule
with comment period, and, when we proceed with a subsequent
document(s), we will respond to those comments in the preamble to that
document(s).

XX. Regulatory Impact Analysis

A. Overall Impact

We have examined the impacts of this final rule with comment period
as required by Executive Order 12866 (September 1993, Regulatory
Planning and Review), the Regulatory Flexibility Act (RFA) (September
19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act,
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive
Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C.
804(2)).
1. Executive Order 12866
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules that have economically
significant effects ($100 million or more in any 1 year) or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal government or communities (58 FR
51741).
We estimate that the effects of the OPPS provisions that will be
implemented by this final rule with comment period will result in
expenditures exceeding $100 million in any 1 year. We estimate the
total increase (from changes in this final rule with comment period as
well as enrollment, utilization, and case-mix changes) in expenditures
under the OPPS for CY 2011 compared to CY 2010 to be approximately $3.2
billion. Because this final rule with comment period for the OPPS is
``economically significant'' as measured by the $100 million threshold
and also a major rule under the Congressional Review Act, we have
prepared a regulatory impact analysis that, to the best of our ability,
presents the costs and benefits of this rulemaking. Table 66 of this
final rule with comment period displays the redistributional impact of
the CY 2011 changes on OPPS payment to various groups of hospitals.
We estimate that the effects of the ASC provisions that will be
implemented by this final rule with comment period for the ASC payment
system will result in expenditures exceeding $100 million in any one
year. We estimate the total increase (from changes in this final rule
with comment period as well as enrollment, utilization, and case-mix
changes) in expenditures under the ASC payment system for CY 2011
compared to CY 2010 to be approximately $230 million. Because this
final rule with comment period for the ASC payment system is
``economically significant'' as measured by the $100 million threshold
and also a major rule under the Congressional Review Act, we have
prepared a regulatory impact analysis of changes to the ASC payment
system that, to the best of our ability, presents the costs and
benefits of this rulemaking. Table 68 and Table 69 of this final rule
with comment period display the redistributional impact of the CY 2011
changes on ASC payment, grouped by specialty area and then grouped by
procedures with the greatest ASC expenditures, respectively.
2. Regulatory Flexibility Act (RFA)
The RFA requires agencies to analyze options for regulatory relief
of small businesses if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Many hospitals, other providers, ASCs, and
other suppliers are considered to be small entities, either by being
nonprofit organizations or by meeting the Small Business Administration
(SBA) definition of a small business (hospitals having revenues of
$34.5 million or less in any 1 year and ASCs having revenues of $10
million or less in any 1 year). (For details on the latest standards
for health care providers, we refer readers the SBA's Web site at:
http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer to the 620000 series).)
For purposes of the RFA, we have determined that many hospitals and
most ASCs will be considered small entities according to the SBA size
standards. Individuals and States are not included in the definition of
a small entity. Therefore, the Secretary has determined that this final
rule with comment period will have a significant impact on a
substantial number of small entities. Because we acknowledge that many
of the affected entities are small entities, the analyses presented
throughout this final rule with comment period constitute our
regulatory flexibility analysis. Therefore, in the CY 2011 OPPS/ASC
proposed rule (75 FR 46441), we solicited public comments on our
estimates and analyses of the impact of the proposed rule on those
small entities.
3. Small Rural Hospitals
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. With
the exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we now define a small rural
hospital as a hospital that is located outside an urban area and has
fewer than 100 beds. Section 601(g) of the Social Security Amendments
of 1983 (Pub. L. 98-21) designated hospitals in certain New England
counties as belonging to the adjacent urban areas. Thus, for OPPS
purposes, we continue to classify these hospitals as urban hospitals.
We believe that the changes to the OPPS in this final rule with comment
period will affect both a substantial number of rural hospitals as well
as other classes of hospitals and that the effects on some may be
significant. Also, the changes to the ASC payment system in this final
rule with comment period will affect rural ASCs. Therefore, the
Secretary has determined that this final rule with comment period will
have a significant impact on the operations of a substantial number of
small rural hospitals.
4. Unfunded Mandates
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)

[[Page 72115]]

also requires that agencies assess anticipated costs and benefits
before issuing any rule whose mandates require spending in any 1 year
of $100 million in 1995 dollars, updated annually for inflation. That
threshold level is currently approximately $135 million. This final
rule with comment period will not mandate any requirements for State,
local, or tribal governments, nor will it affect private sector costs.
5. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct costs on State and local
governments, preempts State law, or otherwise has Federalism
implications.
We have examined the OPPS and ASC provisions included in this final
rule with comment period in accordance with Executive Order 13132,
Federalism, and have determined that they will not have a substantial
direct effect on State, local or tribal governments, preempt State law,
or otherwise have a Federalism implication. As reflected in Table 66
below, we estimate that OPPS payments to governmental hospitals
(including State and local governmental hospitals) will increase by 2.9
percent under this final rule with comment period. While we do not know
the number of ASCs with government ownership, we anticipate that it is
small. We believe that the provisions related to payments to ASCs in CY
2011 will not affect payments to any ASCs owned by government entities.
The following analysis, in conjunction with the remainder of this
document, demonstrates that this final rule with comment period is
consistent with the regulatory philosophy and principles identified in
Executive Order 12866, the RFA, and section 1102(b) of the Act.
This final rule with comment period will affect payments to a
substantial number of small rural hospitals and a small number of rural
ASCs, as well as other classes of hospitals and ASCs, and some effects
may be significant.

B. Effects of OPPS Changes in This Final Rule With Comment Period

We are making several changes to the OPPS that are required by the
statute. We are required under section 1833(t)(3)(C)(ii) of the Act to
update annually the conversion factor used to determine the APC payment
rates. We also are required under section 1833(t)(9)(A) of the Act to
revise, not less often than annually, the wage index and other
adjustments, including pass-through payments and outlier payments. In
addition, we must review the clinical integrity of payment groups and
weights at least annually. Accordingly, in this final rule with comment
period, we are updating the conversion factor and the wage index
adjustment for hospital outpatient services furnished beginning January
1, 2011, as we discuss in sections II.B. and II.C., respectively, of
this final rule with comment period. We discuss our implementation of
section 10324 of the Affordable Care Act, as amended by HCERA,
authorizing a wage index of 1.00 for certain frontier states. We also
are revising the relative APC payment weights using claims data for
services furnished from January 1, 2009, through December 31, 2009, and
updated cost report information. We are continuing the current payment
adjustment for rural SCHs, including EACHs. Finally, we list the 18
drugs and biologicals in Table 27 of this final rule with comment
period that we are removing from pass-through payment status for CY
2011.
Under this final rule with comment period, we estimate that the
update change to the conversion factor and other adjustments (but not
including the effects of outlier payments, pass through estimates, the
expiration of section 508 wages on September 30, 2010, and the
application of the frontier wage adjustment for CY 2011) as provided by
the statute, will increase total OPPS payments by 2.3 percent in CY
2011. The changes to the APC weights, the changes to the wage indices,
and the continuation of a payment adjustment for rural SCHs, including
EACHs, will not increase OPPS payments because these changes to the
OPPS are budget neutral. However, these updates do change the
distribution of payments within the budget neutral system as shown in
Table 66 below and described in more detail in this section. We also
estimate that the total change in payments between CY 2010 and CY 2011,
considering all payments, including changes in estimated total outlier
payments, pass through payments, the expiration of additional money for
specified section 508 reclassification and special exception wages
indices, and the application of the frontier adjustment outside of
budget neutrality, in addition to the application of the hospital
market basket will increase total OPPS payments by 2.5 percent.
1. Alternatives Considered
Alternatives to the changes we are making and the reasons that we
have chosen the options are discussed throughout this final rule with
comment period. Some of the major issues discussed in this final rule
with comment period and the options considered are discussed below.
a. Alternatives Considered for the Extension of Waiver of
Deductible to Services Furnished in Connection With or in Relation to a
Colorectal Screening Test That Becomes Diagnostic
Section 4104(c)(2) of the Affordable Care Act waives the deductible
with respect to a colorectal cancer screening test regardless of the
code that is billed for the establishment of a diagnosis as a result of
the test, or for the removal of tissue or other matter or other
procedure that is furnished in connection with, as a result of, and in
the same clinical encounter as a screening test. We are finalizing our
proposal for CY 2011 that the deductible be waived for all surgical
services furnished on the same date as a planned screening colonoscopy,
planned flexible sigmoidoscopy, or barium enema as being furnished in
connection with, as a result of, and in the same clinical encounter as
the screening test. As discussed in detail in XII.B.3. of this final
rule with comment period, we are implementing this provision by
creating a HCPCS modifier that hospitals will append to the diagnostic
procedure code that is reported instead of the screening colonoscopy or
screening flexible sigmoidoscopy HCPCS code or as a result of the
barium enema when the screening test becomes a diagnostic service. The
claims processing system will respond to the modifier by waiving the
deductible for all surgical services on the same date as the diagnostic
test. Coinsurance or copayment will continue to apply to the diagnostic
test and other services furnished in connection with, as a result of,
and in the same clinical encounter as the screening test.
We considered three alternatives for the extension of wavier of
deductible to services furnished in connection with or in relation to a
colorectal screening test that becomes diagnostic for CY 2011. The
first alternative we considered was to define a limited set of
colonoscopy codes to which the waiver could apply when performed on the
same date as a procedure that began as a screening colonoscopy,
screening flexible sigmoidoscopy, or barium enema. We did not choose
this alternative because it is virtually impossible to create a valid
and complete list of appropriate procedures to handle all situations,
due to the range of problems that could be identified and complications
that could occur with any invasive procedures.

[[Page 72116]]

Furthermore, we believe this alternative would be complex to
implement. Although this alternative narrows the potential for
hospitals to abuse the waiver of the deductible by applying it to
unrelated services, we believe the potential for abuse of the waiver of
the deductible to be minimal. The Part B deductible is a fixed amount
that the beneficiary pays before Medicare begins to pay and typically
will be met after receiving one to two services.
The second alternative we considered was to define a broader, but
still limited set of codes (for example, selected surgical services) to
which the waiver would apply when performed on the same date as a
procedure that began as a screening colonoscopy, screening flexible
sigmoidoscopy, or barium enema. Although this alternative would
encompass a broader set of codes, we believe it is virtually impossible
to create a valid and complete list of appropriate procedures to handle
all situations, due to the range of problems that could be identified
and complications that could occur with any invasive procedures. While
we acknowledge that this alternative would narrow the potential for
abuse of the waiver of the deductible, we believe the potential for
abuse is minimal and that this alternative also would be complex to
implement. For these reasons we did not choose to define a broader set
of limited codes to which the waiver could apply when performed on the
same date as a procedure that began as a screening colonoscopy,
screening flexible sigmoidoscopy, or barium enema.
The third alternative we considered, and the one we are adopting
for CY 2011, is to apply the waiver to any surgical procedure that is
reported with the same date as a screening colonoscopy, flexible
sigmoidoscopy, or barium enema and that providers report is ``in
connection with or as a result of'' the procedure that began as a
screening test. As we discuss in detail in section XII.B.3. of this
final rule with comment period, we have created HCPCS modifier ``PT''
that providers will append to the diagnostic procedure code that is
reported instead of the screening colonoscopy or screening flexible
sigmoidoscopy HCPCS code or as a result of the barium enema when the
screening test becomes a diagnostic service. We chose this alternative
because we believe it provides the greatest ease of public
understanding and provider application. We believe that this
alternative is appropriate because we believe that it will be very rare
for an unrelated surgery to occur on the same date as one of these
scheduled screening tests. Moreover, we believe that the risk of
improper expenditures will be very small under this policy because it
is the deductible, and not the coinsurance, that is waived for the
related procedures other than the screening tests. As noted above, the
Part B deductible is a fixed amount that the beneficiary pays before
Medicare begins to pay and typically will be met after receiving one to
two services.
b. Alternatives Considered for Payment of the Acquisition and Pharmacy
Overhead Costs of Drugs and Biologicals That Do Not Have Pass-Through
Status
We are finalizing our proposal that, for CY 2011, the OPPS will
make payment for separately payable drugs and biologicals under the
methodology that we proposed, which, for CY 2011, results in payment
for separately paid drugs and biologicals at ASP+5 percent. This
payment will continue to represent combined payment for both the
acquisition and pharmacy overhead costs of separately payable drugs and
biologicals. As discussed in detail in section V.B.3. of this final
rule with comment period, we believe that approximately $150 million of
the estimated $457 million in pharmacy overhead cost currently
attributed to coded packaged drugs with an ASP and $50 million of the
overhead cost currently attributed to uncoded packaged drugs without an
ASP should, instead, be attributed to separately payable drugs and
biologicals to provide an adjustment for the pharmacy overhead costs of
these separately payable products. As a result, we also are reducing
the cost of packaged drugs and biologicals that is included in the
payment for procedural APCs to offset the $200 million adjustment to
payment for separately payable drugs and biologicals. We are finalizing
our proposal that any redistribution of pharmacy overhead cost that may
arise from CY 2011 final rule claims data will occur only from some
drugs and biologicals to other drugs and biologicals, thereby
maintaining the estimated total cost of drugs and biologicals under the
OPPS.
We considered three alternatives for payment of the acquisition and
pharmacy overhead costs of drugs and biologicals that do not have pass-
through status for CY 2011. The first alternative we considered was to
continue our standard policy of comparing the estimated aggregate cost
of separately payable drugs and biologicals in our claims data to the
estimated aggregate ASP dollars for separately payable drugs and
biologicals, using the ASP as a proxy for average acquisition cost, to
calculate the estimated percent of ASP that will serve as the best
proxy for the combined acquisition and pharmacy overhead costs of
separately payable drugs and biologicals (70 FR 68642). Under this
standard methodology, using July 2010 ASP information and costs derived
from CY 2009 OPPS final rule claims data, we estimated the combined
acquisition and overhead costs of separately payable drugs and
biologicals to be ASP minus 1 percent. As discussed in section V.B.3.
of this final rule with comment period, we also determined that the
combined acquisition and overhead costs of packaged drugs are 296
percent of ASP. We did not choose this alternative because we believe
that this analysis indicates that our standard drug payment methodology
has the potential to ``compress'' the calculated costs of separately
payable drugs and biologicals to some degree. Further, we recognize
that the attribution of pharmacy overhead costs to packaged or
separately payable drugs and biologicals through our standard drug
payment methodology of a combined payment for acquisition and pharmacy
overhead costs depends, in part, on the treatment of all drugs and
biologicals each year under our annual drug packaging threshold.
Changes to the packaging threshold may result in changes to payment for
the overhead cost of drugs and biologicals that do not reflect actual
changes in hospital pharmacy overhead cost for those products.
The second alternative we considered was to adopt the APC Panel's
February 2010 recommendation to redistribute a larger portion of the
overhead cost from packaged drugs to separately payable drugs for
payment of drugs and biologicals that do not have pass-through status.
We did not choose this alternative because, as we discussed in V.B.3.
of this final rule with comment period, we are not confident that we
know the amount of overhead cost available for redistribution in the
uncoded packaged drugs and, therefore, do not know if it is appropriate
to redistribute more payment from uncoded packaged drugs to separately
paid drugs. Presenters at the February 2010 APC Panel meeting provided
analyses suggesting that the uncoded packaged drug cost contain exactly
the same drugs as those in the coded packaged drug cost, leading to a
recommendation that we could assume the same proportional amount of
overhead cost appears in the uncoded packaged drug cost as observed in
the coded packaged drug cost in order to increase the amount of
``overhead'' drug

[[Page 72117]]

cost available for redistribution from uncoded packaged drugs to
separately payable drugs. Public comments on the proposed rule make
comparable comments, and presenters at the August 2010 APC Panel
meeting reiterated their recommended assumption of comparable overhead
amounts. However, we do not believe we should assume that the costs
reported under uncoded pharmacy revenue code lines are for the same
drugs and biologicals, with the same ASPs, and overhead costs as the
costs of packaged drugs and biologicals reported with a HCPCS code. For
these reasons, we are not accepting the APC Panel's recommendation to
redistribute a larger portion of overhead costs from packaged drugs to
separately payable drugs for CY 2011.
The third alternative we considered and the one we selected for CY
2011 is to continue our CY 2010 redistribution methodology and
redistribute $200 million in overhead costs from packaged coded and
uncoded drugs to separately payable drugs which will result in a
payment for non-pass-through separately payable drugs and biologicals
at ASP+5 percent, which will continue to represent a combined payment
for both the acquisition costs of separately payable drugs and the
pharmacy overhead costs applicable to these products. We also are
reducing the cost of packaged drugs that is included in the payment for
procedural APCs to offset the $200 million adjustment to payment for
separately payable drugs and biologicals, resulting in payment for
packaged drugs and biologicals of ASP+198 percent. We chose this
alternative because we believe that it provides the most appropriate
redistribution of pharmacy overhead costs associated with drugs and
biologicals, based on the analyses discussed in section V.B.3. of this
final rule with comment period, and is the alternative that is most
consistent with the principles of a prospective payment system.
c. Alternatives Considered for the Physician Supervision of Hospital
Outpatient Services
Our proposed revision to our requirement for direct supervision of
therapeutic services provided to hospital and CAH outpatients attempted
to address industry concerns brought to our attention since we issued
our CY 2010 final rule with comment period. The primary issue raised by
CAHs, rural hospitals and other small hospitals following CY 2010
rulemaking was difficulty in staffing their facilities to meet our
requirement for direct supervision of all outpatient therapeutic
services, but especially services that involve a significant amount of
monitoring by auxiliary staff, that may extend past regular business
hours, and that typically are lower clinical complexity and risk. Our
proposal to establish a limited set of ``non-surgical extended duration
therapeutic services'' (extended duration services) was designed to
address these issues. For these services, we proposed to require only a
minimum of direct supervision during an initial period, followed by
general supervision for the remainder of the service. Public commenters
appreciated our attempt to offer flexibility through our proposal for
non-surgical extended duration services, but made several additional
requests. First, they note that direct supervision should require the
supervising physician or nonphysician practitioner be available, but
not specify a physical location. Commenters also requested that CMS
adopt general supervision for all therapeutic services. They noted that
there are other types of outpatient services that they believe qualify
for general supervision, and they made extensive requests for an
independent assessment of the clinically appropriate supervision level
for any given outpatient service. In order to address these concerns
while maintaining an adequate level of safety and quality of care, we
are finalizing a supervision policy with the following four components:
1. We are maintaining our default requirement for direct
supervision of all outpatient therapeutic services. However, we are
revising our definition of direct supervision of both outpatient
therapeutic and diagnostic services (except for diagnostic services
provided under arrangement in non-hospital locations) to require only
``immediate availability,'' meaning physically immediately available,
without specifying a particular physical boundary.
2. Through rulemaking for CY 2012, we will develop a process to
consider industry requests for alternative service-specific supervision
levels that will include an independent technical advisory committee,
potentially the APC Panel.
3. In the interim, we are extending for one year (through CY 2011)
our notice of non-enforcement of the current policy for direct
supervision of all outpatient therapeutic services furnished in CAHs
(http://www.cms.gov/HospitalOutpatientPPS/Downloads/WebNotice.pdf).
Because CAHs and small rural hospitals paid under the OPPS face
comparable staffing challenges, we are extending this provision to
hospitals geographically located in a rural area or designated to be
located in a rural area for their wage index that have 100 or fewer
beds.
4. Finally, for CY 2011, we are finalizing our proposal to
establish a limited set of nonsurgical extended duration services for
which we would allow direct supervision during the initiation of the
service followed by general supervision for the remainder of service at
the discretion of the supervising physician or nonphysician
practitioner. The list of nonsurgical extended duration therapeutic
services subject to this policy for CY 2011 appears in Table 48A of
this final rule with comment period.
We considered two alternatives that we believed may have increased
flexibility while sustaining our payment requirement for direct
supervision of therapeutic hospital outpatient services provided
incident to physicians' services. First, we considered offering
hospitals the flexibility of broadening the list of extended duration
services to include more complex and potentially acute services like
chemotherapy administration and blood transfusions, which some
stakeholders also maintain do not require direct supervision. Because
we were concerned that these services had a higher probability of
needing a physician or nonphysician practitioner to furnish assistance
and direction through provision of the service, we had reasoned that we
could require hospitals to create internal guidelines specifying a
supervision level and protocols for staffing that supervision level for
every extended duration service, including chemotherapy administration
and blood transfusions. We considered minimum requirements for these
internal supervision guidelines, including annual review and approval
by a governing committee, periodic internal evaluation, and the ability
to make these guidelines available to auditors if requested. Further,
auditors would review those guidelines if a quality or patient safety
event were to occur. Fundamentally, we did not choose this policy
because, while many commenters liked this option for the flexibility
that it offered, it did not address commenters fundamental concern that
our uniform requirement for direct supervision as a condition of
payment did not consider the relative risk for needing a supervising
physician or nonphysician practitioner's physical presence against the
cost of providing direct supervision. Because commenters disagreed
about the appropriate level of supervision for individual services,
such as chemotherapy, and because we continue

[[Page 72118]]

to believe supervision is a key component of the service Medicare
purchases for its beneficiaries, we believe that an independent entity,
whether the APC Panel or other technical committee, should evaluate
services for the appropriate supervision level, potentially something
other than direct supervision, to support provision of a safe, quality
service. We also did not choose this alternative because some
commenters did believe the policy would be burdensome to implement and
maintain. Finally, we rejected this alternative because a variable
standard of supervision across hospitals could be administratively
difficult for us to audit and evaluate.
Second, we considered whether to exclude CAHs from the requirements
for direct supervision of therapeutic services. We considered limiting
CAHs to their CoPs, which in effect only require them to operate under
general supervision. We also considered extending the notice of
nonenforcement while we further develop policies. As discussed above,
we believe there are strong grounds for applying the same supervision
requirements to CAHs as to all other hospitals. One of these grounds is
that hospital outpatient services are furnished ``incident to''
physicians' services, and we believe that the incident to rules apply
equally to critical access and other types of hospitals. We continue to
believe that Medicare should purchase the same basic level of quality
and safe outpatient care for all beneficiaries, whether from a CAH, a
small rural hospital, or other hospitals. Moreover, having reviewed
public comments, we do not believe it is safe to permit general
supervision of all hospital outpatient therapeutic services. At the
same time, we acknowledge that in order to purchase the same outpatient
care from CAHs as other hospitals, we need to have a national
discussion about what constitutes the appropriate supervision for a
given service. Therefore, we decided to extend the notice of
nonenforcement for CAHs, as well as adding in small rural hospitals,
while we propose and finalize a process for evaluating service-specific
supervision levels.
We believe that the policies in this final rule will address
industry concerns while maintaining an adequate level of safety and
quality of care in the hospital outpatient services that Medicare
purchases.
2. Limitations of Our Analysis
The distributional impacts presented here are the projected effects
of the CY 2011 policy changes on various hospital groups. We post on
the CMS Web site our hospital-specific estimated payments for CY 2011
with the other supporting documentation for this final rule with
comment period. To view the hospital-specific estimates, we refer
readers to the CMS Web site at: http://www.cms.hhs.gov/
HospitalOutpatientPPS/. Select ``regulations and notices'' from the
left side of the page and then select ``CMS-1504-FC'' from the list of
regulations and notices. The hospital-specific file layout and the
hospital-specific file are listed with the other supporting
documentation for this final rule with comment period. We show
hospital-specific data only for hospitals whose claims were used for
modeling the impacts shown in Table 66 below. We do not show hospital-
specific impacts for hospitals whose claims we were unable to use. We
refer readers to section II.A.2. of this final rule with comment period
for a discussion of the hospitals whose claims we do not use for
ratesetting and impact purposes.
We estimate the effects of the individual policy changes by
estimating payments per service, while holding all other payment
policies constant. We use the best data available, but do not attempt
to predict behavioral responses to our policy changes. In addition, we
do not make adjustments for future changes in variables such as service
volume, service mix, or number of encounters. As we have done in
previous rules, in the CY 2011 OPPS/ASC proposed rule (75 FR 46445), we
solicited public comment and information about the anticipated effects
of our changes on providers and our methodology for estimating them.
We received many public comments on the proposed changes to payment
policies and to proposed payment rates for the CY 2011 OPPS. We have
summarized these public comments and provided our responses to them in
other sections of this final rule with comment period as part of our
discussions of the specific topics to which the comments pertained. We
did not receive any public comments on our methodology for estimating
the anticipated effects of our proposed changes on providers or other
parties. For the reasons set forth in the proposed rule (75 FR 46444),
we are finalizing our proposed methodology for estimating the
anticipated effects of our proposed changes on providers or other
parties.
3. Estimated Effects of This Final Rule with Comment Period on
Hospitals
Table 66 below shows the estimated impact of this final rule with
comment period on hospitals. Historically, the first line of the impact
table, which estimates the change in payments to all hospitals, has
always included cancer and children's hospitals, which are held
harmless to their pre-BBA payment-to-cost ratio. As discussed in
section II.F. of this final rule with comment period, we are not
finalizing our proposal to extend an adjustment to certain cancer
hospitals under section 3138 of the Affordable Care Act. Because these
hospitals will continue to receive hold harmless payments, per our
standard policy, we have excluded them from this impact table. We also
include CMHCs in the first line that includes all providers because we
include CMHCs in our weight scalar estimate.
We present separate impacts for CMHCs in Table 66 because CMHCs are
paid only for partial hospitalization services and CMHCs are a
different provider type from hospitals. For CY 2010, CMHCs and
hospitals were paid under two APCs for services under the OPPS: APC
0172 (Level 1 Partial Hospitalization (3 services)) and APC 0173 (Level
II Partial Hospitalization (4 or more services)). For CY 2011, we are
paying CMHCs under APC 0172 (Level I Partial Hospitalization (3
services) for CMHCs) and APC 0173 (Level II Partial Hospitalization (4
or more services) for CMHCs), and we are paying hospitals for partial
hospitalization services under APC 0175 (Level I Partial
Hospitalization (3 services) for Hospital-based PHPs) and APC 0176
(Level II Partial Hospitalization (4 or more services) for Hospital-
based PHPs). We display the impact on CMHCs of this policy change below
and we discuss the impact on CMHCs in section XX.B.4. of this final
rule with comment period.
The estimated increase in the total payments made under the OPPS is
limited by the increase to the conversion factor set under the
methodology in the statute. The distributional impacts presented do not
include assumptions about changes in volume and service mix. The
increase to the conversion factor is reduced by 0.25 percentage point
as required by section 3401(i) of the Affordable Care Act and as
amended by section 10319(g) of such Act and further amended by section
1105(e) of such Act. Section 3137 of the Affordable Care Act, as
amended by the HCERA, extended additional payment to section 508
reclassification hospitals and special exception hospital wages outside
budget neutrality through September 30, 2010. The amounts attributable
to these reclassifications are incorporated into the CY 2010 estimates
in Table 66. Section 10324 of the Affordable Care Act, as amended by
HCERA, further authorized additional

[[Page 72119]]

expenditures outside budget neutrality for hospitals in certain
frontier States to have a wage index of 1.00. The amounts attributable
to this frontier State wage index adjustment are incorporated into the
CY 2011 estimates in Table 66.
Table 66 shows the estimated redistribution of hospital and CMHC
payments among providers as a result of APC reconfiguration and
recalibration; wage indices and the rural adjustment; the combined
impact of the APC recalibration, wage and rural adjustment effects, and
the market basket update to the conversion factor; the frontier State
wage index adjustment; and, finally, estimated redistribution
considering all payments for CY 2011 relative to all payments for CY
2010, including the impact of changes in estimated outlier payments,
expiring section 508 wage indices, and changes to the pass-through
payment estimate. We did not model an explicit budget neutrality
adjustment for the rural adjustment for SCHs because we are not making
any changes to the policy for CY 2011. Because the updates to the
conversion factor, including the update of the market basket, less the
market basket reduction authorized under the Affordable Care Act, and
the subtraction of additional money dedicated to pass-through payment
for CY 2011, are applied uniformly across services, observed
redistributions of payments in the impact table for hospitals largely
depend on the mix of services furnished by a hospital (for example, how
the APCs for the hospital's most frequently furnished services will
change), and the impact of the wage index changes on the hospital.
However, total payments made under this system and the extent to which
this final rule with comment period will redistribute money during
implementation also will depend on changes in volume, practice
patterns, and the mix of services billed between CY 2010 and CY 2011 by
various groups of hospitals, which CMS cannot forecast.
Overall, the OPPS rates for CY 2011 will have a positive effect for
providers paid under the OPPS, resulting in a 2.5 percent estimated
increase in Medicare payments. Removing cancer and children's hospitals
because their payments are held harmless to the pre-OPPS ratio between
payment and cost and CMHCs suggests that these changes will result in a
2.8 percent estimated increase in Medicare payments to all other
hospitals.
To illustrate the impact of the final CY 2011 changes, our analysis
begins with a baseline simulation model that uses the final CY 2010
weights, the FY 2010 final IPPS wage indices that include
reclassifications, and the final CY 2010 conversion factor. Column 2 in
Table 66 shows the independent effect of the changes resulting from the
reclassification of services among APC groups and the recalibration of
APC weights, based on 12 months of CY 2009 OPPS hospital claims data
and the most recent cost report data. We modeled the effect of the APC
recalibration changes for CY 2011 by varying only the weights (the
final CY 2010 weights versus the final CY 2011 weights calculated using
the service mix and volume in the CY 2009 claims used for this final
rule with comment period) and calculating the percent difference in
weight. Column 2 also reflects the effect of the changes resulting from
the APC reclassification and recalibration changes and any changes in
multiple procedure discount patterns or conditional packaging that
occur as a result of the changes in the relative magnitude of payment
weights.
Column 3 reflects the independent effects of the updated wage
indices, including the application of budget neutrality for the rural
floor policy on a nationwide basis. This column excludes the effects of
the frontier wage index adjustment, which is not budget neutral and is
shown in column 5. We did not model a budget neutrality adjustment for
the rural adjustment for SCHs because we are making no changes to the
policy for CY 2011. We modeled the independent effect of updating the
wage indices by varying only the wage indices, holding APC relative
weights, service mix, and the rural adjustment constant and using the
CY 2011 scaled weights and a CY 2010 conversion factor that included a
budget neutrality adjustment for the effect of changing the wage
indices between CY 2010 and CY 2011.
Column 4 demonstrates the combined ``budget neutral'' impact of APC
recalibration (that is, Column 2), the wage index update (that is,
Column 3), as well as the impact of updating the conversion factor with
the adjusted OPD fee schedule increase (also commonly known as the
market basket update, in this case, the 2.6 percent hospital market
basket update less the 0.25 percentage point reduction required by the
Affordable Care Act). We modeled the independent effect of the budget
neutrality adjustments and the adjusted OPD fee schedule increase by
using the weights and wage indices for each year, and using a CY 2010
conversion factor that included the adjusted OPD fee schedule increase
and a budget neutrality adjustment for differences in wage indices.
Column 5 demonstrates the impact of the budget neutral adjustments
and the OPD fee schedule increase reflected in Column 4 combined with
the non-budget neutral frontier State wage index adjustment, discussed
in section II.C.1. of this final rule with comment period.
Finally, Column 6 depicts the full impact of the CY 2011 policies
on each hospital group by including the effect of all the changes for
CY 2011 (including the APC reconfiguration and recalibration shown in
Column 2) and comparing them to all estimated payments in CY 2010
(these CY 2010 estimated payments include the payments resulting from
the non-budget neutral increases to wage indices under section 508 of
Public Law 108-173 as extended by Public Law 111-148 through September
30, 2010). Column 6 shows the combined budget neutral effects of
Columns 2 through 4, plus the impact of the frontier State wage index
adjustment; the change to the fixed-dollar outlier threshold from
$2,175 to $2,025 as discussed in section II.G. of this final rule with
comment period; the expiration of section 508 reclassifications; the
change in the HOP QDRP payment reduction for the small number of
hospitals in our impact model that failed to meet the reporting
requirements (see section XVI.D. of this final rule with comment
period); and the impact of increasing the estimate of the percentage of
total OPPS payments dedicated to transitional pass-through payments. Of
the 90 hospitals that failed to meet the HOP QDRP reporting
requirements for the full CY 2010 update (and assumed, for modeling
purposes, to be the same number for CY 2011), we included 11 hospitals
in our model because they had both CY 2009 claims data and recent cost
report data. We estimate that the cumulative effect of all changes for
CY 2011 will increase payments to all providers by 2.5 percent for CY
2011. We modeled the independent effect of all changes in Column 6
using the final weights for CY 2010 and the final weights for CY 2011.
We used the final conversion factor for CY 2010 of $67.241, which was
announced in the notice describing implementation of the Affordable
Care Act provisions (75 FR 45769) and the CY 2011 conversion factor of
$68.876 discussed in section II.B. of this final rule with comment
period.
Column 6 also contains simulated outlier payments for each year. We
used the charge inflation factor used in the FY 2011 IPPS/LTCH PPS
final rule of 4.83 percent (1.0483) to increase individual costs on the
CY 2009 claims, and we used the most recent overall CCR in the July
2010 Outpatient Provider-Specific File (OPSF). Using the CY 2009 claims
and a 4.83 percent

[[Page 72120]]

charge inflation factor, we currently estimate that outlier payments
for CY 2010, using a multiple threshold of 1.75 and a fixed-dollar
threshold of $2,175, will be approximately 0.85 percent of total
payments. Outlier payments of 0.85 percent are incorporated in the CY
2010 comparison in Column 6. We used the same set of claims and a
charge inflation factor of 9.88 percent (1.0988) and the CCRs in the
July 2010 OPSF, with an adjustment of 0.9910, to reflect relative
changes in cost and charge inflation between CY 2009 and CY 2011, to
model the CY 2011 outliers at 1.0 percent of estimated total payments
using a multiple threshold of 1.75 and a fixed-dollar threshold of
$2,025.
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 66 shows the total number of
providers (4,185), including designated cancer and children's hospitals
and CMHCs for which we were able to use CY 2009 hospital outpatient
claims to model CY 2010 and CY 2011 payments, by classes of hospitals.
We excluded all hospitals for which we could not accurately estimate CY
2010 or CY 2011 payment and entities that are not paid under the OPPS.
The latter entities include CAHs, all-inclusive hospitals, and
hospitals located in Guam, the U.S. Virgin Islands, Northern Mariana
Islands, American Samoa, and the State of Maryland. This process is
discussed in greater detail in section II.A. of this final rule with
comment period. At this time, we are unable to calculate a
disproportionate share (DSH) variable for hospitals not participating
in the IPPS. Hospitals for which we do not have a DSH variable are
grouped separately and generally include freestanding psychiatric
hospitals, rehabilitation hospitals, and long-term care hospitals. We
show the total number (3,906) of OPPS hospitals, excluding the hold-
harmless cancer and children's hospitals and CMHCs, on the second line
of the table. We excluded cancer and children's hospitals because
section 1833(t)(7)(D) of the Act permanently holds harmless cancer
hospitals and children's hospitals to their proportional payment
relative to reasonable cost prior to payment under the OPPS and,
therefore, we removed them from our impact analyses. We show the
isolated impact on 217 CMHCs at the bottom of the impact table and
discuss that impact separately below.
Column 2: APC Changes Due to Reassignment and Recalibration
This column shows the combined effects of the reconfiguration,
recalibration, and other policies (such as setting payment for
separately payable drugs and biologicals at ASP+5 percent with an
accompanying reduction in the amount of cost associated with packaged
drugs and biologicals and changes in payment for PHP services).
Overall, we estimate that changes in APC reassignment and recalibration
across all services paid under the OPPS will increase payments to urban
hospitals by 0.3 percent. We estimate that both large and other urban
hospitals will see an increase of 0.3 percent, all attributable to
recalibration. We estimate that urban hospitals billing fewer than
5,000 lines for OPPS services will experience an increases of 2.2,
while urban hospitals billing 5,000 or more lines for OPPS services
will see increases of 0.1 to 0.7 percent.
Overall, we estimate that rural hospitals will experience no change
as a result of changes to the APC structure. We estimate that rural
hospitals with fewer than 101 beds will experience decreases of 0.1 to
0.5 percent as a result of APC recalibration and that rural hospitals
with 101 beds or more will experience increases up to 0.4 percent as a
result of APC recalibration. We estimate that rural hospitals that
report fewer than 43,000 lines for OPPS services will experience
decreases of 1.2 to 0.4 percent, while rural hospitals that report
43,000 or more lines for OPPS services will see an increase of 0.1
percent in payment as a result of APC recalibration.
Among teaching hospitals, we estimate that the impact resulting
from APC recalibration will include an increase of 0.4 percent for
major teaching hospitals and an increase of 0.3 for minor teaching
hospitals.
Classifying hospitals by type of ownership suggests that voluntary,
proprietary and governmental hospitals will see an estimated increase
of 0.3 percent as a result of APC recalibration.
Finally, we estimate that hospitals for which DSH payments are not
available will experience a decrease of 0.7 to 0.4 percent. We estimate
that most other classes of hospitals will experience modest increases
from CY 2010 to CY 2011 resulting from APC recalibration.
Column 3: New Wage Indices and the Effect of the Rural Adjustment
This column estimates the impact of applying the final FY 2011 IPPS
wage indices for the CY 2011 OPPS without the influence of the frontier
State wage index adjustment or the expiration of the section 508 wage
index adjustment, which are not budget neutral. The frontier State wage
index adjustment is reflected in the combined impact shown in columns 5
and 6. The expiring section 508 adjustment is reflected in column 6. We
are not changing the rural payment adjustment for CY 2011. We estimate
that the combination of updated wage data and nationwide application of
rural floor budget neutrality will redistribute payment among regions.
We also updated the list of counties qualifying for the section 505
out-migration adjustment. Overall, we estimate that urban hospitals
will experience no change from CY 2010 to CY 2011, and that rural
hospitals will experience a decrease of 0.2 percent as a result of the
updated wage indices. We estimate that hospitals in rural New England
States and rural West South Central States will experience increases of
0.8 and 0.7 percent, respectively, while other rural regions will
experience decreases from 0.6 to 0.1 percent. We estimate that
hospitals located in urban New England, East North Central, West South
Central and Pacific regions will experience increases of 0.1 to 0.5
percent while other urban regions will experience no change or
decreases of 0.4 to 0.1 percent.
Column 4: All Budget Neutrality Changes Combined with the Adjusted OPD
Fee Schedule Increase
We estimate that the addition of the adjusted OPD fee schedule
increase factor of 2.35 percent (which includes the reduction to the
OPD fee schedule update factor of a 0.25 percentage point as required
by section 3401(i), 10319(g), and section 1105(e) of the Affordable
Care Act) will mitigate the negative impacts on hospital payments for
CY 2011 created by the budget neutrality adjustments made in Columns 2
and 3. Rural hospitals with fewer than 43,000 lines experience the
smallest increases of between 1.4 and 1.9 percent. In general, Column 4
shows that all hospitals will experience an estimated increase of 2.6
percent, attributable to the 2.35 percent adjusted OPD fee schedule
increase factor combined with the budget neutrality adjustments.
Overall, we estimate that these changes will increase payments to
urban hospitals by 2.7 percent. We estimate that large urban hospitals
will experience an increase of 2.8 percent, and ``other'' urban
hospitals will experience a 2.6 percent increase. We estimate that
rural hospitals will experience a 2.2 percent increase as a result of
the adjusted OPD fee schedule increase factor and other budget
neutrality adjustments. We estimate that urban hospitals that bill less
than 5,000 lines of OPPS services will experience the largest increase
of 4.8 percent and that rural hospitals will experience increases of
1.4 to 2.2 percent.

[[Page 72121]]

Among teaching hospitals, we estimate that the observed impacts
resulting from the adjusted OPD fee schedule increase factor and other
budget neutrality adjustments will include an increase of 2.8 and 2.6
percent, respectively, for major and minor teaching hospitals.
Classifying hospitals by type of ownership suggests that
proprietary and government hospitals will experience estimated
increases of 2.7 percent, while voluntary hospitals will experience
increases of 2.6 percent.
Column 5: Frontier State Wage Index Adjustment
This column shows the impact of all budget neutrality adjustments,
application of the 2.35 percent adjusted OPD fee schedule increase
factor, and the non-budget neutral impact of applying the frontier
State wage adjustment (that is, the frontier State wage index change in
addition to all changes reflected in column 4). In general, we estimate
that all facilities will see a combined increase of 2.4 percent and
that all hospitals will see a combined increase of 2.7 percent.
Hospitals in the rural Mountain Region will see an increase of 4.0
percent as a result of the combined effects of all budget neutrality
adjustments, application of the 2.35 percent adjusted OPD fee schedule
increase factor, and the non-budget neutral impact of applying the
frontier State wage adjustment.
Column 6: All Changes for CY 2011
Column 6 compares all changes for CY 2011 to estimated final
payment for CY 2010, including the change in the outlier threshold,
payment reductions for hospitals that failed to meet the HOP QDRP
reporting requirements, the influence of the expiration of the section
508 wage adjustment, and the difference in pass-through estimates that
are not included in the combined percentages shown in Column 5. This
column includes estimated payment for a handful of hospitals receiving
reduced payment because they did not meet their hospital outpatient
quality measure reporting requirements; however, we estimate that the
anticipated change in payment between CY 2010 and CY 2011 for these
hospitals will be negligible. (We further discuss the estimated impacts
of hospitals' failure to meet these requirements below in section XX.D.
of this final rule with comment period.) Overall, we estimate that
facilities will experience an increase of 2.5 percent under this final
rule with comment period in CY 2011 relative to total spending in CY
2010. The projected 2.5 percent increase for all facilities in Column 6
of Table 66 reflects the 2.35 percent OPD fee schedule increase, less
0.01 percent for the change in the pass-through estimate between CY
2010 and CY 2011, plus 0.15 percent for the difference in estimated
outlier payments between CY 2010 (0.85 percent) and CY 2011 (1.0
percent), and less 0.06 percent due to the expiration of the special,
non-budget neutral wage index payments made under section 508, plus
0.10 percent due to the frontier wage index adjustment. When we exclude
cancer and children's hospitals (which are held harmless to their pre-
OPPS costs) and CMHCs, the estimated increase is 2.8 percent.
We estimate that the combined effect of all changes for CY 2011
will increase payments to urban hospitals by 2.9 percent. We estimate
that large urban hospitals will experience a 2.9 percent increase,
while ``other'' urban hospitals will experience an increase of 2.8
percent. We estimate that urban hospitals that bill less than 5,000
lines of OPPS services will experience an increase of 5.1 percent, and
we estimate that urban hospitals that bill 5,000 or more lines of OPPS
services will experience increases between 2.7 percent and 3.6 percent.
Overall, we estimate that rural hospitals will experience a 2.4
percent increase as a result of the combined effects of all changes for
CY 2011. We estimate that rural hospitals that bill less than 5,000
lines of OPPS services will experience an increase of 3.6 percent and
rural hospitals that bill 5,000 or more lines of OPPS services will
experience increases ranging from 1.9 percent to 2.5 percent.
Among teaching hospitals, we estimate that the impacts resulting
from the combined effects of all changes will include an increase of
3.0 percent for major teaching hospitals and 2.9 percent for minor
teaching hospitals.
Classifying hospitals by type of ownership, we estimate that
voluntary and proprietary hospitals will gain 2.8 percent, and that
governmental hospitals will experience an increase of 2.9 percent.
4. Estimated Effects of This Final Rule With Comment Period on CMHCs
The last line of Table 66 demonstrates the isolated impact on
CMHCs. CMHCs are currently paid under two APCs for services under the
OPPS: APC 0172 (Level 1 Partial Hospitalization (3 services)) and APC
0173 (Level II Partial Hospitalization (4 or more services)). This
final rule with comment period further refines payment within these
partial hospitalization APCs for CY 2011 by providing two payment rates
for partial hospitalization services for each provider type (CMHCs and
hospital-based PHPs). Specifically, APC 0172 is retitled: ``Level I
Partial Hospitalization (3 services) for CMHCs;'' APC 0173 is retitled:
``Level II Partial Hospitalization (4 or more services) for CMHCs;''
new APC 0175 is titled: ``Level I Partial Hospitalization (3 services)
for Hospital-Based PHPs'' and new APC 0176 is titled: ``Level II
Partial Hospitalization (4 or more services) for Hospital-Based PHPs.''
We are adopting payment rates for each APC based on the cost data
derived from claims and cost reports for the provider type to which the
APC is specific and are providing a 2-year transition to CMHC rates
based solely on CMHC data for the two CMHC PHP per diem rates. For CY
2011, we are calculating the CMHC PHP APC Level I and Level II rates by
taking 50 percent of the difference between the CY 2010 final hospital-
based medians and the CY 2011 final CMHC medians and adding that number
to the CY 2011 final CMHC medians. We modeled the impact of this APC
policy change assuming that CMHCs will continue to provide the same
number of days of PHP care, with each day having either three services
or four or more services, as seen in the CY 2009 claims data. We
excluded days with one or two services. Because the relative weights
for APC 0172 (Level 1 Partial Hospitalization (3 services)) and APC
0173 (Level II Partial Hospitalization (4 or more services)) both
decline in CY 2011 to reflect CMHC cost data for partial
hospitalization services provided by CMHCs under this final rule with
comment period, we estimate that there will be a 24.1 percent decrease
in payments to CMHCs due to these APC policy changes (shown in Column
2).
Column 3 shows that the estimated impact of adopting the CY 2011
wage index values will result in a 0.9 percent increase in payments to
CMHCs. We note that all providers paid under the OPPS, including CMHCs,
will receive a 2.35 percent OPD fee schedule increase. Combining this
OPD fee schedule increase, along with changes in APC policy for CY 2011
and the CY 2011 wage index updates, changes in outlier and pass-though
payments, and the expiration of section 508 wages, we estimate that the
combined impact on CMHCs for CY 2011 will be a 21.1 percent decrease in
payment.
The impact on hospitals of the changes to payment rates to
hospitals for partial hospitalization services is reflected in the
impact of all changes on hospitals.

[[Page 72122]]

All providers paid under the OPPS will receive a 2.35 percent OPD
fee schedule increase under this policy. Combining this OPD fee
schedule increase, along with changes in APC policy for CY 2011 and the
CY 2011 wage index updates, changes in outlier and pass-through
payments, and the expiration of section 508 wages, we estimate that the
combined impact hospitals within the PPS system will be a 2.5 percent
increase in total payment for CY 2011.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR24NO10.314

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[GRAPHIC] [TIFF OMITTED] TR24NO10.315

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[GRAPHIC] [TIFF OMITTED] TR24NO10.316

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[GRAPHIC] [TIFF OMITTED] TR24NO10.317

BILLING CODE 4120-01-C
6. Estimated Effect of This Final Rule With Comment Period on
Beneficiaries
For services for which the beneficiary pays a copayment of 20
percent of the payment rate, the beneficiary share of payment will
increase for services for which the OPPS payments will rise and will
decrease for services for which the OPPS payments will fall. For
example, for a service assigned to Level IV Needle Biopsy/Aspiration
Except Bone Marrow (APC 0037) in the CY 2010 OPPS, the national
unadjusted copayment is $228.76, and the minimum unadjusted copayment
is $208.97. For CY 2011, the national unadjusted copayment for APC 0037
will be $228.76, the same rate in effect for CY 2010. The minimum
unadjusted copayment for APC 0037 will be $216.29 or 20 percent of the
CY 2011 national unadjusted payment rate for APC 0037 of $1,081.42. The
minimum unadjusted copayment will rise because the payment rate for APC
0037 will rise for CY 2011. In all cases, the statute limits
beneficiary liability for copayment for a procedure to the hospital
inpatient deductible for the applicable year. The CY 2010 hospital
inpatient deductible is $1,100. The CY 2011 hospital inpatient
deductible was not known at the time this final rule was written.
In order to better understand the impact of changes in copayment on
beneficiaries, we modeled the percent change in total copayment
liability using CY 2009 claims. We estimate, using the claims of the
4,185 hospitals and CMHCs on which our modeling is based, that total
beneficiary liability for copayments will decline as an overall
percentage of total payments, from 22.3 percent in CY 2010 to 21.9
percent in CY 2011.
7. Conclusion
The changes in this final rule with comment period will affect all
classes of hospitals and CMHCs. We estimate that some classes of
hospitals will experience significant gains and others less significant
gains, but all classes of hospitals will experience positive updates in
OPPS payments in CY 2011 with one exception. We estimate that CMHCs
will see an overall decrease in payment of 21.1 percent during this
first year of a two-year transition to payment rates for partial
hospitalization services

[[Page 72126]]

at CMHCs based on cost report and claims data submitted by CMHCs.
Table 66 demonstrates the estimated distributional impact of the
OPPS budget neutrality requirements that will result in a 2.5 percent
increase in payments for all services paid under the OPPS in CY 2011,
after considering all changes to APC reconfiguration and recalibration,
as well as the adjusted market basket increase, wage index changes,
including the frontier State wage index adjustment and the expiration
of section 508 wage index reclassifications, estimated payment for
outliers, and changes to the pass-through payment estimate. The
accompanying discussion, in combination with the rest of this final
rule with comment period, constitutes a regulatory impact analysis.
8. Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 67, we have
prepared an accounting statement showing the CY 2011 estimated hospital
OPPS incurred benefit impact associated with the CY 2011 OPD fee
schedule increase shown in this final rule with comment period based on
the FY 2011 President's Budget. All estimated impacts are classified as
transfers.

Table 67--Accounting Statement: CY 2011 Estimated Hospital OPPS
Transfers From CY 2010 To CY 2011 Associated With the Final CY 2011
Hospital Outpatient OPD Fee Schedule Increase
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............ $0.7 billion.
From Whom to Whom......................... Federal Government to
outpatient hospitals and
other providers who
received payment under the
hospital OPPS.
Total................................. $0.7 billion.
------------------------------------------------------------------------

C. Effects of ASC Payment System Changes in This Final Rule With
Comment Period

On August 2, 2007, we published in the Federal Register the final
rule for the revised ASC payment system, effective January 1, 2008 (72
FR 42470). In that final rule, we adopted the methodologies to set
payment rates for covered ASC services to implement the revised payment
system so that it will be designed to result in budget neutrality as
required by section 626 of Public Law 108-173; established that the
OPPS relative payment weights will be the basis for payment and that we
will update the system annually as part of the OPPS rulemaking cycle;
and provided that the revised ASC payment rates will be phased in over
4 years. During the 4-year transition to full implementation of the ASC
payment rates, payments for surgical procedures performed in ASCs that
were on the CY 2007 ASC list of covered surgical procedures were made
using a blend of the CY 2007 ASC payment rate and the ASC payment rate
calculated according to the ASC standard ratesetting methodology for
the applicable transitional year. In CY 2009, we paid ASCs using a 50/
50 blend, in which payment was calculated by adding 50 percent of the
CY 2007 ASC rate for a surgical procedure on the CY 2007 ASC list of
covered surgical procedures and 50 percent of the CY 2009 ASC rate
calculated according to the ASC standard ratesetting methodology for
the same procedure. For CY 2010, we transitioned the blend to a 25/75
blend of the CY 2007 ASC rate and the CY 2010 ASC payment rate
calculated according to the ASC standard ratesetting methodology. In CY
2011, we will pay ASCs for all covered surgical procedures, including
those on the CY 2007 ASC list, at the ASC payment rates calculated
according to the ASC standard ratesetting methodology.
ASC payment rates are calculated by multiplying the ASC conversion
factor by the ASC relative payment weight. As discussed fully in
section XV. of this final rule with comment period, we set the CY 2011
ASC relative payment weights by scaling CY 2011 ASC relative payment
weights by the ASC scaler of 0.9238. The estimated effects of the
updated relative payment weights on payment rates during this first
year of full implementation of the ASC payment rates calculated
according to the ASC standard ratesetting methodology are varied and
are reflected in the estimated payments displayed in Tables 68 and 69
below.
Beginning in CY 2011, section 3401 of the Affordable Care Act
requires that the annual update to the ASC payment system, which is the
consumer price index for all urban consumers (CPI-U), be reduced by the
productivity adjustment. The Affordable Care Act defines the
productivity adjustment to be equal to the 10-year moving average of
changes in annual economy-wide private nonfarm business multi-factor
productivity (MFP) (as projected by the Secretary for the 10-year
period ending with the applicable fiscal year, year, cost reporting
period, or other annual period). We calculated the CY 2011 ASC
conversion factor by adjusting the CY 2010 ASC conversion factor by
0.9996 to account for changes in the pre-floor and pre-reclassified
hospital wage indices between CY 2010 and CY 2011 and by applying the
CY 2011 MFP-adjusted CPI-U of 0.2 percent (1.5 percent CPI-U minus 1.3
percent MFP). The CY 2011 ASC conversion factor is $41.939.
1. Alternatives Considered
Alternatives to the changes we are making and the reasons that we
have chosen specific options are discussed throughout this final rule
with comment period. Some of the major ASC issues discussed in this
final rule with comment period and the options considered are discussed
below.
a. Alternatives Considered for Office-Based Procedures
According to our final policy for the revised ASC payment system,
we designate as office-based those procedures that are added to the ASC
list of covered surgical procedures in CY 2008 or later years and that
we determine are predominantly performed in physicians' offices based
on consideration of the most recent available volume and utilization
data for each individual procedure HCPCS code and, if appropriate, the
clinical characteristics, utilization, and volume of related HCPCS
codes. We establish payment for procedures designated as office-based
at the lesser of the MPFS nonfacility practice expense payment amount
or the ASC rate developed according to the standard methodology of the
revised ASC payment system.
In developing this final rule with comment period, we reviewed the
full CY 2009 utilization data for all surgical procedures added to the
ASC list of covered surgical procedures in CY 2008 or later years and
for those procedures for which the office-based designation is
temporary in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60605 through 60608). Based on that review, and as discussed in section
XV.C.1.b. of this final rule with comment period, we are newly
designating two surgical procedures as permanently office-based and
making permanent the office-based designations of three existing
surgical procedures that have temporary office-based designations in CY
2010. In addition, we are making temporary office-based designations
for seven procedures in CY 2011 that were designated as temporarily
office-based for CY 2010. We considered two alternatives in developing
this policy.

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Federal Register / Vol. 75 , No. 226 / Wednesday, November 24, 2010 /
Rules and Regulations
The first alternative we considered was to make no change to the
procedure payment designations. This would mean that we would pay for
the five procedures we are designating as permanently office-based and
the seven procedures we are designating as temporarily office-based at
an ASC payment rate calculated according to the standard ratesetting
methodology of the revised ASC payment system. We did not select this
alternative because our analysis of the data and our clinical review
indicated that all five procedures we are designating as permanently
office-based, as well as the seven procedures that we are designating
temporarily as office-based, are considered to be predominantly
performed in physicians' offices. Consistent with our final policy
adopted in the August 2, 2007 final rule (72 FR 42509 through 42513),
we were concerned that making payments at the standard ASC payment rate
for the five procedures designated as permanently office-based and
seven procedures designated as temporarily office-based could create
financial incentives for the procedures to shift from physicians'
offices to ASCs for reasons unrelated to clinical decisions regarding
the most appropriate setting for surgical care. Further, consistent
with our policy, we believe that when adequate data become available to
make permanent determinations about procedures with temporary office-
based designations, maintaining the temporary designation is no longer
appropriate.
The second alternative we considered and the one we selected for CY
2011 is to designate two additional procedures as permanently office-
based for CY 2011 and to make permanent the office-based designations
of three of the procedures with temporary office-based designations in
CY 2010. We also are designating seven procedures as temporarily
office-based in CY 2011 that were designated as temporarily office-
based for CY 2010. We chose this alternative because our claims data
and clinical review indicate that these procedures could be considered
to be predominantly performed in physicians' offices. We believe that
designating these procedures as office-based, which results in the CY
2011 ASC payment rate for these procedures potentially being capped at
the CY 2011 physicians' office rate (that is, the MPFS nonfacility
practice expense payment amount), if applicable, is an appropriate step
to ensure that Medicare payment policy does not create financial
incentives for such procedures to shift unnecessarily from physicians'
offices to ASCs, consistent with our final policy adopted in the August
2, 2007 final rule.
b. Alternatives Considered for Covered Surgical Procedures
According to our final policy for the revised ASC payment system,
we designate as covered all surgical procedures that we determine would
not be expected to pose a significant risk to beneficiary safety or
would not be expected to require an overnight stay when performed on
Medicare beneficiaries in an ASC.
In developing this final rule with comment period, we reviewed the
clinical characteristics and full CY 2009 utilization data, if
applicable, for all procedures reported by Category III CPT codes
implemented July 1, 2010, and surgical procedures that were excluded
from ASC payment for CY 2010. Based on this review, we identified 8 new
surgical procedures described by Category III CPT codes that were new
for July 2010 and 6 surgical procedures excluded from ASC payment for
CY 2010, that we determined were appropriate for addition to the ASC
list of covered surgical procedures. We considered two alternatives in
developing this policy.
The first alternative we considered was to make no change to the CY
2010 ASC list of covered surgical procedures. We did not choose this
alternative because our analysis of data and clinical review indicated
that the 14 procedures we are designating as covered surgical
procedures for CY 2011 would not be expected to pose a significant risk
to beneficiary safety in ASCs and would not be expected to require an
overnight stay. Consistent with our final policy, we were concerned
that by continuing to exclude them from the list of ASC covered
surgical procedures, we may unnecessarily limit beneficiaries' access
to the services in the most clinically appropriate settings.
The second alternative we considered and the one we selected for CY
2011 was to designate 14 additional procedures as ASC covered surgical
procedures for CY 2011. We chose this alternative because our claims
data and clinical review indicate that these procedures will not be
expected to pose a significant risk to beneficiary safety and will not
be expected to require an overnight stay, and thus they meet the
criteria for inclusion on the list of ASC covered surgical procedures.
We believe that adding these procedures to the list of covered surgical
procedures is an appropriate step to ensure that beneficiary access to
services is not limited unnecessarily.
c. Alternatives Considered for the Extension of Waiver of Deductible to
Services Furnished in Connection With or in Relation to a Colorectal
Screening Test That Becomes Diagnostic
Section 4104(c)(2) of the Affordable Care Act waives the deductible
with respect to a colorectal cancer screening test regardless of the
code that is billed for the establishment of a diagnosis as a result of
the test, or for the removal of tissue or other matter or other
procedure that is furnished in connection with, as a result of, and in
the same clinical encounter as a screening test. We are finalizing our
proposal, without modification, for CY 2011 that the deductible be
waived for all surgical services furnished in an ASC on the same date
as a planned screening colonoscopy or planned flexible sigmoidoscopy as
being furnished in connection with, as a result of, and in the same
clinical encounter as the screening test (we note that barium enemas
are not ASC covered ancillary or surgical procedures). As discussed in
detail under the alternatives considered for the OPPS (section
XX.B.1.a. of this final rule with comment period), we considered three
alternatives for the extension of waiver of deductible to services
furnished in connection with or in relation to a colorectal screening
test that becomes diagnostic for CY 2011. The first alternative we
considered, but did not propose for the reasons previously discussed,
was to define a limited set of colonoscopy codes to which the waiver
could apply when performed on the same date as a procedure that began
as a screening colonoscopy or screening flexible sigmoidoscopy. The
second alternative we considered, but did not propose for the reasons
previously discussed, was to define a broader, but still limited set of
codes (for example, selected surgical services) to which the waiver
could apply when performed on the same date as a procedure that began
as a screening colonoscopy or screening flexible sigmoidoscopy. The
third alternative we considered, and the one we are selecting for CY
2011, is to apply the waiver to any surgical procedure on the same date
as a screening colonoscopy or flexible sigmoidoscopy performed in an
ASC that ASCs report is ``in connection with, as a result of, and in
the same clinical encounter as the screening test.'' As we discuss in
detail in section XII.B.3., we have created HCPCS modifier PT that ASCs
will append to the diagnostic procedure code that is reported instead
of the screening colonoscopy or screening flexible sigmoidoscopy HCPCS
code when the screening test

[[Page 72129]]

becomes a diagnostic service. As already discussed, we chose this
alternative because we believe it provides the greatest ease of public
understanding and ASC application. We believe that this alternative is
appropriate because we believe that it will be very rare for an
unrelated surgery to occur on the same date as one of these scheduled
screening tests. Moreover, we believe that the risk of improper
expenditures will be very small under this policy because it is the
deductible, and not the coinsurance, that is waived for the related
procedures other than the screening tests (that is, the Part B
deductible is a fixed amount that the beneficiary pays before Medicare
begins to pay and typically will be met after receiving one to two
services).
2. Limitations of Our Analysis
Presented here are the projected effects of the changes for CY 2011
on Medicare payment to ASCs. A key limitation of our analysis is our
inability to predict changes in ASC service mix between CY 2009 and CY
2011 with precision. We believe that the net effect on Medicare
expenditures resulting from the CY 2011 changes will be small in the
aggregate for all ASCs. However, such changes may have differential
effects across surgical specialty groups as ASCs continue to adjust to
the payment rates based on the policies of the revised ASC payment
system. We are unable to accurately project such changes at a
disaggregated level. Clearly, individual ASCs will experience changes
in payment that differ from the aggregated estimated impacts presented
below.
3. Estimated Effects of This Final Rule With Comment Period on Payments
to ASCs
Some ASCs are multispecialty facilities that perform the gamut of
surgical procedures, from excision of lesions to hernia repair to
cataract extraction; others focus on a single specialty and perform
only a limited range of surgical procedures, such as eye, digestive
system, or orthopedic procedures. The combined effect on an individual
ASC of the update to the CY 2011 payments will depend on a number of
factors, including, but not limited to, the mix of services the ASC
provides, the volume of specific services provided by the ASC, the
percentage of its patients who are Medicare beneficiaries, and the
extent to which an ASC provides different services in the coming year.
The following discussion presents tables that display estimates of the
impact of the CY 2011 update to the revised ASC payment system on
Medicare payments to ASCs, assuming the same mix of services as
reflected in our CY 2009 claims data. Table 68 depicts the estimated
aggregate percent change in payment by surgical specialty or ancillary
items and services group by comparing estimated CY 2010 payments to
estimated CY 2011 payments, and Table 69 shows a comparison of
estimated CY 2010 payments to estimated CY 2011 payments for procedures
that we estimate will receive the most Medicare payment in CY 2011.
Table 68 shows the estimated effects on aggregate Medicare payments
under the revised ASC payment system by surgical specialty or ancillary
items and services group. We have aggregated the surgical HCPCS codes
by specialty group, grouped all HCPCS codes for covered ancillary items
and services into a single group, and then estimated the effect on
aggregated payment for surgical specialty and ancillary items and
services groups. The groups are sorted for display in descending order
by estimated Medicare program payment to ASCs. The following is an
explanation of the information presented in Table 68.
Column 1--Surgical Specialty or Ancillary Items and
Services Group indicates the surgical specialty into which ASC
procedures are grouped or the ancillary items and services group which
includes all HCPCS codes for covered ancillary items and services. To
group surgical procedures by surgical specialty, we used the CPT code
range definitions and Level II HCPCS codes and Category III CPT codes
as appropriate, to account for all surgical procedures to which the
Medicare program payments are attributed.
Column 2--Estimated ASC Payments were calculated using CY
2009 ASC utilization (the most recent full year of ASC utilization) and
CY 2010 ASC payment rates. The surgical specialty and ancillary items
and services groups are displayed in descending order based on
estimated CY 2010 ASC payments.
Column 3--Estimated CY 2011 Percent Change (Fully
Implemented Payment Rates) is the aggregate percentage increase or
decrease in Medicare program payment to ASCs for each surgical
specialty or ancillary items and services group that will be
attributable to updates to ASC payment rates for CY 2011 compared to CY
2010.
As seen in Table 68, we estimate that the update to ASC rates for
CY 2011 will result in a 0 percent decrease in aggregate payment
amounts for eye and ocular adnexa procedures, a 4 percent decrease in
aggregate payment amounts for digestive system procedures, and a 2
percent increase in aggregate payment amounts for nervous system
procedures.
Generally, for the surgical specialty groups that account for less
ASC utilization and spending, we estimate that the payment effects of
the CY 2011 update are positive. We estimate that ASC payments for
procedures in those surgical specialties will increase in CY 2011. For
instance, we estimate that, in the aggregate, payment for integumentary
system procedures will increase by 5 percent under the CY 2011 rates.
We estimate similar effects for genitourinary, cardiovascular,
musculoskeletal, respiratory, hematologic and lymphatic systems, and
auditory system procedures as well.
An estimated increase in aggregate payment for the specialty group
does not mean that all procedures in the group will experience
increased payment rates. For example, the estimated modest increase for
CY 2011 for nervous system procedures is likely due to increase in the
ASC payment weight for some of the high volume procedures, such as CPT
code 64721 (Neuroplasty and/or transposition; median nerve at carpal
tunnel).
Also displayed in Table 68 is a separate estimate of Medicare ASC
payments for the group of separately payable covered ancillary items
and services. Payment for the current class of New Technology
Intraocular Lenses (NTIOLs) is captured under this category. The
current active class for NTIOLs for reduced spherical aberration
expires on February 26, 2011. Because we did not find sufficient
evidence of clinical benefit to implement a new class of NTIOLs for
blue-light filtering to reduce glare, as discussed in section XV.E. of
this final rule with comment period, we redistributed payment
previously dedicated to separately payment for NTIOLs to other services
for CY 2011. Therefore, we estimate that aggregate payments for these
items and services will decrease by 58 percent for CY 2011. The payment
estimates for the covered surgical procedures include the costs of
packaged ancillary items and services. In rules for years prior to CY
2010, we did not have ASC payment data for covered ancillary items and
services because, prior to CY 2008, they were paid under other fee
schedules or packaged into payment for the covered surgical procedures.
Beginning with the CY 2010 OPPS/ASC rulemaking, we have utilization
data for those services as well as for all of the covered surgical
procedures provided in ASCs under the revised payment system.

[[Page 72130]]

Table 68--Estimated Impact of the Final CY 2011 Update to the ASC Payment System on Aggregate CY 2011 Medicare
Program Payments by Surgical Speciality or Ancillary Items and Services Group
----------------------------------------------------------------------------------------------------------------
Estimated CY 2011
Surgical percent change
specialty Estimated CY 2010 ASC payments (in millions) (fully
group implemented)
-----------------------------------------------------------------------------------------------
(1) (2).............................................................. (3)
----------------------------------------------------------------------------------------------------------------
Total $3,257........................................................... 0
Eye and 1,426............................................................ 0
ocular
adnexa
Digestive 699.............................................................. -4
system
Nervous 391.............................................................. 2
system
Musculosk 350.............................................................. 12
eletal
system
Genitouri 129.............................................................. 9
nary
system
Integumen 122.............................................................. 5
tary
system
Ancillary 68............................................................... -58
items
and
services
Respirato 36............................................................... 17
ry
system
Cardiovas 24............................................................... 7
cular
system
Auditory 8................................................................ 9
system
Hematolog 4................................................................ 16
ic &
lymphati
c
systems
----------------------------------------------------------------------------------------------------------------

Table 69 below shows the estimated impact of the updates to the
revised ASC payment system on aggregate ASC payments for selected
surgical procedures during CY 2011. The table displays 30 of the
procedures receiving the greatest estimated CY 2010 aggregate Medicare
payments to ASCs. The HCPCS codes are sorted in descending order by
estimated CY 2010 program payment.
Column 1-HCPCS code.
Column 2-Short Descriptor of the HCPCS code.
Column 3-Estimated CY 2010 Allowed Charges were calculated
using CY 2009 ASC utilization (the most recent full year of ASC
utilization) and the CY 2010 ASC payment rates. The estimated CY 2010
allowed charges are expressed in millions of dollars.
Column 4-Estimated CY 2011 Percent Change (Fully
Implemented Payment Rates) reflects the percent differences between the
estimated ASC payment for CY 2010 and the estimated payment for CY 2011
based on the update.
As displayed in Table 69, 22 of the 30 procedures with the greatest
estimated aggregate CY 2010 Medicare payment are included in the 3
surgical specialty groups that are estimated to account for the most
Medicare payment to ASCs in CY 2011, specifically eye and ocular
adnexa, digestive system, and nervous system surgical groups.
Consistent with the estimated payment effects on the surgical specialty
groups displayed in Table 68, the estimated effects of the CY 2011
update on ASC payment for individual procedures shown in Table 69 are
varied.
The ASC procedure for which the most Medicare payment is estimated
to be made in CY 2010 is the cataract removal procedure reported with
CPT code 66984 (Extracapsular cataract removal with insertion of
intraocular lens prosthesis (one stage procedure), manual or mechanical
technique (e.g., irrigation and aspiration or phacoemulsification)). We
estimate that the update to the ASC rates will result in a 1 percent
payment decrease for this procedure in CY 2011. The estimated payment
effects on two of the four other eye and ocular adnexa procedures
included in Table 69 are more significant. We estimate that the payment
rate for CPT code 66821 (Discission of secondary membranous cataract
(opacified posterior lens capsule and/or anterior hyaloid); laser
surgery (e.g., YAG laser) (one or more stages)) will decrease by 7
percent and payment for CPT code 67904 (Repair eyelid defect) will
increase by 11 percent.
We estimate that the payment rates for all of the digestive system
procedures included in Table 69 will decrease by 0 to 8 percent in CY
2011. Those estimated decreases are consistent with decreases in the
previous 3 years under the revised ASC payment system and are expected
because, under the previous ASC payment system, the payment rates for
many high volume endoscopy procedures were almost the same as the
payments for the procedures under the OPPS.
The estimated effects of the CY 2011 update on the nine nervous
system procedures for which the most Medicare ASC payment is estimated
to be made in CY 2010 will be variable. Our estimates indicate that the
CY 2011 update will result in payment increases of 2 to 11 percent for
5 of the 9 procedures and result in a 1 percent decrease for the other
4 nervous system procedures. The nervous system procedures for which we
estimate a positive effect on CY 2010 payments, include CPT codes 64721
(Neuroplasty and/or transposition; median nerve at carpal tunnel) and
63685 (Insertion or replacement of spinal neurostimulator pulse
generator or receiver, direct or inductive coupling), which are
expected to have payment increases of 11 percent and 7 percent
respectively.
The estimated payment effects for most of the remaining procedures
listed in Table 69 will be positive. For example, the payment rates for
musculoskeletal CPT codes 29880 (Arthroscopy, knee, surgical; with
meniscectomy (medial and lateral, including any meniscal shaving)) and
29881 (Arthroscopy, knee, surgical; with meniscectomy (medial OR
lateral, including any meniscal shaving)) are estimated to increase 11
percent over the CY 2010 transitional payment rates. Musculoskeletal
procedures are expected to account for a greater percentage of CY 2011
Medicare ASC spending as we estimate that payment for procedures in
that surgical specialty group will increase under the revised payment
system in CY 2011.

[[Page 72131]]

Table 69--Estimated Impact of the Final CY 2011 Update to the ASC Payment System on Aggregate Payments for
Selected Procedures
----------------------------------------------------------------------------------------------------------------
Estimated CY 2011
CPT/ percent change
HCPCS Short descriptor Estimated CY 2010 Allowed charges (in millions) (fully
Code (2) (3) implemented
* (1) payment) (4)
-----------------------------------------------------------------------------------------------
66984 Cat$1,095........................................... -1
iol, 1 stage
43239 Upper GI 163.............................................. -7
endoscopy, biopsy
45380 Col130.............................................. -5
biopsy
45378 Diagnostic 110.............................................. -5
colonoscopy
45385 Lesion removal 88............................................... -5
colonoscopy
66982 Cat74............................................... -1
complex
62311 Inject spine l/s 67............................................... -1
(cd)
66821 After cataract 63............................................... -7
laser surgery
64483 Inj foramen 62............................................... -1
epidural l/s
15823 Revision of upper 39............................................... -3
eyelid
64493 Inj paravert f jnt 36............................................... 2
l/s 1 lev
29826 Shoulder 32............................................... 18
arthroscopy/
surgery
G0105 Col32............................................... -8
hi risk ind
63650 Implant 31............................................... 6
neuroelectrodes
45384 Lesion remove 28............................................... -5
colonoscopy
29881 Knee arthroscopy/ 27............................................... 11
surgery
G0121 Col27............................................... -8
hi rsk ind
64721 Car26............................................... 11
surgery
43235 Uppr gi endoscopy, 24............................................... 0
diagnosis
29880 Knee arthroscopy/ 22............................................... 11
surgery
52000 Cys21............................................... -2
63685 Insrt/redo spine n 21............................................... 7
generator
64622 Destr paravertebrl 17............................................... 4
nerve l/s
28285 Repair of 17............................................... 13
hammertoe
62310 Inject spine c/t 15............................................... -1
67904 Repair eyelid 15............................................... 11
defect
26055 Incise finger 14............................................... 7
tendon sheath
64623 Destr 13............................................... -1
paravertebral n
add-on
67042 Vit for macular 13............................................... -1
hole
50590 Fragmenting of 13............................................... -2
kidney stone
----------------------------------------------------------------------------------------------------------------
* Note that HCPCS codes proposed for deletion for CY 2011 are not displayed in this table.

[[Page 72132]]

The previous ASC payment system served as an incentive to ASCs to
focus on providing procedures for which they determined Medicare
payments will support their continued operation. We note that,
historically, the ASC payment rates for many of the most frequently
performed procedures in ASCs were similar to the OPPS payment rates for
the same procedures. Conversely, procedures with ASC payment rates that
were substantially lower than the OPPS rates have historically been
performed least often in ASCs. We believed that the revised ASC payment
system will encourage greater efficiency in ASCs and will promote
significant increases in the breadth of surgical procedures performed
in ASCs because it distributes payments across the entire spectrum of
covered surgical procedures based on a coherent system of relative
weights that are related to the clinical and facility resource
requirements of those procedures.
The CY 2009 claims data that we used to develop the CY 2011 ASC
payment system relative weights and rates reflect the second year of
utilization under the revised payment system. Although the changes in
the claims data are not large, the data reflect increased Medicare ASC
spending for procedures that were newly added to the ASC list in CY
2008. Our estimates based on CY 2009 data indicate that for CY 2011
there will be especially noticeable increases in spending for
respiratory systems, and hematologic and lymphatic systems, compared to
the previous ASC payment system.
4. Estimated Effects of This Final Rule With Comment Period on
Beneficiaries
We estimate that the CY 2011 update to the ASC payment system will
be generally positive for beneficiaries with respect to the new
procedures that we are adding to the ASC list of covered surgical
procedures and for those that we are designating as office-based for CY
2011. First, as discussed in section XV.D.1.d. of this final rule with
comment period, we are waiving the coinsurance, the Part B deductible,
or both for certain preventive services recommended by the United
States Preventive Services Task Force with a grade of A or B for any
indication or population and that are appropriate for the individual to
comply with sections 4104 and 10406 of the Affordable Care Act. Other
than these services, the ASC coinsurance rate for all procedures is 20
percent. This contrasts with procedures performed in HOPDs, where the
beneficiary is responsible for copayments that range from 20 percent to
40 percent of the procedure payment. Second, ASC payment rates under
the revised payment system are lower than payment rates for the same
procedures under the OPPS; therefore, the beneficiary coinsurance
amount under the ASC payment system almost always will be less than the
OPPS copayment amount for the same services. (The only exceptions will
be if the ASC coinsurance amount exceeds the inpatient deductible. The
statute requires that copayment amounts under the OPPS not exceed the
inpatient deductible.) For new procedures that we are adding to the ASC
list of covered surgical procedures in CY 2011, as well as for
procedures already included on the list, and that are furnished in an
ASC rather than the HOPD setting, the beneficiary coinsurance amount
will be less than the OPPS copayment amount. Furthermore, the additions
to the ASC list of covered surgical procedures will provide
beneficiaries access to more surgical procedures in ASCs. Beneficiary
coinsurance for services migrating from physicians' offices to ASCs may
decrease or increase under the revised ASC payment system, depending on
the particular service and the relative payment amounts for that
service in the physician's office compared to the ASC. However, for
those additional procedures that we are designating as office-based in
CY 2011, the beneficiary coinsurance amount will be no greater than the
beneficiary coinsurance in the physician's office.
In addition, as finalized in the August 2, 2007 final rule (72 FR
42521), in CY 2011, the final year of the 4-year transition to the ASC
payment rates calculated according to the ASC standard ratesetting
methodology of the revised ASC payment system, ASC payment rates for a
number of commonly furnished ASC procedures will continue to be
reduced, resulting in lower beneficiary coinsurance amounts for these
ASC services in CY 2011.
5. Conclusion
The updates to the ASC payment system for CY 2011 will affect each
of the approximately 5,000 ASCs currently approved for participation in
the Medicare program. The effect on an individual ASC will depend on
its mix of patients, the proportion of the ASC's patients that are
Medicare beneficiaries, the degree to which the payments for the
procedures offered by the ASC are changed under the revised payment
system, and the extent to which the ASC provides a different set of
procedures in the coming year.
The CY 2011 update to the revised ASC payment system includes an
MFP-adjusted CPI-U increase factor of 0.2 percent that we estimate will
result in a slightly higher amount of Medicare expenditures in CY 2011
than was estimated to be made in CY 2010. We estimate that the update
to the revised ASC payment system, including the addition of surgical
procedures to the list of covered surgical procedures, will have
minimal effect on Medicare expenditures compared to the estimated level
of Medicare expenditures in CY 2010.
6. Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehousegov/omb/circulars/a004/a-4.pdf), in Table 70 below, we
have prepared an accounting statement showing the classification of the
expenditures associated with the 0.2 percent update to the CY 2011
revised ASC payment system, based on the provisions of this final rule
with comment period and the baseline spending estimates for ASCs in the
FY 2011 President's Budget. This table provides our best estimate of
Medicare payments to suppliers as a result of the update to the CY 2011
ASC payment system, as presented in this final rule with comment
period. All expenditures are classified as transfers.

Table 70--Accounting Statement: Classification of Estimated Transfers
From CY 2010 to CY 2011 as a Result of the CY 2011 Update to the Revised
ASC Payment System
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............ $5.9 million.
From Whom to Whom......................... Federal Government to
Medicare Providers and
Suppliers.
Total................................. $5.9 million.
------------------------------------------------------------------------

D. Effect of Requirements for Hospitals' Reporting of Quality Data for
Annual Hospital Payment Update

In section XVI. of the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68758), we discussed our requirements for subsection (d)
hospitals to report quality data under the HOP QDRP in order to receive
the full payment update for CY 2010. In section XVI. of the CY 2010
OPPS/ASC final rule with comment period (74 FR 60629), we discussed our
requirements for subsection (d) hospitals to report quality data under
the HOP QDRP in order to receive the full payment update for CY 2011.
In section XVI. of this final rule with comment period, we established
additional policies affecting

[[Page 72133]]

the HOP QDRP for CY 2012, CY 2013, and CY 2014. We estimate that about
90 hospitals may not receive the full payment update in CY 2011. Most
of these hospitals receive little to no OPPS reimbursement on an annual
basis. However, at this time, information is not available to determine
the precise number of hospitals that do not meet the requirements for
the full hospital market basket increase for CY 2011. We also estimate
that 90 hospitals may not receive the full payment update in CY 2012.
We are unable at this time to estimate the number of hospitals that may
not receive the full payment update in CY 2013 and CY 2014.
In section XVI.E.3.a. of the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60647 through 60650), for the CY 2011 payment
update, as part of the validation process, we are requiring hospitals
to submit paper copies of requested medical records to a designated
contractor within the required timeframe. Failure to submit requested
documentation can result in a 2 percentage point reduction in a
hospital's update, but the failure to attain a validation score
threshold will not. Of the 90 hospitals that we estimate will not
receive the full payment update for CY 2011, we estimate that no more
than 20 hospitals will fail the validation documentation submission
requirement for the CY 2011 payment update.
In section XVI.E.3.b. of the CY 2010 OPPS/ASC final rule with
comment period, we did not, at that time, adopt our proposal in the CY
2010 OPPS/ASC proposed rule (74 FR 60650 through 60652) to expand the
CY 2011 validation requirement for the CY 2012 payment update. Instead,
we stated that we would consider the public comments we received on
that proposal, as well as any analyses we conduct of the CY 2011
validation process, and propose a CY 2012 validation process as a part
of the CY 2011 OPPS/ASC rulemaking. We stated that we believed that
this approach would give HOP QDRP hospitals experience with the
validation process and allow these hospitals sufficient time to prepare
for the CY 2012 validation.
In this final rule with comment period, we have finalized our
proposal to validate data submitted by 800 hospitals for purposes of
the CY 2012 HOP QDRP payment determination. For CY 2011 and under our
policy for CY 2012 in this final rule with comment period, we stated
that we will conduct a measure level validation (we note, however, that
the validation results will not affect the CY 2011 payment update) by
assessing whether the measure data submitted by the hospital matches
the independently reabstracted measure data. In addition, for the CY
2012 payment update in this final rule with comment period, we have
decided to validate data for only 800 hospitals out of the
approximately 3,200 HOP QDRP participating hospitals. We believe that
this approach is suitable for HOP QDRP data because it will: Produce a
more reliable estimate of whether a hospital's submitted data have been
abstracted accurately; provide more statistically reliable estimates of
the quality of care delivered in each selected hospital as well as at
the national level; and reduce overall hospital burden because most
hospitals will not be selected to undergo validation each year. We have
adopted a threshold of 75 percent as the threshold for the validation
score because we believe this level is reasonable for hospitals to
achieve while still ensuring accuracy of the data. Additionally, this
level is consistent with what we adopted in the Hospital Inpatient
Quality Reporting Program (formerly referred to as the Reporting
Hospital Quality Data for Annual Payment Update (RHQDAPU) program) (75
FR 50225 through 50229). As a result, we believe that the effect of our
validation process for CY 2012 will be minimal in terms of the number
of hospitals that will not meet all program requirements.
The validation requirement for CY 2011 of 7,300 requested cases and
for CY 2012 of a maximum of 12 cases per hospital per quarter will
result in medical record documentation for approximately 7,300 total
cases and 9,600 cases per quarter, respectively, being submitted to a
designated CMS contractor. We will pay for the cost of sending this
medical record documentation to the designated CMS contractor at the
rate of 12 cents per page for copying and approximately $1.00 per case
for postage. We have found that, based on experience, an outpatient
medical chart is up to 10 pages. Thus, as a result of validation
requirements effective for the CY 2011 annual payment update and the CY
2012 annual payment update, respectively, we will have expenditures of
approximately $8,760 total and $21,120 per quarter. Again, as we will
pay for the data collection effort, we believe that a requirement for
medical record documentation for 7,300 total cases for CY 2011 and a
maximum of 12 cases per quarter for 800 hospitals for CY 2012 represent
minimal burden to HOP QDRP-participating hospitals.

E. Executive Order 12866

In accordance with the provisions of Executive Order 12866, this
final rule with comment period was reviewed by the Office of Management
and Budget.

XXI. Final Rule: Changes Relating to Payments to Hospitals for Direct
Graduate Medical Education (GME) and Indirect Medical Education (IME)
Costs

A. Background

Section 1886(h) of the Act, as added by section 9202 of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L.
99-272) and implemented in regulations at 42 CFR 413.75 through 413.83,
establishes a methodology for determining payments to hospitals for the
direct costs of approved graduate medical education (GME) programs.
Section 1886(h)(2) of the Act sets forth a methodology for the
determination of a hospital-specific base-period per resident amount
(PRA) that is calculated by dividing a hospital's allowable direct
costs of GME in a base period by its number of residents in the base
period. The base period is, for most hospitals, the hospital's cost
reporting period beginning in FY 1984 (that is, October 1, 1983 through
September 30, 1984). The base year PRA is updated annually for
inflation. In general, Medicare direct GME payments are calculated by
multiplying the hospital's updated PRA by the weighted number of full-
time equivalent (FTE) residents working in all areas of the hospital
complex (and nonprovider sites, when applicable), and the hospital's
Medicare share of total inpatient days.
Section 1886(d)(5)(B) of the Act provides for an additional payment
amount under the hospital inpatient prospective payment system (IPPS)
for hospitals that have residents in an approved GME program in order
to reflect the higher indirect patient care costs of teaching hospitals
relative to nonteaching hospitals. The regulations regarding the
calculation of this additional payment, known as the indirect medical
education (IME) adjustment, are located at 42 CFR 412.105.
The Balanced Budget Act of 1997 (Pub. L. 105-33) established a
limit on the number of allopathic and osteopathic residents that a
hospital may include in its FTE resident count for direct GME and IME
payment purposes. Under section 1886(h)(4)(F) of the Act, for cost
reporting periods beginning on or after October 1, 1997, a hospital's
unweighted FTE count of residents for purposes of direct GME may not
exceed the hospital's unweighted FTE count for its most recent cost
reporting period ending on

[[Page 72134]]

or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act,
a similar limit on the FTE resident count for IME purposes is effective
for discharges occurring on or after October 1, 1997.
The recently enacted Patient Protection and Affordable Care Act
(Pub. L. 111-148), as amended by the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152) made a number of statutory
changes relating to the determination of a hospital's FTE resident
count for direct GME and IME payment purposes and the manner in which
FTE resident limits are calculated and applied to hospitals under
certain circumstances. (These two pieces of legislation are
collectively referred to in this document as the ``Affordable Care
Act.'') Below we summarize the proposals to implement the provisions of
the Affordable Care Act relating to Medicare direct GME and IME
payments that were included in the August 3, 2010 proposed rule (75 FR
46383) (as part of the CY 2011 OPPS/ASC proposed rule document),
summarize the public comments we received, respond to those public
comments, and set forth our final policy.

B. Counting Resident Time in Nonprovider Settings (Section 5504 of the
Affordable Care Act)

1. Background and Changes Made by the Affordable Care Act
Effective July 1, 1987, the Social Security Act was amended to
allow hospitals to count the time residents spend training in sites
that are not part of the hospital (referred to as ``nonprovider'' or
``nonhospital sites'') for purposes of direct GME payments under
certain conditions. Section 1886(h)(4)(A) of the Act (as added by
section 9314 of the Omnibus Budget Reconciliation Act of 1986 (Pub. L.
99-509, also known as (OBRA `86) provides that the Secretary ``shall
establish rules consistent with this paragraph for the computation of
the number of full-time equivalent residents in an approved medical
residency training program.'' Specifically, section 1886(h)(4)(E) of
the Act requires that the Secretary's rules concerning the computation
of FTE residents for purposes of direct GME payments ``provide that
only time spent in activities relating to patient care shall be counted
and that all the time so spent by a resident under an approved medical
residency training program shall be counted towards the determination
of full-time equivalency, without regard to the setting in which the
activities are performed, if the hospital incurs all, or substantially
all, of the costs for the training program in that setting'' (as added
by section 9314 of the Omnibus Budget Reconciliation Act of 1986 (Pub.
L. 99-509) (OBRA 86)). Regulations implementing this provision were
published in the September 29, 1989 final rule (54 FR 40292) at 42 CFR
413.86(f)(3) (now Sec. 413.78(c)), which stated that a hospital may
count the time residents spend in nonprovider settings for purposes of
direct GME payment if: (1) The residents spend their time in patient
care activities; and (2) there is a written agreement between the
hospital and the nonprovider entity stating that the hospital will
incur all or substantially all of the costs of the program. The
regulations at that time defined ``all or substantially all'' of the
costs to include the residents' compensation for the time spent at the
nonprovider setting. Under section 1886(h)(4)(E) of the Act, only one
single hospital was permitted to incur the costs of a particular
training program and count the time residents spend training in a
particular nonprovider setting.
Prior to October 1, 1997, for purposes of the IME payment
adjustment, hospitals were not permitted to count the time residents
spent training in nonprovider settings. However, section 4621(b)(2) of
the Balanced Budget Act of 1997 (Pub. L. 105-33) revised section
1886(d)(5)(B) of the Act to allow providers to count time residents
spend training in nonprovider sites for IME purposes, effective for
discharges occurring on or after October 1, 1997. Specifically, section
1886(d)(5)(B)(iv) of the Act was amended to provide that ``all the time
spent by an intern or resident in patient care activities under an
approved medical residency program at an entity in a nonprovider
setting shall be counted towards the determination of full-time
equivalency if the hospital incurs all, or substantially all, of the
costs for the training program in that setting.'' In the July 31, 1998
final rule (63 FR 41005), at Sec. 412.105(f)(1)(ii)(C) and Sec.
413.86(f)(4), we specified the requirements that a hospital must meet
in order to include the time spent by residents training in a
nonprovider site in its FTE count for purposes of both direct GME and
IME payments (we note that Sec. 413.86(f)(4) is now redesignated as
Sec. 413.78(d)). In that final rule, we also redefined ``all or
substantially all of the costs for the training program in the
nonprovider setting'' as the residents' salaries and fringe benefits
(including travel and lodging where applicable), and the portion of the
cost of teaching physicians' salaries and fringe benefits that are
attributable to GME.
Pursuant to the statutory authority in sections 1815(a),
1861(v)(1)(A), 1886(h)(3)(B), 1886(h)(4)(A), 1886(h)(4)(E), and
1886(k), and in order to implement section 1886(h)(4)(E) (and later,
section 1886(d)(5)(B)(iv)) of the Act, and to assist contractors in
determining whether a hospital incurred ``all or substantially all'' of
the costs of the program in the nonprovider setting, we required under
Sec. 413.86(f)(3) and (f)(4) that there must be a written agreement
between the hospital and the nonprovider site stating that the hospital
will incur ``all or substantially all'' of the costs of training in the
nonprovider setting (we note that Sec. 413.86(f)(3) and (f)(4) are now
redesignated as Sec. 413.78(c) and (d), respectively). We later
specified at Sec. 413.78(d)(2) that the written agreement must
indicate the amount of compensation provided by the hospital to the
nonprovider site for supervisory teaching activities. We have explained
the nature of and the rationale for the written agreement requirement
and identified the statutory authority for the written agreement in
considerable detail in the preamble to other rules (for example, 63 FR
40954, 40986 through 40989, 63 FR 40992 through 40994, and 63 FR 40996
(July 31, 1998); 68 FR 45346 (August 1, 2003); 69 FR 48916, 49179
through 49180 (August 11, 2004); and 72 FR 26870, 26969-26970 (May 11,
2007)). We have referred to this written agreement as a ``written
contract'' (63 FR 40954, 40989 (July 31, 1998)). We have explained that
the written agreement requirement was a useful and easily administered
documentation requirement, an administrative tool, a payment safeguard
which, among other things, allowed the Secretary to identify the costs
of offsite training and to determine whether a hospital seeking
Medicare reimbursement for the offsite training of residents (or some
other entity) had paid all or substantially all costs of the offsite
training. Among other things, the written agreement requirement allowed
the Secretary to ensure that: (a) Two or more hospitals were not paid
for the same costs of offsite training of residents; (b) the hospital
seeking Medicare reimbursement for the offsite training of residents
was not reimbursed for costs which a nonprovider site really had
incurred; and (c) that the hospital seeking Medicare reimbursement for
the offsite training of residents and a nonprovider setting were not
both paid for costs of offsite training.
Section 713 of the Medicare Prescription Drug, Improvement, and

[[Page 72135]]

Modernization Act of 2003 (MMA) imposed a 1-year moratorium relating to
certain nonprovider site teaching physician costs for the period from
January 1, 2004, through December 31, 2004. During this 1-year period,
we were required to allow hospitals to count FTE allopathic or
osteopathic family practice residents training in nonprovider settings
for IME and direct GME payment purposes without regard to the financial
arrangement between the hospital and the teaching physician practicing
in the nonprovider setting to which the resident was assigned. We
instructed our Medicare contractors (then referred to as only ``fiscal
intermediaries'' or ``FIs'') regarding the effect of section 713 of the
MMA by stating that, when settling prior year cost reports during this
1-year period, or for family practice residents actually training in
nonprovider settings during this 1-year period, contractors should
allow hospitals to count allopathic and osteopathic family practice
residents training in a nonprovider setting for direct GME and IME
payment purposes without regard to the financial arrangement between
the hospital and the nonprovider site pertaining to the teaching
physicians' costs associated with the residency program. For additional
information on this provision and for a summary of public comments we
received and our responses related to this provision, we refer readers
to the FY 2005 IPPS final rule (69 FR 49176, August 11, 2004).
In an effort to build in some flexibility and in an effort to
respond to concerns expressed by hospitals about the administrative
burden associated with meeting the written agreement requirements, the
Secretary revised the written agreement rule to give hospitals more
options. Specifically, in the FY 2005 IPPS final rule (69 FR 49179), we
revised our regulations at Sec. 413.78(e) to allow hospitals to choose
to either enter into a written agreement with the nonprovider site
before the hospital may begin to count residents training at the
nonprovider site, or to pay concurrently for the cost of training at
the nonprovider setting. That is, in the absence of a written
agreement, hospitals are required to pay ``all or substantially all''
of the costs of the training program in the nonprovider setting by the
end of the third month following the month in which the training
occurs. While the FY 2005 final rule preamble language indicated that
the Secretary had concluded that the written agreement was not the only
way for the agency to ensure that a given hospital was complying with
the statute's ``all or substantially all'' of the cost requirement, it
also indicated that it was and had been a sensible means of doing so
(69 FR 48916, 49179, Aug. 11, 2004).
On May 11, 2007, we published changes in the IPPS final rule (72 FR
26949) that once again modified the definition of ``all or
substantially all of the costs for the training program in the
nonprovider setting.'' That final rule further defined ``all or
substantially all'' under Sec. 413.75(b) to mean at least 90 percent
of the total costs of the residents' salaries and fringe benefits
(including travel and lodging where applicable) and the portion of the
cost of the teaching physician's salaries attributable to GME. Although
some public commenters had objected to our proposed redefinition of the
``all or substantially all,'' we adopted the 90 percent rule because we
believed it would substantially address concerns that had been voiced
previously by the industry. With this modification, hospitals were no
longer required to pay 100 percent of the residents' salaries and
fringe benefits (including travel and lodging where applicable) and the
portion of the teaching physicians' costs attributable to GME at the
nonprovider site. This change in policy also allowed providers to use
an alternative, less burdensome method to calculate the GME teaching
physicians' costs attributable to direct GME at nonprovider sites. In
addition to the redefinition of ``all or substantially all of the
costs,'' the May 11, 2007 final rule modified the regulation text at
Sec. 413.78(f)(3)(ii) to clarify that the required written agreement
between a hospital and a nonprovider site must be in place before
residents begin training at the nonprovider site. That final rule also
specified the information that must be included in the written
agreement, and stated that the amounts specified in the written
agreement may be modified by June 30 of the applicable academic year.
Section 5504(a) of the Affordable Care Act made changes to section
1886(h)(4)(E) of the Act to reduce the costs that hospitals must incur
for residents training in nonprovider sites in order to count the FTE
residents for purposes of Medicare direct GME payments. Specifically,
section 5504(a) amended the statute to allow a hospital to count all
the time that a resident trains in activities related to patient care
in a nonprovider site so long as the hospital incurs the costs of the
residents' salaries and fringe benefits for the time that the resident
spends training in the nonprovider site. Section 5504(b) of the
Affordable Care Act made similar changes to section 1886(d)(5)(B)(iv)
of the Act for IME payment purposes. For direct GME payments, the
provision is effective for cost reporting periods beginning on or after
July 1, 2010; for IME payments, the provision is effective for
discharges occurring on or after July 1, 2010. The changes made by
section 5504(a) and (b) of the Affordable Care Act also specify that if
more than one hospital incurs the residency training costs in a
nonprovider setting, those hospitals are to count a proportional share
of the training time as determined by written agreement between the
hospitals. In addition, section 5504(a) amended section 1886(h)(4)(E)
of the Act to require hospitals to maintain documents indicating the
amount of time the residents they are claiming spend training in
nonprovider sites relative to a base year that the Secretary will
specify, and to make those documents available to the Secretary.
Section 5504(c) of the Affordable Care Act specifies that the
amendments made by the provisions of sections 5504(a) and (b) shall not
be applied in a manner that would require the reopening of settled cost
reports, for which there is not a jurisdictionally proper appeal
pending on the issue of direct GME or IME payments as of March 23, 2010
(the date of the enactment of Pub. L. 111-148). In the August 3, 2010
proposed rule (75 FR 46385), we proposed to interpret ``pending,
jurisdictionally proper appeal on direct GME or IME payments'' to mean
that in order for a hospital to request a change to its FTE count, for
direct GME or IME, the ``pending, jurisdictionally proper appeal'' must
be specific to direct GME or IME, respectively.
Comment: One commenter asked that CMS clarify the definition of a
nonprovider site. The commenter specifically asked whether the term
``nonprovider site'' would apply to a situation in which residents in a
family practice program rotate to a physician's office but accompany
the doctor to a separate, nonteaching hospital. Another commenter
requested that CMS clarify the definitions of nonprovider and hospital-
based settings to state that hospital-based settings can include a
variety of ambulatory experiences.
Response: A ``nonprovider site'' is a setting that does not qualify
as a provider-based facility or organization in accordance with the
criteria in the regulations at 42 CFR 413.65. In addition, the
regulations at 42 CFR 413.78(b) state that ``a hospital cannot claim
the time spent by residents at another hospital.'' Therefore, in the
example given by the first commenter,

[[Page 72136]]

the hospital where the resident usually trains in his or her family
practice program cannot count the time that the resident spends
rotating with a physician to another hospital. We do not believe that
the regulations need to be revised to include a separate definition of
a ``nonprovider site'' as it applies to this provision.
Comment: Many commenters disagreed with our interpretation of the
application provisions of section 5504(c) of the Affordable Care Act.
The commenters believed that the statute clearly allows hospitals to
reopen cost reports that have a jurisdictionally proper pending appeal
as of March 23, 2010, regardless of whether or not the issue under
appeal is specifically related to direct GME or IME payments. Because
many of the GME provisions in the Affordable Care Act apply
retroactively (for example, the provisions regarding didactic time in
section 5505), the commenters believed that CMS should not place
additional restrictions on a hospital's ability to appeal. Another
commenter suggested that CMS allow providers to reopen cost reports for
an Affordable Care Act issue on direct GME or IME as long as the
hospital has a jurisdictionally proper appeal pending for either an IME
or direct GME issue.
Another commenter stated that it generally considers an IME appeal
issue to be specific to the aspect of IME that the provider is
contesting. Therefore, the commenter suggested that an allowable appeal
under section 5504 be limited to appeals in which the provider contests
issues covered by section 5504, and not direct GME or IME on an overall
basis.
One commenter asked whether the provisions of section 5504 could be
applied to open cost reports for which no Notice of Program
Reimbursement (NPR) has been issued, and which, therefore, does not
have any jurisdictionally proper appeals pending.
Another commenter claimed that the application provisions of
section 5504(c) clearly apply the provisions of sections 5504(a) and
(b) to cost reporting periods occurring before July 1, 2011 [sic]. The
commenter asserted that because section 5504(c) expressly states that
the provisions of this section ``shall not be applied in a manner that
requires reopening of any settled hospital cost reports as to which
there is not a jurisdictionally proper appeal pending'' as of March 23,
2010, such nonprovider site training time should be allowed for those
cost reports, even though the provisions of sections 5504(a) are only
effective as of July 1, 2010.
Response: There appears to be a misreading of our interpretation of
section 5504(c). The effective date of the provisions of section 5504
is clearly July 1, 2010. This date is unambiguously stated in the plain
text of section 5504(a), which states that it is ``effective for cost
reporting periods beginning on or after July 1, 2010.'' Similarly,
section 5504(b) is ``effective for discharges occurring on or after
July 1, 2010.'' Our discussion of section 5504(c) in the August 3, 2010
proposed rule (75 FR 46385) only intended to explain our interpretation
of the phrase ``a jurisdictionally proper appeal pending'' in the
context of the plain language of the statute. However, we are
clarifying in this final rule that, as noted above, and unlike some
other provisions of the Affordable Care Act, section 5504 is fully
prospective, with an explicit effective date of July 1, 2010, for the
new standards it creates. Nothing in section 5504(c) overrides that
effective date. Section 5504(c) merely notes that the usual
discretionary authority of Medicare contractors to reopen cost reports
is not changed by the provisions of section 5504; it simply makes clear
that Medicare contractors are not required by reason of section 5504 to
reopen any settled cost report as to which a provider does not have a
jurisdictionally proper appeal pending. It does not require reopening
in any circumstance; and the new substantive standard is, in any event,
explicitly prospective. We believe if Congress had wanted to require
such action or to apply the new standards to cost years or discharges
prior to July 1, 2010, it would have done so in far more explicit
terms.
2. Elimination of the ``All or Substantially All of the Costs for the
Training Program in the Nonprovider Setting'' Requirement and New Cost
Requirements for Hospitals
As stated earlier, in the May 11, 2007 final rule (72 FR 26949), we
redefined the phrase ``all or substantially all of the costs for the
training program in the nonprovider setting'' under Sec. 413.75(b) of
the regulations to mean at least 90 percent of the total costs of the
residents' salaries and fringe benefits (including travel and lodging
where applicable) and the portion of the cost of the teaching
physicians' salaries attributable to nonpatient care direct GME.
However, section 5504 of the Affordable Care Act revised the Act,
effective on July 1, 2010, and eliminated the requirement that a
hospital incur ``all or substantially all of the costs for the training
program in the nonprovider setting.'' Under the changes made by section
5504, hospitals are only required to incur the costs of the resident's
salaries and fringe benefits during the time the resident spends in the
nonprovider setting, and they no longer have to incur other training
costs in the nonprovider site in order to count such time for direct
GME and IME purposes.
In the August 3, 2010 proposed rule (75 FR 46385), we proposed to
revise the regulation at Sec. 413.75(b) accordingly to conform to
these new statutory requirements. Specifically, we proposed to revise
the existing definition of ``all or substantially all of the costs for
the training program in the nonprovider setting'' to be effective for
cost reporting periods beginning on or after July 1, 2007, and before
July 1, 2010. We also proposed to add a new Sec. 413.78(g) that
details how hospitals should count residents that train in nonprovider
sites for cost reporting periods beginning on or after July 1, 2010.
Specifically, we proposed to require under Sec. 413.78(g)(2) that a
hospital or hospitals must incur the costs of the salaries and fringe
benefits of the resident during the time the resident spends in the
nonprovider setting in order to count that time for direct GME payment
purposes. We also proposed to revise Sec. 412.105(f) to reflect these
changes for the purposes of IME payments.
Comment: Many commenters supported the proposed changes to the
regulations to reflect the provisions of section 5504 of the Affordable
Care Act. Some commenters remarked that these changes vastly simplify
the recordkeeping required of hospitals to follow the regulations,
which will allow hospitals to focus on providing quality care and
medical education. Similarly, other commenters noted that the proposed
regulations removed hospitals' administrative burden of calculating
teaching physician costs at nonprovider sites. The commenters also
applauded the proposed changes because they reflect encouragement of
resident training in nonprovider settings.
Response: We appreciate this positive feedback from commenters.
Comment: One commenter stated that it is clear that the revisions
to the existing definition of ``all or substantially all of the costs
for the training program in the nonprovider setting'' would be
applicable to cost reporting periods beginning on or after July 1, 2007
and before July 1, 2010, but that it is not clear how years prior to
July 1, 2007 should be handled. The commenter maintained that the
Medicare contractors should be instructed to apply these rules to all
open cost report years.

[[Page 72137]]

Response: The proposed changes to the definition of ``all or
substantially all of the costs for the training program in the
nonprovider setting'' are effective for cost reporting periods
beginning on or after July 1, 2010 for direct GME and for discharges
occurring on or after July 1, 2010 for IME. We did not propose any
changes to the definition of ``all or substantially all of the costs
for the training program in the nonprovider setting'' for cost
reporting periods beginning before July 1, 2010 or for discharges
occurring before July 1, 2010. Medicare contractors will continue to
treat nonprovider site training time prior to July 1, 2010 as they were
required to under the regulations in effect prior to July 1, 2010.
After consideration of the public comments we received, we are
finalizing our proposed changes to the regulations at Sec. 413.75(b),
Sec. 413.78(f)(1), Sec. 413.78(g), and Sec. 412.105(f)(1)(iii)
regarding new cost requirement for hospitals without modification.
3. Revision to Regulations To Allow More Than One Hospital To Incur the
Costs of Training Programs at Nonprovider Settings, Either Directly or
Through a Third Party
As indicated above, prior to the enactment of the Affordable Care
Act, section 1886(h)(4)(E) of the Act (regarding direct GME) and
section 1886(d)(5)(B)(iv) of the Act (regarding IME) allowed a hospital
to count the time spent by residents training in a nonprovider site
only when one single hospital incurred the costs of a particular
training program in a particular nonprovider setting. We note that both
sections of the statute specified that a hospital could count the time
spent by residents training in a nonprovider site ``if the hospital
incurs all or substantially all of the costs for the training program
in that setting'' (emphasis added). While we understand that, in some
cases, hospitals share the costs of training residents in a specific
program at the same nonprovider site, we have historically only allowed
one hospital to count time spent by those residents at a nonprovider
site if that single hospital met the requirement to incur ``all or
substantially all'' of the training program costs at the nonprovider
site. Accordingly, two or more hospitals could not count the time spent
by residents in a specific program training at a nonprovider site if
they shared the training costs at the site or if a third party incurred
the costs of training at a nonprovider site on behalf of several
hospitals. Examples of third parties that might incur nonprovider site
training program costs are a medical or dental school, or a GME
administrative entity that is established to operate the GME program.
Sections 5504(a) and (b) of the Affordable Care Act specifically
address the situation in which more than one hospital incurs the costs
of training programs at nonprovider settings, either directly or
through a third party. Sections 5504(a) and (b) amended sections
1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act, respectively, to
provide that when more than one hospital incur these costs, either
directly or through a third party, those hospitals ``shall count a
proportional share of the time, as determined by written agreement
between the hospitals, that a resident spends training in that
setting.'' Therefore, these statutory changes now allow hospitals to
share the costs of resident training at nonprovider sites, so long as
those hospitals divide the resident time proportionally in accordance
with a written agreement, for the purposes of determining their
respective direct GME and IME FTE resident counts at the nonprovider
site. These provisions of the statute are effective for cost reporting
periods beginning on or after July 1, 2010, for direct GME, and for
discharges occurring on or after July 1, 2010, for IME. Accordingly,
although hospitals that shared training costs at nonprovider sites
could not count any of resident time spent training at those
nonprovider sites prior to July 1, 2010, hospitals can count that
training time beginning on or after July 1, 2010, as long as they
divide the resident training time proportionally and record that
proportion in a written agreement.
In the August 3, 2010 proposed rule (75 FR 46385 through 46387), we
proposed to revise our regulations to reflect the statutory provision
that allows hospitals to proportionally share the costs of resident
training at nonprovider sites under a new paragraph (g)(2) of Sec.
413.78 for direct GME and to make a conforming cross-reference change
under Sec. 412.105(f)(1)(ii)(E) of the IME regulations. While the
statute allows hospitals to determine by a written agreement the
proportional share of time that residents spend training in the
nonprovider site, we proposed that hospitals must use a reasonable
basis for establishing that proportion (proposed Sec.
413.78(g)(2)(ii), final Sec. 413.78(g)(2)(i)). One such reasonable
basis could be that each hospital counts the number of FTEs for which
it incurs the salaries and fringe benefits. For example, if there are
10 FTEs training in a nonprovider setting in a particular program, and
there are 2 hospitals that each incur the costs of the salaries and
fringe benefits of 5 of those FTEs, each hospital could agree to count
50 percent of the FTEs (even if each hospital is not necessarily paying
50 percent of the cost, due to differences in resident salary amounts,
this arrangement is acceptable, so long as 100 percent of the required
cost is paid).
In addition to having a reasonable basis for establishing the
proportion, hospitals must be able to document the amount that they are
paying, and this amount must equate to at least the sum of all the
salaries and fringe benefits of the residents for the amount of time
that the residents are training in that site. The salaries and fringe
benefits of the residents will vary depending upon the program year of
the residents, and the specialty in which they are training. As we
indicated in the May 11, 2007 final rule (72 FR 26961), hospitals must
``take into account the actual salary and fringe benefits for each FTE
resident that trains in the nonprovider site, which may vary by
resident.'' Therefore, as also indicated in the May 11, 2007 final rule
(72 FR 26970), global agreements that cover a variety of issues (GME
and non-GME) between the hospital(s) and the nonprovider site, and that
only specify a lump sum payment amount with no break out of the
residents' salaries and fringe benefits, do not provide sufficient
information for the Medicare contractor to determine that ``all or
substantially all'' of the costs (or, effective July 1, 2010, that all
of the residents' salaries and fringe benefits) have been paid by the
hospitals. Accordingly, we would expect that, regardless of whether
there is one hospital paying the cost, or more than one hospital is
sharing the costs, hospitals would need to determine prior to the start
of nonprovider rotations (with allowance for modification by June 30 of
that academic year) the total cost of the salaries and fringe benefits
of the residents that are training for the proportion of the year spent
in each nonprovider site. Of course, in the instance where the
residents remain on the payroll of one or more hospitals for the entire
year, it would be easier to document that the hospital(s) continues to
pay the residents' salaries and fringe benefits when the residents
rotate to nonprovider sites. Similarly, where the residents are on the
payroll of the medical or dental school, or of a third party GME
administrative entity, and the hospitals reimburse the school or the
third party for the entire salary and fringe benefit costs of the
residents, for both hospital and nonprovider training, the hospitals
could easily document that

[[Page 72138]]

they have incurred the requisite costs of training in nonprovider
sites. However, once the total costs for the residents' salaries and
fringe benefits for time spent in the nonprovider site are determined
and covered by the hospitals, the hospitals may decide among themselves
the proportion of those costs each will incur, and may use a reasonable
basis to allocate among themselves the proportion of FTE residents that
each one will count, as discussed above.
As specified in section 5504 of the Affordable Care Act, in the
August 3, 2010 proposed rule (75 FR 46386), we proposed that hospitals
must record the proportion of the FTE resident time spent training in
the nonprovider site that will be counted by each hospital for purposes
of IME and direct GME payment, as well as the reasonable basis for the
proportion, in a written agreement between the hospitals. We proposed
to add this requirement in regulations at Sec. 413.78(g)(2). If
hospitals have in place written agreements with the nonprovider site in
accordance with our existing regulations at Sec. 413.78(f)(3)(ii), we
proposed that the proportion of the FTE resident training time to be
counted for IME and direct GME purposes by each hospital, and the basis
for the proportion, may be recorded in that agreement (proposed Sec.
413.78(g)(2)(iii)). We proposed that if the hospitals choose to pay the
training program costs concurrently as described in Sec.
413.78(g)(3)(i), that is, without a written agreement, the hospitals
must still agree in writing to the proportion of costs and training
time they plan to incur and count (proposed Sec. 413.78(g)(2)(iv),
final Sec. 413.78(g)(2)(iii)) in addition to the basis for that
proportion, before the end of the applicable training year. That
written agreement between the hospitals must be available for CMS
review and for auditing purposes. In addition, we indicated that we
would expect that the hospitals' records of resident training time and
training costs at nonprovider sites, as required by the Affordable Care
Act and as discussed below, reflect the proportions of training time
and costs as agreed upon and documented in whichever type of written
agreement the hospitals used to record the proportional shares of
resident training time that each will count for purposes of direct GME
and IME payment.
Comment: One commenter supported the proposed changes regarding
allowing hospitals to share the costs of training residents at
nonprovider sites.
Response: We appreciate the commenter's support.
Comment: Several commenters requested that CMS detail the
documentation requirements in cases where a third party incurs the
costs of training at a nonprovider site on behalf of several hospitals,
where hospitals have a global agreement with that third party, and when
a hospital pays a nonprovider site concurrently. Many commenters stated
that they did not believe that resident compensation costs must be
itemized in order for a hospital to receive the Medicare payments to
which it is entitled.
A large number of these commenters noted that hospitals that pay
residents salaries and fringe benefits through global agreements and
that do not use an invoice system to track costs, may find it ``unduly
burdensome'' to change their internal accounting practices in order to
produce the proper documentation to comply with this proposed
regulation. Some of those commenters suggested that, instead, a
``memorandum of understanding'' between a hospital and a third party be
sufficient for documentation of the sharing of costs between the two
entities. They suggested that this memorandum would be effective at the
beginning of a hospital's fiscal year, and it would project the
expected amount of resident compensation for the year. Further, they
suggested that the memorandum would be followed by a year-end
reconciliation of costs. The commenters concluded by stating that all
hospitals would benefit from clear instructions regarding these
documentation requirements. Other commenters suggested that CMS clarify
that as long as the hospital provides documentation that ``(1) it is
compensating the third-party an amount that is at least equal to the
aggregate of the salary and fringes for the resident full-time
equivalents (FTEs) training at a nonprovider site, and (2) the amount
paid to the third-party is identified in the global agreement as being
for that purpose,'' this documentation would be sufficient for the
hospital to demonstrate that it is incurring the costs of training
those resident FTEs at the nonprovider setting. Another commenter
believed that identifying the FTE count at nonprovider sites should be
sufficient for these documentation requirements. Other commenters
suggested that as long as all of the hospitals that share the
residents' time are funding 100 percent of the resident stipends and
benefits in the aggregate, and they are not claiming more than 100
percent of the residents' time, CMS permit hospitals to determine for
themselves when and how to allocate resident time spent in nonprovider
sites.
Response: In order to effectively implement and ensure compliance
with section 5504, we must require that the written agreement between a
hospital and a third party that incurs the costs of training at a
nonprovider site contain information that clearly documents that the
hospital is incurring the costs of the residents' salaries and fringe
benefits at each nonprovider site. If the third party that pays the
residents' salaries and fringe benefits also owns some or all of the
nonprovider sites to which the residents rotate, one master agreement
with the third party is sufficient, so long as the number of FTEs and
dollar amount for total costs incurred for those FTEs is specified in
the master agreement for each program at each nonprovider site.
Similar documentation requirements exist in situations in which two
hospitals share the costs of training residents at a nonprovider site.
If two hospitals share the costs of training residents in a given
program at the same nonprovider site, the hospitals must be able to
document together that they paid the salaries and fringe benefits of
all the residents in that program for the time spent training at that
nonprovider site, and they also must explain in a written agreement the
arrangement for dividing the costs and FTEs. For each nonprovider site
in which the hospital wishes to claim the FTEs for IME and direct GME,
a hospital must include in the written agreement (or document, if it is
paying concurrently)--
(1) The total number of FTE residents in each program at each
nonprovider site (if the hospital is sharing the costs of the
residents' salaries and fringe benefits with another hospital(s), each
hospital would specify the number of FTEs in each program at each site
for which they are paying the salaries and fringe benefits); and
(2) The total dollar amount the hospital is paying for all those
FTE residents at each nonprovider site respectively. The hospital need
not list the program years and the individual salaries and benefits for
each FTE in each program year for each program, but the hospital would
be expected to supply such information at audit so that the Medicare
contractor could replicate how the hospital arrived at the total dollar
amount included in the written agreement (and paid by the hospital). In
addition, the hospital must include all this information regardless of
whether the agreement is directly between it and the nonprovider site,
or if the agreement involves a third party.

[[Page 72139]]

Comment: Several commenters contended that it is impractical and
burdensome to require hospitals to identify the costs of training
residents at nonprovider sites prior to the start of nonprovider site
rotations on July 1 of an academic year. One commenter maintained that
such costs can only be calculated after June 30 of an academic year.
The commenter explained that because residents rotating at nonprovider
sites often retain some responsibilities at a hospital, and that those
residents' rotations between both sites varies from day to day, an
accounting of nonprovider site training time must occur
retrospectively.
Response: We believe that hospitals should have a general sense of
the salary and fringe benefit costs of the residents that will be
training at nonprovider sites before the start of an academic year.
Salary and fringe benefit costs for each specialty and program year are
usually fixed before the start of an academic year, and the only
variable that could reasonably change after the start of resident
rotations would be the exact number of FTEs rotating to nonprovider
sites. If residents' rotation assignments are governed by program
directors at the medical school and not by the hospital itself, the
hospital should be able to retrieve this information from the medical
school.
Written agreements can be amended by the end of the academic year
on June 30 to account for such rotation changes, as specified in the
new Sec. 413.78(g)(3)(ii). Hospitals also can opt to pay nonprovider
sites concurrently according to the new Sec. 413.78(g)(2)(iii), in
which case no written agreement regarding the payment of resident
salaries and fringe benefits is required. (We note that in a case where
multiple hospitals pay the nonprovider site concurrently, a written
agreement is still required to document the reasonable basis upon which
those multiple hospitals divide the payment of resident salaries and
fringe benefits to the nonprovider site.)
Comment: A number of commenters encouraged CMS to clearly state
that section 5504 not only allows hospitals that share the cost of
nonprovider site training to ``count a proportional share of the time''
of that training, but that it also allows hospitals to adjust their
direct GME and IME caps accordingly.
Other commenters noted that hospitals that already train above
their cap would have no incentive to increase their residents'
nonprovider site training under this provision because they would not
be able to claim the additional time if the total count of nonprovider
site training time is less than the amount the hospital is over its
cap.
A number of commenters who generally addressed the current system
of Medicare GME payment called for reforms in the system and advocated
targeted, if not wholesale, lifting of the FTE caps. However, the
commenters noted that such measures would require Congressional
legislation, and they acknowledged that CMS cannot implement such
changes through rulemaking. Rather, the commenters encouraged CMS to
work with Congress toward lifting the cap as soon as possible.
Response: We appreciate the comments on the Medicare GME payment
system in general. With regard to the request for cap increases under
the provisions of section 5504, hospitals cannot adjust their caps to
reflect the additional FTE time that is allowable under section 5504.
Rather, a hospital is permitted to count that additional FTE time
within the limits of its direct GME and IME caps. While hospitals that
already train over their respective FTE caps may not have a clear
financial incentive to increase nonprovider site training time under
this provision, the easing of other nonprovider training requirements
under section 5504 can still facilitate an increase in nonprovider site
training from those hospitals.
Comment: Some commenters requested that CMS refrain from
disallowing resident time spent in shared nonprovider site rotations
prior to July 1, 2010. The commenters claimed that disallowing resident
training time in nonprovider settings harms our national health
interests and violates the spirit of the Affordable Care Act. The
commenters believed that CMS has the authority to refrain from
enforcing its previous policy on counting shared nonprovider site
training time.
Response: The statute does not provide CMS discretion to allow the
counting of resident time spent in shared nonprovider site rotations
for cost reporting periods beginning prior to July 1, 2010. Section
5504 explicitly provides that a hospital may count shared nonprovider
site rotation time to cost reporting periods beginning on or after July
1, 2010, for direct GME, and for discharges occurring on or after July
1, 2010, for IME, if a hospital incurs certain costs.
After consideration of the public comments we received, we are
finalizing our proposed revisions of the regulations at Sec. Sec.
413.78(g)(2) and (g)(3) to allow more than one hospital to incur the
costs of nonprovider site training programs, either directly or through
a third party.
4. Changes to Regulations Regarding Recordkeeping and Comparison to a
Base Year
As stated above, section 5504(a) of the Affordable Care Act
requires hospitals to maintain records of the amount of time that the
residents they are claiming spend in nonprovider settings, and to
compare that time to the time spent by the residents in nonprovider
sites in a base year as the Secretary may specify. This requirement is
effective for cost reporting periods beginning on or after July 1,
2010. In the August 3, 2010 proposed rule (75 FR 46387), we proposed to
incorporate this statutory requirement for maintaining records under a
new paragraph (g)(5) of Sec. 413.78 of the regulations. We also stated
that we anticipated amending the cost report for hospitals to include
lines where hospitals can submit the required data, which is described
below. These data will help CMS identify whether barriers to resident
training in nonprovider sites exist. The original allowance of IME
payments for training in nonprovider sites, as instituted by the BBA,
was intended to act as an incentive to hospitals to increase such
training. However, we have not seen a marked increase in the amount of
training that occurs in nonprovider settings in the years since the
implementation of the BBA. Advocates of expanding training in
nonprovider sites have alleged that CMS' rules for counting residents
in nonprovider sites regarding teaching physician salary costs were an
obstacle to the expansion of training in nonprovider settings. The
recordkeeping and reporting requirement added by section 5504(a) of the
Affordable Care Act will provide the Secretary information to assess
whether nonprovider site resident training increases as a result of the
statutory revision of rules that were viewed as burdensome.
We understand that rotation schedules are a primary source of
information that hospitals supply to Medicare contractors for
determining where and for how much time each resident spends training
in each hospital or nonprovider site. Therefore, in the August 3, 2010
proposed rule (75 FR 46387), we proposed that rotation schedules be the
source for establishing the amount of time that residents spend
training in nonprovider sites, both in the base year and in subsequent
years. The amendment to section 1886(h)(4)(E) of the Act by section
5504(a) of the Affordable Care Act states that the Secretary shall
specify the

[[Page 72140]]

aforementioned base year for the level of training at nonprovider
sites. We proposed that cost reporting periods beginning on or after
July 1, 2009 and before June 30, 2010 be the base year against which we
will compare subsequent years' data to determine if the level of
nonprovider training that occurs in subsequent years increases relative
to that base year (proposed new Sec. 413.78(g)(5)).
Section 5504(a) of the Affordable Care Act also made changes to
require that these records be made available to the Secretary. In order
for CMS to evaluate whether nonprovider site training has increased as
a result of the changes made by section 5504 of the Affordable Care
Act, in the August 3, 2010 proposed rule (75 FR 46387), we proposed to
include several additional cost report lines for hospitals to submit
data for each of their primary care programs on a program-specific
basis. With respect to hospitals' nonprimary care programs, hospitals
would only need to supply that data on an overall hospital basis, and
we proposed to add one line on the cost report for hospitals to submit
that data. We proposed to only require program-specific data with
respect to resident training time in nonprovider sites for primary care
specialties because we believe that that is sufficient for the intent
of this provision. The intent of this recordkeeping requirement is to
see whether, as a result of the policy changes required under section
5504(a) of the Affordable Care Act, there is an increase in the volume
of residency training that takes place in nonprovider settings. Because
residents at nonprovider sites typically train in primary care
specialties, and in order to minimize the documentation burden on
hospitals, we stated that we did not believe it is necessary to require
program-specific data for other specialties that would provide only
marginally useful information. For the purposes of this provision, we
proposed to use the definition of primary care resident in Sec.
413.75(b) to identify those programs for which we proposed to require
program-specific data.
Once this information is made available to CMS, the data would be
compared to the analogous data from the base year of cost reporting
periods beginning on or after July 1, 2009 and before June 30, 2010 to
determine whether the volume of nonprovider site training has
increased. Specifically, we proposed to use the total unweighted direct
GME count of FTE training time in a primary care specialty in
nonprovider sites (prior to application of direct GME FTE resident
limits) as the gauge to determine if residency training time in
nonprovider settings in that specialty has increased in an academic
year relative to the base year. Therefore, we proposed that hospitals
would only be required to submit the respective unweighted direct GME
FTE counts on the new cost report lines for each primary care specialty
and for nonprimary care specialties on an overall basis. For example,
if, in the base year, we find that 3.75 direct GME FTEs out of a total
of 15 FTE family practice residents from a family practice residency
program in a teaching hospital trained in nonprovider settings (that
is, 25 percent of the FTE time of the residents in the family practice
residency program was spent training in nonprovider sites), we would
note the subsequent years' amount of direct GME FTE training time in
nonprovider sites in that particular teaching program to see if that
FTE proportion increased from 25 percent. This would help determine if
more training time is spent by primary care residents in nonprovider
sites. Or, for all of the nonprimary care teaching programs in a
hospital, if 100 direct GME FTE residents out of 400 FTE residents
spent time training in nonprovider settings (that is, 25 percent of the
time spent by residents in the nonprimary care programs is spent
training in nonprovider sites), we would look to see if, in subsequent
years, more than 25 percent of the time spent by nonprimary care direct
GME FTEs from that hospital is spent training in nonprovider sites.
Comment: One commenter recommended that CMS specify that the
primary sources of information that hospitals supply to Medicare
contractors for determining where and for how much time each resident
spends training in each hospital or nonprovider site include not only
rotation schedules, but also ``other similar documentation normally
maintained by the hospital,'' because some hospitals use alternative
standards for documenting resident rotations to nonprovider sites.
Response: The rotation schedules prepared by the program directors
are the primary source of information regarding the residents'
assignments because they contain a snapshot of each resident's
rotations to multiple sites (that is, different hospitals as well as
nonprovider sites). Therefore, this information often allows the
Medicare contractors to determine whether more than one hospital is
including the same rotation in its GME and/or IME FTE count. In rare
and extenuating circumstances where the rotation schedules are not
available, the hospital should upon request, furnish the Medicare
contractor with similar documentation that is official (that is, is
based on the approval of the program director), that is similar for all
hospitals to which the residents in the program rotate, and that is
auditable. We note that such alternative documentation must be
contemporaneous to the academic year in which the rotations occur.
Comment: Several commenters remarked that the data that CMS
proposed to collect under the recordkeeping requirement of section 5504
will not provide a full and complete portrayal of the amount of time
that residents spend training in nonprovider sites. The commenters gave
numerous possible reasons for a decrease in a hospital's nonprovider
setting training time from year to year that would not be related to a
hospital's GME policy decisions. Those reasons include a greater or
lesser ability of the hospitals to match residents into a particular
program and residents' leaves of absence within a particular program.
The commenters also explained that ambulatory care training can occur
in provider-based settings, VA hospitals, and military clinics, in
addition to nonprovider sites, but according to the proposed
recordkeeping requirements, such time would not be included in the data
either. The commenters requested that CMS enumerate the limitations of
the data that will be collected under this statutory requirement, so
that the public and other policymakers understand why the amount of
nonprovider site training for a particular hospital may vary from one
year to the next.
Response: Section 5504 requires CMS to collect the nonprovider site
training data that is affected under this provision. We do not agree
that the data that we are requesting for the purposes of this provision
naturally fluctuates, even if residents leave training programs for
reasons that bear little or no connection to a hospital's GME policy
decisions. The data we are collecting will determine the percentage of
time spent in nonprovider site training. We will analyze the data in
order to determine whether CMS' former rules regarding teaching
physician salary costs for counting residents in nonprovider sites were
truly an obstacle to the expansion of training in nonprovider settings,
as was claimed by advocates of such expanded training. We also remind
providers that the use and evaluation of this data collection will have
no direct implications for Medicare GME payments.
Comment: Numerous commenters believed that the proposal to add
lines to the cost report for the purposes of this

[[Page 72141]]

recordkeeping requirement was an added administrative burden to
hospitals, as was the proposal to require such cost report data on a
program-by-program basis for primary care specialties. The commenters
claimed that the statute merely requires hospitals to ``maintain and
make available to the Secretary'' records on resident training time in
nonprovider sites, and the proposed regulations greatly complicated
this requirement. The commenters believed that the intent of section
5504 was to simplify the already burdensome resident reporting
requirements on hospitals.
Some commenters suggested that CMS instead interpret section 5504
as only requiring hospitals to have these records and make them
available on an as-needed basis. The commenters noted that, if CMS
decides to finalize the policy to add lines to the cost report for the
purposes of this section 5504 requirement, CMS limit the additional
lines to two: one line for primary care data and one line for
nonprimary data.
Response: We believe that the addition of a few cost report lines
for the purposes of this recordkeeping requirement does not pose an
undue burden on hospitals. The data that we are requesting are already
collected by hospitals for other GME purposes, and hospitals should not
experience an added burden from the requirement to enter that
information in the cost report. The Affordable Care Act gave CMS
explicit authority to require that this recordkeeping data be
maintained and made available, and the most direct method of making
such data available to Medicare contractors is by reporting it on the
Medicare cost report. Therefore, we are finalizing this policy as
proposed.
Comment: One commenter suggested that CMS change the base year that
it will use to determine if nonprovider site rotations are increasing
to cost reporting periods beginning on or after July 1, 2010 and before
June 30, 2011. The commenter stated that providers who are currently
unable to claim time spent at nonprovider settings, due to the
administrative requirements in place now, would not be claiming them on
the cost report until the 2010-2011 academic year. Therefore, the
commenter stated, an analysis of nonprovider site training time using
the current proposed base year would indicate a greater increase in
such rotations than might actually exist.
Response: We chose the base year of cost reporting periods
beginning on or after July 1, 2009 and before June 30, 2010 because it
is the last year before the effective date of the provisions of section
5504. Accordingly, we believe that the base year that we proposed will
best serve our goal of determining whether nonprovider site training
actually increased as a result of the provisions of section 5504.
Therefore, we are finalizing the base year as proposed.
Comment: One commenter expressed support for the proposal to track
resident training time in nonprovider sites and requested that CMS
clearly report the findings of its analysis of the nonprovider site
training data. The commenter also requested that CMS enumerate the
various factors that influence training in nonprovider sites when it
reports the findings.
Response: The statute does not require CMS to report any findings
that result from this data collection. Therefore, we are not currently
planning to officially report any such findings.
Comment: Some commenters requested that CMS change the definition
of primary care to replace the outdated term ``osteopathic general
practice'' with the term ``traditional rotating internship'' at section
1886(h)(5)(H) of the Act.
Response: We do not have the authority to change the statutory
definition of ``primary care resident'' at section 1886(h)(5)(H) of the
Act.
After consideration of the public comments we received, we are
finalizing our changes to the regulations at Sec. 413.78(g)(5)
regarding recordkeeping and comparison to a base year as proposed.

C. Counting Resident Time for Didactic and Scholarly Activities and
Other Activities (Section 5505 of the Affordable Care Act)

1. Background and Changes Made by the Affordable Care Act
Prior to the enactment of the Affordable Care Act, only the time
that residents spent training at a nonprovider setting in patient care
activities, as part of an approved program, could be included in a
hospital's direct GME or IME FTE resident count. There were also
differences in the rules for counting FTE resident time during the time
that residents spend training in the hospital for direct GME and IME
payments. For direct GME payment purposes, under 42 CFR 413.78(a),
``residents in an approved program working in all areas of the hospital
complex may be counted.'' As explained in the September 29, 1989
Federal Register (54 FR 40286), the hospital complex consists of the
hospital and the hospital-based providers and subproviders. Therefore,
a hospital need not distinguish between patient care activities and
nonpatient care activities when determining its direct GME count when
the residents are training in the hospital complex. However, for IME
payment purposes, consistent with the regulations at 42 CFR 413.9 and
412.105(f)(1)(ii) only time spent in patient care activities in the
portion of the hospital subject to the hospital inpatient prospective
payment system and the outpatient department of a hospital is counted.
As stated in the FY 2002 IPPS final rule, it has been our longstanding
policy that, regardless of the site of training, ``we do not include
residents in the IME count to the extent that the residents are not
involved in furnishing patient care'' (66 FR 39897). Thus, in the FY
2002 final rule, CMS reiterated its policy that resident research time
not associated with the diagnosis or treatment of a particular patient
could not be included in the IME FTE count (66 FR 39897). In the FY
2007 final rule, CMS clarified that this exclusion also applied to all
nonpatient care activities, such as didactic conferences and seminars
(71 FR 48040).
Section 5505(a) of the Affordable Care Act added new subparagraph
(J) to section 1886(h)(4) (as amended by section 5504) of the Act to
allow hospitals to count certain nonpatient care activities that occur
in certain nonprovider settings, including didactic conferences and
seminars, in the hospital's direct GME FTE resident counts. The
provision added by section 5505(a) allows a hospital to count the time
that residents spend training in an approved program in a ``nonprovider
setting that is primarily engaged in furnishing patient care'' for
direct GME purposes, even if those residents are engaged in nonpatient
care activities, such as didactic conferences and seminars (but not
including research not associated with the treatment or diagnosis of a
particular patient), during that training time at the nonprovider site.
This statutory change is effective for cost reporting periods beginning
on or after July 1, 2009. In the August 3, 2010 proposed rule (75 FR
46388), we proposed to revise our regulations at Sec. 413.78(f)(1) and
(g)(1) to reflect the statutory provision.
Section 5505(b) of the Affordable Care Act addressed IME and added
a new clause (x) to section 1886(d)(5)(B) of the Act which allows
certain nonpatient care activities, including didactic conferences and
seminars (but not including research not associated with the treatment
or diagnosis of a particular patient), to be counted for IME purposes

[[Page 72142]]

as well. However, for IME purposes, this change only applies to such
activities during training that occurs in subsection (d) hospitals
(which are IPPS hospitals), subsection (d) Puerto Rico hospitals (IPPS
hospitals in Puerto Rico), hospitals that are reimbursed under a
reimbursement system authorized under section 1814(b)(3) of the Act, or
provider-based hospital outpatient departments. The IME provision is
applicable to cost reporting periods beginning on or after January 1,
1983. In the August 3, 2010 proposed rule (75 FR 46388), we proposed to
revise our regulations at Sec. 412.105(f)(1)(ii)(A) through
(f)(1)(ii)(D) and (f)(1)(iii)(C) to reflect these statutory provisions.
As specified in section 1886(d)(5)(B)(x)(III) of the Act, as added
by section 5505(b) of the Affordable Care Act, research activities that
are not associated with the treatment or diagnosis of a particular
patient are excluded from the allowable IME count of FTE residents, and
this specific change applies to cost reporting periods beginning on or
after October 1, 2001. Section 5505(c) of the Affordable Care Act
provides that section 1886(d)(5)(B)(x)(III) of the Act shall not give
rise to any inference as to how the law in effect prior to October 1,
2001, should be interpreted. We discuss these provisions and our
proposed and final implementation under section XXI.C.3. of this
preamble.
Section 10501(j) of Public Law 111-148 amended section 5505 to
clarify its application. The amendment prohibits the provisions of
section 5505 from being applied in a manner that would require the
reopening of settled cost reports except where the provider has a
jurisdictionally proper appeal pending on the issue of direct GME or
IME payments as of March 23, 2010 (the date of the enactment of Pub. L.
111-148). In the August 3, 2010 proposed rule (75 FR 46388), we
proposed to reflect this provision in the proposed revisions to our
regulations under Sec. 412.105(f)(1)(ii), Sec. 412.105(f)(1)(iii)(C),
and Sec. 413.78(h). We also proposed, as mentioned in section XXI.B.1.
of this preamble with respect to section 5504 of the Affordable Care
Act, to interpret ``jurisdictionally proper appeal pending'' on direct
GME or IME payments for this section to mean that, in order for a
hospital to request a change to its FTE count, direct GME or IME
respectively, the ``jurisdictionally proper appeal pending'' must be
specific to direct GME or IME respectively. For example, in order for a
hospital to increase its FTE count with regard to a provision of the
Affordable Care Act that is unique to IME (such as inclusion in the IME
count of didactic time occurring in the hospital as specified by new
section 1886(d)(5)(B)(x)(II)) of the Act, the hospital's
``jurisdictionally proper appeal pending'' must be on an IME issue
related to IME FTEs or the available bed count. However, if the
hospital's ``jurisdictionally proper appeal pending'' is on an issue
that only affects direct GME payments, such as the initial residency
period or the Medicare patient load, that appeal would not be
sufficient in order for the hospital to increase its FTE count with
regard to a provision of the Affordable Care Act that is unique to IME,
such as didactic time in the hospital setting.
Comment: Several commenters provided a general statement on their
belief that the Medicare program is intended to support all resident
training time. The commenters explained that direct patient care,
research activities, and educational and didactic activities all
comprise one ``seamless educational experience'' of physician resident
training. The commenters believed that Congress did not intend for this
fluid training to be ``parsed'' by CMS.
Response: We disagree with the commenters' assertions regarding
Congressional intent to fund resident training. The Conference Report
that accompanied the Social Security Amendments of 1965, Public Law 89-
97 (S. Rept. No. 404, 89th Cong., 1st Sess. 36 (1965); H.R. No. 213,
89th Cong., 1st Sess. 32 (1965)) shows that Congress intended for
Medicare GME funding to be limited in scope and temporary in its
duration. The Conference Report also indicates that Medicare GME
funding was only intended to assist hospitals in resident training, and
not to fully fund such training. Finally, we note that much of the
``parsing'' of resident training time into allowable and nonallowable
time was mandated by Congress, and as such, CMS does not have
discretion to allow all resident training time to count for Medicare
GME payment purposes.
Comment: Many commenters disagreed with our interpretation of the
application provision of section 5505(d) of the Affordable Care Act.
The commenters believed that the statute clearly allows hospitals to
reopen cost reports that have a jurisdictionally proper pending appeal
as of March 23, 2010, regardless of whether or not the issue under
appeal is specifically related to direct GME or IME payments. Because
many of the provisions of section 5505 apply retroactively, the
commenters believed that CMS should not place additional restrictions
on a hospital's ability to request reopenings of cost reports. The
commenters also believed that hospitals with cost reports for which the
hospitals retained a right to timely file a jurisdictionally proper
appeal as of March 23, 2010 should be allowed to reopen such cost
reports, whether or not the appeal was pending by that date.
Another commenter requested that CMS clarify certain issues
surrounding the application of section 5505. The commenter asked how
providers will be paid for previous disallowances of didactic time for
IME purposes, now that section 5505 allows hospitals to count such time
retroactively since January 1, 1983, if most relevant cost reports
cannot be reopened under the application of section 5505. The commenter
also asked if administrative and judicial decisions that disallowed IME
didactic time can be reversed.
Another commenter requested that CMS clarify the cost reporting
periods to which section 5505 applies. The commenter explained that
providers have 180 days to appeal a Notice of Program Reimbursement
(NPR), and, therefore, hospitals that received a final determination on
their cost reports after September 24, 2009 would not be permitted to
appeal or reopen a cost report for didactic time for the purposes of
section 5505. The commenter believed that CMS should allow hospitals
that have not received their initial NPR as of September 24, 2009 to
reopen or appeal their respective cost reports.
Response: Section 5505(d) of the Affordable Care Act explicitly
states that the amendments of that section need not be applied to
settled cost reports, unless there is a jurisdictionally proper appeal
pending on that cost report on certain direct GME or IME issues. We do
not have the authority to expand the scope of section 5505(d) to
pending appeals on other issues, and we are retaining our
interpretation of the term ``jurisdictionally proper appeal pending''
in the context of section 5505(d) to mean that the appeal must be
specific to direct GME or IME respectively. We believe that the intent
of section 5505 as a whole was to change GME policy for the future, and
that the intent of section 5505(d) specifically was to limit the number
of cost report adjustments, and not to encourage a mass reopening of
cost reports. The cost report reopening process is one that is very
costly and time-consuming for CMS and its contractors, and it is
disruptive to the efficient operation of the Medicare program.
Therefore, we interpreted section 5505(d) in the spirit of the section
as a whole, to be only applicable in those limited circumstances where
there is a ``jurisdictionally proper appeal

[[Page 72143]]

pending'' on a cost report specific to direct GME or IME respectively.
2. Definition of ``Nonprovider Setting That Is Primarily Engaged in
Furnishing Patient Care''
As stated above, section 5505(a) of the Affordable Care Act amended
section 1886(h)(4) of the Act to allow a hospital to count the time
that residents spend in certain didactic nonpatient care activities in
nonprovider sites towards the hospital's direct GME resident count for
cost reporting periods beginning on or after July 1, 2009. Section
5505(a)(2) defines the term ``nonprovider setting that is primarily
engaged in furnishing patient care'' to mean ``a nonprovider setting in
which the primary activity is the care and treatment of patients, as
defined by the Secretary.'' In past discussions regarding our policy to
disallow time spent by residents in didactic nonpatient care
activities, we have provided extensive explanations of what is meant by
the term ``patient care activities.'' When section 1886(h)(4)(E) of the
Act was first implemented, we specifically stated that ``only time
spent in activities relating to patient care may be counted [in
nonprovider sites]'' (54 FR 40292, September 29, 1989). In 1998, when
we implemented the statute allowing FTE residents to be counted in
nonprovider sites for IME, we reiterated that a hospital may only count
resident training time ``in nonprovider sites for indirect and direct
GME, respectively, if the resident is involved in patient care'' (63 FR
40986, July 31, 1998). In addition, we note that the scope of the term
``patient care'' had been well-established in the Medicare program even
prior to issuance of the first rules on counting FTE residents for
purposes of direct GME and IME payments. For example, prior to the
IPPS, acute care hospitals were paid by Medicare for inpatient services
based on their reasonable operating costs, or costs relating to the
provision of reasonable and necessary ``patient care.'' The
longstanding regulation at 42 CFR 413.9 (Costs related to patient care)
specifies that Medicare payment is limited to those services relating
to ``patient care,'' or to those directly related to covered services
for the care of beneficiaries. In the August 18, 2006 Federal Register,
we defined the term ``patient care activities'' at 42 CFR 413.75(b) in
a way that was consistent with these previous, plain-language
applications of the term as ``the care and treatment of particular
patients, including services for which a physician or other
practitioner may bill, and orientation activities as defined in this
section'' (71 FR 48142).
Section 5505(a) of the Affordable Care Act added a new subparagraph
(K) to section 1886(h)(5) of the Act which defines the term
``nonprovider setting that is primarily engaged in furnishing patient
care'' to mean ``a nonprovider setting in which the primary activity is
the care and treatment of particular patients, as defined by the
Secretary.'' This definition uses the term ``patient care'' which we
have defined previously, as discussed above. In the August 3, 2010
proposed rule (75 FR 46388 and 46389), we proposed to continue applying
our current definition of the term ``patient care'' as described above
and in current regulations and other guidance. Examples of nonprovider
settings that would be ``primarily engaged in furnishing patient care''
are those settings in which the main mission is to provide patient
care, such as doctors' offices and community health clinics.
Nonprovider settings that would not meet these criteria include those
with a main mission other than patient care. An example of a
nonprovider setting that does not meet the ``primarily engaged in
furnishing patient care'' criterion set forth in this section would be
a hotel or convention center. While residents may attend didactic
conferences and seminars in a hotel or convention center, that didactic
time cannot be counted toward a hospital's direct GME FTE count because
the main mission of a hotel or convention center is the provision of
hospitality and meeting services. Thus, any such time spent in a hotel
or convention center would not occur in a setting that is primarily
engaged in furnishing patient care. Another example of such settings is
a medical school and dental school, even if those schools are part of a
larger system that includes institutions that are primarily engaged in
patient care. Despite any affiliations with patient care settings,
medical and dental schools are institutions that are primarily engaged
in educational activities as opposed to patient care. Medical and
dental schools retain their principal mission of education regardless
of their participation in various systems and affiliations, parts of
which may involve settings that are primarily engaged in furnishing
patient care.
The exclusion of medical and dental schools from the definition of
``nonprovider setting that is primarily engaged in furnishing patient
care'' is consistent with longstanding CMS policy, and we have
addressed this policy several times in the past. We explained in
response to comments in the aforementioned August 18, 2006 Federal
Register that, ``[W]e understand that it is quite common for hospitals,
especially large academic medical centers, to be located on the same
campus as a medical school, where the buildings are very closely
situated or even connected, and the facilities are often shared.
However * * * hospitals, nonprovider sites, and medical schools are
structured separately for legal and financial purposes, and are
recognized independently for state licensing and Medicare cost
reporting purposes.'' As we stated in the FY 2007 final rule, ``to put
it simply, a hospital is not a medical school, and a medical school is
not a hospital'' (71 FR 48093). In the August 22, 2007 Federal
Register, we clarified that, ``[T]he commenter is also correct that
orientation activities in a related medical school cannot be counted *
* * the nonprovider settings we were referring to in which orientation
may be counted are those nonprovider settings such as physicians'
offices or clinics, where patient care is routinely provided and a
hospital is permitted to count the time spent by residents in
accordance with our regulations at Sec. Sec. 412.105(f)(1)(ii)(C) and
413.78(f), not other nonprovider settings where time spent by residents
is not permitted to be counted for purposes of direct GME and IME'' (72
FR 47382). Thus, while time spent by residents in certain nonpatient
care activities may be counted for direct GME payment purposes in a
nonprovider site primarily engaged in furnishing patient care, time
spent by residents in nonpatient care activities at nonprovider sites
that are not primarily engaged in patient care activities is not
allowable for direct GME and IME payment purposes.
In the August 3, 2010 proposed rule (75 FR 46389), we proposed to
add, under Sec. 413.75(b), the statutory definition of ``nonprovider
setting that is primarily engaged in furnishing patient care'' to the
definition of general terms used throughout the GME regulations.
Comment: A number of commenters requested that CMS adopt a one
workday payment policy threshold for didactic time as it relates to
resident training in the nonprovider setting. The commenters indicated
that this threshold would allow a hospital to count a full day of
resident training, so long as the resident engaged in some patient care
during the day (that is, the entire day of training did not consist of
didactic training time). The commenters believed that this suggested
policy change would ease and simplify hospitals' administrative
burdens. The commenter suggested that if CMS is not willing to adopt
this policy threshold, CMS at least confirm that its current one

[[Page 72144]]

workday administrative rule, which is a documentation policy and not a
payment policy, continues to apply for IME purposes to didactic
training in nonprovider settings.
Response: We believe that, with section 5505, Congress has spoken
definitively regarding didactic time. Prior to the enactment of the
Affordable Care Act, our strict reading of the statute regarding
``patient care'' led us to deny counting didactic training for IME in
the hospital settings and to deny counting didactic time for both
direct GME and IME in the nonprovider setting. As such, we adopted the
one workday rule as an administrative expediency policy for hospitals
that wished to simplify documentation practices. However, now that
Congress has specifically allowed all didactic training in the hospital
for IME, and even allowed didactic training time in a nonprovider site
that is ``primarily engaged in furnishing patient care'' to be counted
for direct GME, we believe that generally, most didactic training in
GME programs will now be allowable under the provisions of section
5505. Accordingly, we believe it is appropriate to strictly apply the
statutory criteria and no longer allow hospitals to apply a one workday
administrative rule. Therefore, we are clarifying in this final rule
that the one workday administrative rule regarding didactic training
time will no longer be permitted for IME or direct GME documentation
and counting of time beginning with portions of cost reporting periods
beginning on or after January 1, 2011.
Comment: Many commenters suggested that CMS include dental clinics
within the definition of a ``nonprovider setting that is primarily
engaged in providing patient care.'' The commenters explained that
dental schools frequently train dental residents in patient-care
clinics that are located on the dental school premises. The commenters
pointed out that this is in contrast to medical schools, which do not
typically operate medical clinics. As such, the commenters claimed that
``dental residency programs are singled out by CMS' proposed
interpretation in a way that medical residency programs are not.'' The
commenters maintained that because the ``main mission'' of dental
clinics is clearly to provide patient care, the time that a dental
resident spends in a clinic, including any time the residents spends in
didactic training in the clinic, should be counted for DGME payment
purposes.
Another commenter requested that, in addition to dental school
clinics, CMS include physician offices housed within medical schools
and homes of patients in its definition of ``a nonprovider setting that
is primarily engaged in furnishing patient care.''
Another commenter asked if a nonteaching hospital could be
considered ``a nonprovider setting that is primarily engaged in
furnishing patient care.''
Response: We agree with the commenters who requested that we
consider dental school clinics to be a ``nonprovider setting that is
primarily engaged in furnishing patient care.'' In the proposed
definition at Sec. 413.75(b), we defined ``nonprovider setting that is
primarily engaged in furnishing patient care'' as ``a nonprovider
setting in which the primary activity is the care and treatment of
patients.'' We agree that dental and medical clinics fit that proposed
criterion. Therefore, we are amending our proposed policy to include
both dental and medical school patient care clinics in the category of
a ``nonprovider setting that is primarily engaged in furnishing patient
care,'' as long as the hospital clearly documents that any such
didactic activities occurred in the clinics proper, and not in another
location on the school campus. For example, a didactic activity that
occurs in a conference room that is clearly located within the clinic
may be counted, but if the same activity occurs elsewhere on the school
campus that is outside the clinic, the time may not be counted.
A physician's office is also considered a ``nonprovider setting
that is primarily engaged in furnishing patient care.'' Homes of
patients are obviously not settings that are primarily engaged in
furnishing patient care, and nonteaching hospitals are not considered
``nonprovider settings'' at all because they are, by definition,
providers. Furthermore, the regulations at Sec. 413.78(b) state that a
hospital cannot claim the time spent by residents training at another
hospital. We are not expanding our definition of ``nonprovider setting
that is primarily engaged in furnishing patient care'' to any other
additional settings in this final rule.
After consideration of the public comments we received, we are
finalizing our proposed definition of ``nonprovider setting that is
primarily engaged in furnishing patient care,'' at Sec. 413.75(b), but
we are amending our proposed policy to include dental and medical
school clinics under that definition, as discussed above.
Comment: One commenter asked about a case in which a resident is
transferred to train at another hospital, and which hospital should
claim that FTE time in such a case.
Response: This comment is out of scope of the provisions of the
proposed rule and is not relevant to the GME changes of the Affordable
Care Act that are being implemented. Therefore, we are not addressing
it in this final rule.
3. Distinguishing Between Allowed ``Nonpatient Care Activities'' and
Nonallowable Research Time
As discussed above, research time that is not associated with the
treatment or diagnosis of a particular patient is specifically excluded
from the ``nonpatient care activities, such as didactic conferences and
seminars'' that are otherwise allowable under section 5505 of the
Affordable Care Act. There are several unique features of ``research
not associated with the treatment or diagnosis of a particular
patient'' that distinguish it from ``nonpatient care activities, such
as didactic conferences and seminars.'' From the outset of the Medicare
program, research costs have not been considered reasonable costs of
patient care, unless the research is associated with the treatment or
diagnosis of a particular patient. (S. Rept. No. 89-404, Part I, p. 36
(June 30, 1965) (``Identifiable expenses for medical research * * *
over and above the costs closely related to normal patient care, would
not be met from the trust fund.'')); 31 FR 14814, Nov. 22, 1966
(promulgating prior version of 42 CFR 413.90(a)).
``Research not associated with the treatment or diagnosis of a
particular patient'' usually comprises activities that are focused on
developing new medical treatments, evaluating medical treatments for
efficacy or safety, or elaborating upon knowledge that will contribute
to the development and evaluation of new medical treatments in the
future, rather than on establishing a diagnosis or furnishing
therapeutic services for a particular patient.
Section 5505 of the Affordable Care Act further distinguishes
``research not associated with the treatment or diagnosis of a
particular patient'' from ``nonpatient care activities, such as
didactic conferences and seminars,'' by specifying that nonpatient care
activities include ``didactic conferences and seminars,'' but not
research that is not associated with the treatment or diagnosis of a
particular patient. Conferences or seminars could include an
administrative rotation, which would include resident training in the
administrative aspects of medical care such as practice management.
Comment: Many commenters believed that the definition of ``research
not associated with the treatment or diagnosis of a particular
patient'' was

[[Page 72145]]

too broad. Specifically, several commenters remarked that the inclusion
of ``evaluating medical treatments for efficacy or safety'' appeared to
include quality and safety projects, which the commenters believed to
be essential to train a new generation of physicians who prioritize
quality and safety in patient care. The commenters requested that CMS
clarify that resident time spent on quality and safety projects is
countable as didactic time. One commenter specifically suggested that
CMS revise the definition of research to be ``activities whose sole
purpose is the development of new medical treatment for use in the
future.''
Several commenters also requested that CMS adopt a one workday
payment policy threshold for research time. Similar to the same
commenters' request above for a one workday threshold for didactic
time, the commenters requested that if CMS would not be willing to
adopt the one workday threshold suggestion, CMS adopt a one workday
administrative rule for research time, which is a documentation policy
and not a payment policy. The commenters were of the opinion that
consistency between the policies for both didactic and research time is
critical for reducing hospitals' administrative burden and preventing
confusion between the two policies.
Response: We are not revising our proposed definition of ``research
not associated with the treatment or diagnosis of a particular
patient'' at this time, nor are we expanding our proposed policy on
research time to allow for a one workday threshold. Moreover, we are
not establishing an administrative rule for documenting resident time
spent in such research activities. We believe that our proposed
definition of the term encompasses the activities that Congress
excluded from the allowed ``nonpatient care activities'' of section
5505. We believe that, with section 5505, Congress has spoken
definitively regarding research time. In section 5505, Congress clearly
excluded counting any research time for IME purposes and research time
at nonprovider sites for direct GME purposes, unless it is associated
with the treatment or diagnosis of a particular patient. As such, we
believe it is appropriate to exclude even a partial day of ``research
not associated with the treatment or diagnosis of a particular
patient'' from the determination of the number of FTEs for GME payment
purposes. A one workday rule would effectively allow the hospital to
count nonallowable research time in its FTE counts. In addition, as we
explained in response to a comment above, the one workday
administrative rule is no longer permitted for didactic time either,
for portions of cost reporting periods beginning on or after January 1,
2011.
Comment: One commenter stated that, in the proposed rule, CMS did
not include a regulation regarding the October 1, 2001 effective date
for the exclusion of ``research activities that are not associated with
the treatment or diagnosis of a particular patient'' for IME payment
purposes. The commenter noted that the statute clearly stated the
October 1, 2001 effective date of the provision, and that the statute
clarified that ``such section, as so added, shall not give rise to any
inference as to how the law in effect prior to such date should be
interpreted.'' The commenter then remarked that when CMS referred in
the proposed rule to section 5505's allowance of didactic activities
for IME purposes (75 FR 46387), which CMS noted as excluding such
research, CMS referred simultaneously to two policies with effective
dates that spanned almost 20 years. The commenter requested that CMS
revise the regulations to include the October 1, 2001 effective date of
the exclusion of such research, and to treat the two policies regarding
didactic time and research time as two distinct and separate policies.
Response: The existing regulations regarding the exclusion of
research for IME merely reiterate longstanding policy, as we explained
in the August 1, 2001 final rule (66 FR 39896) and, therefore, that the
regulation at 42 CFR 412.105(f)(1)(iii)(B) does not have an effective
date. We did not include the October 1, 2001 effective date of the
exclusion of research time for IME payment purposes in our proposed
regulations for the same reason. Congress specified the date we
reiterated in our policy by regulation as an effective date for the
statutory exclusion of research time for IME. However, Congress did not
state that research activities prior to October 1, 2001, are allowed.
Rather, Congress deferred to the Secretary to interpret and implement
policy regarding research time for IME payment purposes prior to
October 1, 2001. This is the meaning of the statement in section 5505
that is quoted by the commenter, that ``such section, as so added,
shall not give rise to any inference as to how the law in effect prior
to such date should be interpreted.'' This language further means that,
subject to the limitations of section 5505(d), in the instances where
providers disagree with the Secretary's interpretation of research
policy in cost reports prior to October 1, 2001, and the providers
appeal research time that was disallowed from their IME FTE counts in
those cost reports, the matter would be reserved for adjudication in
the courts.
However, there has been some confusion regarding the application of
this provision of the Affordable Care Act. Some individuals, and one
court decision, have interpreted section 5505(b)'s allowance of
nonpatient care activities for IME as of January 1, 1983 to include
research time as well. We believe that this interpretation is contrary
to the express intent of the statute, which clearly distinguishes
``research activities that are not associated with the treatment or
diagnosis of a particular patient'' from ``nonpatient care activities,
such as didactic conferences and seminars,'' and which unmistakably
excludes research time. In addition, as explained above, Congress
clearly provided that the October 1, 2001 effective date ``shall not
give rise to any inference'' as to how any research time prior to that
effective date should be counted for IME. Several other commenters on
the proposed rule shared CMS' understanding of section 5505(c) within
their comments. These commenters acknowledged that ``the law does not
opine on the status of IME research time prior to October 1, 2001,
stating that research provision of the law `shall not give rise to any
inference as to how the law in effect prior to such date should be
interpreted''' (emphasis added). This widespread understanding of
section 5505(c) aligns with CMS' understanding of this Affordable Care
Act language, and is consistent with our view that the Secretary has
the authority to interpret section 1886(d)(5)(B) of the Act, as amended
by section 5505, and implement policy regarding the time spent in
research activities prior to October 1, 2001, as the Secretary
determines appropriate.
For all these reasons, we are exercising our authority to define
the term ``nonpatient care activities,'' as used in section 5505(b) of
the ACA, to adopt proposed Sec. 412.105(f)(1)(iii)(C), which excludes
research activities not related to the treatment or diagnosis of a
particular patient from the category of allowable ``nonpatient care
activities.'' Instead, such research activities would continue to be
excluded under Sec. 412.105(f)(1)(iii)(B). In addition to the language
and structure of section 5505, as discussed above, we believe such a
decision is also supported by important differences between these
research activities and the types of nonpatient care activities, for
example, didactic conferences and seminars, enumerated in section 5505.
For example, interns and residents are often assigned to

[[Page 72146]]

blocks of research time, whereas didactic conferences and seminars may
occur during periods when an intern or resident is otherwise assigned
to a rotation primarily requiring the provision of patient care. In
addition, such didactic conferences and seminars may involve
presentations or discussions related to the treatment of current
patients. It has been our consistent policy to exclude research
activities, as we clarified in rulemaking in 2001. We also engaged in
rulemaking in 2006 to clarify that didactic time would also not be
counted for GME and IME purposes. Set against this background, we read
section 5505 as reflecting Congress' clear intent to reverse our 2006
policy regarding didactic time and to ratify our policy regarding
research time from October 1, 2001, forward, while also indicating that
it was not directing any result as to research activities before
October 1, 2001.
After consideration of the public comments we received, we are
adopting revised Sec. 412.105(f)(1)(iii)(C) of the regulations to
include allowed didactic activities for IME purposes, as proposed
without modification. ``Research activities that are not associated
with the treatment or diagnosis of a particular patient'' continue to
be excluded under Sec. 412.105(f)(1)(iii)(B).
4. Approved Leaves of Absence
In the FY 2008 IPPS proposed rule (72 FR 24814), we proposed to
remove vacation, sick leave and other types of leave from the FTE
calculation for IME and for direct GME purposes. We proposed this
policy based on our belief that such leave time involved neither
patient care nor nonpatient care activities. However, we did not
finalize this proposed policy after many public commenters explained
that the implementation of the policy would involve significant
administrative burdens (FY 2008 IPPS final rule, 72 FR 47374). Instead,
our previously existing policy, which allowed vacation and sick leave
generally to be counted for direct GME and IME purposes, remained in
effect. In the FY 2008 IPPS proposed rule, we also proposed to continue
to count the time spent by residents in orientation activities in both
the hospital and nonprovider settings. We proposed this policy because
we recognized the distinct character of orientation activities as
essential to the provision of patient care by residents. We did
finalize our policy on orientation time, and in doing so, we specified
that patient care activities means the care and treatment of particular
patients, including services for which a physician or other
practitioner may bill, and orientation activities (Sec. 413.75(b)),
effective for cost reporting periods beginning on or after October 1,
2007.
Section 5505(a) of the Affordable Care Act added new subparagraph
(K) to section 1886(h)(4) of the Act to clarify that hospitals may
count residents' vacation, sick leave, and other approved leave time
toward the hospitals' direct GME FTE resident count, so long as the
leave does not prolong the total time the resident participates in his
or her approved program. This direct GME provision regarding leave time
is effective for cost reporting periods beginning on or after January
1, 1983. In addition, section 5505(b) of the Affordable Care Act added
section 1886(d)(5)(B)(x)(I) to the Act, which allows hospitals to count
residents' vacation, sick leave, and other approved leave time toward
the hospitals' IME FTE resident count, as long as the leave does not
prolong the total time the resident participates in his or her approved
program. This IME provision regarding leave time is effective for cost
reporting periods beginning on or after January 1, 1983.
In the August 3, 2010 proposed rule (75 FR 46389 and 46390), we
proposed to revise our regulations to reflect these statutory changes
regarding counting residents' vacation, sick leave, and other approved
leave time toward the hospitals' direct FTE resident count under new
Sec. 413.78(h) for GME and under Sec. 412.105(f)(1)(iii)(D) for IME.
We noted that when a resident on leave is training at two hospitals,
each hospital is to count the proportion of the leave of absence time
as specified in the August 22, 2007 final rule (72 FR 47382). In that
rule, we explained that regardless of which hospital is paying the
resident's salaries and fringe benefits, the hospital to which the
resident is assigned during the time the vacation is taken is the
hospital that counts that FTE time for direct GME and IME. If the
rotation schedule does not clearly indicate where the resident is
assigned during the time the vacation is taken, the hospitals to which
the resident rotates over the course of the academic year would divide
and count the resident's vacation time proportionately based on the
amount of time spent in actual training at the respective hospitals. In
the August 3, 2010 proposed rule, we also proposed to specify that
``other approved leave'' includes those types of generally accepted
leave of short duration (those that do not prolong the total time that
the resident is participating in the approved training program) that
have not been included in our resident leave time policies in the past.
Examples of such ``other approved leave'' could include jury duty,
other court leave, or voting leave.
Comment: Numerous commenters objected to the instructions regarding
allocating resident vacation time when a resident's rotation schedule
does not clearly indicate the resident's assignment during the vacation
time. The commenters claimed that hospitals had never been given such
strict instructions regarding the allocation of resident vacation time,
and the methods used by hospitals to allocate such time among
themselves have worked well up until this point. The commenters
requested that if CMS is not willing to grant hospitals the discretion
to allocate resident vacation time on their own, hospitals should at
least be permitted to choose the period over which they divide the
time, so long as the period is used consistently.
Response: The instructions given above regarding allocating
resident vacation time is a statement of existing policy that we
finalized in the FY 2008 final rule (72 FR 47382). We note that this
policy only applies in a situation where a resident's rotation schedule
does not clearly indicate the resident's assignment during the vacation
time. The above instructions are necessary in a case where rotation
schedules are unclear as to which hospital a resident is assigned to at
any given time. We also note that we have observed a number of
hospitals successfully using the method we described to divide resident
training time.
Comment: One commenter requested that CMS clarify the definition of
``other approved leave,'' specifically to address whether time away for
education that is part of a benefit package would be considered ``other
approved leave.''
Response: In the proposed rule, we explained ``other approved
leave'' as those types of generally accepted leave of short duration
(those that do not prolong the total time that the resident is
participating in the approved training program) that have not been
included in our resident leave time policies in the past. We stated
that examples of such ``other approved leave'' could include jury duty,
other court leave, or voting leave. In general, ``other approved
leave'' refers to leave that is taken for personal or administrative
reasons, and not leave related to a resident's school or training
program.
After consideration of the public comments we received, we are
finalizing our proposed policies regarding approved leaves of absences,

[[Page 72147]]

as reflected in the regulation at Sec. Sec. 412.105(f)(1)(iii)(D) and
413.78(h).

D. Reductions and Increases to Hospitals' FTE Resident Caps for GME
Payment Purposes (Sec. Sec. 412.105(f)(1)(iv) and 413.79(m) and (o))

1. General Background on Methodology for Determining the FTE Resident
Count
As we discuss in section XXI.A. of this preamble, Medicare makes
both direct and indirect GME payments to hospitals that train residents
in approved medical residency training programs. Direct GME payments
are made in accordance with section 1886(h) of the Act, based generally
on hospital-specific PRAs, the number of FTE residents, and the
hospital's Medicare patient share. IME payments are made in accordance
with section 1886(d)(5)(B) of the Act, based generally on the ratio of
the hospital's FTE residents to the number of hospital beds applied to
the DRG payments. Accordingly, the calculation of both direct GME and
IME payments is affected by the number of FTE residents that a hospital
is allowed to count; generally, the greater the number of FTE residents
a hospital counts, the greater the amount of Medicare direct GME and
IME payments the hospital will receive. In an attempt to end the
implicit incentive for hospitals to increase the number of FTE
residents, Congress instituted a cap on the number of allopathic and
osteopathic residents a hospital is allowed to count for direct GME and
IME purposes under the provisions of section 1886(h)(4)(F) of the Act
for direct GME and section 1886(d)(5)(B)(v) of the Act for IME. Dental
and podiatric residents are not included in this statutorily mandated
cap.
2. Reduction of Hospitals' FTE Resident Caps Under the Provisions of
Section 5503 of the Affordable Care Act
Some hospitals have trained a number of allopathic and osteopathic
residents in excess of their FTE resident caps. Other hospitals have
reduced their FTE resident counts to some level below their FTE
resident caps. Section 5503 of the Affordable Care Act added a new
section 1886(h)(8) to the Act to provide for reductions in the
statutory FTE resident caps for direct GME under Medicare for certain
hospitals, and authorizes a ``redistribution'' to hospitals of the
estimated number of FTE resident slots resulting from the reductions.
Section 5503 also amended section 1886(d)(5)(B)(v) of the Act to
require application of the provisions of 1886(h)(8) ``in the same
manner'' to the FTE resident caps for IME. A previous redistribution of
``unused'' FTE resident slots was performed under section 422 of Public
Law 108-173 (the MMA). Section 422 provided for the redistribution of
unused residency positions effective for portions of cost reporting
periods beginning on or after July 1, 2005. While the redistribution
under section 5503 of the Affordable Care Act is similar to section 422
of Public Law 108-173, there are substantive differences between the
two provisions.
The new section 1886(h)(8)(A) of the Act provides that, effective
for portions of cost reporting periods occurring on or after July 1,
2011, a hospital's FTE resident cap will be reduced if its ``reference
resident level'' is less than its ``otherwise applicable resident
limit,'' as these terms are described below. We note that when we refer
to ``otherwise applicable resident cap'' and ``otherwise applicable FTE
resident cap'' in the regulations, we are using these phrases
interchangeably with the statutory term ``otherwise applicable resident
limit.'' Use of the phrases ``otherwise applicable resident cap'' and
``otherwise applicable FTE resident cap'' is consistent with our
reference to a hospital's ``limit'' as its ``cap.'' Rural hospitals
with fewer than 250 acute care inpatient beds as well as those
hospitals described in section XXI.D.4. of this preamble are exempt
from a reduction. For other hospitals, any such reduction will be equal
to 65 percent of the difference between the hospital's ``otherwise
applicable resident limit'' and its ``reference resident level.''
Under the new section 1886(h)(8)(B) of the Act, the Secretary is
authorized to increase the FTE resident caps for certain categories of
hospitals for portions of cost reporting periods occurring on or after
July 1, 2011, by an aggregate number that does not exceed the estimated
overall reduction in FTE resident caps for all hospitals under section
1886(h)(8)(A) of the Act. A single hospital may receive an increase in
its FTE resident cap of no more than 75 additional FTEs. That is, a
hospital would be allowed to receive up to 75 additional slots for
direct GME and up to 75 additional slots for IME. In determining which
hospitals would receive an increase in their FTE resident caps,
sections 1886(h)(8)(B) through 1886(h)(8)(E) of the Act directs us to--
Take into account the demonstrated likelihood of the
hospital filling the additional positions within the first three cost
reporting periods beginning on or after July 1, 2011.
Take into account whether the hospital has an accredited
rural training track program.
Distribute 70 percent of the resident slots to hospitals
located in States with resident-to-population ratios in the lowest
quartile.
Distribute 30 percent of the resident slots to hospitals
located in a State, a territory of the United States, or the District
of Columbia that are among the top 10 States, territories, or Districts
in terms of the ratio of the total population living in an area
designated as a health professional shortage area (HSPA), as of March
23, 2010, to the total population, and/or to hospitals located in rural
areas.
In summary, section 5503 of the Affordable Care Act added a new
section 1886(h)(8) of the Act that prescribes a methodology for
determining reductions to certain hospitals' FTE resident caps based on
unused FTE resident slots, provides for certain exceptions to the FTE
resident cap reductions, and includes general criteria that CMS must
consider in making a ``redistribution'' to other hospitals of the
estimated number of FTE resident slots resulting from the reductions in
the FTE resident caps. In the August 3, 2010 proposed rule (75 FR 46391
through 46410), we proposed procedures for determining whether, and by
what amount, a hospital's FTE resident cap is subject to a reduction
under section 1886(h)(8)(A) of the Act. We also specified an
application process for hospitals that seek to receive increases in
their FTE resident caps and the specific criteria that we will use to
determine which hospitals will receive increases in their FTE resident
caps under section 1886(h)(8)(B) of the Act.
3. Hospitals Subject to the FTE Resident Cap Reduction
As indicated earlier, section 1886(h)(8)(A) of the Act, as added by
section 5503 of the Affordable Care Act, provides that if a hospital's
``reference resident level'' is less than its ``otherwise applicable
resident limit,'' its FTE resident cap(s) will be reduced by 65 percent
of the difference between its ``otherwise applicable resident limit''
and its ``reference resident level.'' Under section 1886(h)(8)(H)(i) of
the Act (as added by section 5503 of the Affordable Care Act), the
``reference resident level'' refers to the number of unweighted
allopathic and osteopathic FTE residents who are training at a hospital
in a given cost reporting period. That is, the ``reference resident
level'' refers to a hospital's allopathic and osteopathic FTE resident
count for a specific period. Under section 1886(h)(8)(H)(ii) the
``otherwise applicable resident limit'' refers to a hospital's FTE
resident cap established under sections

[[Page 72148]]

1886(h)(4)(F)(i) and (h)(4)(H) of the Act for direct GME payment
purposes and a hospital's resident cap established under section
1886(d)(5)(B)(v) for IME payment purposes. For most hospitals, the
permanent FTE cap under section 1886(h)(4)(F)(i) of the Act is based
on: (1) For an urban hospital, the number of unweighted allopathic and
osteopathic FTE residents in the hospital's most recent cost reporting
period ending on or before December 31, 1996 (the ``1996 cap''); (2)
for a rural hospital, 130 percent of the 1996 cap, adjusted as
specified under existing Sec. 413.79(c)(2); and (3) any adjustments to
the hospital's cap under paragraph (7), which specifies the previous
``redistribution'' of resident positions required by section 422 of
Public Law 108-173. Section 1886(h)(4)(H) of the Act specifies that a
hospital's FTE resident cap under subparagraph (F) may be adjusted for
a new medical residency training program established on or after
January 1, 1995, participation in a Medicare GME affiliated group, and
establishment by an urban hospital of a separately accredited rural
training track program. In the August 3, 2010 proposed rule (75
FR46391), we proposed that, in defining a hospital's ``otherwise
applicable resident limit'' for purposes of section 1886(h)(8)(A) of
the Act, we will look at the hospital's 1996 cap during its reference
year, as adjusted for the following criteria: New programs as defined
at Sec. 413.79(e); participation in a Medicare GME affiliation
agreement as defined at Sec. Sec. 413.75(b) and 413.79(f);
participation in an emergency Medicare GME affiliation agreement as
defined at Sec. 413.79(f); participation in a hospital merger; and
whether an urban hospital has a separately accredited rural training
track program as defined at Sec. 413.79(k). We discuss the
applicability of Medicare GME affiliation agreements under section
1886(h)(8)(A) of the Act in more detail under section XXI.D.8.c. of
this preamble and the treatment of hospital mergers under section
XXI.D.8.d. of this preamble. Furthermore, section 1886(h)(8)(H)(iii) of
the Act requires that, in determining a hospital's ``otherwise
applicable resident limit,'' section 1886(h)(7)(A) of the Act shall be
taken into account. Section 1886(h)(7)(A) of the Act refers to the
reduction to a hospital's cap(s) under section 422 of Public Law 108-
173. The application of section 422 of Public Law 108-173 to the
implementation of section 5503 of the Affordable Care Act is further
discussed under section XXI.D.10. of this preamble.
In our discussion of the provisions of section 5503 of the
Affordable Care Act under this section, we generally refer to a
hospital's number of unweighted allopathic and osteopathic FTE
residents in a particular period as a hospital's ``resident level.'' We
also refer to a hospital's resident level in the applicable ``reference
period,'' as explained further below, as the hospital's ``reference
resident level.'' In addition, we refer to the ``otherwise applicable
resident limit'' as the hospital's FTE resident cap that is applicable
during the relevant cost reporting period. Thus, in the August 3, 2010
proposed rule (75 FR 46391), we proposed that, effective for portions
of cost reporting periods beginning on or after July 1, 2011, we would
permanently reduce the hospital's FTE resident cap by 65 percent of the
difference between the reference resident level and the hospital's
otherwise applicable resident limit for IME and direct GME,
respectively. For example, if a hospital's otherwise applicable
resident limit for the reference period is 100, and its reference
resident level is 80 FTEs, we would reduce the hospital's FTE resident
cap by 13 FTEs (0.65*[100--80)] = 13). We proposed to add new
regulations at Sec. 412.105(f)(1)(iv)(B)(2) for IME and at Sec.
413.79(m) for direct GME to reflect our proposals regarding reductions
to hospitals' FTE resident caps under section 5503 of the Affordable
Care Act.
Comment: One commenter requested that emergency Medicare GME
affiliation agreements be disregarded for purposes of determining a
hospital's otherwise applicable resident limit. The commenter agreed
with CMS' proposed policy to consider Medicare GME affiliation
agreements when determining a hospital's otherwise applicable resident
limit, but stated that emergency Medicare GME affiliation agreements
are distinctly different from regular Medicare GME affiliation
agreements because the purpose of emergency Medicare GME affiliation
agreements is to minimize the disruption in residents' training that
occurs as a result of a natural disaster. The commenter stated that as
a result of Hurricane Ike, which led to the declaration of an emergency
area under section 1135(b) of the Act for parts of Louisiana and Texas,
its facility quickly entered into an emergency Medicare GME affiliation
agreement without first determining whether it needed a temporary cap
increase. The commenter stated that facilities that acted as quickly as
its hospital should not be penalized for taking such prompt action. The
commenter believed that emergency Medicare GME affiliation agreements
should not be considered in determining a hospital's otherwise
applicable resident limit because ``[f]rom a statutory perspective, the
provision defining the `otherwise applicable resident limit' only
cross-references the routine Medicare GME affiliation agreement
provisions in section 1886(h)(4)(H) of the Act. It does not cross-
reference the emergency Medicare GME affiliation agreement legislative
authority in section 1135(b) of the Act.'' The commenter indicated that
if CMS decides not to account for emergency Medicare GME affiliation
agreements in determining a hospital's otherwise applicable resident
limit, CMS would not in turn reduce the FTE resident caps of hospitals
located in emergency areas. Rather, the commenter suggested that CMS
could exempt hospitals located in areas affected by an emergency from
the cap redistribution on the basis that they were unable to train up
to their FTE resident caps due to the natural catastrophes. The
commenter stated that because the natural catastrophe led to the
declaration of a public health emergency under section 1135(b) of the
Act, ``* * * the direct consequences of those events should also fall
under the same waiver authority.'' The commenter stated ``[i]mplicitly,
the Affordable Care Act imposes a retrospective requirement on
hospitals to have trained at a level at least equal to their FTE
resident caps to avoid the penalty of the FTE cap reduction. With its
section 1135(b) authority, CMS can waive this retrospective requirement
effective with the date of the beginning of the emergency period.''
Response: We commend the commenters for its hospital's
participation in an emergency Medicare GME affiliation agreement to
provide residents training in affected hospitals with continuity of
training. We do not agree that an emergency Medicare GME affiliation
agreement is fundamentally different from a regular Medicare GME
affiliation agreement. Both types of affiliation agreements allow for a
temporary adjustment to hospitals' FTE caps to permit residents to
train at another facility. Furthermore, section 1886(h)(4)(H)(ii) of
the Act, which gives the Secretary the authority to prescribe rules
which allow members of the same affiliated group to elect to apply the
members' caps on an aggregate basis, is the statutory foundation for
the establishment of emergency Medicare GME affiliation agreements.
Section 1135(b) of the Act only provides the Secretary with the
authority to temporarily waive or modify the

[[Page 72149]]

requirements of a regular Medicare GME affiliation agreement; it did
not provide the Secretary with the authority to create emergency
Medicare GME affiliation agreements. We further note that the
``emergency period'' declared pursuant to section 1135(b) of the Act
with respect to Hurricane Ike expired before the emergency Medicare GME
affiliation agreements provision ended.
In response to the commenters request that CMS exempt hospitals
that were unable to train up to their caps because of a natural
disaster, section 1886(h)(8)(A) of the Act does not provide for
specific exemption for hospitals located in an emergency area during an
emergency period. We believe that section 1886(h)(8)(A) of the Act
allows a hospital to account for its participation in a regular
Medicare GME affiliated group and to account for its participation in
an emergency Medicare GME affiliated group in determining a hospital's
``otherwise applicable resident limit.''
Therefore, we are finalizing our policy as proposed that based on
the statutory language at section 1886(h)(8)(H)(iii) of the Act, in
determining a hospital's otherwise applicable resident limit, we will
generally consider a hospital's 1996 cap during its reference year, as
adjusted for the following criteria: new programs as defined at Sec.
413.79(e); participation in a Medicare GME affiliation agreement as
defined at Sec. Sec. 413.75(b) and 413.79(f); participation in an
emergency Medicare GME affiliation agreement as defined at Sec.
413.79(f); participation in a hospital merger; and whether an urban
hospital has a separately accredited rural training track program as
defined at Sec. 413.79(k).
4. Exemption from FTE Resident Cap Reduction for Certain Rural
Hospitals
Section 1886(h)(8)(A)(ii)(I) of the Act, as added by section 5503
of the Affordable Care Act, specifically exempts rural hospitals (as
defined in section 1886(d)(2)(D)(ii) of the Act) with fewer than 250
acute care inpatient beds from reductions to their FTE resident caps
under section 1886(h)(8)(A). Section 1886(d)(2)(D)(ii) of the Act
defines a rural area as any area outside a Metropolitan Statistical
Area (MSA). Under the existing regulations at Sec. 412.62(f)(ii), an
``urban area'' means: (1) An MSA or New England County Metropolitan
Area (NECMA), as defined by the Executive Office of Management and
Budget; or (2) the following New England counties: Litchfield County,
Connecticut; York County, Maine; Sagadahoc County, Maine; Merrimack
County, New Hampshire; and Newport County, Rhode Island. Under existing
Sec. 412.62(f)(iii), a ``rural area'' means any area outside an urban
area. We note that we no longer use the term MSA, and instead use the
term Core-Based Statistical Area (CBSA) for locality and wage index
purposes.
A hospital's bed size is based on its number of available beds, as
determined for IME payment purposes under Sec. 412.105(b) of the
regulations. For purposes of determining whether a rural hospital has
fewer than 250 beds, we proposed to use data from the rural hospital's
most recent cost reporting period ending on or before March 23, 2010.
(This information may be found on Worksheet S-3, Part I of the Medicare
cost report, CMS-2552-96: the sum of lines 1 and 6 through 10 in column
2, minus line 26 in column 6, divided by the number of days in the cost
reporting period.) In the August 3, 2010 proposed rule (75 FR 46391 and
46392), we proposed that if a rural hospital has fewer than 250 beds in
its most recent cost reporting period ending on or before March 23,
2010, the hospital would not be subject to a possible reduction to its
FTE resident cap(s) under section 1886(h)(8)(A) of the Act. However, if
a rural hospital has at least 250 beds in its most recent cost
reporting period ending on or before March 23, 2010, we proposed that
the rural hospital would be subject to a reduction to its FTE resident
cap(s).
Comment: Several commenters supported the exclusion of rural
hospitals with fewer than 250 beds from a cap reduction under section
1886(h)(8)(A) of the Act. The commenters stated it is important that
these hospitals be exempt from a cap reduction and that excluding
hospitals with fewer than 250 beds will ensure that section 5503 of the
Affordable Care Act will not cause unnecessary harm to these rural
hospitals. The commenter added that due to the rural workforce
shortage, these rural hospitals have a need to retain their current
residency slots which they already struggle to maintain.
One commenter requested clarification on the treatment of rural
hospitals that have a temporary decrease in their available bed count
due to, for example, a unit being closed for renovation. The commenter
asked whether a hospital that only experiences a temporary decrease in
its bed count would be exempt from a cap reduction because the bed
count would probably increase once the renovation, for example, was
completed. The commenter stated that the cost reports at issue, from
the most recent cost reporting ending on or before March 23, 2010, will
neither be audited nor reviewed by the Medicare contractor by the date
cap reductions are made. The commenter asked for clarification on how
the policy for exempting rural hospitals with fewer than 250 beds would
be applied if the temporary reduction is later proven to be invalid.
The commenter recommended ``* * * that CMS require a review process to
validate the bed size of rural hospitals that claim exemption from the
FTE cap reduction due to their bed count.''
Response: We appreciate the commenters' support of our proposed
policy to exclude rural hospitals with fewer than 250 beds from cap
reductions under section 1886(h)(8)(A) of the Act. In response to the
commenter who requested clarification on whether rural hospitals that
only had a temporary bed reduction, such that they meet the requirement
of having fewer than 250 beds for a limited period of time, a hospital
will be exempt from a cap reduction, regardless of whether or not the
bed reduction is temporary, if the data on its cost report at issue
indicates the hospital had fewer than 250 beds. We note that the
determination regarding the availability of beds in a unit that is
closed for renovation would be made in accordance with the existing
regulations at Sec. 412.105(b)(1), which states, ``[b]eds in a unit or
ward that is not occupied to provide a level of care that would be
payable under the acute care hospital inpatient prospective payment
system at any time during the 3 preceding months (the beds in the unit
or ward are to be excluded from the determination of available bed days
during the current month).'' We also are clarifying in this final rule
that the Medicare contractor will determine whether a rural hospital
has fewer than 250 beds by using the number of available beds on the
rural hospital's most recently submitted cost report for its cost
reporting period ending on or before March 23, 2010, for which a cost
report has been settled or has been submitted to the Medicare
contractor by March 23, 2010. That is, we are clarifying that the cost
report used to determine whether the rural hospital is exempt from a
cap reduction must have been settled or have been submitted to the
Medicare contractor by March 23, 2010. In this final rule, we are
revising Sec. 413.79(m)(1) to reflect this clarification.
In response to the commenter's request that CMS require a review
process to validate a rural hospital's bed count, the Medicare
contractors will review rural hospitals' bed size in accordance with
normal audit procedures.

[[Page 72150]]

5. Application of Section 5503 to Hospitals That Participate in
Demonstration Projects or Voluntary Residency Reduction Programs and
Certain Other Hospitals
In addition to certain rural hospitals as noted above, section
1886(h)(8)(A)(ii) of the Act also exempts certain other hospitals from
a residency cap reduction. Section 1886(h)(8)(A)(ii)(II) of the Act, as
amended by section 5503 of the Affordable Care Act, specifically
exempts ``a hospital that was part of a qualifying entity which had a
voluntary residency reduction plan approved under paragraph (6)(B) or
under the authority of section 402 of Public Law 90-248, if the
hospital demonstrates to the Secretary that it has a specific plan in
place for filling the unused positions by not later than 2 years after
the date of enactment of this paragraph.'' This language is referring
to the National Voluntary Residency Reduction Plan (VRRP), the New York
Medicare GME Demonstration (New York Demonstration), and the Utah
Medicare GME Demonstration (Utah Demonstration).
In July 1997, 42 New York teaching hospitals participated in the
New York Demonstration. An additional seven hospitals joined the New
York Demonstration in July 1998. The purpose of the New York
Demonstration was to test reimbursement changes associated with
residency training to determine whether hospitals could use time-
limited transition funding to replace and reengineer the services
provided by a portion of their residency trainees. In exchange for
reducing its count of residents by 20 to 25 percent over a 5-year
period, while maintaining or increasing its primary care-to-specialty
ratio of residents, a participating hospital (or consortium of
hospitals) participating in the New York Demonstration would receive
``hold harmless payments'' for 6 years.
Since 2003, nine Utah teaching hospitals have participated in the
Utah Demonstration to allocate Medicare GME funding to Utah hospitals
based on health professions workforce planning. Under the Utah
Demonstration, Medicare contractors redirect Medicare direct GME funds
from each of the teaching hospitals in Utah and pay those amounts to
the Utah Medical Education Council, an agency of the State government.
Under the VRRP approved under section 1886(h)(6)(B) of the Act,
hospitals could use time-limited transition funding to replace the
services provided by a portion of their residents. In exchange for
reducing its count of residents by 20 to 25 percent over a 5-year
period, while maintaining or increasing its primary care-to-specialty
ratio of residents, a VRRP participating hospital would receive ``hold
harmless payments'' for 5 years.
Based on the language of section 1886(h)(8)(A)(ii)(II) of the Act,
in the August 3, 2010 proposed rule (75 FR 46392), we proposed that
hospitals that participated in the New York Demonstration, the Utah
Demonstration, or a VRRP could be exempt from a cap reduction under
section 1886(h)(8)(A) of the Act. We proposed to not differentiate
between those hospitals that withdrew from either demonstration prior
to its completion and those hospitals that completed either
demonstration. That is, we proposed that any hospital that, at some
point, participated in the New York Demonstration, the Utah
Demonstration, or the VRRP could be exempt from a cap reduction.
Specifically, consistent with the statutory language at section
1886(h)(8) of the Act, even though only seven hospitals actually
completed the New York Demonstration, any hospital that participated in
the New York Demonstration could be exempt from a cap reduction. As
required under section 1886(h)(8)(A)(ii)(II) of the Act, to be exempt
from the cap reduction, a hospital that had a VRRP approved under
section 1886(h)(6)(B) of the Act or hospitals that participated in a
demonstration project approved under section 402 of Public Law 90-248
must demonstrate to the Secretary that it has a plan in place for
filling its unused slots within 2 years after the date of enactment of
Public Law 111-148 (that is, by March 23, 2012). We proposed that those
hospitals must submit their plans specifying how they would fill their
unused slots to CMS by December 1, 2010, in order to be exempt from a
cap reduction.
In addition to the hospitals described under 1886(h)(8)(A)(ii)(II)
of the Act, section 1886(h)(8)(A)(ii)(III) of the Act exempts a
hospital described under section 1886(h)(4)(H)(v) of the Act from a cap
reduction. Therefore, in the August 3, 2010 proposed rule (75 FR
46392), we proposed that such a hospital described under section
1886(h)(4)(H)(v) of the Act be exempt from a cap reduction.
Finally, section 1886(h)(8)(H)(i) of the Act provides that the
hospital's reference resident level is the resident level for the one
cost reporting period out of the three most recent cost reporting
periods ending before March 23, 2010, with the highest resident level.
Under section 1886(h)(8)(A)(i) of the Act, that reference resident
level is used to make the determination of whether a hospital's FTE
resident cap(s) should be reduced. Therefore, in the August 3, 2010
proposed rule, we proposed that if a hospital trains at or above its
otherwise applicable resident limit in all of its three most recent
cost reporting periods ending before March 23, 2010, the hospital would
be exempt from a cap reduction. A separate determination would be made
regarding any reduction to the hospital's direct GME cap and its IME
cap.
Comment: Several commenters supported our proposed policy to
exclude hospitals that participated in the Utah Demonstration and the
New York Demonstration if the hospitals submit their plans to CMS by
December 1, 2010, specifying how they would fill their unused slots by
March 23, 2012.
One commenter asserted that it is important for CMS to understand
the structure, timeline, and post-demonstration requirements associated
with the New York Demonstration. The commenter stated the terms and
conditions for the seven hospitals that completed the New York
Demonstration required that, if a hospital exceeded its post-
demonstration cap, which was in effect until July 1, 2009, and reduced
a participating hospital's cap 20 to 25 percent below its otherwise
applicable Medicare resident cap, the hospital would be accountable for
the Medicare GME reimbursement associated with its additional FTE
residents. The commenter stated the hospitals that completed the New
York Demonstration had to adhere to a separate lower Medicare resident
cap through July 1, 2009, a requirement not applicable to other
hospitals in the country. The commenter also noted that certain
hospitals that did not complete the entire New York demonstration had
already made substantial reductions to their FTE resident counts of 20
or 25 percent before formally ending their participation in the
demonstration. The commenter stated, for this reason, it agrees with
CMS' proposal to apply the Affordable Care Act exemption for hospitals
that participated in the demonstration authority to hospitals that
participated at any time in the New York Demonstration.
The commenter stated CMS' proposal to require that hospitals that
participated in the New York Demonstration submit a plan to CMS by
December 1, 2010, for how they plan to fill their slots by March 23,
2012, is unrealistic, given that the final rule will not be available
until November 1, 2010, and ``* * * given the magnitude of the
reductions required by CMS and the fact that CMS mandated an incentive
to

[[Page 72151]]

maintain those large reductions through July 1, 2009.'' The commenter
requested that CMS finalize a policy that hospitals that participated
in the New York Demonstration be required to submit a plan to CMS by
March 1, 2011, for how they plan to fill their unused slots by March
23, 2012. The commenter suggested that if CMS needs an estimate of the
number of slots the demonstration hospitals plan to fill by March 23,
2012, CMS could require a two-step process by which hospitals would
provide to CMS by December 1, 2010, an estimate of the number of FTE
resident slots they plan to fill and provide to CMS by March 1, 2011, a
detailed plan for how they anticipate to fill those slots.
The commenter noted that some hospitals that participated in the
New York Demonstration accepted displaced residents from hospitals that
closed after March 23, 2008. The commenter recommended that CMS allow,
but not require, hospitals that participated in the New York
Demonstration to ``* * * include as part of its submitted plan for
filling unused slots by March 23, 2012 its intention to apply for
additional slots to continue training residents in the same program as
displaced residents from a closed hospital, if the hospital desires to
do so.'' The commenter believed that CMS' interpretation that
demonstration hospitals must have residents training in the hospitals'
unused slots as of March 23, 2012, is not practical because it cannot
be reconciled with the ``core characteristic of residency training,''
that residents begin their applicable program years July 1 of each
calendar year. The commenter added that CMS' interpretation means that
a hospital would have to have residents training in the unused slots by
July 1, 2011, to ensure these residents are actually training as of
March 23, 2012, which would only allow these hospitals approximately 15
months to fill their unused slots rather than 2 years. The commenter
stated ``[t]he more sensible approach to interpreting this requirement
would be for CMS to permit the demonstration hospitals to specify a
plan whereby the hospitals will fill the unused slots in a progressive
and logical manner that recognizes the staggered nature of residency
training.'' Therefore, the commenter recommended that the unused FTE
resident cap slots of hospitals that participated in the New York
Demonstration be considered to be filled by March 23, 2012, if any one
of the following three scenarios occurs: (1) A resident is actually
training at the hospital by March 23, 2012; (2) a resident is enrolled
in a hospital's unused cap slot by March 23, 2012, and will begin
training no later than July 1, 2012; or (3) ``there is a demonstrated
likelihood of slots in a new program being filled in a progressive
sequence as evidenced by the matching to or enrollment in the program
of the first cohort of residents by that date and that first cohort
will begin training in the slots no later than July 1, 2012.''
Response: We appreciate the commenters' support of our proposed
policy that if a hospital at any time participated in the New York
Demonstration or the Utah Demonstration, it would be exempt from a cap
reduction if it submits a plan to CMS by December 1, 2010, for how it
plans to fill its unused slots by March 23, 2012. We understand the
commenter's concern that the proposed requirement to submit a plan to
CMS by December 1, 2010, for how the hospital plans to fill its slots
by March 23, 2012, may not provide hospitals that participated in the
New York demonstration sufficient time to draft their plans. Therefore,
we are amending our proposed policy in this final rule to require
hospitals that participated in the New York Demonstration, the Utah
Demonstration, or a VRRP to submit their plans to CMS by January 21,
2011, for how they plan to fill their unused slots by March 23, 2012.
We are revising the proposed regulatory text at Sec. 413.79(m)(2) to
reflect this date change.
In response to the commenter's question of whether applying for FTE
cap slots from a closed hospital under section 5506 of the Affordable
Care Act could be considered part of a hospital's plan for filling
unused slots by March 23, 2012, we do not agree that showing that a
hospital is applying for cap slots under section 5506 demonstrates that
the hospital will be filling its unused cap slots by March 23, 2012. On
the contrary, applying for additional cap slots under section 5506 of
the Affordable Care Act would give a demonstration hospital an
additional cap, which could further increase its number of unused
slots.
In response to the commenter's concerns regarding the likelihood of
having additional residents training as of March 23, 2012, we are
stating in this final rule that if a hospital described under section
1886(h)(8)(A)(ii)(II) of the Act can show that a resident(s) has
matched into a program by March 23, 2012, or has signed a formal letter
of commitment with the program by March 23, 2012, and that a
resident(s) will begin training no later than July 1, 2012, that
hospital has met the requirement of demonstrating that it has a plan
for filling an unused cap slot(s) by March 23, 2012. We note that, for
purposes of submitting a plan indicating that the hospital will fill
its unused slots by March 23, 2012, the type of documentation required
to demonstrate that the hospital is filling unused slots must be the
type of documentation listed under the demonstrated likelihood criteria
for purposes of implementing cap increases under section 5503 of the
Affordable Care Act. For example, the hospital could submit to CMS the
documentation it submitted to the ACGME requesting approval for a new
program or a permanent expansion to the number of residents in its
existing program.
In summary, we are finalizing our proposed policies regarding the
treatment of hospitals that participated in the New York Demonstration,
the Utah Demonstration, and a VRRP, and a hospital described under
section 1886(h)(4)(H)(v) of the Act, except that we are allowing
hospitals to submit their plans to CMS by January 21, 2011, for how
they plan to fill their unused slots by March 23, 2012. We also are
allowing hospitals that participated in the New York Demonstration, the
Utah Demonstration, or a VRRP to demonstrate that they are filling
unused slots by March 23, 2012, by showing that a resident(s) has
matched into a program by March 23, 2012, or has signed a formal letter
of commitment with the program by March 23, 2012, and will begin
training at the hospital at the latest by July 1, 2012.
We also are clarifying in this final rule that a hospital that is
training at or above its otherwise applicable resident limit in all
three of its three most recent cost reporting periods ending before
March 23, 2010, for which a cost report has been either settled or
submitted (subject to audit) to the Medicare contractor by March 23,
2010, is exempt from a cap reduction under section 1886(h)(8)(A) of the
Act. A separate determination would be made regarding any reduction to
the hospital's direct GME cap and its IME cap.
6. Determining the Estimated Number of FTE Resident Slots Available for
Redistribution
In accordance with section 1886(h)(8)(A) of the Act, as added by
section 5503 of the Affordable Care Act, we will determine the number
of resident positions available for redistribution by estimating the
expected reductions to hospitals' FTE resident caps. We believe that
section 1886(h)(8)(A) of the Act allows us to distinguish between the
FTE counts that are used to determine the number of

[[Page 72152]]

FTE resident slots that are available for redistribution (that is, the
``redistribution pool'') and the actual number of FTE residents by
which hospitals' FTE resident caps are ultimately reduced. In the
August 3, 2010 proposed rule (75 FR 46392 and 46393), we proposed to
estimate the reduction to a hospital's FTE cap under section
1886(h)(8)(A) of the Act for purposes of determining the number of FTEs
that a hospital might contribute to the redistribution pool. We
proposed to estimate the redistribution pool in accordance with section
1886(h)(8)(B)(i) of the Act, as added by section 5503(a)(4), which
states: ``The aggregate number of increases in the otherwise applicable
resident limit under this subparagraph shall be equal to the aggregate
reduction in such limits attributable to subparagraph (A) (as estimated
by the Secretary)'' (emphasis added). Therefore, we proposed to
estimate and redistribute the number of resident slots in the
redistribution pool, and to ensure that the aggregate number of FTE
residents by which we increase the FTE resident caps of qualifying
hospitals under section 1886(h)(8)(B) of the Act is not more than CMS'
estimate of the redistribution pool. In the proposed rule, we noted if
we were subsequently to perform an audit, as described further in
section XXI.D.7. of this preamble, in order to make a final
determination regarding any reductions to a hospital's FTE resident
cap, and find that the aggregate number of FTE resident reductions
differed from the number CMS had initially estimated for the
redistribution pool, the number of slots that can be redistributed from
the redistribution pool to qualifying hospitals would not be affected.
To ensure that we would begin making payments for most hospitals
based on the revised FTE resident caps by July 1, 2011, as required by
the statute, in the August 3, 2010 proposed rule (75 FR 46393), we
proposed to set a date by which we would have determined a hospital's
reference resident level and compared it to the hospital's otherwise
applicable resident limit(s) to estimate whether, and by how much, the
hospital's FTE cap(s) would be reduced. We proposed this date to be May
1, 2011, and that date would apply for all hospitals for purposes of
determining an estimate of whether and by how much their FTE resident
caps should be reduced. In the event that the Medicare contractors have
not completed an audit of a hospital's GME data (explained further
under section XXI.D.7. of this preamble) by May 1, 2011, we proposed to
estimate by May 1, 2011, the number of FTE residents by which a
hospital's FTE resident cap is expected to be reduced based on the data
in the as-submitted cost report. For example, a Medicare contractor may
estimate by May 1, 2011, that Hospital A's FTE resident cap should be
reduced by 10 FTEs. Thus, we would place 10 FTEs into the
redistribution pool. It is possible that even after May 1, 2011, the
contractor may continue to audit Hospital A's relevant cost reports to
determine if, in fact, 10 FTEs is the appropriate number by which to
reduce Hospital A's FTE resident cap, and could ultimately conclude
that Hospital A's FTE resident cap should only be reduced by 8 FTEs. If
the Medicare contractor does not make this revised determination based
on the audit by May 1, 2011, while we would only reduce Hospital A's
FTE resident cap by 8 FTEs effective July 1, 2011, the number of FTE
residents in the redistribution pool attributable to Hospital A would
remain at 10 FTEs (the estimated number as of May 1, 2011). Similarly,
if the Medicare contractor ultimately concluded that Hospital A's FTE
resident cap should be reduced by 12 FTEs, but this final determination
is not made by May 1, 2011, Hospital A's FTE resident cap would be
reduced by 12 FTEs effective July 1, 2011, but the number of FTE
residents in the redistribution pool attributable to Hospital A would
remain at 10 FTEs. Therefore, because we believe that section
1886(h)(8)(B)(i) of the Act allows us to distinguish between the FTE
counts that are used to determine the size of the redistribution pool,
and the actual aggregate number of FTE residents by which hospitals'
FTE resident caps are ultimately reduced, we proposed to use estimated
information to determine possible reductions to hospitals' FTE resident
caps to estimate the number of FTE resident slots to be distributed
under section 1886(h)(8)(B) of the Act. In addition, we noted that, as
was done when we implemented section 422 of Public Law 108-173,
Medicare contractors will provide hospitals with a time-limited
opportunity to review cap reduction determinations for possible
technical errors before they are finalized. As set forth at section
5503(a)(3), cap reduction determinations are not subject to
administrative or judicial review.
Comment: One commenter believed that the proposal for CMS to
distinguish between the estimated number of positions available for
redistribution and the actual number of positions by which hospitals'
FTE residency caps ultimately would be reduced is a reasonable
proposal. However, the commenter was concerned that an underestimate of
available positions could result in reducing the universe of GME
positions. The commenter recommended that CMS consider reconciling the
number of positions lost with the number awarded after cost reports are
audited, applications evaluated, and the redistribution process
complete. Further, the commenter stated that this additional step
should not result in loss of positions once they are awarded.
One commenter asked how Medicare contractors are to estimate the
number of slots available by May 1, 2011, because the cost reports at
issue will not be audited in the timeframe in which the resident
information is needed. The commenter stated that cost report
settlements for disproportionate share hospitals (DSHs), many of which
are also teaching hospitals, are delayed until CMS can supply revised
Supplemental Security Income (SSI) ratios. The commenter stated that
final settlements have not been issued for cost reporting periods
beginning in FY 2006 and for subsequent cost reporting periods. The
commenter asked whether CMS is proposing to use cost reports that have
not been final settled to perform the FTE cap redistribution. The
commenter also asked whether there would be ``* * * special,
abbreviated audits or settlements made specific to the FTE resident
counts for those years in order to ensure that the data used to
redistribute the FTE caps is reviewed by the Medicare contractor and
settled appropriately.'' The commenter suggested that, in establishing
any additional workload requirements for Medicare contractors for
purposes of section 5503 of the Affordable Care Act, CMS consider other
Medicare contractor workload requirements, including settlement of DSH
appeals under CMS Ruling 1498 and wage index reviews, which have to be
completed in the same timeframe.
One commenter noted that implementation of section 5505 of the
Affordable Care Act may increase a hospital's reference resident levels
for didactic time in the hospital's three most recent cost reporting
periods submitted before March 23, 2010. The commenter asked whether
hospitals' reference resident levels would be modified to account for
any additional resident FTEs. The commenter asked whether if
adjustments are to be made, they would be made for all affected
hospitals or only for those hospitals that have a jurisdictionally
valid appeal. The commenter stated that the section 5505 provisions
will be available for all

[[Page 72153]]

providers when the FTE cap reductions are applied in subsequent cost
reporting periods.
One commenter believed that reference resident levels used for
purposes of reducing hospitals' caps under section 5503 of the
Affordable Care Act should be based on years that will include
additional FTEs based on additional FTE time spent at nonprovider sites
that is due to the changes made by section 5504 of the Affordable Care
Act. The commenter stated that its hospital is below its cap because it
has not been allowed to include weeks spent by residents at nonprovider
sites. The commenter stated that if its hospital's cap is reduced, this
action would eliminate any benefit it may receive by being able to
count additional rotations at nonprovider sites. The commenter also
referred to the recordkeeping requirement included in section 5504 of
the Affordable Care Act. The commenter stated ``It does not seem
logical to reduce caps while at the same time monitoring for increases
in FTEs for time spent in nonprovider settings.'' The commenter stated
that redistributing FTE cap slots should be delayed until adjustments
have been made to hospitals' FTE counts for weeks spent at nonprovider
settings.
Several commenters supported CMS' proposal to provide hospitals
with a time-limited opportunity to review cap reductions for any
possible technical errors before the reductions are finalized.
Response: In response to the commenter who recommended that CMS
reconcile the number of FTE cap slots reduced with the number of FTE
cap slots awarded, we note that we are not required to reconcile the
cap reductions with the caps awarded under the provisions of section
5503 of the Affordable Care Act. Specifically, section 1886(h)(8)(B)(i)
of the Act, in part, states ``The aggregate number of increases in the
otherwise applicable resident limit under this subparagraph shall be
equal to the aggregate reduction in such limits attributable to
subparagraph (A) (as estimated by the Secretary)'' (emphasis added). We
believe the use of the phrase ``as estimated by the Secretary'' gives
the Secretary the authority to estimate the FTE redistribution pool for
purposes of finality. We and the Medicare contractors will endeavor to
make cap reduction determinations based on the most accurate data
available. However, because some of the audits to finally determine
whether a hospital has excess slots will not be completed prior to July
1, 2011, and because the statutory effective date of the increases to
hospitals' caps is July 1, 2011, we are not changing our proposed
policy and, therefore, we are not reconciling the number of FTE cap
slots reduced with the number of FTE cap slots awarded. Doing so would
preclude implementation of section 5503 of the Affordable Care Act by
its effective date, July 1, 2011.
In response to the commenter who requested clarification on how
Medicare contractors can estimate the FTE redistribution pool as of May
1, 2011, as we note in a subsequent comment, we are moving the internal
deadline for Medicare contractors to estimate the number of slots
available for redistribution from May 1, 2011 to May 16, 2011. As we
did when implementing section 422 of the MMA, we will be issuing
separate instructions to the Medicare contractors regarding the process
for determining if and by how much a hospital's FTE resident cap should
be reduced. We understand that many cost reports used for determining
if and by how much a hospital's FTE resident cap might be reduced will
not be final settled, or may not even be audited under normal cost
report settlement procedures. We note that section 1886(h)(8)(H) of the
Act directs the Secretary to use the highest resident level (as the
reference resident level) for any of a hospital's three most recent
cost reporting periods ending before the date of enactment, which is
March 23, 2010, ``for which a cost report has been settled (or, if not,
submitted (subject to audit)), as determined by the Secretary.'' Thus,
the Secretary has the flexibility to use either settled cost reports,
if available, or not as yet settled cost reports, and subject those
cost reports, or parts of those cost reports, to audit, as appropriate.
In response to the commenter's concern about additional Medicare
contractor workload requirements, we understand the competing audit and
payment priorities the Medicare contractors face in the upcoming
months, and we will make every effort to be accommodating to those
concerns.
In relation to the issue of adding in FTE resident time for
didactic time previously disallowed for purposes of IME in the hospital
setting and for purposes of direct GME in the nonprovider setting as
provided by section 5505, the hospital's cost report must either not
have been settled or must have a jurisdictionally proper appeal pending
by March 23, 2010, for IME to include didactic time in prior cost
reporting periods for IME payment purposes. For purposes of direct GME
in the nonprovider setting, the hospital's cost report must either not
have been settled or must have a jurisdictionally proper appeal pending
for direct GME to include didactic time in a prior cost reporting
period starting on or after July 1, 2009 (but ending before March 23,
2010) for direct GME payment purposes. If an audit of a hospital's cost
report is performed by May 16, 2011, and as a result of that audit, a
hospital's cost report includes the additional didactic time, that
adjustment will be reflected in the estimate of the FTE redistribution
pool. Because in this final rule we are finalizing our proposed policy
to give Medicare contractors until December 31, 2011, to continue their
audit work with respect to reductions under section 5503 of the
Affordable Care Act, adjustments to hospitals' cost reports for
didactic time as a result of audit work through December 31, 2011, for
purposes of calculating any cap reductions, will be retroactive to July
1, 2011. However, changes made between May 16, 2011 and December 31,
2011 will not be included in the estimated pool. We note that including
this didactic time prior to determining whether a hospital should
receive a cap reduction is contingent on Medicare contractor workload.
That is, we must use the most recent cost report data we have available
in order to make the determination of whether a hospital's cap should
be reduced in such a manner that section 5503 can be implemented by
July 1, 2011.
In response to the commenter who requested clarification on whether
time FTE residents spent in nonprovider settings, which was disallowed,
would be added into a hospital's FTE count, prior to determining
whether the hospital should receive a cap reduction, we note that
section 5504 of the Affordable Care Act is effective prospectively for
cost reporting periods beginning on or after July 1, 2010. Because we
are stating in this final rule that cost reports used to determine a
hospital's reference resident level must be settled or submitted to the
Medicare contractor by March 23, 2010, section 5504 will have no
bearing on a hospital's reference cost reporting period because those
amendments are only effective for cost reporting periods beginning on
or after July 1, 2010.
7. Reference Cost Reports That Are Under Appeal
We understand that there may be instances where a hospital's
otherwise applicable resident limit or a hospital's FTE resident count
for a reference cost reporting period might be under appeal. When
implementing section 422 of Public Law 108-173, we stated in the August
11, 2004 Federal Register (69 FR

[[Page 72154]]

49118) that we believe that it is in the best interest of the Medicare
program, CMS, the contractors, and the hospitals to adopt an approach
that allows for finality as early as possible during the process of
implementing this provision. We stated that we believed Congress gave
some consideration to the challenges we would encounter in implementing
a provision as complex as section 422 in such a short timeframe by
providing the Secretary with the discretion to distinguish between the
FTE counts that are used to estimate the number of FTE resident slots
that are available for redistribution (that is, the ``redistribution
pool''), and the actual number of FTE residents by which hospitals' FTE
resident caps are ultimately reduced.
Furthermore, as we stated in the August 11, 2004 Federal Register
(69 FR 49118), the fact that the Congress took the unusual step of
including the language at section 1886(h)(7)(D) of the Act which
provides that, ``There shall be no administrative or judicial review *
* * with respect to determinations made under this paragraph,''
supports the position advocating for finality. If we had delayed
determinations concerning hospital-specific FTE cap determinations
until all affected cost reports are settled, audited, and appealed
through the various channels normally available to providers, the
language, and in particular the specified timeframe, under section
1886(h)(7)(D) of the Act would have been rendered meaningless.
Therefore, despite the complexity of section 422 and the potential for
profound and long-term GME payment ramifications, we believed that the
Congress did not expect the implementation of section 422 provision to
linger indefinitely. Rather, by limiting appeal rights and requiring an
effective date of July 1, 2005 for reductions in FTE resident caps
(which required implementation in a relatively short timeframe), the
Congress expected section 1886(h)(7) of the Act, as added by section
422 of Public Law 108-173, to be implemented with expediency and
finality.
Similarly, in implementing section 5503 of the Affordable Care Act,
we note that determinations under section 1886(h)(8)(A)(i) of the Act
are required to be made by and effective July 1, 2011, and, for the
same reasons cited when we implemented section 422, we believe these
determinations should be final on, or as quickly as possible after,
that date. We note that section 5503(a)(3) of the Affordable Care Act
modified section 1886(h)(7)(E) of the Act by inserting ``or paragraph
(8)'' to specify that there shall be no administrative or judicial
review with respect to determinations made under section 5503 as well.
Therefore, as was our final policy when implementing section 422, in
the August 3, 2010 proposed rule (75 FR 46393), we proposed to not wait
for all appeals of reference period cost reports to be resolved before
making a final determination as to whether and by how much a hospital's
FTE resident cap will be reduced. However, we indicated that we did
perceive the need in certain instances to continue audit work for a
limited time period past July 1, 2011, to promote the accuracy of FTE
resident cap reduction determinations. As under section 422, we
proposed to adopt a policy that would require the Medicare contractors
to use the latest available cost report or audit data at the time they
make their hospital-specific determinations. We proposed that if, as of
the time the Medicare contractor makes the determination as to whether
and by how much a hospital's FTE resident cap should be reduced, there
is a pending appeal of the hospital's otherwise applicable resident
limit for the reference cost reporting period (that is, a final
decision has not been rendered), the Medicare contractor would not wait
until a decision is rendered, but would use the FTE resident cap from
the initially settled (as indicated in the Notice of Program
Reimbursement (NPR)) reference period cost report. However, we proposed
that if the appeal regarding the otherwise applicable resident limit
has been resolved as of the time that the Medicare contractor makes the
determination as to whether and by how much a hospital's FTE resident
cap should be reduced, the Medicare contractor would use the FTE
resident level as established through the appeal. We proposed that if a
reference period cost report has been submitted but not settled at the
time the Medicare contractor is making the determination as to whether
and by how much a hospital's FTE resident cap should be reduced, the
reference resident level is subject to audit by the Medicare
contractor. The final determination regarding any possible reduction to
the hospital's FTE resident cap is not subject to appeal. We indicated
that although we would make every effort to provide contractors with
the resources they need to complete the audits in time to notify each
hospital by July 1, 2011, of their FTE cap determinations under section
1886(h)(8)(A) of the Act, there may be instances where the audits of
the reference resident levels may not be completed by July 1, 2011. We
stated that we anticipate that, within the scope of their normal audit
work, the Medicare contractors will complete as many of these audits as
possible, and some of the audits may not be completed until December
31, 2011. In the August 3, 2010 proposed rule (75 FR 46394), we
proposed that, in accordance with section 1886(h)(8)(A) of the Act, all
cap determinations made after July 1, 2011 and through December 31,
2011, would be effective retroactively to July 1, 2011.
Comment: One commenter disagreed with the proposal to not correct a
hospital's FTE count due to the resolution of a hospital's appeal,
unless the appeal is resolved prior to July 1, 2011. The commenter
stated that ``* * * Congress' determination to preclude judicial and
administrative review does not give license to CMS to lock in erroneous
FTE counts.'' The commenter stated that this same policy negatively
impacted its hospitals under section 422 and will likely have a
significant future impact. The commenter indicated that, under section
422, its ``reference period'' for calculating the section 422 cap was
FY 1997. The commenter indicated that it had appealed its FY 1997 IME
count as inappropriately excluding certain residents training in its
psychiatric residency program. The commenter stated that, in June 2006,
it entered into an administrative resolution with its Medicare
contractor to include these psychiatric FTEs in its IME count. However,
the commenter added, the cap was not adjusted and the IME cap remains
permanently understated. The commenter stated that, as a result of the
IME cap being understated, the hospital must either operate its
residency program at the inappropriately reduced cap, or operate its
residency program above its cap without appropriate IME reimbursement.
The commenter stated that it may continue to appeal its FTE resident
counts for more recent fiscal years and those years may include the
year that is the new reference cost reporting period for purposes of
section 5503 of the Affordable Care Act. The commenter stated that not
correcting FTE resident caps for purposes of section 5503 would have
the same result as under section 422. The commenter believed an
erroneous cap could compound problems because the FTE resident caps
could be even further reduced leading to losses in IME payments and
could restrict a hospital's ability to operate its program at or near
the appropriate cap levels. The commenter suggested a preferred
approach that CMS provide for finality as late in the process as
possible and that, at a minimum, CMS instruct its

[[Page 72155]]

Medicare contractors to resolve relevant cost report appeals and/or
reopening requests as quickly as possible before the 2011 deadline.
Another commenter stated that CMS in the proposed rule did not
define ``audit.'' The commenter believed that the estimate of unused
FTE cap slots should be derived from cost reports that are filed,
amended filed, or settled. The commenter stated ``[i]t is unclear why
CMS chose May 1, 2011, when all of the cost reports that will be used
to estimate the unused FTE caps have already been submitted or
settled.'' The commenter suggested that the ``measurement date'' be
changed to December 31, 2010, which is prior to the ``match'' date so
that hospitals will be able to adjust the number of residents it is
training for the July 1, 2011-June 30, 2012 academic year and so that
Medicare contractors will have sufficient time to resolve any
differences in the calculation of unused caps. The commenter stated
that, although finality is important, the proposal to retroactively
adjust a hospital's FTE cap as a result of audit work completed by
December 31, 2011, is not consistent with CMS' desire for finality. The
commenter recommended that the data used to estimate the FTE cap pools
be final with no additional adjustments. The commenter stated ``[t]his
will ensure that the aggregate 1996 FTE cap pool is not affected by
implementation of section 5503.''
Another commenter stated that, in prior final rules, CMS has
permitted determinations to be subject to audits, reopenings, and
appeals within the appropriate guidelines. The commenter recommended
that this final rule be treated in the same manner.
Response: We believe that we need to consider the need for accuracy
and for finality in determining any reductions to a hospital's cap
under section 5503 of the Affordable Care Act. Therefore, as we stated
in the proposed rule, we will make every effort to provide Medicare
contractors with the resources they need to complete as many audits as
possible in time to notify each hospital by July 1, 2011, of their FTE
cap determinations. However, in the instances where audits of the
reference resident levels may not be completed by July 1, 2011, as we
stated in the proposed rule, we anticipate that within the scope of
their normal audit work, the Medicare contractors will complete as many
of these audits as possible, and some of the audits may not be
completed until December 31, 2011. We believe it would be disruptive to
the Medicare contractors and to the implementation of section 5503 of
the Affordable Care Act if we extended the deadline to continue audit
work past December 31, 2011.
In regards to the commenter who suggested that we move the
``measurement'' date from May 1, 2011 to December 31, 2010, as noted
elsewhere in this preamble, in this final rule, we are changing the
date by which Medicare contractors need to estimate a pool of reduced
cap slots for purposes of redistributing the slots under section 5503
from May 1, 2011, to May 16, 2011. We are not able to change this date
to December 31, 2010, because this final rule is not effective until
January 1, 2011. Furthermore, only giving Medicare contractors until
December 31, 2010, will not give them sufficient time to review
submitted cost reports.
In response to the commenter who stated that CMS did not define
``audit'' work, as noted above, we stated in the proposed rule that
determinations related to hospitals' cap reductions under section
1886(h)(8)(A) of the Act would be completed in the course of the CMS'
contractors normal audit work (that is, the normal process the Medicare
contractors utilize to review hospital cost reports for accuracy.)
In response to the commenter who believed that determinations made
under section 5503 of the Affordable Care Act should be subject to
audits, reopening, and appeals within the appropriate guidelines, the
statutory language for implementing section 5503 specifically precludes
us from permitting administrative and judicial review of the
determinations made under this provision.
After consideration of the comments we received on this section, we
are finalizing our policies as proposed. That is, we are finalizing our
proposed policy to not wait for appeals of reference period cost
reports to be resolved before making a final determination as to
whether and by how much a hospital's FTE resident cap will be reduced.
In addition, we are finalizing our proposed policy that all cap
determinations made after July 1, 2011, and through December 31, 2011,
would be effective retroactively to July 1, 2011.
8. Determining the Reduction to a Hospital's FTE Resident Cap
a. Reference Resident Level--General
In order to determine if a hospital's reference resident level is
less than the hospital's otherwise applicable FTE resident cap, section
1886(h)(8)(H) of the Act, as added by section 5503 of the Affordable
Care Act, directs the Secretary to use one of three reference cost
reporting periods. Section 1886(h)(8)(H) of the Act directs the
Secretary to use any of a hospital's three most recent cost reporting
periods ending before the date of enactment, which is March 23, 2010,
with the highest resident level ``for which a cost report has been
settled (or, if not, submitted (subject to audit)), as determined by
the Secretary,'' as the reference period. Generally, if the hospital's
resident level for either direct GME or IME is less than the hospital's
otherwise applicable resident limit for direct GME or IME,
respectively, in the reference period, the hospital's FTE resident cap
for direct GME and/or IME will be reduced by 65 percent of the
difference between the resident level and the otherwise applicable
resident limit. We note that, for purposes of determining a reduction
to a hospital's direct GME cap, the unweighted direct GME cap will be
compared to the unweighted direct GME FTE resident count. The following
explanation is an example of how a hospital's cap(s) would be reduced
under section 1886(h)(8)(A) of the Act. For purposes of this example,
Hospital A's three most recent cost reporting periods ending before
March 23, 2010, for which a cost report has been submitted to the
Medicare contractor by March 23, 2010, are as follows: July 1, 2006-
June 30, 2007; July 1, 2007-June 30, 2008; and July 1, 2008-June 30,
2009. Hospital A's FTE resident count and FTE resident caps (as
adjusted for those items discussed in section XXI.D.3. of this
preamble) are as noted in the table.

----------------------------------------------------------------------------------------------------------------
Direct GME
Cost reporting period IME unweighted unweighted FTE IME FTE Direct
FTE count count cap GME cap
----------------------------------------------------------------------------------------------------------------
July 1, 2006--June 30, 2007................................... 17 20 18 20
July 1, 2007--June 30, 2008................................... 16 21 20 20
July 1, 2008--June 30, 2009................................... 14 20 20 20
----------------------------------------------------------------------------------------------------------------

[[Page 72156]]

As noted earlier in this preamble, a separate determination
regarding whether and by how much to reduce a hospital's cap will be
made for its direct GME cap and for its IME cap. In order to determine
whether Hospital A would be subject to a cap reduction, we must first
determine whether Hospital A was training at or above its cap in all
three most recent cost reporting periods ending before March 23, 2010,
for which a cost report has been settled or has been submitted to the
Medicare contractor by March 23, 2010. For purposes of a reduction to
Hospital A's IME cap, we note from the chart above that in all three
cost reporting periods, Hospital A is training below its otherwise
applicable resident limit for IME. Therefore, we know that Hospital A
would be subject to an IME cap reduction. In order to determine which
cost reporting period should be used as the reference period to
determine the FTE cap reduction for IME, we would use the cost
reporting period with the highest FTE resident count for IME, which
would be July 1, 2006-June 30, 2007. Therefore, we calculate the
difference between the otherwise applicable resident limit for IME for
the reference period (July 1, 2006-June 30, 2007) and the reference
resident level for IME, and determine the IME cap reduction based on 65
percent of the difference. For purposes of Hospital A's IME cap
reduction, we would determine the difference between 18 (the otherwise
applicable resident limit) and 17 (the reference resident level) and
multiply that difference by 65 percent [(18-17) x .65] = 0.65.
Therefore, the IME FTE cap for Hospital A would be reduced by 0.65 of
an FTE. For purposes of a reduction to Hospital A's direct GME cap, we
note from the chart above that Hospital A was training at or above its
otherwise applicable resident limits for direct GME in all three cost
reporting periods. Because a hospital that is training at or above its
cap in all three cost reporting periods is exempt from a cap reduction,
we would conclude that Hospital A's direct GME cap would not be reduced
for direct GME payment purposes. We note that, in the August 3, 2010
proposed rule (75 FR 46394), we proposed that if a hospital has the
same resident level for two or more cost reporting periods and that
resident level is the ``highest'' resident level, we would use the cost
reporting period of those ``highest'' cost reporting periods in which
there is the least amount of difference between the resident level and
the otherwise applicable resident limit to determine a cap reduction.
Comment: Many commenters disagreed with CMS' proposal that if a
hospital's reference resident level is below its otherwise applicable
resident limit during the hospital's reference cost reporting period,
the hospital would receive a cap reduction even though that hospital
might be training at or above its cap in one or both of the other two
cost reporting periods. The commenters stated that a hospital should
only receive a cap reduction if it is training below its FTE resident
cap in all three of its three most recent cost reporting periods ending
before March 23, 2010. One commenter disagreed with the suggestion by
another commenter to exempt from a cap reduction any hospital that is
training over its cap in any one cost reporting period out of the three
most cost recent cost reporting periods ending before March 23, 2010.
The commenter recommended that CMS finalize its proposal to only exempt
hospitals that are training over their cap in all three cost reporting
years.
Commenters stated it is possible that a hospital that is training
at or above its FTE resident caps in 1 or 2 years of the hospital's
three most recent cost reporting periods ending before March 23, 2010,
which the commenters referred to as the 3-year look-back period, may
lose cap slots because if the hospital is participating in a Medicare
GME affiliated group, its cap may change from year to year and the year
with the highest FTE resident count may not be the year with the least
amount of difference between the FTE resident cap and the FTE resident
count. The commenters believed that Congress' intent was only to
redistribute ``unused'' cap slots and therefore, if a hospital was
training at its cap or exceeded its cap in any cost reporting period
included in the 3-year look-back period, it is clearly using its cap
slots and should not receive a cap reduction. The commenters noted that
they understood that CMS may have been obligated to interpret the term
``reference resident level'' as referring to the cost reporting period
with the highest FTE resident count because of the statute's use of the
phrase ``the highest resident level.'' However, the commenters believed
that Congress' instruction was that the ``reference resident level'' is
to be ``determined by the Secretary'' and, therefore, CMS has the
authority to finalize a policy that exempts a hospital that is training
at or above its cap at some point during the 3-year look-back period,
from a cap reduction. The commenters requested that CMS amend the
regulations at proposed Sec. 413.79(m)(4) to exempt, from a cap
reduction, a hospital that is training at or above its otherwise
applicable resident limit ``for any of the three most recent cost
reporting periods ending prior to March 23, 2010.'' The commenters
stated that this suggested regulatory change would prevent ``perverse
consequences'' for hospitals that participate in Medicare GME
affiliated groups, which cause their adjusted FTE resident caps to
change from year to year. The commenters gave the example of a hospital
that could be training under its cap in 2007, but is training over its
cap in 2008 and 2009; however, 2007 is the year with the highest
resident count and, therefore, even though the hospital is training
above its cap in 2008 and 2009, it would receive a cap reduction based
on 65 percent of the unused cap slots based on data from the 2007 cost
report.
One commenter stated the definition of ``reference resident level''
in the Affordable Care Act indicates that the ``reference resident
level'' is comprised of only one year, the one cost reporting period
out of the three most recent cost reporting periods with the highest
resident level. The commenter believed that because a hospital's cap
will not be reduced if its ``otherwise applicable resident limit''
exceeds its reference resident level,'' as long as the FTE resident
count in any one of the three cost reporting periods exceeds the
``otherwise applicable resident limit,'' it does not matter if the
hospital is training below its cap in the two remaining cost reporting
periods; the hospital will not receive a cap reduction. The commenter
stated that this logic is not included in the preamble discussion, but,
rather, when referring to a cost reporting period in which a hospital
is training over its cap, the word ``any'' is replaced by the word
``all.'' The commenter stated ``[w]hile the actual proposed definition
included in the new regulation 42 CFR 413.79(c)(1)(ii)(A) includes the
correct wording of `any', the subsequent discussion regarding the
implementation of this regulation is not consistent with the plain
reading of the definition. The inclusion of the word `all' in the
discussion suggests that the `reference resident level' does not refer
to a single year but to all of the three most recent years. This
implies that if one of the resident levels falls below the `otherwise
applicable resident limit,' then a hospital will have its cap reduced,
even if the remaining two years of its three year reference period are
above the `otherwise applicable reference level.''' The commenter
stated that, historically, the Provider

[[Page 72157]]

Reimbursement Manual has been used by Medicare to provide guidance to
auditors. However, recently, the commenter added, it appears that
preamble discussion has been substituted as guidance for auditors. The
commenter stated that including the word ``all'' in the preamble
discussion is confusing and may put auditors in a position where they
cannot correctly implement regulation and the law. The commenter stated
that if a hospital's reference resident level is greater than its
otherwise applicable resident limit, but its FTE count is less than its
otherwise applicable resident limit in one or both of the two remaining
cost reporting periods, the auditors may perceive that based on the
preamble discussion that FTE resident counts in all three of the cost
reporting periods must be above the otherwise applicable resident limit
in order for the hospital to be exempt from a cap reduction and
inappropriately reduce the hospital's FTE resident count. The commenter
noted that because hospitals do not have appeal mechanisms available to
them related to the cap reductions and because there is contradictory
guidance included in the preamble of the proposed rule, hospitals may
have their caps inappropriately reduced. The commenter suggested that
this issue be clarified in the final rule so that audits that implement
the cap reductions can be performed correctly and consistently.
Another commenter stated ``CMS proposes that if a hospital trains
at or above its otherwise applicable resident level in all of its three
most recent cost reporting periods ending before March 23, 2010, the
hospital would be exempt from a cap reduction.'' The commenter stated
that this provision is unclear and asked whether CMS is referring to
hospitals that are training FTE residents at levels above their FTE
caps.
Response: We stated in the proposed rule that section
1886(h)(8)(H)(i) of the Act directs the Secretary to use as the
reference cost report, the one cost report out of the hospital's three
most recent cost reporting periods ending before March 23, 2010, with
the highest unweighted resident count ``for which a cost report has
been settled (or, if not, submitted (subject to audit), as determined
by the Secretary.'' Generally, if the hospital's reference resident
level for either direct GME or IME is less than the hospital's
otherwise applicable resident limit for direct GME or IME,
respectively, in the reference period, the hospital's FTE resident cap
for direct GME or IME will be reduced by 65 percent of the difference
between the reference resident level and the otherwise applicable
resident limit. We understand the commenters' concerns that if a
hospital is participating in a Medicare GME affiliated group, even
though that hospital may be training below its cap, the Medicare GME
affiliated group as whole is training above its aggregated cap and,
therefore, the individual hospital should not have its cap reduced for
training residents below its otherwise applicable limit. However, as
discussed further below, section 1886(h)(8)(A) of the Act does not
provide for treatment of GME affiliated groups as whole. In contrast,
section 422 of the MMA included specific language at section
1886(h)(7)(A)(iii) of the Act that specifically directed the Secretary
to apply the provisions for determining programs subject to reductions
under section 422 to hospitals that are members of the same affiliated
group. Section 5503 does not include similar language. In addition, we
note that the definition of ``reference resident level'' at section
1886(h)(8)(H)(i) of the Act states ``* * * with respect to a hospital,
the highest resident level for any of the three most recent cost
reporting periods (ending before the date of enactment of this
paragraph) of the hospital for which a cost report has been settled
(or, if not, submitted (subject to audit)), as determined by the
Secretary'' (emphasis added). Therefore, if a hospital has a reference
resident level below its otherwise applicable resident limit during its
reference cost reporting period, then that hospital will receive a cap
reduction, even if the affiliated group as a group is not training at a
level below its aggregate otherwise applicable resident limit. In
addition, the statute requires the Secretary to take ``the highest
resident level'' (emphasis added) from the applicable reference period,
and compare that level to the hospital's otherwise applicable resident
limit. The statute does not include language that expressly states that
if a hospital is training below its otherwise applicable resident limit
during its reference cost reporting period, the Secretary shall look to
the two other cost reporting periods to determine whether the hospital
is training at or above its cap in either of those two other cost
reporting periods. We believe that if Congress had intended a hospital
to be exempt from a cap reduction if it is training at or above its cap
in any of its three most recent cost reporting periods, it would have
included specific statutory language instructing the Secretary that
once the determination is made as to which cost reporting period is the
cost reporting period with the highest FTE resident count, a
determination must also be made as to whether the hospital is training
at or above its cap in any of its three most recent cost reporting
periods.
We believe there may be confusion as to the use of the terms
``otherwise applicable resident limit'' and ``reference resident
level.'' We are clarifying that ``otherwise applicable resident limit''
generally refers to a hospital's 1996 FTE cap adjusted for the
scenarios described earlier in this preamble (including a hospital's
participation in Medicare GME affiliated group) and for any cap
reductions made under section 422 of Public Law 108-173 in a specific
cost reporting period. The reference resident level refers to a
hospital's highest resident level (the highest FTE resident count) for
any of the three most recent cost reporting periods ending before March
23, 2010, for which a cost report has been settled, or if not,
submitted (subject to audit), as determined by the Secretary. We
disagree with the commenter who stated that the proposed definition of
``reference resident level'' for purposes of section 5503 of the
Affordable Care Act includes the correct word ``any,'' and therefore
the preamble discussion is not consistent with the definition. The
commenter is referring to the proposed definition of reference resident
level at Sec. 413.79(c)(1)(ii)(B), which stated ``[f]or purpose of
paragraph (m) of this section, reference resident level means with
respect to a hospital, the highest resident level for any of the three
most recent cost reporting periods ending before March 23, 2010, for
which a cost report has been either settled or submitted (subject to
audit).'' We do not believe this definition is inconsistent with our
preamble discussion regarding cap reductions under section
1886(h)(8)(A) of the Act. The proposed definition at Sec.
413.79(c)(1)(ii)(B) includes the same use of the word ``any,'' as the
definition of reference resident level at section 1886(h)(8)(H)(i) of
the Act, which states `` * * * with respect to a hospital, the highest
resident level for any of the 3 most recent cost reporting period * *
*'' The use of the word ``any'' is referring to the instruction that
the Secretary is to use the one cost reporting period with the highest
resident level (highest FTE resident count) from any of the hospital's
three most recent cost reporting periods ending before March 23, 2010
which have been settled or if not, submitted, subject to audit. The use
of the word ``any'' in the proposed definition at Sec.
413.79(c)(1)(ii)(B) does not infer that if a hospital is training FTE
residents at or above its FTE resident cap in any of the

[[Page 72158]]

three most recent cost reporting periods, that it would be exempt from
a cap reduction. Rather, we specifically included in the proposed
regulation text at Sec. 413.79(m)(4) the following: ``[a] hospital
training at or above its otherwise applicable FTE resident cap as
determined under paragraph (c)(2) of this section for all three most
recent cost reporting periods ending prior to March 23, 2010 (as
described under section (iv) of this paragraph), is exempt from any
reduction to its otherwise applicable FTE resident cap under paragraph
(m) of this section.'' Therefore, if a hospital is training at or above
its caps in each (that is, all) of its three most recent cost reporting
periods used to determine the hospital's reference resident level, it
would be exempt from a cap reduction.
In response to the commenter's concern that previously the Provider
Reimbursement Manual provided guidance for auditors and that, in recent
years, Medicare has substituted instructions in the Provider
Reimbursement Manual with preamble language, we intend to issue
additional instructions to Medicare contractors that will provide
further instructions regarding the implementation of section 1886(h)(8)
of the Act. Additionally, we encourage Medicare contractors to contact
us if they have questions regarding the situation of a specific
hospital.
Comment: One commenter stated that, as is probably true for other
academic medical centers, it has experienced a number of changes over
time concerning the GME programs it sponsors. For the commenter, these
changes have resulted in a reduction in the number of FTE residents it
is training from its 1996 base year. The commenter stated that its
affiliations with other institutions also have changed; specifically,
it had previously affiliated with an institution in Maryland but is
currently in its third year of participating in a Medicare GME
affiliation agreement with an institution in Virginia. The commenter
stated that, because of this history, it is concerned with the way that
CMS is proposing to implement section 5503 of the Affordable Care Act
and that the proposed calculation of the otherwise applicable resident
limit may result in an unnecessary reduction to its FTE cap. The
commenter believed that the three cost reporting periods used to
determine its reference cost reporting periods would be FYEs June 30,
2007, June 30, 2008, and June 30, 2009; however, its Medicare GME
affiliation agreement has only been in place for the July 1, 2008-June
30, 2009 cost reporting period. The commenter believed that this period
is its period with the highest FTE resident count. However, the
commenter indicated that it realizes that, through the unpredictable
audit process, the June 30, 2007 FYE or June 30, 2008 FYE could become
the reference cost reporting period. Therefore, the commenter believed
it is possible that the hospital's reference cost reporting period
could be a cost reporting period in which it was participating in a
Medicare GME affiliated group under which the cap reduction would be
higher than if it was based on a cost reporting period where there was
the smallest difference between the cap and the count. The commenter
stated ``[a]lthough CMS has proposed that there be a `matching' of the
year used to determine both the reference resident level and the
otherwise applicable resident limit, governing legal authority does not
compel such a policy.'' The commenter stated that, in the proposed
rule, CMS inferred that the data used to determine the reference
resident level and the otherwise applicable resident limit are to come
from the same cost reporting period. The commenter believed that if a
hospital entered into a Medicare GME affiliation agreement in the cost
reporting period with the highest FTE resident count, the hospital's
adjusted cap would be used to determine a cap reduction but if the
hospital did not participate in a Medicare GME affiliated group during
that year, its unadjusted cap would be used to determine the cap
reduction. The commenter stated that if the hospital is not
participating in a Medicare GME affiliated group, its unadjusted cap
would be used even if the hospital participated in a Medicare GME
affiliated group in one of the other two cost reporting periods, which
resulted in a smaller difference between the cap and the count. The
commenter stated CMS did not include the rationale for such a policy in
the proposed rule. The commenter presented several options for CMS to
consider regarding how to calculate cap reductions under section 5503.
The commenter stated that one alternative would be to determine
whether a hospital should receive a cap reduction using the year in
which there is the least amount of difference between the cap and the
count. The commenter stated that although the statute defines the
``reference resident level'' as ``the highest resident level for any of
the 3 most recent cost reporting periods,'' ``the literal wording of
the statute is at odds with its manifest intent.'' The commenter stated
that Congress' goal in using the highest FTE resident count included in
the three most recent cost reporting periods ending before March 23,
2010, is to make sure hospitals receive the minimum cap reduction
reasonable based on recent data. The commenter asserted that because
the literal reading of the statute is at odds with its ``manifest
intent,'' CMS is permitted and expected to interpret the statute in a
manner that more closely reflects its purpose. The commenter referenced
the court case in American Water Works Association v. Environmental
Protection Agency (40 F.3d 1266, 1271 (D.C. Cir. 1994). The commenter
described this case as ``deferring to the agency, which prioritized a
statute's overarching intent over its literal wording, where that
wording would have led to `absurd results.'''
The commenter offered a second option under which CMS could
finalize a policy in which the otherwise applicable resident limit
would be determined to be the lowest FTE cap from any of the three most
recent cost reporting periods ending prior to March 23, 2010. The
commenter stated that Congress was silent on which year should be used
to determine the otherwise applicable resident limit; therefore, CMS
has the discretion to decide which year to use for this limit. The
commenter stated ``CMS can, however, glean congressional intent from
the definition of reference resident level, which relies on a 3-year
look-back to properly protect hospitals from excessive FTE cap
reductions. Using the lowest FTE cap of the prior three years would
therefore appropriately mirror the reference resident level
provisions.''
The commenter gave a third option under which CMS could use the FTE
cap that a hospital had on the date of enactment to determine whether a
hospital should receive a cap reduction. In describing this option, the
commenter referred to the court case in Johnson v. United States (529
U.S. 694, 702 (2000)). In reference to this case, the commenter stated
``finding that the effective date for a statute, where Congress gives
no clear direction, is the date of enactment.'' The commenter stated
that, under this option, if a hospital was participating in a Medicare
GME affiliation agreement on March 23, 2010, CMS could use the cap as
adjusted per that affiliation agreement for purposes of determining
whether a hospital should receive a cap reduction. The commenter
indicated that, under this proposal, any amendments made to the
Medicare GME affiliation agreement prior to July 1, 2010, could also be
taken into account (because hospitals are able to amend their Medicare
GME affiliation agreements through June 30 of the

[[Page 72159]]

academic year for which they are effective).
The final option suggested by the commenter was to consider a
hospital's participation in a Medicare GME affiliated group if it was
participating in a Medicare GME affiliation agreement either in the
year the hospital had its highest FTE resident count or the date of
enactment (March 23, 2010). The commenter suggested that if a hospital
participated in a Medicare GME affiliated group in both years, CMS
could use the lower of either of the two caps for determining whether
the hospital should receive a cap reduction.
Response: We do not agree with the commenter's statement that
although CMS proposed that the reference resident level and otherwise
applicable resident limit come from the same cost reporting period,
that legal authority does not require such a policy. We do not
understand how comparing the FTE resident cap and FTE resident count
from two separate cost reporting periods would provide for a valid
comparison because both a hospital's FTE resident cap and its FTE
resident count, for numerous reasons, could change from year to year
and would not necessarily be a measure of excess capacity. Therefore,
in this final rule, we are clarifying that the reference resident level
and otherwise applicable resident level used to determine whether a
hospital has any unused cap, must come from the same cost reporting
period. As discussed later in this preamble, the cost reporting period
that is used to determine whether a hospital will receive a cap
reduction under section 5503 of the Affordable Care Act, must be based
on a cost report that is settled or has been submitted to the Medicare
contractor by March 23, 2010. In addition, the statute requires that
the Secretary take ``the highest resident level'' from the applicable
reference period, and compare that level to the hospital's otherwise
applicable resident limit. The statute does not include language that
would allow the Secretary to determine that the reference cost
reporting period for hospitals is the cost reporting period where there
is the least amount of difference between the FTE resident count and
the cap.
Comment: One commenter stated that Congress' intent in specifying
the use of the three most recent cost reporting periods was ``to make
it clear that it wanted CMS to consider the three most recent completed
cost report years for which data would be available for each hospital
prior to the enactment of the ACA.'' The commenter stated that this
approach would ensure that CMS was working with the most up-to-date
data so that inappropriate cap redistributions would not be made based
on data from older cost reporting periods. The commenter stated there
was some vagueness in the proposed rule regarding the application of
cap reductions to hospitals that have a cost reporting period that
corresponds to the calendar year. Specifically, the commenter indicated
that there is a concern for the January 1, 2009 through December 31,
2009 cost reporting period because these providers would not be
required to submit their cost report to their Medicare contractor until
May 31, 2010.
Commenters requested that CMS confirm that its contractors will be
directed to include the cost reporting period ending December 31, 2009
in their review of the three most recent cost reporting periods. One
commenter specifically requested that a hospital with a fiscal year of
January 1-December 31 be able to use its December 31, 2009 FYE cost
reporting period as one of the hospital's three most recent cost
reporting periods as long as the hospital has submitted its December
31, 2009 FYE cost report by the time the audit of the hospital's FTE
count has taken place. Another commenter stated that the 3-year look-
back period used to determine cap reductions may disadvantage those
hospitals that attempted to fill unused FTE resident slots after the
Affordable Care Act was enacted. The commenter stated that, while
generally the 3-year look-back period would be acceptable, because of
the timing of the enactment of the Affordable Care Act in late March,
the end of resident recruitment in June 2010, and the date of issuance
of the proposed rule, some hospitals, in an effort to preserve their
FTE resident slots, may have interviewed and hired additional residents
for their current academic year. The commenter requested that CMS
include as part of the 3-year look-back period, the count of residents
included in the current academic year, that is July 1, 2010-June 30,
2011, so that hospitals that acted as quickly as possible to fill their
FTE slots, especially slots associated with primary care programs, are
not penalized for their actions.
One commenter indicated that recent developments have caused a
change in the number of residents training at its hospital;
specifically, a realignment of affiliations has caused a decrease in
the number of residents the medical school rotates to the hospital.
However, in its efforts to meet the community's needs and provide high
quality medical care, the commenter indicated that the hospital has
established several new programs, is starting one new residency program
this year, and is in the process of receiving accreditation for nine
new programs, which will start in the next 5 years. The commenter
stated that, as a member of one Medicare GME affiliated group, it
reduced its caps for the benefit of the other participant in the
affiliated group. In another instance, where the hospital accepted
displaced residents as part of an emergency Medicare GME affiliation
agreement, the commenter indicated that, in order to provide a seamless
transition to a new training site, the hospital did not have an
opportunity to verify in advance if it needed any additional residency
positions under its FTE cap. The commenter believed that, within a
year, its count will at least equal its 1996 caps, and given that its
FTE count reduction was only temporary, any permanent reduction to its
FTE caps would result in financial hardship which could cause the
hospital to have to reduce its caps and would be detrimental to the
community. The commenter asserted that in the statutory definition of
reference resident level, the phrase ``(ending before the date of
enactment of this paragraph)'' modifies the phrase ``3 most recent cost
reporting periods.'' The commenter stated the FYE December 31, 2009
cost reporting period would be included in this definition of reference
resident level because the January 1, 2009 through December 31, 2009
cost reporting period ended prior to March 23, 2010. The commenter
believed that even though the statutory language refers to cost reports
being settled or at least submitted, these requirements do not need to
occur prior to March 23, 2010. The commenter believed that, considering
the literal wording of the statute, the only requirement that must have
been met prior to March 23, 2010 is that the cost report must have
ended, submission of and settling of the cost report must only occur
prior to CMS' determination of reductions. The commenter stated that
the interpretation of the language included in section 5503 outlined in
its comment letter is similar to the interpretation made by CMS of the
language included in section 422 of the MMA. The commenter included the
following language which refers to the definition of ``reference
resident level'' under section 422 of the MMA:

``[T]he reference resident level specified in this clause for a
hospital is the resident level for the most recent cost reporting
period of the hospital ending on or before September 30, 2002, for
which a cost report has been settled (or, if not, submitted (subject
to audit)), as determined by the Secretary.''

[[Page 72160]]

The commenter pointed out that CMS, in its proposed rulemaking,
stated it would calculate the reduction in the number of FTE resident
slots using the cost reporting period ending on or before September 30,
2002, using either a settled cost report or an as-submitted cost
report, which would be subject to audit, and that CMS set a cut-off
date of December 2005 as the date by which the cost report submission
and audit would be completed. The commenter stated that, under section
422, there was no express cut-off date by which the reference cost
report was required to be submitted, and there was certainly not a cut-
off date of before September 30, 2002. The commenter stated that, for
purposes of section 422, CMS' primary concern was timely audit of the
cost report for the reference cost reporting period. The commenter
asserted that a similar approach could be applied to using the cost
reporting period January 1, 2009-December 31, 2009 to determine
reductions under section 5503. The commenter stated that because CMS
stated in the proposed rule that it expects decisions to be made about
cap reductions by December 2011, Medicare contractors will have 19
months to review, audit, and finalize audit adjustments to cost reports
for the January 1, 2009 through December 31, 2009 cost reporting
period. The commenter believed that there is nothing preventing CMS
from maintaining consistency with implementation of section 422 of the
MMA by including the January 1, 2009-December 31, 2009 cost reporting
period as a cost reporting period that can be used to determine a
hospital's reference resident level.
Response: We do not agree that the cost reporting period of January
1, 2009-December 31, 2009 should be included in the group of the three
cost reporting periods used to determine whether a hospital will
receive a cap reduction under section 1886(h)(8)(A) of the Act. We
believe that the cost reports used to determine whether a hospital will
receive a cap reduction must, at the very least, have been submitted to
the Medicare contractor as of March 23, 2010. Furthermore, we do not
believe it would be appropriate to include in the determination of
which cost reports are used to establish a hospital's reference
resident level, those cost reporting periods that occurred at the time
the Affordable Care Act was in development. Rather the cost reporting
period used to determine the reference resident level should be a cost
reporting period that reflects a number of FTE residents that a
hospital is accustomed to training, not a number of FTE residents that
is based on a hospital's rushed attempt to avoid a cap reduction.
Therefore, we also disagree with the commenter who requested that CMS
include, as part of the 3-year look-back period, the count of residents
included in the July 1, 2010-June 30, 2011 academic year. Additionally,
this cost reporting period does not end prior to March 23, 2010.
In response to the commenter who suggested that CMS follow a
similar process for determining a hospital's reference resident level
for purposes of section 5503 of the Affordable Care Act as it did for
section 422 of the MMA, we note that the time period for implementing
section 5503 of the Affordable Care Act is shorter than the time that
was available to implement section 422 of the MMA. In general, the cost
reporting period used to determine the reference resident level under
section 422 was the most recent cost reporting period ending on or
before September 30, 2002. Public Law 108-173, which included section
422, was enacted on December 8, 2003. Therefore, in general, the cost
reports used to determine the reference resident level for section 422
had already been submitted at the time Public Law 108-173 was enacted.
For purposes of section 5503 of the Affordable Care, a cost report for
the cost reporting period January 1, 2009-December 31, 2009, would
likely not have been submitted by March 23, 2010, the time section 5503
of the Affordable Care Act was enacted. Therefore, in this final rule,
we are clarifying that the three most recent cost reports used to
determine a hospital's reference resident level must be cost reports
that, if not settled, have been submitted to the Medicare contractor by
March 23, 2010. We also are clarifying our regulation text at Sec.
413.79(c)(1)(ii)(B) to state: ``For purposes of paragraph (m) of this
section, reference resident level means with respect to a hospital, the
highest resident level for any of the three most recent cost reporting
periods ending before March 23, 2010, for which a cost report has been
either settled or submitted (subject to audit) to the Medicare
contractor by March 23, 2010.'' In addition, as we explain in response
to comments below regarding the cost report data that must be submitted
with a hospital's application for additional slots and the cost reports
used to establish a hospital's primary care average under section
1886(h)(8)(B)(ii)(I) of the Act, these cost reports must also be
submitted to the Medicare contractor by March 23, 2010.
Comment: Several commenters asked for clarification on the
application of cap reductions to new teaching hospitals. The commenters
believed that the final rule should clarify that hospitals which have
had their cap established during the last three cost reporting periods
ending prior to March 23, 2010, and those new teaching hospitals that
do not yet have a cap established because they are in the middle of the
three year cap building period should be exempt from any cap reduction.
The commenters believed that these new teaching hospitals should not
have their caps reduced under section 1886(h)(8)(A) of the Act because
they are still in the process of building their residency training
programs, especially those residency programs that have an initial
residency period of longer than 3 years; therefore, these hospitals
should not lose any cap which they are in the process of establishing.
Response: We agree with the commenters that new teaching hospitals
should not have their caps reduced if the hospitals are still in the
process of establishing their cap and that some new teaching hospitals
may still be in the process of growing their new program(s),
particularly if the new program(s) has an initial residency period of
greater than 3 years. Because Congress specifically required the
Secretary to consider three cost reporting periods to determine which
cost reporting period would be the reference cost reporting period
based on the period with the highest resident level, we do not believe
it would be appropriate to consider whether a new teaching hospital,
with less than three years of cap data, should receive a cap reduction.
Therefore, we are clarifying in this final rule that those teaching
hospitals that do not yet have a cap established for Medicare payment
purposes because they are in the middle of their 3-year cap building
period will be exempt from a cap reduction. Additionally, we understand
the commenters' concerns regarding new teaching hospitals that have a
cap established but are still in the process of growing their program
because the initial residency period of the program is greater than 3
years. Therefore, after considering these comments, we are finalizing
the policy that if a new teaching hospital has submitted cost reports
for its three most recent cost reporting periods ending before March
23, 2010, by March 23, 2010, but a cap is not applied in all three of
those cost reporting periods, the new teaching hospital would be exempt
from a cap

[[Page 72161]]

reduction. For example, if a new teaching hospital submitted three cost
reports by March 23, 2010, but a cap was only applied to the hospital
in two of the three cost reports, the new teaching hospital would be
exempt from a cap reduction. We are revising the regulations at Sec.
413.79(m) to reflect this change.
Comment: One commenter stated there was nothing in the proposed
rule that exempted a hospital located in Louisiana, which was
devastated by Hurricane Katrina, from a cap reduction under section
1886(h)(8)(A) of the Act. The commenter stated that, as a result of the
devastation to its facilities caused by Hurricane Katrina, the hospital
loaned 300 of its 573 FTE cap slots to other facilities located mostly
in the New Orleans area through emergency Medicare GME affiliation
agreements. The commenter stated that its hospital is in the process of
rebuilding, and if the facility's 300 FTE cap slots are not exempt from
the resident redistribution, redistributing these slots to other
hospitals would be devastating to the New Orleans area and to the
facility's rebuilding process.
Response: The statute does not provide for a specific exemption
from a cap reduction for those hospitals affected by Hurricane Katrina.
However, we note that, in our discussion regarding cap increases under
section 5503 of the Affordable Care Act, the State of Louisiana is
indicated as a State that can apply for additional slots.
b. Audits of the Reference Cost Reporting Periods
As mentioned under XXI.D.8.a. of this preamble, to determine a
possible reduction to a hospital's FTE resident cap, section
1886(h)(8)(H)(i) of the Act, as added by section 5503(a) of Affordable
Care Act, directs the Secretary to use, as the reference cost report,
the one cost report out of the hospital's three most recent cost
reporting periods ending before March 23, 2010, with the highest
resident count ``for which a cost report has been settled (or, if not,
submitted (subject to audit), as determined by the Secretary''
(emphasis added). In the August 3, 2010 proposed rule (75 FR 46394 and
46395), we proposed that if a hospital's cost report for the reference
cost reporting period has been settled, the hospital's settled cost
report, without further audit, would be used to determine possible
reductions to the FTE resident caps. We noted that the ``settled'' cost
report does not necessarily mean the initial cost report settlement.
The Medicare contractor may have previously settled the cost report,
reopened it to audit it, and then settled the cost report again,
issuing a revised NPR. Thus, we would refer to the most recently issued
NPR for that cost reporting period (prior to March 23, 2010). For those
cost reporting periods that would be used as the reference cost
reporting period, which have been submitted to the Medicare contractor
but not settled, Medicare contractors may perform desk or onsite audits
related to section 5503. In addition, if the reference period cost
report is for a period other than 12 months, we proposed that for
direct GME, the Medicare contractor would prorate the FTE resident caps
and unweighted FTE resident count to equal 12-month counts.
We did not receive public comments specific to this section.
Therefore, we are finalizing the stated policy as proposed.
c. Medicare GME Affiliation Agreements
As described above, some hospitals that have resident levels below
their FTE resident caps may have entered into Medicare GME affiliation
agreements (as permitted under Sec. 413.79(f) of our regulations) with
other hospitals that would otherwise exceed their FTE resident caps.
Thus, while some hospitals in the Medicare GME affiliated group were
training a number of residents below their FTE resident caps prior to
entering into a Medicare GME affiliation agreement, upon affiliating,
their FTE resident caps were temporarily reduced because some or all of
their excess FTE slots were temporarily added to the FTE resident caps
of other hospitals as part of the affiliation agreement. Under section
422 of Public Law 108-173, the statute explicitly directed the
Secretary to apply the provisions to hospitals that were members of the
same affiliated group as of July 1, 2003. Specifically, section
1886(h)(7)(A)(iii) of the Act states ``The provisions of clause (i)
shall be applied to hospitals which are members of the same affiliated
group (as defined by the Secretary under paragraph (4)(H)(ii)) as of
July 1, 2003.'' Therefore, in implementing section 422, we based the
FTE resident cap reductions for hospitals that were participating in a
Medicare GME affiliated group on the aggregate cap and count data from
all hospitals participating in the same Medicare GME affiliated
group(s). If a hospital was training a number of residents below its
FTE resident cap for the reference cost reporting period but the
hospital was part of a Medicare GME affiliated group for some or all of
that reference cost reporting period, the Medicare contractor
determined if the aggregate affiliated count for all hospitals in the
affiliated group was greater than the aggregate affiliated cap. If the
aggregate affiliated count was greater than the aggregate cap, then
there was no reduction made to the FTE caps of any hospital in the
affiliated group (even for the hospital that was part of the affiliated
group, but was training below its cap). However, we note that, in
contrast to section 422 of Public Law 108-173, section 5503 of the
Affordable Care Act does not include language specific to affiliated
groups as was included in section 422 under section 1886(h)(7)(A)(iii)
of the Act. Thus, section 5503 of the Affordable Care Act does not
provide for determinations based on the aggregate experience of a
Medicare GME affiliated group. In addition, section 1886(h)(8)(H) of
the Act, as added by section 5503 of the Affordable Care Act, defines
the reference resident level and the otherwise applicable resident
limit with respect to ``a hospital.'' Similarly, section 1886(h)(8)(A)
of the Act refers only to ``a hospital's'' reference resident level.
Therefore, we are determining whether a hospital should receive a cap
reduction based on that individual hospital's experience and not the
aggregate experience of the Medicare GME affiliated group. Therefore,
in the August 3, 2010 proposed rule (75 FR 46395), we proposed that
Medicare contractors would make determinations regarding FTE cap
reductions under section 1886(h)(8)(A)(i) of the Act by considering the
relationship of the individual hospital's otherwise applicable resident
limit for the reference period (which is the FTE resident cap for a
period as adjusted by any affiliation agreement(s)) to the individual
hospital's reference resident level. That is, we proposed that in a
hospital's reference year, if that hospital is participating in a
Medicare GME affiliated group and is training a number of residents
below its FTE caps as adjusted pursuant to any affiliation agreements
which can be found on Worksheet E, Part A, line 3.06 for IME, and
Worksheet E-3 Part IV, line 3.03 for direct GME, the hospital's FTE
resident caps would be subject to a reduction under section
1886(h)(8)(A)(i) even if the Medicare GME affiliated group as a whole
may be training a number of residents above the group's aggregate FTE
resident cap.
Comment: Many commenters addressed the proposed policies regarding
the treatment of affiliated groups in determining whether a hospital
would receive a cap reduction

[[Page 72162]]

under section 1886(h)(8)(A) of the Act. Commenters supported the
proposal to account for a hospital's participation in a Medicare GME
affiliated group during its reference year. One commenter stated that,
in finalizing the proposal to consider a hospital's participation in a
Medicare GME affiliated group during its reference year, it will be
important for the Secretary to recognize the hospital's cap as reduced
due to participation in a Medicare GME affiliated group before
comparing the hospital's count to its cap during the reference cost
reporting year. Commenters disagreed with the proposal to not consider
aggregated caps and counts of a Medicare GME affiliated group when
determining if an individual hospital would receive a cap reduction.
Commenters stated that if CMS does not consider affiliated groups as a
whole when determining cap reductions, entire residency programs could
be lost, each hospital participating in an affiliated group could be
negatively affected, and training relationships could be damaged.
One commenter addressed the situation of a specific Medicare GME
affiliated group. The commenter stated that a hospital in Iowa is
receiving a temporary cap increase through participation in the
Medicare GME affiliated group. The commenter asserted that if the
hospital that is transferring cap receives a cap reduction, the
existence of the entire residency program could be put in jeopardy
because the residents may no longer be able to rotate to various sites.
One commenter stated that the purpose of Medicare GME affiliation
agreements is to allow for transfer of the cap to appropriate hospitals
to provide residents with opportunities for additional training. The
commenter believed that, in keeping with the spirit of the law, the
resident level and limit should be calculated in aggregate for all
hospitals participating in a Medicare GME affiliated group. Another
commenter stated that hospitals that are complying with the regulations
at Sec. 413.75 should only receive cap reductions under section 5503
after looking at the aggregate affiliated cap. The commenter noted that
it has sponsorship under the ACGME for programs at hospitals included
in its affiliated group and that such sponsorship supports the position
that hospitals' caps and counts should be looked at in the aggregate.
The commenter stated that because CMS proposed to look at an individual
hospital's cap as adjusted for any Medicare GME affiliation agreements,
such a proposal indicates that CMS recognizes the potential impact
affiliation agreements may have on hospitals' caps, and, therefore, CMS
should apply the same policy for treatment of affiliated groups to
section 5503 as it did for section 422 of the MMA. Other commenters
also suggested CMS be consistent in its policies and follow the
precedent set for treatment of Medicare GME affiliated groups under the
implementation of section 422 of the MMA. Another commenter stated that
affiliation agreements are intended to provide stability and address
changes in rotations and programs for participating hospitals and that
CMS should make sure that FTE caps are not unintentionally removed from
an affiliated group.
Many commenters stated that redistributing slots used through a
Medicare GME affiliation agreement was not the intent of Congress.
Rather, the commenters believed that Congress' intent was only to
redistribute those slots which are ``unused.'' The commenters stated
that if the affiliated group as a whole is over its cap, the slots are
clearly being used. One commenter stated that, in addressing the
implementation of section 5503, Congress was certainly knowledgeable
about the common practice of hospitals participating in Medicare GME
affiliation agreements to ``share'' FTE slots to maximize the training
of residents and of the FTE slots. The commenter stated ``Under any
common language meaning of the term `unused,' FTE cap slots that are
shared among hospitals in GME affiliated groups would not be considered
`unused positions.' '' Some commenters noted that they plan to work to
correct the statutory problem of not considering the aggregated caps
and counts of hospitals participating in a Medicare GME affiliated
group. Commenters stated that, although they appreciated that CMS is
using adjusted cap numbers in situations where hospitals share cap
through a Medicare GME affiliated group, the initial cap and count
comparison should be made at the affiliated group level. The commenters
stated that performing an initial comparison of the affiliated group's
cap and count is supported by the statutory definition of ``otherwise
applicable resident limit'' included in the Affordable Care Act, which
states:

``The term `otherwise applicable resident limit' means, with
respect to a hospital, the limit otherwise applicable under
subparagraphs (F)(i) and (H) of paragraph (4) on the resident level
for the hospital determined without regard to this paragraph but
taking into account paragraph (7)(A).''

The commenters also referred to language from paragraph (h)(4)(H)
of section 1886 of the Act:

``(ii) Aggregation--The Secretary may prescribe rules which
allow institutions which are members of the same affiliated group
(as defined by the Secretary) to elect to apply the limitation of
subparagraph (F) on an aggregate basis.''

The commenters believed that because CMS has the authority to
``prescribe rules'' concerning GME affiliated groups, CMS has the
authority to view the affiliated group as a whole for purposes of
determining cap reductions under section 1886(h)(8)(A) of the Act.
One commenter recommended that CMS finalize a policy for treatment
of affiliated groups such that in the case where the aggregate count is
above the aggregate cap in any of the 3 years, none of the hospitals
participating in the Medicare GME affiliated group would receive a cap
reduction. The commenter stated ``* * * that surprising and
counterintuitive outcomes may result when CMS attempts to compare an
individual hospital's affiliated cap and count for just one year and
then apply that result to the individual hospital's unaffiliated cap.''
The commenter noted there have been situations where agreements to
provide for educational rotations among hospitals have ``worked to the
(permanent) detriment of a hospital when reduction determinations have
been made.'' Therefore, the commenter believed that it is important for
CMS to include safeguards such that inappropriate redistributions do
not occur when reducing the caps of individual hospitals. The commenter
believed that because Congress went out of its way to provide CMS with
the opportunity to review 3 separate years instead of just 1 year for
purposes of cap reductions under section 1886(h)(8)(A) of the Act, the
intent of Congress was to clarify that if a hospital is training above
its cap in any of its three most recent cost reporting periods, the
hospital should not receive a cap reduction. The commenter noted that
if a hospital's cap changes during the 3 years, for example through
participation in a Medicare GME affiliated group, only considering the
1 year with the highest resident count ``may cause different kinds of
results for individual hospitals.'' The commenter suggested that, to
determine whether a hospital should receive a cap reduction, the policy
be that if a hospital is participating in a Medicare GME affiliated
group, the year that is used to determine a cap reduction is the

[[Page 72163]]

year where there is the smallest gap between the aggregate cap and the
aggregate count.
One commenter stated that if two hospitals participate in a
Medicare GME affiliated group, under the proposed rule, these hospitals
may be penalized for their participation because one hospital is going
to be training residents over its cap while the other hospital is going
to be training residents under its cap. The commenter gave an example
where hospital A and hospital B are participating in a Medicare GME
affiliated group and hospital A's cap prior to the affiliation was 50
and hospital B's cap prior to the affiliation agreement was 100. Under
the commenter's example, hospital A transfers 10 cap slots to hospital
B for FYEs 2006-2008 such that during the affiliation agreements,
hospital A's FTE resident count is 40 and hospital B's FTE resident
count is 110. The commenter stated that during the Medicare GME
affiliation agreement, the aggregate count is 150 and the aggregate cap
is 150, but based on CMS' proposed rule, hospital A's cap would be
reduced by 6.5 FTEs. The commenter questioned why hospitals should be
penalized if they enter into Medicare GME affiliated groups and
maintained an aggregate count that is the same as the aggregate cap.
Another commenter stated that many teaching hospitals affiliated with
colleges of osteopathic medicine train residents in rural and
underserved areas and that even though rural hospitals with fewer than
250 beds may be exempt from a cap reduction, those hospitals may be
negatively impacted if the hospitals with which they affiliate have
their caps reduced. The commenter stated that reducing the caps of
hospitals with which these rural hospitals are affiliated could limit
access to patient care in areas where these providers are needed to
provide care. The commenter requested that CMS reconsider its policy
regarding cap reductions so that areas served by osteopathic training
programs that are in greatest need of physicians are not limited.
Commenters reasoned that if a hospital is participating in a
Medicare GME affiliated group and is training below its cap, the
hospital that is receiving the temporary cap adjustment through the
Medicare GME affiliation agreement would be the facility that receives
a cap reduction and not the hospital that loaned slots through the
Medicare GME affiliation agreement. The commenters requested
clarification on this assumption. One commenter stated that not
considering the affiliated group as a whole could potentially lead to
not recapturing all of the unused cap slots in the situation where a
hospital without a 1996 cap and without a new program cap is part of a
GME affiliated group due to a shared rotational arrangement. The
commenter stated, ``If the hospital's FTE count exceeded its cap
affiliation adjustment, the hospital has no 1996 cap or new program cap
that could be reduced to effect a cap recapture.''
One commenter requested that, for purposes of the cap
redistribution under section 5503 of the Affordable Care Act, CMS take
into consideration the shared rotational agreement its hospital has had
with another hospital since 1993 (``1993 Agreement''), even though the
shared rotational agreement did not comply with the requirements of a
Medicare GME affiliated group until July 1, 2009. The commenter
suggested that, in the alternative, if CMS does not consider the shared
rotational arrangement that has been in place between the two hospitals
since 1993, CMS at the very least maintain the status quo by
considering the fact that these two hospitals have in place fully
compliant Medicare GME affiliation agreements for academic years July
1, 2009 through June 30, 2011, which reflect the hospitals'
longstanding practice of rotating the residents between the two
facilities. The commenter stated that if CMS does not change its
proposed rule as presented in the comment, one of the hospitals
participating in the shared rotational arrangement will be subject to a
large cap reduction, which in turn will place the longstanding training
relationship between the two hospitals at risk. The commenter stated
that one of the hospitals that participates in the shared rotational
arrangement and the county jointly sponsor about 54 primary care and
subspecialty residency training programs, and approximately 900
residents participate in these programs, with 500 of these residents
also training at the second hospital participating in the shared
rotational arrangement. The commenter stated that both hospitals serve
a broad demographic of patients throughout the State of California, and
both offer specialized and advanced services that provide residents
with a variety of educational opportunities. The commenter stated that
the ``1993 Agreement'' provided for a ``bilateral exchange'' of
residents, and that, without this exchange, certain ACGME opportunities
would not be available because the hospitals offer different services.
The commenter stated that the sending hospital employs the residents
but the receiving hospital is financially responsible for the cost of
the residents' salaries and fringe benefits for the time that the
residents spend at the receiving hospital. The commenter stated that
the ``1993 Agreement'' was in place before direct GME and IME caps or
the concept of a Medicare GME affiliation agreement, and although it
does not meet all the regulatory requirements of a Medicare GME
affiliation agreement, it has been in place for more than 17 years,
including what will be one of the hospital's reference periods. The
commenter stated that because the ``1993 Agreement'' did not include
all the elements of a Medicare GME affiliation agreement, one of the
hospitals was not eligible to receive payment for about half of the 90
FTEs it trained in FYEs May 31, 2007 through May 31, 2009. However, the
commenter stated this problem was mostly corrected when both facilities
entered into a Medicare GME affiliation agreement effective with the
July 1, 2009 training year. The commenter stated that the analysis
applied to the cap reductions ``* * * should focus on use of the FTE
slots and whether, in practice and pursuant to a written agreement that
is akin to a Medicare GME affiliation agreement, the hospitals were
transferring FTEs.'' The commenter stated that the legislative history
does not indicate that Congress wanted to disturb existing training
relationships or not provide for payment where there were, in fact,
residents providing care to Medicare beneficiaries but rather the
purpose of section 1886(h)(8) of the Act is to transfer FTE slots from
facilities that are not providing training to those that are. The
commenter stated that CMS could view the hospitals' situation one of
two ways, either that the FTE slots that went to the receiving hospital
were slots that were in use by the sending hospital, or that the
hospitals had in place a shared rotational arrangement that basically
complied with the requirements of a Medicare GME affiliation agreement
and under these circumstances the sending hospital's cap was reduced by
70 or 80 FTEs through the transfer agreement. The commenter stated
that, under either approach, the hospital that has been sending its FTE
residents to the second facility is not presumed to have an extra gap
of 70 to 80 FTEs between its reference resident level and its otherwise
applicable resident limit because those 70 or 80 FTEs were being used
at the receiving facility and being used pursuant to a written
affiliation agreement. The commenter stated that if CMS chooses not to
take into account the shared rotational agreement between the two
hospitals and that the agreement

[[Page 72164]]

was in effect during the reference period, then, at the very least, CMS
should preserve the current status quo based on the Medicare GME
affiliation agreement in place during the current and prior academic
years. The commenter indicated that, given the July 1, 2009-June 30,
2010 Medicare GME affiliation agreement was executed well before
Congress authored the Affordable Care Act and covers part of one of the
hospital's fiscal year ending before March 2010, CMS should take this
agreement into account when determining which hospitals will receive
cap reductions. The commenter also noted the two hospitals have entered
into a Medicare GME affiliation agreement effective July 1, 2010
through June 30, 2011, which transfers the same number of FTEs as the
July 1, 2009-June 30, 2010 Medicare GME affiliation agreement. The
commenter stated that the Medicare GME affiliation agreement that is in
place now will renew automatically and will continue unless CMS
redistributes the slots. The commenter stated that, in addition to
considering the formal FTE cap adjustments that make changes to
hospitals' cost report worksheets on Worksheets E, Part A and E-3 Part
IV, CMS could also consider shared rotational agreements that had the
same effect. The commenter also stated that CMS could require, as part
of the audit process, that providers submit to their Medicare
contractor relevant written agreements and documentation regarding the
exact number of FTEs exchanged between the two hospitals.
Response: We appreciate the commenters' support of the proposed
policy to account for an individual hospital's participation in a
Medicare GME affiliated group for purposes of determining that
hospital's otherwise applicable resident limit. In response to the
commenters who stated CMS should apply the same policy for determining
whether a hospital that is participating in a Medicare GME affiliated
group would receive a cap reduction, as was applied for purposes of
implementing section 422, specific statutory language was included in
section 422, which referred to Medicare GME affiliations. Section 422
amended section 1886(h) of the Act, by adding paragraph (7)(A)(iii)
which stated ``[t]he provisions of clause (i) shall be applied to
hospitals which are members of the same affiliated group (as defined
under paragraph (4)(H)(ii)) as of July 1, 2003.'' Neither this same
statutory language nor similar language addressing Medicare GME
affiliated groups was included in section 5503 of the Affordable Care
Act. As we stated in the proposed rule, the definition of ``otherwise
applicable resident limit'' does not include language that can support
a policy allowing Medicare contractors to look at the Medicare GME
affiliated group in the aggregate before determining whether an
individual hospital would receive a cap reduction based on its
participation in the affiliated group. Rather, in the definition of
``otherwise applicable resident limit'' in section 5503, the statute
refers to ``a hospital.'' Although the commenters noted that the
definition of ``otherwise applicable resident limit'' refers to section
1886(h)(4)(H) of the Act, which includes at paragraph (ii) the
following language: ``[t]he Secretary may prescribe rules which allow
institutions which are members of the same affiliated group (as defined
by the Secretary) to elect to apply the limitation of subparagraph (F)
on an aggregate basis,'' the reference made to prescribing rules for
Medicare GME affiliation agreements refers to developing regulations to
implement how each hospital's cap can be adjusted for its participation
in a Medicare GME affiliated group. The language at section
1886(h)(4)(H)(ii) of the Act does not give the Secretary the authority
to prescribe rules for treatment of Medicare GME affiliated groups
under section 1886(h)(8)(A) of the Act. Furthermore, section
1886(h)(4)(H)(ii) of the Act was not amended after implementation of
section 422 to provide the Secretary with the authority to prescribe
specific rules for the treatment of Medicare GME affiliated groups for
purposes of determining cap reductions under section 422. The lack of
amendments made to section 1886(h)(4)(H) of the Act as a result of
section 422 is further evidence that the reference to section
1886(h)(4)(H) of the Act in the definition of ``otherwise applicable
resident limit'' under section 5503 is not intended to give the
Secretary the authority to prescribe specific rules for the treatment
of Medicare GME affiliated groups under section 5503 by mention of
section 1886(h)(4)(H)(ii) of the Act. Rather, the reference to section
1886(h)(4)(h)(ii) of the Act is to require the Secretary to consider
the hospital's cap after any adjustment agreed to in an affiliation
agreement in determining the hospital's ``otherwise applicable resident
limit.'' To do otherwise, in a situation where a hospital has
``affiliated away'' some of its slots and trained up to its revised
cap, would force the hospital to lose some of its ``excess,'' even
though in the year of the affiliation after reducing its cap in the
affiliation, it had no excess.
In response to the commenter who stated that, under the proposed
rule, if two hospitals are participating in a Medicare GME affiliated
group, one hospital would be penalized for its participation because
one hospital would be training below its cap and the other hospital
would be training above its cap, we stated in the proposed rule that a
hospital's otherwise applicable resident limit would generally be its
1996 cap adjusted for several criteria, including a hospital's
participation in a Medicare GME affiliation agreement. Therefore, if a
hospital's cap is temporarily reduced because it is transferring some
of its cap slots to another hospital as part of a Medicare GME
affiliation agreement, the hospital must only be concerned with a cap
reduction if during its reference cost reporting period its reference
resident level is below its adjusted cap, ``the otherwise applicable
resident limit.'' In the commenter's example, hospital A and hospital B
are participating in a Medicare GME affiliated group and have caps of
50 and 100, respectively. As part of the Medicare GME affiliation,
hospital A transfers 10 cap slots to hospital B so that for purposes of
the Medicare GME affiliated group, hospital A's adjusted cap is 40 and
hospital B's adjusted cap is 110. If hospital A and hospital B are
participating in this Medicare GME affiliated group during their
reference cost reporting period, hospital A would only have to be
concerned with a cap reduction if its highest FTE resident count in its
reference cost reporting period was less than 40 and hospital B would
only have to be concerned with a cap reduction if its highest FTE
resident count in its reference cost report was less than 110.
In response to the commenter who stated that, even though rural
hospitals with fewer than 250 beds would be exempt from a cap reduction
under section 1886(h)(8)(A) of the Act, those hospitals would be
negatively affected if the hospital(s) with which they affiliate have
their caps reduced, we appreciate the commenter's concern to ensure
that access to care is not limited in rural and underserved areas as a
result of section 5503. However, section 1886(h)(8)(A) of the Act does
not provide for a specific exemption for urban hospitals that
participate in Medicare GME affiliated groups with rural hospitals with
fewer than 250 beds. We note that the application for receiving cap
slots under section 1886(h)(8) of the Act includes the following
Evaluation Criterion, which specifically addresses residency training
in rural areas: The hospital is in a rural area (as defined under
section

[[Page 72165]]

1886(d)(2)(D)(ii) of the Act) and is or will be on or after July 1,
2011, a training site for a rural track residency program (as specified
under Sec. 413.79(k)), but is unable to count all of the FTE residents
training in the rural track because the rural hospital's FTE cap is
lower than its unweighted count of allopathic or osteopathic FTE
residents as of portions of cost reporting periods on or after July 1,
2011. Furthermore, we note that, under the regulations at Sec.
413.79(e)(1)(iii) a rural hospital can always receive a permanent cap
adjustment for training residents in a new residency training program.
In response to the commenter who asked for clarification as to
whether, if a hospital received FTE cap slots through participation in
a Medicare GME affiliated group but was training below its cap adjusted
under the Medicare GME affiliation agreement during its reference cost
reporting period, we are clarifying that the hospital that received the
cap slots or the hospital that loaned the cap slots would receive a cap
reduction, the hospital that received the slots but is training below
its adjusted cap would receive a cap reduction. The hospital that is
transferring some of its FTE cap slots would not be penalized if the
hospital to which it temporarily transferred some of its FTE cap slots
is training below its adjusted cap during its reference cost reporting
period.
In response to the commenter who stated ``If the hospital's FTE
count exceeded its cap affiliation adjustment, the hospital has no 1996
cap or new program cap that could be reduced to effect a cap
recapture,'' in describing a hospital that has no 1996 cap or new
program cap but receives cap slots as part of a Medicare GME
affiliation agreement, we believe the commenter meant to describe the
scenario as one in which a hospital does not have a 1996 cap or a new
program cap and receives a temporary cap adjustment as part of a
Medicare GME affiliated group but is training below its affiliated cap
during its reference cost reporting period. Under this scenario, the
commenter is correct that there would be no cap to recapture because
the hospital does not have a base year cap to reduce. Rather, it only
has a temporary cap due to its participation in the Medicare GME
affiliated group, and section 1886(h)(8)(A) of the Act does not provide
for the Secretary to look at a Medicare GME affiliated group as a whole
for purposes of determining individual hospitals' cap reductions.
In response to the commenter who requested that CMS either take
into consideration the shared rotational agreement it has had since
1993 with another hospital or maintain the status quo by considering
the fact that these two hospitals have in place a fully compliant
Medicare GME affiliation agreements for academic years July 1, 2009
through June 30, 2011, which reflect the hospitals' longstanding
practice of rotating the residents between the two facilities, we
appreciate the commenter's interest in maintaining its current level of
training at its facilities. However, section 1886(h)(8)(A) of the Act
does not provide the Secretary with the authority to provide an
exception for these specific scenarios. Therefore, if either one of the
hospitals participating in the shared rotational arrangement is
training below its official adjusted cap during its reference cost
reporting period, it would receive a cap reduction. The fact that the
hospitals acted as if they had an affiliation agreement, as required by
the regulations, is not a sufficient basis for revising the hospitals'
caps.
After consideration of the public comments we received, we are
finalizing our policy regarding treatment of Medicare GME affiliated
groups as proposed. Specifically, we are finalizing our policy to state
that, in a hospital's reference cost reporting period, if the hospital
is participating in a Medicare GME affiliated group and is training a
number of residents below its FTE caps, as adjusted under any
affiliation agreements that can be found on Worksheet E, Part A, line
3.06 for IME, and Worksheet E-3 Part IV, line 3.03 for direct GME, the
hospital's FTE resident caps would be subject to a reduction under
section 1886(h)(8)(A)(i) of the Act, even if the Medicare GME
affiliated group as a whole may be training a number of residents above
the group's aggregate FTE resident cap.
d. Treatment of Hospitals That Have Merged
We note that there may be instances where two hospitals merge on or
after March 23, 2010, but were not merged in any or all of their three
most recent cost reporting periods ending before March 23, 2010. For
these hospitals, in the August 3, 2010 proposed rule (75 FR 46395), we
proposed that the Medicare contractors identify the hospitals' three
most recent cost reporting periods ending before March 23, 2010, and
treat the hospitals for purposes of section 1886(h)(8)(A)(i) of the Act
as if they were merged during those periods in determining whether
there should be a reduction to the merged facility's FTE resident
cap(s). That is, we proposed that, for each of the 3 years, we would
combine the FTE resident counts and caps of the formerly separate
facilities in order to identify the reference period, and to calculate
the reference resident level and the otherwise applicable resident
limit for the merged facility (for IME and direct GME, respectively),
even if the two facilities have different fiscal year ends. In
addition, if any of the cost reporting periods are less than 12 months
or greater than 13 months, the Medicare contractor would prorate the
FTE resident counts and FTE caps for direct GME to equal a 12-month
cost reporting period.
Comment: One commenter requested that hospitals that merged be
allowed to use different cost reporting periods in determining whether
the merged facility will receive an FTE cap reduction. The commenter
stated that, for hospitals that have merged, the year with the highest
reference resident level may not be the same year for all of the
hospitals. The commenter believed that, to ensure there is the smallest
reduction in hospitals' resident caps, the Secretary should permit
different cost reporting periods to be used (as long as all of the
years are within the periods contemplated by section 5003) when the
hospital's FTE counts and caps are combined to determine whether the
merged facility should receive a cap reduction. The commenter further
believed that the final rule should address the treatment of hospitals
that merged during the three most recent cost reporting periods ending
before March 23, 2010. Commenters stated that the same policy that was
proposed for hospitals that merge on or after March 23, 2010, should
apply to hospitals that merged prior to March 23, 2010, as long as the
merger occurred in any of the three most recent cost reporting periods
ending before March 23, 2010.
Response: Although we had proposed to apply the proposed policy to
hospitals that had merged on or after March 23, 2010, after
consideration of the public comments we received, we believe the policy
does not need to be applied to hospitals that merge on or after March
23, 2010. In fact, where two hospitals have three separate cost
reporting periods that can be used to determine the hospitals'
reference resident levels, we will determine the highest reference
resident level and the otherwise applicable resident limit for each
hospital separately, and then combine the determinations of any excess
to apply to the merged hospitals, effective July 1, 2011. However,
where for either 1 or 2 of the 3 years used to determine the reference
resident level, the hospitals had merged, it will be necessary to
determine 3 years of data

[[Page 72166]]

as if those hospitals had merged during all of those 3 years. In this
final rule, we are revising the policy to reflect these changes.
9. Application of Section 5503 to Hospitals That File Low Utilization
Medicare Cost Reports
In general, section 5503 of the Affordable Care Act applies to
Medicare-participating hospitals that train residents in approved
residency training programs. However, some Medicare-participating
hospitals may choose to submit low utilization cost reports. These low
utilization cost reports may not contain the cost report worksheet that
is used to calculate payments for direct GME, Worksheet E-3 Part IV.
That is, these cost reports may not contain FTE resident count and cap
information. For example, because Medicare-participating children's
hospitals primarily serve a non-Medicare population and, therefore,
receive minimal Medicare payments, some teaching children's hospitals
submit low utilization cost reports. If a children's hospital files a
low utilization cost report in a given cost reporting period, and does
not file the Worksheet E-3 Part IV, that hospital has no data to
determine its reference resident level. In addition, although
children's hospitals may have an FTE resident ``cap'' that is
applicable for purposes of the Children's Hospital Graduate Medical
Education (CHGME) Payment Program, administered by HRSA, this cap is
not necessarily used for Medicare payment purposes. Therefore, in the
August 3, 2010 proposed rule (75 FR 46395), we proposed that if a low
utilization hospital does not have a cap for Medicare payment purposes,
it would not be subject to a negative cap reduction under section 5503.
In addition, we proposed that if a low utilization hospital does have a
cap for Medicare payment purposes (for example, it had filed a regular
cost report in 1996) but did not file Worksheet E-3 Part IV as part of
its cost report in all of its three most recent cost reporting periods
ending before March 23, 2010, it would be exempt from cap reduction. In
addition, we proposed that if a low utilization hospital has a cap for
Medicare payment purposes and filed Worksheet E-3 Part IV in at least
one of its three most recent cost reports ending before March 23, 2010,
the Medicare contractor would determine, based on the data of the
available cost reports with Worksheet E-3 Part IV, whether a cap
reduction is necessary under section 1886(h)(8)(A)(i) of the Act.
For those low utilization hospitals that have an FTE cap for
Medicare payment purposes and have filed Worksheet E-3 Part IV in any
of the three most recent cost reporting periods ending before March 23,
2010, we proposed that in determining whether, and by how much, that
low utilization hospital's cap may be reduced, we would use the same
methodology that we proposed to use for other Medicare-participating
teaching hospitals. In addition, for purposes of section 1886(h)(8)(B)
of the Act, we proposed that a low utilization hospital would be
eligible to apply for an increase in its FTE resident cap under section
1886(h)(8)(B) of the Act, subject to the same demonstrated likelihood
and evaluation criteria proposed for all other hospitals. However, as
explained further below in this preamble, section 1886(h)(8)(B)(ii) of
the Act, as added by section 5503(a)(4) of the Affordable Care Act,
specifies certain requirements and thresholds that a hospital that
receives additional slots must meet in order to retain those slots. One
requirement is that the hospital must ensure that, for a 5-year period,
its number of FTE primary care residents is not less than the average
number of FTE primary care residents during the three most recent cost
reporting periods ending prior to March 23, 2010. Accordingly, in the
August 3, 2010 proposed rule (75 FR 46396), we proposed that an
applying children's hospital must meet the same documentation
requirements to establish this primary care average as other applying
hospitals, which would mean that the children's hospital must have
submitted a Worksheet E-3, Part IV with its Medicare cost report for
those three most recent cost reporting periods ending prior to March
23, 2010. Furthermore, we proposed that, in order to receive an
increase in its FTE resident cap under section 1886(h)(8)(B) of the
Act, effective July 1, 2011, in addition to complying with the proposed
application requirements as described in this preamble, the hospital
would be required to file Worksheet E-3, Part IV, with its Medicare
cost report for its cost reporting period that includes July 1, 2011,
through and including its cost reporting period that includes June 30,
2016 (that is, the 5-year period). We proposed that the low utilization
hospital must meet this requirement because section 1886(h)(8)(B) of
the Act is intended to allow a hospital to increase its FTE counts for
purposes of Medicare GME payments. We do not believe it would be
appropriate to grant an increase in a hospital's FTE resident cap under
section 1886(h)(8)(B) of the Act if the hospital does not use the slots
for Medicare purposes (but only, for example, for purposes of the CHGME
Payment Program) as would be evidenced by not filing a Worksheet E-3,
Part IV. Moreover, as explained further below, we are required under
sections 1886(h)(8)(B)(ii) and 1886(h)(8)(B)(iii) of the Act to ensure
certain levels of primary care or general surgery training, and the
information in Worksheet E-3, Part IV, would be necessary for that
purpose.
Comment: Commenters supported the proposed policy that if a low
utilization hospital does not have a cap for Medicare payment purposes
or did not file Worksheet E-3, Part IV, in any of its three most recent
cost reporting periods ending before March 23, 2010, it would be exempt
from a cap reduction. One commenter encouraged CMS to consider the
differences in the patients that children's hospitals serve as well as
the unique relationship children's hospitals have with both the
Medicare GME and CHGME programs as CMS makes decisions about
redistribution of slots. Specifically, the commenter recommended that
low or no-filer children's hospitals that meet all the other criteria
should be eligible to apply for additional slots even if they have not
submitted Worksheet E-3, Part IV over the past 3 years, as this will
allow children's hospitals the opportunity to expand primary care and
general surgery programs.
Response: We thank the commenters for their support of the proposed
policy. In this final rule, we are finalizing a policy regarding low
utilization hospitals such that if a low utilization hospital does not
have a cap for Medicare payment purposes or did not file Worksheet E-3,
Part IV for any of its three most recent cost reporting periods ending
before March 23, 2010, for which a cost report has been settled or
submitted to the Medicare contractor by March 23, 2010, that low
utilization hospital would be exempt from a cap reduction. We are
finalizing the policy that if a low utilization hospital has a cap for
Medicare payment purposes and filed Worksheet E-3, Part IV in at least
one of its three most recent cost reports ending before March 23, 2010,
for which a cost report has been settled or has been submitted to the
Medicare contractor by March 23, 2010, the Medicare contractor would
determine, based on the data of the available cost reports with
Worksheet E-3, Part IV, whether a cap reduction is necessary under
section 1886(h)(8)(A)(i) of the Act. For purposes of section
1886(h)(8)(B) of the Act, we proposed that a low utilization hospital
would be eligible to apply for an increase in its FTE resident cap
under section

[[Page 72167]]

1886(h)(8)(B) of the Act, subject to the same demonstrated likelihood
and evaluation criteria proposed for all other hospitals. As explained
further in this preamble, section 1886(h)(8)(B)(ii) of the Act, as
added by section 5503(a)(4) of the Affordable Care Act, specifies
certain requirements and thresholds that a hospital that receives
additional slots must meet in order to retain those slots. One
requirement is that the hospital must ensure for a 5-year period that
its number of FTE primary care residents is not less than the average
number of FTE primary care residents during the three most recent cost
reporting periods ending prior to March 23, 2010.
In response to the commenter's recommendation that low or no filer
children's hospitals that meet all the other criteria should be
eligible to apply for additional slots even if they had not submitted
Worksheet E-3, Part IV over the past 3 years, we are changing our
proposed policy in this final rule to allow a low utilization hospital
to be eligible to apply for an increase in its FTE resident cap if it
submitted by March 23, 2010, at least one cost report (instead of three
cost reports) that includes Worksheet E-3, Part IV for cost reporting
periods ending prior to March 23, 2010. Therefore, in determining
whether, in its 5-year period of July 1, 2011 through June 30, 2016,
the hospital's number of primary care residents is not less than a
baseline amount, that baseline amount must include at least one cost
report that includes Worksheet E-3, Part IV for a cost reporting period
ending prior to March 23, 2010, that was submitted by March 23, 2010.
If the low utilization hospital submits more than one cost report, the
baseline amount will be based on an average of those cost reports (up
to 3 years). In addition, we proposed a general requirement that all
applicants must submit copies of their most recent as filed Worksheet
E-3, Part IV for direct GME, Worksheet E, Part A for IME (which would
not apply for children's hospitals), and if the hospital received slots
under section 422 of the MMA, Worksheet E-3, Part VI as well (75 FR
46399 and 46420). In this final rule, as explained further below, under
the Demonstrated Likelihood Criteria, applicants are also required to
submit copies of these same worksheets from the cost report that was
most recently submitted to the Medicare contractor by March 23, 2010.
Secondly, we proposed that, in order to receive an increase in its FTE
resident cap under section 1886(h)(8)(B) of the Act, effective July 1,
2011, in addition to complying with the proposed application
requirements as described in this preamble, the hospital must file
Worksheet E-3, Part IV, with its Medicare cost report for cost
reporting periods that include July 1, 2011, through and including its
cost reporting period that includes June 30, 2016 (that is, the 5-year
period). In this final rule, we are finalizing these requirements for
low utilization hospitals, without modification, and we are clarifying
that a cost report or reports that would be used to determine whether a
low utilization hospital would receive a cap reduction, would be a cost
report that has been settled or submitted (subject to audit) to the
Medicare contractor by March 23, 2010.
10. Treatment of Hospitals with Caps That Have Been Reduced or
Increased Under Section 422 of Public Law 108-173
For purposes of implementation of section 5503(a) of the Affordable
Care Act, section 1886(h)(8)(H)(iii) of the Act states that the term
``otherwise applicable resident limit,'' means, ``with respect to a
hospital, the limit otherwise applicable under subparagraphs (F)(i) and
(H) of paragraph (4) on the resident level for the hospital determined
without regard to this paragraph but taking into account paragraph
(7)(A).'' As noted earlier in this preamble, section 1886(h)(7)(A) of
the Act, as added by section 422 of Public Law 108-173, provided for
reductions to hospitals' caps if the hospitals were training a number
of residents below their FTE resident caps during the relevant
reference period, and for a ``redistribution'' that increased the FTE
resident caps for certain hospitals. Although sections 1886(h)(4)(F)(i)
and 1886(h)(4)(H) of the Act refer to paragraph (7), which includes
both cap reductions and increases made pursuant to section 422 of
Public Law 108-173, we believe that specific mention of only paragraph
(7)(A), which refers to cap reductions made under section 422, gives
the Secretary the authority to only take into account the reductions
made to hospitals' caps under section 1886(h)(7)(A) of the Act, for
purposes of implementing section 1886(h)(8)(A)(i) of the Act. That is,
we believe specific mention of paragraph (7)(A) is meant to provide
that in determining a hospital's otherwise applicable resident limit,
the Secretary should take into account any reductions to its reference
resident level made under section 1886(h)(7)(A) of the Act to determine
whether a cap reduction under section 1886(h)(8)(A)(i) of the Act is
necessary. Furthermore, section 1886(h)(8)(H)(i) of the Act requires
that, for purposes of determining the reference resident level, the
Secretary is required to consider the hospital's three most recent cost
reporting periods ending prior to March 23, 2010, that have been
settled (or, if not, submitted (subject to audit)), as determined by
the Secretary. In addition, we note that increases made under section
1886(h)(7)(B) of the Act were effective for portions of cost reporting
periods beginning on or after July 1, 2005, and that some hospitals may
still be filling their residency training programs with FTE resident
slots gained under section 1886(h)(7)(B) of the Act, during what may be
their reference cost reporting period for purposes of section
1886(h)(8)(A)(i) of the Act. Therefore, we believe that it would be
inappropriate to include increases made under section 1886(h)(7)(B) of
the Act in determining the hospital's reference resident level for
purposes of cap reductions under section 1886(h)(8)(A)(i) of the Act.
Hospitals that received increases to their caps under section
1886(h)(7)(B) of the Act may still be ``building'' their residency
programs using the additional FTE resident slots they received under
section 1886(h)(7)(B) of the Act. Therefore, it would be premature to
remove any of those FTE resident slots. Accordingly, in the August 3,
2010 proposed rule (75 FR 46396), we proposed that, in determining
whether a cap reduction is necessary under section 1886(h)(8)(A)(i) of
the Act, we would compare the hospital's FTE resident count for its
reference period to its FTE resident cap, as adjusted under section
1886(h)(7)(A) of the Act. We proposed that we would not consider any
increases to its resident cap a hospital may have received under
section 1886(h)(7) of the Act.
Comment: Commenters supported the proposed policy to compare a
hospital's reference resident level to its cap as reduced under section
422 for purposes of determining whether the hospital should receive a
cap reduction. One commenter requested that CMS confirm that its
reference in the proposed Sec. Sec. 412.105(f)(iv)(B)(2) and (C)(2) to
paragraph ``(f)(1)(E)(iv)(B)(1)'' is a typographical error and the
reference should be to paragraph ``(f)(1)(iv)(B)(1).''
Response: The commenter is correct that we made a typographical
error and the cross-reference in Sec. 412.105(f)(iv)(B)(2) should be
changed from paragraph ``(f)(1)(E)(iv)(B)(1)'' to paragraph
``(f)(1)(iv)(B)(1).'' We are not making any reference to paragraph
(f)(1)(iv)(B)(1) in Sec. 412.105(f)(1)(iv)(C)(2) because it is
possible that a hospital may not have received a cap reduction either
under section 1886(h)(7)(A) or section 1886(h)(8)(A) of the Act. We are

[[Page 72168]]

making these corrections to the regulations in this final rule. We
appreciate the commenters' support of our proposed policy regarding
treatment of hospitals' caps as reduced under section 422. We are
finalizing our treatment of hospitals' caps as reduced under section
422 as proposed.
11. Criteria for Determining Hospitals That Will Receive Increases in
Their FTE Resident Caps
Generally, under section 1886(h)(8)(A) of the Act, as added by
section 5503(a)(4) of the Affordable Care Act, the Secretary is to
reduce the FTE resident caps for hospitals that were training a number
of residents below their otherwise applicable resident limit in the
reference period by 65 percent of the ``excess'' resident slots. Under
section 1886(h)(8)(B) of the Act, the Secretary is to ``redistribute''
the estimated number of FTE reductions under section 1886(h)(8)(A) of
the Act to increase the FTE resident caps for use by other hospitals.
Under section 1886(h)(8)(B)(i) of the Act, the Secretary is authorized
to increase the otherwise applicable FTE resident cap for each
qualifying hospital that submits a timely application by a number that
the Secretary may approve, for portions of cost reporting periods
occurring on or after July 1, 2011. In implementing section
1886(h)(8)(B) of the Act, we note the difficulty in deciding how to
prioritize hospitals' requests when redistributing unused resident
slots. Therefore, in addition to some considerations and priorities in
redistribution that are specified in section 5503 of the Affordable
Care Act, in the August 3, 2010 proposed rule (75 FR 46396), we
proposed certain additional criteria that we believe would allow for an
objective decision-making process.
Section 1886(h)(8)(B) of the Act, as added by section 5503 of the
Affordable Care Act, establishes certain parameters in the statutory
language for hospitals to meet to qualify to receive increases in their
FTE resident caps. First, section 1886(h)(8)(B)(i) of the Act states
that the aggregate number of increases in the otherwise applicable
resident limits (caps) shall be equal to the aggregate reduction in the
resident limits determined under section 1886(h)(8)(A) of the Act as
estimated by the Secretary (as discussed in section XXI.D. of this
preamble). Section 1886(h)(8)(F) of the Act states that in no case will
any hospital receive an FTE cap increase of more than 75 FTE positions
as a result of the redistribution. In addition, section 1886(h)(8)(C)
of the Act specifies that, in determining which hospitals will receive
the increases to their FTE resident caps, the Secretary is required to
take into account the demonstrated likelihood that the hospital would
be able to fill the position(s) within the first three cost reporting
periods beginning on or after July 1, 2011, and whether the hospital
has an accredited rural training track program.
In setting up an application process for hospitals to apply for FTE
resident cap increases from the redistribution pool (discussed in
section XXI.D.12. of this preamble), in the August 3, 2010 proposed
rule (75 FR 46397), we proposed to consider the ``demonstrated
likelihood'' criterion under section 1886(h)(8)(C)(i) as an eligibility
criterion that a hospital must meet in order for CMS to further
consider the hospital's application for an increase in its FTE resident
cap. We proposed that a hospital would meet the ``demonstrated
likelihood'' criterion by demonstrating that it is either already
training a number of FTE residents at or in excess of its current FTE
caps (IME and direct GME FTE caps, respectively, including any
applicable section 422 cap add-on), or that it does not have sufficient
room under its current FTE caps to accommodate a planned new program or
expansion of an existing program. We indicated that we believe it is
appropriate to consider a hospital's ``demonstrated likelihood'' as a
requirement because we believe such hospitals will be best positioned
to make immediate and efficient use of any FTE cap increase, and
thereby, to use any resulting increase in Medicare GME payments to
train the physician workforce that will provide care to Medicare
beneficiaries. Thus, we proposed that, in order to be eligible for
consideration for an increase under section 1886(h)(8)(B) of the Act, a
hospital must first demonstrate the likelihood that it will able to
fill the slots within the first three cost reporting periods beginning
on or after July 1, 2011, by meeting at least one of the following
three criteria and by providing documentation that it meets the
criterion in its application for an increase to its FTE resident cap:
Demonstrated Likelihood Criterion 1. The hospital does not
have sufficient room under its current FTE cap for a new residency
program that it intends to establish on or after July 1, 2011 (that is,
a newly approved program that begins training residents at any point
within the hospital's first three cost reporting periods beginning on
or after July 1, 2011). Under this criterion, the hospital would select
one of the following:
(1) Hospital will establish a newly approved residency program.
(Under this selection, the hospital would be required to check at least
one of the following, if applicable):
[squ] Application for approval of the new residency program has
been submitted to the ACGME, AOA, or the ABMS by December 1, 2010. (The
hospital would be required to attach a copy.)
[squ] The hospital has submitted an institutional review document
or program information form concerning the new program in an
application for approval of the new program by December 1, 2010. (The
hospital would be required to attach a copy.)
[squ] The hospital has received written correspondence from the
ACGME, AOA, or ABMS acknowledging receipt of the application for the
new program, or other types of communication from the accrediting
bodies concerning the new program approval process (such as
notification of site visit). (The hospital would be required to attach
a copy.)
(2) Hospital will likely fill the slots requested. (The hospital
would be required to select at least one of the following, if
applicable.)
[squ] The hospital does not have sufficient room under its FTE cap,
and the hospital's existing residency programs had a combined resident
fill rate of at least 85 percent in each of program years 2007 through
2009. (The hospital would be required to attach documentation.)
[squ] The hospital does not have sufficient room under its FTE cap,
and the specialty program for which the hospital is applying has a
resident fill rate either nationally, within the State, or within the
CBSA in which the hospital is located, of at least 85 percent. (The
hospital would be required to attach documentation.)
Demonstrated Likelihood Criterion 2. The hospital does not
have sufficient room under its FTE cap, and the hospital intends to use
the additional FTEs to expand an existing residency training program
within the hospital's first three cost reporting periods beginning on
or after July 1, 2011.
(1) Hospital intends to expand an existing program. Under this
selection, the hospital would be required to check at least one of the
following, if applicable:
[squ] The appropriate accrediting body (the ACGME, AOA, or ABMS)
has approved the hospital's expansion of the number of FTE residents in
the program. (The hospital would be required to attach documentation.)
[squ] The American Osteopathic Association Residency Match Program

[[Page 72169]]

has accepted or will be accepting the hospital's participation in the
match for the existing program that will include additional resident
slots in that residency training program. (The hospital would be
required to attach documentation.)
[squ] The hospital has submitted an institutional review document
or program information form for the expansion of the existing residency
training program by December 1, 2010. (The hospital would be required
to attach documentation.)
(2) Hospital will likely fill the slots of the expanded existing
residency program. Under this selection, the hospital would be required
to check at least one of the following, if applicable:
[squ] The hospital does not have sufficient room under its FTE cap,
and the hospital has other previously established residency programs,
with a resident fill rate of at least 85 percent in each of program
years 2007 through 2009.) (The hospital would be required to attach
documentation.)
[squ] The hospital does not have sufficient room under its FTE cap,
and the hospital is expanding an existing program in a particular
specialty with a resident fill rate either nationally, within the
State, or within the CBSA in which the hospital is located, of at least
85 percent. (The hospital would be required to attach documentation.)
Demonstrated Likelihood Criterion 3. The hospital is
applying for an increase in its FTE resident cap because the hospital
is already training residents in an existing residency training
program(s) in excess of its direct GME FTE cap or IME FTE cap, or both.
The hospital would be required to attach copies of each of the
following:

--Copies of the Medicare cost reports that have been most recently
submitted to the Medicare contractor on or by July 1, 2010, documenting
on Worksheet E, Part A, Worksheet E-3, Part IV, and Worksheet E-3, Part
VI, the resident counts and FTE resident caps for both direct GME and
IME for the relevant cost reporting periods.
--Copies of the 2010 residency match information concerning the number
of residents at the hospital in its existing programs (that is, all
programs, not only the ones for which the hospital may be requesting
more slots).
--Copies of the most recent accreditation letters on all of the
hospital's training programs in which the hospital trains and counts
FTE residents for direct GME and IME.

In the August 3, 2010 proposed rule, we proposed that each hospital
applying for an increase under section 1886(h)(8)(B)(i) of the Act
would be required to meet at least one of the above criteria in order
to demonstrate the likelihood that it will be able to fill the
additional slots associated with any increase in the hospital's FTE
resident cap within the first three cost reporting periods beginning on
or after July 1, 2011. In other words, each hospital that wishes to
apply for an increase in its FTE resident cap, as a preliminary matter,
would be required to meet the ``demonstrated likelihood'' criterion in
order for CMS to further consider the hospital's application for an
increase in its FTE resident cap.
Although a hospital might be applying for additional slots for more
than one specialty program, each application by a hospital must be
program-specific. That is, the hospital would be required to complete a
separate CMS evaluation form for each program and to demonstrate the
likelihood of filling the slots in each program. However, in accordance
with our general policy with respect to FTE resident caps, increases in
hospital's FTE resident caps under section 1886(h)(8)(B)(i) of the Act
for direct GME and IME, once granted to a hospital, would no longer be
program-specific. Rather, the hospital's adjusted FTE resident caps
would be applied to the hospital's FTE resident counts, including any
residents the hospital trains. However, we noted, that for FTE
residents counted as a result of an increase in the FTE resident caps
under section 422 of Public Law 108-173, payment is calculated
separately for direct GME purposes using the national average PRA and,
for IME purposes using a multiplier of 0.66. If a hospital receives an
increase to its FTE resident cap(s) under section 5503 of the
Affordable Care Act, and also received a cap increase under section
422, we proposed that the hospital would first assess whether it is
training a number of residents in excess of its combined 1996 FTE and
section 5503 caps and, only if its number of FTE residents still
exceeds this combined cap would the separate 422 payment rates be
applied to the excess FTEs for IME and direct GME respectively.
Nevertheless, while the slots a hospital would receive under section
1886(h)(8)(B)(i) of the Act for direct GME and IME, once granted to a
hospital, would no longer be program-specific, the hospital that
receives the slots must comply with the requirements specified at
section 1886(h)(8)(B)(ii) of the Act for a 5-year period; that is,
maintaining the primary care average and the 75-percent threshold. In
addition, we note that because of the 75-percent threshold, a hospital
cannot apply for slots under section 5503 only for a non-primary care
program (other than general surgery). However, a hospital could apply
for slots, and demonstrate that it needs 75 percent of those slots to
start or expand a particular primary care (or general surgery) program,
and that it needs 25 percent of those slots for use in a particular
nonprimary care program. However, the hospital's request for each
program will be evaluated separately. The hospital's request for slots
to start or expand a particular primary care (or general surgery)
program could receive some points under the Evaluation Criteria, and
may be fulfilled, while the hospital's request for slots for use in a
non-primary care program would not receive any points and would be
ranked last after all other applications for primary care or general
surgery programs. For example, a hospital could apply for a total of 4
slots; 3, or 75 percent, for use in starting a geriatrics fellowship
program (5 points under Evaluation Criterion Two), and 1, or 25
percent, to be used to add a Vascular & Interventional Radiology fellow
(0 points). The hospital would likely be awarded three slots for
geriatrics, but the chances that it would also be rewarded one slot for
the Vascular & Interventional Radiology fellow are very slim, as the
request for this program would be ranked last after all requests for
primary care or general surgery programs.
For purposes of the application for the increase to the FTE caps
under section 1886(h)(8)(B)(i) of the Act, we proposed to define
``national fill rate'' for each academic year, as we did when
implementing section 422 of Public Law 108-173. That is, we defined
``national fill rate'' as the number of residents training in a program
nationally as compared to the number of accredited slots in that
program as of June 30 of that year. This information is available from
the ACGME and the AOA. Furthermore, we proposed to require that, for
the purposes of an application for an increase to a hospital's FTE
resident cap under section 1886(h)(8)(B) of the Act, a hospital must
use the ``fill rate'' for the most recent academic year for which data
are available.
We understand that hospitals may train fewer residents than the
number of available accredited slots in their approved programs due to
reasons other than an inability to fill those slots. Furthermore,
because we understand that a national fill rate is not necessarily the
only indicator of the ability of hospitals to fill residency positions
in its CBSA or State, and there may be

[[Page 72170]]

characteristics particular to a region, such as population density,
variety of practice settings, or access to technology or procedures
that may allow a specified area to have a fill rate in a specific
program that exceeds the program's national fill rate, we proposed
several options for a hospital to satisfy the ``fill rate''' criterion.
In part, as when implementing section 422 of Public Law 108-173, we
specified that the fill rate ``threshold'' is 85 percent. We believe
that this rate will reasonably identify those programs that are likely
to fill FTE resident positions in newly approved or expanded programs
(while providing some latitude to account for other factors that affect
the national fill rate), and to fully utilize an increase in FTE
resident cap slots that may be available under section 1886(h)(8)(B) of
the Act as added by section 5503 of the Affordable Care Act. We
proposed that a hospital may demonstrate the likelihood of filling FTE
resident positions associated with a possible increase in its FTE
resident cap under section 5503 by documenting that any of the
following applies to the new program or to an expansion of an existing
program:
The specialty program has a resident fill rate nationally,
across all hospitals, of at least 85 percent.
The specialty program has a resident fill rate within the
State in which the hospital is located of at least 85 percent.
If the hospital is located within an urban CBSA, the
specialty program has a resident fill rate within the CBSA of at least
85 percent.
For the purposes of demonstrating the likelihood of filling FTE
resident positions under section 1886(h)(8)(C)(i) of the Act, as added
by section 5503, we proposed that ``national fill rate'' means, for the
most recent academic year for which data is available, the number of
residents training in a program nationally (combined allopathic and
osteopathic residents) compared to the number of accredited slots in
that program nationally as of June 30 of that year. The proposed
Demonstrated Likelihood Criterion 1 and Demonstrated Likelihood
Criterion 2 also allow a hospital to demonstrate the likelihood of
filling the requested slots by demonstrating that the hospital's
existing residency programs had a ``resident fill rate'' of at least 85
percent in each program year from 2007 through 2009. For the purpose of
fulfilling these demonstrated likelihood criteria, we proposed to
define ``resident fill rate'' to mean, for the most recent academic
year for which data is available, the number of residents training in
each program in total at a particular hospital as compared to the
number of accredited slots in each program in total at that hospital as
of June 30 of that year.
We also understand that, for certain programs, because of the
length of the accreditation process and a relatively long match period,
a hospital may be unable to accept its first class of PGY-1 residents
until July 1, 2012. In the August 3, 2010 proposed rule (75 FR 46398
through 46399), we proposed that the hospital may still apply to
receive a full complement of residents for the 3 years beginning July
1, 2012, assuming the applicant hospital can demonstrate the likelihood
that it will fill the slots relating to a possible increase in its FTE
resident caps under section 1886(h)(8)(B)(i). However, if the applicant
hospital does not demonstrate the likelihood that it will fill any FTE
slots for programs described by the hospital on the CMS evaluation
form(s) at any point within the hospital's first three cost reporting
periods beginning on or after July 1, 2011, the hospital would not be
eligible for further consideration by CMS of an increase to the
hospital's FTE caps under section 1886(h)(8)(B)(i). Accordingly, our
proposed Demonstrated Likelihood Criterion 1 would reflect that the
hospital does not have sufficient room under its FTE cap to train
residents in a newly approved residency program that it demonstrates it
will establish within the hospital's first three cost reporting periods
beginning on or after July 1, 2011 (that is, a newly approved program
that begins training residents at any point within the hospital's first
three cost reporting periods beginning on or after July 1, 2011)''
(emphasis added).
Under Demonstrated Likelihood Criterion 3, we proposed to allow a
hospital that is already training a number of FTE residents in an
existing residency training program(s) in excess of its direct GME FTE
cap or IME FTE cap, or both, to meet the demonstrated likelihood
requirement. In order to document that it meets this criterion, a
hospital would be required to submit copies of the 2010 ``residency
match'' information concerning the number of residents the hospital has
in an existing program. We believed the most recent match information
could indicate that the hospital is expected to take in more residents
than the number of cap slots it has available. For purposes of the
application of this demonstrated likelihood criterion, we proposed to
define ``residency match'' as a national process administered by the
National Residency Matching Program (NRMP), including the NRMP's
Specialties Matching Service, the San Francisco Matching Program, the
American Osteopathic Association Residency Match Program, or the
Urology Matching Program, by which applicants to approved medical
residency programs are paired with programs on the basis of preferences
expressed by both the applicants and the program directors. (We note
that in this final rule, we removed Demonstrated Likelihood Criterion
3).
We also noted in the proposed rule that under Demonstrated
Likelihood Criteria 2 and 3, the hospital would be applying for an
increase in its FTE cap because it is expanding an existing residency
program, or it is already training residents in an existing residency
training program(s) in excess of its FTE caps, respectively. By
existing program, we proposed that, as of July 1, 2010, the hospital is
either already training residents in this program or programs, or the
program exists at another hospital prior to July 1, 2011, but the
residents begin to rotate at the applying hospital on or after July 1,
2011. We set forth several proposed methods for hospitals to be able to
demonstrate to CMS under the proposed Demonstrated Likelihood Criterion
1 that they can fill the slots by showing CMS that they are
establishing a new residency program on or after July 1, 2011. We
believe hospitals that establish new residency programs before July 1,
2011, could possibly also meet Demonstrated Likelihood Criterion 2,
relating to a hospital that is expanding an existing residency program
on or after July 1, 2011. From the perspective of applying for the cap
increase under section 1886(h)(8)(B)(i) of the Act, the new program
that starts training residents in 2010 is an ``existing residency
program'' because it began before July 1, 2011, and it is ``expanding''
if that program is increasing the number of FTE residents in the first
three cost reporting periods beginning on or after July 1, 2011.
We noted that the listing of programs participating in the AOA
Match Program will be available on the National Matching Services Web
site as of November 1, 2010. Therefore, we proposed that programs
utilizing the AOA Match Program may, in addition to the two options
listed above, demonstrate the intent to expand an existing program by
documenting that the AOA has accepted the hospital's participation in
the match program by the December 1, 2010 application deadline.
Therefore, we proposed that this method of demonstrating the hospital's
intent to expand an existing program would be applicable for

[[Page 72171]]

programs participating in the AOA Match Program.
Comment: One commenter requested that CMS clarify that
``Demonstrated Likelihood Criterion 3'' applies both to hospitals at
their cap as well as to those training residents ``in excess of'' their
cap. The commenter noted that on page 46397 of the proposed rule, CMS
states that a hospital may meet this demonstrated likelihood criterion
``by demonstrating that it is [ ] already training a number of FTE
residents at or in excess of its current FTE caps;'' however, the
longer description of ``Demonstrated Likelihood Criterion 3'' on page
46398 states that a hospital ``is applying for an increase in its FTE
resident cap because the hospital is already training residents in an
existing residency training program(s) in excess of its direct GME FTE
cap or IME FTE cap, or both.''
Another commenter thought that hospitals that are currently
exceeding their caps should qualify to receive additional cap slots
even without adding a new program or expanding an existing program. The
commenter stated that CMS' explanation of the application of the ``75
percent'' test makes it appear that it is impossible to obtain
increases to the caps without either starting or expanding a program.
The commenter believed that there are inconsistencies in the preamble
that permit a hospital that is over its cap to meet the ``Demonstrated
Likelihood'' criteria without adding or expanding a program, and the
point criteria which do not make adding or expanding a program
essential, and the 75 percent test which cannot be satisfied without
adding or expanding a program.
Response: After reading these comments and reviewing the proposed
Demonstrated Likelihood Criteria 1, 2, and 3, we agree that
clarification and revision of the criteria are necessary. Specifically,
we are revising Demonstrated Likelihood Criteria 1 to incorporate the
point that a hospital is applying for additional cap slots because it
is either already exceeding its FTE cap, or it does not have sufficient
room under its FTE cap to start a new program. For Demonstrated
Likelihood Criterion 2, we are incorporating the point that a hospital
is applying for additional cap slots because it is either already
exceeding its FTE cap, or it does not have sufficient room under its
FTE cap to expand an existing program. Thus, Demonstrated Likelihood
Criteria 1 and 2 may apply to a hospital that may or may not already be
exceeding its FTE cap, but it definitely plans on starting a new or
expanding an existing program. Because we are specifying in this final
rule that Demonstrated Likelihood Criteria 1 and 2 may also apply for
hospitals that are in excess of their caps (albeit not solely for cap
relief), we are adding that hospitals applying under these criteria
could also submit copies of their Medicare cost report worksheets,
documenting that they are in excess of their caps. However, in this
final rule, instead of stating that the hospital must submit a copy of
the Medicare cost report that has been most recently submitted to the
Medicare contractor by July 1, 2010, as we stated in the proposed rule,
we are stating that the hospital must submit a copy of the Medicare
cost report that has been most recently submitted to the Medicare
contractor on or before March 23, 2010, documenting on Worksheet E,
Part A, Worksheet E-3, Part IV, and Worksheet E-3, Part VI, the
resident counts and FTE resident caps for both direct GME and IME for
the relevant cost reporting periods. We are removing the proposed
Demonstrated Likelihood Criterion 3 from this final rule because it is
duplicative. Further, it has confused the commenters and has led some
to believe that hospitals that are already training residents in excess
of their caps, and are seeking the additional slots for cap relief,
rather than for the purpose of starting a new or expanding an existing
program, may apply for slots under section 5503. Since the intent of
section 5503 is to increase the number of primary care or general
surgery physicians by providing Medicare funding for new primary care
or general surgery positions (either through establishment of new
programs or expansions of existing programs), as the 75 percent
requirement indicates, it would be inconsistent with this intent to
provide funding for already existing positions. Thus, if hospitals are
willing to increase the number of primary care or general surgery
residents they are training above current levels, there may be some
funding available under section 5503 for them to do so. Accordingly, we
are clarifying that a hospital may not request additional slots under
section 5503 solely for the purpose of cap relief. We explain in great
detail below in response to comments regarding the primary care average
requirement and the 75 percent threshold requirement how a hospital
that is exceeding its FTE caps and that applies for additional slots
would have to increase the number of residents it is training in order
to meet the 75 percent threshold requirement. We refer readers to those
comments and responses below.
With regard to the commenter's belief that there are
inconsistencies in the preamble that permit a hospital that is over its
cap to meet the ``Demonstrated Likelihood'' criteria without adding or
expanding a program, and the Evaluation Criteria which do not make
adding or expanding a program essential, we have reviewed the
Evaluation Criteria and we believe that proposed Evaluation Criteria
Two, Three, and Four specifically state that the ``hospital will use
the additional slots to establish a new or expand an existing
program.'' This implies that the hospital intends to create new
positions, rather than only seeking cap relief for existing positions.
Proposed Evaluation Criteria One, Five, and Six are specific to the
hospital's situation, rather than its particular programs, and they can
be used in addition to Evaluation Criteria Two, Three, and Four.
Therefore, we do not agree that there are inconsistencies between the
proposed (or final) Demonstrated Likelihood Criteria and Evaluation
Criteria.
Comment: One commenter agreed with CMS' proposal that one way of
demonstrating the likelihood of filling slots awarded under section
5503 is for a hospital to show that it is already training residents in
excess of its cap, but thought that the documentation requirements for
such a hospital is ``excessive.'' The commenter found it to be
``particularly perplexing'' that ``three pieces of documentation would
be required for a criterion that is the most straightforward rationale
for requesting additional cap slots.'' The three pieces are (1) copies
of most recent Medicare cost reports, documenting the DGME and IME
caps, (2) copies of the 2010 residency match information concerning the
number of residents at the hospital in its existing programs (all
programs--not just the programs for which the hospital is requesting
additional slots), and (3) copies of the most recent accreditation
letters on all of the hospital's training programs for which the
hospital trains and counts residents for DGME and IME payments. The
commenter did not see the need to submit 2010 residency match
information, ``because these data do not necessarily indicate the total
number of residents training at an institution,'' and submission of
accreditation information is also ``unnecessary and burdensome,
particularly for institutions with 75 or more residency and fellowship
programs--which is not uncommon.'' The commenter urged CMS to adopt
only the requirement that copies of the most recent Medicare cost
reports be submitted for Demonstrated Likelihood Criterion 3, and at a
minimum, this requirement should be the requirement

[[Page 72172]]

for hospitals that were over their caps in all of the past three cost
reporting periods. Another commenter asked CMS to clarify which cost
reporting periods will be used to determine whether a hospital is
``currently'' over its cap.
Response: As we explained in response to the previous comment, we
are clarifying that a hospital may not request additional cap slots
under section 5503 merely for cap relief. Furthermore, since we have
consolidated Demonstrated Likelihood Criteria 1 and 2, we are removing
Demonstrated Likelihood Criterion 3 and its attending documentation
requirements that the commenter believed were overly burdensome from
this final rule.
Comment: One commenter believed that CMS should include an
exception for family medicine in the fill rate requirement and expanded
need requirement for the Demonstrated Likelihood Criteria 1 and 2. The
commenter argued that the accreditation process for family medicine is
unique in that it allows for ``leeway'' in the number of residents
allowed to be trained. The commenter stated that a program may increase
its complement of residents by a ``limited, yet unstated'' number as
long as it is justified in its next accreditation review or approval
cycle and as such, a specific number would not be stated. For the same
reasons, the commenter further asserted that the information on a
family medicine accreditation letter for Demonstrated Likelihood
Criterion 3 would be inappropriate.
This commenter also noted that CMS seems to switch from using fill
rate data to match data in Demonstrated Likelihood Criterion 3. The
commenter recommended that CMS use fill rate data because ``match data
is incomplete and inaccurate as an aid to determining a resident
census.''
Response: We note first that, as stated in response to previous
comments, we have eliminated Demonstrated Likelihood Criterion 3 from
this final rule. Second, we are unsure of the precise question that the
commenter is asking. It appears that the commenter is stating that
directors of family medicine programs need not request approval from
the ACGME every time they want to expand an existing program by a
``limited'' number of unspecified positions, so long as the increase in
resident positions is declared and explained at the next accreditation
review. If we are understanding the commenter correctly, we think the
commenter is asking that hospitals that are applying for additional
slots for the purpose of using those slots for a family medicine
program should not be required to submit to CMS applications for
approval (or actual approvals) of new or expansions of existing family
medicine programs to the ACGME, or copies of recent accreditation
letters. However, we do not think we should make a special exception to
the Demonstrated Likelihood Criteria for family medicine programs since
we have heard of situations where hospitals have increased their number
of residents training in various programs (not just family medicine)
above the number of accredited slots without immediate approval of the
increase and without repercussions from the ACGME. Furthermore, even if
a hospital increases the number of residents in a particular residency
program, and that increase is not significant enough to definitely
require pre-approval from the ACGME, we believe that requiring
hospitals to submit to CMS as part of the Demonstrated Likelihood
requirements applications for approval to expand programs is
appropriate in the context of applications for additional slots under
section 5503. The statute requires hospitals to ``demonstrate the
likelihood'' of filling the positions, and documents submitted to the
ACGME either requesting approval of, or received from the ACGME showing
approval of expansions of existing programs demonstrates a commitment
on the part of the hospital to actually expand those programs.
Furthermore, although the commenter asked for an exception for family
medicine programs from Demonstrated Likelihood Criterion 1, which is
applicable to hospitals seeking slots with which to start a new program
(in addition to asking for an exception to Demonstrated Likelihood
Criterion 2), we are skeptical that the ACGME would actually allow a
hospital to start a brand new family medicine program, without any
submission of documentation at all. Although we understand that there
are instances where residents may begin training in a new program on
July 1 of an academic year, and the ACGME may retroactively accredit
that program a few months later, the hospital would certainly have
submitted to the ACGME an institutional review document or program
information form concerning the new program, and by such time as the
hospital begins to train the residents, we would hope that the hospital
would have received written correspondence from the ACGME acknowledging
receipt of the application for the new program, and notification of a
site visit, as described under the requirements for Demonstrated
Likelihood Criterion 1. Therefore, we are not revising the
documentation requirements under Demonstrated Likelihood Criteria 1 and
2 specifically for family medicine.
However, we do believe some revision can be made to the
documentation requirements under Demonstrated Likelihood Criterion 1 to
ease the burden on hospitals applying for slots under section 5503 for
family medicine and other programs. Under the proposed Demonstrated
Likelihood Criterion 1, a hospital could demonstrate that it would
likely fill the slots in a new program by showing that it (1) already
received approval from the ACGME, AOA, or ABMS, (2) has already
submitted an institutional review document or program information form
requesting approval for a new program, or (3) has received
correspondence from the accrediting agencies acknowledging receipt of
the application for the new program, or other types of communication
regarding the approval process. We understand that completing the
program information form can be a time-consuming and lengthy process,
which may pose some challenges for hospitals to complete in a timely
fashion and meet CMS' application deadline for receipt of slots under
section 5503. Therefore, we are adding a fourth option under
Demonstrated Likelihood Criterion 1 which we believe may make it easier
for some hospitals to comply with this criterion. Specifically, we are
adding that the hospital may submit documentation demonstrating that it
has made a commitment to start a new program. One example of such a
commitment would be for the hospital to provide the minutes from the
meeting at which the hospital's GME committee gave approval for the
hospital to proceed with the process of applying to the accrediting
agency for approval to start a new program. We are not adding a similar
option under Demonstrated Likelihood Criterion 2 because we understand
that the process for requesting approval to expand an existing program
is not as time-consuming and labor-intensive as the process for
requesting approval for a brand new program.
We are revising and consolidating the Demonstrated Likelihood
Criteria as follows:
Demonstrated Likelihood Criterion 1. The hospital is
training residents in excess of its FTE resident cap(s), or does not
have sufficient room under its current FTE cap(s), and the hospital
intends to use the additional FTEs for a new residency program that it
intends to start on or after July 1, 2011 (that is, a newly approved
program that begins training residents at any point within

[[Page 72173]]

the hospital's first three cost reporting periods beginning on or after
July 1, 2011). Under this criterion, the hospital must select one of
the following:
(1) Hospital will establish a newly approved residency program.
(Under this selection, the hospital must check at least one of the
following, if applicable):
[square] Application for approval of the new residency program has
been submitted to the ACGME, AOA, or the ABMS by January 21, 2011. (The
hospital must attach a copy.)
[square] The hospital has submitted an institutional review
document or program information form concerning the new program in an
application for approval of the new program by January 21, 2011. (The
hospital must attach a copy.)
[square] The hospital has received written correspondence from the
ACGME, AOA, or ABMS acknowledging receipt of the application for the
new program, or other types of communication from the accrediting
bodies concerning the new program approval process (such as
notification of site visit). (The hospital must attach a copy.)
[square] The hospital may submit documentation demonstrating that
it has made a commitment to start a new program.
(2) Hospital will likely fill the slots requested. (The hospital
must select at least one of the following, if applicable.)
[square] The hospital does not have sufficient room under its FTE
cap, or is exceeding its FTE cap, and the hospital's existing residency
programs had a combined resident fill rate of at least 85 percent in
each of program years 2007 through 2009. (The hospital must attach
documentation.)
[square] The hospital does not have sufficient room under its FTE
cap, or is exceeding its FTE cap, and the specialty program for which
the hospital is applying has a resident fill rate either nationally,
within the State, or within the CBSA in which the hospital is located,
of at least 85 percent. (The hospital must attach documentation.)
[square] The hospital is training residents in excess of its direct
GME FTE cap, or IME FTE cap, or both. The hospital must submit a copy
of the Medicare cost report that has been most recently submitted to
the Medicare contractor on or before January 21, 2011, documenting on
Worksheet E, Part A, Worksheet E-3, Part IV, and Worksheet E-3, Part
VI, the resident counts and FTE resident caps for both direct GME and
IME for the relevant cost reporting periods.
Demonstrated Likelihood Criterion 2. The hospital is
training residents in excess of its FTE cap(s), or does not have
sufficient room under its FTE cap(s), and the hospital intends to use
the additional FTEs to expand an existing residency training program
within the hospital's first three cost reporting periods beginning on
or after July 1, 2011.
(1) The hospital intends to expand an existing program. Under this
selection, the hospital must check at least one of the following, if
applicable:
[square] The appropriate accrediting body (the ACGME, AOA, or ABMS)
has approved the hospital's expansion of the number of FTE residents in
the program. (The hospital must attach documentation.)
[square] The American Osteopathic Association Residency Match
Program has accepted or will be accepting the hospital's participation
in the match for the existing program that will include additional
resident slots in that residency training program. (The hospital must
attach documentation.)
[square] The hospital has submitted an institutional review
document or program information form for the expansion of the existing
residency training program by January 21, 2011. (The hospital must
attach documentation.)
(2) Hospital will likely fill the slots of the expanded existing
residency program. Under this selection, the hospital must check at
least one of the following, if applicable:
[square] The hospital does not have sufficient room under its FTE
cap, or is exceeding its FTE cap, and the hospital has other previously
established residency programs, with a resident fill rate of at least
85 percent in each of program years 2007 through 2009.) (The hospital
must attach documentation.)
[square] The hospital does not have sufficient room under its FTE
cap, or is exceeding its FTE cap, and the hospital is expanding an
existing program in a particular specialty with a resident fill rate
either nationally, within the State, or within the CBSA in which the
hospital is located, of at least 85 percent. (The hospital must attach
documentation.)
[square] The hospital is training residents in excess of its direct
GME FTE cap, or IME FTE cap, or both. The hospital must submit a copy
of the Medicare cost report that has been most recently submitted to
the Medicare contractor by March 23, 2010, documenting on Worksheet E,
Part A, Worksheet E-3, Part IV, and Worksheet E-3, Part VI, the
resident counts and FTE resident caps for both direct GME and IME for
the relevant cost reporting periods.
Comment: One commenter requested that CMS allow hospitals to
demonstrate their likelihood of using redistributed slots for three
reporting periods beginning July 1, 2012, instead of July 1, 2011, as
CMS has proposed. The commenter posited that by using the reporting
period beginning July 1, 2012, hospitals would be able to document with
greater precision their effective use of the redistributed slots.
Response: We understand that three cost reporting periods after a
date of July 1, 2012, would give the commenters more time to
demonstrate their effective use of the redistributed slots. However, we
do not have any flexibility in choosing this date because section
1886(h)(8)(C) of the Act clearly specifies that the Secretary is
required to take into account the demonstrated likelihood that a
hospital would be able to fill the position(s) within the first 3 cost
reporting periods beginning on or after July 1, 2011.
After consideration of the public comments we received, we are
revising Demonstrated Likelihood Criteria 1 to incorporate the point
that a hospital is applying for additional cap slots because it is
either already exceeding its FTE cap, or it does not have sufficient
room under its FTE cap and plans to start a new program. We also are
revising Demonstrated Likelihood Criterion 1 to add that the hospital
may submit documentation demonstrating that it has made a commitment to
start a new program. For Demonstrated Likelihood Criterion 2, we are
incorporating the point that a hospital is applying for additional cap
slots because it is either already exceeding its FTE cap, or it does
not have sufficient room under its FTE cap and it plans to expand an
existing program. Thus, Demonstrated Likelihood Criteria 1 and 2 may
apply to a hospital that may or may not already be exceeding its FTE
cap, but it definitely plans on starting a new or expanding an existing
program. Because we are specifying in this final rule that Demonstrated
Likelihood Criteria 1 and 2 may also apply for hospitals that are in
excess of their caps, we are adding that hospitals applying under these
criteria must also submit copies of their Medicare cost report
worksheets, documenting that they are in excess of their caps.
Therefore, we are removing the proposed Demonstrated Likelihood
Criterion 3 from this final rule because it is duplicative. Further, we
are clarifying that because the intent of section 5503 is to increase
the number of primary care or general surgery physicians by providing
Medicare funding for new primary care or general surgery positions
(either through establishment of new programs or expansions of existing
programs),

[[Page 72174]]

hospitals may not apply to receive slots under section 5503 for the
purpose of cap relief.
12. Application Process for the Increases in Hospitals' FTE Resident
Caps
In order for hospitals to be considered for increases to their FTE
resident caps under section 1886(h)(8)(B)(i) of the Act, as added by
section 5503(a)(4) of the Affordable Care Act, in the August 3, 2010
proposed rule (75 FR 46399), we proposed to require that each
qualifying hospital submit a timely application by December 1, 2010. As
part of the requirements that a hospital must fulfill in order to
complete an application for an increase to its FTE resident caps, we
proposed to require that the applicant hospital must include the total
number of requested FTE resident slots (for all residency programs) for
direct GME or IME, or both (not to exceed 75 FTEs for each, as
specified under section 1886(h)(8)(F) of the Act). Thus, we would
require that the hospital's total requests for increases in the IME and
the direct GME caps (that is, the total number of requested FTE
resident slots increases (for all residency programs at the hospitals))
would be required to be indicated on the same application for an
increase under section 1886(h)(8)(B)(i) of the Act. We proposed that
each hospital must submit the following information on its application
for an increase in its FTE resident cap:
The name and Medicare provider number of the hospital, and
the name of the Medicare contractor to which the hospital submits its
cost report.
The total number of requested FTE resident slots (for all
residency programs at the hospital) for direct GME or IME, or both (not
to exceed 75 FTEs each).
A completed copy of the CMS evaluation form (as described
below) for each residency program for which the applicant hospital
intends to use the requested increase in the number of FTE residents
and source documentation to support the assertions made by the hospital
on the evaluation form. (For example, if the hospital checks off on the
evaluation form that the hospital is starting a new geriatrics program,
the hospital would include documentation to support that assertion.)
FTE resident counts for direct GME and IME and FTE
resident caps for direct GME and IME reported by the hospital in the
most recent as-filed cost report (as clarified in this final rule,
submitted by March 23, 2010). (The hospital would be required to
include copies of Worksheets E, Part A, E-3, Part IV, and if a hospital
received an increase to its FTE cap(s) under section 422 of Public Law
108-173, a copy of Worksheet E-3, Part VI.)
An attestation, signed and dated by an officer or
administrator of the hospital who signs the hospital's Medicare cost
report, of the following information in the hospital's application for
an increase in its FTE resident cap:

``I hereby certify that I understand that misrepresentation or
falsification of any information contained in this application may
be punishable by criminal, civil, and administrative action, fine
and/or imprisonment under federal law. Furthermore, I understand
that if services identified in this application were provided or
procured through payment directly or indirectly of a kickback or
were otherwise illegal, criminal, civil, and administrative action,
fines and/or imprisonment may result. I also certify that, to the
best of my knowledge and belief, it is a true, correct, and complete
application prepared from the books and records of the hospital in
accordance with applicable instructions, except as noted. I further
certify that I am familiar with the laws and regulations regarding
Medicare payment to hospitals for the training of interns and
residents.''

We proposed that any hospital that wishes to apply for an increase
in its FTE resident cap(s) under section 1886(h)(8)(B)(i) of the Act
must submit a copy of its completed application (as described above) to
the CMS Central Office and to the CMS Regional Office for the region in
which the applicant hospital is located, and that the application must
be received by CMS on or before December 1, 2010. (The mailing
addresses for the CMS offices are indicated at the end of this section
of the preamble.) We noted that some hospitals' FTE counts would be
subject to audit for purposes of possible cap reductions under section
1886(h)(8)(A)(i) of the Act, and those audits may not be completed by
December 1, 2010. Because the results of such an audit may be a factor
in a hospital's decision whether to request an increase in its FTE
resident cap under section 1886(h)(8)(B)(i) of the Act, we proposed to
allow a later date for those hospitals to apply for increases in their
FTE resident caps. Therefore, if a hospital's resident level is audited
for purposes of section 1886(h)(8)(A) of the Act, whether or not the
hospital's FTE resident caps are reduced under section 1886(h)(8)(A) of
the Act, if that hospital wishes to apply for an increase in its FTE
resident cap(s) available under section 1886(h)(8)(B)(i) of the Act, we
proposed that the hospital must submit a completed application to CMS
and that the application must be received on or before March 1, 2011.
We note that, although a hospital might be applying for an increase
to its FTE caps either to start a new program or expand a particular
program, the FTE caps are not program-specific; but rather, they are
hospital-specific. A hospital, and not a particular residency training
program, would be applying for an increase to its FTE caps. We proposed
that all completed applications that are timely received according to
the above deadlines would be evaluated by CMS according to the criteria
described under section XXI.D.14. of this preamble for determining the
priority distribution of FTE resident slots. Hospitals that satisfy at
least one of the ``demonstrated likelihood'' criteria would be further
evaluated by the evaluation criteria described below.
Comment: Commenters expressed concern regarding the proposed
application deadline of December 1, 2010, for hospitals to apply for
additional slots under section 5503. The commenters understand the
short time frame CMS has to implement section 5503, but believe this
deadline does not provide hospitals sufficient time after November 1,
2010, the date by which the final rule will be issued, to prepare their
applications. The commenters noted that CMS proposed a second deadline
of March 1, 2011, for certain hospitals that will be subject to an
audit for purposes of determining a possible cap reduction, but those
audits may not be completed by December 1, 2010. The commenters
requested that CMS make March 1, 2011, the deadline for all hospitals
to apply for slots under section 5503 since CMS would need to wait for
the March 1 applications to be submitted before beginning the process
of awarding slots anyway.
Response: While we agree with the commenters that more time is
needed by hospitals after November 1, 2010, to review the final
policies, gather documentation, and to submit the applications to CMS,
we do not believe that it is necessary to extend the deadline to March
1, 2011 for all hospitals. Therefore, we are establishing the
application deadline for hospitals requesting slots under section 5503
in this final rule to be Friday, January 21, 2011. However, if a
hospital is notified that it will be audited for purposes of
determining a possible cap reduction, such a hospital would be allowed
to submit an application for additional cap slots by March 1, 2011.
Comment: One commenter urged CMS to reduce its proposed limit of 75
positions allowed for distribution to a single hospital in order to
create opportunity for more institutions and more geographically
diverse locations to meet requirements. The commenter

[[Page 72175]]

noted that it is highly likely that many of these positions would be
used to sustain existing positions and, therefore, not meet the intent
of the overall legislation. Additionally, the availability of positions
in the environment must also be approved by the accrediting body that
will have to evaluate the overall availability of teaching experiences
and the impact on existing programs and existing complements of
residents.
Response: As described in the August 3, 2010 proposed rule (75 FR
46390), section 5503 of the Affordable Care Act, which added a new
section 1886(h)(8)(F) to the Act, specifically provides that a hospital
may not receive more than 75 additional FTE slots under the section
5503 redistribution for direct GME and for IME, respectively.
Therefore, a reduction to the limit of 75 positions for distribution to
a single hospital is not authorized under the Affordable Care Act.
Comment: Another commenter noted that in order to be considered for
increases to its FTE resident cap, a hospital must submit, as part of
its application, its FTE resident counts and FTE resident caps for
direct GME and IME in the most recent as-filed cost report. The
commenter stated that if these worksheets are not audited, or at least
reviewed by the Medicare contractor, there is no assurance of the
accuracy of the number of FTE residents claimed by the provider. For
consistency and accuracy purposes, the commenter recommended that the
same source documents be used for determinations of both the increase
and decrease in FTE caps, that is, a hospital's most recent cost report
ending on or before March 23, 2010, which is subject to audit or desk
review by the Medicare contractor.
Response: We agree that to the extent possible, the documentation
used to determine whether a hospital's FTE resident caps will be
reduced should be the same documentation used to determine whether a
hospital qualifies for an increase in its FTE resident caps. As we
stated above in response to a comment in section XXI.D.8.a. of this
final rule, we believe that the cost reporting periods used to
determine whether a hospital will receive a cap reduction must, at the
very least, have been submitted to the Medicare contractor as of March
23, 2010. Furthermore, we do not believe it would be appropriate to
include in the determination of which cost reports are used to
establish a hospital's reference resident level, those cost reporting
periods that occurred at the time the Affordable Care Act was in
development. Rather, the cost reporting period used to assess the
number of residents a hospital is training for the purpose of
determining if it qualifies for an increase to its FTE resident cap
should be a cost reporting period that reflects a number of FTE
residents that a hospital is accustomed to training, not a number of
FTE residents that is based on a hospital's attempt to meet the
Demonstrated Likelihood Criteria or the 3-year primary care average
requirement under section 1886(h)(8)(B)(ii)(I) of the Act. Therefore,
we are clarifying in this final rule that the cost report data to be
submitted with a hospital's application for additional slots and the
cost reports used to establish a hospital's 3-year primary care average
under section 1886(h)(8)(B)(ii)(I) of the Act must also be submitted to
the Medicare contractor by March 23, 2010.
13. CMS Evaluation of Applications for Increases in FTE Resident Caps
In the August 3, 2010 proposed rule (75 FR 46400), we proposed to
require hospitals to submit, with their applications for increases in
their FTE resident caps, a completed copy of the CMS Evaluation Form.
The CMS Evaluation Form will ask the hospital to check off which of the
``demonstrated likelihood'' criteria (described above in section
XXI.D.11. of this preamble) the hospital meets. We also proposed to
require that the hospital provide the documentation that supports the
``demonstrated likelihood'' criteria it has checked off on the
Evaluation Form.
Assuming that the applicant hospital meets the ``demonstrated
likelihood'' requirement, we proposed that the applicant hospital would
indicate on the CMS Evaluation Form the category(ies) for which it
believes it will qualify. We would use this indication to prioritize
the applications. This prioritization is derived from sections
1886(h)(8)(C), (D), and (E) of the Act, as added by section 5503 of the
Affordable Care Act. These sections established considerations in
redistribution and a priority order that must be applied in determining
the hospitals that will receive increases in their FTE caps. As
discussed above, the first consideration in redistribution is that the
applicant hospital must demonstrate the likelihood of filling the slots
requested within the first three cost reporting periods beginning on or
after July 1, 2011. Another consideration is ``whether the hospital has
an accredited rural training track'' (as described in section
1886(h)(4)(H)(iv) of the Act). Accordingly, we proposed that, in
distinguishing between hospitals within a priority category, and
determining which hospitals will receive FTE cap increases, we would
give preference to a hospital that has an accredited rural training
track over a hospital that does not have such a program. Under section
1886(h)(4)(H)(iv) of the Act, as implemented in the regulations at
Sec. 413.79(k), an urban hospital that operates a rural training track
(often known as separately accredited 1-2 tracks in family medicine)
wherein residents rotate at the urban hospital for less than one-half
of the duration of the program, and to a rural area for the remainder
of the program, the urban hospital may include in its FTE count the FTE
resident time spent training in the rural track, even if that time
would be in excess of the hospital's FTE cap. We note that if an urban
hospital is interested in starting a new rural training track, it need
not apply for additional slots under section 1886(h)(8)(B)(i) of the
Act. Rather, under the existing regulations at Sec. 413.79(k), the
urban hospital may receive an increase to its FTE cap to reflect FTE
residents training in the rural track. (For more details on rural
training tracks, and the direct GME and IME payment rules associated
with them, we refer readers to 66 FR 39902, August 1, 2001, and 68 FR
45454, August 1, 2003.) However, because section 1886(h)(8)(C) of the
Act states that the Secretary shall take into account ``whether the
hospital has an accredited rural training track'' (emphasis added), we
proposed that an applying urban hospital that either has a separately
accredited rural training track, or can document that it will have a
separately accredited rural training track as of July 1, 2011, may
receive preference over a hospital that, all other things being equal,
does not and will not have a rural training track by that date. We
noted that section 1886(h)(8)(C) of the Act does not specify that a
hospital must be applying for additional slots in order to expand its
existing rural training track in order to qualify to receive additional
slots. Rather, section 1886(h)(8)(C) of the Act merely states that
``the Secretary shall take into account * * * whether the hospital has
an accredited rural training track (as described in paragraph
(4)(H)(iv))'' (emphasis added). That is, the fact that an urban
hospital already has (or, under the proposed rule and this final rule,
would have as of July 1, 2011) a separately accredited rural training
track is sufficient to give preference in redistribution to such a
hospital.
Section 1886(h)(8)(D) of the Act instructs the Secretary to
``distribute the

[[Page 72176]]

increase to hospitals based on the following factors'':
Whether the hospital is located in a State with a
resident-to-population ratio in the lowest quartile (as determined by
the Secretary) (section 1886(h)(8)(D)(i) of the Act). In order to
determine which States are in the lowest quartile for resident-to-
population ratios, in the August 3, 2010 proposed rule (75 FR 46400),
we proposed to use three sources of data, and the latest data available
for each of those three sources. First, we proposed to determine the
number of allopathic residents in each State by using data from the
ACGME's Data Resource Book for the Academic Year 2008-2009. As of
publication of the proposed rule, this was the most recent data
available from the ACGME. However, after publication of the proposed
rule, the ACGME released its 2009-2010 Data Resource Book. Therefore,
in this final rule, we are using data from the ACGME's Data Resource
Book for the Academic Year 2009-2010. In this book, which is available
free of charge on the ACGME's Web site, is a table titled ``Number of
Residents, by State'' (http://www.acgme.org/acWebsite/databook/2009-2010_ACGME_Data_Resource_Book.pdf). This table lists each State
(including Puerto Rico), and includes a column called ``Total
Residents.'' We are using the data from this column called ``Total
Residents'' as part of the numerator to determine the resident-to-
population ratio in each state. However, because these data only
include residents enrolled in ACGME-accredited programs, we also
proposed to add to these numbers the number of residents enrolled in
AOA-accredited programs. We proposed to access data on the number of
osteopathic residents in each State from the AOA, which was provided to
CMS upon special request. These data are what is generally published in
the AOA's Journal of the American Osteopathic Association (JAOA). For
the proposed rule, we requested and received data from the AOA for the
2008-2009 academic year as well. Although these data were not to be
published in the JAOA for some months, we received permission from the
AOA to publish it in the proposed rule. For the final rule, we
requested and received data from the AOA for the number of osteopathic
residents in each State for the 2009-2010 academic year. These data are
also presented in the form of a table listing each State (there are no
osteopathic programs in Puerto Rico), and a column for the total number
of residents in each State. Therefore, we proposed that the numerator
for the ratio for each State would be the sum of the residents from the
2008-2009 ACGME's table for that State, and the residents from the
2008-2009 AOA table for that State. However, for this final rule, the
numerator for the ratio for each State is the sum of the residents from
the 2009-2010 ACGME's table for that State, and the residents from the
2009-2010 AOA table for that State.
We understand that, although graduates of allopathic medical
schools are precluded from training in AOA-accredited programs, there
is no similar prohibition on osteopathic residents training in
allopathic programs. Because there are osteopathic residents who enroll
and participate in allopathic ACGME-accredited programs, we want to
ensure that there is no double counting of residents in the numerator.
We have learned from the ACGME that their data in the ACGME Data
Resource Book include osteopaths, but only those training in ACGME-
accredited programs. The AOA data do not include osteopathic residents
who are training in ACGME-accredited programs; AOA data only include
osteopathic residents enrolled and training in AOA-accredited programs.
Therefore, we do not believe there is a concern about double counting
with respect to osteopathic residents training in allopathic programs.
However, we also are aware that there are some programs that are dually
accredited by the ACMGE, and the AOA, and residents completing these
programs are able to sit for both the ABMS and the AOA board
examination in that specialty. We understand that the ACGME will
include a resident in its resident count as long as that resident is
training in an ACGME-accredited program, even if that program is dually
accredited. The AOA has the same practice of including in its total
count of residents those who are in AOA-accredited programs, even if it
is a dual eligible program. Therefore, there is some degree of
unavoidable double counting of residents in the total count. However,
we understand that, as of the publication of the proposed rule, the
number of residents in dually-accredited programs was less than 500. We
have not been able to receive an updated count of residents in dually
accredited programs for this final rule. However, because 500 is only
0.43 percent of the combined ACGME and AOA 2009-2010 resident count of
117,191, we believe the effect of counting these residents by both the
ACGME and AOA is negligible and would not harm the integrity of the
data.
In the August 3, 2010 proposed rule (75 FR 46401), we proposed to
define ``resident'' in ``resident-to-population'' ratio as actual
individual residents, as opposed to the FTE resident figures that are
used for Medicare payment purposes. We believe it is appropriate to
define ``residents'' as actual individual residents in this instance
because the intent behind this criterion is to identify those States
that have low numbers of physicians-in-training in relation to the
general population for which those physicians-in-training are providing
health care services. An ``FTE'' measure, which is the measure used for
most Medicare payment purposes, does not accurately reflect the number
of individual physicians-in-training providing services in a State.
With regard to State population data to be used in the denominator
of each State's resident-to-population ratio, we again proposed to use
the latest available data on State populations. We proposed to use data
from the Census Bureau that is from the 2000 Census, but that have been
updated with the most recent data available as of July 1, 2009. We
accessed these data from the following Web site: http://www.census.gov/popest/states/states.html. On this Web page, the following data can be
found: State population datasets--Population, population change and
estimated components of population change: April 1, 2000 to July 1,
2009 (NST-EST2009-alldata). We proposed to use the CSV file at this
link. Specifically, we proposed to use the data for State population
from the column called POPESTIMATE2009 (Column Q of the CSV
spreadsheet). Therefore, we proposed to determine each State's
resident-to-population ratio, and specifically those States that fall
within the lowest quartile by using the sum of the 2008-2009 ACGME and
AOA resident data for each State, as described above, in the numerator
for each State, and by using the population data updated as of July 1,
2009, in the denominator for each State from the column called
POPESTIMATE2009 in Column Q of the CSV spreadsheet. The following table
has been updated for this final rule using 2009-2010 ACGME and AOA
resident data. It lists each State, and is sorted by resident-to-
population ratio from lowest to highest. The first 13 shaded States are
the States in the lowest quartile.
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Based on the proposed data, the following States fall within the
lowest quartile for resident-to-population ratios: Montana, Idaho,
Alaska, Wyoming, Nevada, South Dakota, North Dakota, Mississippi,
Florida, Puerto

[[Page 72179]]

Rico, Indiana, Arizona, and Georgia. Based on the revised finalized
data, although the same States fall within the lowest quartile for
resident-to-population ratios, the order changed somewhat as follows:
Montana, Idaho, Alaska, Wyoming, South Dakota, Nevada, North Dakota,
Mississippi, Indiana, Puerto Rico, Florida, Georgia, and Arizona.
Accordingly, we proposed that, consistent with section 1886(h)(8)(D)(i)
of the Act, a hospital located in any one of these States that applies
for an increase to its FTE cap under section 1886(h)(8)(B) of the Act
would receive preference over a hospital that is applying for an
increase to its cap that is not located in one of these States.
Comment: One commenter requested that CMS use the most recent
resident data from the 2009-2010 academic year in the calculation of
the resident-to-population ratios. The commenter noted that since the
academic year 2008-2009, there are 80 additional accredited programs
and 1,904 additional residents according to the ACGME's web site.
Response: Since the CY 2011 OPPS/ASC proposed rule went on display
at the Federal Register on July 2, 2010, the ACGME has posted the 2009-
2010 Data Resource Book. As we explain in the preamble to this final
rule, this book, which is available free of charge on the ACGME's Web
site, has a table titled ``Number of Residents, by State'' (http://www.acgme.org/acWebsite/databook/2009-2010_ACGME_Data_Resource_Book.pdf). This table lists each State (including Puerto Rico), and
includes a column called ``Total Residents.'' We are using the data
from this column called ``Total Residents'' as part of the numerator to
determine the resident-to-population ratio in each state.
Whether the hospital is located in a State, a territory of
the United States, or the District of Columbia that is among the top 10
States, territories, or Districts in terms of (1) the total population
of the State, territory, or District living in an area designated
(under such section 332(a)(1)(A)) as a health professional shortage
area (as of the date of enactment of this paragraph); to (2) the total
population of the State, territory, or District (as determined by the
Secretary based on the most recent available population data published
by the Bureau of the Census).
In order to determine which applying hospitals fall within this
priority category, we need to determine the total population living in
a HPSA in each State, territory, or District computed ``as of the date
of enactment,'' and we need to determine the total population of each
State, territory, or District ``(as determined by the Secretary based
on the most recent available population data published by the Bureau of
the Census).'' ``Territory'' is referring to Puerto Rico, which
currently has teaching hospitals, and ``District of Columbia'' refers
to Washington, DC. For ease of reference, and consistent with the
definition of ``State'' at section 210 of the Act, we proposed to refer
to ``State, territory, or District'' simply as ``State.'' We have
received data on the population of each HPSA from the Health Resources
and Services Administration's (HRSA) Geospatial Warehouse. HRSA's
Shortage Designation Branch develops shortage designation criteria and
uses them to decide whether or not a geographic area, or population
group, is a HPSA. HRSA updates HPSA statistics on its Web site on a
daily basis, and we have requested and received the data reflective of
the ``date of enactment''; that is, March 23, 2010. This data, as of
this date, remains the same for this final rule. Because HRSA updates
the data on its Web site daily, the data as of March 23, 2010 are no
longer available on its Web site. (General information on HPSAs and
current data can be found on HRSA's Web site at: http://bhpr.hrsa.gov/shortage/).
HRSA designates three different kinds of HPSAs: Primary Care HPSAs,
Dental HPSAs, and Mental Health HPSAs. While many areas may only be
designated as one of these kinds of HPSAs, some areas may be designated
as two or three of these kinds of areas. Thus, if we were to add the
population in each State that is in a Primary Care HPSA, a Dental HPSA,
and a Mental Health HPSA, we would be duplicating the HPSA populations
in each State. Therefore, we proposed to use only the population in
each State that is in a Primary Care HPSA. We believe that it is
appropriate to choose to recognize only the Primary Care HPSAs in each
State for the purpose of implementing section 5503 because section 5503
is intended to encourage an increase in the number of primary care
residents that are currently being trained in hospitals, as is
evidenced by the ``Requirements'' in section 1886(h)(8)(B)(ii) of the
Act, as added by section 5503(a)(4), which requires hospitals that
receive additional slots under this section to maintain a certain
average number of primary care resident positions, and that not less
than 75 percent of the redistributed positions must be awarded for
slots used in a primary care or a general surgery residency.
With respect to data on each State's total population ``as
determined by the Secretary based on the most recent available
population data published by the Bureau of the Census,'' we proposed to
use the same data that we are using under the first priority category
with regard to determining resident-to-population ratios, as explained
above. These data, which are the most recent available, were last
updated on July 1, 2009. As explained above, we accessed these data
from the following Web site: http://www.census.gov/popest/states/states.html. On this Web page, the following data can be found: State
population datasets--population change and estimated components of
population change: April 1, 2000 to July 1, 2009 (NST-EST2009-alldata).
We proposed to use the CSV file at this link. Specifically, we proposed
to use the data for State population from the column called
POPESTIMATE2009 (Column Q of the CSV spreadsheet).
The following table lists each State, its Primary Care HPSA
population-to-State population ratio from highest to lowest, and
whether that State falls within the top 10 States for such Primary Care
HPSA population-to-State population ratios:
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Whether the hospital is located in a rural area (as
defined in section 1886(d)(2)(D)(ii) of the Act). Section
1886(d)(2)(D)(ii) of the Act defines a rural area as any area outside a
MSA. Under the existing regulations at Sec. 412.62(f)(ii), an ``urban
area'' means: (1) A Metropolitan Statistical Area (MSA) or New England
County Metropolitan Area (NECMA); or (2) the following New England
counties: Litchfield County, Connecticut; York County, Maine; Sagadahoc
County, Maine; Merrimack County, New Hampshire; and Newport County,
Rhode Island. Under existing Sec. 412.62(f)(iii), a ``rural area''
means any area outside an urban area. Thus, for purposes of the
amendments made by section 5503, in the August 3, 2010 proposed rule
(75 FR 46406), we proposed that any hospital located in an area that is
not in a MSA is a rural hospital, regardless of any reclassification
under Sec. 412.102 or Sec. 412.103. We also pointed out that, since
FY 2005, we no longer use the term MSA, but instead we use CBSA, or
Core-Based Statistical Area. There are urban CBSAs, and rural CBSAs are
areas outside of an urban CBSA. We note that this definition of
``rural'' is consistent with our policy concerning designation of wage
index areas.
We also proposed that, in determining which applicant hospitals
receive priority within the priority category of hospitals located in a
State in the lowest quartile for resident-to-population ratios that
hospitals in a State that is ranked lower in the quartile (with number
one being the lowest) would receive preference over hospitals in states
that are still within the quartile, but ranked higher. For example, all
other things being equal, a hospital located in Montana would receive
preference over a hospital located in Idaho, while this hospital would
receive preference over a hospital located in Alaska, and so on.
Similarly, we proposed that, in determining which applicant hospitals
receive priority within the priority category of hospitals located in a
State that is among the top 10 of these areas in terms of the ratio of
Primary Care HPSA population to total population, hospitals in an area
that is ranked higher in the top 10 (with number 1 being highest and
number 10 being lowest) would receive preference over hospitals in an
area that are still within the top 10, but ranked lower. For example,
all other things being equal, a hospital located in Louisiana would
receive preference over a hospital located in Mississippi, while a
hospital in Mississippi would receive preference over a hospital
located in Puerto Rico, and so on.
Comment: A couple of commenters urged CMS to consider expanding the
slot redistribution eligibility to all States, not just those hospitals
in States with a low resident-to-population ratio or high proportion of
population living in a HPSA or in a rural area. The commenters stated
that allowing all states to be eligible will be a faster way to
increase the physician supply. The commenters believed that restricting
redistribution eligibility would deny training opportunities to
qualified residents that may be training at hospitals that are already
over their caps. Other commenters also urged CMS to consider a more
equitable method to redistribute unused slots to hospitals over their
caps.
Response: An action to allow hospitals in all states to be eligible
for redistributed slots under section 5503 is not authorized under the
Affordable Care Act. As described in the August 3, 2010 proposed rule
(75 FR 46390), section 5503 of the Affordable Care Act, which added a
new section 1886(h)(8)(E) to the Act, specifically directs the
Secretary to distribute 70 percent of the resident slots to hospitals
located in States with resident-to-population ratios in the lowest
quartile and 30 percent to hospitals located in a State, a territory of
the United States, or the District of Columbia that are among the top
10 States, territories, or Districts in terms of the ratio of the total
population living in an area designated as a health professional
shortage area as of March 23, 2010, to the total population, and to
hospitals located in rural areas. Therefore, only those hospitals in
States, territories, or

[[Page 72182]]

Districts that fall into the aforementioned categories will be
considered for redistributions under section 5503.
Comment: One commenter asked CMS to define the cities of Anchorage
and Fairbanks, Alaska as rural. The commenter noted that even though
the majority of Alaskans live in Anchorage, Fairbanks, or the Mat-Su
(57%), most hospitals outside of Anchorage and Fairbanks are not large
enough to meet basic requirements for accreditation by the ACGME.
Therefore, Anchorage and Fairbanks should be added to the Priority
Category and Evaluation Criteria list of rural areas.
Response: We cannot accommodate the commenter's request to classify
Anchorage and Fairbanks as rural areas because the reference to rural
areas under section 5503 regarding giving preference to hospitals
located in rural areas is to subsection (d)(2)(D)(ii) of the Act.
Section 1886(d)(2)(D)(ii) of the Act defines a rural area as any area
outside a MSA. Under the existing regulations at Sec. 412.62(f)(ii),
an ``urban area'' means, in part, a MSA. Under existing Sec.
412.62(f)(iii), a ``rural area'' means any area outside an urban area.
Thus, for purposes of the amendments made by section 5503, any hospital
located in an area that is not in a MSA is a rural hospital, regardless
of any reclassification under Sec. 412.102 or Sec. 412.103. We also
pointed out in the proposed rule that, since FY 2005, we no longer use
the term MSA, but instead we use CBSA, or Core-Based Statistical Area
(75 FR 46406). Further, we note that Alaska is already given preference
under section 5503 since it is one of the states that is in the lowest
quartile for resident-to-population ratios.
As we described above, we proposed that an applicant hospital
indicate on the CMS Evaluation Form the category(ies) for which it
believes it will qualify, and we will use this indication to prioritize
the applications. Each of the categories (described below) was derived
from the priorities established by section 1886(h)(8)(D) of the Act, as
added by section 5503 of the Affordable Care Act. We proposed to use
the following categories to determine the order in which hospitals
would be eligible to receive increases in their FTE resident caps:
First Level Priority Category: The hospital is in a State
whose resident-to-population ratio is within the lowest quartile, AND
the hospital is in a State whose Primary Care HPSA to population ratio
is in the top 10 States, AND the hospital is located in a rural area.
Second Level Priority Category: The hospital is in a State
whose resident-to-population ratio is within the lowest quartile, and
is either in a State whose Primary Care HPSA to population ratio is in
the top 10 States, or it is located in a rural area, or is an urban
hospital and has, or will have as of July 1, 2011 (we note the proposed
rule incorrectly stated 2010), a rural training track.
Third Level Priority Category: The hospital is in a State
whose resident-to-population ratio is within the lowest quartile.
Fourth Level Priority Category: The hospital is in a State
whose Primary Care HPSA to population ratio is in the top 10 States,
and either the hospital is located in a rural area or the hospital is
an urban hospital and has, or will have as of July 1, 2011 (we note the
proposed rule incorrectly stated 2010), a rural training track.
Fifth Level Priority Category: The hospital is in a State
whose Primary Care HPSA to population ratio is in the top 10 States, or
the hospital is located in a rural area.
We believe it is appropriate to establish priority level categories
based on the fact that some hospitals that apply for the additional
resident slots may fit into more than one of the three statutory
priority categories listed in section 1886(h)(8)(D) of the Act.
Therefore, we proposed to give consideration first to those hospitals
that meet more than one of the statutory priority categories over those
hospitals that meet only one of the statutory priorities. We further
proposed that a hospital that is in a State whose resident-to-
population ratio is within the lowest quartile would receive priority
over a hospital that is not located in one of these States. We believe
this is consistent with the direction established at section
1886(h)(8)(E)(i) of the Act which specifies that the Secretary shall
reserve 70 percent of all positions available for distribution for
hospitals in a State whose resident-to-population ratio is within the
lowest quartile. Only 30 percent of the positions are to be distributed
to hospitals in States whose Primary Care HPSA to population ratio is
in the top 10 States, and hospitals located in rural areas. In
addition, as discussed above, the first consideration in redistribution
under section 1886(h)(8)(C) of the Act is that the applicant hospital
must demonstrate the likelihood of filling the slots requested within
the first three cost reporting periods beginning on or after July 1,
2011. The second consideration is ``whether the hospital has an
accredited rural training track'' (as described in section
1886(h)(4)(H)(iv) of the Act). Accordingly, we proposed that, in
distinguishing between hospitals within priority categories, and in
determining which hospitals qualify to receive additional slots, we
would give preference to a hospital that has an accredited rural
training track as compared to a hospital that does not have such a
program.
Because section 1886(h)(8)(E) of the Act specifies that 70 percent
of the slots are to be reserved for hospitals that are in a State whose
resident-to-population ratio is within the lowest quartile, and 30
percent of the positions are to be reserved for hospitals in States
whose Primary Care HPSA to population ratio is in the top 10 States,
and hospitals located in rural areas, we proposed that no slots would
be given to hospitals that do not fit within either of these
categories.
Comment: Some commenters reflected on the method CMS proposed to
allocate the slots, in which there would be a single ``redistribution
pool'', out of which 70 percent of the slots will first be awarded to
hospitals in Priority Categories 1, 2, and 3, with the remaining 30
percent of the slots being awarded to hospitals in Priority Categories
4 and 5. The commenters further noticed that hospitals that qualify for
slots from both the ``70-percent pool'' and the ``30-percent pool''
would be awarded slots first, with slots being awarded to these
hospitals from only the ``70-percent pool.'' The commenters believed
that hospitals in States further down the low resident-to-population
list should ``not have their chances of being awarded slots unduly
diminished by hospitals that qualify under both categories.'' The
commenters believed it is more equitable to allocate slots to hospitals
that qualify for both pools by prorating the number of slots awarded
between both pools. The commenters included an example where, for a
rural hospital in a State on the low resident-to-population list that
is awarded 10 slots through the redistribution program, 70 percent, or
7 slots, would come from the ``70-percent pool'' while 30 percent, or 3
slots would come from the ``30-percent pool.'' The commenters believed
that ``this result is more easily achieved with two distinct pools of
slots, but we defer to CMS as to how to implement the mechanics of
prorating.''
One commenter suggested that CMS should review and modify its
complex prioritization criteria to ensure that 70 percent of the slots
go to hospitals in States with low resident-to-population ratios. The
commenter noted that under the priority criteria that CMS proposed,

[[Page 72183]]

it is possible that a hospital located in a lowest quartile resident-
to-population State would not receive any slots. The commenter argued
that this was not the intent of Congress and that CMS should develop a
process that ensures that all hospitals in the lowest quartile
resident-to-population States that apply and meet the demonstrated
likelihood criteria receive at least some caps through the
redistribution process.
Response: On page 46409 of the August 3, 2010 proposed rule, we
discussed the scenario where a hospital could qualify to receive slots
from both the ``70-percent pool'' and the ``30-percent pool.'' We
stated that we considered a ``possible scenario that could occur with
respect to hospitals that fall into the Second Level Priority Category:
The hospital is in a State whose resident-to-population ratio is within
the lowest quartile, and is either in a State whose Primary Care HPSA
to population ratio is in the top 10 States, or it is located in a
rural area, or is an urban hospital and has or will have as of July 1,
2011, a rural training track. Because a hospital in this second level
priority category is located both in a State whose resident-to-
population ratio is within the lowest quartile, and is either in a
State whose Primary Care HPSA to population ratio is in the top 10
States, or it is located in a rural area, we believe that its request
for additional slots must first be fulfilled from the ``70-percent
pool.'' However, if there are insufficient slots in the ``70-percent
pool'' to satisfy the requests of all otherwise qualified applicants in
the Second Level Priority Category, then, rather than immediately
prorating the remaining slots in the ``70-percent pool'' among the
applicable hospitals in the second level priority category, we proposed
to draw from the ``30-percent pool'' to grant the full FTE cap
increases (as applicable) to qualifying hospitals in the second level
priority category.''
The commenters raise a fair point, in that hospitals that qualify
to fit into either the ``70-percent pool'' or the ``30-percent pool''
(but not both) should not have their chances of receiving their fair
share of slots from the respective pools diminished by hospitals that
fall into priority categories qualifying for slots from both pools.
Section 5503 essentially requires that two distinct pools of slots be
created; one for hospitals located in States that are in the lowest
quartile for resident-to-population ratios, and one for hospitals
located in States that are the top 10 States for Primary Care HPSA to
population ratios, or for rural hospitals. We have reconsidered our
proposed method described above, which ranks a hospital that is in a
State whose resident-to-population ratio is within the lowest quartile,
and the hospital is located in a State whose Primary Care HPSA to
population ratio is in the top 10 States, and/ory the hospital is
rural, above a hospital that is only located in a State whose resident-
to-population ratio is within the lowest quartile. We realize that
these ``doubled'' Priority Categories allow for the possibility that a
hospital located only in States whose resident-to-population ratios are
in the lowest quartile may have its chances of receiving slots
diminished by hospitals in States that fall within both priority
categories. Therefore, in this final rule, we are reducing the number
and revising the Priority Categories as follows:
First Level Priority Category: The hospital is in a State
whose resident-to-population ratio is within the lowest quartile, AND
it is an urban hospital that has, or will have as of July 1, 2011, a
rural training track.
Second Level Priority Category: The hospital is in a State
whose resident-to-population ratio is within the lowest quartile.
Third Level Priority Category: The hospital is in a State
whose Primary Care HPSA to population ratio is in the top 10 States,
AND the hospital is an urban hospital that has, or will have as of July
1, 2011, a rural training track.
Fourth Level Priority Category: The hospital is in a State
whose Primary Care HPSA to population ratio is in the top 10 States, OR
the hospital is located in a rural area.
Priority Level Categories 1 and 2 are for distributing slots in the
70-percent pool, and Priority Level Categories 3 and 4 are for
distributing slots in the 30-percent pool. With regard to a hospital
that is located in a State that falls into both priority categories,
such a hospital's application would be evaluated first based on its
Evaluation Criteria within the context of the First and Second Level
Priority Categories, and if there are not enough slots left in the 70-
percent pool to satisfy the hospital's request, we believe the hospital
must be allowed to receive the remainder of its otherwise deserved
slots from the 30-percent pool, based on its Evaluation Criteria within
the context of the Third and Fourth Level Priority Categories. In
distributing the slots from both the 70-percent and the 30-percent
pools, we would be sure to do so in a way to ensure that a hospital
that falls into both priority categories should not be at a greater
disadvantage than a hospital that only is in a State that is in the
lowest quartile for resident-to-population ratios.
We are also finalizing our proposal that, in determining which
applicant hospitals receive priority within the priority category of
hospitals located in a State in the lowest quartile for resident-to-
population ratios that hospitals in a State that is ranked lower in the
quartile (with number one being the lowest) would receive preference
over hospitals in States that are still within the quartile, but ranked
higher (75 FR 46406). For example, all other things being equal, a
hospital located in Montana would receive preference over a hospital
located in Idaho, while this hospital would receive preference over a
hospital located in Alaska, and so on. Similarly, we are finalizing our
proposal that, in determining which applicant hospitals receive
priority within the priority category of hospitals located in a State
that is among the top 10 of these areas in terms of the ratio of
Primary Care HPSA population to total population, hospitals in an area
that is ranked higher in the top 10 (with number 1 being highest and
number 10 being lowest) would receive preference over hospitals in an
area that are still within the top 10, but ranked lower. For example,
all other things being equal, a hospital located in Louisiana would
receive preference over a hospital located in Mississippi, while a
hospital in Mississippi would receive preference over a hospital
located in Puerto Rico, and so on.
Comment: One commenter stated that the ``30-percent pool'' must be
maintained for distribution of the resident FTE cap slots to rural
hospitals as described in section 1886(h)(8)(D)(iii) of the Act. The
commenter asserted that ``to the extent that this proposal were to
diminish the 30-percent pool to the degree that an eligible rural
teaching hospital that is not located in a State whose resident-to-
population ratio is in the lowest quartile would be contrary to the
intent of Congress in establishing the 30-percent pool for hospitals
that include rural teaching hospitals.'' The commenter stated that the
Secretary must interpret section 5503 of the Affordable Care Act to
reserve some slots from the `30-percent pool' for rural teaching
hospitals, that is, hospitals that are rural hospitals but may not also
meet either of the other preference criteria at sections
1886(h)(8)(D)(i) and 1886(h)(8)(D)(ii) of the Act.
Response: As we stated in response to a previous comment, we agree
that hospitals within States whose resident-to-population ratios are in
the lowest quartile should receive 70 percent of the available slots,
while hospitals located in States whose Primary Care HPSA to population
ratio is in the top 10 States,

[[Page 72184]]

or hospitals located in rural areas should receive 30 percent of the
available slots. Thus, the commenter need not be concerned that the
chances of a rural hospital receiving slots from the `30-percent pool'
would be diminished by those slots being diverted to a hospital that is
located in a State whose resident-to-population ratio is in the lowest
quartile. However, we disagree with the commenter that the Secretary
``must interpret section 5503 of the Affordable Care Act to reserve
some slots from the ``30-percent pool'' for rural teaching hospitals''
that may not also be located in States with the lowest resident-to-
population ratios or States in the top 10 for Primary Care HPSA to
population ratios. We note that Congress intentionally placed hospitals
located in rural areas and in States in the top 10 for Primary Care
HPSA to population ratios on equal footing, by specifying clearly that
hospitals in both these categories qualify for 30 percent of the
redistributed slots. Therefore, all other things being equal, rural
hospitals that fit within the final Fourth Level Priority Category,
would receive equal preference with hospitals in States whose Primary
Care HPSA to population ratio is in the top 10 States. The hospitals,
both urban and rural, that fall within this Fourth Level Priority
Category would be ranked based on the scores they receive on the
applicable Evaluation Criteria, with a higher scoring applicant
receiving slots before a lower scoring applicant.
Comment: One commenter stated that section 5503 must be interpreted
in a way that gives preference to hospitals located in rural areas that
sponsor training programs in the same way as hospitals that have an
accredited rural track. This commenter stated that even though it may
be less common for a rural hospital to be large and sophisticated
enough to support or sponsor teaching programs, these rural hospitals
should be eligible for preference under section 1886(h)(8)(C) of the
Act. Further, the commenter asserted that a training program located at
a teaching hospital in a rural area is even more ``rural'' than a rural
track training program because the overwhelming majority of the
training takes place in a rural area, therefore it should meet the
second redistribution consideration.
Response: We understand that rural hospitals that engage in GME
activities, whether they sponsor those activities directly, or serve as
a training site for a program sponsored by another institution, provide
valuable health care services to underserved areas. However, we do not
believe it is necessary to give additional preference to rural
hospitals, above that which is already provided for by section 5503.
Section 1886(h)(8)(D)(iii) already provides that hospitals located in
rural areas should receive some part of the ``30-percent pool.'' This
designation provides rural hospitals with a significant advantage for
receiving redistributed slots relative to other hospitals. We also note
that we proposed an evaluation criterion, which we are finalizing, that
provides a point for rural hospitals that serve as a training site for
a rural training track program. Therefore, we do not believe it is
necessary to modify the priority categories to give additional
preference to rural hospitals that serve as training sites for rural
training tracks (which are sponsored by urban hospitals).
After consideration of the public comments we received, in this
final rule, we are reducing the number of Priority Categories from five
to four, and we are also significantly revising them, as discussed
above. We are also finalizing our proposal that, in determining which
applicant hospitals receive priority within the priority category of
hospitals located in a State in the lowest quartile for resident-to-
population ratios that hospitals in a State that is ranked lower in the
quartile (with number one being the lowest) would receive preference
over hospitals in States that are still within the quartile, but ranked
higher (75 FR 46406). Similarly, we are finalizing our proposal that,
in determining which applicant hospitals receive priority within the
priority category of hospitals located in a State that is among the top
10 of these areas in terms of the ratio of Primary Care HPSA population
to total population, hospitals in an area that is ranked higher in the
top 10 (with number 1 being highest and number 10 being lowest) would
receive preference over hospitals in an area that are still within the
top 10, but ranked lower.
14. CMS Evaluation of Application for Increases in FTE Resident Caps--
Evaluation Criteria
We anticipate that there will be a limited number of slots
available for distribution from the redistribution pool, while there
will be a great demand for those limited slots. Therefore, as we did
when implementing section 422 of Public Law 108-173, in the August 3,
2010 proposed rule (75 FR 46406), we proposed to use additional
criteria (some of which are the same as those used to implement section
422) for evaluating the applications for increases in hospitals' FTE
resident caps within each of the five (we note the proposed rule
incorrectly stated seven) level priority categories described above
under section 5503. (In this final rule, there are four Level Priority
Categories). In addition, in implementing section 5503, we proposed to
assign a certain number of points to each evaluation criterion, such
that some will be worth more points than others. We noted that the
criteria are not mutually exclusive. Hospitals may qualify for a number
of different criteria and their ``score'' is the total point value for
all criteria met by the hospital for each program. Because we
anticipate that the redistribution pool under section 5503 will be
smaller than that under section 422, we believe a more rigorous and
competitive ranking system is appropriate under section 5503. Thus, we
proposed to assign a different amount of points to each Evaluation
Criterion, rather than just assigning one point to each.
Evaluation Criterion One. The hospital that is requesting the
increase in its FTE resident cap(s) has a Medicare inpatient
utilization over 60 percent, as reflected in at least two of the
hospital's last three most recent audited cost reporting periods for
which there is a settled cost report. (5 Points) We have selected 60
percent utilization because we believe that level would identify
hospitals where Medicare beneficiaries will benefit the most from the
presence of a residency program, and, although the applicant hospital
may be urban or rural, it is consistent with the utilization percentage
required for Medicare-dependent, small rural hospitals (MDHs) as
specified in Sec. 412.108. In addition, it identifies a type of
hospital that warrants atypical treatment by the Medicare program
because it is so reliant on Medicare funding.
Evaluation Criterion Two. The hospital will use additional slots to
establish a new geriatrics residency program, or to add residents to an
existing geriatrics program. (5 Points) Section 5503 places a
particular emphasis on increasing the number of residency positions in
primary care specialties, as evidenced by the requirements at sections
1886(h)(8)(B)(ii)(I) and (II) of the Act that a hospital that receives
slots must maintain at least the same number of primary care residents
as it had during the three most recent cost reporting periods prior to
enactment, and that not less than 75 percent of additional positions
received must be in a primary care or a general surgery residency.
Geriatrics is included in the definition of ``primary care resident''
at section 1886(h)(5)(H) of the Act. We believe that, of all the
medical specialties, geriatrics is the one specialty that is

[[Page 72185]]

devoted primarily to the care of the elderly, including Medicare
beneficiaries. As such, we proposed to give special consideration to
geriatric programs to meet the ``fill rate'' criterion for
demonstrating the likelihood of filling FTE resident slots under
section 5503. Geriatrics is a subspecialty of family practice or
internal medicine. We proposed that, for the purposes of meeting the 85
percent fill rate criterion, we would allow hospitals that are starting
a new geriatrics program or expanding an existing geriatric program to
use the fill rate associated with the overall specialty program (rather
than the fill rate for the geriatric subspecialty) to meet this
demonstrated likelihood criterion.
Evaluation Criterion Three. The hospital will use additional slots
to establish a new or expand an existing primary care program with a
demonstrated focus on training residents to pursue careers in primary
care, rather than in nonprimary subspecialties of those primary care
programs (for example, the hospital has an internal medicine program
with a designated primary care track). (3 Points) As stated previously,
section 5503 places a particular emphasis on encouraging the growth in
the number of primary care residents, and specifically, physicians who
practice in primary care, rather than only completing a primary care
residency as a prerequisite for further subspecialty training. Although
this proposed Evaluation Criterion applies to any primary care
specialty, according to the 2010-2011 ACGME Green Book, 30.1 percent of
accredited internal medicine programs offer a primary care track.
However, the ACGME does not have separate standards for or does not
separately accredit primary care tracks from categorical primary care
programs. We understand that, particularly for internal medicine
residents, these tracks are a way for graduating medical students who
are interested in primary care to declare that interest early on, and
in many cases, actually match into an internal medicine program with a
primary care track through the National Residency Match Program. These
residents may pursue their interest in primary care by choosing to do
more electives in ambulatory and community-based settings throughout
the 3 years of primary care training than residents with an interest in
specialization might do. We believe that encouraging growth of these
programs will increase the number of primary care practitioners.
Therefore, we proposed to give special consideration to hospitals that
are applying for additional slots to start or expand a program(s) that
particularly focuses on residents who wish to pursue careers in primary
care, and we would prioritize among hospitals that are applying for
slots in a primary care program(s) accordingly. One example of a
hospital that demonstrates a focus on training residents to pursue
careers in primary care is a hospital that has a primary care track in
internal medicine. We proposed that one way hospitals may qualify for a
point under this evaluation criterion is by documenting that they are
advertising that they have an internal medicine program with a primary
care track in the March 2011 National Residency Match Program.
Evaluation Criterion Four. The hospital will use all the additional
slots to establish a new or expand an existing primary care residency
program or general surgery program. (5 Points) ``Primary care
resident'' is defined at section 1886(h)(5)(H) of the Act as a resident
enrolled in an approved medical residency training program in family
medicine, general internal medicine, general pediatrics, preventive
medicine, geriatric medicine, or osteopathic general practice. Section
1886(h)(8)(B)(ii)(II) of the Act states that not less than 75 percent
of additional positions received must be in a primary care or a general
surgery residency. Therefore, we proposed to award 5 points to a
hospital that goes beyond this minimum requirement, and documents that
it will use all of the slots received for either primary care or
general surgery programs.
Evaluation Criterion Five. The hospital is located in a Primary
Care HPSA. (2 Points) We believe this evaluation criterion is
consistent with the goal of reducing the shortage of primary care
physicians, and increasing access to care in underserved areas.
Evaluation Criterion Six. The hospital is in a rural area (as
defined under section 1886(d)(2)(D)(ii) of the Act) and is or will be
on or after July 1, 2011, a training site for a rural track residency
program (as specified under Sec. 413.79(k)), but is unable to count
all of the FTE residents training in the rural track because the rural
hospital's FTE cap is lower than its unweighted count of allopathic or
osteopathic FTE residents as of portions of cost reporting periods on
or after July 1, 2011. (1 Point) We understand that there are some
rural hospitals that serve as training sites for an urban hospital's
rural training track. The residents in the rural track are counted in
the urban hospital's FTE count, but because the rural training tracks
are not necessarily considered ``new'' medical residency programs
according to the regulations at Sec. 413.79(l), the rural hospital
cannot receive an increase in its FTE caps under Sec. 413.79(e)(3)
and, therefore, cannot receive direct GME and IME payments for training
all or some of those residents. The rural hospital may be training
residents in excess of its FTE resident cap prior to July 1, 2011 and,
therefore, cannot receive IME or direct GME payment for some or all of
the FTEs in the rural training track, or it wishes to expand its rural
training track above its FTE resident cap on or after July 1, 2011. We
proposed this evaluation criterion as a remedy to these scenarios to
allow the rural hospital the possibility of receiving payment for FTEs
in its rural training track.
We proposed to use these criteria to evaluate the applications by
hospitals for increases in their FTE resident caps that fall within
each of the five (we note that the proposed rule incorrectly stated
seven) level priority categories. (In this final rule, there are four
Level Priority Categories). We proposed to place each application in
the appropriate priority level category based on a review of the
information a hospital checks off on the proposed CMS Evaluation Form
for each allopathic and osteopathic specialty program requested by the
applicant hospital, and the corresponding requested FTE cap increase.
We proposed to place all of these evaluation criteria on the CMS
Evaluation Form and to ask the hospital to check off which criteria on
the form apply for each specialty program for which an FTE cap increase
is requested. Based on the evaluation criteria checked off on the form,
we proposed to score each CMS Evaluation Form. The higher-scoring CMS
Evaluation Form(s) for each applicant hospital within each level
priority category would be awarded the FTE resident cap increases
first. It is possible that a hospital may qualify for multiple points
for the same program. For example, if a hospital would be applying for
slots to start a primary care track within an internal medicine
program, and also would be using all of the slots it receives in that
internal medicine program, the hospital may receive points both for
Evaluation Criterion Three and Evaluation Criterion Four. Similarly, if
a hospital would be applying for slots to start or expand a geriatrics
program, and the additional slots would all be used for the geriatrics
program, then the hospital may receive points for both Evaluation
Criterion Two and Evaluation Criterion Four. Further, as specified by
section 1886(h)(8)(E) of the Act, 70 percent of all positions are
reserved to be

[[Page 72186]]

distributed to qualifying hospitals that are in States with resident-
to-population ratios in the lowest quartile, and 30 percent of the
positions are reserved to go to hospitals that are located in States
with HPSA population to State population ratios within the top 10 and
to rural hospitals. As we described above, we proposed to award the cap
increases in the order of the five (we note the proposed rule
incorrectly stated seven) specified level priority categories because,
as a general rule, we believe hospitals that meet more than one of the
statutory priorities should be awarded the increases in their FTE
resident caps first before other hospitals. (In this final rule, there
are four Level Priority Categories). We also believe that hospitals
that meet a higher statutory priority category should receive first
consideration over hospitals that meet lower statutory priorities.
Furthermore, in the case where, for example, Hospital A's application
for a program falls within the Level Priority Category One, but scores
no points on the evaluation criteria on the CMS Evaluation Form for
that program, and Hospital B's application for a program falls within
the Level Priority Category Two, and scored 5 points on the evaluation
criteria on the CMS Evaluation Form for the program, Hospital A would
receive the section 5503 cap increase before Hospital B, because
Hospital A qualified to be in the higher level priority category.
Thus, first level priority category hospitals that score highest on
the evaluation criteria on the CMS Evaluation Form for a particular
specialty program would receive the increases in their FTE resident
caps first. For example, if Hospital D is a hospital that is located in
Idaho, thereby falling within the second level priority category, and
Hospital D checks off on the CMS Evaluation Form that it has a Medicare
utilization of 60 percent (5 points), is using all the slots to expand
a primary care residency program (5 points), and is located in a
Primary Care HPSA (2 points), Hospital D would receive a score of 12
points on the completed CMS Evaluation Form. We proposed that we would
first award FTE cap increases to hospitals whose CMS Evaluation Forms
for a particular program receive the most points (if there are any),
and then to those with successively fewer points within the level
priority category. Hospital D would receive the increase in its FTE
resident cap(s) requested on its application only after all the
hospitals in the first level priority category whose applications
receive 13 or more points are awarded their requests first. We proposed
to proceed through each level priority category accordingly, and only
move on to distribute slots to hospitals in the next priority level
category once all the qualifying applicants in the previous priority
level category have received slots. Once we have distributed 70 percent
of the slots to hospitals within States with resident-to-population
ratios in the lowest quartile in accordance with the First and Second
Level Priority Categories (or awarded increases to all qualified
applicant hospitals located in States with resident-to-population
ratios in the lowest quartile), we proposed to then distribute the
remaining slots to hospitals in the Third and Fourth Level Priority
Categories. Because of this requirement that 70 percent of the slots be
reserved for distribution to hospitals within States with resident-to-
population ratios in the lowest quartile, it is possible that after
first distributing slots to hospitals with the highest scores on their
CMS Evaluation Form, if there are requests for slots by those hospitals
which in the aggregate exceed the 70 percent of slots available, there
may be some remaining qualifying hospitals within the same priority
level category that receive the same score on the CMS Evaluation Form.
Thus, we would have no way of distinguishing among these hospitals of
equal rank. If this situation occurs, we proposed to prorate the
remaining amount of slots in the ``70-percent pool'', and distribute an
equal share of slots to these hospitals of equal rank. If a similar
situation occurs within the ``30-percent pool'', we also proposed to
prorate the remaining amount of slots in the ``30-percent pool'', and
distribute an equal share of slots to hospitals of equal rank.
For example, assume all applicant hospitals in the First Level
Priority Category receive the requested increases in their FTE resident
caps, and that we have awarded cap increases for all the Second Level
Priority Category hospitals that scored 5 or above on their CMS
Evaluation Forms for each residency program. We next evaluate hospital
applications and accompanying CMS Evaluation Forms in the Second Level
Priority Category (The hospital is in a State whose resident-to-
population ratio is within the lowest quartile) with fewer than 5
points and we find that there is only a sufficient number of resident
slots remaining in the estimated ``70-percent pool'' to grant half of
the requests for slots from hospitals that scored 4 points. We proposed
to prorate all of the remaining FTEs among the 4-point CMS Evaluation
Forms and accompanying applications in the Second Level Priority
Category. Thus, after awarding slots to hospitals in the Second Level
Priority Category with at least 5 points, and to hospitals in the First
Level Priority Category, if we could have awarded a total of 200 FTE
slots for direct GME and 185 FTE slots for IME to only 50 percent of
the 4-point CMS Evaluation Forms in the Second Level Priority Category
(at the point that the estimated ``70-percent pool'' of FTE slots is
spent), we proposed to divide all of the 200 FTE slots remaining in the
70-percent pool for direct GME and 185 FTE slots for IME among all of
the 4-point CMS Evaluation Forms and accompanying applications in that
Second Level Priority Category, no matter what level of FTE resident
cap increase was requested on the individual hospital's application,
but not to exceed the number of slots a hospital requested for IME and
direct GME respectively.
We also considered another possible scenario that could occur with
respect to hospitals that fall into the proposed Second Level Priority
Category: The hospital is in a State whose resident-to-population ratio
is within the lowest quartile, and is either in a State whose Primary
Care HPSA to population ratio is in the top 10 States, or it is located
in a rural area, or is an urban hospital and has or will have as of
July 1, 2010, a rural training track. Because a hospital in the
proposed Second Level Priority Category is located both in a State
whose resident-to-population ratio is within the lowest quartile, and
is either in a State whose Primary Care HPSA to population ratio is in
the top 10 States, or it is located in a rural area, we believed that
its request for additional slots must first be fulfilled from the ``70-
percent pool.'' However, if there are insufficient slots in the ``70-
percent pool'' to satisfy the requests of all otherwise qualified
applicants in the Second Level Priority Category, then, rather than
immediately prorating the remaining slots in the ``70-percent pool''
among the applicable hospitals in the proposed Second Level Priority
Category, we proposed to draw from the ``30-percent pool'' to grant the
full FTE cap increases (as applicable) to qualifying hospitals in the
proposed Second Level Priority Category. (We note that the proposed
Second Level Priority Category and its attending policy were changed in
this final rule).
Alternatively, although unlikely, we recognize that the reverse
situation may occur, where there may not be a sufficient number of
qualified applicants or requests for FTEs in order to distribute at
least 70 percent of the

[[Page 72187]]

slots to hospitals located in the 13 States whose resident-to-
population ratios are in the lowest quartile (the First and Second
Level Priority Categories). Should this occur, we proposed to begin
evaluating applications from the next category of qualifying hospitals
(that is, those located in States that are among the top 10 States for
Primary Care HPSA to population ratios, and rural hospitals--the Third
and Fourth Level Priority Categories), and potentially distribute more
than 30 percent of the slots to hospitals in those latter categories.
We recognize the complexity of the proposed evaluation process for
the award of increases in hospital's FTE resident caps under section
1886(h)(8)(B) of the Act. Therefore, we included the following examples
depicting the proposed procedures:
Example 1
Hospital H is an urban hospital located in a State that is in the
lowest quartile for resident-to-population ratios. Hospital H can
demonstrate the likelihood that it will fill the requested five FTEs
resident slots for direct GME and IME for expanding a geriatric program
because it is currently training a number of FTE residents that exceeds
both of its FTE caps, and has attached to its application for the
increase a copy of Hospital H's past three Medicare cost reports (as
filed or audited, whichever is most recent and available), which
documents on Worksheet E, Part A, Worksheet E-3, Part IV, and Worksheet
E-3, Part VI that, according to the resident counts and the FTE
resident caps, Hospital H is training residents in excess of its caps.
Hospital H is also located in a Primary Care HPSA (but is not located
in a State that is among the top 10 States in terms of its Primary Care
HPSA population to State population ratio).
We would evaluate Hospital H's application as follows: Hospital H
is in the Second Level Priority Category (The hospital is in a State
whose resident-to-population ratio is within the lowest quartile), and
receives a score of 12 (expanding a geriatrics program-Evaluation
Criterion Two--5 points, using all slots for a primary care residency
program-Evaluation Criterion Four--5 points, and is located in a
Primary Care HPSA-Evaluation Criterion Five--2 points).
Example 2
Hospital J is a rural hospital located in Montana. Hospital J is a
rotation site for an urban hospital's family practice rural training
track program, but is unable to count all of the FTE residents training
in the rural track because Hospital J's FTE cap is lower than its
unweighted count of allopathic or osteopathic FTE residents as of
portions of cost reporting periods on or after July 1, 2011. Hospital J
wishes to expand the number of FTE residents training in the family
practice rural training track. Hospital J also wishes to serve as a
training site for one pediatrics resident in a pediatrics program that
already exists at the urban hospital (that is, it is not a new
pediatrics program).
Hospital J would need to submit two CMS Evaluation Forms; one for
family practice and another for pediatrics, and we would evaluate each
accordingly. Both requests would put the hospital in the Second Level
Priority Category (The hospital is in a State whose resident-to-
population ratio is within the lowest quartile), and it can demonstrate
the likelihood of filling the slots (because it is already over its FTE
caps based on the family medicine residents it is training in the rural
training track, and together with the urban hospital, it has requested
from the ACGME accreditation to expand the number of family practice
residents training in the rural training track and to receive a
pediatrics resident). For the family practice request, Hospital J would
receive 5 points under Evaluation Criterion Four because all the slots
it is requesting (that is, family practice and pediatrics) are for
primary care programs, and it would receive 1 point under Evaluation
Criterion Six because it is requesting the family practice slots for
its rural training track, for a total of 6 points for the family
practice request. For the pediatrics request, Hospital J would be
placed in the Second Level Priority Category, and receives 5 points
under Evaluation Criterion Four because all the slots it is requesting
(that is, family practice and pediatrics) are for primary care
programs.
Comment: Some commenters objected to the 5 points that CMS proposed
to award to a hospital under Evaluation Criterion One: The hospital
that is requesting the increase in its FTE residents cap(s) has a
Medicare inpatient utilization over 60 percent, as reflected in at
least two of the hospital's last three most recent cost reporting
periods for which there is a settled cost report (5 points). The
commenters urged CMS to reduce the number of points awarded from 5 to
1, asserting that ``CMS pays hospitals their proportionate Medicare
share for their resident training costs, regardless of what that
Medicare share may be, and hospitals with smaller Medicare utilization
numbers have no less need for Medicare support for their residency
programs.'' However, another commenter stated that they are ``wholly
supportive'' of Evaluation Criterion One because it ``gives priority
recognition to hospitals reliant on Medicare funding, and where
beneficiaries will benefit most from an increase in residency slots.''
Commenters also asked that CMS consider determining the 60 percent
share by calculating Medicare inpatients as a share of Medicare and
privately insured patients, or Medicare patients plus Medicaid patients
plus uninsured patients as a share of total patients. The commenter
believed that teaching hospitals that treat a significant number of
Medicaid and uninsured patients should not be put at a disadvantage
under this criterion. The commenter also requested that CMS accept
submitted cost reports (and not just settled cost reports) for this
evaluation criterion, due to the time lag in settling cost reports.
Lastly, commenters asked that CMS clarify that Medicare Advantage
patients may be counted toward a hospital's Medicare inpatient
utilization for purposes of this evaluation criterion.
Response: We proposed and finalized a similar Evaluation Criterion
under section 422 of the MMA and received similar comments (we refer
readers to 69 FR 49150, August 11, 2004). We continue to believe, as we
did then, that an Evaluation Criterion geared to hospitals, urban or
rural, that treat a disproportionately high percentage of Medicare
patients is appropriate because Medicare beneficiaries at these
hospitals will benefit greatly from the presence of a residency
program, and further, these hospitals are typically reliant on Medicare
funding. Therefore, we are not reducing the number of points allotted
to this Criterion from 5 to 1. We also proposed that the determination
of whether a hospital qualifies for this criterion should be made based
on at least two of the hospital's last three most recent audited cost
reporting periods for which there is a settled cost report because this
condition is modeled after the Medicare Dependent Hospital regulations
at Sec. 412.108. We continue to believe that the 60 percent threshold
is appropriate for purposes of establishing priorities under section
5503, based on most recently audited and settled cost reports.
Therefore, we are not adopting the commenters' suggestion to lower the
percentage threshold, or that we accept as-submitted cost reports.
Further, we do not believe it is appropriate to include non-Medicare,
Medicaid, or private payer utilization for purposes of Evaluation
Criterion One. This would

[[Page 72188]]

not be consistent with longstanding regulations regarding the
computation of Medicare utilization, be it for Medicare GME purposes or
otherwise. Finally, we are clarifying that in determining whether a
hospital qualifies under this Evaluation Criterion One, the hospital's
Medicare Advantage patient load may be incorporated into the Part A
patient load (in at least two of the hospital's last three most recent
audited cost reporting periods for which there is a settled cost
report) to determine whether the hospital has a Medicare inpatient
utilization of over 60 percent. The hospital may document its Medicare
Advantage (MA) patient days for the respective cost reports in the
areas of the hospital subject to the IPPS, the IPF PPS (for psychiatric
distinct part units), and the IRF PPS (for rehabilitation distinct part
units) using data from the Provider Statistical & Reimbursement (PS&R)
Report, report type 118.
Comment: One commenter stated that they ``appreciate[s] CMS'
careful construction of evaluation criteria for determining increases
in FTE resident caps,'' but proposed that CMS consider including
language referencing the Health Resources and Services Administration's
(HRSA) Teaching Health Center (THC) program and the recently-awarded
Primary Care Residency Expansion (PCRE) grants in the discussion of
Evaluation Criteria Three and Four, which both relate to new or
expanded primary care residency programs. The commenter believed that
the inclusion of THC residencies in the CMS criteria and the
possibility of receiving additional cap slots would encourage hospitals
to participate in the formation and operation of these programs. The
commenter also suggested that hospitals associated with HRSA's PCRE
grants, which award 5-year grants to cover stipends of primary care
residency programs to encourage hospitals to increase their number of
primary care trainees, should be eligible for increases in their FTE
resident caps. The commenter noted that these hospitals are not allowed
to claim Medicare GME payments for the new residents until after the
grant ends.
Response: While the THC program, the PCRE grants, and section 5503
are all intended to try to increase the number of primary care
physicians training in community non-hospital settings, we are unsure
whether it is necessary to link all three provisions for purposes of
awarding slots under section 5503. Presumably under the THC program,
the residents will be spending the majority of their training time in
the THC, which is a non-hospital site and, therefore, is not subject to
FTE resident cap rules. We further presume that the THC would be
incurring the costs of the residents' salaries and fringe benefits for
the time spent training at the THC. We are not convinced that a
hospital should receive points merely because it will be associated
with a program occurring at a THC. With regard to the PCRE grants, if,
as the commenter stated, a hospital receiving that grant cannot claim
Medicare GME payments anyway until the grant ends, we do not see how
such a hospital would benefit from the receipt of additional slots
under section 5503, which are funded by Medicare, unless those slots
would be used for some other primary care program not associated with
the grants. After considering the public comment, we believe it would
be overly complicated, and possibly not even necessary, to incorporate
into the Evaluation Criteria a preference for a hospital that is
associated with the THC program and/or the PCRE grants. We believe that
if the goal is to increase the number of primary care residents, the
proposed Evaluation Criteria already clearly give preference to
hospitals requesting slots for use in primary care programs.
Comment: One commenter stated that Evaluation Criterion Two should
be expanded. Although supportive of incentives for geriatrics training,
this commenter stated that geriatrics is only a limited subspecialty of
primary care similar to gastroenterology, sports medicine, or
adolescent medicine.
Response: We believe it is appropriate to have an Evaluation
Criterion that focuses exclusively on geriatrics because not only is
geriatrics a specialty that directly affects Medicare beneficiaries,
but, unlike gastroenterology, sports medicine, or other subspecialties
of primary care programs, it is specifically defined in the statute as
being ``primary care'' (we refer readers to the definition of ``primary
care resident'' at section 1886(h)(5)(H) of the Act). Therefore, we are
not adopting the commenter's suggestion.
Comment: A commenter stated that the intent behind Evaluation
Criterion Three is excellent, ``but it has no teeth.'' The commenter
suggested that for programs such as internal medicine, with a primary
care track, the more important criterion is what the output of primary
care physicians has been in recent years, and whether the new slots
would, in fact, be used for the primary care track positions. The
commenter recommended that CMS require applicants to include a review
of recent graduates of the program, including information regarding
what type of practice the graduates are involved in 2 years following
graduation from this program. Further, the commenter suggested that if
CMS sets a threshold of 50 percent for the percentage of graduates
practicing only primary care within 2 years after graduation to attain
these points, it would capture programs that are actually producing
more primary care physicians. The commenter asserted that the same
logic could be applied to Evaluation Criterion Four.
Also related to Evaluation Criterion Three, this commenter
requested that CMS clarify whether family medicine would be included in
this criterion. Lastly, the commenter recommended that if a program
wishes to expand its number of family medicine residents, or establish
a new program in family medicine, it should get at least an additional
point for Evaluation Criteria Three and Four, because ``unlike other
primary care programs, the vast majority of family medicine graduates
will be serving as primary care physicians upon graduation into
practice.''
Response: We believe that implicit in Evaluation Criterion Three,
which is targeted to primary care programs with a ``demonstrated
focus'' on residents who pursue careers in primary care is the
assumption that applicant hospitals that wish to receive the 3 points
under Evaluation Criterion Three must ``demonstrate'' that residents
graduating from their programs actually do practice in primary care,
and do not enroll in nonprimary care subspecialty programs or work as
something other than a primary care practitioner. The commenter's
recommendation that applicants include a review of recent graduates of
the program, including information regarding what type of practice the
graduates are involved in 2 years following graduation from this
program, is a reasonable method for documenting that focus. For
example, hospitals applying for consideration under Evaluation
Criterion Three could provide documentation regarding residents who
completed the primary care program in question in June 2008, and in
what capacity those graduates have been practicing, at least through
June 2010. The commenter suggested that CMS set a threshold of 50
percent for the percentage of graduates practicing only primary care
within 2 years after graduation to ``demonstrate'' that their program
focuses on residents who wish to pursue careers in primary care. We
believe that a threshold of greater than 50 percent would be acceptable
as a basis to demonstrate that

[[Page 72189]]

a program produces physicians who pursue careers in primary care. We
are choosing more than 50 percent as the threshold because this is
consistent with the Evaluation Criterion added in this final rule for
hospitals that request additional slots for an existing program(s) for
which the hospital can demonstrate that more than 50 percent of
residents completing the program(s) go on to practice in a rural area
or a Primary Care HPSA.
While Evaluation Criterion Three does focus on outcomes, which as
explained in the previous paragraph, applicant hospitals must
demonstrate, we do not think it is necessary that Evaluation Criterion
Four also focus on outcomes. Considering that section 1886(h)(8)(B)(ii)
of the Act, as added by section 5503(a)(4) of the Affordable Care Act,
already establishes its own rules for a 5 year probationary period and
establishes a primary care threshold for which a hospital that receives
slots cannot fall below, we are not adopting the commenter's
recommendation that applicants applying for the 5 points under
Evaluation Criterion Four also be required to demonstrate the practice
outcomes of its graduates.
In response to the commenter's request, we are clarifying that
slots requested for use in a family practice program may fall under
Evaluation Criterion Three. As we stated in the proposed rule (75 FR
46407), Evaluation Criterion Three is for primary care programs with a
demonstrated focus on training residents to pursue careers in primary
care, and family medicine is a primary care program. Internal medicine
programs with primary care tracks are just one type of several primary
care programs that may qualify for 3 points under Evaluation Criterion
Three. Further, as we explained on page 46408 of the proposed rule, a
hospital may qualify for multiple points for the same program. For
example, it is possible for a primary care program to qualify for 3
points under Evaluation Criterion Three and for 5 points under
Evaluation Criterion Four. However, contrary to the commenter's last
request, we do not think it is necessary to provide an extra point for
family medicine programs that qualify under Evaluation Criteria Three
or Four, simply because most graduates of family medicine programs
practice as primary care physicians. While that is a laudable goal, we
believe that each primary care specialty, family practice or otherwise,
from which the graduates dedicate themselves to pursue careers in
primary care, deserves an equal amount of points.
Comment: One commenter expressed that the presence of a primary
care track for an internal medicine residency does not justify any
additional weighting of an application from such a residency over
another internal medicine residency without such a track. The commenter
explained that many internal medicine residency programs are entirely
focused on primary care training and subsequently do not need a
separately labeled primary care track while other programs do not want
the burden of managing two tracks for the training program and have
dissolved the administrative listing of a track but not the educational
experiences in the program. The commenter requested that if CMS does
not eliminate this preference, then it should allow non-track programs
the opportunity to demonstrate equivalency.
Response: We believe the commenter has misunderstood the proposed
Evaluation Criterion Three, which already allows ``non-track'' programs
to demonstrate equivalency. The proposed Evaluation Criterion Three
states, ``The hospital will use additional slots to establish a new or
expand an existing primary care program with a demonstrated focus on
training residents to pursue careers in primary care, rather than in
nonprimary subspecialties of those primary care programs (for example,
the hospital has an internal medicine program with a designated primary
care track).'' Therefore, the proposed Evaluation Criterion Three
allows any primary care program to demonstrate a focus on training
residents to pursue careers in primary care, rather than in nonprimary
care subspecialties of primary care programs. We also stated on page
46407 of the August 3, 2010 proposed rule that this Evaluation
Criterion applies to any primary care specialty. Internal medicine
programs with primary care tracks were provided as just one example of
primary care programs that may be able to demonstrate a focus on
training residents to pursue careers in primary care. Thus, as the
commenter requested, we already intended to allow ``non-track''
internal medicine or other primary care programs to demonstrate
equivalency.
Comment: One commenter suggested that the proposed evaluation
criteria together with the proposed prioritization framework could
result in few or no residency slots being awarded to general surgery
residencies. Though the commenter noted that they do not believe CMS
intended to exclude general surgery residency programs from the
redistribution, the commenter expressed concern that there is a
formulaic bias in the proposed rule as a whole that could produce this
result. The commenter urged CMS to re-examine these criteria and the
proposed priority categorization schema or otherwise find a means to
ensure that general surgery residency programs seeking additional slots
will have a reasonable opportunity of securing them. Moreover, the
commenter noted that general surgery programs would be able to
demonstrate the likelihood of filling additional positions because
these programs have a track record of attracting candidates and filling
positions.
Response: We are unsure why the commenter believes that few or no
slots will be awarded to general surgery residencies. Section
1886(h)(8)(B)(ii)(II) of the Act specifically requires that a hospital
must ensure that at least 75 percent of the slots it receives are used
to train primary care or general surgery residents. Some hospitals may
choose to use their slots for a combination of primary care or general
surgery residents, while others may choose to use 75 percent of their
slots for only one or the other. Further, we have included Evaluation
Criterion Four, which awards 5 points to applicants that will use all
the additional slots for a primary care or a general surgery
program(s).
Comment: One commenter urged CMS to assign an increased point value
for Evaluation Criterion Five. The commenter cited the 2009 National
Healthcare Disparities Report, issued by the Agency for Healthcare
Research and Quality that showed a lack of significant progress in
addressing health care disparities. This commenter believes that
primary care plays a large role in working to eliminate health care
disparities and thus more emphasis should be placed on primary care
HPSAs.
Response: We agree that it is important to address the health care
disparities in Primary Care HPSAs and underserved areas. In response to
an earlier comment, we stated that we are adding an additional
Evaluation Criterion for hospitals that request additional slots for an
existing program(s) for which the hospital can demonstrate that more
than 50 percent of residents completing the program(s) go on to
practice in a rural area or a Primary Care HPSA. Therefore, rather than
increase the point value under existing Evaluation Criterion Five, we
are adding a new Evaluation Criterion to address the health care
disparities in underserved areas.
Comment: One commenter observed that a hospital could potentially
``work the system'' of points because there is no requirement on how
many additional slots would be necessary in order to be

[[Page 72190]]

considered an expanded program under Evaluation Criterion Two for
geriatrics. The commenter argued that the same logic also applies to
Evaluation Criterion Three. Therefore, the commenter suggested that a
varying amount of points be assigned based on the number of geriatrics
or primary care residents that are to be added under Evaluation
Criteria Two and Three, respectively.
Response: The commenter is correct that a hospital may request as
little as one FTE slot for use in a geriatrics program (using
Evaluation Criterion Two as an example), and simply because that slot
is for geriatrics, the hospital will receive 5 points for that request.
However, we note that the points are allocated by program and,
therefore, an applicant cannot use the points awarded in response to a
request for slots for use in a geriatrics program to gain an advantage
in its request for slots for use in another type of program. The points
awarded for geriatrics would only benefit the hospital in its request
for slots to be used in a geriatrics program. Similarly, the points
awarded under Evaluation Criterion Three would only benefit the
hospital for that request.
Comment: One commenter stated that the proposed system of selecting
States for priority status in the redistribution is flawed and that it
would ultimately only benefit the ``ultra large training
institutions.'' The commenter noted that these institutions only
average 9 percent of their training in primary care. Moreover, the
commenter stated that ``the large to ultra large hospitals received 82
percent of all FTEs redistributed to these areas in the 2003
redistribution.'' The commenter further stated that the proposed
requirement that 75 percent of the slots are to be used for primary
care will also not be met. The commenter asserted that large
institutions that train only 9 percent of their residents in primary
care ``will gladly keep these slots in primary care for 5 years and
then they will convert them to sub-specialty programs.'' Therefore, a
redistribution of FTEs to these hospitals would not meet the goal of
primary care growth. This commenter suggested that rewarding hospitals
that already have a track record of supporting primary care would be a
better mechanism for redistribution. Specifically, the commenter
proposed that a descending list of ratios of primary care residents to
other residents at each hospital would be a simple way to measure a
hospital's level of support for primary care residents. The commenter
suggested that any available slots should be awarded across the country
to hospitals based upon this descending percentage list, allowing every
teaching hospital the chance to receive new FTE slots based upon their
past performance.
Response: As the commenter is aware, the method for selecting
States for priority status to receive slots is prescribed under section
5503 and, therefore, the Secretary has little, if any, discretion to
alter it. Although we certainly cannot predict with great accuracy
which hospitals will apply for and receive slots under section 5503, we
disagree with the commenter that the redistribution criteria will
benefit the ``ultra large teaching institutions'' who, according to the
commenter, only train about 9 percent of their residents in primary
care. We note that under section 1886(h)(8)(D) of the Act, which
prescribes the priority that should be given to certain areas (that is,
to hospitals located in States that are in the lowest quartile for
resident-to-population ratios, to hospitals located in a State that is
among the top 10 States for primary care HPSA to population ratios, or
hospitals located in rural areas), these States generally have teaching
hospitals that are relatively small and moderate in size, and the
preference categories do not include States located in the Northeast,
which contains the country's highest concentration of residents and
large teaching institutions. However, we do agree with the commenter
that hospitals that already have a track record of training residents
in primary care should be recognized in the redistribution process. We
believe that Evaluation Criterion Three serves this purpose, under
which hospitals that are requesting slots for a primary care program
with a demonstrated focus on training residents to pursue careers in
primary care may receive 3 points on their application requesting
additional slots.
Comment: One commenter disagreed with the First Level Priority
Category requirement that a hospital must be located in a rural area
and stated that many rural hospitals do not have the infrastructure to
support GME. This commenter suggested that placement of a hospital's
graduates in rural areas or HPSAs or in practices that serve an
underserved population, such as Federally Qualified Health Centers,
Medically Underserved Areas, or Medically Underserved Populations,
would be a more logical requirement. This same commenter also requested
that ``integrated rural training tracks'' be considered for Second
Level Priority Category. The commenter noted that this term is included
in the statute, but has not yet been defined by CMS. The commenter
proposed that a program with a minimum of 3 months required rural
training (integrated in any time frame in its curriculum) should be
eligible to be considered an accredited training program with an
integrated track. The commenter also reiterated that CMS should
consider the resident placement outcomes of a hospital more than its
physical location.
Response: Section 1886(h)(8)(D)(iii) of the Act specifically states
that hospitals located in rural areas receive preference for receiving
redistributed slots. Therefore, the Secretary does not have the
flexibility to divert those slots to hospitals in urban areas or to
hospitals that generally serve ``underserved'' populations that are not
located in a State that falls within the top 10 States for Primary Care
HPSA to population ratios. Similarly, the statute specifically states
that the Secretary shall take into account hospitals that have an
``accredited rural training track,'' not an ``integrated rural training
track.'' Furthermore, as we know from the ACGME, there is no defined
category of programs called ``integrated rural training tracks'' and
therefore, we cannot give special recognition under the priority
categories to hospitals that operate integrated rural training tracks.
However, the commenter raises a legitimate policy consideration with
regard to the suggestion that CMS should consider resident placement
outcomes more so than the hospital's physical location. Although we
cannot create new priority categories, we do have the flexibility to
create additional Evaluation Criteria for use in distinguishing among
applicant hospitals within each priority category. Therefore, in this
final rule, we are adding an additional Evaluation Criterion for
hospitals that request additional slots for an existing program(s) for
which the hospital can demonstrate that more than 50 percent of
residents completing the program(s) go on to practice in a rural area
or a Primary Care HPSA.
Comment: One commenter stated that in addition to the proposed
categories of hospitals that would be awarded points in applying for
additional slots, CMS should create several additional categories for
which hospitals could receive points in the application process as
well. The commenter suggested the following additional Evaluation
Criteria: (1) Hospitals that exceed their caps--hospitals that have
undertaken to train physicians without any financial support from
Medicare because it is their ``mission obligation'' to do so deserve
recognition, and CMS should

[[Page 72191]]

consider ``giving even more weight to those hospitals that are
significantly over their resident caps compared to other hospitals that
are over their caps''; (2) Hospitals that are in the process of
building programs and would lose slots during the build-up period--This
would protect hospitals that have made the investment of time and
resources to receive accreditation for a new program, and appear to
have unused slots but actually are in the middle of a several year
build-up process; (3) Hospitals that lose slots for ``purely technical
reasons''--One example would be hospitals whose ``highest'' resident
count during the three most recent cost reports ending on or before
March 23, 2010, did not occur in the year with the smallest difference
between its cap and its count and, therefore, would lose slots under
CMS' proposed interpretation of the statute.
Response: As we have stated in response to previous comments, and
discuss in greater detail below, we believe the intent of section 5503
is to increase the number of primary care or general surgery physicians
and, therefore, the provision provides funding for new or expanded
programs in primary care and general surgery, rather than funding for
existing positions. Therefore, we are not adopting the commenter's
request to add an Evaluation Criterion for hospitals that are exceeding
their FTE resident caps. With regard to the second request, since we
are exempting new teaching hospitals that do not have their FTE
resident caps established in all three of their reference cost reports
from cap reductions, the commenter's request to add an Evaluation
Criterion to protect these new teaching hospitals is no longer
necessary. Finally, in response to the commenter's third request, we
decline to accept the recommendation to add Evaluation Criteria to
protect hospitals that lose slots for ``purely technical'' reasons, as
this is a difficult category to define and limit.
Comment: One commenter noted that CMS has little discretion in
developing regulations given how prescriptive the statutory language
is, but that does not change the reality of the need for more residency
trained and board-certified emergency physicians in rural America. The
commenter asked that the redistribution criteria be modified to allow
new or expanding emergency medicine programs in the designated shortage
States to qualify. Moreover, this same commenter noted that current
ACGME residency accreditation requirements cannot be met by a total
rural residency experience so these programs cannot be established
exclusively in rural hospitals. Nonetheless, the commenter asked CMS to
change its regulations to allow teaching hospital payment when
emergency medicine residents rotate through rural hospitals.
Response: It appears that the commenter is making two separate
requests; first, that some special consideration be given in
redistributing slots to hospitals that are located in ``designated
shortage areas'' and are training emergency medicine residents, and
second, that CMS should change its regulations to allow a hospital that
operates an emergency medicine residency program, and sends those
residents to a rural hospital for some rotations, to continue to count
in its direct GME and IME FTE counts the training time spent at the
rural hospital. With regard to the first request, similar to the
Evaluation Criterion for emergency medicine we included for the purpose
of implementing section 422 of the MMA, we agree it is worthwhile to
include an Evaluation Criterion regarding emergency medicine programs
under section 5503 as well. Specifically, we are adding the following
to this final rule: Evaluation Criterion Eight. The hospital is
requesting slots to expand an existing emergency medicine program in
which the residents train in Primary Care HPSAs. (1 Point)
To answer the second request, the prohibition against one hospital
claiming the time at another hospital is based in the statute and
cannot be changed without legislation. We have explained this policy
numerous times in previous Federal Register notices (we refer readers
to 67 FR 50077, August 1, 2002). This law is implemented in the
regulations at section 413.78(b), which states, ``A hospital cannot
claim the time spent by residents training at another hospital.''
Comment: One commenter expressed support for the residency slot
redistributions under section 5503, but also asked that CMS reconsider
the definition of primary care as it relates to section 5503. This
commenter asked CMS to include adult psychiatry in the definition of
primary care. This commenter noted that depression is the fourth
leading cause of disability world-wide and mental illness and
addictions together are the second leading cause of disability and
premature mortality in the United States. Moreover, the commenter
stated that national studies also suggest that two-thirds of primary
care physicians report being unable to obtain outpatient mental health
services for patients. The commenter also asserted that a comprehensive
primary care Home Health Model will include mental health and
psychiatry.
Similarly, one commenter strongly encouraged CMS to count combined
residencies in internal medicine-pediatrics among the primary care
residency programs eligible for additional slots under the
redistribution effort. The commenter explained that internal medicine-
pediatrics residencies are combined 4-year training programs in which
residents experience the array of training opportunities open to
residents in internal medicine and pediatrics separately. The commenter
noted that Congress has treated internal medicine-pediatrics
residencies unevenly over the years, including recognition as primary
care residency programs in one section of the Affordable Care Act (ACA)
while overlooking these residencies as primary care training
experiences in other sections of the same law. Further, the commenter
believed CMS has the authority to include these combined programs for
these regulations.
Response: The definition of ``primary care resident'' is found in
the statute at section 1886(h)(5)(H) of the Act, and psychiatry is not
one of the specialties defined as primary care. While we acknowledge
the existing shortage in the provision of mental health services, the
Secretary does not have the authority to include psychiatry in the
definition of primary care without a change in the law. To respond to
the second commenter that requested that combined internal medicine-
pediatrics programs be recognized as primary care programs eligible for
slots under section 5503, we note that these programs are already
considered to be primary care under section 1886(h)(5)(H) of the Act.
We believe that the commenter's confusion regarding CMS's treatment of
combined internal medicine-pediatrics programs may stem from the fact
that the ACGME does not specifically accredit residency programs in the
combined format. The ACGME separately accredits internal medicine
programs and pediatrics programs. However, the ABMS recognizes combined
programs, and provides board certification in both internal medicine
and pediatrics for residents who train in combined internal medicine-
pediatrics programs. Because both internal medicine and pediatrics
programs meet the definition of primary care at section 1886(h)(5)(H)
of the Act, we agree that combined internal medicine-pediatrics
programs also meet the definition of primary care programs. Thus,
hospitals applying for slots under section 5503 to start or expand
combined internal medicine-pediatrics programs might

[[Page 72192]]

qualify to receive points under Evaluation Criteria Three and Four.
After consideration of the public comments we received, we are
finalizing our proposed six Evaluation Criteria, and we also are adding
two more Evaluation Criteria in this final rule. We are also clarifying
that, because of the 75-percent threshold, a hospital cannot apply for
slots under section 5503 only for a non-primary care program (other
than general surgery). However, a hospital could apply for slots, and
demonstrate that it needs 75 percent of those slots to start or expand
a particular primary care (or general surgery) program, and that it
needs 25 percent of those slots for use in a particular non-primary
care program. However, the hospital's request for each program will be
evaluated separately.
15. Exception If Positions Are Not Redistributed by July 1, 2011
Section 1886(h)(8)(E)(ii) of the Act states that in the case where,
by July 1, 2011, the Secretary ``does not distribute positions to
hospitals,'' the Secretary shall distribute such positions to other
hospitals in accordance with the considerations in redistribution
specified at section 1886(h)(8)(C) of the Act (that is, the
demonstrated likelihood of filling the slots and whether the hospital
has a rural training track), and the priority for certain areas
specified at section 1886(h)(8)(D) of the Act (that is, whether the
hospital is located in a State with a resident-to-population ratio in
the lowest quartile, whether the hospital is located in a State that is
in top 10 States in terms of Primary Care HPSA population to State
population, and whether the hospital is rural). We believe that the
phrase ``does not distribute positions to hospitals'' contemplates the
scenario where there would be more slots available than the amount that
qualifying hospitals requested, and therefore, CMS would be left with
slots in the distribution pool as of July 1, 2011. The Secretary is
directed to initiate another round of applications after July 1, 2011,
in which hospitals that could demonstrate that they could use the slots
would apply and possibly receive a portion of the remaining slots,
until all the slots in the pool are redistributed. Should the situation
arise where there are unused slots available as of July 1, 2011, we
would propose a process for redistributing those slots ``in accordance
with the considerations described in subparagraph (C) and the priority
described in subparagraph (D).'' We would then notify the public to
establish the application timeframe, criteria, process and other
relevant information at that time.
Comment: Several commenters addressed additional items for
consideration if all of the available caps are not redistributed by
July 1, 2011, using the criteria under section 5503. One commenter
stated that these leftover caps should be distributed to hospitals that
are currently exceeding their caps. Another commenter recommended that
the Secretary broaden the redistribution criteria to ensure that all
slots are filled and utilized while emphasizing the considerations made
by section 5503. This commenter urged CMS to consider using a
hospital's post-residency placement of residents in rural areas, and
not necessarily require a certified rural training track within that
hospital's GME program. This commenter also requested that the criteria
listed in section 5503 be used only as guidance rather than as
prescriptive criteria in the event all available caps are not
distributed by July 1, 2011. This commenter also recommended that CMS
use applications from the first round of redistribution and fill those
slots first before proposing additional rules.
Another commenter suggested that, should slots remain in the
distribution pool after the first round of applications has been
processed, CMS continue down the lists of States with low resident-to-
population ratios and high HPSA populations, allowing hospitals in the
next several States on each list to apply for slots in a second round
of applications. This commenter further stated that should a second
application process occur, it should not be identical in all ways to
the first round because hospitals that were unable to accommodate
additional residents in the first round would not be significantly more
likely to meet the same requirements in under a year from now.
Additionally, another commenter suggested that if there are more slots
than the anticipated demand, hospitals that do not fit into the
prescribed categories should be able to apply for the additional slots.
Response: As we explained in the proposed rule (75 FR 46410),
should the situation arise where there are unused slots available as of
July 1, 2010, we would propose a process for redistributing those slots
``in accordance with the considerations described in subparagraph (C)
and the priority described in subparagraph (D).'' We would then notify
the public to establish the application timeframe, criteria, process
and other relevant information at that time. We appreciate the
commenters' suggestions and will keep them in mind should the need
arise to propose a second round for redistribution of unused slots.
16. Application of Direct GME PRAs for Primary Care and Nonprimary Care
Residents and Conforming Changes for the IME Multiplier
Section 1886(h)(8)(G) of the Act states that, ``With respect to
additional residency positions in a hospital attributable to the
increase provided under this paragraph, the approved FTE per resident
amounts are deemed to be equal to the hospital per resident amounts for
primary care and nonprimary care computed under paragraph (2)(D) for
that hospital.'' Hospitals that receive increases in their FTE resident
caps under section 1886(h)(8)(B)(i) of the Act will receive direct GME
payments associated with those FTE residents in the same manner as they
receive direct GME payments for their other (non-section 422) FTE
residents, that is, using the primary care PRA that is reported on
Worksheet E-3, Part IV, line 3.23, and the nonprimary care PRA reported
on line 3.17 of the same worksheet. This provision in section 5503
differs from section 422 in that hospitals that received additional
slots under section 422 receive direct GME payment for FTE residents
attributable to those slots using a single locality-adjusted national
average PRA (42 CFR 413.77(g)), and the payment determination is made
on Worksheet E-3, Part VI. Thus, if a hospital received additional
slots under section 422, and they train a number of residents that is
sufficient to require them to count FTE residents under those slots,
the hospital will continue to receive direct GME payment for those
slots using the locality-adjusted national average PRA. However, in the
August 3, 2010 proposed rule (75 FR 46410), we proposed that a hospital
that receives additional slots under section 5503 would be paid for FTE
residents counted under those slots using the same primary care and
nonprimary PRAs for which payment is made for FTE residents subject to
the 1996 FTE cap. We indicated that we are expecting to revise
Worksheet E-3, Part IV to add a line on which hospitals would report
the number of FTEs by which the hospital's FTE caps were increased for
direct GME slots received under section 5503. (We note that on the new
Medicare cost reporting form, CMS-2552-10, the direct GME worksheet is
E-4). To create a hospital's total adjusted direct GME FTE cap, the
increase granted under section 1886(h)(8)(B)(i) of the Act would be
added to the 1996 direct GME FTE cap and would include any applicable
new

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program adjustment received under Sec. 413.79(e), and any applicable
adjustments for the cost reporting period due to a Medicare GME
affiliation agreement. In a given cost reporting year, we proposed that
a hospital would only count FTE residents under its direct GME section
422 cap slots on Worksheet E-3, Part VI if the number of unweighted
allopathic and osteopathic residents it is training exceeds the total
adjusted direct GME cap (including the section 5503 slots) on Worksheet
E-3, Part IV.
In addition, with respect to the IME adjustment, in the August 3,
2010 proposed rule (75 FR 46410), we proposed that a hospital that
receives an increase in its FTE cap under section 1886(h)(8)(B)(i) of
the Act will count FTE residents under those slots, and payment will be
made with respect to residents counted under those slots, using the
same IME multiplier for which payment is made for FTE residents subject
to the 1996 FTE cap (that is, currently a multiplier of 1.35). This is
because section 1886(d)(5)(B)(x) of the Act, as added by section
5503(b)(2), states, ``For discharges occurring on or after July 1,
2011, insofar as an additional payment amount under this subparagraph
is attributable to resident positions distributed to a hospital under
subsection (h)(8)(B), the indirect teaching adjustment factor shall be
computed in the same manner as provided under clause (ii) with respect
to such resident positions.'' This provision in section 5503 differs
from section 422 in that hospitals that received additional slots under
section 422 receive IME payment for FTE residents counted under those
slots using a special multiplier of 0.66 (42 CFR 412.105(e)(2)), and
the payment determination is made on Worksheet E-3, Part VI. We also
indicated that we are expecting to revise Worksheet E, Part A to add a
line in which applicable hospitals would report the amount of
additional IME slots received under section 5503. To create a
hospital's total adjusted IME FTE cap, this additional amount would be
added to the 1996 IME FTE cap, any applicable new program adjustment
received under Sec. 413.79(e), and any applicable adjustments for the
period due to a Medicare GME affiliation agreement. In a given cost
reporting year, we proposed that a hospital would only use its IME
section 422 cap slots on Worksheet E-3, Part VI if the number of
unweighted allopathic and osteopathic residents it is training exceeds
the total adjusted IME cap (including the section 5503 slots) on
Worksheet E, Part A. Finally, under section 422 of Public Law 108-173,
hospitals that were members of the same Medicare GME affiliated group
on or after July 1, 2005, and that received additional FTE cap slots
under section 422 are precluded from including those additional section
422 slots in the aggregate affiliated cap. This is in part because
section 422 specified that a hospital would receive direct GME and IME
payments for additional slots awarded under section 422 with rates that
were different from the non-section 422 cap slots, and tracking the
different direct GME and IME payment rates associated with FTE
residents that are counted as a result of the section 422 cap increases
and those that were not would be extremely difficult for the Medicare
contractors. In addition, in order to qualify for additional slots
under section 422, the hospitals had to document a need for those
slots. Similarly, under section 5503, we proposed that hospitals that
receive additional slots under section 5503 cannot use these slots as
part of the aggregate cap in a Medicare GME affiliation agreement. This
is because we believe that once a hospital has demonstrated that it
truly needs the additional slots, has made the effort to carefully
document that it will fill those slots within 3 years, and once we have
determined that the characteristics of the hospital and its training
program warrant an increase in the hospital's FTE resident caps under
section 1886(h)(8)(B)(i) of the Act, we do not believe it would be
appropriate for the hospital to transfer those positions to another
hospital, albeit temporarily, under the terms of a Medicare GME
affiliation agreement. To do so would be to undermine the goals and
specifications for the redistribution of residency positions as set
forth under section 5503 of the Affordable Care Act.
We note that section 1886(h)(8)(B) of the Act, which addresses the
increases in hospitals' FTE resident caps, makes no reference to
section 1886(h)(4)(G) or 1886(d)(5)(B)(vi)(II) of the Act, which are
the provisions concerning the rolling average count of FTE residents.
Furthermore, there is no mention of section 1886(d)(5)(B)(vi)(I) of the
Act, the provision regarding the cap on the IME resident-to-bed ratio,
in section 1886(h)(8)(B) of the Act either. That is, the statute does
not provide for an exclusion from application of the rolling average
for residents counted as a result of FTE cap increases under section
1886(h)(8)(B)(i) of the Act, nor does the statute exempt the residents
counted pursuant to FTE cap increases under section 1886(h)(8)(B)(i)
from the application of the cap on the IME resident-to-bed ratio. In
light of the absence of a specific directive in section
1886(h)(8)(B)(i) of the Act exempting those residents from application
of the rolling average for direct GME and IME, and the cap on the IME
resident-to-bed ratio, and with no apparent reason to treat residents
counted as a result of the FTE cap increases under section
1886(h)(8)(B) of the Act differently, in the August 3, 2010 proposed
rule (75 FR 46411), we proposed to require that if a hospital increases
its direct GME or IME FTE count of residents under an increase in the
hospital's FTE resident cap under section 1886(h)(8)(B)(i) of the Act,
those FTE residents would be immediately subject to the rolling average
calculation and the cap on the IME resident-to-bed ratio. Furthermore,
we believe that, given potentially significant shifts of FTE resident
positions among hospitals as a result of section 1886(h)(8) of the Act,
the inclusion of FTE residents counted as a result of FTE cap increases
under section 1886(h)(8)(B)(i) of the Act in the rolling average would
introduce a measure of stability and predictability, and mitigate
radical shifts in GME payments from period to period.
Comment: Commenters expressed support of the treatment of hospitals
with caps that have been reduced or increased under section 422 of the
MMA. However, one commenter suggested that payment levels should either
be the same for all FTE cap types or that each of the three should have
its own payment level to perhaps provide additional incentives for
training primary care residents.
Response: Both section 422 of the MMA and section 5503 of the
Affordable Care Act specify clearly which direct GME and IME payment
rates are to be used.
Comment: One commenter agreed with CMS' proposal that if a hospital
receives slots under 5503, and also received slots under section 422,
only FTE residents in excess of the hospital's 1996 cap, as increased
by the new section 5503 slots, would be paid at the section 422 payment
rates (the locality-adjusted national average PRA for direct GME, and
the 2.7 percent multiplier for IME).
Response: We are finalizing our proposal that only FTE residents in
excess of a hospital's 1996 FTE cap, as increased by the section 5503
slots, would be paid at the section 422 rates (the locality-adjusted
national average PRA for direct GME, and the 2.7 percent multiplier for
IME).
Comment: Commenters disagreed with CMS' proposal to include FTE

[[Page 72194]]

residents added to a hospital under section 5503 in the hospital's
rolling average count for IME and direct GME, and in the cap on the IRB
ratio for IME. The commenters acknowledged that section 5503 is silent
on this matter, but argued that the absence of language to exclude
redistributed FTEs from the rolling average and IRB ratio cap need not
compel CMS to include redistributed FTEs in the rolling average and IRB
ratio cap. The commenters noted that CMS has used its authority in the
past to create exceptions to the rolling average and IRB ratio cap when
the application of these provisions would ``create an unfair result''
(for example, to exclude residents displaced by the closure of a
hospital or residency program from a receiving hospital's rolling
average or IRB ratio cap). The commenters argued that ``it makes little
sense'' to apply the rolling average and IRB ratio cap here as well.
The commenters believed that the fact that Congress wanted
redistributed resident slots to be used to meet specific policy goals
for a 5-year period demonstrates that Congress did not intend the usual
FTE counting rules to apply to redistributed FTE slots.
Another commenter agreed with CMS' proposal to include residents
added under section 5503 in the rolling average and the IME IRB ratio
cap. The commenter believed that the inclusion of these FTE residents
in the rolling average and IME IRB ratio cap would ``introduce a level
of stability in the aggregate GME payments.''
Response: Regarding the applicability of the rolling average and
the IRB ratio cap to redistributed slots under section 5503, we
explained in the August 3, 2010 proposed rule (75 FR 46411) that, ``In
light of the absence of a specific directive in section
1886(h)(8)(B)(i) of the Act exempting those residents from application
of the rolling average for direct GME and IME, and the cap on the IME
resident-to-bed ratio, and with no apparent reason to treat residents
counted as a result of the FTE cap increases under section
1886(h)(8)(B) of the Act differently, we are proposing to require that
if a hospital increases its direct GME or IME FTE count of residents
under an increase in the hospital's FTE resident cap under section
1886(h)(8)(B)(i) of the Act, those FTE residents would be immediately
subject to the rolling average calculation and the cap on the IME
resident-to-bed ratio. Furthermore, we believe that, given potentially
significant shifts of FTE resident positions among hospitals as a
result of section 1886(h)(8) of the Act, the inclusion of FTE residents
counted as a result of FTE cap increases under section 1886(h)(8)(B)(i)
of the Act in the rolling average would introduce a measure of
stability and predictability, and mitigate radical shifts in GME
payments from period to period.'' We continue to believe that it is
appropriate to include these FTE slots in the rolling average and in
the IRB ratio cap. In the instance of displaced residents that result
from the closure of a hospital or a residency program, an exemption was
provided under sections 413.79(h) for direct GME and 412.105(b) for IME
regarding the rolling average and the IRB ratio cap respectively so as
to provide an incentive for hospitals that may have experienced some
financial loss when accepting actual residents, not merely FTEs, into
their hospitals and programs who may otherwise not have been able to
complete their training. Such an exception is not warranted under
section 5503, where hospitals are only applying for FTE slots to either
start new programs or expand existing programs. We also appreciate the
support of the commenter that wrote that the inclusion of these FTE
residents in the rolling average and IME IRB ratio cap would
``introduce a level of stability in the aggregate GME payments.'' We
are finalizing our proposal to include FTE slots added under section
5503 in the rolling average and IRB ratio cap accordingly.
Comment: A commenter thought that CMS should permit hospitals to
use slots awarded under section 5503 as part of Medicare GME
affiliation agreements after a certain period of time, such as 5 years,
coinciding with the end of the time period of other restrictions
applicable to slots awarded under section 5503. The commenter
understood CMS' rationale for proposing to require that hospitals not
include slots received as part of Medicare GME affiliation agreements,
but the commenter believed that keeping separate track of these FTEs is
administratively burdensome, and that circumstances can change over
time. Similarly, commenters expressed concern that redistributed
positions could not be aggregated under a Medicare GME affiliation
agreement. Commenters stated that this limitation seems contradictory
in that it allows these affiliated programs to lose slots, but not gain
them when they meet the redistribution criteria. Moreover, commenters
thought that this policy restricts collaborative training arrangements,
which are particularly important for resident training in rural and
underserved areas.
Response: In the August 3, 2010 proposed rule (75 FR 46410), we
proposed that hospitals that receive additional slots under section
5503 cannot use these slots as part of the aggregate cap in a Medicare
GME affiliation agreement. This is because we believe that once a
hospital has demonstrated that it truly needs the additional slots, has
made the effort to carefully document that it will fill those slots
within 3 years, and once we have determined that the characteristics of
the hospital and its training program warrant an increase in the
hospital's FTE resident caps under section 1886(h)(8)(B)(i) of the Act,
we do not believe it would be appropriate for the hospital to transfer
those positions to another hospital, albeit temporarily, under the
terms of a Medicare GME affiliation agreement. To do so would be to
undermine the goals and specifications for the redistribution of
residency positions as set forth under section 5503 of the Affordable
Care Act. However, the commenters' provide a compelling argument that
this limitation seems contradictory in that it allows these affiliated
programs to lose slots, but not gain them when they meet the
redistribution criteria. Further, we understand that training needs can
change over time, and there may be a need to cross-train residents in
different hospital settings. In addition, because slots received under
section 5503 are to be paid with the same direct GME PRA and IME
multiplier as a hospital's other residents (unlike slots received under
section 422 of the MMA which are paid at different payment rates), it
would not present an administrative burden to include section 5503
slots in Medicare GME affiliation agreements. Therefore, we are
revising our proposal and adopting the commenters' suggestion to permit
hospitals to use slots awarded under section 5503 as part of Medicare
GME affiliation agreements after 5 years, which would coincide with the
end of the time period of other restrictions applicable to slots
awarded under section 5503. Thus, slots awarded under section 5503
could first be used (either lent or received) as part of Medicare GME
affiliation agreements for the academic year beginning July 1, 2016.
However, we caution that section 5503 slots that are used in Medicare
GME affiliation agreements on or after July 1, 2016, are at risk for
removal by the Medicare contractor from those affiliation agreements
if, while auditing a cost report that falls within the 5-year period,
the contractor finds that the hospital did not meet the primary care
average or 75 percent threshold requirement.
After consideration of the public comments we received, we are

[[Page 72195]]

finalizing our proposals not to exempt slots added under section 5503
from the rolling average or the IRB ratio. However, we are accepting
the commenters' request regarding use of the section 5503 slots in
Medicare GME affiliation agreements, and we are modifying our proposal
policy to allow these slots to be used as part of the FTE caps in
Medicare GME affiliation agreements for the academic year beginning
July 1, 2016.
17. Other Issues Related to a Request for Increase in the FTE Caps
under Section 5503 of the Affordable Care Act
a. Rural Hospitals or Urban Nonteaching Hospitals
Rural hospitals may receive an adjustment to their FTE caps for
establishing a new residency program under Sec. 413.79(e)(1)(iii) of
the existing regulations at any time. Therefore, if a rural hospital is
interested in starting a new program, or interested in participating in
training residents in a new program on or after July 1, 2011, it need
not apply for slots under section 5503 of the Affordable Care Act for
that new program. If a rural hospital seeks to expand an existing
program, and does not have sufficient space under its existing FTE caps
to cover those additional residents, the rural hospital may apply for
an increase to its FTE caps under section 5503. Similarly, an urban
hospital may request additional slots under section 5503 for the
purpose of expanding an existing program. A hospital, rural or urban,
that is not yet a teaching hospital and does not have a cap
established, may not apply for a permanent adjustment to their FTE caps
under section 5503 since a non-teaching hospital may apply for a
permanent cap adjustment under current Medicare regulations at Sec.
413.79(e). Also, if an urban non-teaching hospital becomes a teaching
hospital because it begins to serve as a rotating site for another
hospital's existing program, it may apply for additional slots under
section 5503, which would not preempt the hospital from later getting a
new cap adjustment under Sec. 413.79(e) for starting a new program.
We did not receive any public comments on this section, and we are
finalizing our proposals accordingly.
b. Closed Teaching Hospitals
We note that under section 5506 of the Affordable Care Act, as
explained further in section XXI.E. of this preamble, the FTE resident
caps of teaching hospitals that close on or after March 23, 2008, are
to be redistributed to other qualifying hospitals according to specific
criteria. Assuming a teaching hospital closed recently, it is possible
that based on the closed teaching hospital's three most recent cost
reporting periods ending prior to March 23, 2010, its FTE resident caps
could be subject to reduction under section 5503. However, so as to
avoid duplication of FTE resident slots in the redistribution processes
under sections 5503 and 5506, in the August 3, 2010 proposed rule (75
FR 46411), we proposed that if a hospital closes on or after March 23,
2008, then its FTE resident cap slots would not be redistributed under
section 5503, but would be reserved for redistribution under section
5506.
We received one public comment in support of this proposal, and we
are finalizing our policy accordingly.
c. Requirements for Hospitals That Receive Additional Slots Under
Section 5503
Section 1886(h)(8)(B)(ii) of the Act, as added by section
5503(a)(4) of the Affordable Care Act, specifies requirements and
thresholds that a hospital that applies for and receives additional
slots effective July 1, 2011, must meet in order to retain those slots.
Under section 422 of Public Law 108-173, hospitals that received
additional slots were not held accountable for meeting any requirements
once those slots were received effective July 1, 2005, nor did section
422 require that CMS conduct any subsequent reviews of the hospitals
that received the slots in order to determine that the hospitals were
meeting certain thresholds. However, section 1886(h)(8)(B)(ii) of the
Act, as added by section 5503 of the Affordable Care Act, specifies
requirements that a hospital that receives an increase in its FTE
resident caps under section 1886(h)(8)(B)(i) must meet, at least for a
5-year period beginning on or after July 1, 2011, and section
1886(h)(8)(B)(iii) directs the Secretary to reduce the FTE caps of the
hospital by the same number of FTE residents by which the hospital's
FTE caps were increased if the hospital fails to meet these
requirements. Specifically, section 1886(h)(8)(B)(ii) of the Act
states, ``a hospital that receives an increase in the otherwise
applicable resident limit under this subparagraph shall ensure, during
the 5-year period beginning on the date of such increase, that--
(I) The number of full-time equivalent primary care residents, as
defined in paragraph (5)(H) (as determined by the Secretary), excluding
any additional positions under subclause (II), is not less than the
average number of full-time equivalent primary care residents (as so
determined) during the 3 most recent cost reporting periods ending
prior to the date of enactment of this paragraph; and
(II) Not less than 75 percent of the positions attributable to such
increase are in a primary care or general surgery residency (as
determined by the Secretary).
The Secretary may determine whether a hospital has met the
requirements under this clause during such 5-year period in such manner
and at such time as the Secretary determines appropriate, including at
the end of such 5-year period.''
Section 1886(h)(5)(H) of the Act defines ``primary care resident''
as a resident enrolled in an approved medical residency training
program in family medicine, general internal medicine, general
pediatrics, preventive medicine, geriatric medicine, or osteopathic
general practice. In the August 3, 2010 proposed rule (75 FR 46411), we
proposed that a hospital that is applying to receive additional slots
would have to submit data from the three most recent cost reporting
periods ending before March 23, 2010 (the date of enactment) on the
number of unweighted FTE residents in these primary care programs. We
note that this primary care average is based on the hospital's total
FTE count that would otherwise be allowable in absence of the FTE cap;
if a hospital is training FTE residents in excess of its FTE caps, it
would still determine the 3-year average based on the total number of
unweighted primary care FTE residents. A total primary care FTE count,
one for IME and one for direct GME, is sufficient for the hospital for
each of these three cost reporting periods; a hospital need not report
these data by specialty. However, we note that, currently, the Medicare
cost report does not track a hospital's number of primary care
residents. For direct GME, on Worksheet E-3, Part IV, line 3.19, the
hospital's number of weighted primary care and OB/GYN residents is
reported. Thus, if a hospital trains OB/GYN residents in addition to
primary care residents, we proposed that the OB/GYN count must be
subtracted from the number reported on line 3.19 of Worksheet E-3, Part
IV for the hospital's three most recent cost reporting periods ending
before March 23, 2010. This would produce a weighted FTE count for
direct GME, which should then be converted to an unweighted count. In
any case, the source documentation for these data is the rotation
schedules for the applicable years. For IME, on Worksheet E, Part A,
there is no line that currently records the number of

[[Page 72196]]

primary care residents, as the distinction between primary care and
nonprimary care residents is only necessary in the direct GME payment
formula (due to the use of a primary care and OB/GYN PRA and a
nonprimary care PRA for certain years).
Therefore, in the August 3, 2010 proposed rule (75 FR 46412), we
proposed that the applicant hospital must develop from its rotation
schedules three IME FTE primary care counts to correspond to its three
most recent cost reporting periods ending before March 23, 2010. As
part of its application, we proposed that the hospital must include the
documentation that it used to arrive at its direct GME and IME primary
care FTE counts, including a copy of Worksheet E-3, Part IV for direct
GME, and if the hospital has an OB/GYN program, the rotation schedules
corresponding to the three most recent cost reporting periods ending
prior to March 23, 2010 for OB/GYN, and the rotation schedules for all
primary care residency programs used to establish the IME primary care
FTE count corresponding to the three most recent cost reporting periods
ending prior to March 23, 2010. Although we considered proposing that a
hospital may demonstrate that it is complying with the requirement to
maintain the primary care average with only a single unweighted FTE
count, rather than one FTE count for direct GME and one FTE count for
IME, we believed that we needed to propose to require documentation
from both a direct GME and an IME FTE count because section 5503 of the
Affordable Care Act amended section 1886(d)(5)(B)(v) of the Act to make
the entire section 1886(h)(8), of which maintenance of this primary
care average is a part, applicable for purposes of IME. Thus, both
section 1886(h) of the Act for direct GME and section 1886(d)(5)(B) of
the Act for IME are equally impacted by section 5503. Furthermore, we
proposed that the FTE counts for IME and direct GME used to derive
these primary care averages are subject to audit by the Medicare
contractors, and that, as part of reviews or audits performed by the
Medicare contractors in accordance with their normal audit plans, the
Medicare contractors would check whether a hospital is maintaining its
primary care average in each of the cost reports in the 5-year period
as early as tentative settlement of those five respective cost reports,
and may take prompt action accordingly to adjust a hospital's FTE caps
and direct GME and IME interim payments.
In addition to maintaining this average number of primary care
residents, section 1886(h)(8)(B)(ii)(II) of the Act also requires that
a hospital that receives an increase to its FTE resident caps under
section 1886(h)(8)(B)(i) of the Act must ensure that 75 percent of
those slots are used to train primary care or general surgery
residents. A hospital that applies for additional slots may or may not
already train at least 75 percent or more of its residents in primary
care or general surgery programs. At a minimum, the applicant hospital
is required to maintain the average number of FTE primary care
residents that it trained during the three most recent cost reporting
periods ending prior to March 23, 2010. Further, in the August 3, 2010
proposed rule (75 FR 46412), we proposed that in addition to the
primary care residents used to maintain the primary care average, the
applicant hospital must separately ensure that at least 75 percent of
the increased FTE cap slots it receives are used to count FTE residents
in primary care or general surgery. We proposed that the hospital must
be able to document that, during each of the 5 years in the 5-year
period of July 1, 2011 to June 30, 2016, for IME and direct GME
respectively, and for each cost report during those 5 years, that not
only is it maintaining its primary care average, but that 75 percent of
the increased FTE cap slots that it received are being used to count
residents training in primary care or general surgery programs. For
example, Hospital A has a June 30 fiscal year end, an FTE cap of 100
FTEs, and a total FTE count of 110. In its three most recent cost
reports ending prior to March 23, 2010 (fiscal year end June 30, 2009,
June 30, 2008, and June 30, 2007), Hospital A was training 60 primary
care FTE residents, 50 primary care FTE residents, and 40 primary care
FTE residents respectively. The average number of primary care FTE
residents during those 3 years is 50. Hospital A applied for and
received 10 additional FTE cap slots under section 5503. Beginning July
1, 2011, for each cost report ending June 30, 2012, June 30, 2013, June
30, 2014, June 30, 2015, and June 30, 2016, Hospital A must ensure that
it does not train less than 50 primary care FTE residents, and it must
ensure that it trains an additional 7.5 FTEs of the 10 slots it
receives in either primary care or general surgery. In another example,
Hospital B has a December 31 fiscal year end, an FTE cap of 10 FTEs,
and a total FTE count of 12. In its three most recent cost reports
ending prior to March 23, 2010 (fiscal year end December 31, 2009,
December 31, 2008 and December 31, 2007), Hospital A was training 12
primary care FTE residents in each of the 3 years. The average number
of primary care FTE residents is 12. Hospital B applied for and
received 4 additional FTE cap slots under section 5503. Beginning July
1, 2011 and ending June 30, 2016, Hospital B must ensure that it does
not train less than 12 primary care FTE residents, and it must ensure
that it trains an additional 3 FTEs of the 4 slots it receives, for a
total of 15, in either primary care or general surgery. We proposed
that the Medicare contractors would check whether a hospital is
maintaining this 75-percent threshold as part of reviews or audits
performed by the Medicare contractors in accordance with their normal
audit plans in the 5-year period as early as tentative settlement of
those five respective cost reports, and may take action accordingly to
adjust a hospital's FTE resident caps and direct GME and IME interim
payments.
It is possible that there are hospitals that are not currently
training, nor have they trained in any of their three cost reporting
periods ending prior to March 23, 2010, any primary care residents at
all, but that such hospitals are applying for an increase to their FTE
caps for a new primary care or general surgery program that they would
like to start. Such hospitals would have a primary care average of
zero. Because the intent of section 5503 is to try to increase the
number of primary care (or general surgery) residents in training, we
proposed that such hospitals would be able to apply for additional
slots under section 5503. Should such a hospital receive an FTE cap
increase, we proposed that 75 percent of the increased FTE cap slots
must be used to count FTE residents in either primary care or general
surgery. We proposed that a hospital is required to document in each of
the 5 years that it has maintained the primary care average and that at
least 75 percent of the slots it receives is used for training either
primary care and/or general surgery residents rather than only once at
the end of the 5-year period. As explained more fully below, if a
hospital has not met these requirements, in the proposed rule, we
stated that we believe it would be less disruptive financially and
administratively to a hospital if we make the adjustment to the
hospital's FTE resident caps under section 1886(h)(8)(B)(iii)(I) of the
Act and recover any overpayment after 1 year rather than after the
conclusion of the

[[Page 72197]]

full 5 year monitoring period under section 1886(h)(8)(B)(ii) of the
Act.
Section 1886(h)(8)(B)(ii) of the Act also states that ``The
Secretary may determine whether a hospital has met the requirements
under this clause during such 5-year period in such manner and at such
time as the Secretary determines appropriate, including at the end of
such 5-year period'' (emphasis added). In the August 3, 2010 proposed
rule (75 FR 46413), we proposed that the ``5-year period beginning on
the date of such increase'' is July 1, 2011 through June 30, 2016,
because the effective date of section 5503 is for portions of cost
reporting periods beginning on or after July 1, 2011. Thus, it is
during this 5-year period that an ``average number of full-time
equivalent primary care residents'' must be maintained, and that 75
percent of the additional slots must be trained in primary care or
general surgery, for IME and direct GME respectively. However, the
Secretary is given some discretion as to how and when she determines
whether a hospital is meeting or has met the requirements ``during such
5-year period.'' Although we believe that the 5-year period must be
within July 1, 2011 through June 30, 2016, we believe we have
flexibility to determine which cost reporting periods within that 5-
year period we may use to assess whether the hospital is consistently
meeting the required criteria. For the sake of administrative
simplicity, on behalf of hospitals and the Medicare contractors, we
proposed that the Medicare contractors, in accordance with their normal
audit plans, would make assessments based on a hospital's fiscal year
when possible, such that the Medicare contractors could make a first
assessment for an initial ``short'' period, then annually as each of
the hospital's fiscal year ends until there is another final ``short''
assessment period that starts after the provider's last fiscal year end
within the 5-year window and runs through June 30, 2016. If a hospital
has a June 30 fiscal year end, we proposed that the Medicare contractor
could assess whether the hospital is meeting the required criteria five
times, starting with its cost reporting period beginning on July 1,
2011, and ending with its fifth cost reporting period that starts on
July 1, 2015 (and ending June 30, 2016). However, for hospitals that
have a fiscal year end of other than June 30, we proposed that the
Medicare contractors could assess whether the hospital met the
requirements for the portion of its cost reporting period that occurs
after July 1, 2011, its subsequent full cost reporting periods, and
then ending with the portion of the cost reporting period prior to June
30, 2016. In other words, we proposed that the hospital would be
considered to meet the required criteria in ``Year 1'' if it meets the
requirements based on an annualized FTE count from July 1, 2011 through
the end of its cost reporting period; in each of years 2 through 4, it
must meet the requirements based on its next three cost reporting
periods; and in year 5, it must meet the requirements based on an
annualized FTE count from the first day of its cost reporting period
through June 30, 2016 (which is the last day on which a hospital has
any obligation to meet these requirements). For example, assume
Hospital C has a September 30 fiscal year end, and receives 16
additional slots under section 5503, and has a primary care average of
30 FTE residents. We proposed that during the period of July 1, 2011
through June 30, 2016, Hospital C must demonstrate that it is training
at least 75 percent of its 16 slots in primary care or general surgery
(that is, 12 slots), and that it maintains a primary care FTE count of
30, as follows:
Year 1--July 1, 2011 to September 30, 2011, with an annualized
count of 3 (that is, 12 divided by 4) additional FTEs in primary care/
general surgery, and an annualized count of 7.5 (that is, 30 divided by
4) FTEs training in primary care residency programs.
Year 2--October 1, 2011 to September 30, 2012, with 12 FTEs in
primary care/general surgery, and 30 FTEs in primary care programs.
Year 3--October 1, 2012 to September 30, 2013, with 12 FTEs in
primary care/general surgery, and 30 FTEs in primary care programs.
Year 4--October 1, 2012 to September 30, 2014, with 12 FTEs in
primary care/general surgery, and 30 FTEs in primary care programs.
Year 5--October 1, 2014 to September 30, 2015, with 12 FTEs in
primary care/general surgery, and 30 FTEs in primary care programs.
Year 6--October 1, 2015 to June 30, 2016, with an annualized count
of 9 additional FTEs in primary care/general surgery, and an annualized
count of 22.5 FTEs training in primary care residency programs.
We proposed to reserve the right to assess as many times as
necessary in the 5-year period that a hospital is meeting the required
criteria. Furthermore, if a Medicare contractor determines during an
audit that a hospital did not meet the requirements during, for
example, the second year, the contractor could go back and audit the
first year (full, or short period), and make a retroactive adjustment.
We also understand that we should consider that hospitals might not
immediately fill all the slots they receive, particularly because they
are only required to demonstrate the likelihood of filling the slots
within the first three cost reporting periods beginning on or after
July 1, 2011. Accordingly, in the preceding example in which Hospital C
was awarded 16 slots and has a September 30 fiscal year end, assume it
only added 2 actual residents immediately on July 1, 2011. Two
residents equate to 0.5 FTE for the 3-month period of July 1, 2011 to
September 30, 2011. Seventy five percent of 0.5 FTE equals 0.375. We
proposed that at least 0.375 of the new FTEs added for the period of
July 1, 2011 to September 30, 2011 must be in primary care or general
surgery in order to meet the requirement in ``Year 1.''
In a case where the Medicare contractor determines that a hospital
did not meet the requirements in a cost reporting year within the 5-
year time period, section 1886(h)(8)(B)(iii) of the Act states that
``the Secretary shall--
(I) Reduce the otherwise applicable resident limit of the hospital
by the amount by which such limit was increased under this paragraph;
and
(II) Provide for the distribution of positions attributable to such
reduction in accordance with the requirements of this paragraph.''
Hospitals have different fiscal year ends and are subject to different
audit schedules, which may occur several years after a hospital's cost
report is submitted. Therefore, even though we proposed that the
Medicare contractors may make adjustments to a hospital's direct GME
and IME payments as early as tentative settlement, it may be several
years after June 30, 2016 before CMS determines the exact number of
reductions, if any, that are applied to the FTE caps of hospitals that
received additional slots, but that failed to meet the requirements
under section 1886(h)(8)(B)(ii) of the Act, discussed above. However,
once we have determined the number of slots available for a second
redistribution, we would distribute them ``in accordance with the
requirements of this paragraph.'' That is, we would distribute the
slots to hospitals that applied under this first redistribution and
that qualified to receive the slots they requested, but for whom we did
not have sufficient slots in the ``pool'' to grant them the full number
of FTE slots that they requested. As discussed above in section XXI.D.
of this preamble, because of the requirement that 70 percent of the
slots be redistributed to hospitals within States with resident-to-
population ratios in the lowest quartile,

[[Page 72198]]

it is possible that, after first distributing slots to hospitals with
the highest scores on their CMS Evaluation Form, there may be some
remaining qualifying hospitals within the same priority level category
that receive the same score on the CMS Evaluation Form. Thus, we would
have no way of distinguishing among these hospitals of equal rank. If
this situation occurs, we proposed to prorate the remaining amount of
slots in the ``70-percent pool'', and distribute an equal share of
slots to these hospitals of equal rank. If a similar situation occurs
within the ``30-percent pool'', we also proposed to prorate the
remaining amount of slots in the ``30-percent pool'' and distribute an
equal share of slots to hospitals of equal rank. Accordingly, in the
event that there is a second redistribution process pursuant to section
1886(h)(8)(B)(iii)(II) of the Act, we proposed to distribute the slots
in the ``pool'' (created by the failure of one or more hospitals to
meet the criteria specified under section 1886(h)(8)(B)(ii)) of the Act
to those hospitals that did not receive all of the slots for which they
technically qualified, and for which we had to prorate under the first
redistribution. If we have sufficient slots to fully satisfy the
original requests of those qualifying hospitals, we would assign them
the difference between the prorated amount awarded under the first
redistribution and the amount of slots they requested on their original
application (assuming they actually otherwise qualified for all the
slots they requested). In other words, we would go back to the original
applications and continue to assign slots to those hospitals that
originally qualified to receive slots under section 5503, but for which
we did not have sufficient slots to satisfy their requests. We proposed
to assign the additional slots in the same priority order as under the
first redistribution process under section 5503, resuming where we left
off, until all the slots have been distributed. After such point, there
would be no further harvesting of slots or redistribution under section
5503.
In the August 3, 2010 proposed rule (75 FR 46414), we proposed to
add new regulations at Sec. 412.105(f)(1)(iv)(C)(2) for IME and at
Sec. 413.79(n) for direct GME to reflect our proposals regarding
hospitals receiving increases to their FTE resident caps under section
5503, and the requirements that hospitals must meet in order to keep
those FTE slots, and not be subject to a removal of those FTE slots
during the 5-year period of July 1, 2011 through June 30, 2016.
Comment: One commenter requested clarification regarding how the 5-
year restrictions on the use of redistributed slots would apply to a
hospital that is training residents in excess of its cap. The commenter
believed that such a hospital would use the additional cap slots it
receives under section 5503 for ``over-the-cap'' residents, as long as
the hospital converts the ``over-the-cap'' positions to primary care or
to general surgery to meet the primary care average and the 75 percent
requirement.
Response: Even if a hospital that is already training residents in
excess of its caps applies for additional slots, that hospital must use
those cap slots in accordance with the 5-year restrictions established
by section 1886(h)(8)(B)(ii) of the Act; that is, it must maintain the
primary care average, and at least 75 percent of the positions must be
used for additions of primary care or general surgery residents. The
hospital must devote at least 75 percent of those slots to new primary
care and/or general surgery programs, or to expanding existing primary
care and/or general surgery programs. For example, a hospital with an
FTE cap of 100 is training 50 primary care residents and 60 non-primary
care residents, for a total of 110 FTE residents being trained. Assume
the hospital's primary care average is also 50. The hospital receives
10 slots under section 5503, raising its FTE cap from 100 to 110. The
hospital must make sure to continue to train at least 50 FTEs in
primary care, excluding from this count any of the new primary care
positions created under section 5503, so as to meet the primary care
average requirement. That is, the hospital cannot reduce its primary
care FTE count from 50 to 40, and then increase its primary care FTE
count to 50 again using the 10 FTEs received under section 5503 for
primary care residents in an attempt to meet the primary care average
and the 75 percent requirement, because section 1886(h)(8)(B)(ii)(I) of
the Act states ``excluding any additional positions under subclause
(II).'' Rather, since the hospital received 10 slots under section
5503, the hospital must use at least 75 percent of those 10 positions,
or 7.5, to either create a new or expand an existing primary care or
general surgery program. If the hospital wishes to maintain training
110 FTE residents with a cap of 110, the hospital would need to
eliminate 7.5 FTEs of its existing non-primary care residents, and in
their place, train an additional 7.5 primary care or general surgery
FTE residents. Assuming that the hospital chose to use the slots for
primary care (and not for general surgery), the hospital would then be
training 57.5 primary care FTE residents and 52.5 nonprimary care FTE
residents. If the hospital does not want to reduce its non-primary care
FTE count, then it would need to increase the number of residents it is
training above 110, ensuring that it trains at least 7.5 additional
FTEs in either primary care or surgery.
The situation is somewhat different for a hospital that is training
residents in excess of its FTE resident cap, but all of the residents
it has been training are in primary care specialties. If this hospital
receives slots under section 5503, then this hospital would not need to
convert any positions to primary care or general surgery, because it is
already training 100 percent of its FTEs as primary care residents. It
would be using 75 percent of the additional slots to start a new or
expand an existing primary care or general surgery program. For
example, a hospital has an FTE cap of 15, but after July 1, 2011, it is
training 20 primary care FTE residents (and no other residents). Assume
its primary care average is also 20 FTEs. It applies for and receives 4
slots, raising its FTE cap to 19. This hospital must continue to train
20 primary care FTE residents on or after July 1, 2011, in order to
meet the primary care average requirement. Furthermore, it must use 75
percent of 4 of the slots it received (that is, 3) to train an
additional 3 residents in primary care or general surgery programs, for
a total of at least 23 primary care residents being trained (or 20
primary care in addition to 3 new surgery residents being trained).
Comment: One commenter said that CMS' proposed application of the
primary care average test and the requirement that 75 percent of the
slots received must be in primary care or general surgery appears
``cumulative,'' which can lead to ``absurd results.'' The commenter
gave the following example:
The hospital has a current resident cap of 24 FTEs. For the last 3
years, the hospital has trained an average of 36 FTE residents, so it
is 12 over its cap. In addition, for the last 3 years, the hospital has
had an average of 36 residents in primary care, that is, 100 percent in
primary care. One would think that 100 percent primary care is a good
thing, but it is impossible for this hospital to change its mix to add
75 percent of its increased slots above the 3-year average in primary
care.
The commenter believed this result was not required by the ACA.
Specifically, section 1886(h)(8)(B)(ii) of the Act states, ``a hospital
that receives an increase in the otherwise applicable resident limit
under this subparagraph shall ensure, during the 5-year period

[[Page 72199]]

beginning on the date of such increase, that--
(I) The number of full-time equivalent primary care residents, as
defined in paragraph (5)(H) (as determined by the Secretary), excluding
any additional positions under subclause (II)[emphasis added by the
commenter], is not less than the average number of full-time equivalent
primary care residents (as so determined) during the 3 most recent cost
reporting periods ending prior to the date of enactment of this
paragraph; and
(II) Not less than 75 percent of the positions attributable to such
increase are in a primary care or general surgery residency (as
determined by the Secretary).
The commenter believed that ``excluding any additional positions''
added for primary care means that the number of primary care positions
maintained in the prior 3-year period should be determined by excluding
primary care positions over the cap for which the hospital is seeking
an addition to its cap. Thus, the commenter believed in the example
above, the primary care average requirement would be met by the
hospital continuing to train 100 percent of their FTEs as primary care
residents, and the 75 percent test would be applied to residents the
hospital is already training in excess of its cap.
Response: We believe the commenter has misunderstood our proposal
regarding the requirements for meeting the 75 percent threshold
requirement. Contrary to the commenter's assertion, the hospital in the
commenter's example need not ``change its mix to add 75% of its
increased slots above the 3 year average in primary care.'' Rather, the
hospital in the example is already training only primary care
residents. To meet the primary care average requirement, it would not
need to convert current positions to primary care. As explained in
response to the previous comment, to meet the test at section
1886(h)(8)(B)(ii)(I), this hospital would need to continue to train at
least 36 primary care FTE residents, and in so doing, would satisfy the
primary care average requirement. In addition, to meet the 75 percent
threshold requirement, the hospital will need to increase the number of
residents it is training and add at least 9 FTEs (that is, 75 percent
of 12 FTEs it receives under section 5503) for primary care or general
surgery, for a total of 45 primary care residents (or a total of 36
primary care and 9 new surgery residents). This is because, under
section 1886(h)(8)(B)(ii)(I) of the Act, a hospital cannot apply the
positions it is using to fulfill the 75 percent threshold toward
meeting the primary care average requirement. This is also consistent
with the example given with Hospital B in the third column on page
46412 of the August 3, 2010 proposed rule. [``In another example,
Hospital B has a December 31 fiscal year end, an FTE cap of 10 FTEs,
and a total FTE count of 12. In its three most recent cost reports
ending prior to March 23, 2010 (fiscal year end December 31, 2009,
December 31, 2008 and December 31, 2007), Hospital A was training 12
primary care FTE residents in each of the 3 years. The average number
of primary care FTE residents is 12. Hospital B applied for and
received 4 additional FTE cap slots under section 5503. Beginning July
1, 2011 and ending June 30, 2016, Hospital B must ensure that it does
not train less than 12 primary care FTE residents, and it must ensure
that it trains an additional 3 FTEs of the 4 slots it receives in
either primary care or general surgery. (75 FR 46412)] This means that
Hospital B must add 3 additional FTEs above the 12 it is training, and
those 3 FTEs would either be in primary care or general surgery.
The commenter believed that ``excluding any additional positions''
added for primary care means that the number of primary care positions
maintained in the prior 3-year period should be determined by excluding
primary care positions over the cap for which the hospital is seeking
an addition to its cap. We disagree with the commenter. Knowing that
the overall goal of section 5503 is to increase the number of primary
care practitioners, we believe that the phrase ``excluding any
additional positions under subclause (II)'' simply means that a
hospital should not attempt to meet its primary care average
requirement, which is based on historical numbers of primary care
residents trained, by filling in the quota with newly added primary
care positions as a result of slots received under section 5503. That
is, with the primary care average requirement, Congress sought a
measure of assurance that, at least with respect to hospitals that
receive slots under section 5503, a relatively consistent ``baseline''
number of primary care residents would continue to be trained, while,
through the 75 percent requirement ``under subclause (II),'' at least
75 percent of the redistributed slots would also be used for additional
primary care (or general surgery) slots. To the extent that the
redistributed slots must be used to create new or expand existing
programs, this means that even more primary care residents above the
``baseline'' will be trained. That is why we proposed in the proposed
rule that, ``At a minimum, the applicant hospital is required to
maintain the average number of FTE primary care residents that it
trained during the three most recent cost reporting periods ending
prior to March 23, 2010. Further, we are proposing that in addition to
the primary care residents used to maintain the primary care average,
the applicant hospital must separately ensure that at least 75 percent
of the increased FTE cap slots it receives are used to count FTE
residents in primary care or general surgery'' (emphasis added, 75 FR
46412).
Comment: Commenters disagreed with CMS' proposal that hospitals
that receive additional slots under section 5503 must demonstrate that
for each cost report during the 5 years from July 1, 2011 through June
30, 2016, for IME and direct GME respectively, at least 75 percent of
the FTE residents added in each year must be used for residents
training in primary care or general surgery programs. The commenters
believed this requirement is burdensome to both hospitals and
contractors, and is also untenable because hospitals do not always fill
all positions they offer. The commenters believe that CMS has the
authority to make determinations about whether hospitals have met the
75 percent and the primary care average requirements at the end of the
5-year period: ``The Secretary may determine whether a hospital has met
the requirements under this clause during such 5-year period in such
manner and at such time as the Secretary determines appropriate,
including at the end of such 5-year period.'' The commenter also
encouraged CMS to allow hospitals some flexibility in meeting the 75
percent requirement, because there are a number of reasons why a
hospital's primary care and general surgery numbers could fluctuate
slightly from year to year, including accreditation standards, fill
match rates, and leaves of absence. The commenters requested that CMS
find a hospital to have met the 75 percent requirement so long as the
average number of residents the hospital added over the course of the 5
years is within the greater of 2 resident FTEs or 95 percent of the
target number of primary care and general surgery residents. For
example, if a hospital was awarded 20 new slots through the
redistribution program and added an additional 20 resident FTEs, 75
percent of 20 would be 15 resident FTEs. CMS should find the hospital
to have met the 75 percent requirement so long as on

[[Page 72200]]

average, at the end of the five year period, at least 13 of those FTE
residents were training in primary care or general surgery.
Another commenter recommended that hospitals demonstrate that they
met the 75 percent test over no less than 3 years. The commenter said
there ``is no room for mistakes under CMS' proposal.'' The commenter
noted that FTEs are measured in fractions, and ``it is conceivable that
a hospital could lose additions to its cap by reason of falling short
.01 of the 75 percent standard.'' The commenter argued that there are
various reasons why a hospital might fall short of the 75 percent
threshold (such as residents leaving the program due to personal or
other reasons or uncertainties in rotation schedules). The commenter
argued that CMS has used ``multi-year measures'' in other contexts,
such as the 3-year rolling average for the direct GME and IME FTE count
and in the context of geographic reclassification for the wage index.
Therefore, particularly considering the ``severe adverse consequences''
that could result from the loss of additions to a hospital's cap, CMS
should apply an averaging method to measuring compliance with the 75
percent test. However, one commenter applauded the 75 percent
requirement and requested that CMS extend this requirement beyond 5
years, if the statute permits.
Another commenter asked that CMS allow for concessions to be made
in the calculation of the average number of primary care residents that
were trained in the last three cost reporting periods ending prior to
March 23, 2010. The commenter stated that concessions may be necessary
to account for changes in school, program(s), and rotation(s) that have
occurred either during those 3 years or between the end of the last
fiscal year and the time the additional slots are awarded. Some of
these changes may include a closure of a program, a shifting of a
rotation to another affiliated hospital, and a shifting of residents
between training sites. Another commenter requested that we clarify and
provide more detail regarding the repercussions to hospitals that are
awarded resident slots through the redistribution program but fail to
meet the 75 percent primary care/general surgery requirement or the
primary care average requirement in a given hospital fiscal year.
Response: We agree with the commenters that the Secretary has the
authority to make determinations about whether a hospital has met the
75 percent and the primary care average requirements at the end of the
5-year period. Section 1886(h)(8)(B)(ii)(II) of the Act states, ``The
Secretary may determine whether a hospital has met the requirements
under this clause during such 5-year period in such manner and at such
time as the Secretary determines appropriate, including at the end of
such 5-year period.'' We stated in the proposed rule (75 FR 46413) that
we believe we have the flexibility to determine which cost reporting
periods within the 5-year period of July 1, 2011 to June 30, 2016 we
may use to assess whether a hospital is consistently meeting the
required criteria. We also proposed to reserve the right to assess as
many times as necessary in the 5-year period that a hospital is meeting
the criteria. Further, we also proposed that Medicare contractors, in
accordance with their normal audit plans, would make assessments as to
whether hospitals are meeting the criteria. Because every hospital is
not audited every year, the Medicare contractor may not audit to
determine if a hospital is meeting the criteria every year within the
5-year period. We believe this proposal is fair and in accordance with
normal audit procedures and, therefore, we are not adopting the
comments requesting that the contractors determine that hospitals met
the requirements over no less than 3 years or only once at the end of
the 5-year period. While we certainly note the ``applause'' from one
commenter regarding the 75 percent threshold requirement, the statute
clearly limits the ``probationary period'' to 5 years and, therefore,
we cannot extend such monitoring beyond June 30, 2016.
We are sympathetic to the commenters' concerns that there is ``no
room for mistakes under CMS' proposal,'' and that some kind of range or
``multi-year'' average should be used to measure compliance with the 75
percent test. Another commenter asked that CMS allow for concessions to
be made in the calculation of the average number of primary care
residents that were trained in the last three cost reporting periods
ending prior to March 23, 2010. We have considered whether the
Secretary has the authority at all to allow for any ``wiggle room'' in
determining whether a hospital meets the primary care average and the
75 percent threshold, and whether that authority would apply to the FTE
counts on the applicable cost report being reviewed during the 5-year
period, or whether, as the one commenter suggests, concessions could
instead be made in the determination of the primary care average based
on the cost reports that most recently ended on or before March 23,
2010. We do not believe we have flexibility to adjust the number for
the primary care average or the 75-percent threshold. The statutory
language stating ``The number of full-time equivalent primary care
residents, as defined in paragraph (5)(H) (as determined by the
Secretary), excluding any additional positions under subclause (II), is
not less than the average number of full-time equivalent primary care
residents (as so determined) during the 3 most recent cost reporting
periods ending prior to the date of enactment of this paragraph'' is
very specific; ``close'' is not close enough. Therefore, we are not
adopting the commenter's request that a hospital has met the 75 percent
requirement so long as the average number of residents the hospital
added over the course of the 5 years is within the greater of 2
resident FTEs or 95 percent of the target number of primary care and
general surgery residents. However, we believe we have the discretion
to consider a hospital's performance over more than 1 year, rather than
only always reviewing each year during the 5 years independently. For
example, if Hospital A's GME payments are reviewed during Year 1 of the
5-year period, and Hospital A is found to not meet the primary care
average or the 75 percent threshold requirement, then Hospital A would
lose the slots it received under section 5503. If Hospital A has met
the requirements in Year 1, it would keep the slots. If Hospital A is
reviewed in Year 2, and the contractor determines that in Year 2's cost
report, the primary care average or the 75 percent threshold is not
met, then rather than immediately removing the slots that the hospital
received, the contractor could review Year 1's and Year 2's cost
reports, and average the resident counts from both years to determine
if the hospital has met the criteria over a 2-year period. If, over
that 2-year period, the hospital met the requirements, then the
hospital would be able to keep the slots it received under section
5503. If not, then the contractor would remove the slots. Similarly, if
Hospital A's GME payments are reviewed during Year 3 of the 5-year
period, and the contractor determines that in Year 3's cost report, the
primary care average or the 75 percent threshold is not met, then
rather than immediately removing the slots that the hospital received,
the contractor could review Year 1's and Year 2's cost reports, and
average the resident counts from all 3 years to determine if the
hospital has met the criteria over a 3-year period. If, over that 3-
year period, the hospital met the requirements, then the hospital would
be able to keep the

[[Page 72201]]

slots it received under section 5503. If not, then the contractor would
remove the slots from the earliest year (that is, cost reporting
period) that is reopenable in which it would be determined that the
hospital did not meet the requirements. The same method could apply for
reviews occurring during Years 4 and 5 of the 5-year period.
Comment: Another commenter noted that CMS proposed that Medicare
contractors, in accordance with their normal audit plans, would make
assessments based on a hospital's fiscal year ``when possible''
(commenter emphasis added), and as early as the tentative settlements,
such that the Medicare contractors could make a first assessment for an
initial short assessment period, then annually as each of the
hospital's fiscal year ends until there is another final short
assessment period that starts after the provider's last fiscal year end
within the 5-year window and runs through June 30, 2016. The commenter
stated that it is unlikely that the Medicare contractor might review a
hospital's number of primary care residents as early as the tentative
settlement because (1) a review of interns and residents is not part of
the normal review process for a tentative settlement, and (2) this
information is not on the cost report in the level of detail needed for
review. The commenter expected the most likely scenario to be that a
Medicare contractor would review the information, if available, at desk
review (which is supposed to be within 1 year of cost report
submission, for timeliness), or at audit.
Response: In the August 3, 2010 proposed rule (75 FR 46412), we
proposed that ``the FTE counts for IME and direct GME used to derive
these primary care averages are subject to audit by the Medicare
contractors, and that, as part of reviews or audits performed by the
Medicare contractors in accordance with their normal audit plans, the
Medicare contractors would check whether a hospital is maintaining its
primary care average in each of the cost reports in the 5-year period
as early as tentative settlement of those five respective cost reports,
and may take prompt action accordingly to adjust a hospital's FTE caps
and direct GME and IME interim payments.'' Under this proposal, we did
not necessarily require the Medicare contractors to review compliance
with the primary care average during every tentative settlement, and at
that time, to also adjust a hospital's FTE caps and interim payments.
However, it was certainly our intention to clearly state that if
noncompliance was discovered, then the contractors would not need to
wait until final settlement to adjust a hospital's IME and direct GME
payments, but such action could occur as soon as possible. It is still
our intention to clearly state that it is within CMS' and the
contractors' rights to adjust a hospital's IME and direct GME payments
as early as possible within a cost report's submission and review
cycle, and that we would not need to wait until desk review, actual
audit, or final settlement to do so. However, the commenter has
prompted us to consider what documentation is actually available to the
contractors at tentative settlement. When a Medicare contractor would
review a hospital's data to determine whether a hospital that received
slots under section 5503 is meeting the primary care average for
portions of cost reporting periods occurring between July 1, 2011 and
June 30, 2016, the contractor would need the documentation that the
hospital used to arrive at its direct GME and IME primary care FTE
counts, including a copy of Worksheet E-3, Part IV for direct GME, and
if the hospital has an OB/GYN program, the rotation schedules
corresponding to the three most recent cost reporting periods ending
prior to March 23, 2010 for OB/GYN, and the rotation schedules for all
primary care residency programs used to establish the IME primary care
FTE count corresponding to the three most recent cost reporting periods
ending prior to March 23, 2010. Further, the contractor would need the
rotation schedules for the cost reporting period under review (that is,
the portions of cost reports occurring between July 1, 2011 and June
30, 2016). We agree with the commenter that rotation schedules and
other documentation generally used for verifying FTE counts are not
available at tentative settlement, as such source documentation is not
typically submitted with the initial cost report. Source documentation
is typically requested by the contractor and submitted by the hospital
when a cost report is desk reviewed or audited, which would be
subsequent to tentative settlement. Accordingly, in this final rule, we
are emphasizing that when a Medicare contractor reviews one or more of
a hospital's cost reports within the 5-year period as explained above,
the contractor may take prompt action as soon as is feasible to adjust
a hospital's FTE caps and direct GME and IME payments, and need not
wait until final settlement to do so.
Comment: One commenter observed that the proposed rule states that
Medicare contractors will check that hospitals that receive slots under
section 5503 maintain a specified level of primary care residents
through their normal audit plans. The commenter pointed out that
Medicare contractors do not audit each teaching hospital every year as
part of their normal audit plans, and if Medicare contractors are to
validate the level of primary care residents at the hospitals that
received additions to their FTE caps, this would be outside of the
normal audit plan.
Response: In the August 3, 2010 proposed rule (75 FR 46413), we
proposed to reserve the right to assess as many times as necessary in
the 5-year period that a hospital is meeting the required criteria.
Furthermore, if a Medicare contractor determines during an audit that a
hospital did not meet the requirements during, for example, the second
year, the contractor could go back and audit the first year (full, or
short period), and make a retroactive adjustment. We will be providing
separate instructions to the Medicare contractors regarding the
implementation of section 5503 and the 5-year probationary period.
Comment: One commenter asked if the hospital has one or more cost
reporting periods in which it does not maintain the primary care
resident level, and then achieves the primary care resident level in
another cost reporting period, will the FTE slots be reinstated. For
example, a hospital in the first year of its 5-year period meets the
requirement for training primary care residents. In the second year, it
does not meet the requirement, so the Medicare contractor removes the
additional FTE caps from both year one and year two. However, based on
the third year's average, which includes years one, two and three, the
provider meets the primary care requirements. The commenter wondered
if, in this example, the FTE cap would be reinstated for all three
years.
The same commenter pointed out that the information required to
determine the level of primary care residents is not on the Medicare
cost report, as noted in the proposed rule. Therefore, the Medicare
cost report is insufficient as a primary source of documentation for
this purpose. The commenter recommended that CMS require hospitals that
receive additional slots under section 5503 to ``reconcile'' the FTE
counts they will report on the Medicare cost report worksheets E, Part
A, and E-3, Part IV, to their primary care resident FTE counts. The
commenter believed the reconciliations should be submitted to the
Medicare contractors, with documentation to support the reconciliation
and the

[[Page 72202]]

number of primary care residents being trained at the hospital each
year.
Response: Once the Medicare contractor and CMS determine that a
hospital has failed to meet the primary care average requirement or the
75 percent threshold between July 1, 2011 and June 30, 2016, it would
lose those slots permanently and the slots would not be reinstated,
even if the hospital meets the requirements in a subsequent cost
reporting period. We believe that once the Secretary determines that a
hospital's FTE caps should be reduced, those slots are subject to
redistribution under section 1886(h)(8)(B)(iii)(II). Therefore, we are
not holding those slots in reserve on the chance that the hospital may
meet the requirements in a subsequent cost reporting period. Further,
we believe the commenter has misunderstood how the determinations
regarding whether compliance with the primary care average requirement
will be achieved. In the commenter's example, the commenter
hypothesizes that based on the third year's average, which includes
years one, two and three (that is, in cost reporting periods during the
5-year probationary period), the provider meets the primary care
requirements. However, determination of the primary care average is
prescribed clearly in the law at section 1886(h)(8)(B)(ii)(I) as being
based on ``* * * the average number of full-time equivalent primary
care residents (as so determined) during the 3 most recent cost
reporting periods ending prior to the date of enactment of this
paragraph'' (emphasis added). Thus, in fact what will happen is that
the Medicare contractor will compare the primary care FTE count from a
given cost reporting period between July 1, 2011 and June 30, 2016, to
the primary care average number of FTE residents that was determined
from averaging the primary care FTE count from the 3 most recent cost
reporting periods ending prior to March 23, 2010. However, as we have
stated in response to the previous comments requesting flexibility in
the determinations regarding whether a hospital has met the primary
care average requirement, if Hospital A's GME payments are reviewed
during Year 3 of the 5-year period, and the contractor determines that
in Year 3's cost report, the primary care average or the 75 percent
threshold is not met, then rather than immediately removing the slots
that the hospital received, the contractor could review Year 1's and
Year 2's cost reports, and average the resident counts from all 3 years
to determine if the hospital has met the criteria over a 3-year period.
If, over that 3-year period, the hospital met the requirements, then
the hospital would be able to keep the slots it received under section
5503. If not, then the contractor would remove the slots.
This commenter is correct that the information required to
determine the level of primary care residents is not on the Medicare
cost report. The commenter recommended that CMS require that hospitals
that receive additional slots under section 5503 ``reconcile'' the FTE
counts they will report on the Medicare cost report worksheets E, Part
A, and E-3, Part IV, to their primary care resident FTE counts, and
that the reconciliations should be submitted to the Medicare
contractors, with documentation to support the reconciliation and the
number of primary care residents being trained at the hospital each
year. As we stated in response to a previous comment, when a Medicare
contractor would review a hospital's data to determine whether a
hospital that received slots under section 5503 is meeting the primary
care average for portions of cost reporting periods occurring between
July 1, 2011 and June 30, 2016, the contractor would need the
documentation that the hospital used to arrive at its direct GME and
IME primary care FTE counts, including a copy of Worksheet E-3, Part IV
for direct GME, and if the hospital has an OB/GYN program, the rotation
schedules corresponding to the three most recent cost reporting periods
ending prior to March 23, 2010 for OB/GYN, and the rotation schedules
for all primary care residency programs used to establish the IME
primary care FTE count corresponding to the three most recent cost
reporting periods ending prior to March 23, 2010. Further, the
contractor would need the rotation schedules for the cost reporting
period under review (that is, the portions of cost reports occurring
between July 1, 2011 and June 30, 2016). We believe that contractors
and hospitals should follow normal cost report and documentation
submission requirements in this regard. As with other audit and
reimbursement issues, hospitals are required to have documentation
available and provide that documentation to the contractor upon
request. The same would apply with the aforementioned required GME
documentation so that the contractors may review a hospital's
compliance with section 1886(h)(8)(B)(ii) of the Act.
Lastly, as stated previously in section XXI.D.12. of this final
rule, we are clarifying in this final rule that ``* * * the average
number of full-time equivalent primary care residents (as so
determined) during the three most recent cost reporting periods ending
prior to the date of enactment of this paragraph'' means the three most
recent cost reports submitted to the Medicare contractor by March 23,
2010.
Comment: One commenter stated that some teaching hospitals that
were awarded positions under section 422 of the MMA on the basis of
qualifying to start or augment a residency program in one specialty
actually used the acquired slots for other programs. The commenter
asked CMS to explain in the final rule how the Agency will ensure that
the awards actually go to create primary care slots.
Response: As we explained on page 46411 of the proposed rule,
section 422 of Public Law 108-173 did not hold hospitals that received
slots accountable for meeting any requirements once those slots were
received effective July 1, 2005, nor did section 422 require CMS to
conduct subsequent reviews of the hospitals that received slots in
order to determine if the hospitals were meeting certain thresholds.
However, section 1886(h)(8)(B)(ii) of the Act, as amended by the
Affordable Care Act, specifically requires a hospital that receives
slots under this provision to meet certain thresholds regarding
training of primary care and/or general surgery residents for a period
of 5 years. As we explained in the proposed rule and in this final
rule, the Medicare contractors will perform reviews or audits to
determine whether hospitals that received slots under section
1886(h)(8)(B)(i) of the Act are meeting those thresholds under section
1886(h)(8)(B)(ii) of the Act, and if not, those slots will be removed
and redistributed in accordance with section 1886(h)(8)(B)(iii) of the
Act.
Comment: One commenter argued that the preclusion on administrative
and judicial review does not apply to audits that the Medicare
contractors will complete, either every 5 years, or at the end of the
5-year period, and therefore, hospitals should have the opportunity to
demonstrate that they met the requirements for how slots received under
section 5503 must be used. Another commenter noted that CMS stated that
determinations of the FTE cap reductions may not be subject to appeal.
However, these FTE cap additions and reductions are reported on the
Medicare cost report, which is subject to appeal.
Response: Section 5503(a)(3) of the Affordable Care Act amended
section 1886(h)(7) of the Act to insert ``or paragraph (8)'' into
paragraph (E), which, as amended, precludes administrative or judicial
review ``with respect to determinations made under

[[Page 72203]]

this paragraph, paragraph (8) * * *.'' (This sentence was subsequently
amended by section 5506(e) as ``this paragraph, paragraph (8), or
paragraph (4)(H)(vi)).'' We believe that this amendment refers to the
entirety of sections 1886(h)(7) and (h)(8) of the Act, respectively,
which would include determinations regarding the FTE cap reductions,
increases, whether a hospital meets the requirements during the 5-year
``probationary'' period, and finally, the redistribution of those
positions if a hospital no longer meets those requirements. Further, we
note that section 1886(h)(8)(B)(ii) of the Act states, ``The Secretary
may determine whether a hospital has met the requirements under this
clause during such 5-year period in such manner and at such time as the
Secretary determines appropriate * * *'' (emphasis added). Therefore,
we disagree with the first commenter and we believe that the preclusion
of administrative and judicial review even applies to determinations
made regarding whether a hospital meets the requirements in the 5-year
``probationary'' period; that is, whether the slots awarded to a
hospital under section 1886(h)(8)(B)(i) of the Act are to be removed
and redistributed due to failure to meet the requirements at section
1886(h)(8)(B)(ii) of the Act. However, because, as the second commenter
points out, the Medicare cost reports are subject to appeal, a hospital
could appeal its FTE count on a cost report occurring between July 1,
2011 and June 30, 2016. To the extent that this FTE count is at the
center of a dispute as to whether the requirements at section
1886(h)(8)(B)(ii) of the Act are met, we do not believe that this
should affect a final determination as to whether the requirements at
section 1886(h)(8)(B)(ii) are actually met. As we clarified in this
final rule, even though we are proposing that the Medicare contractors
may make adjustments to a hospital's direct GME and IME payments as
early as is feasible, it may be several years after June 30, 2016
before CMS determines the exact number of reductions, if any, that are
applied to the FTE caps of hospitals that received additional slots,
but that failed to meet the requirements under section
1886(h)(8)(B)(ii) of the Act * * *.'' This is because under normal
audit work plans, it often takes several years from an initial
submission of a cost report to final settlement. However, if the Notice
of Program Reimbursement (NPR) is issued by the contractor to the
hospital, final settling that cost report, and as part of that final
settlement, the contractor determined that the hospital's primary care
FTE count in that cost report was less than the primary care average,
or that less than 75 percent of the hospital's FTE count was used to
train primary care or general surgery residents, that determination is
not subject to administrative or judicial review--it is a final
determination. This determination that the requirements at section
1886(h)(8)(B)(ii) of the Act are not met, in turn, would trigger the
determinations regarding the reduction and the redistribution of the
awarded positions. These latter determinations are also not subject to
administrative or judicial review. It is true that the cost report in
which those determinations were made is appealable under normal
procedures. Even if the outcome of the appeal, which could occur a
number of years after the initial NPR, would be in favor of the
hospital, raising its primary care FTE count in that year, for example,
this would have no effect on the determination already made years
before that the hospital did not meet the requirements at section
1886(h)(8)(B)(ii) of the Act. The outcome of the appeal could only
affect IME and direct GME payment in that particular cost reporting
year, but would not affect payments or FTE caps in subsequent cost
reports.
After consideration of the public comments we received, we are
clarifying that a hospital cannot use section 5503 slots for cap relief
only; the hospital must use those cap slots to train more primary care
or general surgery residents, or reduce its number of non-primary care
residents, in accordance with the 75-percent threshold requirement. We
also do not believe we have flexibility to adjust the number for the
primary care average or the 75-percent threshold. Therefore, we are not
adopting the commenter's request that a hospital has met the 75-percent
requirement so long as the average number of residents the hospital
added over the course of the 5 years is within the greater of 2
resident FTEs or 95 percent of the target number of primary care and
general surgery residents. However, we believe we have the discretion
to consider a hospital's performance over more than 1 year as to
whether or not the primary care average and 75 percent threshold is
met, although we believe we also maintain the authority to review each
year during the 5 years independently as well. We are modifying our
proposal accordingly.
We are also clearly stating in this final rule that it is within
CMS' and the contractors' rights to adjust a hospital's IME and direct
GME payments as early as is feasible within a cost report's submission
and review cycle, and that we need not wait until final settlement to
do so. Finally, we are clarifying that the determination of the primary
care average is prescribed clearly in the law at section
1886(h)(8)(B)(ii)(I) of the Act as being based on ``* * * the average
number of full-time equivalent primary care residents (as so
determined) during the three most recent cost reporting periods ending
prior to the date of enactment of this paragraph'' means the three most
recent cost reporting periods submitted to the Medicare contractor by
March 23, 2010.
d. No Administrative or Judicial Review
Section 5503(a)(3) of the Affordable Care Act amended section
1886(h)(7)(E) of the Act by adding ``or paragraph (8)'' such that
section 1886(h)(7)(E) of the Act now specifies that ``There shall be no
administrative or judicial review under section 1869, 1878, or
otherwise, with respect to determinations made under this paragraph or
paragraph (8)'' (and then further amended to include paragraph
(4)(H)(vi)). As stated in the preceding section regarding reference
cost reports that are under appeal, we believe the fact that Congress
included this language clearly means that the Congress intended for our
determination with regard to FTE resident cap reductions and
redistributions under sections 1886(h)(8)(A) and (h)(8)(B) to be final,
and not subject to appeal. Because of this statutory language, together
with the requirement that all reductions and increases in FTE resident
caps be made effective July 1, 2011, we do not believe it would be
appropriate to allow hospitals (or CMS) to appeal determinations
concerning the FTE cap reductions or the FTE cap increases) under
section 1886(h)(8) of the Act. In addition, as indicated previously, we
believe that Congress intended this provision to be implemented fairly,
but efficiently, avoiding the delays and uncertainty that would be
produced by an appeals process. Furthermore, we note that, as explained
previously in this preamble, as was done under section 422 of Public
Law 108-173, Medicare contractors will provide hospitals with a time-
limited opportunity to review cap reduction determinations for possible
technical errors before they are finalized.
We did not receive any public comments on this section, and we are
finalizing our proposal accordingly.
The following are miscellaneous public comments we received on
section 5503 and our responses to them.
Comment: Several commenters expressed general support for the
redistribution of resident slots through section 5503. Many commenters
agreed

[[Page 72204]]

that redistribution preference given to hospitals in a State whose
resident-to-population ratio is within the lowest quartile and
hospitals in the top 10 States/territories/districts in terms of
primary care HPSA to population ratios is appropriate. One commenter
wrote that ``we believe the distribution of these unused medical
education slots will help us maintain, even increase, the number of
family practice physicians we can train.'' Another commenter considered
these residency slot redistributions to be positive developments in the
effort to improve the physician workforce shortage in rural areas.
Although many commenters expressed general support for these policies,
several commenters also mentioned that additional efforts will be
necessary to meet the nationwide need for resident slots.
Response: We appreciate the commenters' support for our proposals.
Comment: One commenter asked that CMS clarify whether there is any
relationship between the section 5503 redistribution program and the
rules for counting residents for the IME teaching adjustments under the
psychiatric or rehabilitation PPSs.
Response: Section 5503(a) amended section 1886(h) of the Act, which
covers direct GME payments to hospitals paid under the IPPS or other
hospital PPSs, which are the Inpatient Rehabilitation Facility (IRF)
PPS, the Inpatient Psychiatric Facility (IPF) PPS, and the Long Term
Care Hospital (LTCH) PPS. However, section 5503(b) amended section
1886(d)(5)(B)(v) of the Act for IPPS IME purposes. Therefore, the IME
FTE cap reductions and increases under section 5503 only apply to
``subsection (d)'' IPPS hospitals. Section 5503 has no applicability to
the IME teaching adjustments under the IRF PPS or the IPF PPS.
Comment: One commenter generally urged CMS to proceed with caution
in the development of the final rule and to implement regulations that
minimize, to the extent possible, the administrative burden associated
with those requirements.
Response: We are sensitive to the documentation burdens which
hospitals have, and despite the exemption of section 5503 from the
Paperwork Reduction requirements, we have attempted to require
documentation that is crucial for us to implement this provision in as
fair and effective manner as possible.

ADDENDUM

Trainees in Osteopathic Programs as Reported by State--2009-2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Internship Programs Residency Programs Total
State --------------------------------------------------------------------------------------------------------------------
Programs Positions Trainees Programs Positions Trainees Programs Positions Trainees
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama............................ 0 0 0 1 18 0 1 18 0
Alaska............................. 0 0 0 1 9 9 1 9 9
Arizona............................ 0 0 0 8 81 39 8 81 39
Arkansas........................... 0 0 0 2 15 2 2 15 2
California......................... 6 75 31 25 309 191 31 384 222
Colorado........................... 1 4 3 1 9 0 2 13 3
Connecticut........................ 1 12 1 1 11 3 2 23 4
Delaware........................... 1 15 10 1 24 8 2 39 18
Florida............................ 10 124 45 47 536 327 57 660 372
Georgia............................ 1 4 3 3 29 18 4 33 21
Illinois........................... 6 41 29 39 427 293 45 468 322
Indiana............................ 1 3 1 4 30 21 5 33 22
Iowa............................... 0 0 0 4 40 28 4 40 28
Kansas............................. 0 0 0 1 12 11 1 12 11
Kentucky........................... 2 9 3 6 42 18 8 51 21
Maine.............................. 0 0 0 7 76 42 7 76 42
Massachusetts...................... 2 10 5 2 12 10 4 22 15
Michigan........................... 20 213 92 185 1878 1289 205 2091 1381
Minnesota.......................... 0 0 0 2 14 10 2 14 10
Mississippi........................ 0 0 0 2 24 6 2 24 6
Missouri........................... 3 15 5 21 163 116 24 178 121
Nevada............................. 1 15 13 6 85 57 7 100 70
New Jersey......................... 6 57 21 54 595 350 60 652 371
New York........................... 19 212 89 64 845 507 83 1057 596
North Carolina..................... 2 17 0 3 33 11 5 50 11
Ohio............................... 11 105 42 100 872 589 111 977 631
Oklahoma........................... 2 16 7 28 291 130 30 307 137
Oregon............................. 1 6 0 8 61 11 9 67 11
Pennsylvania....................... 32 263 124 99 1190 770 131 1453 894
Rhode Island....................... 0 0 0 4 50 23 4 50 23
South Carolina..................... 0 0 0 1 14 15 1 14 15
Tennessee.......................... 0 0 0 3 33 13 3 33 13
Texas.............................. 4 32 13 23 194 107 27 226 120
Virginia........................... 3 33 5 14 207 72 17 240 77
Washington......................... 0 0 0 1 6 5 1 6 5
West Virginia...................... 7 37 16 18 208 111 25 245 127

[[Page 72205]]

Wisconsin.......................... 0 0 0 2 46 31 2 46 31
Wyoming............................ 0 0 0 1 12 4 1 12 4
Total.......................... 142 1,318 558 792 8,501 5,247 934 9,819 5,805
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: The American Osteopathic Association.

BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

Application Process and CMS Central Office and Regional Office Mailing
Addresses for Receiving Increases in FTE Resident Caps

In order for hospitals to be considered for increases in their FTE
resident caps, each qualifying hospital must submit a timely
application. The following information must be submitted on
applications to receive an increase in FTE resident caps:
The name and Medicare provider number of the hospital.
The name of the Medicare contractor to which the hospital
submits its Medicare cost report.
The total number of requested FTE resident slots for
direct GME or IME, or both, up to 75 direct GME FTE and 75 IME FTE per
hospital.
A completed copy of the CMS Evaluation Form for each
residency program for which the hospital intends to use the requested
increase in FTE residents.
Source documentation to support the assertions made by the
hospital on the CMS Evaluation Form.
FTE resident counts for direct GME and IME and FTE
resident caps for direct GME and IME reported by the hospital in the
most recent cost report submitted to the Medicare contractor by March
23, 2010. (Include copies of Worksheets E, Part A, E-3, Part IV, and if
a hospital received an increase to its FTE cap(s) under section 422 of
the MMA, a copy of E-3, Part VI).
As part of its application, for purposes of computing the
primary care average under section 1886(h)(8)(B)(ii)(I) of the
Affordable Care Act, the hospital must include the documentation that
it used to arrive at its direct GME and IME primary care FTE counts,
including a copy of Worksheet E-3, Part IV for direct GME, and if the
hospital has an OB/GYN program, the rotation schedules corresponding to
the three most recent cost reporting periods ending prior to March 23,
2010 (and submitted to the Medicare contractor by March 23, 2010) for
OB/GYN, and the rotation schedules for all primary care residency
programs used to establish the IME primary care FTE count corresponding
to the three most recent cost reporting periods ending prior to March
23, 2010.
An attestation, signed and dated by an officer or
administrator of the hospital who signs the hospital's Medicare cost
report, of the following information:
``I hereby certify that I understand that misrepresentation or
falsification of any information contained in this application may be
punishable by criminal, civil, and administrative action, fine and/or
imprisonment under federal law. Furthermore, I understand that if
services identified in this application were provided or procured
through payment directly or indirectly of a kickback or were otherwise
illegal, criminal, civil, and administrative action, fines and/or
imprisonment may result. I also certify that, to the best of my
knowledge and belief, it is a true, correct, and complete application
prepared from the books and records of the hospital in accordance with
applicable instructions, except as noted. I further certify that I am
familiar with the laws and regulations regarding Medicare payment to
hospitals for the training of interns and residents.''
The completed application and supporting documentation (as
described above) must be submitted to the CMS Central Office and the
CMS Regional Office for the region in which the applicant hospital is
located. The application must be received on or before January 21,
2011. The addresses of the CMS Central Office and Regional Offices are
listed below.

CMS Central and CMS Regional Office Mailing Addresses for Applications
for Increases in FTE Resident Caps

Central Office

[[Page 72212]]

Building, Suite 216, 150 South Independence Mall West, Philadelphia, PA
19106, Phone: (215) 861-4140.
Region IV (Alabama, North Carolina, South Carolina, Florida, Georgia,
Kentucky, Mississippi, and Tennessee)
Centers for Medicare and Medicaid Services (CMS), Associate
Regional Administrator, Division of Financial Management and Fee for
Service Operations, Region IV, Atlanta Federal Center, 61 Forsyth
Street, SW., Suite 4T20, Atlanta, GA 30303-8909, Phone: (404) 562-7300.
Region V (Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin)
Centers for Medicare and Medicaid Services (CMS), Associate
Regional Administrator, Division of Financial Management and Fee for
Service Operations, Region V, 233 North Michigan Avenue, Suite 600,
Chicago, IL 60601, Phone: (312) 886-6432.
Region VI (Arkansas, Louisiana, New Mexico, Oklahoma, and Texas)
Centers for Medicare and Medicaid Services (CMS), Associate
Regional Administrator, Division of Financial Management and Fee for
Service Operations, Region VI, 1301 Young Street, Suite 714, Dallas, TX
75202, Phone: (214) 767-6423.
Region VII (Iowa, Kansas, Missouri, and Nebraska)
Centers for Medicare and Medicaid Services (CMS), Associate
Regional Administrator, Division of Financial Management and Fee for
Service Operations, Region VII, Richard Bolling Federal Building, Room
235, 601 East 12th Street, Kansas City, MO 64106, (816) 564-1843.
Region VIII (Colorado, Montana, North Dakota, South Dakota, Utah and
Wyoming)
Centers for Medicare and Medicaid Services (CMS), Associate
Regional Administrator, Division of Financial Management and Fee for
Service Operations, Region VIII, Colorado State Bank Building, 1600
Broadway, Suite 700, Denver, CO 80202, Phone: (303) 844-2111.
Region IX (Arizona, California, Hawaii, and Nevada and Territories of
American Samoa, Guam and the Commonwealth of the Northern Mariana
Islands)
Centers for Medicare and Medicaid Services (CMS), Associate
Regional Administrator, Division of Financial Management and Fee for
Service Operations, Region IX, 90 7th Street, Suite 5-300 (SW), San
Francisco, CA 94103-6708, Phone: (415) 744-3501.
Region X (Alaska, Idaho, Oregon, and Washington)
Centers for Medicare and Medicaid Services (CMS), Associate
Regional Administrator, Division of Medicare Financial Management,
Region X, 2201 Sixth Avenue, MS/RX-46, Seattle, WA 98121, Phone (206)
615-2094.

E. Preservation of Resident Cap Positions From Closed Hospitals
(Section 5506 of the Affordable Care Act)

1. Background
As we explain in section XXI.A. of this preamble, Medicare makes
both direct GME and IME payments to hospitals that train residents in
approved medical residency training programs. Direct GME payments are
made in accordance with section 1886(h) of the Act, based generally on
hospital-specific PRAs, the number of FTE residents a hospital trains,
and the hospital's Medicare patient share. IME payments are made in
accordance with section 1886(d)(5)(B) of the Act, based generally on
the ratio of the hospital's FTE residents to the number of hospital
beds. Accordingly, the calculation of both direct GME and IME payments
is affected by the number of FTE residents that a hospital is allowed
to count; generally, the greater the number of FTE residents a hospital
counts, the greater the amount of Medicare direct GME and IME payments
the hospital will receive. In an attempt to end the implicit incentive
for hospitals to increase the number of FTE residents, Congress
instituted a cap on the number of allopathic and osteopathic residents
a hospital is allowed to count for direct GME and IME purposes under
the provisions of section 1886(h)(4)(F) of the Act for direct GME and
section 1886(d)(5)(B)(v) of the Act for IME. Dental and podiatric
residents were not included in this statutorily mandated cap. For most
hospitals, the limit, or cap, is the unweighted number of allopathic
and osteopathic FTE residents training in the hospital's most recent
cost reporting period ending on or before December 31, 1996. Thus, each
teaching hospital's FTE resident cap is unique to the number of FTE
residents that it trained in the hospital's most recent cost reporting
period ending on or before December 31, 1996.
Under existing regulations at Sec. 413.79(h) for direct GME and
Sec. 412.105(f)(1)(ix) for IME, a hospital that is training FTE
residents at or in excess of its FTE resident caps and takes in
residents displaced by the closure of another teaching hospital may
receive a temporary increase to its FTE residents caps so that it may
receive direct GME and IME payment associated with those displaced FTE
residents. However, those temporary FTE resident cap increases are
associated with those specific displaced FTE residents, and the
increases expire as those displaced residents complete their training
program. Thus, if a teaching hospital closes, its direct GME and IME
FTE resident cap slots would be ``lost,'' because those cap slots are
associated with a specific hospital's Medicare provider agreement,
which would be retired upon the hospital's closure. The closure of a
teaching hospital, particularly if it is a large academic medical
center, could mean not only the displacement of hundreds of residents,
but also the permanent loss of hundreds of Medicare-funded residency
training slots and a sophisticated GME infrastructure that could take
many years to rebuild, threatening the availability of health care
services in a community. Section 5506 of the Affordable Care Act
addresses this situation by amending section 1886(h)(4)(H) of the Act
to add a new clause (vi) that instructs the Secretary to establish a
process by regulation under which, in the event a teaching hospital
closes, the Secretary will permanently increase the FTE resident caps
for hospitals that meet certain criteria by the number of FTE resident
positions in the closed hospital's training programs.
Section 5506 of the Affordable Care Act specifically instructs the
Secretary to increase the FTE resident caps for other hospitals based
upon the FTE resident positions in teaching hospitals that closed ``on
or after a date that is 2 years before the date of enactment'' (that
is, March 23, 2008). Although certain of the FTE cap increases granted
pursuant to section 5506 will be based on hospital closures that
occurred prior to this notice and comment rulemaking procedure, we
indicated in the August 3, 2010 proposed rule that the process we
proposed to establish in the final rule would also be used for all
future teaching hospital closures. We indicated that we were in the
process of instructing the Medicare contractors to notify us of every
teaching hospital that has closed since March 23, 2008, and of the
direct GME and IME FTE caps for each of those closed hospitals. We plan
to use this information to determine how many slots are currently
available for increases to other hospitals' FTE resident caps.
We note that section 1886(h)(4)(H)(vi)(IV) of the Act, as

[[Page 72213]]

added by section 5506(a) of the Affordable Care Act, states that ``The
aggregate number of increases in the otherwise applicable resident
limits for the hospitals under this clause shall be equal to the number
of resident positions in the approved medical residency programs that
closed on or after'' March 23, 2008. For purposes of implementing this
section 1886(h)(4)(H)(vi)(IV) of the Act, in the August 3, 2010
proposed rule (75 FR 46421), we proposed to interpret ``the number of
resident positions'' to mean the number that is equal to the IME and
direct GME FTE resident caps of a hospital that closed, or will close.
We do not believe the intent of this provision is to distribute and pay
for more FTE resident slots than the amount equal to a closed
hospital's IME and direct GME FTE resident caps, in the instance where
a closed hospital was training more FTE residents than its FTE resident
caps. Further, in the situation where a closed hospital was training
FTE residents below its caps, we believe that for the sake of ensuring
that a community could retain up to its full training strength, we
believe it is appropriate to distribute, not the actual number of slots
the closed hospital had been training prior to its closure, but the
number of FTE resident slots equal to the IME and direct GME FTE caps
of the closed hospital.
2. Definition of a ``Closed Hospital''
Section 1886(h)(4)(H)(vi) of the Act, as added by section 5506(a)
of the Affordable Care Act, states that ``the Secretary shall, by
regulation, establish a process under which, in the case where a
hospital (other than a hospital described in clause (v)) with an
approved medical residency program closes on or after'' March 23, 2008,
the Secretary shall increase the FTE resident caps of other hospitals
accordingly (emphasis added). Under existing regulations at Sec.
489.52 and Sec. 413.79(h), ``closure of a hospital'' means the
hospital terminates its Medicare provider agreement. In the August 3,
2010 proposed rule (75 FR 46421 and 46422), we proposed to define a
``closed teaching hospital'' for purposes of section 5506 in a similar
manner, but would also specify that the FTE resident cap slots of the
hospital that closed no longer exist as part of any other hospital's
permanent FTE resident cap. Thus, we proposed that this provision would
not apply to hospitals that declare bankruptcy but are still
participating under the same Medicare provider agreement, nor would it
apply to teaching hospitals that remain open, but close one or more
residency programs. It also would not apply to mergers, because in the
case of a merger, the Medicare provider agreement of one hospital is
subsumed into the provider agreement of the surviving provider; no
provider agreement is retired, even if operations at one facility are
scaled back or ceased.
However, we proposed that the proposed revised definition of
hospital closure for purposes of implementing section 5506 would apply
in the case of acquisitions, where the new owner voluntarily terminates
the Medicare provider agreement of the hospital it purchased by
rejecting assignment of the previous owners' provider agreement, thus
abdicating the FTE resident cap slots associated with that provider
agreement, even if the new owner will continue to operate the hospital
exactly as it had been operated before the acquisition (that is, makes
no changes to the bed size, infrastructure, services, and GME
programs). We believe this is appropriate because section 5506 of the
Affordable Care Act specifically addresses hospital ``closure'' and
ensures preservation of the FTE cap slots within a community when a
teaching hospital does ``close,'' based on specified criteria for
redistributing the slots from the closed hospital to increase the FTE
caps for other hospitals. However, as we explain further below, it is
possible for the new hospital formed in an acquisition to receive
preference in receiving an increase to its FTE resident caps based on
redistributed slots from the closed hospital that it acquired.
Section 1886(h)(4)(H)(vi) of the Act, as added by section 5506(a),
also states that ``the Secretary shall, by regulation, establish a
process under which, in the case where a hospital (other than a
hospital described in clause (v)) with an approved medical residency
program closes * * *'' (emphasis added). A hospital described in
section 1886(h)(4)(H)(v) of the Act is an entity that enters into a
provider agreement pursuant to section 1866(a) of the Act to provide
hospital services on the same physical site previously used by Medicare
Provider No. 05-0578. Accordingly, we proposed not to redistribute any
FTE cap slots associated with Medicare Provider Number 05-0578.
Comment: One commenter noted that CMS proposed to define a closed
teaching hospital for purposes of section 5506 as a hospital (a) that
terminates its Medicare provider agreement, and (b) whose cap slots no
longer exist as part of any other hospital's permanent FTE resident
cap. The commenter asked CMS to clarify situations in which a
hospital's Medicare provider agreement would be terminated but whose
slots would still exist as part of another hospital's permanent FTE
resident cap. The commenter also observed that the existing regulations
text regarding the definition of hospital closure at Sec. Sec.
413.79(h) and 489.52 do not indicate the concept that caps of a closed
teaching hospital no longer exist as part of another hospital's
permanent FTE resident cap.
Another commenter noted the provision authorizing the
redistribution of residency slots would apply, however, in the case of
an acquisition wherein the new owner voluntarily terminates the
provider agreement of the hospital it purchased, ``even if the new
owner will continue to operate the hospital exactly as it had been
operated before the acquisition (that is, make no changes to the bed
size, infrastructure, services, and GME programs).'' The commenter
understood that CMS would propose this because ``(1) CMS does not view
this situation as a merger of two hospitals under its current policy,
and (2) CMS has proposed a separate process whereby this situation
could be addressed (within Ranking Criterion 1).'' The
commenter requested confirmation of its understanding of this policy
proposal. Another commenter also commented on this issue and
appreciates the extension of the definition of a closed hospital to
include acquisitions.
Response: We regret that there was confusion regarding the
definition of a closed hospital for the purposes of implementing
section 5506. By specifying that ``the FTE resident cap slots of the
hospital that closed no longer exist as part of any other hospital's
permanent FTE resident caps'' in the August 3, 2010 proposed rule (75
FR 46422), we proposed to emphasize that if slots were permanently
transferred to another provider and they continue to exist, section
5506 would not apply. An example of such a situation would be a merger
wherein the Medicare provider agreement of one hospital is subsumed
into the provider agreement of the surviving provider. In this example,
no provider agreement is terminated, and the FTE resident caps also
would be subsumed permanently into the provider agreement of the
surviving provider. Thus, the purpose of section 5506 is to ensure that
slots that are not already part of another hospital's permanent cap are
not lost, but rather will be redistributed to qualifying hospitals.
The second commenter's understanding of our proposal regarding
acquisitions is correct. We do include

[[Page 72214]]

acquisitions in a case in which the new owner terminates the provider
agreement of the hospital it purchased in the definition of hospital
closure because, in this case, a Medicare provider agreement is
terminated, thus releasing the FTE resident cap slots associated with
that provider agreement. In addition, we are clarifying that for a
hospital that closed due to an acquisition on or after March 23, 2008,
and for which CMS has not given those slots to another provider by
March 23, 2010, that hospital's slots are governed by section 5506 and
CMS' final policies implementing this section.
Comment: One commenter requested that CMS provide additional
clarification regarding the definition of a closed hospital.
Specifically, the commenter asked: ``If the FTEs go permanently to
another hospital because of a provision in an affiliation agreement, is
the hospital considered closed?'' The commenter believed that, in these
instances, the hospital is not considered closed, but requested
clarification from CMS.
Response: In general, a hospital is not closed unless the
hospital's Medicare provider agreement is terminated. With regard to
transfers of FTE caps under Medicare GME affiliation agreements, in
other instances, we have clarified that hospitals cannot use Medicare
GME affiliation agreements to permanently transfer FTE caps from one
hospital to another, regardless of whether the hospital transferring
the FTE cap slots remains open or closes. As described in the August 1,
2002 final rule (67 FR 50076), effective for Medicare GME affiliation
agreements that terminate after October 1, 2002 for any reason,
including closure of a participating hospital, FTEs cannot be
permanently transferred to another participating hospital even if this
circumstance is outlined as a provision in the Medicare GME affiliation
agreement. Rather, if a hospital withdraws from the agreement, or if
the agreement terminates for any reason, the hospitals participating in
the Medicare GME affiliation agreement would revert to their original
FTE caps prior to entering into the Medicare GME affiliation agreement.
FTE cap transfers occurring under Medicare GME affiliation agreements
are temporary and are to be used solely for the purpose of cross-
training residents among hospitals that share residency training
programs (as described in the regulations at Sec. Sec. 413.75(b) and
413.79(f).
3. Priority for Hospitals in Certain Areas
Section 1886(h)(4)(H)(vi)(II), as added by section 5506(a) of the
Affordable Care Act, specifies that the Secretary shall distribute the
FTE cap increases in the following priority order, ``with preference
given within each category to hospitals that are members of the same
affiliated group'' (as defined by the Secretary) as the closed
hospital:
First, to hospitals located in the same core-based
statistical area (CBSA) as, or in a CBSA contiguous to, the hospital
that closed.
Second, to hospitals located in the same State as the
closed hospital.
Third, to hospitals located in the same region as the
hospital that closed.
Fourth, if the slots have not yet been fully distributed,
to qualifying hospitals in accordance with the criteria established
under section 5503 (``Distribution of Additional Residency Positions'')
of the Affordable Care Act.
First, in the August 3, 2010 proposed rule (75 FR 46422), we
proposed to use the same pre-reclassification CBSAs that are used for
wage index purposes under the IPPS in determining which hospitals are
located in the same or contiguous CBSAs as the CBSA in which the
hospital that closed was located, without regard to any
reclassifications made under the provisions of Sec. Sec. 412.102,
412.103, 412.230, 412.232, 412.234, and 412.235 of the regulations.
Second, we proposed to define ``State'' in the second priority category
to include Puerto Rico and the District of Columbia. Third, we proposed
to define ``region'' in the third priority category as Census Region,
consistent with the use of the term elsewhere in the GME regulations.
(The term is used for purposes of establishing direct GME PRAs of
certain new teaching hospitals at Sec. 413.77(e)(1)(iii).) Fourth, as
specified in the fourth priority category, we proposed to employ the
criteria for redistribution of residency positions described in section
5503 of the Affordable Care Act, as implemented in the proposed revised
regulations at Sec. 413.79(n), should there be any slots not
redistributed under the first through third priority categories.
Comment: One commenter supported CMS' proposal to define ``region''
as census region, consistent with the use of the term elsewhere in the
GME regulations. The commenter stated that if CMS elects to use a
different definition of ``region,'' the commenter would support
defining ``region'' consistent with the CMS administrative regions (for
example, CMS Regions I through X).
Response: We appreciate the commenter's support. We are adopting
this proposal as final.
With regard to members of the same Medicare GME affiliated group,
we proposed to give priority within each category to hospitals that are
members of the same Medicare GME affiliated group as the hospital that
closed. A Medicare GME affiliated group, as defined at Sec. 413.75(b),
consists of hospitals that enter into a Medicare GME affiliation
agreement, also as defined at Sec. 413.75(b), for the purpose of
cross-training residents and that, under the terms of the agreement,
aggregate and make temporary adjustments to their respective individual
FTE resident caps. To provide flexibility to hospitals that have
affiliated with the hospital that closed, we proposed to refer to the
most recent Medicare GME affiliation agreement of which the closed
hospital was a member. Hospitals that were listed as participants of
the Medicare GME affiliated group on that most recent Medicare GME
affiliation agreement before the closure of the hospital will receive
preference in receiving FTE cap increases based on the redistributed
slots.
Comment: One commenter noted that, although the commenter
understood that CMS is bound by the statute, it suggested that less
emphasis be placed on whether a hospital was in an affiliation
agreement in the distribution of residency slots resulting from a
hospital closure. Alternatively, the commenter suggested that CMS
prioritize increasing the caps of applying hospitals that are currently
training residents over their caps and, therefore, are training
residents that are not funded by Medicare. The commenter did not
support the proposal to give preference to an applying hospital based
solely on an affiliation that no longer exists with the closed
hospital. The commenter posited that if less emphasis was placed on
affiliation agreements, there could potentially be more opportunity for
new or expanded programs in needed areas such as primary care to emerge
as a result of increased caps. The commenter further stated that an
applying hospital that had a previous affiliation with a closed
hospital could use the increase in its FTE resident cap to train
residents in a specialty for which CMS had not identified a need. To
prevent this, the commenter suggested that hospitals applying under
Ranking Criterion Two should be further ranked based on whether they
are also requesting slots for use in specialties for which CMS has
identified a need. For example, a hospital that is applying under
proposed Ranking Criterion Six to start or expand a primary care
program and was also part of an affiliation agreement with the closed
hospital should be ranked higher than a hospital that is

[[Page 72215]]

applying under proposed Ranking Criterion Six and was not part of the
same affiliated group as the closed hospital. However, both hospitals
should be ranked higher than a hospital that had been a member of an
affiliated group with the closed hospital but is requesting slots to
start a non-primary care program (other than general surgery).
Response: While we appreciate the commenter's suggestions, the
commenter is correct that we are bound by the statute and cannot
consider the suggestions for implementation. The statute does not allow
us to ignore a hospital's affiliated status in determining whether the
hospital qualifies for a cap increase under section 5506. As such, a
hospital that was part of a Medicare GME affiliated group and received
slots from the closed hospital would be ranked under Ranking Criterion
Two, ahead of a hospital that was not part of the same Medicare GME
affiliated group as the closed hospital. We further believe this is
appropriate given that a primary consideration under section 5506 is
continuity of training programs. Therefore, a hospital that is
requesting slots because it seamlessly assumed a program from the
closed hospital, even if that program is in a nonprimary care
specialty, that hospital would qualify under a higher Ranking Criterion
than would another hospital that is requesting the slots to start a new
primary care program.
4. Application Process
In the August 3, 2010 proposed rule (75 FR 46422), we proposed to
establish an application process for hospitals to apply to CMS to
receive an increase in FTE caps based on slots from closed hospitals.
Section 5506 of the Affordable Care Act did not specify an effective
date or an application deadline for hospitals to request an increase to
their caps when a hospital closes. Accordingly, with respect to the
first application process to be implemented for section
1886(h)(4)(H)(vi) of the Act, as added by section 5506(a) of the
Affordable Care Act, and which includes all teaching hospital closures
back to March 23, 2008, we proposed that the application deadline would
be January 1, 2011. For future teaching hospital closures, we proposed
that we would inform the public through an appropriate medium that
increases to hospitals' FTE resident caps are available for
redistribution due to the closure of a teaching hospital, and the
application deadline would be 4 months following the issuance of that
notice to the public.
Comment: Commenters noted that CMS proposed an application deadline
for distribution of slots under section 5506 of January 1, 2011, for
hospitals that closed on or after March 23, 2008, and that for future
teaching hospital closures, CMS proposed that hospitals will have 4
months after CMS notifies the public that slots are available to submit
an application for those slots. The commenters asked that CMS clarify
which deadline will apply to hospitals that close during the comment
period between publication of the proposed rule and the final rule. Two
commenters encouraged CMS to consider teaching hospitals that closed at
any point after publication of the proposed rule to fall into CMS'
second category, for which CMS would provide notice and a future
application deadline.
Some commenters were concerned that the proposed application
deadlines, particularly the first one for January 1, 2011, are too
soon. They pointed out that a hospital's decision to take on displaced
residents permanently may depend on multiple factors, and receiving
ACGME approval for permanent resident positions is also extremely time-
consuming. One commenter recognized that hospitals wish for the
distribution of these slots to occur as quickly as possible, yet the
commenter believed that April 1, 2011, would be a more realistic
deadline than January 1, 2011, for the initial set of applications.
However, another commenter agreed with the proposed deadline of January
1, 2011.
Response: We agree with the suggestion that any closures after
August 3, 2010, the publication date of the proposed rule, should be
part of a second hospital closure process for which CMS will send out a
separate notice. In addition, we agree that to allow all affected
parties sufficient time to gather the documentation necessary to
complete and submit an application for slots from a closed hospital,
the application date for requesting slots from hospitals that have
closed between March 23, 2008 through August 3, 2010, should be
extended to April 1, 2011. Therefore, in this final rule, we are
establishing the application deadline for receipt of slots from
hospitals that closed between March 23, 2008, through August 3, 2010,
as April 1, 2011. Hospitals that close at any point after publication
of the proposed rule, that is, August 3, 2010, will fall into the
second category, for which we will provide separate notice with a
future application deadline.
In addition, as the commenters noted, since receiving approval for
permanent resident positions is very time consuming, in order to ease
the administrative burden on hospitals, similar to the change we made
in this final rule under the Demonstrated Likelihood Criterion 1 for
section 5503, we are adding to the Demonstrated Likelihood Criteria for
section 5506 in this final rule that the hospital may submit
documentation demonstrating that it has made a commitment to start a
new program or take over a program(s) from the closed hospital. One
example of such a commitment would be for the hospital to provide the
minutes from the meeting at which the hospital's GME Committee gave
approval for the hospital to proceed with the process of applying to
the accrediting agency for approval to start a new program.
Comment: One commenter stated that because hospitals interested in
applying for resident cap slots under this provision must be put on
notice of all slots that will be available through the closed hospital
resident slot preservation program, CMS would accomplish this most
effectively by publishing in the final rule a list of all hospitals
that closed on or after March 23, 2008. In publishing this list, the
commenter suggested that CMS also indicate how many cap slots are
available from the hospital's 1996 cap versus how many cap slots are
available from the section 422 redistribution program. Another
commenter also suggested that, for future hospital closures, CMS
publish a notice within 60 days from the effective date of the
termination of the closed hospital's Medicare provider number.
Response: We agree with the commenter's request and have included
at the end of this section a list of teaching hospital closures on or
after March 23, 2008 through August 3, 2010, along with their 1996 FTE
caps and section 422 caps as applicable. We also appreciate the
commenter's suggestion to publish a notice within 60 days from the
effective date of the termination of the closed hospital's Medicare
provider agreement for future hospital closures. We will publish future
closure notices as soon as possible. However, we acknowledge that, in
certain cases, due to various circumstances, publication within 60 days
may not always be achievable. Therefore, we will not be adopting the
requirement to publish a notice within 60 days from the effective date
of the termination of the closed hospital's Medicare provider agreement
for future hospital closures.
After consideration of the public comments we received, in this
final rule, we are establishing the application deadline for receipt of
slots from hospitals that closed between March 23,

[[Page 72216]]

2008 through August 3, 2010, as April 1, 2011. Hospitals that close at
any point after publication of the proposed rule, that is, August 3,
2010, will fall into the second category, for which we will provide
separate notice with a future application deadline.
5. Ranking Criteria
Unlike the application process for FTE cap increases under section
1886(h)(8) of the Act as added by section 5503 of the Affordable Care
Act, we did not propose to establish a ``point'' system to distinguish
between hospitals within each of the first three priority categories.
Rather, within each of the three first statutory priority categories in
section XXI.E.3. of this preamble (that is, same or contiguous CBSAs,
same State, and same Region), in the August 3, 2010 proposed rule (75
FR 46422), we proposed to rank categories in which we would assign
slots first to hospitals that fall within the first ranking category
before assigning slots to those hospitals that fall within the second
ranking category, and would assign slots to those hospitals that fall
within the second ranking category before assigning slots to hospitals
in the third ranking category, and so forth. We did not propose to use
these ranking categories within the fourth priority category because,
under that fourth priority category, the Secretary would use the
process established under section 5503 for section 1886(h)(8) of the
Act. In order to maintain stability in existing GME programs, these
proposed ranking categories generally give preference to applying
hospitals that demonstrate a commitment to continue training residents
in the same programs that the closed hospital operated, or that had a
training relationship with the closed hospital (such as a Medicare GME
affiliation agreement).
Ranking Criterion One. The applying hospital is requesting
the increase in its FTE resident cap(s) because it is assuming (or
assumed) an entire program (or programs) from the hospital that closed,
and the applying hospital is continuing to operate the program(s)
exactly as it had been operated by the hospital that closed (that is,
same residents, same program director, and same (or many of the same)
teaching staff). We proposed this ranking criterion because we
understand that there are situations where, when a hospital is acquired
and its provider agreement is terminated and a new provider agreement
is established in the place of the old one, the new formed
``acquiring'' hospital continues to operate the GME programs seamlessly
and in the same manner as under the previous provider agreement. If
this situation occurs, we believe the new hospital with the new
provider agreement is demonstrating a strong commitment to not only
maintain the GME programs in the community for the long term (that is,
continuity), but to also allow the residents that were at the hospital
when the change in provider agreement occurred to continue to train
there, such that no residents are displaced and no training is
interrupted.
Alternatively, it is possible that perhaps a year or more prior to
a hospital's closure, the hospital closed some or all of its residency
programs, and another hospital assumed an entire program (or programs)
at the time of the residency program's closure, and the applying
hospital has continued to operate that program seamlessly, as it had
been operated at the hospital that ultimately closed. Because the
applying hospital has also demonstrated a strong commitment to
continuity of the residency program(s) in the community by assuming the
program(s) even prior to the other hospital's closure, we proposed that
the applying hospital would be categorized in Ranking Criterion One.
Ranking Criterion Two. The applying hospital was listed as
a participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement of which the closed hospital was a
member before the hospital closed, and under the terms of that Medicare
GME affiliation agreement, the applying hospital received slots from
the hospital that closed, and the applying hospital will use the
additional slots to continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement. We proposed this ranking criterion because
section 1886(h)(4)(H)(vi) of the Act, as added by section 5506(a) of
the Affordable Care Act, directs the Secretary to give preference to
hospitals that are members of the same affiliated group as the hospital
that closed. We believe that, generally, if the applying hospital was
affiliated to receive slots from the hospital that closed, then the
applying hospital was relying on that number of FTE resident slots that
it received in order to maintain its fair share of the cross-training
of the residents in the jointly operated programs. In the absence of
those slots received from the closed hospital, the applying hospital
may not be able to continue training that number of FTE residents, and
those same residents would not only be displaced from the closed
hospital, but might essentially become ``displaced'' from the
affiliated hospitals in which they were used to doing a portion of
their training. Accordingly, we proposed this ranking criterion to
allow hospitals that were affiliated with the closed hospitals to at
least maintain their fair share of the training of the residents in the
programs that they had jointly operated with the closed hospital. We
note that we proposed this ranking criterion regarding affiliated
hospitals as second, after the first ranking criterion regarding
applying hospitals that assume an entire program or programs from the
closed hospital because, even though section 5506 of the Affordable
Care Act directs the Secretary to give preference to members of the
same affiliated group, we believe that a hospital that assumes the
responsibility for an entire program or programs demonstrates a
commitment to maintain the programs to an even greater degree than does
a hospital that was affiliated with the hospital that closed and may
only be maintaining a portion of the residency program or programs.
Ranking Criterion Three. The applying hospital took in
residents displaced by the closure of the hospital, but is not assuming
an entire program or programs, and will use the additional slots to
continue training residents in the same programs as the displaced
residents, even after those displaced residents complete their training
(that is, the applying hospital is permanently expanding its own
existing programs). Similar to Ranking Criterion Two, hospitals fitting
into Ranking Criterion Three also demonstrate a commitment to protect
residents displaced by a hospital's closure, and to ensure that there
is a degree of continuity in the community with respect to the
particular training program or programs that the closed hospital
operated. However, because an applying hospital fitting into this
category was not part of the same Medicare GME affiliated group as the
closed hospital, we proposed that this category would be ranked as
third, below Ranking Criterion Two which relates to hospitals that were
members of the same affiliated group as the closed hospital.
We proposed that the next five proposed ranking criteria would
apply in the instance where there are still slots available from the
closed hospital after distributing slots to hospitals falling within
the first three ranking criteria. Thus, hospitals fitting into proposed
Ranking Criteria Four through Eight would not fit into proposed Ranking
Criteria One, Two, or Three, but they can demonstrate that they will
use the slots in a manner that is consistent with

[[Page 72217]]

current Medicare policy goals, as indicated in section 5503 of the
Affordable Care Act, such as using the slots for a geriatrics or for
other primary care residency programs, or for a general surgery
residency program.
Ranking Criterion Four. The applying hospital does not fit
into Ranking Criteria One, Two, or Three, and will use additional slots
to establish a new or expand an existing geriatrics residency program.
Ranking Criterion Five. The applying hospital does not fit
into Ranking Criteria One, Two, or Three, is located in a Primary Care
HPSA, and will use all the additional slots to establish a new or
expand an existing primary care residency program.
Ranking Criterion Six. The applying hospital does not fit
into Ranking Criteria One, Two, or Three, and will use all the
additional slots to establish a new or expand an existing primary care
residency program.
Ranking Criterion Seven. The applying hospital does not
fit into Ranking Criteria One, Two, or Three, and will use all the
additional slots to establish a new or expand an existing general
surgery residency program.
Ranking Criterion Eight. The applying hospital does not
fit into Ranking Criteria One through Seven.
Comments on Ranking Criterion One
Comment: Several commenters generally supported CMS' proposal to
prioritize the distribution of resident slots to applying hospitals
that assume and seamlessly continue to operate a closed hospital's
entire program. However, the commenters also noted that additional
efforts must be made in order to meet the nationwide need for residency
slots.
Response: We appreciate the commenters' support for the proposal to
prioritize the distribution of resident slots to applying hospitals
that assume and seamlessly continue to operate a closed hospital's
entire program. Any additional efforts to address the commenters'
stated need for additional residency slots would need to be addressed
by Congress as a legislative change affecting hospitals' existing caps.
Comment: One commenter stated that, although it was appreciative of
CMS' attempts to create a mechanism for the redistribution of residency
slots from closed hospitals, the proposed priority ranking criteria may
be too restrictive for many teaching hospitals to achieve. The
commenter asked CMS to consider the ability of current GME programs
that are able to meet critical primary care needs as a high priority
during the application process.
Response: We believe we have developed a system to distribute slots
from closed hospitals that will be administratively achievable and that
will primarily promote the continuity of existing programs. We also
recognize the importance of training primary care physicians, and we
have included Ranking Criteria which reflect this accordingly.
Comment: One commenter observed that CMS included two types of
scenarios in which an applicant hospital would be categorized within
Ranking Criterion One: a situation in which a closed teaching hospital
is acquired by another hospital that continues to train all residents
from the program on the same site; and a situation in which a hospital
closes some or all of its residency programs a year or more prior to
the hospital's closure, and those programs are assumed by another
hospital at a different site. The commenter agreed that hospitals
assuming residency programs under both of these scenarios should be
entitled to the preferential treatment of Ranking Criterion One, but
believed that CMS inadvertently omitted a third example of when this
first ranking criterion would apply. That is, the commenter believed
that a hospital should also be eligible for Ranking Criterion One if it
is located on a site that is different from the closed hospital, and
assumes an entire program at the time the hospital closes (not a year
or more prior to the hospital's closure). The commenter requested that
CMS clarify that this third scenario would fit into Ranking Criterion
One as well.
Response: The commenter raises a good point and is correct that we
did not intend to exclude the third scenario from qualifying under
Ranking Criterion One which would involve a hospital that is located on
a different site than the closed hospital, and that hospital assumes an
entire program simultaneous to the closure of the other hospital, and
not a year or more prior to the hospital's closure. We are clarifying
in this final rule that a hospital is eligible for Ranking Criterion
One if it is located on a site that is different from the closed
hospital, and assumes an entire program at the time the hospital closes
(not a year or more prior to the hospital's closure). In fact, we are
adding a fourth scenario in this final rule that could fit into Ranking
Criterion One--that is, when one hospital acquires another hospital,
retires the provider agreement of the acquired hospital, and creates a
multi-campus hospital, but otherwise, the second campus continues to
operate as before. In that case, the acquiring hospital may qualify
under Ranking Criterion One. In addition, we are clarifying and
refining the timeframe we had in mind when describing the scenario
where one hospital assumes a program ``a year or more'' prior to the
closure of another hospital (75 FR 46423). We did not mean that a
hospital that took over a program 20 years before the closure of a
hospital would qualify under Ranking Criterion One. Rather, we intended
to convey a relatively short timeframe prior to the hospital's closure
in which another hospital assumed a program. For purposes of this final
rule, we are clarifying that in order to qualify under Ranking
Criterion One in the instance where a hospital assumed a program(s)
from a hospital that closed prior to the hospital's closure, the
hospital must have assumed the program(s) in its entirety no more than
5 years prior to the date of the hospital's closure.
Comment: One commenter suggested that CMS reorder Ranking Criteria
One and Two and give precedence to applicant hospitals that have an
affiliation agreement with the closing hospital. The commenter also
suggested that if the applicant hospital is also a member of the
affiliated group and a corporate affiliate (subsidiary, parent or
sister corporation) of the closing hospital, it should be given the
highest priority within Ranking Criterion One. The commenter believed
that Congress intended to allow hospitals that are part of an
affiliated group, to keep FTEs that would otherwise be lost because of
the closure of a hospital within the affiliated group. The commenter
suggested that if CMS wishes to protect programs that would continue to
run after a hospital ``closes'' because it is acquired (and its
provider number terminated), CMS could specify this item as the second
ranking criterion as long as it specifies that this scenario is a
result of an acquisition. The commenter further noted that the
requirement to operate the program exactly as it was operated before
may be counterproductive. The commenter indicated that it may, for
example, cause the acquiring hospital to avoid replacing faculty
members that were not performing well or making other improvements.
Response: We acknowledge that Congress desired to give preference
to hospitals that are members of the same Medicare GME affiliated group
as the closed hospital when distributing the slots from the closed
hospital, as stated in section 1886(h)(4)(H)(vi) of the Act, as added
by section 5506(a) of the Affordable Care Act. However, we are

[[Page 72218]]

not convinced that being a member of the same Medicare GME affiliated
group alone, or being a corporate affiliate of the closed hospital,
warrants a greater degree of preference than hospitals that assume an
entire program or programs from the closed hospital. As we explained in
the August 3, 2010 proposed rule (75 FR 46423), ``We note that we are
proposing this ranking criterion regarding affiliated hospitals as
second, after the first ranking criterion regarding applying hospitals
that assume an entire program or programs from the closed hospital
because, even though section 5506 of the Affordable Care Act directs
the Secretary to give preference to members of the same affiliated
group, we believe that a hospital that assumes the responsibility for
an entire program or programs demonstrates a commitment to maintain the
programs to an even greater degree than does a hospital that was
affiliated with the hospital that closed and may only be maintaining a
portion of the residency program or programs.''
Furthermore, the commenter need not be concerned that hospitals
that would fit into Ranking Criterion Two would be at a disadvantage
and deprived of their fair share of slots to hospitals that would fit
under Ranking Criterion One. In fact, Ranking Criteria One and Two are
not competing with each other, and hospitals fitting into each category
would get their ``fair'' share of slots. For example, assume a hospital
with an FTE resident cap of 100 closes. Hospital A assumes the entire
programs in which 80 FTE residents were training when the hospital
closed. Hospital B had been receiving 20 FTE slots from the closed
hospital under the terms of a Medicare GME affiliation agreement.
Hospital A applies for 80 slots under Ranking Criterion One and, all
other things being equal, is awarded 80 slots. Hospital A could apply
for more than 80 slots, but it could only receive consideration under
Ranking Criterion One for a maximum of 80 slots. Therefore, 20 slots
would remain for Hospital B to apply for and receive under Ranking
Criterion Two. Accordingly, we do not believe it is necessary to
reorder Ranking Criteria One and Two.
Comment: Some commenters asked for clarification regarding what CMS
meant by a hospital assuming an ``entire'' program. One commenter urged
CMS to be flexible with applicants for Ranking Criterion One and
clarify that a hospital that takes on ``substantially all of the
residents training in a particular program at the closed hospital prior
to the hospital's closure or at the time of the hospital's closure''
would be deemed to have assumed an ``entire'' program. The commenters
pointed out that there may be reasons beyond the control of an applying
hospital as to why it may not be able to assume all of the residents in
a program from the hospital that closed, unfairly placing the applying
hospital in a lower ranking category than Ranking Criterion One. For
example, one or more residents might choose not to train at the
applying hospital with the rest of their program colleagues, but
instead may choose to complete their training elsewhere.
Additionally, the commenters asked CMS to define an ``entire
program'' to include only FTE residents training in the closed hospital
at the time of the hospital's closure. For example, if a particular
program at a closed hospital consists of 50 residents, but 20 were
training at another hospital at the time of the closure, a hospital
that agrees to assume the remaining 30 residents who were all training
at the closed hospital should qualify under ``Ranking Criterion One,''
even though the hospital did not assume the program's full complement
of 50 residents.
Response: We agree with the commenters that flexibility in the
definition of ``entire'' program is appropriate because there could be
reasons beyond the control of the applying hospital why it is unable to
assume all of the residents from the closed hospital. The commenters
recommended that a hospital that takes on ``substantially all of the
residents training in a particular program at the closed hospital prior
to the hospital's closure or at the time of the hospital's closure''
would be deemed to have assumed an ``entire'' program. We agree with
this concept, and for purposes of section 5506, we are stating that a
hospital that takes on 90 percent of the residents training in a
particular program at the closed hospital within 5 years prior to the
hospital's closure or at the time of the hospital's closure would be
deemed to have assumed an ``entire'' program. We note that assuming the
``entire'' program, even if it is 90 percent or more of the residents,
implies no limitation based on the closed hospital's FTE resident cap.
For example, if a closed hospital is only training residents in an
internal medicine program, its FTE resident cap is 10, and it was
training 15 FTEs, then assumption of the ``entire'' program does not
mean 10 FTEs, it means at least 90 percent of 15, i.e., 13.5 FTEs. The
applying hospital may request up to 13.5 FTEs under Ranking Criterion
One.
In the example that the commenters provided regarding a particular
program at a closed hospital that consists of 50 residents, but 20 were
training at another hospital at the time of the closure, we agree that
a hospital that assumes the remaining 30 residents who were all
training at the closed hospital should qualify under ``Ranking
Criterion One,'' even though the hospital did not assume the program's
full complement of 50 residents. This policy with regard to what
constitutes a ``closed program'' is consistent with our current policy
and definition of ``closure of a hospital residency program'' at Sec.
413.79(h)(1)(ii), which means ``the hospital ceases to offer training
for residents in a particular approved medical residency training
program.'' This definition recognizes that hospitals often co-sponsor
accredited programs, so that while one of the hospitals may cease to
provide training in that accredited program, the program and rotations
still continue to exist at the other hospitals that co-sponsor and
train residents in that same accredited program. Furthermore, in light
of the clarified definition of ``entire'' program above, using this
example, an applying hospital need only assume 90 percent of the 30 FTE
residents, or 27 FTE residents, in this particular program from the
closing hospital. However, we note that if a hospital is only assuming
90 percent of the residents in the program, then it may only apply to
receive 90 percent of the slots in the program under Ranking Criterion
One. If the applying hospital plans to further expand the program and
can meet the demonstrated likelihood requirement for doing so, it may
possibly qualify for those additional slots under Ranking Criterion
Four through Seven (but not under Ranking Criterion Three because
Ranking Criterion Three is for instances where less than an ``entire''
program is assumed).
Comment: One commenter acknowledged CMS' intent to promote
continuity and supported this requirement for hospitals that close on a
going forward basis. However, the commenter did not believe that the
``seamless'' operation requirement under Ranking Criterion One should
apply to hospitals that apply for resident cap slots from hospitals
that closed between March 23, 2008, and the date of publication of the
final rule. Another commenter understood ``seamless'' to mean that
there cannot have been a point at which the assumption of the program
was interrupted. The commenter believed this requirement is ``wholly
unfair'' to hospitals that assumed programs from hospitals that closed
prior to the publication of the proposed or final rules. The first
commenter believed that while these

[[Page 72219]]

hospitals may have been willing to provide a service to the community
by continuing the entire residency program from the closed hospital,
they were not previously on notice that they would have to do so
``seamlessly.'' The second commenter asserted that this proposed
requirement ``drastically minimizes the importance to these hospitals
of Medicare GME funding.'' The commenters believed that it is
unrealistic and unfair for CMS to expect a hospital to have applied for
ACGME approval to train an entire program on a permanent basis without
``any clear indication that Medicare funding would be continuing.'' For
these reasons, the commenters urged CMS to adopt the ``seamless''
requirement for Ranking Criterion One on a prospective basis only.
Response: As the commenters acknowledge, our intent in implementing
section 5506 is to promote continuity, and, therefore, our intent is
that ``seamless'' assumption of a program from a closed hospital does
mean that there cannot have been a point at which the assumption of the
program was interrupted. The commenters are describing situations where
hospitals have closed in the past one or two years, and while the
programs from those closed hospitals may have been transferred
``seamlessly'' to the applying hospitals 1 or 2 years ago, the applying
hospitals have allowed those programs to phase out, as the residents
that had originally trained at the closed hospital have graduated. We
understand that Medicare GME funding is extremely important to teaching
hospitals, and the absence of it may be a strong factor in an applying
hospital's decision to allow a transferred program to phase out.
Further, we have never required other teaching hospitals to absorb
additional residents on a temporary or permanent basis. While we do not
negatively regard a hospital that did not seamlessly assume a program
or programs from hospitals that have already closed, we also do not see
the need to reward these same hospitals by ranking them under Ranking
Criterion One, now that the prospect of additional Medicare GME funding
may be available to them and they are willing to ``revive'' phased-out
programs. Rather, we believe these hospitals could apply for slots
under section 5506 and may, in fact, receive them, but they would be
ranked under criteria below Ranking Criterion One, as appropriate.
Accordingly, we do not believe it is necessary to adopt the
``seamless'' requirement under Ranking Criterion One on a prospective
basis.
Comment: One commenter noted that CMS proposed that, to qualify
under Ranking Criterion One, an applying hospital must ``continu[e] to
operate the program(s) exactly as it had been operated by the hospital
that closed (that is, same residents, same program director, and same
(or many of the same) teaching staff).'' While the commenter understood
that such continuity may be the likely outcome of moving the entire
program to a new hospital, the commenter believed that decisions about
who the program director and teaching staff should be are better left
to the ``leaders of academic medicine'' to decide, and ``should not be
dictated by CMS or used as a litmus test for whether a hospital has
``assumed'' an entire program.'' The commenter expressed particular
concern about these requirements in situations in which an already-
existing teaching hospital takes over the entire program. The commenter
pointed out that, unlike nonteaching hospitals just beginning to train
residents, such teaching hospitals may not need to hire additional
faculty or program directors, but instead, may simply absorb the entire
program into one of its own, already-established residency training
programs (perhaps, for example, to avoid having two identical programs
at the same hospital). The commenter believed that the adopting
hospital should not be forced to hire these individuals from the closed
hospital to meet ``Ranking Criterion One.'' The commenter argued that
such staffing decisions should be in the hands of the academic medical
leaders who assume responsibility for the program.
Response: In the proposed rule, we defined ``assuming an entire
program'' as maintaining the same residents, staff, and program
director as the original program because that is consistent with our
policy, as clarified in the FY 2010 IPPS/LTCH PPS final rule, regarding
the definition of assuming an existing program (as distinguished from
starting a brand new program). However, we believe that, in this case,
Congress was concerned with preservation of FTE cap slots, and
maintaining continuity for the residents. Therefore, we agree with the
commenter that a hospital may fit into Ranking Criterion One without
taking in the same staff and program director of the closed hospital,
and instead it may be determined to have assumed an entire program if
it trains all of the residents from the closed hospital's program.
Comment: One commenter asked CMS to use its authority to give slots
from hospitals that have closed to be used for replacement of positions
of family medicine programs that have closed. The commenter
acknowledged that hospitals frequently close family medicine training
programs and use its current slots to promote production of more
lucrative specialties. The commenter urged the Secretary to utilize the
authority under Ranking Criterion One to distribute slots from the
closed hospital to those hospitals in the same core-based statistical
area (CBSA) that have continued to operate a family medicine residency
program that was closed by another hospital with the same program
director and the same residents with the family medicine residency
program. The commenter requested parallel provisions under Ranking
Criteria Two and Three.
Response: Ranking Criterion One addresses the commenter's request
to provide preference to hospitals in the same CBSA that assume an
entire family medicine program that was previously operated by a
hospital that closed. Although Ranking Criterion One does not specify
any one specialty in particular; it does provide preference to a
hospital that assumed an entire program in any specialty (including
family medicine) that closed as a result of a hospital closure. It is
important to note that in the event a program closes for reasons other
than hospital closure (assuming the hospital does not subsequently
close shortly thereafter as well), these slots will not be available
for redistribution under section 5506.
Comments on Ranking Criterion Two
Comment: Some commenters believed that CMS proposed to interpret
too strictly the requirement for giving preference to hospitals that
are members of the same affiliated group as the hospital that closed.
The commenters noted that section 5506 merely states that CMS shall
give preference within each geographic category ``to hospitals that are
members of the same affiliated group (as defined by the Secretary under
clause (ii)) as the closed hospital.'' The commenter further noted that
CMS proposed that in order to receive preference, the applying hospital
must have received slots from the closed hospital under the terms of
the affiliation agreement. The commenters asserted that Congress never
limited this priority to only hospitals that received slots from the
closed hospital under the affiliation agreement. Rather, the commenters
believed that having a relationship with the closed hospital ``in the
context of a GME affiliated group'' should be sufficient to qualify for
preference.
Response: As we have explained in the proposed rule and as the
commenters acknowledge, we believe the intent of section 5506 is to
promote

[[Page 72220]]

continuity and limit disruption in residency training. In that light,
we believe it is logical to give preference to a hospital that received
slots under the terms of the Medicare GME affiliation agreement so that
the hospital could continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement, avoiding the displacement of even more
residents. We do not see why a hospital that loaned slots to the closed
hospital under the terms of the Medicare GME affiliation agreement
warrants special consideration if it wants more slots, simply because
it was a member of the same affiliated group. We further disagree with
the commenter's argument that having a relationship with the closed
hospital ``in the context of a GME affiliated group'' should be
sufficient to qualify for preference. We note that under the rules of
the ``shared rotational arrangement'' (as defined at Sec. 413.75(b))
which is a requirement for all members within the same Medicare GME
affiliated group, it is possible for a hospital in the same Medicare
GME affiliated group as the closed hospital not to have any rotating
relationship with the closed hospital--it may have a training
relationship with other hospitals in the group which in turn, had the
training relationship with the closed hospital. We see no reason to
grant this hospital, which had no direct training relationship with the
closed hospital, preference under Ranking Criterion Two, simply because
it was a member of the same Medicare GME affiliated group as the closed
hospital. Therefore, we are not adopting the commenter's
recommendation, and are only giving preference to hospitals that
received slots from the closed hospital under the terms of the Medicare
GME affiliation agreement, so that the hospital could continue to train
at least the number of FTE residents it had trained under the terms of
the Medicare GME affiliation agreement. We also note that should the
hospital that received slots from the closed hospital, or should the
hospital that lent slots to the closed hospital, desire to assume
additional programs or parts of programs from the closed hospital, they
may qualify for slots for those respective programs under Ranking
Criteria One, Three, or others, as appropriate.
Comment: One commenter stated that limiting preference to hospitals
that received slots under the most recent affiliation agreement would
deny some hospitals the opportunity to regain slots unfairly lost due
to prior affiliation agreements. Therefore, the commenter asked CMS to
expand preference for the redistributed slots to hospitals that were
part of the same affiliated group at any point within 5 years prior to
the statutory cut off of March 23, 2008. The commenter also asked CMS
to ensure that any hospitals operating under the same provider number
as a member of the affiliated group during that time period are
eligible for the slots.
Response: In determining which hospitals qualify under Ranking
Criterion Two regarding being in the same Medicare GME affiliated group
as the hospital that closes, we believe, as the proposed Ranking
Criterion Two specifies, that the hospital or hospitals that were most
recently affiliated with and received slots from the closed hospital
would have the most immediate need for those slots. Hospitals that have
not been affiliated with the closed hospital for a year or more would
not likely be as reliant on the slots from the closed hospital, nor
would they be affected quite so significantly by the sudden closure of
the hospital. Nevertheless, we acknowledge that it is possible that
limiting Ranking Criterion Two to only hospitals that had been
affiliated with the closed hospital on the most recent Medicare GME
affiliation prior to the hospital's closure in some instances might be
too restrictive, and could deny hospitals that were affiliated with the
closed hospital in prior years some share of the slots upon which they
are still reliant. We believe the commenter's recommendation that CMS
expand preference for the redistributed slots to hospitals that were
part of the same affiliated group at any point within 5 years prior to
the statutory cut-off of March 23, 2008, has merit. We believe an
administratively feasible approach would be one in which, as a first
step, we would refer to the Medicare GME affiliation agreement of which
the closed hospital was a member most recently prior to its closure.
Those hospitals in that most recent Medicare GME affiliation agreement
that received slots from the closed hospital would get first preference
under Ranking Criterion Two. However, in the case where the most recent
Medicare GME affiliation agreement of which the closed hospital is a
member before it closes is with a hospital that also has closed or is
closing, we would then refer to a previous affiliation agreement, or
agreements, but not to Medicare GME affiliation agreements that were
entered into more than 5 years prior to the hospital's closure.
Preference would then be given to an applying hospital that was listed
as a participant in the next most recent Medicare GME affiliation
agreement of which the closed hospital was a member before the hospital
closed, but would be limited to affiliations entered into in the past 5
years, and that the applying hospital received slots from the closed
hospital under the terms of that affiliation agreement. We are
modifying Ranking Criterion Two to read as follows:
Ranking Criterion Two. The applying hospital was listed as
a participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement of which the closed hospital was a
member before the hospital closed, and under the terms of that Medicare
GME affiliation agreement, the applying hospital received slots from
the hospital that closed, and the applying hospital will use the
additional slots to continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement. If the most recent Medicare GME affiliation
agreement of which the closed hospital was a member before the hospital
closed was with a hospital that itself has closed or is closing,
preference would be given to an applying hospital that was listed as a
participant in the next most recent Medicare GME affiliation agreement
(but not one which was entered into more than 5 years prior to the
hospital's closure) of which the first closed hospital was a member
before the hospital closed, and that applying hospital received slots
from the closed hospital under the terms of that affiliation agreement.
Finally, to address the commenter's request, we are confirming that
a hospital that undergoes a name change but whose provider number and
agreement do not change while it is a member of the affiliated group
during the 5 years prior to the closure, could be eligible for receipt
of slots from the closed hospital.
Comment: One commenter requested that CMS confirm that the Ranking
Criterion Two preference would be given only for the total number of
resident slots that the applying hospital actually received from the
closed hospital pursuant to the former affiliation agreement between
them.
Response: In the August 3, 2010 proposed rule (75 FR 46423), we
describe that Ranking Criterion Two gives preference to hospitals that
are ``listed as a participant of a Medicare GME affiliated group on the
most recent Medicare GME affiliation agreement of which the hospital
was a member before the hospital closed, and under the terms of that
Medicare GME affiliation agreement, the applying hospital received
slots from the hospital that

[[Page 72221]]

closed, and the applying hospital will use the additional slots to
continue training at least the number of FTE residents it had trained
under the terms of the Medicare GME affiliation agreement.'' Therefore,
under Ranking Criterion Two, a hospital may request as many slots as it
received under its most recent affiliation agreement. This would be the
number of FTE residents that were transferred from the closed hospital
in the most recent affiliation agreement (or as amended by June 30 of
that academic year, if applicable). Therefore, under Ranking Criterion
2, preference would only be given for the total number of residents
slots that the applying hospital actually received from the closed
hospital.
Comment: One commenter suggested that CMS reorder Ranking Criteria
One and Two and give precedence to applicant hospitals that have an
affiliation agreement with the closing hospital. The commenter also
suggested that if the applicant hospital is also a member of the
affiliated group and a corporate affiliate (subsidiary, parent or
sister corporation) of the closing hospital, it should be given the
highest priority within Ranking Criterion One. The commenter believed
that Congress intended to allow hospitals that are part of an
affiliated group to keep FTEs that would otherwise be lost because of
the closure of a hospital within the affiliated group. The commenter
suggested that if CMS wishes to protect programs that would continue to
run after a hospital ``closes'' because it is acquired (and its
provider number terminated), CMS could specify this item as the second
ranking criterion as long as it specifies that this scenario is a
result of an acquisition. The commenter further noted that the
requirement to operate the program exactly as it was operated before
may be counterproductive. The commenter stated that it may, for
example, cause the acquiring hospital to avoid replacing faculty
members that were not performing well or making other improvements.
Response: We disagree with the commenter's suggestion that we
reorder the Ranking Criteria to give first preference to hospitals that
were members of the same affiliated group as the closed hospital, and
rather, we assert that the primary principle for a section 5506 is
continuity of existing training. Therefore, we are finalizing our
proposal to give priority to a hospital that will continue to operate
the existing program, either at the original site or at another
hospital.
Comment: One commenter noted that while under CMS' ranking
criteria, hospitals are awarded slots from a closed hospital for
particular uses (for example, to establish a new or expand an existing
geriatrics residency program), CMS did not specify the period of time
during which these slots would be restricted to these specific uses.
The commenter believed that CMS should place a 5-year limit on
hospitals' obligation to use the slots for the purpose for which the
hospital is awarded the slots, as this amount of time is consistent
with the amount of time with the restrictions Congress imposed.
Furthermore, the commenter stated that while it is unlikely that
hospitals would change their programs after only five years, they
should be permitted the flexibility to adapt their programs as their
educational needs or the patient care needs of the community change.
Several commenters also disagreed with the proposal that any slots
awarded through the closed hospital redistribution program may not be
used as part of the aggregate cap in a Medicare GME affiliation
agreement, and encouraged CMS to permit hospitals to use these slots as
part of a GME affiliation agreement. One commenter suggested that
perhaps CMS could permit hospitals to use these slots as part of a GME
affiliation agreement after 5 years.
Response: As we have stated in this final rule, each application by
a hospital must be program specific. That is, the hospital must
complete a separate CMS Evaluation Form for each program and
demonstrate the likelihood of filling the slots in each program.
However, increases in hospital's FTE resident caps under section 5506
for direct GME and IME, once granted to a hospital, are no longer
program specific. Rather, the caps are applied to any residents the
hospital trains in excess of its otherwise applicable FTE cap(s) (which
could include the hospital's 1996 caps, subject to permanent
adjustments for new programs or reductions under section 1886(h)(4)(H)
of the Act).
We also note that hospitals must sign an attestation as part of the
hospital's application for the overall increase to the cap under
section 5506 to certify that the information claimed in the application
is true at the time of the application. Thus, if a hospital claims on
one of its CMS Evaluation Forms that the hospital is applying for the
increase because it plans to use the FTEs because it is training
residents from a program or a hospital that closed, and the applicant
hospital no longer qualifies for a temporary adjustment to its cap, at
least at the time of the application, the hospital intends to use at
least that part of its section 5506 cap for this stated purposes (that
is, the purposes documented in the hospital's application).
We agree with the commenters that slots awarded under section 5506
should be permitted for use as part of the aggregate cap in a Medicare
GME affiliation agreement. As we stated in response to a similar
comment received regarding section 5503 slots, we understand that
training needs can change over time, and there may be a need to cross-
train residents in different hospital settings. In addition, since
slots received under section 5506 are to be paid with the same direct
GME PRA and IME multiplier as a hospital's other residents (unlike
slots received under section 422 of the MMA which are paid at different
payment rates), it would not present an administrative burden to
include section 5506 slots in Medicare GME affiliation agreements. The
commenter suggested that we allow the slots awarded under section 5506
to be used in Medicare GME affiliation agreements after 5 years. We
believe 5 years is a reasonable timeframe for hospitals to use the
slots they received for the purpose for which they applied for those
slots. After a 5-year period, a hospital that received slots under
section 5506 may use those slots as part of its FTE residents caps in a
Medicare GME affiliation agreement. The 5 years will begin
prospectively from the date that the slots were made permanent at each
respective hospital.
Comments on Ranking Criterion Three
Comment: Commenters requested that, as under Ranking Criterion One,
CMS not require that a hospital must have requested a permanent
expansion of their residency program from the accrediting body prior to
the conclusion of the training of a displaced resident in order to
qualify for Ranking Criterion Three, or that CMS not require that the
applying hospital must have permanently expanded its program
immediately following the completion of the displaced residents'
training. One commenter requested that here too, CMS should apply any
similar ``seamless'' approach on a prospective basis only.
Response: As we stated in response to the similar previous comment
regarding Ranking Criterion One, our intent in implementing section
5506 is to promote continuity. Therefore, in order to qualify under
Ranking Criterion Three, the applying hospital must have permanently
expanded its program immediately following the completion of the
displaced residents' training. If there was an interruption in the

[[Page 72222]]

expansion of the program, perhaps the hospital could apply for slots
under section 5506, and may in fact receive them, but the hospital
would be ranked under a criterion below Ranking Criterion Three, as
appropriate. Accordingly, we do not believe it is necessary to adopt
the ``seamless'' requirement under Ranking Criterion Three on a
prospective basis.
Comment: Some commenters requested that Ranking Criterion Three
should apply to a hospital that took in displaced residents, regardless
of whether the applying hospital actually qualified for and received a
temporary cap adjustment for the displaced resident(s). One commenter
also observed that, in the proposed rule, CMS did not specify the means
by which a hospital would need to demonstrate that it took in displaced
residents (that is, CMS did not specify that only a hospital that
actually received a temporary cap adjustment for the displaced
resident(s) could qualify under Ranking Criterion Three). The commenter
argued that, regardless of whether the applying hospital needed or
received a temporary cap adjustment, the applying hospital ``performed
no less of a service to the community and to the resident's education
as a hospital that required temporary cap slots to be paid for the
residents' training time.'' The commenter requested that CMS be
flexible in the ways it would allow a hospital to demonstrate that it
took in displaced residents, including through ACGME documents
indicating approval for temporary training.
Response: We disagree with the commenter's argument that regardless
of whether the applying hospital needed or received a temporary cap
adjustment, the applying hospital ``performed no less of a service to
the community and to the resident's education as a hospital that
required temporary cap slots to be paid for the residents' training
time.'' Moreover, we believe that whether the applying hospital
actually needs a temporary cap adjustment is indeed relevant because a
hospital that has sufficient room under its FTE resident cap to train
displaced residents would not need to apply for additional slots under
section 5506 in order to continue training those residents. Therefore,
such a hospital would only need to apply under Ranking Criterion Three
if it is currently training residents in excess of its FTE resident
cap. However, it is possible that a hospital may not have received a
temporary cap adjustment because at the time of hospital closure, there
simply were not enough available caps available to cover each of the
displaced residents. In such a case, the hospital could demonstrate a
need for additional caps to continue training the displaced residents
in the absence of a temporary cap adjustment. With regard to the
commenter's second point, we will accept ACGME documents that indicate
approval for temporary training as legitimate documentation to
demonstrate that a hospital took in displaced residents.
Comment: One commenter suggested that, similar to Ranking Criterion
One, CMS limit the number of residency slots that could be awarded to
an applying hospital under Ranking Criterion Three to the actual number
of individual residents that the applying hospital took in and trained
through the completion of their residencies.
Response: We agree with the commenter and will limit the number of
residency slots that will be awarded to an applying hospital under
Ranking Criterion Three to the actual number of individual displaced
FTE residents that the applying hospital took in and trained through
the completion of their residencies.
Comments on Ranking Criteria Four Through Seven
Comment: One commenter acknowledged that CMS devised the Ranking
Criteria Four through Eight consistent with the spirit of the preferred
specialties under section 5503, but did not believe it is appropriate
for CMS to make judgments regarding the appropriateness of one type of
program versus another ``absent a clear directive within the ACA.'' The
commenter believed all primary care programs and general surgery were
deemed equally important within section 5503, and therefore, geriatrics
should not be favored, nor should primary care be ranked above general
surgery. The commenter recommended that Ranking Criteria Four through
Eight be simplified and collapsed into the following three criteria:
Recommended Ranking Criterion Four: Applying hospital does
not meet ranking criterion 1, 2, or 3, is located in a HPSA, and is
seeking to establish or expand a primary care or general surgery
residency program.
Recommended Ranking Criterion Five: Applying hospital does
not meet ranking criterion 1, 2, or 3, is not located in a HPSA, and is
seeking to establish or expand a primary care or general surgery
residency program.
Recommended Ranking Criterion Six: Applying hospital seeks
the slots for purposes that do not fit into any of the above ranking
criteria.
Another commenter suggested that Ranking Criteria Four, Five, and
Six should be reorganized to place a higher priority on primary care
rather than geriatrics. The commenter believed that, based on available
data, there is a greater need for primary care than for geriatrics in
communities that have large Medicare and Medicaid populations. The
commenter also noted that Ranking Criterion 4 does not require the
applying hospital to use every additional slot to establish a new or
expand an existing geriatrics residency program, but proposed Criteria
5 and 6 would require the applying hospital to use all the additional
slots for primary care residency programs. The commenter believed that
this distinction suggests that CMS recognizes the need for additional
primary care residency slots and therefore should support the
reprioritization of Ranking Criteria Four, Five, and Six.
This same commenter was supportive of Ranking Criteria Seven and
Eight. The commenter also provided some additional criteria that could
be used in this process. The suggested additional criteria include: (1)
The percentage by which the applying hospital is operating above its
Medicare-funded GME and IME FTE caps; (2) whether the applying hospital
qualifies for DSH payments; and (3) the ratio of unfunded residents to
Medicare census. The commenter also suggested that, within each
criterion, preference should be given to hospitals that were deemed
qualified to receive additional FTE slots pursuant to section 422 of
the MMA, but that did not receive any additional slots through that
process.
Response: We agree with the first commenter's suggestions regarding
simplifying and collapsing Ranking Criteria Four, Five, and Six.
However, the commenter did not specify that the applying hospital will
use ``all'' the additional slots toward primary care or general
surgery, and we are adding ``all'' to our final ranking criteria as
follows:
Ranking Criterion Five: Applying hospital does not meet
ranking criterion 1, 2, or 3, is located in a HPSA, and will use all
the additional slots to establish or expand a primary care or general
surgery residency program.
Ranking Criterion Six: Applying hospital does not meet
ranking criterion 1, 2, or 3, is not located in a HPSA, and will use
all the additional slots to establish or expand a primary care or
general surgery residency program.
Ranking Criterion Seven: Applying hospital seeks the slots
for purposes that do not fit into any of the above ranking criteria.
We also agree that general surgery should not be given priority
over other

[[Page 72223]]

primary care specialties. However, we do believe that geriatrics should
be favored within the section 5506 ranking criteria, as the field of
geriatrics specifically serves the beneficiaries of the Medicare
program. Therefore, we are retaining our original Ranking Criteria
four, and we are adopting the Ranking Criteria Five, Six, and Seven
stated above.
With regard to the comment that Ranking Criterion Four does not
require all of the slots awarded to be used toward geriatrics, unlike
the final Ranking Criteria Five, Six, and Seven that do require all of
the slots awarded to be used toward each criterion's respective
specialty, we are specifically not requiring all of the slots awarded
under Ranking Criteria Four to be used for geriatrics because a
hospital may not necessarily need so many slots for geriatrics
fellowships, which typically are not large programs. Therefore, because
applications under section 5506 are program-specific, we believe that a
hospital that is applying for slots for use in a geriatrics program
should not be precluded from also applying for slots for other programs
(although the requests for those other programs, even other primary
care or surgery programs, would fall under Ranking Criterion Seven). We
are not adopting the second commenter's remaining suggestions for
additional criteria, as they represent goals and policies that do not
necessarily align with the policy goal of section 5506, which is
continuity and preservation of existing GME infrastructure in an area.
Comment: One commenter requested that a ranking criterion
preference should be given to hospitals training primary care
residents, particularly family medicine residents, with ``principal
preference'' given to hospitals that have been operating a family
medicine program as of the enactment of the Affordable Care Act, and
have been doing so without Medicare GME reimbursement, and do not have
an FTE cap established. The commenter believed that hospitals that are
supporting programs that, by application of CMS regulations, have not
qualified for payment ``would be greatly strengthened'' by the receipt
of slots from teaching hospitals that closed. The commenter believed
that CMS should establish a first priority Ranking Criterion for such
hospitals, across the first three of the priority order groupings (for
example, CBSA, State, and region). Alternatively, the commenter
suggested that Ranking Criteria Five and Six be combined and become
Ranking Criterion One, with the proposed Ranking Criterion One being
redesignated as Ranking Criterion Two, and so forth. The commenter
noted that, to the extent that an applying hospital is requesting slots
because it is assuming or assumed an entire program, the new primary
care Ranking Criterion One would ``work in tandem'' with the proposed
rule's Ranking Criterion One.
Response: We believe that the commenter is requesting that points
be assigned to a new teaching hospital that offers family medicine
training without receipt of Medicare payment. However, we did not
propose to create a point system under section 5506 as it did under
section 5503. Furthermore, there is no need for us to provide
additional preference to family medicine programs because we already
provide preference for primary care programs under Ranking Criteria
Five and Six. Because family medicine is also primary care, family
medicine programs would receive preference under these ranking
criteria. We also note that the commenter described an applying
hospital that is assuming or assumed an entire program; therefore, it
is possible that the commenter's hospital may already qualify under
Ranking Criterion One, and additional preference for family medicine or
primary care may not be necessary.
After consideration of the public comments we received, we are
finalizing the following Ranking Criteria:
[square] Ranking Criterion One. The applying hospital is requesting
the increase in its FTE resident cap(s) because it is assuming (or
assumed) an entire program (or programs) from the hospital that closed,
and the applying hospital is continuing to operate the program(s)
exactly as it had been operated by the hospital that closed (that is,
same residents, possibly the same program director, and possibly the
same (or many of the same) teaching staff).
[square] Ranking Criterion Two. The applying hospital was listed as
a participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement of which the closed hospital was a
member before the hospital closed, and under the terms of that Medicare
GME affiliation agreement, the applying hospital received slots from
the hospital that closed, and the applying hospital will use the
additional slots to continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement. If the most recent Medicare GME affiliation
agreement of which the closed hospital was a member before the hospital
closed was with a hospital that itself has closed or is closing,
preference would be given to an applying hospital that was listed as a
participant in the next most recent Medicare GME affiliation agreement
(but not one which was entered into more than 5 years prior to the
hospital's closure) of which the first closed hospital was a member
before the hospital closed, and that applying hospital received slots
from the closed hospital under the terms of that affiliation agreement.
[square] Ranking Criterion Three. The applying hospital took in
residents displaced by the closure of the hospital, but is not assuming
an entire program or programs, and will use the additional slots to
continue training residents in the same programs as the displaced
residents, even after those displaced residents complete their training
(that is, the applying hospital is permanently expanding its own
existing programs).
[square] Ranking Criterion Four. The applying hospital does not fit
into Ranking Criteria One, Two, or Three, and will use additional slots
to establish a new or expand an existing geriatrics residency program.
[square] Ranking Criterion Five: Applying hospital does not meet
Ranking Criterion One, Two, or Three, is located in a HPSA, and will
use all the additional slots to establish or expand a primary care or
general surgery residency program.
[square] Ranking Criterion Six: Applying hospital does not meet
Ranking Criterion One, Two, or Three, is not located in a HPSA, and
will use all the additional slots to establish or expand a primary care
or general surgery residency program.
[square] Ranking Criterion Seven: Applying hospital seeks the slots
for purposes that do not fit into any of the above ranking criteria.
We are also finalizing the following policies with regard to the
Ranking Criteria:
For purposes of section 5506, we are stating that a
hospital that takes on 90 percent of the residents training in a
particular program at the closed hospital within 5 years prior to the
hospital's closure or at the time of the hospital's closure would be
deemed to have assumed an ``entire'' program.
Under Ranking Criterion Two, we are only giving preference
to hospitals that received slots from the closed hospital, under the
terms of the Medicare GME affiliation agreement so that the hospital
could continue to train at least the number of FTE residents it had
trained under the terms of the Medicare GME affiliation agreement.
Slots awarded under section 5506 may be used as part of
the aggregate cap

[[Page 72224]]

in a Medicare GME affiliation agreement after five years from the date
of their award.
6. Demonstrated Likelihood of Filling the Positions Within a Certain
Time Period
Section 1886(h)(4)(H)(vi) of the Act, as added by section 5506(a)
of the Affordable Care Act, does not place a limit on the number of
slots an applying hospital may request, although under section
1886(h)(4)(H)(iv)(IV) of the Act, the Secretary must ensure that the
aggregate number of increases to hospitals' FTE residents caps are
equal to the FTE residents caps of the hospital that closed. However,
section 1886(h)(4)(H)(iv)(III) of the Act specifies that the Secretary
may only award slots to an applying hospital ``if the Secretary
determines that the hospital has demonstrated a likelihood of filling
the positions made available under this clause within 3 years.'' In the
August 3, 2010 proposed rule (75 FR 46424), we proposed that hospitals
must provide documentation to demonstrate the likelihood of filling
requested slots under section 5506 within 3 years. For example, the
applying hospital would document that it does not have sufficient room
under its FTE resident caps to take in the additional residents, and
has approval from the relevant accrediting body to take over the closed
hospital's residency program(s), or expand its own residency program(s)
to reflect a permanent commitment to train additional residents. We
proposed that ``within 3 years'' would mean within the 3 academic years
immediately following the application deadline to receive slots after a
particular hospital closes. For example, where the application deadline
is April 1, 2011, the immediately following academic year is July 1,
2011, and therefore, hospitals must demonstrate the likelihood of
filling their slots by June 30, 2014.
We did not receive any public comments on this section, but as
noted in response to a previous comment, we are adding to the
Demonstrated Likelihood Criteria for section 5506 in this final rule
that if the hospital has made a commitment to start a new program, or
if the hospital is seeking approval from the relevant accrediting body
to take over the closed hospital's residency program(s), the hospital
may submit documentation that it has made a commitment to start a new
program or take over the program(s), respectively.
7. No Duplication of FTE Cap Slots
Section 5506(d) of the Affordable Care Act specifies that ``the
Secretary shall give consideration to the effect of the amendments made
by this section on any temporary adjustment to a hospital's FTE cap
under Sec. 413.79(h) * * * (as in effect on the date of enactment of
this Act) in order to ensure that there is no duplication of FTE slots
* * *.'' Under existing regulations at Sec. 413.79(h), hospitals that
take in residents that are displaced by the closure of another hospital
may receive temporary increases to their FTE resident caps so that they
may receive payment for training the specific displaced residents. The
temporary cap adjustment lasts only for the duration of a specific
displaced resident's training. In distributing slots permanently under
section 5506, we may need to be cognizant of the number of FTE
residents for whom a temporary FTE cap adjustment was provided, and
when those residents will complete their training, at which point the
temporary slot associated with those displaced residents would be
available for permanent redistribution.
In the proposed rule, we stated that we believe it will only be
necessary to delay permanent assignment of FTE cap slots in instances
where if, after fulfilling the requests of hospitals that qualify to
receive additional slots under Ranking Criteria One, Two, and Three,
there are still excess slots available. In the case where an applying
hospital fits within Ranking Criterion One, in the August 3, 2010
proposed rule (75 FR 46424), we proposed to revise the existing
regulations at Sec. 413.79(h) limiting temporary cap adjustments for
displaced residents by the number of FTE residents in the program(s) in
which the applying hospital is operating seamlessly. We proposed to
immediately assign permanently that number of FTE slots to the
qualifying hospital. For example, if teaching hospital B assumes an
entire internal medicine program with 20 FTEs from closed hospital A,
no temporary FTE cap adjustment under Sec. 413.79(h) would be needed
for those internal medicine residents, and teaching hospital B would
immediately receive a permanent FTE resident cap increase of 10 FTE
residents. Similarly, in the case where an applying hospital fits
within Ranking Criterion Two, we proposed to revise the existing
regulations at Sec. 413.79(h) limiting temporary cap adjustments for
displaced residents by the number of FTE residents that the applying
hospital received under the terms of the affiliation agreement from the
closed hospital. We proposed to immediately assign permanently that
number of FTE slots to the qualifying hospital. For example, if
teaching hospital D had received 30 FTE slots from closed hospital C
under the terms of a Medicare GME affiliation agreement for the
purposes of a shared rotational arrangement (as defined at Sec.
413.75(b)) for a general surgery program, teaching hospital D would
immediately receive a permanent FTE resident cap increase of 30 FTE
residents, which would enable hospital D to continue to receive direct
GME and IME payment for its share of training 30 general surgery
residents.
Lastly, in the case where an applying hospital fits within Ranking
Criterion Three, we proposed to revise Sec. 413.79(h) to provide for
temporary cap adjustments for displaced residents by the number of
displaced FTE residents the applying hospital takes in, and to
immediately assign permanently that number of FTE slots to the
qualifying hospital. For example, if Hospital E takes in three FTE
displaced residents in a family medicine program, and not only trains
those three displaced residents until they complete their training, but
permanently expands its existing family medicine program such that it
will add three more FTEs in the place of three that completed their
training, we would immediately assign three FTEs permanently to
Hospital E, bypassing any temporary adjustment under Sec. 413.79(h).
Accordingly, there would be no duplication of FTE slots when
distributing slots to hospitals that qualify under the first three
ranking criteria.
If, after distributing the slots from a closed hospital to increase
the FTE caps for applying hospitals that fall within Ranking Criteria
One, Two, and Three, there are still excess slots available, it is
possible that those excess slots might be associated with displaced
residents for whom temporary cap adjustments under Sec. 413.79(h) are
necessary. That is, it is possible that in the case where applying
hospitals do not permanently assume all of the closed hospital's
residents and programs, temporary cap transfers under Sec. 413.79(h)
would be necessary to allow the remaining residents to complete their
training. Therefore, we proposed to distribute the slots accordingly to
increase the FTE resident caps for hospitals that fall within Ranking
Criteria Four through Seven. However, to avoid duplicate FTE counting,
we would only permanently assign the slots to the qualified hospitals
falling within Ranking Criteria Four through Seven once the displaced
residents have completed their training and their temporary cap
adjustments have expired.
In the August 3, 2010 proposed rule (75 FR 46424), we proposed to
add new regulations text at Sec. 412.105(f)(1)(ix)(B)

[[Page 72225]]

for IME and Sec. 413.79(o)(2) for direct GME to reflect the provisions
of section 5506 of the Affordable Care Act. In addition, we proposed
some very minor changes to direct GME and IME existing text in order to
clarify meaning and standardize the terminology that is used
throughout.
Comment: One commenter stated that CMS did not indicate in the
proposed rule how the completion of displaced residents' training would
be tracked and how this would effectuate the vacating of specific
resident slots granted under Ranking Criteria Four through Eight. The
commenter believed that it is ``critically important that valuable
residency slots'' from closed hospitals that are not redistributed
through Ranking Criteria One through Three should be redistributed to
hospitals requesting a residency cap increase as quickly as possible.
For this reason, the commenter recommended that CMS ensure that
permanent resident cap increases awarded via Ranking Criteria Four
through Eight are redistributed on an annual basis following the
completion of their use for the purpose of supporting displaced
residents.
Commenters also opposed CMS' proposal to subject FTE resident slots
received under section 5506 from a closed hospital to the three-year
rolling average count and inclusion in the IRB ratio cap. The
commenters expressed specific concern about this issue in situations in
which CMS proposed to make temporary, displaced resident slots
available immediately on a permanent basis as under Ranking Criteria
One through Three. The commenters stated that taking in additional
residents may be costly, particularly if a hospital is taking on an
entire program or multiple programs, and therefore, the rolling average
payment methodology and the IRB ratio cap should not apply to hospitals
qualifying under Ranking Criterion One until the time the slot is
awarded to the hospital on a permanent basis, or at the earliest, at
the beginning of the hospital's next fiscal year.
Response: On page 46424 of the August 3, 2010 proposed rule, we
stated that we believe that it will only be necessary to delay
permanent assignment of FTE cap slots in instances where if, after
fulfilling the requests of hospitals that qualify to receive additional
slots under Ranking Criteria One, Two, and Three, there are still
excess slots available. In the case where an applying hospital fits
within Ranking Criterion One, in the August 3, 2010 proposed rule (75
FR 46424), we proposed to revise the existing regulations at Sec.
413.79(h) limiting temporary cap adjustments for displaced residents by
the number of FTE residents in the program(s) in which the applying
hospital is operating seamlessly. We proposed to immediately assign
permanently that number of FTE slots to the qualifying hospital. For
example, if teaching hospital B assumes an entire internal medicine
program with 20 FTEs from closed hospital A, no temporary FTE cap
adjustment under Sec. 413.79(h) would be needed for those internal
medicine residents, and teaching hospital B would immediately receive a
permanent FTE resident cap increase of 20 FTE residents. Similarly, in
the case where an applying hospital fits within Ranking Criterion Two,
because the closed hospital had given slots to the applying hospital
under an affiliation agreement, we proposed to immediately assign
permanently that number of FTE slots to the qualifying hospital. For
example, if teaching hospital D had received 30 FTE slots from closed
hospital C under the terms of a Medicare GME affiliation agreement for
the purposes of a shared rotational arrangement (as defined at Sec.
413.75(b)) for a general surgery program, teaching hospital D would
immediately receive a permanent FTE resident cap increase of 30 FTE
residents, which would enable hospital D to continue to receive direct
GME and IME payment for its share of training 30 general surgery
residents. Lastly, in the case where an applying hospital fits within
Ranking Criterion Three, we proposed to revise Sec. 413.79(h) to
immediately assign permanently that number of FTE slots to the
qualifying hospital. For example, if Hospital E takes in three FTE
displaced residents in a family medicine program, and not only trains
those three displaced residents until they complete their training, but
permanently expands its existing family medicine program such that it
will add three more FTEs in the place of three that completed their
training, we would immediately assign three FTEs permanently to
Hospital E, bypassing any temporary adjustment under Sec. 413.79(h).
Accordingly, there would be no duplication of FTE slots when
distributing slots to hospitals that qualify under the first three
ranking criteria.
In this final rule, we are making limited modification to our
proposal regarding the overriding of the temporary cap adjustment
regulations at Sec. 413.79(h) for Ranking Criteria One through Three.
We had proposed that in each of these three Ranking Criteria, we would
``immediately'' assign permanently the number of applicable slots to
the qualifying hospital. However, we realize that taking in more
residents may be costly for a hospital. We also want to implement
section 5506 in a manner that is the most administratively feasible,
particularly in terms of how the adjustments are to be reported on the
Medicare cost report, while also distributing the slots and allowing
them to take effect as soon as possible. Therefore, except for the case
of a brand new hospital taking over a program(s), or an acquisition
which we describe under the definition of ``hospital closure'' (75 FR
46422), where the new owner receives a new provider agreement and
operates the hospital exactly as it had been operated prior to the
acquisition, we believe that it would still be appropriate to allow a
hospital that ultimately would qualify to receive slots permanently
under any of the ranking criteria and that took in displaced residents
to receive temporary cap adjustments and, in a limited manner,
exemptions from the rolling average and IRB ratio cap (subject to the
regulations at Sec. 412.105(a)(1)(iii)). As a general rule, even if we
do not make the determination as to which hospitals will receive the
slots until sometime after the hospital closes, the effective date of
the permanent cap adjustments to an applying hospital would be the date
of the hospital's closure. However, for administrative ease, in that
first cost reporting period in which the applying hospital takes in
displaced residents and the hospital closure occurs, the applying
hospital could receive a temporary cap adjustment, an exemption from
the rolling average, and an exemption from the IRB ratio cap for the
displaced residents. Then, as the commenters recommended, effective
beginning with the cost reporting period following the one in which the
hospital closure occurred, the applying hospital's permanent cap
increase would take effect, and there would be no rolling average
exemption (and no IRB ratio cap exemption in accordance with the
existing regulations at Sec. 412.105(a)(1)(iii), which state that the
exception from the IRB ratio cap applies only through the end of the
first 12-month cost reporting period in which the receiving hospital
trains the displaced FTE residents). If the hospital closure and CMS'
determination as to whether a particular applying hospital receives a
permanent cap increase occur within the same cost reporting period for
the applying hospital, and the applying hospital takes in displaced
residents, then again, the applying hospital could receive a temporary
cap adjustment, an exemption from the

[[Page 72226]]

rolling average, and an exemption from the IRB ratio cap only until the
end of that cost reporting period. Effective beginning with the
following cost reporting period, the permanent cap would apply and
there would be no exemption from the rolling average (or IRB ratio
cap). Following is an example of how this policy regarding the
effective date of the permanent cap increases and the exemption from
the rolling average and IRB ratio cap would work under section 5506:
Hospital Q closes on February 28, 2009. Hospital R, which has a
December 31, 2009 fiscal year end (FYE), assumes Hospital Q's
orthopedic program which is accredited for 6 positions, and 6 FTE
residents are still training at Hospital Q at the time Hospital Q
closes. Thus, these 6 FTEs are displaced and they transfer to Hospital
R on March 1, 2009. Hospital R has an FTE resident cap of 50, and has
been training approximately 50 FTEs for the past 3 years. Hospital R
receives a temporary cap adjustment for the 6 displaced FTEs, which
would equate to a prorated cap adjustment of 5 for the period between
March 1, 2009 and December 31, 2009. For the IME calculation in its FYE
December 31, 2009 cost report, Hospital R may add a prorated count of 5
FTEs after the rolling average calculation to the numerator of its IRB
ratio. Hospital R may also increase the numerator of its FYE December
31, 2008 IRB ratio by 5 FTEs, so as not to be held to the IRB ratio cap
(in accordance with the existing regulations at Sec.
412.105(a)(1)(iii)). For the direct GME calculation in its FTE December
31, 2009 cost report, Hospital R would also add 5 FTEs after the
nonprimary care rolling average calculation. Thus, Hospital R's payment
should reflect about 5 FTEs for IME and direct GME, respectively, in
FYE December 31, 2009.
The displaced orthopedic residents continue training at Hospital R
in Hospital R's FYE December 31, 2010 and December 31, 2011 cost
reporting periods (that is, these are not new orthopedic residents that
Hospital R has recruited), and Hospital R has continued to report the
displaced residents after the rolling average calculation on the
Medicare cost report. On April 1, 2011, Hospital R applies for 6 slots
under Ranking Criterion One. On November 5, 2011, CMS determines that
Hospital R may receive a permanent increase to its cap of 6 FTEs,
raising its FTE resident cap from 50 to 56. Hospital R continues to
train approximately 50 other FTEs. Effective with its cost reporting
period beginning on January 1, 2010, the permanent cap increase of 6
takes effect, and the displaced orthopedic FTEs must be included in the
rolling average calculation of the Medicare cost reports for FYE
December 31, 2010 and December 31, 2011.
As explained above, the policy is similar if the dates of the
hospital closure and CMS's determinations of permanent cap assignments
are in the same cost reporting period. For example, Hospital S closes
on February 1, 2012. Hospital T, who has a December 31 FYE, assumes
several programs and applies for slots under Ranking Criterion One. CMS
determines that Hospital T receives a permanent cap increase on October
1, 2012. Hospital T may receive a temporary cap adjustment, an
exemption from the rolling average calculation, and an exemption from
the IRB ratio cap on its FYE December 31, 2012 cost report. On its FYE
December 31, 2013 cost report, Hospital T would report a permanent cap
increase and any remaining displaced residents would be included in the
rolling average calculation. During the process of reviewing the
applications for slots after a hospital closes, be it for hospitals
that have already closed between March 23, 2008 and August 3, 2010 (the
first round of applications), or for future hospital closures, we would
still assign the slots to hospitals qualifying under Ranking Criteria
One, Two, and Three in descending order. We agree with the commenter
that it is very important that the residency slots from closed
hospitals that are not redistributed through Ranking Criteria One
through Three should be redistributed to hospitals requesting a
residency cap increase as quickly as possible.
The commenter recommended that CMS ensure that permanent resident
cap increases awarded via Ranking Criteria Four through Eight are
redistributed on an annual basis following the completion of their use
for the purpose of supporting displaced residents. First, we note that
in this final rule, we have consolidated and reduced the number of
Ranking Criteria from Eight to Seven. The slots that we would be
distributing could be based on slots attributable to displaced
residents for which the temporary cap adjustments to their receiving
hospitals would expire upon graduation of those residents from their
programs. We would have to hold these slots in reserve, and release
them for permanent assignment to qualifying hospitals on an annual
basis, as the commenter suggests, as each of those residents graduates.
With each hospital closure, we will request and receive information
from the closed hospital if possible, from the Medicare contractors,
and the hospitals that take in the displaced residents, regarding, at a
minimum, the FTE number of residents that are displaced, the programs
the residents are in, and the program year in which each resident was
at the time of the hospital closure, which would help us determine the
number of years each displaced resident has to complete his or her
training. Using this information, at the time that we are reviewing the
applications, we will determine the point (typically July 1) at which
each qualifying hospital will receive the FTEs permanently, and we will
inform the qualifying hospital that effective with a certain graduation
date, possibly in the past, but likely in the future, the qualifying
hospital's FTE resident caps would be permanently increased by a
specified number, as appropriate. When that graduation date arrives,
the permanent cap increase will occur automatically for the qualifying
hospital--the hospital need not wait for further adjudication by CMS.
Depending on the length of the particular program and the number of
years left for the displaced residents to train, it may take several
years (that is, several graduation dates) until a hospital receives its
full cap increase under section 5506. In this way, although some
hospitals will not receive their total permanent cap increases
``immediately,'' they will at least know the date(s) in the future that
they will receive their permanent cap adjustments, and those cap
adjustments will occur automatically. Of course, because residents who
are closer to the completion of their program at the time they are
displaced by the hospital closure will graduate sooner than those
residents closer to the beginning of their training, their FTE slots
are more ``valuable.'' We would assign the slots of those residents
graduating sooner to those hospitals ranked higher, in descending
order.
The following example illustrates how the permanent assignment of
slots would be effectuated when displaced residents are involved.
Hospital G has an FTE resident cap of 8 and closes on December 31,
2010. It had 8 residents in an internal medicine program. Hospital J
currently has an internal medicine program with 15 residents, and wants
to expand it permanently, and on January 1, 2011, Hospital J expands
its internal medicine program and seamlessly assumes 5 internal
medicine residents from Hospital G. The remaining 3 internal medicine
residents are accepted by hospitals in various locations solely to
complete their training. In the section 5506 application process,
Hospital J is located in the same CBSA as Hospital G and it applies for
5 slots and qualifies

[[Page 72227]]

to receive those slots under Ranking Criterion Three. Assume CMS
determines on January 1, 2012 that Hospital J may receive those slots
permanently. Hospital J has a September 30 FYE. Hospital J had been
receiving temporary cap adjustments and the exemption from the rolling
average and the IRB ratio cap for the 5 FTEs for its cost reporting
period ending September 30, 2011. On January 1, 2012, the FTE cap
adjustment is permanent for Hospital J's entire FYE September 30, 2012
cost report, and the exemption from the rolling average does not apply
to Hospital J's FYE September 30, 2012 cost report. Of the 3 displaced
residents, John Doe, was a PGY1 when Hospital G closed, and is expected
to graduate on June 30, 2013. Jane Doe was a PGY2 and is expected to
graduate on June 30, 2012. Kreshen Doe was a PGY3 and is expected to
graduate on June 30, 2011. Hospital M is also located in the same CBSA
as Hospital G, which is a HPSA, and applies to receive 1 slot under
Ranking Criterion Five to expand a primary care program. Hospital N is
located in a CBSA that is contiguous to the CBSA that Hospital G is
located in, it is not located in a HPSA, and is requesting 1 slot under
Ranking Criterion Six to expand a primary care program. Hospital P is
located in the same State but not the same CBSA as Hospital G, and
applies under Ranking Criterion Four for 1 slot to start a geriatrics
fellowship.
On January 1, 2012, CMS determines that Hospital M receives the
slot associated with PGY3 Kreshen Doe, who finished his training at
another hospital on June 30, 2011. (The hospital that took in Kreshen
Doe until he finished his training received a temporary cap adjustment
under Sec. 413.79(h), which ended on June 30, 2011). Thus, Hospital
M's permanent FTE cap increase is effective July 1, 2011. On January 1,
2012, CMS also determines that Hospital N will receive the slot
associated with PGY2 Jane Doe, and we inform Hospital N that its FTE
cap will increase permanently effective July 1, 2012. Finally, on
January 1, 2012, CMS determines that Hospital P will receive the slot
associated with PGY1 John Doe, and we inform Hospital P that its FTE
cap will increase permanently effective July 1, 2013. (We note that
this example is for illustrative purposes only and we are not implying
that all cap determinations and assignments would be made according to
the timeline used in this example).
The example above described how the slots would be awarded
permanently on an annual basis under Ranking Criteria Four through
Seven in the instance where temporary cap increases are being used in
accordance with Sec. 413.79(h) by various hospitals and we would need
to ensure that those residents graduated before permanently assigning
the slots to avoid duplication in the FTE caps. In the scenario where a
hospital closes but for whatever reason, there are no hospitals that
receive temporary cap adjustments under Sec. 413.79(h), the effective
date of the permanent cap increases would be prospectively from the
date of the determination. For example, a hospital closes on April 30,
2013. Another hospital applies under Ranking Criterion Six and will use
all the requested slots to start a general surgery program. The
hospital shows that it can meet the demonstrated likelihood
requirements to fill those slots. We determine on January 15, 2014 that
the hospital may receive the slots, and its permanent cap increase is
effective on January 15, 2014.
We will be making changes to the Medicare cost report, Worksheet E,
Part A for IME, and Worksheet E-3, Part IV for direct GME, (and
Worksheet E-4, the direct GME worksheet on CMS-2552-10), to accommodate
the increases to the FTE resident caps of hospitals that receive slots
under section 5506.
Comment: One commenter support CMS' implementation of the
Congressional mandate that there be no duplication of FTE cap slots as
provided at section 5506(d). The commenter asked that the Secretary
give greater priority to hospitals that could have availed themselves
of the application of temporary cap adjustments at Sec. 413.79(h) but
did not because, in this instance, there is ``good assurance'' that
there is no duplication of FTE slots.
Response: We believe that the commenter misunderstood the
Congressional mandate that there be no duplication of FTE slots as
provided at section 5506(d). This Congressional mandate applies not
only to the hospital applying for slots or that took over the program,
but rather it applies across all hospitals. It is important to note
that although the commenter's hospital may not have availed itself to
temporary cap adjustments at Sec. 413.79(h), other hospitals may have
taken in residents and received temporary cap adjustments for the same
program. Therefore, slots associated with that program cannot be
distributed permanently until it is known that any and all temporary
cap adjustments for those slots have expired.
After consideration of public comments we received, we are revising
our proposal regarding the application of the rolling average and the
IRB ratio cap. Specifically, except for the case of a brand new
hospital taking over a program(s), or an acquisition which we describe
under the definition of ``hospital closure'' (75 FR 46422), where the
new owner receives a new provider agreement and operates the hospital
exactly as it had been operated prior to the acquisition, we believe
that it would still be appropriate to allow a hospital that ultimately
would qualify to receive slots permanently under any of the ranking
criteria and that took in displaced residents to receive temporary cap
adjustments and, in a limited manner, exemptions from the rolling
average and IRB ratio cap (subject to the regulations at Sec.
412.105(a)(1)(iii)), as discussed above.
8. Other Payment Issues Regarding Hospitals that Receive Increase in
FTE Caps Based on Slots from Closed Hospitals
In the proposed rule, we noted that section 1886(h)(4)(H)(vi) of
the Act, as added by the Affordable Care Act, makes no reference to
section 1886(h)(4)(G) or 1886(d)(5)(B)(vi)(II) of the Act, which are
the provisions concerning the rolling average count of FTE residents.
Furthermore, there is no mention of section 1886(d)(5)(B)(vi)(I) of the
Act, the provision regarding the cap on the IME resident-to-bed ratio,
in section 1886(h)(4)(H)(vi) either. That is, the statute does not
provide for an exclusion from application of the rolling average for
residents counted as a result of FTE cap increases under section
1886(h)(4)(H)(vi) of the Act, nor does the statute exempt these
residents from the application of the cap on the IME resident-to-bed
ratio. In light of the absence of a specific directive in section
1886(h)(4)(H)(vi) of the Act exempting those residents from application
of the rolling average for direct GME and IME, and the cap on the IME
resident-to-bed ratio, and with no apparent reason to treat residents
counted as a result of the FTE cap increases under section
1886(h)(4)(H)(vi) of the Act differently, in the August 3, 2010
proposed rule (75 FR 46425), we proposed to require that if a hospital
increases its direct GME or IME FTE count of residents as a result of
an FTE resident cap increase under section 1886(h)(4)(H)(vi) of the
Act, those FTE residents would be immediately subject to the rolling
average calculation and the cap on the IME resident-to-bed ratio.
We also note that section 1886(h)(4)(H)(vi) of the Act for direct
GME and section 1886(d)(5)(B)(v) of the Act for IME does not specify
use of a special direct GME PRA or IME multiplier for residents counted
by a hospital under an FTE cap increase

[[Page 72228]]

received after the closure of another hospital. Therefore, we proposed
that residents counted by a hospital under a permanent adjustment to
the hospital's FTE resident caps under the provisions of section 5506
of the Affordable Care Act would be paid for using the receiving
hospital's otherwise applicable direct GME PRA (which is hospital-
specific) and IME multiplier (which is the same for all hospitals).
(Further, as we proposed with respect to FTE resident cap increases
awarded under section 5503 (section XXI.D. of this preamble), we
proposed that these slots may not be used as part of the aggregate FTE
resident cap under a Medicare GME affiliation agreement. However, as we
explained in response to comments above, we are allowing slots awarded
under section 5506 to be included in a Medicare GME affiliation
agreement after a 5-year period).
Comment: Commenters opposed CMS' proposal to subject FTE resident
slots received under section 5506 from a closed hospital to the three-
year rolling average count and inclusion in the IRB ratio cap under
Ranking Criteria One through Three.
Response: As we explained above in response to comments under the
``No Duplication of FTE Slots'' section, in this final rule, we are
modifying our proposed position regarding the rolling average and the
IRB ratio cap. Specifically, except for the case of a brand new
hospital taking over a program(s), or an acquisition which we describe
under the definition of ``hospital closure'' (75 FR 46422), where the
new owner receives a new provider agreement and operates the hospital
exactly as it had been operated prior to the acquisition, we believe
that it would still be appropriate to allow a hospital that ultimately
would qualify to receive slots permanently under any of the Ranking
Criteria and that took in displaced residents to receive temporary cap
adjustments and, in a limited manner, exemptions from the rolling
average and IRB ratio cap (subject to the regulations at Sec.
412.105(a)(1)(iii)).
Comment: Two commenters requested clarification regarding which
direct GME PRA and IME intern-and-resident to bed (IRB) ratio cap would
be used for the hospital assuming the programs of the closed hospital,
particularly if the hospital assumed all of the residency programs from
the closed hospital.
Response: In the case where a hospital assumes the programs of a
closed hospital, and seamlessly operates those programs on the same
site as the closed hospital, but did not assume the provider agreement
of the closed hospital, it is then a new hospital, and therefore does
not have its own PRA or resident and bed history for use in the IRB
ratio cap. A new PRA would have to be calculated in accordance with
regulations at Sec. 413.77(e), and the IRB ratio cap would not apply
for the new hospital's first cost reporting period under Sec.
412.105(f), but would apply for the hospital's second cost reporting
period. Furthermore, in the new hospital's first cost reporting period,
there would be no rolling average calculation, and in the second cost
reporting period, there would be a 2-year rolling average calculation.
In the third cost reporting period, the rolling average would be based
on three years of cost report data. However, in the case where a
hospital assumes one or more programs and does not operate them on the
site of the closed hospital, but instead operates the program(s) on the
site of its own hospital, then the PRA of the applying hospital would
be used, and the bed counts and FTE counts of the applying hospital
would be used in the IRB ratio cap calculation.
9. Other Comments and Responses Regarding Section 5506
Comment: Two commenters noted that section 5506 appears to be
silent as to whether, if a closed hospital also received slots under
section 422 of the MMA, those 422 slots are subject to redistribution
under section 5506 along with the closed hospital's 1996 FTE resident
cap slots. The commenters believed Congress intended for all residency
cap slots to be redistributed from a closed hospital including section
422 slots. One commenter recognized that the IME adjustment and the
direct GME Per Resident Amount to be used for section 422 cap slots
differs from the rates used for regular cap slots, which could make the
422 cap slots less attractive to qualifying hospitals. Therefore, the
commenter encouraged CMS to consider distributing the 422 slots last
(to hospitals lower in the priority order).
Response: We agree with the commenter. In implementing section
1886(h)(4)(H)(vi)(IV) of the Act, we proposed to interpret ``the number
of resident positions'' to mean the number that is equal to the IME and
direct GME FTE resident caps of a hospital that closed, or will close.
Because section 422 of the MMA provided many hospitals with additional
IME and/or direct GME FTE resident cap slots, those additional cap
slots will also be subject to redistribution under section 5506. As the
commenter mentioned, the IME adjustment and the direct GME PRA used for
section 422 cap slots differs from the rates used for regular cap
slots, making the section 422 cap slots ``less attractive'' to
qualifying hospitals. Accordingly, we agree with the commenter's
suggestion to distribute section 422 slots only after all regular cap
slots from the closed hospital are assigned for redistribution.
However, hospitals that receive section 422 slots under section 5506
would be paid for those slots using the section 422 direct GME PRA and
IME multiplier. If a hospital that closes has both regular FTE caps and
section 422 caps, we envision the redistribution of all those cap slots
in the following method. We would review and rank the applications and
assign as many regular slots as we can to qualifying hospitals based on
the ranking order, in a descending manner. Once the regular slots are
all assigned, we would then assign all the section 422 slots,
continuing to follow the ranking priorities in descending order. If the
remaining number of requests for slots from qualified hospitals of
equal rank exceeds the amount of section 422 cap slots available, we
would prorate the remaining section 422 slots among those equally
ranked hospitals (the same way we would prorate the remaining regular
FTE cap slots in the instance where a closed hospital only had regular
FTE cap slots but the requests exceed the number of regular FTE cap
slots available). We would prorate as follows: [(total number of
available slots remaining/total number of requested slots remaining) x
number of slots requested by Hospital A] and [(number of slots
remaining/total number of requested slots remaining) x number of slots
requested by Hospital B] and so forth.
It could also be possible that, in distributing the slots from a
single closed hospital that had section 422 cap slots, there may not be
sufficient regular cap slots to satisfy all the requests from hospitals
of equal rank, in which case we would have to prorate both the regular
cap slots and the section 422 cap slots. For example, assume Closed
Hospital had a 1996 FTE cap of 50, and a section 422 FTE cap of 25.
After ranking all the applicants, we assign 40 of the slots to
qualified hospitals without any proration. Ten of the 1996 FTE cap
slots remain, while requests for 50 slots from Hospitals Y and Z of
equal rank still remain as well. Hospital Y requested and qualifies for
30 slots and Hospital Z requested and qualifies for 20 slots. In this
case, we would prorate and assign the remaining ten 1996 FTE cap slots
as follows: [(total number of available 1996 slots remaining/total
number of requested slots remaining) x number of slots requested by
Hospital

[[Page 72229]]

Y] and [(total number of available 1996 slots remaining/total number of
requested slots remaining) x number of slots requested by Hospital Z]
etc. In this example, this would mean: [(10/50) x 30] = 6 of the 1996
slots for Hospital Y, and [(10/50) x 20] = 4 of the 1996 slots for
Hospital Z. Thus, only 10 out of the 50 requested slots have been
assigned to Hospitals Y and Z (Hospital Y has 24 requested slots
unfulfilled, and Hospital Z has 16 of its requested slots unfulfilled),
and there are still 25 section 422 cap slots available. We would
prorate the 25 section 422 slots to Hospitals Y and Z as follows:
[(number of section 422 slots remaining/total number of requested slots
remaining) x remaining number of slots requested by Hospital Y] and
[(number of section 422 slots remaining/total number of requested slots
remaining) x remaining number of slots requested by Hospital Z]. In
this example, this would mean: [(25/40) x 24] = 15 of the section 422
slots for Hospital Y, and [(25/40) x 16] = 10 of the section 422 slots
for Hospital Z.
It is also important to consider how the redistribution process
would work in the instance where a hospital that closes is training
residents above its FTE caps at the time it closes, and there are
multiple hospitals that assume an entire program or programs from that
closed hospital. In such a case, not only will the number of requested
slots from all applicants exceed the amount of FTEs in the FTE caps of
the hospital that closed, but the number of FTE residents that are
being assumed also exceeds the closed hospital's FTE caps. For example,
a closed hospital was training 700 FTE residents, but its FTE resident
cap was 500. Hospital K assumes the entire program for 680 FTEs, and
Hospital L assumes one program of 20 FTEs. Both hospitals qualify under
Ranking Criterion One. As a first step, before we begin to assign any
slots to the qualified applicants, we would first prorate each of the
qualified applicants' requests. We would then prorate the closed
hospital's IME and direct GME FTE caps as follows:

Hospital K: (680 FTEs assumed/700 total FTEs) x closed hospital's FTE
resident cap of 500 = 485.71 slots.
Hospital L: (20 FTEs assumed/700 total FTEs) x closed hospital's FTE
resident cap of 500 = 14.29 slots.
485.71 + 14.29 = 500.

Comment: One commenter stated that they understand that by law they
can only receive a permanent cap for interns and residents from
hospitals that closed or close on or after March 23, 2008. However, the
commenter recommended that in future rulemaking CMS should take into
consideration hospitals that have consistently taken in interns and
residents from closed hospitals (and are over their cap) prior to March
23, 2008 and make those temporary cap adjustments into permanent caps.
Response: We appreciate this suggestion to consider hospitals that
have consistently taken in interns and residents from closed hospitals
prior to March 23, 2008 in future rulemaking. However, as noted by the
commenter, CMS is bound by statute in this instance and thus can only
make permanent cap adjustments as a result of hospitals that have
closed on or after March 23, 2008.
Comment: Commenters asked CMS to clarify whether a nonteaching
hospital that takes displaced residents and receives permanent cap
slots through the closed hospital redistribution program may still
start a new program under Sec. 413.79(e) and proceed through the
normal 3-year process of building a permanent resident cap.
Response: Whether a nonteaching hospital could receive slots under
section 5506 and still not be precluded from still qualifying for a new
program cap adjustment under Sec. 413.79(e) depends upon which ranking
criteria the hospital applies for slots under 5506. In the instance
where a non-teaching hospital is assuming entire program(s) and
receives a permanent cap increase for the program(s) under Ranking
Criterion One, we do not believe that hospital should still have the
opportunity to receive a further cap increase under Sec. 413.79(e).
Such a hospital should decide whether it wants to assume an entire
existing program(s) from a closed hospital and receive slots under
section 5506, or whether it wants to reserve its rights to start new
programs and therefore, not request (and receive) slots under section
5506. Nonteaching hospitals that would qualify to request slots under
the other ranking criteria could still qualify to start new programs
and receive a cap increase under Sec. 413.79(e). In general, we note
that if a non-teaching hospital is simply interested in starting a new
program and qualifies for a new program cap adjustment under Sec.
413.79(e), the non-teaching hospital should not be applying for slots
under 5503 or 5506 for the FTEs in the new program, because there is no
need for it to do so. It would receive slots under the normal mechanism
for new teaching hospitals, in accordance with the regulations at Sec.
413.79(e).
Comment: One commenter stated that CMS should clearly specify that
a hospital operating below its cap at the time it began training
displaced residents, and thus did not receive a temporary increase in
its cap under the existing rules, would be considered under section
5506. The commenter noted that a hospital may subsequently implement a
plan to expand enrollment in its existing program, causing it to
operate above its cap. The commenter expressed that this concern is
particularly salient for New York hospitals that participated in the
New York Medicare GME Demonstration Program.
Response: All hospitals requesting slots under section 5506 will be
considered when distributing slots from a closed hospital. It is quite
possible that a hospital could qualify for a cap adjustment under
section 5506 even if it did not receive a temporary cap increase at the
time it began training displaced residents, because at that time, it
had room below its caps. A hospital that accepted displaced residents
in the past from a hospital or program that closed would only have been
eligible to receive a temporary cap adjustment if it was already
training residents in excess of its caps. Subsequent to accepting those
displaced residents, the hospital may decide to permanently expand the
number of residents it is training to an amount in excess of its caps.
If such a hospital can show a demonstrated likelihood to fill slots
within 3 years, and if the applying hospital can show that it is
expanding in excess of its caps, then the applying hospital could apply
under section 5506, but only for the incremental amount in excess of
its caps that is needed. It is important to note, therefore, that a
hospital that currently has room under its caps to expand its program
to a level that it desires would not be considered for receipt of
additional slots under section 5506.
10. Application--No Reopening of Settled Cost Reports
Section 5506(c) of the Affordable Care Act specifies that the
changes made by the provisions of sections 5506(a) and (b) should not
be applied in a manner that would require the reopening of settled cost
reports for which there is not a jurisdictionally proper appeal pending
on direct GME or IME payments as of March 23, 2010 (the date of the
enactment of Pub. L. 111-148). In the August 3, 2010 proposed rule (75
FR 46425), we proposed to reflect this provision in the proposed
revisions under Sec. 412.105(f)(1)(ix)(B) and Sec. 413.79(o)(2)(ii)
of the regulations. We proposed to interpret ``jurisdictionally proper
appeal pending'' on direct GME or IME payments to mean that in order
for a hospital to request a change to its FTE count, direct GME or IME

[[Page 72230]]

respectively, the ``jurisdictionally proper appeal pending'' must be
specific to direct GME or IME respectively. For example, in order for a
hospital to increase its FTE count with regard to an Affordable Care
Act provision that is unique to IME (such as inclusion in the IME count
of didactic time occurring in the hospital as specified by new section
1886(d)(5)(B)(x)(II) of the Act), the hospital's ``jurisdictionally
proper appeal pending'' must be on an IME issue; IME FTEs or the
available bed count. However, if the hospital's ``pending,
jurisdictionally proper appeal'' is on an issue that only affects
direct GME payments, such as the initial residency period or the
Medicare patient load, that appeal would not be sufficient in order for
the hospital to increase its FTE count with regard to an Affordable
Care Act provision that is unique to IME, such as didactic time in the
hospital setting.
We did not receive any public comments specific to this section.
However, after reviewing public comments received regarding the ``No
Duplication of FTE Slots'' proposal, and the timing and effective dates
of slots awarded permanently under section 5506, we have reconsidered
the manner in which we interpreted section 5506(c) of the Affordable
Care Act. Because section 5506 was enacted on March 23, 2010, and
instructs the Secretary to redistribute slots from teaching hospitals
that closed on or after March 23, 2008, there are some retroactive
aspects to this provision. Furthermore, as we explained in response to
comments above in the section on ``No Duplication of FTE Slots,'' there
are instances where we would determine that an applying hospital's FTE
resident cap would increase permanently effective with the fiscal year
begin date of the cost reporting period that follows the cost reporting
period in which the closure occurred. In contemplating the meaning and
implications of section 5506(c), we have considered that, particularly
for closures that occurred in 2008 or 2009, it is possible that those
cost reporting periods are closed, and 180 days since the Notice of
Program Reimbursement (NPR) was issued has passed as well. Section
5506(c) states that the provision should not be applied in a manner
that would require the reopening of settled cost reports for which
there is not a pending, jurisdictionally proper appeal on direct GME or
IME payments as of March 23, 2010. Therefore, section 5506(c) reminds
the Secretary that in the absence of an appeal on the 2008 or 2009 cost
report of the applying hospital, the Medicare contractor would not
assign a permanent cap increase to cost reports that are beyond the
180-day appeal period. Instead, the permanent cap increase would take
effect on the next cost report that has not yet been settled.
11. No Administrative or Judicial Review Under Section 5506
We inadvertently omitted a discussion from the proposed rule
regarding section 5506(e), which amended section 1886(h)(7)(E) of the
Act (as also amended by section 5503(a)) to state, ``There shall be no
administrative or Judicial review * * * with respect to determinations
made under this paragraph, paragraph (8), or paragraph (4)(H)(vi).''
The fact that Congress included this language clearly means that the
Congress intended for our determination with regard to FTE resident cap
redistributions under section 1886(h)(4)(H)(vi) of the Act as added by
section 5506(a) to be final, and not subject to appeal. Because of this
statutory language, we do not believe it would be appropriate to allow
hospitals (or CMS) to appeal determinations concerning the FTE cap
redistributions under section 1886(h)(4)(H)(vi) of the Act.

List of Teaching Hospitals That Have Closed On or After March 23, 2008 and Before August 3, 2010
----------------------------------------------------------------------------------------------------------------
Sec. 422 Sec. 422
Terminating Increase/ Increase/
Provider No. Provider name date DGME cap IME cap decrease decrease CBSA
DGME IME
----------------------------------------------------------------------------------------------------------------
01-0064............. Physicians Carraway 11/01/2008 65.08 65.08 -4.5 -4.5 13820
Medical Ctr.
03-0017............. Mesa General 05/31/2008 20.52 13.33 0.00 0.00 38060
Hospital.
14-0075............. Michael Reese 06/11/2009 199.52 200.82 0.00 0.00 16974
Hospital.
15-0029............. St. Joseph Hospital 07/01/2008 13.43 7.68 -3.79 -1.23 43780
Mishawaka.
19-3034............. Touro 12/31/2009 3.20 2.99 0.00 0.00 35380
Rehabilitation
Center.
26-4011............. Mid-Missouri Mental 06/30/2009 5.33 1.25 0.00 0.00 17860
Health Center.
31-0063............. Muhlenberg Regional 08/13/2008 30.17 30.17 0.00 0.00 35620
Medical Center.
31-0088............. William B Kessler 03/12/2009 2.00 2.00 0.00 0.00 12100
Memorial Hospital.
33-0133............. Cabrini Medical 06/16/2008 134.01 124.1 -21.36 -23.83 35644
Center.
33-0357............. Caritas Health 03/06/2009 190.23 190.23 -9.40 -9.40 35644
Care, Inc.
33-0390............. North General 07/10/2010 57.17 54.29 -6.23 -4.08 35644
Hospital.
39-0023............. Temple East 06/28/2009 2.36 2.36 0.00 0.00 37964
Hospital.
39-0169............. Geisinger South 07/10/2009 4.00 3.33 0.98 1.67 42540
Wilkes-Barre.
42-0006............. Charleston Memorial 11/25/2008 40.88 40.83 0.00 0.00 16700
Hospital.
----------------------------------------------------------------------------------------------------------------

BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

Application Process and CMS Central Office and Regional Office Mailing
Addresses for Receiving Increases in FTE Resident Caps

In order for hospitals to be considered for increases in their FTE
resident caps, each qualifying hospital must submit a timely
application. The following information must be submitted on
applications to receive an increase in FTE resident caps:
The name and Medicare provider number, and Medicare
contractor (to which the hospital submits its cost report) of the
hospital.
The total number of requested FTE resident slots for
direct GME or IME, or both.
A completed copy of the CMS Evaluation Form for each
residency program for which the hospital intends to use the requested
increase in FTE residents.
Source documentation to support the assertions made by the
hospital on the CMS Evaluation Form.
FTE resident counts for direct GME and IME and FTE
resident caps for direct GME and IME reported by the hospital in the
most recent as-filed cost report. (Include copies of Worksheets E, Part
A, E-3, Part IV, and if a hospital received an increase to its FTE
cap(s) under section 422 of the MMA, a copy of E-3, Part VI).
An attestation, signed and dated by an officer or
administrator of the hospital who signs the hospital's Medicare cost
report, of the following information:
``I hereby certify that I understand that misrepresentation or
falsification of any information contained in this application may be
punishable by criminal, civil, and administrative action, fine and/or
imprisonment under federal law. Furthermore, I understand that if
services identified in this application were provided or procured
through payment directly or indirectly of a kickback or were otherwise
illegal, criminal, civil, and administrative action, fines and/or
imprisonment may result. I also certify that, to the best of my
knowledge and belief, it is a true, correct, and complete application
prepared from the books and records of the hospital in accordance with
applicable instructions, except as noted. I further certify that I am
familiar with the laws and regulations regarding Medicare payment to
hospitals for the training of interns and residents.''
The completed application and supporting documentation (as
described above) must be submitted to the CMS Central Office and the
CMS Regional Office for the region in which the applicant hospital is
located. The addresses of the CMS Central Office and Regional Offices
are listed below.

CMS Central and CMS Regional Office Mailing Addresses for Applications
for Increases in FTE Resident Caps

Central Office

Centers for Medicare and Medicaid Services (CMS), Director, Division of
Acute Care, 7500 Security Boulevard, Mail Stop C4-08-06, Baltimore,
Maryland 21244, (410) 786-4548.
Region I (Connecticut, Maine, Massachusetts, New Hampshire, Rhode
Island, and Vermont)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region I, JFK Federal Building, Room 23275, Boston, MA
02203, Phone: (617) 565-1331.
Region II (New York, New Jersey, U.S. Virgin Islands, and Puerto Rico)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region II, 26 Federal Plaza, 38th Floor, New York, NY
10278, Phone: (212) 616-2545.
Region III (Delaware, Maryland, Pennsylvania, Virginia and West
Virginia, and the District of Columbia)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region III, Public Ledger Building, Suite 216, 150 South
Independence Mall West, Philadelphia, PA 19106, Phone: (215) 861-4140.
Region IV (Alabama, North Carolina, South Carolina, Florida, Georgia,
Kentucky, Mississippi, and Tennessee)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region IV, Atlanta Federal Center, 61 Forsyth Street, SW.,
Suite 4T20, Atlanta, GA 30303-8909, Phone: (404) 562-7300.
Region V (Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region V, 233 North Michigan Avenue, Suite 600, Chicago, IL
60601, Phone: (312) 886-6432.

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Region VI (Arkansas, Louisiana, New Mexico, Oklahoma, and Texas)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region VI, 1301 Young Street, Suite 714, Dallas, TX 75202,
Phone: (214) 767-6423.
Region VII (Iowa, Kansas, Missouri, and Nebraska)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region VII, Richard Bolling Federal Building, Room 235, 601
East 12th Street, Kansas City, MO 64106, (816) 564-1843.
Region VIII (Colorado, Montana, North Dakota, South Dakota, Utah and
Wyoming)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region VIII, Colorado State Bank Building, 1600 Broadway,
Suite 700, Denver, CO 80202, Phone: (303) 844-2111.
Region IX (Arizona, California, Hawaii, and Nevada and Territories of
American Samoa, Guam and the Commonwealth of the Northern Mariana
Islands)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region IX, 90 7th Street, Suite 5-300 (SW), San Francisco,
CA 94103-6708, Phone: (415) 744-3501.
Region X (Alaska, Idaho, Oregon, and Washington)
Centers for Medicare and Medicaid Services (CMS), Associate Regional
Administrator, Division of Financial Management and Fee for Service
Operations, Region X, 2201 Sixth Avenue, MS/RX-46, Seattle, WA 98121,
Phone: (206) 615-2094.

F. Collection of Information Requirements

G. Regulatory Impact Analysis

We have examined the impacts of this final rule as required by
Executive Order 12866 (September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules that have economically
significant effects ($100 million or more in any 1 year) or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal government or communities (58 FR
51741).
We have determined that this final rule is not a major rule as
defined in 5 U.S.C. 804(2).
The RFA requires agencies to analyze options for regulatory relief
of small businesses if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small

[[Page 72239]]

governmental jurisdictions. Many hospitals are considered to be small
entities, either by being nonprofit organizations or by meeting the
Small Business Administration (SBA) definition of a small business
(hospitals having revenues of $34.5 million or less in any 1 year).
(For details on the latest standards for health care providers, we
refer readers to the SBA's Web site at: http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_table.pdf (refer to the
620000 series).) For purposes of the RFA, we have determined that many
hospitals will be considered small entities according to the SBA size
standards. Individuals and States are not included in the definition of
a small entity. Therefore, the Secretary has determined that this final
rule will have a significant impact on a substantial number of small
entities. Because we acknowledge that many of the affected entities are
small entities, the analyses presented throughout this final rule
constitute our regulatory flexibility analysis. In the August 3, 2010
(75 FR 46459 through 46460), we solicited public comments on our
estimates and analyses of the impact of the proposed rule on those
small entities. We respond to any public comments that we received
throughout this final rule.
As discussed in section XXI.D. of this final rule, section 5503 of
the Affordable Care Act added a new section 1886(h)(8) to the Act that
provides for reductions in the statutory FTE resident caps under
Medicare for certain hospitals and authorizes a ``redistribution'' of
the FTE resident slots resulting from the reduction in the FTE resident
caps to other hospitals. At this time, we are unable to project how
many FTE resident slots will be available for redistribution under
section 5503 of the Affordable Care Act. Unlike section 422 of the
Medicare Modernization Act, which also provided for a redistribution of
FTE resident slots but provided that the redistributed slots will be
paid using the national average per resident amount (PRA) for direct
GME payment purposes, section 5503 of the Affordable Care Act requires
that hospitals be paid for their additional FTE resident slots using
the hospitals' specific PRAs. Because we are unable to determine the
number of FTE resident slots that will be redistributed under section
5503 of the Affordable Care Act or which hospitals will be receiving
additional FTE resident slots, we cannot calculate a direct GME impact
for section 5503. We do not know the PRAs and Medicare utilization
rates of hospitals that will be receiving additional FTE resident
slots. For purposes of determining an impact for IME payment purposes,
section 5503 requires us to use an IME multiplier of 1.35; however, we
do not know the intern-to-bed ratio and resident-to-bed ratio for the
hospitals that will receive additional FTE resident slots or the volume
or case mix of Medicare discharges at those hospitals. Therefore, we
cannot determine a financial impact for purposes of direct GME and IME
for this provision.
In section XXI.B. of this final rule, we discuss our implementation
of several changes made by section 5504 of the Affordable Care Act with
regard to counting resident time in nonprovider settings for GME and
IME payment purposes. Specifically, section 5504 of the Affordable Care
Act eliminates the requirement for hospitals to incur ``all or
substantially all of the costs for the training program in the
nonprovider setting,'' and now hospitals must only incur the costs of
the salaries and fringe benefits of residents who train in nonprovider
sites. Section 5504 also allows more than one hospital to incur the
costs of training programs at nonprovider settings, either directly or
through a third party. In addition, section 5504 of the Affordable Care
Act creates a recordkeeping requirement for hospitals to track the time
residents spend training in nonprovider settings, which CMS must
compare to analogous data from a base year.
With respect to the recordkeeping requirement, we are adopting our
proposal that rotation schedules be the source for establishing the
amount of time that residents spend training in nonprovider sites, both
in the base year and in subsequent years. In addition, we are adopting
our proposal that cost reporting periods beginning on or after July 1,
2009 and before June 30, 2010 be the base year against which we will
compare subsequent years' data to determine if the amount of
nonprovider training that occurs in subsequent years increases relative
to that base year. We also are adopting our proposal that hospitals
only need to maintain records of the unweighted direct GME FTE count of
resident training time in nonprovider settings. Finally, we are
adopting our proposal to include several additional lines on the
Medicare cost report for hospitals to submit these data. Hospitals will
be required to report these data on a program-specific basis for their
primary care programs, and on an overall hospital basis for their
nonprimary care programs. These data will help us to identify whether
barriers to resident training in nonprovider sites continue to exist.
We do not believe that any of these policies will have a
significant financial impact on the Medicare program. While these
policies may allow hospitals to count additional FTEs training in
nonprovider sites, we do not believe that this constitutes significant
financial impact on the Medicare program, because those residents will
have been training at the hospital if they were not training at the
nonprovider site. We note that the FTE slot redistribution discussed
above that is required by section 5503 of the Affordable Care Act may
have an impact on the hospitals' ability to increase the number of
residents training at nonprovider sites, unless it moves the training
that is currently conducted at the hospital to a nonprovider site.
Therefore, the financial impact of section 5504 will be minimal.
In section XXI.C. of this final rule, we discuss our policies to
implement the provisions of section 5505 of the Affordable Care Act
that make several changes to existing CMS policy with respect to
counting resident training time for didactic, scholarly and other
activities. Specifically, section 5505(a) of the Affordable Care Act
allows a hospital to count the time that residents spend training in an
approved program in a ``nonprovider setting that is primarily engaged
in furnishing patient care'' for direct GME purposes. Section 5505(b)
of the Affordable Care Act allows nonpatient care activities to count
toward resident time for IME purposes as well, but only in certain
hospital settings. These nonpatient care activities do not include
research activities that are not associated with the treatment or
diagnosis or a particular patient. Section 5505 of the Affordable Care
Act also allows hospitals to count the time spent by residents on
vacation, sick leave, or other approved leave in the hospitals' direct
GME and IME resident counts, as long as the leave time does not prolong
the total time that the resident is participating in the approved
training program. In our discussion of the provisions of section 5505,
we described the definitions of the various new terms used in this
section of the Affordable Care Act.
We do not believe that any of the policies which implement section
5505 of the Affordable Care Act will have a significant financial
impact on the Medicare program. While all of these provisions allow
teaching hospitals to claim more resident training time on their
respective cost reports, a hospital is limited as to how many resident
FTEs it can count. In addition, we note that the FTE slot
redistribution that is

[[Page 72240]]

required by section 5503 of the Affordable Care Act discussed earlier
may impact hospitals' ability to increase the number of residents
training at nonprovider sites, unless a hospital moves the training
that is currently conducted at the hospital to a nonprovider site.
Therefore, the financial impact of section 5505 of the Affordable Care
Act is minimal.
In section XXI.E. of this final rule, we discuss our policies to
implement section 5506 of the Affordable Care Act. Prior to the passage
of the Affordable Care Act, if a teaching hospital closed, its direct
GME and IME FTE resident cap slots would be ``lost,'' because those
slots were associated with a specific hospital's Medicare provider
agreement. Section 5506 of the Affordable Care Act addresses this
situation by instructing the Secretary to establish a process by
regulation that will redistribute FTE resident cap slots from teaching
hospitals that close to hospitals that meet certain criteria.
Section 5506 of the Affordable Care Act applies to teaching
hospitals that closed ``on or after a date that is 2 years before the
date of enactment,'' that is, March 23, 2008. Accordingly, although
section 5506 of the Affordable Care Act does address certain teaching
hospital closures that have already occurred, the focus of this
provision is primarily on future teaching hospital closures, and
ensuring that FTE resident cap slots are not lost to a community. We
are unable to project which teaching hospitals will close, how many FTE
resident slots they have, and to which hospitals those slots will be
ultimately redistributed. Therefore, we cannot determine a financial
impact for this provision.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. With
the exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we now define a small rural
hospital as a hospital that is located outside an urban area and has
fewer than 100 beds. Section 601(g) of the Social Security Amendments
of 1983 (Pub. L. 98-21) designated hospitals in certain New England
counties as belonging to the adjacent urban areas. Thus, we continue to
classify these hospitals as urban hospitals. We believe that the
changes in this final rule will affect both a substantial number of
rural hospitals as well as other classes of hospitals and that the
effects on some may be significant. Therefore, the Secretary has
determined that this final rule will have a significant impact on the
operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. That threshold
level is currently approximately $135 million. This final rule will not
mandate any requirements for State, local, or tribal governments, nor
will it affect private sector costs.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct costs on State and local
governments, preempts State law, or otherwise has Federalism
implications. Because this regulation does not impose any costs on
State or local governments, the requirements of Executive Order 13132
are not applicable.
In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Executive Office of Management and
Budget.

XXII. Final Rule: Changes to Whole Hospital and Rural Provider
Exceptions to the Physician Self-Referral Prohibition and Related
Changes to Provider Agreement Regulations

A. Background

Section 1877 of the Act, also known as the physician self-referral
law: (1) Prohibits a physician from making referrals for certain
``designated health services'' (DHS) payable by Medicare to an entity
with which he or she (or an immediate family member) has a financial
relationship (ownership or compensation), unless an exception applies;
and (2) prohibits the entity from filing claims with Medicare (or
billing another individual, entity, or third party payer) for those DHS
furnished as a result of a prohibited referral. The Act establishes a
number of specific exceptions and grants the Secretary the authority to
create regulatory exceptions that pose no risk of program or patient
abuse.
Section 1877(d) of the Act sets forth additional exceptions related
to ownership or investment interests held by a physician (or an
immediate family member of a physician) in an entity that furnishes
DHS. Section 1877(d)(1) of the Act provides that an ownership or
investment interest in a hospital located in Puerto Rico shall not be
considered to be an ownership or investment interest. Section
1877(d)(2) of the Act provides an exception for ownership or investment
interests in rural providers. In order for an entity to qualify for the
exception, the DHS must be furnished in a rural area (as defined in
section 1886(d)(2) of the Act) and substantially all of the DHS
furnished by the entity must be furnished to individuals residing in a
rural area. Section 1877(d)(3) of the Act provides an exception, known
as the ``whole hospital'' exception, for ownership or investment
interests in a hospital located outside of Puerto Rico, provided that
the referring physician is authorized to perform services at the
hospital and the ownership or investment interest is in the hospital
itself (and not merely in a subdivision of the hospital).

B. Changes Made by the Affordable Care Act Relating to the Whole
Hospital and Rural Provider Exceptions to Ownership and Investment
Prohibition

Section 6001(a) of the Affordable Care Act amended the whole
hospital and rural provider exceptions to impose additional
restrictions on physician ownership or investment in hospitals to
qualify for such exceptions. The statute defines a ``physician owner or
investor'' in a hospital as a physician or an immediate family member
of a physician who has a direct or indirect ownership or investment
interest in the hospital. In this document, we refer to hospitals with
such ``physician owners or investors'' as ``physician-owned
hospitals.''
Section 6001(a)(2) of the Affordable Care Act provides that in
order to satisfy the whole hospital exception, a physician-owned
hospital must meet the requirements described in a new section
1877(i)(1) of the Act no later than September 23, 2011. Section
6001(a)(1) of the Affordable Care Act amended the rural provider
exception to require that hospitals located in rural areas also satisfy
the requirements of new section 1877(i)(1) of the Act no later than
September 23, 2011.
Section 6001(a)(3) of the Affordable Care Act, as amended by the
HCERA, sets forth the terms of new section 1877(i)(1) of the Act. Under
section 1877(i)(1) of the Act, a hospital must:
(1) Have physician owners or investors and a provider agreement in
effect on December 31, 2010;
(2) Not expand facility capacity beyond the number of operating
rooms, procedure rooms, and beds for which the hospital was licensed as
of March 23, 2010, unless an exception is granted by the Secretary;

[[Page 72241]]

(3) Comply with certain reporting and disclosure requirements and
not condition any physician ownership or investment interests directly
or indirectly on a physician making or influencing referrals to or
generating other business for the hospital;
(4) Comply with certain requirements designed to ensure that all
ownership and investment interests in the hospital are bona fide;
(5) Inform patients before admission if the hospital does not have
a physician available on the premises during all hours and receive a
signed acknowledgment that the patient understands this fact; and
(6) Not have been converted from an ASC on or after March 23, 2010.
In addition, section 1877(i)(2) of the Act requires the Secretary
to collect, publish, and update on an annual basis on the CMS Web site
(http://www.cms.hhs.gov) the physician and other ownership information
submitted by hospitals under section 1877(i)(1)(C)(i) of the Act.
Section 1877(i)(3) of the Act requires the Secretary to create an
exception process related to the prohibition on expansion of facility
capacity and publish in the Federal Register the final decision with
respect to each applicant hospital.
Section 6001(b)(1) of the Affordable Care Act requires the
Secretary to establish policies and procedures to ensure compliance
with the requirements described in section 1877(i)(1) of the Act, which
may include unannounced site reviews of hospitals. Section 6001(b)(2)
of the Affordable Care Act requires the Secretary, beginning no later
than May 1, 2012, to conduct audits to determine whether hospitals are
in compliance with the requirements of new section 1877(i)(1) of the
Act.
As noted above, physician-owned hospitals must meet the
requirements of new section 1877(i)(1) of the Act not later than 18
months after the date of enactment (that is, by September 23, 2011). We
have received numerous inquiries concerning how this language relates
to several of the requirements set forth in section 1877(i)(1) of the
Act that specify earlier deadlines. We believe that compliance with all
requirements must occur no later than September 23, 2011, and failure
to satisfy earlier deadlines will preclude use of the revised
exceptions after the earlier deadline has passed. For example, section
1877(i)(1)(A) of the Act provides that the hospital must have had
physician ownership or investment on December 31, 2010, and a provider
agreement in effect on that date. Failure to obtain a provider
agreement that is effective on or before December 31, 2010, will
preclude use of the revised rural provider and whole hospital
exceptions on and after January 1, 2011. Another example can be seen in
section 1877(i)(1)(D)(i) of the Act, which provides that the percentage
of the total value of physician ownership or investment interests held
in the hospital, in the aggregate, must not exceed such percentage as
of March 23, 2010. Therefore, if a hospital has no physician ownership
or investment as of March 23, 2010, and later adds physician owners or
investors, the hospital will not satisfy the whole hospital or rural
provider exceptions. Most of the provisions within section 1877(i)(1)
of the Act do not specify an explicit deadline for compliance. Thus, in
the August 3, 2010 proposed rule (75 FR 46432), we proposed that the
deadline for compliance with all provisions within section 1877(i)(1)
of the Act that do not contain an explicit deadline is September 23,
2011, that is, 18 months after the date of enactment.
Below, we discuss changes we proposed to make to our regulations in
response to section 6001 of the Affordable Care Act, as amended, the
public comments we received, if any, our responses to those comments,
and our final policies.

C. Changes to Physician Self-Referral Regulations

In order to conform our regulations to the amendments made to the
rural provider exception by section 6001(a)(1) of the Affordable Care
Act, in the August 3, 2010 proposed rule (75 FR 46432), we proposed to
revise Sec. 411.356(c)(1) to specify that, in the case where the rural
provider is a hospital, the hospital must meet the requirements of
proposed new Sec. 411.362 no later than September 23, 2011.
Similarly, we proposed to revise the whole hospital exception at
Sec. 411.356(c)(3) to add a new paragraph (iv) that provides that the
hospital must meet the requirements in new Sec. 411.362 not later than
September 23, 2011. In the new Sec. 411.362, we set forth the
additional requirements for both exceptions as mandated by section
1877(i)(1) of the Act.
1. Physician Ownership and Provider Agreement
Section 1877(i)(1)(A) of the Act requires that, in order to use the
rural provider or whole hospital exception under section 1877(d)(3) of
the Act, the hospital must have physician ownership or investment on
December 31, 2010, and a provider agreement under section 1866 of the
Act in effect on this date. In the August 3, 2010 proposed rule (75 FR
46432), we proposed to incorporate these requirements in Sec.
411.362(b)(1) of the regulations.
Section 1877(i)(5) of the Act defines a ``physician owner or
investor'' as a physician (or an immediate family member of such
physician) with a direct or an indirect ownership or investment
interest in the hospital. We proposed to incorporate this statutory
definition in Sec. 411.362(b)(1) of the regulations.
We received many public comments concerning this proposal and have
considered each comment as discussed below.
Comment: Many commenters agreed with the proposed interpretation
that, given the language in section 1877(i)(1)(D)(i) of the Act
prohibiting the level of physician ownership from increasing after
March 23, 2010, both existing hospitals and prospective hospitals, must
have physician ownership or investment on March 23, 2010 regardless of
the provision in section 1877(i)(1)(A) of the Act, which states that a
hospital must have physician ownership on or before December 31, 2010
and a provider agreement in effect on such date. The commenters
asserted that this provides a bright line rule and assures that
existing hospitals and hospitals currently under development are
treated equally with respect to physician ownership and investment.
Response: We appreciate the commenters' support for our proposals.
Comment: Two commenters disagreed with our interpretation that both
existing hospitals and prospective hospitals must have physician
ownership or investment on March 23, 2010 regardless of the provision
in section 1877(i)(1)(A) of the Act stating that a hospital must have
physician ownership on December 31, 2010. One commenter believed that
our interpretation of the statute is flawed because it is contrary to
congressional intent and the principle of statutory construction
providing that, wherever possible, a statute should be construed to
give effect to every word and to avoid rendering language meaningless.
The commenter reasoned that, in the case of a hospital under
development, there is merely a construction project, rather than a
licensed hospital, in existence as of March 23, 2010. The commenter
indicated that our proposed interpretation requiring physician
ownership to exist on March 23, 2010, would render meaningless the
statutory language specifying that a hospital must have physician
ownership on December 31, 2010. Both commenters asserted that the March
23, 2010 date was a drafting

[[Page 72242]]

error that should be corrected through rulemaking. The commenters urged
CMS to reconcile these provisions by applying the March 23, 2010
deadline for measuring the baseline percentage of physician ownership
only to hospitals that already had a Medicare provider agreement in
effect on March 23, 2010 and allowing hospitals that are under
development and without any existing physician ownership or investment
interests as of March 23, 2010 to add physician owners until the end of
the year.
Response: We disagree with the commenters' proposal and reasoning.
First, section 1877(i)(1)(D)(i) of the Act specifically states that the
percentage of the total value of physician ownership or investment
interests held in the hospital, or in an entity whose assets include
the hospital, must not exceed such percentage as of date of enactment
(March 23, 2010). Nothing in the plain language of the statute suggests
that this provision applies only to hospitals that already have a
provider agreement in effect on March 23, 2010. The reference to
entities whose assets include the hospital suggest that Congress
intended this provision to apply to hospitals that are under
development. Therefore, if a hospital does not have physician ownership
on March 23, 2010, and later adds physician owners, the hospital will
be unable to qualify for the rural provider or whole hospital
exception. Adopting the commenter's suggested interpretation would
render section 1877(i)(1)(D)(i) of the Act entirely meaningless and
require us to substitute its reference to the date of enactment (March
23, 2010) with ``December 31, 2010.'' This is contrary to the principle
that a statute must not be construed to add words that Congress has not
included.
Second, the interpretation in the proposed rule does not render any
provision of the Act meaningless. Our interpretation gives meaning to
both sections 1877(i)(1)(A) and 1877(i)(1)(D)(i) of the Act. Reading
both of these statutory provisions together, a hospital must have at
least some physician ownership on March 23, 2010 and, even if it
subsequently decreases physician ownership, it must at least retain
some physician ownership on December 31, 2010. The hospital may not,
for example, reduce physician ownership to zero on December 31, 2010,
and later increase physician ownership to the level that existed on
March 23, 2010. Additionally, we are clarifying that a physician-owned
hospital may add or increase the number of physician owners or
investors, or replace physician owners or investors, as long as the
aggregate percentage of physician ownership or investment does not
increase.
Comment: One commenter requested clarification regarding whether a
physician-owned hospital would satisfy the exception if its provider
agreement is issued after December 31, 2010, but with an effective date
on or before December 31, 2010. The commenter suggested that the
proposed regulatory language of Sec. 411.362(b)(1) should be revised
to read `` * * * a provider agreement under section 1866 of the Act in
effect on that date.'' Additionally, the commenter suggested that
proposed Sec. 411.362(b)(2) be revised to include similar language
clarifying an effective date of December 31, 2010.
Response: A physician-owned hospital would satisfy the whole
hospital or rural provider exception if its provider agreement is
issued after December 31, 2010, so long as the provider agreement
letter contains an effective date of on or before December 31, 2010.
Comment: One commenter stated that it takes a tremendous amount of
money, time, staff and other resources to develop a hospital, obtain
financing, and complete other steps necessary to have a provider
agreement in effect on December 31, 2010 deadline to be grandfathered.
The commenter further stated that it entered into a formal physician
contribution agreement on March 1, 2010, and closed the contribution on
April 30, 2010, relying on the language of section 6001 of the
Affordable Care Act, believing it had until December 31, 2010 to obtain
a Medicare provider agreement and physician ownership. The commenter
contended that under CMS' interpretation of section 6001 of the
Affordable Care Act and the March 23, 2010 enactment date, this
hospital will not qualify for the whole hospital exception if it adds
any physician owners after that date. The commenter further asserted
that this interpretation is inconsistent with statutory construction
and has harsh consequences. The commenter stated that if it had known
March 23, 2010 was the deadline, it would have conformed to that date.
Response: The existence of the proposed legislation was well known
and publicized. The terms of the legislation as enacted on March 23,
2010, clearly provided that the percentage of the total value of
physician ownership or investment interests held in the hospital, in
the aggregate, must not increase above the level that existed on the
date of enactment. The commenter's choice to proceed with the
contribution and not close it sooner was extremely risky under the
circumstances if it intended for the physician owners to be able to
refer to the new hospital. As noted above, we disagree that our
interpretation of the statute is impermissible.
Comment: One commenter contended that interpreting section 6001 of
the Affordable Care Act to require physician ownership in the hospital
by March 23, 2010, renders meaningless the requirement that a
physician-owned hospital must not have been converted from an
ambulatory surgical center (ASC) to a hospital on or after the date of
enactment.
Response: We disagree. Section 1877(i)(1)(D)(i) provides that the
total value of the ownership or investment interests held by physicians
in the aggregate in the hospital ``or in an entity whose assets include
the hospital'' cannot exceed the percentage that existed on March 23,
2010. We believe that, depending on the facts, an ASC that later
converts to a hospital could be an ``entity whose assets include the
hospital.'' In our experience, the hospital that exists after
conversion from an ASC possesses the same equipment and other assets
that once belonged to the ASC. For example, if an ASC converted to a
physician-owned hospital on April 1, 2010, and the hospital later has a
provider agreement in effect on December 31, 2010, it might not qualify
for the whole hospital or rural provider exception. The parties could
seek an advisory opinion to address this issue.
Comment: Another commenter raised a similar objection, asserting
that there was an inconsistency between CMS' proposed interpretation
that the hospital must have physician ownership by March 23, 2010, but
that the facility expansion deadline is December 31, 2010, not March
23, 2010. The commenter believed these distinctions are arbitrary and
that CMS is fabricating Congressional intent by stating in the proposed
rule (75 FR 46434) that section 1877(i)(1)(D)(i) of the Act ``assumes
the existence of physician ownership'' on March 23, 2010.
Response: We recognize that some commenters disagree with our
interpretations of the statutory requirements. However, we believe
that, in each instance, we have interpreted the various sections
harmoniously. Also, we must clarify that we did not propose a uniform
December 31, 2010 facility expansion deadline. Rather, consistent with
the statute, we proposed in Sec. 411.362(b)(2) that the hospital may
not increase the number of operating

[[Page 72243]]

rooms, procedure rooms, and beds beyond that for which the hospital is
licensed on March 23, 2010 (or, in the case of a hospital that did not
have a provider agreement, in effect as of that date, but does have a
provider agreement in effect on December 31, 2010, the effective date
of such provider agreement).
Comment: One commenter asserted that many hospitals have projects
that have been in the works prior to March 23, 2010, and December 31,
2010 is not enough time to obtain all approvals, licenses, and
inspections in order to qualify for the grandfather provision. The
commenter stated that, because the provider agreement deadline is this
year, some hospitals will be disadvantaged merely because complying
with regulations in some States takes longer than others.
Response: Section 1877(i)(1)(A) of the Act requires that, in order
to use the whole hospital or rural provider exception, the hospital
must have a provider agreement in effect on December 31, 2010. This is
a statutory directive and we do not have the discretion to address the
concern raised by the commenter.
Comment: One commenter recommended that CMS adopt, for the purposes
of section 1877(i)(1)(A)(ii) of the Act only, the concept of an
``approvable'' application, similar to what is done for physicians. The
commenter further suggested that assuming the applicant is ultimately
successful in its certification survey, the point at which the
application is submitted and reviewed by the fiscal intermediary or MAC
and recommended to CMS for approval would be an appropriate point to
establish compliance with the provider agreement deadline. An
alternative suggestion made by the commenter was to require any fiscal
intermediary or MAC that receives a provider application from a
hospital trying to comply with section 1877(i)(1)(A)(ii) of the Act to
review and respond to the applicant within 15 days.
Response: We are not persuaded by the commenter's recommendations.
We will consider a provider to have a provider agreement in effect on
December 31, 2010, if the effective date of the agreement is no later
than December 31, 2010. As set forth in Sec. 489.13(b), the effective
date of a provider agreement may not be earlier than the latest of the
dates on which CMS determines that the applicable Federal requirements
are satisfied.
After consideration of the public comments we received, we are
adopting as final, without modification, our proposed regulations at
Sec. 411.362(b)(1) and Sec. 411.362(a)(1).
2. Limitation on Expansion of Facility Capacity
Section 1877(i)(1)(B) of the Act requires that the number of
operating rooms, procedure rooms, and beds for which the hospital is
licensed at any time on or after March 23, 2010, be no greater than the
number of operating rooms, procedure rooms, and beds for which the
hospital was licensed on that date. However, section 1877(i)(3)(C) of
the Act authorizes the Secretary to permit a physician-owned hospital
to increase capacity above its ``baseline number of operating rooms,
procedure rooms, and beds.'' Section 1877(i)(3)(C)(iii) of the Act, as
amended by section 1106(2)(B) of the HCERA, defines the term ``baseline
number of operating rooms, procedure rooms, and beds'' to mean ``the
number of operating rooms, procedure rooms, and beds for which the
applicable hospital is licensed as of [March 23, 2010] (or, in the case
of a hospital that did not have a provider agreement in effect as of
that date, but does have an agreement in effect on December 31, 2010,
the effective date of such provider agreement).'' Although section
1877(i)(1)(B) of the Act does not reflect the language in section
1877(i)(3)(C)(iii) permitting the baseline facility capacity to be
determined for some hospitals as of December 31, 2010, we must read
sections 1877(i)(1)(B) and 1877(i)(3)(C)(iii) of the Act together and
interpret them harmoniously. Accordingly, in proposed Sec.
411.362(b)(2) in the August 3, 2010 proposed rule (75 FR 46463), we
specified that the hospital will be limited to the number of operating
rooms, procedure rooms, and beds for which the hospital is licensed on
March 23, 2010, or if the hospital did not have a provider agreement in
effect as of that date, but does have an agreement in effect on
December 31, 2010, the effective date of such provider agreement.
The limitation on expansion of facility capacity applies to
operating rooms, procedure rooms, and beds for which the hospital is
licensed. It is important to note that the limitation on expansion
applies to operating rooms and procedure rooms, regardless of whether a
State licenses these rooms. Referrals are prohibited if made by
physician owners and investors after facility expansion and prior to
the Secretary's granting of an exception to the capacity restriction.
Exceptions for expanding facility capacity will protect only those
referrals made after the exception is granted.
Section 1877(i)(3)(G) of the Act specifies that ``the term
`procedure rooms' includes rooms in which catheterizations,
angiographies, angiograms, and endoscopies are performed, except such
term shall not include emergency rooms or departments (exclusive of
rooms in which catheterizations, angiographies, angiograms, and
endoscopies are performed).'' Under our proposed definition of
procedure rooms at Sec. 411.362(a)(2), the term is limited to the
types of rooms specified in the statute. Although the statute would
permit us to define ``procedure rooms'' to include rooms where other
services are performed, we did not propose to do so. We encouraged
public comments on whether ``procedure rooms'' should include rooms
where additional services, such as CT or PET scans, or other services,
are performed.
Section 1877(i)(3)(A) of the Act gives the Secretary until January
1, 2012, to promulgate regulations concerning the process for a
hospital to apply for an exception and provides that the implementation
of this process must occur on February 1, 2012. As we indicated in the
proposed rule, we plan to issue a separate rulemaking document that
will provide for implementation of this exceptions process.
We received a large number of comments on our proposal and have
considered each comment as discussed below. Commenters in favor of our
proposal agreed that the limitations on expansion on procedure rooms,
operating rooms, and beds were necessary and consistent with section
1877(i)(1)(B) of the Act. Commenters who opposed the proposal raised
questions concerning the financial impact upon hospitals that were in
the midst of an expansion, our interpretation of the expansion
deadline, and the interplay with the deadlines associated with other
provisions found in section 1877(i) of the Act. A large number of
commenters requested clarifications regarding situations where the
State does not license these rooms and beds. We discuss below all of
the significant points raised by commenters to our proposal.
Comment: One commenter urged CMS to confirm that a physician-owned
hospital may replace operating rooms, procedure rooms, and beds with
new ones, so long as the total number of each does not increase beyond
the baseline number for which the hospital is licensed as of March 23,
2010. The

[[Page 72244]]

commenter noted that while Congress significantly increased the
requirements to satisfy the whole hospital exception, such hospitals
are permitted to exist under the law and, therefore, will need to be
improved to maintain their infrastructure over time.
Response: The commenter correctly characterizes our interpretation
of the Act. The language in section 1877(i)(1)(D) of the Act limits
expansion of the total number of operating rooms, procedure rooms, and
beds beyond the number for which the hospital is licensed as of March
23, 2010. Thus, if a hospital retires old beds for new beds (or retires
old operating rooms and procedure rooms for new operating rooms and
procedure rooms) without increasing the baseline number, there would be
no violation of section 1877(i)(1)(B) of the Act.
Comment: One commenter stated that the proposed regulation did not
address hospitals that had a provider agreement in effect on March 23,
2010, and were in the middle of an expansion project, including those
projects or renovations that were occurring in States that do not
license operating or procedure rooms.
Response: We recognize that States usually do not license the
number of hospital operating and procedure rooms. As we stated in the
August 3, 2010 proposed rule (75 FR 46433), the limitation on expansion
applies to operating rooms and procedure rooms, regardless of whether a
State licenses these rooms. We interpret the statutory phrase ``for
which the hospital is licensed'' as applying only to beds. In other
words, we believe the statute limits a hospital's ability to increase
the number of beds for which it was licensed and the number of
operating and procedure rooms that existed at the hospital and were
operational on March 23, 2010 (or December 31, 2010, if applicable). A
hospital that had a provider agreement in effect on March 23, 2010 and
was in the process of expanding the number operating rooms or procedure
rooms, but did not have the rooms in existence by March 23, 2010, would
not be able to include in its baseline facility capacity the rooms that
were not yet operational. The hospital could, however, seek the
Secretary's approval of the expansion through the process that will be
established under section 1877(i)(3)(A) of the Act.
Comment: One commenter stated that it could be difficult to satisfy
the criteria for obtaining the Secretary's approval for an exception to
the prohibition against expansion of facility capacity, particularly
for general acute care full service hospitals, within an area of
population growth.
Response: We understand the concerns expressed by the commenter,
but we have no discretion to ignore the standards set forth in sections
1877(i)(3)(E) and (i)(3)(F) of the Act.
Comment: Several commenters objected to the proposed interpretation
of section 1877(i)(1)(B) of the Act that the hospital will be limited
to the number of operating rooms, procedure rooms, and beds for which
the hospital is licensed on March 23, 2010, or in the case of a
hospital that did not have a provider agreement in effect on that date,
but does have an agreement in effect on December 31, 2010, the
effective date of such agreement. Some commenters objected based on
equity, while other commenters made arguments concerning this
interpretation of section 1877(i)(1)(B) of the Act. Those commenters
who objected to the interpretation suggested that the last clause in
subsection (B) refers not the ``date of enactment,'' which Congress
could have easily done, but rather to ``such date'' as the date by
which expansion must be completed. The commenters asserted that this
language could refer to either the date of enactment or December 31,
2010, which appears in the preceding provision at section 1877(i)(1)(B)
of the Act. The commenters further stated that this provision is
ambiguous and capable of being interpreted several ways that do not
necessitate limiting the number of beds, operating rooms, or procedure
rooms to March 23, 2010 numbers. Additionally, some of the commenters
asserted that this proposal renders the provision ``18 months after the
date of enactment'' meaningless and superfluous. Those commenters
stated that the statute should be read to give meaning to the 18-month
deadline so that the hospital can add beds, operating rooms, or
procedure rooms to its license before 18 months after the date of
enactment.
Response: We are not persuaded to adopt either of the expansion
deadlines recommended by the commenters. Although there may be varying
interpretations of the statutory language, we believe that our reading
is a rational reading of the statute. Section 1877(i)(1)(B) of the Act
requires that the number of operating rooms, procedure rooms, and beds
for which the hospital is licensed at any time on or after the date of
enactment (March 23, 2010), be no greater than the number of operating
rooms, procedure rooms, and beds for which the hospital was licensed
``as of such date.'' We do not believe the commenter's suggestion that
we construe ``such date'' to mean any date other than the date of
enactment is reasonable. We note that section 1877(i)(3)(C) of the Act
authorizes the Secretary to permit a physician-owned hospital to
increase capacity above its ``baseline number of operating rooms,
procedure rooms, and beds.'' Section 1877(i)(3)(C)(iii) of the Act, as
amended by section 1106(2)(B) of the HCERA, defines the term ``baseline
number of operating rooms, procedure rooms, and beds'' to mean ``the
number of operating rooms, procedure rooms, and beds for which the
hospital is licensed as of [March 23, 2010] (or, in the case of a
hospital that did not have a provider agreement in effect as of that
date, but does have an agreement in effect on December 31, 2010, the
effective date of such provider agreement).'' Although section
1877(i)(1)(B) of the Act does not reflect the language in section
1877(i)(3(C)(iii) of the Act permitting the baseline facility capacity
to be determined for some hospitals as of December 31, 2010, we must
read sections 1877(i)(1)(B) and 1877(i)(3)(C)(iii) of the Act together
and interpret them harmoniously. Accordingly, in proposed Sec.
411.362(b)(2), we specified that the hospital will be limited to the
number of operating rooms, procedure rooms, and beds for which the
hospital is licensed on March 23, 2010, or if the hospital did not have
a provider agreement in effect as of that date, but does have an
agreement in effect on December 31, 2010, the effective date of such
provider agreement. Referrals are prohibited if made by physician
owners and investors after facility expansion and prior to the
Secretary's granting of an exception to the capacity restriction.
Exceptions for expanding facility capacity will protect only those
referrals made after the exception is granted.
The other recommendation made by commenters involved interpreting
the statute to permit facility expansion until September 23, 2011. In
the August 3, 2010 proposed rule (75 FR 46432), we stated that
physician-owned hospital must meet the requirements of new section
1877(i)(1) of the Act not later than 18 months after the date of
enactment (that is, by September 23, 2011). We believe that compliance
with all requirements must occur no later than September 23, 2011, and
failure to satisfy earlier deadlines (such as that forth in section
1877(i)(1)(B) of the Act) will preclude use of the revised exceptions
after the earlier deadlines have passed. We do not believe that the
commenters' suggestion gives effect to other deadlines in the statute.

[[Page 72245]]

Comment: One commenter asserted that the deadline for obtaining
physician ownership and a provider agreement and the deadline for
measuring the baseline facility capacity are in conflict. The commenter
believed there was a drafting oversight and that the proposed rule
defies logic. The commenter remarked that the ``grandfathering'' of
providers and the limitations on expansion were clearly intended to run
until the end of this year but because of a technical oversight, the
grandfathered provider must have physician ownership as of March 23,
2010.
Response: We are obligated to follow the statutory directive, and
we believe our interpretation of the statutory provision is reasonable.
We believe there is no conflict between section 1877(i)(1)(A) of the
Act, which mandates that, in order to use the rural provider and whole
hospital exceptions, the hospital must have a provider agreement and
physician ownership or investment on December 31, 2010, and the
restriction on facility expansion set forth in section 1877(i)(1)(B) of
the Act and interpreted in accordance with section 1877(i)(3)(C) of the
Act. As we noted in the proposed rule, several of the requirements in
section 1877(i)(1) of the Act have differing deadlines for compliance
and we must give meaning to those deadlines.
Comment: One commenter argued that the proposed rule will have a
significant and deleterious effect on psychiatric hospitals in
particular because the number of beds available for psychiatric
patients has been declining over the years and as a result, this
shortage has increased demands on hospital emergency rooms. The
commenter recommended the following changes to the proposed rule at
Sec. 411.362(b)(2):
1. Exempt grandfathered psychiatric hospitals from Sec.
411.362(b)(2).
2. Revise the rule to specify that grandfathered psychiatric
hospitals are permitted to expand bed capacity (only) beyond that for
which it was licensed as of March 23, 2010.
Response: We are not persuaded to adopt the commenter's
suggestions. We have the authority pursuant to section 1877(b)(4) of
the Act to create new regulatory exceptions for financial relationships
such as the one recommended by the commenter, provided that such an
exception poses no risk of program or patient abuse. At this time, we
are unable to conclude that there is no risk of program or patient
abuse and, therefore, we will not be promulgating the exception
requested by the commenter. We will continue to consider whether there
are certain types or categories of hospitals that warrant an exception.
In addition, we remind the commenter that, pursuant to section
1877(i)(3)(A) of the Act, there will be a process for hospitals to
apply for an exception to the limitation on the expansion of rooms and
beds. Individual psychiatric hospitals that are impacted by the
limitation on expansion may wish to request an exception under this
process.
Comment: One commenter stated the prohibition against facility
expansion should not apply when a physician-owned hospital relocates
some or all of the operating rooms, procedure rooms, or beds for which
the hospital was licensed as of March 23, 2010, to an existing or new
site if:
1. Relocation would not increase the number of operating rooms,
procedure rooms, or beds for which the hospital was licensed on March
23, 2010;
2. Following this relocation, all of the hospital's operating
rooms, procedure rooms, and beds (including those relocated to the
other site) would continue to be operated by the same legal entity,
under the same State-issued hospital license, the same Medicare
provider agreement and the same CMS certification number;
3. The hospital's original location and other site would be
operated in compliance with all applicable Medicare laws and
requirements; and
4. The hospital would comply fully with all the requirements under
the whole hospital exception.
The commenter urged CMS to clarify that a hospital is free to
relocate its existing beds under the circumstances described above.
Response: Under the circumstances described by the commenter, the
relocation of beds would not constitute an increase in the number of
licensed beds. Under other circumstances, the hospital may wish to seek
an advisory opinion regarding the applicability of the prohibition
against expansion.
Comment: One commenter contended that section 1877(i)(1)(B) of the
Act does not provide any basis for including restrictions on how a
hospital uses its beds, as long as it does not increase the number of
beds beyond the number that were licensed on March 23, 2010. Another
commenter similarly inquired whether operating rooms, procedure rooms,
and beds could change purposes (for example, through the conversion of
a cardiac catheterization room into an endoscopy room), as long as the
number of operating rooms, procedure rooms, and beds in the aggregate
did not increase. However, another commenter asserted that, under the
terms of the statute, a hospital cannot reduce its operating rooms to
increase the number of its procedure rooms, and each individual
category must remain capped at its March 23, 2010 level.
Response: We interpret section 1877(i)(1)(B) of the Act to impose
restrictions only on the aggregate number of operating rooms, procedure
rooms, and beds. Therefore, we will not impose any restrictions
regarding the manner in which a physician-owned hospital uses its beds,
operating rooms, or procedure rooms. In other words, if a hospital is
authorized to operate 20 beds, 2 operating rooms, and 2 procedure
rooms, the hospital may reduce or increase the number of beds,
operating rooms, or procedure rooms as long as the resulting aggregate
number of beds, operating rooms, and procedure rooms does not exceed 24
(assuming any applicable licensure requirements are satisfied).
Comment: Several commenters supported the statement in the preamble
of the proposed rule (75 FR 46433) that the limitation on the expansion
of procedure rooms and operating rooms applies regardless of whether a
State licenses those rooms.
Response: We appreciate the commenters' support for our position.
Comment: One commenter recommended that CMS clarify that even if
the hospital's State-issued license does not separately enumerate the
number of operating rooms or procedure rooms, the State can confirm the
number of operating rooms and procedure rooms that the hospital was
authorized to operate as of March 23, 2010, and if no increase has
occurred since that time, the hospital would be viewed as being
compliant with this provision.
Response: The commenter's suggestion is an acceptable method of
demonstrating compliance with section 1877(i)(1)(B) of the Act.
Comment: One commenter requested that the proposed regulation be
revised to clarify how the number of operating rooms and procedures
rooms at physician-owned hospitals will be determined in States that do
not license such rooms. The commenter recommended that CMS adopt
certain conditions which, if met, would deem an operating room or
procedure room to be ``licensed.'' The commenter stated that if a
hospital was conducting a construction or renovation project as of
March 23, 2010, in a State that does not license operating rooms or
procedure rooms, that room should be deemed licensed as of March 23,
2010.
Response: We are not persuaded to adopt the commenter's suggestion
to

[[Page 72246]]

revise our proposal such that a renovation or construction project that
was underway as of March 23, 2010, would be deemed licensed. As stated
above, we do not interpret the statutory reference to licensure as
applying to operating and procedure rooms. We believe the baseline
capacity includes those operating and procedure rooms that were in
existence and operational on March 23, 2010 (or December 31, 2010, if
applicable). The advisory opinion process could be used to determine
whether rooms undergoing renovation or construction were in existence
by the applicable date.
Comment: One commenter urged CMS to clarify whether a prohibited
expansion would occur if a hospital has rooms ``approved'' by the State
in ``shelled space,'' which is space included in plans for a future
specified use, if the space has been physically built (walls, floors,
doors) on or before the baseline date determined under subparagraph
(3)(C)(iii) of section 1877(i) of the Act but fitted out after the
baseline date.
Response: We are unclear as to the situation that the commenter is
describing. The commenter's situation may be addressed through the
advisory opinion process or the process for obtaining an exception to
the prohibition on facility expansion.
Comment: The majority of commenters agreed with the proposed
definition of ``procedure rooms.'' Many commenters stated that the
statute makes specific references to these services, underscoring
Congress' intent to ensure that this definition specifically mirrors
that statutory language. Another commenter stated that to expand the
listing of specific procedure rooms would not take into account
continued trends in technological advancements of equipment that
require hospitals to change the traditional and treatment option to
modalities that are less invasive. This same commenter asserted that
restricting hospitals' ability to add these services for their patients
would fragment treatment plans for the patients, thus requiring
transfers to other facilities, which may result in additional costs to
the patients and providers.
Response: We agree with many of the points offered by the
commenters. Therefore, we are not adding any additional services to the
proposed definition of procedure rooms beyond those set forth in
section 1877(i)(3)(G) of the Act.
Comment: One commenter recommended that the regulatory definition
of ``procedure rooms'' be broadened in a number of respects:
1. The definition should include rooms where the following
additional services are provided: Radiation therapy and all diagnostic
imaging services, including MRI, CT, and PET scans, interventional
radiology, and mammography.
2. The definition should include freestanding emergency
departments, prohibiting physician-owned hospitals from adding these
facilities after the date of enactment of the Affordable Care Act.
3. The definition should include areas not technically defined as
separate procedure rooms, in which medical services similar to those
provided in procedure rooms can be provided, and the commenter believes
that the proposed rules should account for changes in technology which
may allow the list of procedures to be furnished in a patient room.
Response: We are not persuaded that a broadening of the definition
of procedure rooms is warranted at this time. However, we will continue
to monitor expansions in procedure rooms to determine whether we should
revisit this issue in future rulemaking, such as the separate
rulemaking that will provide for implementation of the exceptions
process.
Comment: Several commenters noted that the proposed rule did not
address the process for requesting exceptions to the growth restriction
on existing physician-owned hospitals. The commenters stated that more
guidance is necessary for hospitals to align their actions with section
6001 of the Affordable Care Act.
Response: We understand the commenters' request for more guidance,
particularly with regards to the exception process. However, section
1877(i)(3)(A) of the Act gives the Secretary until January 1, 2012 to
promulgate regulations concerning the exceptions process. We believe it
is important that we balance the commenters' sense of urgency with the
need to develop and implement an exceptions process that adheres to the
statute, addresses all issues necessary for a provider to request such
an exception, and ensure that we receive all information needed in
order to timely render an informed decision.
After consideration of the public comments we received, we are
finalizing our proposed Sec. 411.362(b)(2) without modification.
3. Preventing Conflicts of Interest
Section 1877(i)(1)(C)(i) of the Act requires the hospital to submit
to the Secretary an annual report containing a detailed description of
the identity of each physician owner or investor and any other owners
or investors of the hospital, and the nature and extent of all
ownership and investment interests in the hospital. We plan to propose
procedures for this reporting requirement in a separate rulemaking or
guidance document.
Sections 1877(i)(1)(C)(ii) through (i)(1)(C)(iv) of the Act
requires hospitals to: (1) Develop procedures requiring a referring
physician owner or investor to disclose (in time to permit the patient
to make a meaningful decision about receipt of care) his or her
ownership interest to the patient and, if applicable, the treating
physician's ownership or investment interest; (2) not condition any
physician ownership or investment interests either directly or
indirectly on the physician making or influencing referrals to the
hospital or otherwise generating business for the hospital; and (3)
disclose on any public Web site for the hospital and in any public
advertising that it is owned or invested in by physicians. Compliance
with these three requirements must be achieved no later than September
23, 2011.
To incorporate these requirements into our regulations, in the
August 3, 2010 proposed rule (75 FR 46463), we proposed to: (1) Add
Sec. 411.362(b)(3)(ii)(A) to specify that a hospital must require each
referring physician owner or investor to agree, as a condition of
continued medical staff membership or admitting privileges, to provide
written disclosure of his or her ownership or investment interest in
the hospital (and, if applicable, the treating physician's ownership or
investment interest in the hospital) to all patients the physician
refers to the hospital, at the time the referral is made; (2) add Sec.
411.362(b)(3)(ii)(B) to specify that a hospital may not condition any
physician ownership or investment interests either directly or
indirectly on the physician owner or investor making or influencing
referrals to the hospital or otherwise generating business for the
hospital; and (3) add Sec. 411.362(b)(3)(ii)(C) to specify that the
hospital must disclose on any public Web site for the hospital and in
any public advertising that the hospital is owned or invested in by
physicians.
Proposed Sec. 411.362(b)(3)(ii)(A) defines the procedures that a
hospital must have in place to require its physician owners and
investors to make certain patient disclosures. In the proposed rule, we
stated that we do not believe the disclosures to be made by physicians
will be burdensome. For example, a physician owner or investor could
provide a written, form notice to each patient that discloses the

[[Page 72247]]

physician's ownership or investment interest in the hospital, informs
the patient that his or her treating physician may have an ownership or
investment interest in the hospital, and directs the patient to review
an attached list identifying all other physician owners or investors in
the hospital. This notice may be used by the patient to make a
meaningful decision regarding his or her receipt of care.
In the August 3, 2010 proposed rule, we solicited public comments
on several different issues relating to preventing conflicts of
interest. First, we sought public comments on the benefits and
drawbacks of our proposal, discussed above, relating to the procedures
hospitals must have in place to require referring physician owners and
investors to make the patient disclosures set forth in section
1877(i)(1)(C)(ii) of the Act. We stated that we were interested in
receiving information about other methods and alternative approaches to
address this issue and what should constitute sufficient hospital
procedures to require such disclosures to a patient by a referring
physician owner or investor.
Second, we indicated that we were aware that a patient may have
multiple conditions for which there are a variety of physician
specialists who are responsible for different aspects of a patient's
care, even though the statute refers to a single ``treating
physician.'' We did not propose to define ``treating physician.'' We
stated that we would consider treating physicians to be those
physicians who are responsible for any aspect of a patient's care or
treatment. We welcomed public comments on this approach.
Finally, we encouraged public comments on the methods a hospital
should be required to use in disclosing its physician ownership or
investment in public advertising pursuant to section 1877(i)(1)(C)(iv)
of the Act. For example, we indicated that we were interested in
comments on whether a hospital should be required to disclose physician
ownership or investment on its homepage, any particular page on its Web
site (for example, an ``About Us'' page), or all pages on its Web site;
the types of media that constitute, or do not constitute, public
advertising; and whether a minimum font size should be required for the
disclosure.
We received several comments on this proposal and have considered
each comment as discussed below. Commenters in favor of our proposal
agreed that the proposed procedures for assuring that patients are
informed about hospital ownership interests of referring and treating
physicians are adequate, reasonable, and not overly burdensome. The
commenters who were opposed to the proposal raised various issues
concerning the appropriateness and timeliness of ownership disclosure
to patients by hospitals and physicians. Commenters also had
suggestions concerning the methods hospitals should utilize in
disclosing physician ownership on Web sites and in public advertising.
Comment: Several commenters noted that the proposed rule did not
address the requirement under section 1877(i)(1)(C)(i) of the Act for
hospitals to submit to the Secretary an annual report containing a
detailed description of the identity of each physician and other owner
or investor in the hospital and the nature and extent of all ownership
and investment interests in the hospital. The commenters stated that
more guidance is necessary for hospitals to ensure compliance with this
provision by September 23, 2011.
Response: We understand the commenters' request for more guidance
regarding the process for reporting information to CMS. As noted above,
the process for collecting this information will be the subject of a
separate rulemaking or guidance document. We are using this time to
determine the exact type of information that must be reported, the
mechanisms for hospitals to submit the required information,
instructions to hospitals, and how we will post the required
information on the CMS Web site. After the process has been determined,
we will provide hospitals and physicians with the guidance requested by
the commenters. In the meantime, we have added a provision at Sec.
411.362(b)(3)(i) to clarify that the hospital shall submit the annual
report at such time and in such manner as specified by CMS.
Comment: A few commenters had questions about the appropriateness
and timeliness of ownership disclosures made by physicians to their
patients. For instance, one commenter wanted to know: (1) If a separate
disclosure is required for every admission; (2) when should a
disclosure occur; (3) if a physician has previously disclosed
ownership, whether another disclosure should occur before admission;
(4) if a patient is treated in an outpatient clinic, but suddenly needs
to be admitted as an inpatient, should disclosure be immediate or after
treatment; and (5) if disclosures are required for confused,
unconscious, or otherwise incoherent patients. Another commenter
suggested that it will be problematic to require in all cases a
referring physician to disclose to the patient his or her ownership
interest in a timely fashion to permit the patient to make a meaningful
decision about receipt of care.
Response: Section 1877(i)(1)(C)(ii) of the Act requires that a
physician disclose his or her ownership interest in a hospital to a
referred patient by a time that permits the patient to make a
``meaningful decision regarding the receipt of care.'' We stated in the
proposed rule that, in order for the patient to make a meaningful
decision regarding the receipt of care, the disclosure must occur at
the time of referral. We have reconsidered this policy in light of the
commenters' concerns regarding the burden of making disclosures at the
time of each referral and the potential for this policy to result in
disproportional overpayment liability under section 1877(g)(1) of the
Act. We are modifying the regulation text to mirror the statutory
language, which we believe offers more flexibility regarding the timing
and method of disclosure. We recognize that our existing regulations
governing provider agreements at Sec. 489.20(u)(2) require each
physician who is a member of the hospital's medical staff to agree to
make a similar disclosure at the time of referral. Because we did not
propose to change this standard in Sec. 489.20(u)(2), we are not doing
so in this final rule.
Comment: One commenter believed that CMS should give further
consideration as to how it can impose the disclosure requirements
directly on the physician rather than the hospital. The commenter noted
that the hospital, not the physician, is in a position to be sanctioned
for a physician owner's failure to disclose. Another commenter
recommended that the loss of a physician's medical staff membership or
admitting privileges was too draconian a remedy for the physician's
failure to disclose his or her hospital ownership interests. One
commenter recommended that if a physician does not disclose his or her
ownership in a hospital at the time of referral, the physician should
not receive Medicare payment for his or her professional services
provided at the hospital.
Response: Section 1877(i)(1)(C)(ii) of the Act requires hospitals
to have procedures in place to require a referring physician owner to
disclose to the patient his or her ownership or investment interest in
the hospital as well as any ownership interest, if applicable, of the
treating physician. Those procedures, in turn, must require physicians
to agree to make such disclosures as a condition of continued medical
staff membership or admitting privileges. A physician's failure to
fully comply with such agreement is a

[[Page 72248]]

disciplinary matter for the hospital to resolve in accordance with the
medical staff bylaws and would not necessarily result in a violation of
the physician self-referral law. As noted above, a similar requirement
already appears in our provider agreement regulations at Sec.
489.20(u)(2). The last comment is beyond the scope of this rulemaking.
Comment: One commenter suggested that, in emergency situations,
that is, non-elective admissions, it will be very difficult for
physicians to provide the required disclosure in a timely fashion.
Therefore, the commenter recommended that when a patient is first seen
by a physician in a hospital emergency department, the physician should
be exempted from the pre-admission disclosure requirement. Another
commenter suggested that the physician ownership disclosure requirement
can be satisfied by the hospital on behalf of the physician during the
patient admission and registration process, as hospitals are already
required, under Sec. 489.20(u)(1) to disclose physician ownership at
the beginning of the patient's hospital stay or outpatient visit.
Response: In the case of a patient who is treated by a physician
owner in the hospital emergency department, we believe that no
disclosure is necessary other than that required under Sec. 489.20(u).
The statute requires hospitals to ensure that physician owners make the
relevant disclosures ``by a time that permits the patient to make a
meaningful decision regarding the receipt of care.'' By the time a
patient has presented at the emergency department, the patient or the
patient's representative has already made a decision about where to
receive care. If a patient is admitted to the hospital, the patient or
the patient's representative must be notified by the hospital under
Sec. 489.20(u) that the hospital is physician-owned.
Comment: One commenter believed that the regulations should be
amended to allow physicians to prominently display in their offices a
notice informing patients that the physician has an ownership interest
in a particular hospital facility and that the patient can inquire
further or request admission to another facility. Another commenter
noted our suggestion that the referring physician could disclose the
ownership or investment interest of any treating physician by directing
the patient to review a list of other investors in the hospital. The
commenter requested clarification as to whether physician owners would
be required to provide such a list for each patient referral. The
commenter suggested that if this requirement were imposed for each and
every referral, the paperwork involved would be substantial and
cumbersome. The commenter recommended that such a disclosure be
required only when a patient requests a list of all other owners.
Response: We are not revising the regulations to require any
particular means of notification by a physician of hospital ownership.
Physicians can inform patients of their ownership interests and the
ownership interests of treating physicians in any manner that permits
the patient to make a meaningful decision regarding the receipt of
care. A prominently displayed sign and list of other treating
physicians with an ownership or investment interest in the hospital
could satisfy the disclosure requirement, although we note that it may
not be a meaningful disclosure in all cases. If a patient is blind,
unable to read, or is incapacitated, it would be incumbent upon the
physician to notify the patient or an immediate family member of the
patient in a manner other than the one suggested.
Comment: One commenter noted that, in many cases, a patient of a
referring physician with hospital ownership interests may have several
treating physicians. The commenter recommended that the referring
physician provide the patient with a list of all physician owners who
are actively practicing at the hospital. Another commenter believed
that a referring physician hospital owner, especially in an emergency
room setting, will not have an early opportunity to inform the patient
of the treating physician's ownership interests in the hospital. The
commenter was concerned that the disclosure process could place the
patient in danger by delaying patient care in order to provide timely
ownership disclosure information.
Response: We suggested in the preamble to the proposed rule that a
referring physician could use a written, form notice to disclose his or
her ownership interest to the patient. Also, we suggested that the
referring physician could disclose the ownership interest of one or
more treating physicians by directing the patient to review a list of
other investors in the hospital. As we stated above, no disclosure by a
physician owner is necessary with respect to a patient whom the
physician treated in a hospital emergency department.
Comment: Several commenters stated that the statutory provision at
section 1877(i)(1)(C)(iv) of the Act requiring hospitals to disclose
physician ownership information on the hospitals' Web sites could be
accomplished by placing such information on the home page or ``about
us'' section on the Web sites. The commenters also believed that the
disclosures on the Web sites should be clearly visible to the typical
reader.
Response: We agree with the recommendations made by the commenters.
We believe a hospital could satisfy this requirement by including on
one location within its public Web site a list of the physician owners
who actively practice at the facility. A list of the physician owners
should be located in a conspicuous place on the Web site, on a page
that is commonly visited by current or potential patients, such as the
home page or ``about us'' section. We also believe the physician
ownership information should be readily legible and in a size that is
consistent with other text on the Web site.
Comment: One commenter recommended that the hospital requirement to
disclose hospital ownership information in any public advertising
should be limited to specific activities and should not be required in
all public advertising. The commenter suggested that the inclusion of
physician ownership information in its public advertising should apply
only to direct mail, Internet, and other print communications where
such communication can be read and fully understood. The commenter
believed that a hospital should not be required to include disclosures
in other advertising, such as the kind found on billboards, or radio
and television. Another commenter also recommended that hospital
disclosures in public advertising should be confined to print media
such as newspapers, magazines, and other internally produced print
material for public use.
Response: We have no flexibility regarding the disclosure of
hospital ownership information. Section 1877(i)(1)(C)(iv) of the Act
requires that the hospital disclose the fact that the hospital is
partially owned or invested in by physicians in ``any public
advertising'' for the hospital. We believe that the disclosure can be
satisfied by simply adding a sentence to this effect in public
advertisements. We agree that a hospital also is required to disclose
this information in a clear and readable manner in any of its print
advertising made available to the public, such as direct mailings and
other print communications, for example, newspapers and magazines.
In addition, we are finalizing our proposed Sec. 411.362(b)(3)
regarding ``Preventing Conflicts of Interest'' with one technical
change. We are making a

[[Page 72249]]

technical correction to proposed Sec. 411.362(b)(3)(ii)(C) by
replacing ``or'' with ``and'' in order to conform to the precise
language of section 1877(i)(1)(C)(iv) of the Act.
4. Ensuring Bona Fide Investment
Section 1877(i)(1)(D) of the Act sets forth seven different
requirements related to ensuring bona fide investment in order for
hospitals to qualify for the rural provider and whole hospital
exceptions set forth in the physician self-referral law. First, the
percentage of the total value of the ownership or investment interests
held in the hospital, or in an entity whose assets include the
hospital, by physician owners or investors, in the aggregate may not
exceed such percentage as of March 23, 2010. Second, any ownership or
investment interests that the hospital offers to a physician owner or
investor must not be offered on more favorable terms than the terms
offered to a person who is not a physician owner or investor. Third,
the hospital (or any owner or investor in the hospital) must not
directly or indirectly provide loans or financing for any investment in
the hospital by a physician owner or investor. Fourth, the hospital (or
any owner or investor in the hospital) must not directly or indirectly
guarantee a loan, make a payment toward a loan, or otherwise subsidize
a loan, for any individual physician owner or investor or group of
physician owners or investors that is related to acquiring any
ownership or investment interest in the hospital. Fifth, ownership or
investment returns must be distributed to each owner or investor in the
hospital in an amount that is directly proportional to the ownership or
investment interest of such owner or investor in the hospital. Sixth,
physician owners and investors must not receive, directly or
indirectly, any guaranteed receipt of or right to purchase other
business interests related to the hospital, including the purchase or
lease of any property under the control of other owners or investors in
the hospital or located near the premises of the hospital. Lastly, the
hospital must not offer a physician owner or investor the opportunity
to purchase or lease any property under the control of the hospital or
any other owner or investor in the hospital on more favorable terms
than the terms offered to an individual who is not a physician owner or
investor. We note that additional or different factors may be relevant
to a determination of whether an investment is bona fide for purposes
of complying with other laws, including fraud and abuse laws.
In the August 3, 2010 proposed rule (75 FR 46434), we proposed to
add Sec. 411.362(b)(4) to incorporate these provisions in our
regulations. We stated that we recognized that section 1877(i)(1)(A) of
the Act provides that the hospital must have had physician ownership or
investment on December 31, 2010, while section 1877(i)(1)(D)(i) of the
Act assumes the existence of physician ownership or investment on March
23, 2010 and further provides that the percentage of the total value of
physician ownership or investment interests held in the hospital, in
the aggregate, on that date must not increase. Reading these provisions
together, we conclude the following: (i) If a hospital had no physician
ownership or investment as of March 23, 2010, it will not qualify for
the whole hospital or rural provider exceptions if it adds any
physician owners or investors after that date; and (ii) if a hospital
had physician ownership or investment as of March 23, 2010, it may
reduce the number of physician owners or investors, provided that the
percentage of the total value of physician ownership or investment
interests, in the aggregate, remains the same or decreases.bona fide
The second through seventh requirements tied to ensuring bona fide
investment (sections 1877(i)(1)(D)(ii) through 1877(i)(1)(D)(vii) of
the Act) do not specify any deadlines for compliance. Accordingly,
compliance with the second through seventh requirements must be
achieved no later than September 23, 2011.
In the proposed rule, we stated that if we determine that further
guidance related to any aspect of section 1877(i)(1)(D) of the Act is
necessary, we would provide clarification in future rulemaking.
Furthermore, a hospital may request an advisory opinion (pursuant to
Sec. Sec. 411.370 through 411.389) for a determination of whether an
existing or proposed arrangement meets the requirements for hospitals
to ensure that investment is bona fide.
Comment: Some commenters stated that CMS should clarify whether
section 1877(i)(1)(D) of the Act would be violated if the total value
of ownership or investment interests held in the hospital by physicians
in the aggregate (the ``bona fide investment level'') fluctuates. For
example, one commenter inquired whether a hospital could repurchase the
ownership interest held by a recently deceased physician (thereby
reducing the bona fide investment level) and later resell that
ownership interest to another physician, returning the bona fide
investment limit to the same level it was on March 23, 2010.
Response: The bona fide investment level may fluctuate as long it
never exceeds the level that existed on March 23, 2010.
Comment: Many commenters stated that CMS should clarify whether a
hospital can reduce or increase the number of physician owners as long
as the percentage of the total value of physician ownership remains
unchanged. The commenters believed that nothing in the statute
precludes the addition of new physician owners as long as the
percentage of ownership remains constant.
Response: We agree that section 1877(i)(1)(D) of the Act does not
restrict the number of physicians that may have an ownership interest
in a hospital. The bona fide investment level requirement would not be
violated as long as the percentage of the total value of the ownership
or investment interest held in the hospital by physician owners in the
aggregate does not exceed such percentage as of March 23, 2010.
Comment: One commenter sought confirmation that a hospital wishing
to recruit a new physician would be able to give some ownership units
from one physician to another new physician.
Response: Any arrangement in which a hospital or physician owner
``gives'' to another physician an ownership or investment interest in
the hospital is highly suspect. We assume the commenter is inquiring
whether section 1877(i)(1)(D)(i) of the Act would be violated if one or
more physician owners transferred some of their shares in the hospital
to the recruited physician for fair market value, possibly at the
request of the hospital. This provision would not be violated as long
as the bona fide investment level does not exceed that which existed as
of March 23, 2010. In addition, the parties should carefully review the
arrangement to ensure that it fully complies with the physician
recruitment exception at Sec. 411.357(e), the anti-kickback statute,
and any other applicable laws.
Comment: Several commenters addressed the situation in which a
hospital has physician owners, but no Medicare provider agreement, as
of March 23, 2010. One commenter sought clarification that the level of
physician ownership can increase prior to December 31, 2010. Several
other commenters disagreed with this interpretation and requested that
CMS explicitly state that the bona fide investment level is capped as
of March 23, 2010 even if the hospital does not have a Medicare
provider agreement as of that date.

[[Page 72250]]

Response: The bona fide investment level may not increase for any
hospital with physician owners as of March 23, 2010, regardless of
whether the hospital has a Medicare provider agreement as of that date.
In addition, as we indicated in the proposed rule (75 FR 46432), if a
hospital has no physician owners or investors on March 23, 2010, the
hospital will not satisfy the whole hospital or rural provider
exception if it later adds physician owners or investors.
Comment: One commenter inquired as to whether the bona fide
investment level is based on the aggregate percentage of the number of
shares held by physicians or the aggregate percentage of the value of
shares held by physicians. The commenter suggested that the more
workable option is for the limit to be based on a strict percentage of
the number of outstanding shares. The commenter further contended that
basing the limit on a hospital's value would require the hospital to
ascertain its value on a regular basis to make certain that the
aggregate value of the physicians' ownership never exceeds the March
23, 2010 limit.
Response: We are not adopting the commenter's suggestion. Section
1877(i)(1)(D) of the Act refers to ``the total value of the ownership
or investment interests held in the hospital * * * by physician owners
or investors in the aggregate'' as of March 23, 2010. The plain
language of the statute refers to the value of the investment
interests, not the number of shares held by physicians.
Comment: A few commenters presented differing scenarios that
involved the sale of ownership shares in a hospital. The commenters
stated that the statute does not appear to impose any restrictions on
the ability to transfer ownership pursuant to a sale of the ownership/
investment interests but, nevertheless, believed it would be important
for CMS to clarify this issue. One commenter asserted that the
statutory language does not prohibit private sales among physician
owners/investors where the bona fide investment level in the hospital
remains unchanged.
Response: We agree with the commenters. The statute does not
restrict the transfer of physician ownership interests pursuant to a
bona fide sale, as long as the percentage of the total value of the
ownership or investment interests held in the hospital, or in an entity
whose assets include the hospital, by physician owners or investors in
the aggregate would not exceed the percentage as of March 23, 2010.
Comment: One commenter representing a hospital system requested
clarification concerning whether hospitals may continue to condition a
physician's ownership interest on his or her continued practice of
medicine and require the physician to divest his or her investment
interest in the hospital if the physician retires or ceases to practice
medicine in the community served by the hospital.
Response: Section 1877(i)(1)(C)(iii) of the Act prohibits a
hospital from conditioning any physician ownership or investment
interest either directly or indirectly on the physician's ability to
make or influence referrals to the hospital. Depending on the facts,
the conditions described by the commenter could implicate this
provision.
Comment: Some commenters believed that the bona fide investment
level should be calculated without regard to any ownership or
investment interests held by physicians who do not make any referrals
to the hospital, including physicians who are no longer practicing
medicine. The commenters asserted that the purchase of a referring
physician's ownership interest by a non-practicing, non-referring
physician should not be prohibited by the statute because it has no
potential for program or patient abuse. They suggested various
revisions to the regulation to avoid this result, including amendments
to the definition of ``referral,'' ``referring physician,'' and the
creation of a new exception using our authority under section
1877(b)(4) of the Act.
Response: The ownership or investment interests of nonreferring
physicians need not be considered when calculating the baseline
physician ownership level. Section 1877(i)(1)(D)(i) of the Act provides
that the percentage of the total value of the ownership or investment
interests held in the hospital by ``physician owners or investors'' in
the aggregate may not exceed such percentage that existed on March 23,
2010. Section 1877(i)(5) broadly defines ``physician owner or
investor'' to include any physician with a direct or indirect ownership
or investment interest in the hospital. Under the definition of
``indirect ownership or investment interest'' at Sec. 411.353(b)(5),
only ``referring physicians'' can have an indirect ownership or
investment interest in a DHS entity. We caution that we would view with
great suspicion any arrangements in which physician owners or investors
of a hospital in one State engage in a mutually beneficial cross-
referral or cross-investment scheme with physician owners or investors
of a hospital in another State.
Comment: Two commenters asserted that CMS minimized the significant
difficulty hospitals will experience in monitoring and measuring the
bona fide investment level, particularly with respect to indirect
ownership interests held by non-referring physicians. The commenters
stressed that it is unlikely that entities investing in hospitals such
as trusts, private equity funds, and contractually affiliated health
care providers, monitor whether they or their shareholders are directly
or indirectly owned by physicians, particularly if those physicians are
not referring physicians or physicians on the medical staff of the
hospital. The commenters further stated that interests in hospitals may
be transferred voluntarily in subsequent transactions beyond the reach
of the hospital, or involuntarily through devise or bequest. The
commenters contended that monitoring these transactions is a daunting
task not suited to the normal operations of a hospital.
Response: We appreciate the commenters' concerns. Section 6001
defines the term ``physician owner or investor'' to mean ``a physician
(or immediate family member of such physician) with a direct or
indirect ownership or investment interest in the hospital.'' Under the
definition of ``indirect ownership or investment interest'' at Sec.
411.353(b)(5), there must be an unbroken chain of ownership or
investments between the referring physician and the DHS entity and the
DHS entity must have actual knowledge of, or act in reckless disregard
or deliberate ignorance of, the fact that the referring physician (or
immediate family member) has some ownership or investment interest in
the entity furnishing DHS. Thus, the bona fide investment level may be
calculated without regard to any ownership or investment interest that
does not satisfy this standard. We note that, as provided in Sec.
411.354(b)(5)(ii), an indirect ownership or investment interest exists
even though the DHS entity does not know, or acts in reckless disregard
or deliberate ignorance of, the precise composition of the unbroken
chain or the specific terms of the ownership or investment interests
that form the links in the chain.
Comment: One commenter sought clarification regarding the
requirement at section 1877(i)(1)(D)(iii) of the Act, which provides
that a hospital may not directly or indirectly provide loans or
financing to assist a physician acquiring an investment in the
hospital. The commenter requested clarification that this limitation
will not affect the current practice whereby an affiliate (for

[[Page 72251]]

example, a parent company) makes a loan to a hospital that has
physician owners when the terms of such loans are commercially
reasonable, provide for an interest rate above the lender's cost of
funds, are secured by the assets of the borrower, and are repaid at
maturity prior to distribution to the investors.
Response: Section 1877(i)(1)(D)(iii) of the Act would not preclude
the parent company from making a loan to the physician-owned hospital,
as long as the loan is being made and used for purposes other than
assisting physicians in the acquisition of ownership or investment
interests in the hospital.
After consideration of the public comments we received, we are
finalizing proposed Sec. 411.362(b)(4), with the modification to
paragraph (b)(4)(i) discussed above.
5. Patient Safety
Section 1877(i)(1)(E) of the Act, as added by the Affordable Care
Act, requires a hospital that is owned or invested in by physicians to
disclose to a patient before admission if it does not have a physician
available on the premises to provide services during all hours that the
hospital is providing services to such patient. Following this
disclosure, the hospital must receive a signed acknowledgment of such
fact from the patient. In addition, the hospital must have the capacity
to provide assessment and initial treatment for patients and refer and
transfer such patients to hospitals with the capability to treat the
patients involved. We see no reason to treat the safety of inpatients
differently than outpatients. Accordingly, given the language and
purpose of the statute, in the August 3, 2010 proposed rule (75 FR
46434), we proposed to apply these patient safety requirements to
inpatients as well as outpatients. Hospitals must meet these
requirements no later than September 23, 2011. We proposed to
incorporate these provisions into our regulations at Sec.
411.362(b)(5).
Comment: One commenter questioned whether a hospital would be in
compliance with the exception contained in Sec. 411.362(b)(5)(i) if it
inadvertently failed to obtain a written acknowledgment from the
patient stating that the patient understood that a physician was not
available to provide services during all hours that the hospital was
providing services to such patient.
Response: A failure by the hospital to obtain a signed
acknowledgment from the patient, inadvertent or not, would constitute
non-compliance with this statutory provision. As a matter of prudent
business practice, hospitals should include the notice with other
papers that must be signed by the patient or the patient's
representative at the time of registration.
Comment: One commenter recommended that the hospital's
responsibility to obtain the patient's signed acknowledgment, following
the hospital's preadmission disclosure to the patient that the hospital
does not have a physician available on the premises to provide services
during all hours in which the hospital is providing services to the
patient, should be done in conjunction with the registration process
and not in advance of admission.
Response: If a hospital obtains the required signed acknowledgment
during a registration process that occurs prior to admission, the
hospital would be in compliance with this statutory provision.
Comment: One commenter suggested that a physician-owned hospital
would meet the requirement of having physician coverage 24 hours a day,
7 days a week if the hospital physically adjoins another hospital and
there is a coverage and transfer agreement in place that requires
immediate presence of a physician to address the issue. The commenter
believed such a physician-owned hospital should not be required to make
a preadmission disclosure to a patient in accordance with section
1877(i)(1)(E)(i) of the Act.
Response: In the situation described, because the physician-owned
hospital will always have a physician available on its premises to
provide services during all hours in which the hospital is providing
services to a patient, we agree that the hospital would not be required
to make the preadmission disclosures mandated by section
1877(i)(1)(E)(i) of the Act.
Comment: One commenter supported the proposed amendment to Sec.
482.12, which would require hospitals, as a condition of participation,
to have the capacity to provide assessment and initial treatment for
all patients and the ability to transfer patients to hospitals that
have the ability to treat the patients. The commenter sought
clarification regarding the terms ``capacity'' and ``initial
treatment'' and inquired if the provision was intended to apply to
inpatients, outpatients, or emergency department patients.
Response: We withdraw this proposal. We do not believe it is
necessary to modify the hospital conditions of participation to reflect
the provision in section 1877(i)(1)(E)(ii) of the Act.
In this final rule, we are finalizing proposed Sec. 411.362(b)(5)
regarding ``Patient Safety'' without modification.
6. Conversion From ASC
Section 1877(i)(1)(F) of the Act, as added by the Affordable Care
Act, also prohibits the use of the rural provider and whole hospital
exceptions by physician-owned hospitals that were converted from an ASC
to a hospital on or after March 23, 2010. We proposed to add Sec.
411.362(b)(6) to reflect this provision in our regulations.
Comment: Two commenters stated that the proposed rule did not offer
any guidance as to what constitutes a ``conversion.'' The commenters
urged CMS to provide further guidance.
Response: We decline to provide a specific definition of
``conversion.'' Whether an ASC has been converted to a physician-owned
hospital on or after March 23, 2010 will depend on the facts. In some
cases, the existence of a conversion may be obvious (for example, when
an ASC that is wholly-owned by physicians terminates its Medicare ASC
agreement on June 1, 2010, and obtains a Medicare hospital provider
agreement or hospital license effective on or after June 1, 2010, for a
hospital that occupies the same premises as the former ASC and is
physician owned). Parties may submit an advisory opinion request
pursuant to Sec. 411.372 if they are uncertain whether a conversion
has occurred.
After consideration of the public comments we received, we are
finalizing, without modification, our proposed regulations at Sec.
411.362(b)(6) that the hospital must not have been converted from an
ASC to a hospital on or after March 23, 2010.
7. Publication of Information Reported
Section 1877(i)(2) of the Act requires that the Secretary publish,
and update on an annual basis, the information submitted by hospitals
under section 1877(i)(1)(C) of the Act on the CMS Web site. As with the
annual report requirement set forth in section XVIII.B. of the proposed
rule (now section XXII.B. of this final rule), we did not make a
proposal related to this provision in the proposed rule. We did not
receive any public comments regarding this matter.
8. Enforcement
Section 6001(b)(1) of the Affordable Care Act requires the
Secretary to establish policies and procedures to ensure compliance
with the requirements described in section 1877(i) of the Act, and
states that these policies and procedures may include

[[Page 72252]]

unannounced site reviews of hospitals. Section 6001(b)(2) of the
Affordable Care Act requires the Secretary, beginning no later than May
1, 2012, to conduct audits to determine if physician-owned hospitals
are in compliance with section 1877(i)(1) of the Act. In the August 3,
2010 proposed rule (75 FR 46434 through 46435), we indicated that we
would comply with the statutory mandate, but did not propose any
regulations on this topic at that time.
Comment: Several commenters noted that the proposed rule did not
address enforcement procedures. The commenters asserted that more
guidance is necessary for hospitals to align their actions with section
6001 of the Affordable Care Act. One of the commenters urged CMS to
conduct open door forum calls and other outreach efforts to educate
hospitals and physicians concerning enforcement procedures.
Response: As stated in the proposed rule (75 FR 46434 through
46435), we will comply with the statutory mandate and provide hospitals
and physicians with further guidance after the rules are finalized. In
addition, we will explore various forms of outreach, including, but not
limited to, open door forums.

D. Related Changes to Provider Agreement Regulations

Section 1866 of the Act states that a provider of services shall be
qualified to participate in the Medicare program and shall be eligible
for Medicare payments if it files a Medicare provider agreement and
abides by the requirements applicable to Medicare provider agreements.
These requirements are incorporated in our regulations at 42 CFR Part
489, Subparts A and B (Provider Agreements and Supplier Approval).
Section 1861(e) of the Act defines the term ``hospital.'' Section
1861(e)(9) of the Act defines a hospital and authorizes the Secretary
to establish requirements as determined necessary in the interest of
patient health and safety. Section 5006 of the Deficit Reduction Act of
2005 mandated the Secretary to develop a strategic and implementing
plan to address certain issues with respect to physician ownership of
specialty hospitals. As part of that plan, we used our authority under
sections 1866 and 1861(e)(9) of the Act (as well as our general
rulemaking authority under sections 1102 and 1871 of the Act) to impose
certain additional requirements on physician-owned hospitals as part of
their provider agreements. These new requirements were established in
the FY 2008 IPPS final rule with comment period (72 FR 47385 through
47391) and the FY 2009 IPPS final rule (73 FR 48686 through 48688).
Specifically, we amended the regulations at Sec. 489.3 governing
Medicare provider agreements to define a ``physician-owned hospital''
as any participating hospital (including a CAH) in which a physician or
immediate family member of a physician has an ownership or investment
interest, unless the ownership or investment interest satisfies the
exceptions at Sec. 411.356(a) or (b) regarding publicly-traded
securities and mutual funds. In addition, we added a new provision at
Sec. 489.20(u)(1) to require a physician-owned hospital to agree to
furnish patients with written notice, in a manner reasonably designed
to be understood by all patients, that it is physician-owned and that
the list of physician owners is available upon request. Further, we
added a new provision at Sec. 489.20(u)(2) to compel hospitals to
require that all physician owners who are also members of the
hospital's medical staff to disclose, in writing, their ownership
interest in the hospital (and that of any immediate family member) to
all patients they refer to the hospital, as a condition of continued
medical staff membership. Patient disclosure is required at the time
the physician makes a referral.
We also added a new provision to require that hospitals and CAHs:
(1) Furnish all patients written notice at the beginning of their
inpatient hospital stay or outpatient service if a doctor of medicine
or a doctor of osteopathy is not present in the hospital 24 hours per
day, 7 days per week; and (2) describe how the hospital or CAH will
meet the medical needs of any patient who develops an emergency medical
condition at a time when no physician is present in the hospital or
CAH. These requirements are codified at Sec. 489.20(w). The
requirements of Sec. Sec. 489.20(u) and (w) were made applicable to
both inpatient hospital stays and outpatient services because, as we
stated in the FY 2008 IPPS final rule with comment period, these
provisions are in the interest of the health and safety of all
individuals who receive services in these institutions. The notice
requirements are intended to permit individuals to make more informed
decisions regarding their treatment.
In the August 3, 2010 proposed rule (75 FR 46435), we proposed to
modify the Medicare provider agreement regulations in Subpart B of Part
489 in order to make the rules consistent with new Sec. 411.362, as
required by the Affordable Care Act. We stated our belief that
incorporating the additional requirements of the Affordable Care Act
into Part 489 would be in the best interest of the health and safety of
individuals who receive services in hospitals and CAHs. With respect to
Sec. 489.20(u), we proposed to: (1) Add a provision in Sec.
489.20(u)(1)(ii) to specify that the hospital must disclose on any
public Web site for the hospital and in any public advertising that it
is owned or invested in by physicians; (2) amend Sec. 489.20(u)(2) to
specify that a referring physician owner or investor must also disclose
in writing, if applicable, the treating physician's ownership or
investment interest in the hospital; and (3) add Sec. 489.20(u)(3) to
specify that a hospital may not condition any physician ownership or
investment interests either directly or indirectly on the physician
making or influencing referrals to the hospital or otherwise generating
business for the hospital.
Regarding Sec. 489.20(w), we proposed to specify that, in the case
of a hospital where a doctor of medicine or a doctor of osteopathy is
not present in the hospital 24 hours per day, 7 days per week, before
admitting a patient or providing an outpatient service, the hospital
must receive a signed acknowledgment from the patient stating that the
patient understands that a physician may not be present during all
hours services are rendered to the patient.
We encouraged public comments on whether the changes to the
provider agreement regulations (Part 489) are necessary or whether the
amendments and additions made to the whole hospital and rural provider
exceptions within subpart J of Part 411 of our regulations are
sufficient to provide guidance relating to section 6001 of the
Affordable Care Act.
Comment: Two commenters suggested that any changes to the existing
provider agreement regulations in 42 CFR part 489 are unnecessary. The
commenters stated that the proposed amendments to the whole hospital
and rural provider exceptions in 42 CFR part 411, subpart J are
sufficient to provide guidance to physician-owned hospitals. Another
commenter supported entirely the proposal to make conforming changes to
the provider agreement regulations.
Response: We are persuaded by the commenters who suggested that the
proposed amendments and additions made to the whole hospital and rural
provider exceptions in subpart J of part 411 are sufficient for
providing the necessary guidance to physician-owned hospitals. For the
most part, the proposed conforming language we added to the provider
agreement regulations does not substantively

[[Page 72253]]

impact the health and/or safety of patients. As a result, we are not
finalizing the following proposed modifications to part 489: (1) In
Sec. 489.20(u)(1)(ii) concerning a hospital's responsibility to
disclose physician ownership on a Web site and in any public
advertising; (2) in Sec. 489.20(u)(2) concerning a referring
physician's responsibility to disclose to the patient any ownership
interest in the hospital by a treating physician; and (3) in Sec.
489.20(u)(3) concerning a hospital's responsibility not to condition
any physician ownership either directly or indirectly on the physician
owner making or influencing referrals to the hospital or otherwise
generating business for the hospital.
However, we are finalizing, as proposed, Sec. 489.20(w)(2), which
requires a hospital to obtain a signed acknowledgment from a patient
(before admitting the patient or providing an outpatient service to the
patient) stating that the patient understands that a physician may not
be present during all hours services are furnished to the patient. This
provision is important to include in Part 489 as it addresses the
patient health and safety concerns raised by the Affordable Care Act.

E. Conditions of Participation for Hospitals

In the proposed rule, we inadvertently included proposed changes to
the regulatory text at Sec. 482.12(g), concerning the condition of
participation for a hospital's governing body. As discussed above, in
this final rule, we are withdrawing this proposal.

F. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and to solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In the August 3, 2010 proposed rule (75 FR 46436), we solicited
public comments on each of the issues outlined above regarding the
provisions of section 6001 of the Affordable Care Act relating to
physician self-referrals that were discussed in section XVIII.A.
through D. of the proposed rule (now in sections XXII.A through D. of
this final rule) that contained information collection requirements. We
discuss these provisions below and address any public comments that we
received in response to our solicitation.
As discussed in section XVII.C.4. and D. of the preamble of the
August 3, 2010 proposed rule (and section XXII.C.4. and D. of this
final rule), current Sec. 489.20(u)(1) states that, in the case of a
physician-owned hospital as defined in Sec. 489.3, the hospital must
furnish written notice to all patients at the beginning of their
hospital stay or outpatient visit that the hospital is a physician-
owned facility. Current Sec. 489.20(u)(2) provides that hospitals must
require each physician who is a member of the hospital's medical staff
to agree, as a condition of his or her continued medical staff
membership or admitting privileges, to disclose in writing to all
patients the physician refers to the hospital any ownership or
investment interest held by the physician or an immediate family member
of the physician. We proposed to amend Sec. 489.20(u)(2) to correspond
to changes we proposed at the same time to the physician self-referral
regulations. Specifically, we proposed to modify Sec. 489.20(u)(2) to
expand the physician disclosure obligation to include disclosure of the
treating physician's ownership or investment interest in the hospital.
The burden associated with the requirements in this section is the time
and effort necessary for hospitals and physicians to furnish the
required notices. This requirement is subject to the PRA; however, the
associated burden under the existing Sec. 489.20(u) is currently
approved under OCN 0938-1034, with a February 28, 2011 expiration date.
Section 6001 of the Affordable Care Act amended the rural provider
and whole hospital exceptions to the physician self-referral
prohibition in section 1877 of the Act. To implement these provisions,
we proposed to add Sec. 411.362 to our regulations and to amend Sec.
489.20(u)(2) (we note that we are not finalizing the proposed amendment
to Sec. 489.20(u)(2) in this final rule, as discussed below). We
proposed new Sec. 411.362(b)(3)(ii)(A), which would require physician-
owned hospitals to have procedures in place to require that each
referring physician agree, as a condition of his or her continued
medical staff membership or admitting privileges, to provide written
disclosure of his or her ownership or investment interest in the
hospital (and, if applicable a treating physician's ownership or
investment interest in the hospital) to all patients whom the physician
refers to the hospital. This provision imposes a burden on both
hospitals and physicians.
With respect to hospitals, we indicated in the proposed rule that
the burden associated with this requirement is the time and effort
necessary for hospitals to develop, draft, and implement changes to its
medical staff bylaws and other policies governing admitting privileges.
Approximately 265 hospitals would be required to comply with these
requirements. We estimate that it would require a hospital's general
counsel 2 hours to revise a hospital's medical staff bylaws and
policies governing admitting privileges. Therefore, the total annual
hospital burden would be 530 hours at a cost of $32,875.90. As
discussed earlier in section XXII.D. of this final rule, based upon
public comments we received, we are not finalizing the proposed
amendment to Sec. 489.20(u)(2) that the referring physician must
provide written disclosure of the treating physician's ownership or
investment interest in the hospital. However, we are finalizing the
proposed requirement at Sec. 411.362(b)(3)(ii)(A).
With respect to physicians, the burden associated with this
requirement is the time and effort necessary for a referring physician
owner or investor to develop a list of all other physician owners or
investors in the hospital and draft a formal notice to patients that
discloses the referring physician's ownership or investment interest in
the hospital, informs the patient that his or her treating physician(s)
may have an ownership or investment interest in the hospital, and
directs the patient to review a list identifying all other physician
owners or investors in the hospital. This list may be used by patients
in making their health care decisions. Under existing Sec.
489.20(u)(1), hospitals are currently required to provide a list of
their physician owners or investors to patients upon request at the
beginning of their inpatient stay or outpatient visit. Because
hospitals already maintain lists of their owners and investors, we
estimate that it will take each physician 1 hour annually to obtain
such a list from the hospital, draft a disclosure notice, and make
copies that will be distributed to patients. In addition, we estimate
that it will take 30 seconds to provide the

[[Page 72254]]

disclosure notice to each patient and an additional 30 seconds to
record proof of disclosure in each patient's medical record. Although
we can estimate the number of physician-owned hospitals, we are unable
to quantify the number of physicians (or their immediate family
members), who possess an ownership or investment interest in hospitals.
There are limited data available concerning physician ownership in
hospitals. The studies to date, including those by CMS and the GAO,
pertain to physician ownership in specialty hospitals (cardiac,
orthopedic, and surgical hospitals). These specialty hospitals
published data concerning the average percentage of shares of direct
ownership by physicians (less than 2 percent), indirect ownership
through group practices, and the aggregate percentage of physician
ownership, but did not publish the number of physician owners in these
types of hospitals. More importantly, Sec. 489.20(u)(2) applies to
physician owners of any type of hospital. Our other research involved a
review of enrollment data. However, the CMS Medicare enrollment
application (CMS-855) requires physicians to report only those
ownership interests that are 5 percent or more (direct or indirect),
and thus, most physician ownership is not captured. While we
acknowledge there is a burden associated with this information
collection requirement, we have no way to quantify this requirement's
burden. Therefore, because we are unable to estimate the total
physician burden associated with this reporting requirement, we
proposed to assign 1 burden hour to this requirement. We sought public
comments pertaining to this burden. However, we did not receive any
public comments. Therefore, we are finalizing the burden estimate of 1
hour.
Existing Sec. 489.20(w) requires hospitals, as defined in Sec.
489.24(b), to furnish all patients notice in accordance with Sec.
482.13(b)(2), at the beginning of their hospital stay or outpatient
visit if a doctor of medicine or a doctor of osteopathy is not present
in the hospital 24 hours per day, 7 days per week. The notice must
indicate how the hospital will meet the medical needs of any inpatient
who develops an emergency medical condition, as defined in Sec.
489.24(b), at a time when there is no physician present in the
hospital. The burden associated with this requirement is the time and
effort necessary for each hospital to develop a standard notice to
furnish to its patients. Although this requirement is subject to the
PRA, the associated burden is approved under OCN 0938-1034, with an
expiration date of February 28, 2011.
Sections 489.20(w)(2) and 411.362(b)(5)(i) require that, following
a hospital's disclosure to a patient that it does not have a physician
available during all hours that the hospital is providing services to
such patient, the hospital must obtain a signed acknowledgment from the
patient stating that the patient understands that no physician is
available for that period. The burden associated with these
requirements is the time and effort necessary for each hospital to add
an acknowledgment line to its current form, disclose the form to the
patient, obtain the patient's signature, and copy and record the form
in the patient's medical record. The requirements in Sec. 489.20(w)
applies to all hospitals (not just physician-owned hospitals), as
defined in Sec. 489.24(b). We estimate that there are approximately
2,557 hospitals and CAHs that may not have a physician on site at all
times. We estimate that it will take each hospital 30 minutes to amend
its current disclosure form to add an acknowledgment line, an
additional 30 seconds to obtain the patient's signature, and an
additional 30 seconds to include a copy of the notice in the patient's
medical record. The estimated annual burden associated with developing
an amended form, obtaining patient signatures, and copying and
recording the form is 1,196,932.6 hours at a cost of approximately
$18,518,081. We did not receive any public comments regarding this
requirement. Therefore, we are finalizing the burden estimate as
proposed.
Section 411.362(b)(3)(ii)(C) requires disclosure by a hospital, on
any public Web site for the hospital and in any public advertising,
that the hospital is owned or invested in by physicians. The burden
associated with this disclosure requirement is the time and effort
necessary for hospitals to draft and post such a disclosure on their
Web sites (where applicable) and to include such a disclosure in any
existing or future public advertising that the hospitals may utilize.
We estimate that 265 hospitals will be required to comply with this
requirement. In addition, we estimate that it will take each hospital 1
hour to develop and place this information on its Web site and/or in a
public advertisement. The estimated annual hospital burden associated
with placing the aforementioned information in Web sites, public
advertisement, or both is 265 hours at a cost of $3,993.55. In
addition, we estimate that it will take 30 minutes annually for a
hospital to review and update the information contained in its Web
site, public advertising or both. The estimated annual burden
associated with the annual review and update of the information is
132.5 hours at a cost of $1,996.77. As discussed in section XXII.D. of
this final rule), we have concluded that a proposed conforming change
to Sec. 489.20(u)(1)(ii) is unnecessary, and therefore, we are not
finalizing that proposed regulation.

G. Regulatory Flexibility Analysis

[[Page 72255]]

hospitals will be considered small entities according to the SBA size
standards. Individuals and States are not included in the definition of
a small entity.
As discussed in sections XXII.A. through D. of this final rule,
section 6001 of the Affordable Care Act amended section 1877 of the Act
to impose additional requirements in order to qualify for the rural
provider and hospital ownership or investment exceptions. Our policies
in this final rule incorporate these requirements into our regulations.
Most physicians who have ownership or investment interests in hospitals
(``physician-owned hospitals'') and who refer DHS to the hospital, are
subject to the physician self-referral prohibition, and are unable to
qualify for the ownership and investment exception at section
1877(d)(1) of the Act. Section 1877(d)(1) of the Act provides an
exception for ownership or investment in publicly traded securities in
a corporation where there is stockholder equity exceeding $75 million
at the end of the corporation's most recent fiscal year or on average
during the previous 3 fiscal years; or the ownership or investment
interest involves mutual funds in a company that has assets greater
than $75 million. Studies by the OIG and GAO have concluded that
physician-owned hospitals tend to be smaller and are unable to meet the
$75 million threshold. Therefore, most physician-owned hospitals avail
themselves of the rural provider or hospital ownership exceptions
(sections 1877(d)(2) and (d)(3) of the Act, respectively).
Our revisions to the regulations limit the creation of new
Medicare-participating hospitals in which physician owners or investors
intend to refer patients for DHS by requiring such hospitals to have
physician ownership and a provider agreement in effect on December 31,
2010, as provided for by section 6001 of the Affordable Care Act. This
revision affects facilities with physician ownership or investment that
are currently under development but may be unable to have a provider
agreement in effect on December 31, 2010. We believe there are only a
few facilities or hospital projects under development that will be
unable to meet either of these criteria.
In addition to the effect on the creation of new physician-owned
hospitals, the revision of the regulations to incorporate the
provisions of section 6001 of the Affordable Care Act will impact
existing physician-owned hospitals that currently avail themselves of
the rural provider or whole hospital exception. Specifically, a
physician-owned hospital is prohibited from expanding the number of
beds, operating rooms, and procedure rooms beyond those for which it
was licensed as of March 23, 2010, or, in the case of a hospital that
did not have a provider agreement in effect as of this date but does
have a provider agreement in effect on December 31, 2010, the effective
date of the provider agreement. We believe there are some hospitals
that were in the midst of an expansion that was not completed by March
23, 2010 (or, in the case of a hospital that did not have a provider
agreement in effect as of this date but does have a provider agreement
in effect on December 31, 2010), and thus, may not be able to use the
new beds, operating rooms, and procedures rooms. We believe that most
facilities and their investors were aware of the possible legislation
that will limit facility expansion and, thus, did not continue to
pursue expansion of their facilities.
Our regulations require hospitals to have procedures in place that
require referring physicians to disclose to patients the referring
physicians' ownership or investment interests in the hospital, as well
as any ownership or investment interest in the hospital held by a
treating physician. This policy also requires hospitals to disclose on
any public Web site for the hospital or in any public advertising that
it is owned or invested in by physicians. Finally, under the revision
of the regulations, a hospital may not condition any physician
ownership or investment either directly or indirectly on the physician
making or influencing referrals to the hospital or otherwise generating
business for the hospital. Most physician-owned hospitals comply with
the current provisions of Sec. 489.20(u). Thus, they have procedures
in place to require referring physician owners or investors to disclose
their ownership or investment interests to patients. We believe most
physicians and hospitals will be minimally affected by the additional
requirements.
Our revisions to the regulations require that hospitals must ensure
that all ownership and investment interests are bona fide, a step that
we believe most prudent hospitals are already undertaking. We believe
most of the new statutory and regulatory provisions will have little,
if any, impact on physician-owned hospitals or physicians. The only
provision that may have a minor impact is the provision found under
section 1877(i)(1)(D)(i) of the Act and Sec. 411.362(b)(4)(i) of the
regulations that prohibits physician-owned hospitals from increasing
the percentage of the total value of the ownership or investment
interests held in the hospital, or in an entity whose assets include
the hospital, by physician owners or investors beyond that which
existed on March 23, 2010. Therefore, hospitals and other entities that
own the hospital must monitor the percentages of ownership or
investment to ensure that the percentage is not increased. We believe
this provision will have a minor effect on some hospitals and their
physician owners or investors.
Our revisions to the regulations also require hospitals to take
certain steps to ensure patient safety, most of which are practices or
procedures that we believe most hospitals currently undertake. Building
upon the safety requirements found in existing Sec. 489.20(w), we are
requiring under Sec. Sec. 411.362(b)(5)(i) and 489.20(w)(2) that,
before admitting a patient, a hospital that does not have a physician
available on the premises to provide services during all hours in which
the hospital is providing services to the patient, must receive a
signed acknowledgment from the patient stating that the patient
understands that a physician may not be present during the time
services are furnished to a patient. In addition, Sec. Sec.
411.362(b)(5)(ii) and 489.20(w)(1) will require hospitals to have the
capacity to provide assessment and initial treatment for patients and
the ability to refer and transfer patients to hospitals with the
capability to treat the needs of the patient involved. We believe
requesting a signed acknowledgment will impose a minimal burden on
hospitals. Also, most hospitals currently have in place procedures to
ensure that they have the capacity to provide assessment and initial
treatment for patients and the ability to refer and transfer patients.
Lastly, our revisions to the regulations prohibit a facility that
was previously an ASC and was converted into a hospital from qualifying
for the rural provider or whole hospital ownership exceptions to the
self-referral prohibition. Although we have no direct data on this
issue, we believe there are only a few ASCs that are being converted to
a hospital, and, thus, the effect is minimal.
The changes concerning disclosure of physician ownership in
hospitals and patient safety are consistent with the physician self-
referral statute and regulations, our existing regulations governing
basic commitments of providers, and the current practices of most
hospitals. Thus, our requirements will present a negligible impact on
physician-owned hospitals. Physician-owned hospitals will have a one-
time cost associated with creating or modifying a notice to be used
when a physician is not on the premises 24

[[Page 72256]]

hours a day. In addition, these hospitals will incur the costs
associated with ensuring that a signed acknowledgment is received from
patients. Similarly, the costs borne by individual physicians to
implement the provisions will be limited to a one-time cost associated
with developing a disclosure notice that discloses the ownership of the
referring and, where applicable, the treating physician.
Overall, we believe that beneficiaries will be positively impacted
by these provisions. Specifically, additional information concerning
disclosures of ownership and patient safety measures equip patients to
make informed decisions about where they elect to receive care. Our
policies make no significant changes that have the potential to impede
patient access to health care facilities and services. We believe that
our policies are necessary to conform our regulations to the amendments
to section 1877 of the Act. We also believe the regulations will help
minimize anticompetitive behavior that can affect the decision as to
where a beneficiary receives health care services and will possibly
enhance the quality of the services furnished.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. With
the exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we now define a small rural
hospital as a hospital that is located outside an urban area and has
fewer than 100 beds. Section 601(g) of the Social Security Amendments
of 1983 (Pub. L. 98-21) designated hospitals in certain New England
counties as belonging to the adjacent urban areas. Thus, we continue to
classify these hospitals as urban hospitals.
We believe that our policies in this final rule will affect a
relatively small number of physician-owned hospitals and physicians. We
are uncertain of the exact numbers of hospitals with physician
ownership or investment that will be impacted by the policies and their
restrictions. However, the most recent studies by CMS (August 8, 2006
Final Report to the Congress Required under Section 5006 of the Deficit
Reduction Act of 2005) and MedPAC (June 2005 Report to the Congress)
concluded that there were approximately 128 physician-owned specialty
hospitals (those that focus primarily on patients with a cardiac
condition, orthopedic condition, or those receiving a surgical
procedure). We recognize that there are other hospitals with physician
ownership that do not meet the definition of a specialty hospital but
we do not have verifiable data on the number of these facilities.
However, we have recently received information from a trade association
representing physician-owned hospitals that there are approximately 265
hospitals that will be subject to the provisions of our final rule with
comment period.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. That threshold
level is currently approximately $135 million. This final rule will not
mandate any requirements for State, local, or tribal governments, nor
will it affect private sector costs.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct costs on State and local
governments, preempts State law, or otherwise has Federalism
implications. Because this regulation does not impose any costs on
State or local governments, the requirements of Executive Order 13132
are not applicable.
In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Executive Office of Management and
Budget.

XXIII. Interim Final Rule With Comment Period: Certified Registered
Nurse Anesthetist (CRNA) Services Furnished in Rural Hospitals and
Critical Care Hospitals (CAHs)

A. Background

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50299), we adopted a
policy that would allow otherwise eligible critical access hospitals
(CAHs) or hospitals that have reclassified from urban to rural status
under section 1886(d)(8)(E) of the Act and 42 CFR 412.103 to receive
reasonable cost payments for anesthesia services and related care
furnished by nonphysician anesthetists (referred to in this section as
CRNA pass-through payments), effective for cost reporting periods
beginning on or after October 1, 2010. After the issuance of the final
rule, we received an inquiry from a public commenter who indicated that
CMS had misunderstood its submitted comment on the FY 2011 IPPS/LTCH
PPS proposed rule in which the commenter stated that the policy should
be effective on the basis of a calendar year, not a cost reporting
period, as a hospital can only begin receiving CRNA pass-through
payments on the basis of a calendar year. Our response to this public
comment in the CY 2011 IPPS/LTCH PPS final rule (75 FR 50303) indicated
that it was unnecessary to modify the effective date in the final rule
because ``if the provision is effective for cost reporting periods
beginning on or after October 1, 2010, it will also be in effect for
the calendar year beginning January 1, 2011.'' While this statement is
accurate, it does not take into account that if a hospital's cost
reporting period begins on or after January 1, 2011, the hospital will
be ineligible to receive CRNA pass-through payments until the beginning
of the next calendar year on January 1, 2012. Under the finalized
policy in the CY 2011 IPPS/LTCH PPS final rule, hospitals reclassifying
from urban to rural areas with cost reporting periods beginning between
October 1, 2010, and December 31, 2011, will be able to first receive
CRNA pass-through payments effective January 1, 2011, while hospitals
with cost reporting periods beginning on or after January 1, 2011, will
not be able to receive CRNA pass-through payments until one year later
on January 1, 2012.

B. Revised Policy

Our intention in the FY 2011 IPPS/LTCH PPS final rule was not to
make the provision for CRNA pass-through payment for anesthesia
services and related care furnished by nonphysician anesthetists
effective January 1, 2011, for some hospitals and CAHs and January 1,
2012, for other hospitals and CAHs. We believe the provision would be
more equitable if it had a uniform effective date for all hospitals and
CAHs. While we considered changing the effective date to January 1,
2011, for all hospitals and CAHs to begin receiving CRNA pass-through
payments under this provision, we note that our regulations at 42 CFR
412.113(c)(2)(iii) state that the hospital or CAH must demonstrate to
its fiscal intermediary prior to the start of the calendar year that it
meets the requirements for receiving CRNA pass-through payments. For
this reason, we believe the best option would be to adopt an effective
date of December 2, 2010, for all hospitals and CAHs, which we are
providing for in this interim final rule with comment period. With an
effective date of December 2, 2010, hospitals and CAHs will be able to
demonstrate prior to January 1, 2011, that they meet the requirements
for receiving CRNA pass-

[[Page 72257]]

through payments beginning January 1, 2011. We are amending the
regulations at 42 CFR 412.113(c)(2)(i)(A) to provide for an effective
date of December 2, 2010, for all hospitals and CAHs to begin receiving
CRNA pass-through payments for anesthesia services and related care
furnished by nonphysician anesthetists.

C. Waiver of Notice of Proposed Rulemaking and Delay in the Effective
Date

Because a change to the effective date of a regulation previously
adopted through notice-and-comment rulemaking is a substantive change,
we would ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule before
making any change to the regulation. This procedure can be waived,
however, if an agency finds good cause that notice-and-comment
procedure is impracticable, unnecessary, or contrary to the public
interest and incorporates a statement of the finding and its reasons in
the rule issued. In addition, the Administrative Procedure Act (APA)
normally requires a 30-day delay in the effective date of a final rule.
Furthermore, the Congressional Review Act (CRA) generally requires an
agency to delay the effective date of a major rule by 60 days in order
to allow for congressional review of the agency action.
We believe there is good cause to waive notice-and-comment
rulemaking to make a change in the effective date of the CRNA pass-
through payment provision adopted in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50414). As stated above, we believe it would be inequitable
and contrary to the public interest to have two different effective
dates one year apart for hospitals and CAHs depending on when their
cost reporting period begins. A change to the effective date will only
advantage hospitals and CAHs without disadvantaging any hospital or CAH
as it does not affect the ability of hospitals or CAHs with cost
reporting periods beginning between October 1, 2010, and December 31,
2010, to begin receiving CRNA pass-through payments on January 1, 2011,
and allows hospitals and CAHs with cost reporting periods beginning on
any other date to receive CRNA pass-through payments one year earlier.
Furthermore, because the purpose of making pass-through payments for
CRNA services is to provide more favorable payment treatment for these
services in order to improve access to anesthesia services in hospitals
and CAHs that are in low population density areas, we believe it would
serve the public interest to have this provision apply to all
qualifying hospitals and CAHs during 2011, including those hospitals
and CAHs that, under the existing regulations, cannot receive CRNA
pass-through payments until January 1, 2012. Further, it would be
impracticable to go through notice-and-comment rulemaking to achieve
what we believe would be the more equitable result because there is
insufficient time to complete a proposed rule, allow for a public
comment period and prepare a final rule responding to those public
comments prior to January 1, 2011, when hospitals and CAHs can next
begin receiving CRNA pass-through payments.
For these reasons, in this interim final rule with comment period,
we are adopting a change to the effective date of the CRNA pass-through
provision originally adopted under Sec. 412.113(c)(2)(i)(A) of the
regulations in the FY 2011 IPPS/LTCH PPS final rule for FY 2011 (75 FR
50414) from ``cost reporting periods beginning on or after October 1,
2010'' to ``December 2, 2010.'' Under this revision, hospitals and CAHs
that are reclassified from urban to rural areas can demonstrate to
their Medicare contractor on or after December 2, 2010, that they meet
the requirements to receive CRNA pass-through payment under Sec.
412.113(c)(2)(iii) in order to begin receiving payments on January 1,
2011.\38\ Hospitals and CAHs may receive CRNA pass-through payment for
any portion of a cost reporting period that occurs on or after January
1, 2011, provided all other requirements specified in Sec.
412.113(c)(2)(iii) are met.
---------------------------------------------------------------------------

\38\ The December 2, 2010 effective date is intended to give
hospitals and CAHs affected by the change in the effective date
sufficient time to demonstrate to their Medicare contractor that
they meet the requirements in 42 CFR 412.113(c)(2)(iii) to begin
receiving CRNA pass-through payments effective January 1, 2011. If,
pursuant to the terms of the existing regulations, hospitals and
CAHs have already demonstrated prior to December 2, 2010, that they
meet the requirements in Sec. 412.113(c)(2)(iii) to begin receiving
CRNA pass-through payments beginning January 1, 2011, they do not
have to do so again as they will have already demonstrated prior to
the start of the calendar year, consistent with both the existing
regulations and the revised regulations, that they meet the
requirements for receiving CRNA pass-through payments.
---------------------------------------------------------------------------

With respect to a delay in the effective date, this interim final
rule with comment period is not a major rule because it does not have
an annual effect on the economy of $100 million or more in any 1 year
and will not adversely affect in a material way the economy, a section
of the economy, productivity, competition, jobs, the environment,
public health or safety, or State, local, or tribal government or
communities. As this interim final rule with comment period is not a
major rule, we are not required to provide a 60-day delay in its
effective date. However, we are providing a 30-day delay in the
effective date of this interim final rule with comment period,
consistent with the APA. We also are providing a 60-day comment period
to receive public comments, as specified in the ADDRESSES section of
this document.

D. Response to Comments

Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this document,
and, when we proceed with a subsequent document, we will respond to
those comments in the preamble to that document.

E. Collection of Information Requirements

This interim final rule with comment period does not impose any new
information collection and recordkeeping requirements. Consequently, it
need not be reviewed by the Office of Management and Budget under the
authority of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter
35).

F. Regulatory Impact Analysis

We have examined the impact of this interim final rule with comment
period as required by Executive Order 12866 (September 1993, Regulatory
Planning and Review), the Regulatory Flexibility Act (RFA) (September
19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act,
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive
Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C.
804(2)).
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules that have economically
significant effects ($100 million or more in any 1 year) or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal government or communities (58 FR
51741). We have determined that this

[[Page 72258]]

interim final rule with comment period is not a major rule as defined
in 5 U.S.C. 804(2).
The RFA requires agencies to analyze options for regulatory relief
of small businesses if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Most hospitals, including CAHs, are
considered to be small entities, either by being nonprofit
organizations or by meeting the Small Business Administration (SBA)
definition of a small business (hospitals having revenues of $34.5
million or less in any 1 year). (For details on the latest standards
for health care providers, we refer readers to the SBA's Web site at:
http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer to the 620000 series).) Individuals and States are
not included in the definition of a small entity. For purposes of the
RFA, we have determined that most of the affected hospitals and CAHs
will be considered small entities according to the SBA size standards.
As discussed above, in this interim final rule with comment period,
we are making a revision to the effective date of a change to the CRNA
pass-through provision for hospitals and CAHs that have reclassified
under section 1886(d)(8)(E) of the Act and Sec. 412.103 of the
regulations from ``cost reporting periods beginning on or after October
1, 2010'' to ``December 2, 2010.'' This change to the effective date
will allow hospitals and CAHs that have reclassified under section
1886(d)(8)(E) of the Act and Sec. 412.103 of the regulations to begin
receiving CRNA pass-through payments on January 1, 2011, instead of
January 1, 2012, if they have a cost reporting period that begins on or
after January 1, 2011. (The December 2, 2010 effective date gives these
hospitals and CAHs 1 month to demonstrate that they are otherwise
eligible to receive these pass-through payments). In the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50664), we indicated that it would be
difficult to quantify the payment impact of the change to the
regulations that would allow hospitals and CAHs reclassified under
section 1886(d)(8)(E) of the Act and Sec. 412.103 of the regulations
because, in order to qualify to receive reasonable cost-based payment
for anesthesia and related services provided by qualified nonphysician
anesthetists, a rural hospital or CAH cannot exceed an annual limit of
800 surgical procedures requiring anesthesia. In addition, although a
hospital or CAH may contract with more than one qualified nonphysician
anesthetist and be paid based on reasonable cost for anesthesia and
related services performed by these anesthetists, the total number of
hours of services furnished by the nonphysician anesthetists may not
exceed 2,080 hours annually. In the final rule, we indicated that we
could not establish the number of facilities that would meet or exceed
this threshold and, as a result, we could not quantify the impact of
the change, but we stated our belief that the impact of the change to
the regulations would be expected to be relatively minor. A change to
the effective date will only affect a subset of those hospitals and
CAHs affected by the change to the regulations adopted in the FY 2010
IPPS/LTCH PPS final rule. For this reason, we would similarly expect
the change to the effective date in this interim final rule with
comment period to have a minor impact on Federal expenditures.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. With
the exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside an urban area and has
fewer than 100 beds. Section 601(g) of the Social Security Amendments
of 1983 (Pub. L. 98-21) designated hospitals in certain New England
counties as belonging to the adjacent urban areas. Thus, we continue to
classify these hospitals as urban hospitals. As this provision will
only affect hospitals and CAHs that are geographically located in an
urban area, but have reclassified as rural under section 1886(d)(8)(E)
of the Act and Sec. 412.103 of the regulations, the change may allow
some reclassified small rural hospitals and CAHs to receive CRNA pass-
through payments up to 1 year earlier than under the regulations with
the prior effective date.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation, by State,
local, or tribal governments in the aggregate, or by the private
sector. That threshold level is currently approximately $135 million.
This interim final rule with comment period will not mandate any
requirements for State, local, or tribal governments, nor will it
affect private sector costs.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct costs on State and local
governments, preempts State law, or otherwise has Federalism
implications. Because this regulation does not impose any costs on
State or local governments, the requirements of Executive Order 13132
are not applicable.
In accordance with the provisions of Executive Order 12866, the
Office of Management and Budget reviewed this interim final rule with
comment period.

List of Subjects

42 CFR Part 410

Health facilities, Health professions, Laboratories, Medicare,
Rural areas, X-rays.

42 CFR Part 411

Kidney diseases, Medicare, Physician referral, Reporting and
recordkeeping requirements.

42 CFR Part 412

Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.

42 CFR Part 416

Health facilities, Health professions, Medicare, Reporting and
recordkeeping requirements.

42 CFR Part 419

Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 489

Health facilities, Medicare, Reporting and recordkeeping
requirements.

0
For reasons stated in the preamble of this document, the Centers for
Medicare & Medicaid Services is amending 42 CFR Chapter IV as set forth
below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
1. The authority citation for part 410 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

[[Page 72259]]

0
2. Section 410.2 is amended by--
0
a. Under the definitions of ``Community mental health center (CMHC)'',
removing the word ``and'' at the end of paragraph (4); removing the
period at the end of paragraph (5) and adding in its place ``; and'';
and adding a new paragraph (6).
0
b. Revising the definition of ``Partial hospitalization services''.
The revisions and additions read as follows:

Sec. 410.2 Definitions.

* * * * *
Community mental health center (CMHC) means an entity that--
* * * * *
(6) Provides at least 40 percent of its services to individuals who
are not eligible for benefits under title XVIII of the Social Security
Act.
* * * * *
Partial hospitalization services means a distinct and organized
intensive ambulatory treatment program that offers less than 24-hour
daily care other than in an individual's home or in an inpatient or
residential setting and furnishes the services as described in Sec.
410.43.
* * * * *

0
3. Section 410.27 is amended by--
0
a. Removing the word ``and'' at the end of paragraph (a)(1)(iii).
0
b. Revising paragraph (a)(1)(iv).
0
c. Adding a new paragraph (a)(1)(v).
0
d. Adding paragraph (a)(2).
0
e. Revising paragraphs (e) and (f).
0
f. Deleting paragraph (g).
The addition and revisions read as follows:

Sec. 410.27 Outpatient hospital or CAH services and supplies incident
to a physician or nonphysician practitioner service: Conditions.

(a) * * *
(1) * * *
(iv) Under the direct supervision of a physician or a nonphysician
practitioner as specified in paragraph (f) of this section.
Nonphysician practitioners may directly supervise services that they
may personally furnish in accordance with State law and all additional
requirements, including those specified in Sec. Sec. 410.71, 410.73,
410.74, 410.75, 410.76, and 410.77. For services furnished in the
hospital or CAH, or in an outpatient department of the hospital or CAH,
both on and off-campus, as defined in Sec. 413.65 of this subchapter,
``direct supervision'' means that the physician or nonphysician
practitioner must be immediately available to furnish assistance and
direction throughout the performance of the procedure. It does not mean
that the physician or nonphysician practitioner must be present in the
room when the procedure is performed. For pulmonary rehabilitation,
cardiac rehabilitation, and intensive cardiac rehabilitation services,
direct supervision must be furnished by a doctor of medicine or
osteopathy, as specified in Sec. Sec. 410.47 and 410.49, respectively;
and
(v) As nonsurgical extended duration therapeutic services.
(A) Nonsurgical extended duration therapeutic services (extended
duration services) are hospital outpatient therapeutic services that
can last a significant period of time, have a substantial monitoring
component that is typically performed by auxiliary personnel, have a
low risk of requiring the physician's or appropriate nonphysician
practitioner's immediate availability after the initiation of the
service, and are not primarily surgical in nature. For these services,
Medicare requires a minimum of direct supervision during the initiation
of the service which may be followed by general supervision at the
discretion of the supervising physician or the appropriate nonphysician
practitioner. For these services, ``direct supervision'' means the
definition specified in paragraph (a)(1)(iv) of this section. ``General
supervision'' means the definition specified at Sec. 410.32(b)(3)(i).
(B) ``Initiation'' means the beginning portion of the non-surgical
extended duration therapeutic service which ends when the patient is
stable and the supervising physician or the appropriate nonphysician
practitioner believes the remainder of the service can be delivered
safely under general supervision.
(2) In the case of partial hospitalization services, also meet the
conditions of paragraph (d) of this section.
* * * * *
(e) Services furnished by an entity other than the hospital or CAH
are subject to the limitations specified in Sec. 410.42(a).
(f) For purposes of this section, ``nonphysician practitioner' ''
means a clinical psychologist, licensed clinical social worker,
physician assistant, nurse practitioner, clinical nurse specialist, or
certified nurse-midwife.

0
4. Section 410.28 is amended by revising paragraph (e) to read as
follows:

Sec. 410.28 Hospital or CAH diagnostic services furnished to
outpatients: Conditions.

* * * * *
(e) Medicare Part B makes payment under section 1833(t) of the Act
for diagnostic services furnished by or under arrangements made by the
participating hospital only when the diagnostic services are furnished
under the appropriate level of physician supervision specified by CMS
in accordance with the definitions in this paragraph and in Sec.
410.32(b)(3)(i), (b)(3)(ii), and (b)(3)(iii). Under general supervision
at a facility accorded provider-based status, the training of the
nonphysician personnel who actually perform the diagnostic procedure
and the maintenance of the necessary equipment and supplies are the
continuing responsibility of the facility. In addition--
(1) For services furnished directly or under arrangement in the
hospital or in an on-campus or off-campus outpatient department of the
hospital, as defined in Sec. 413.65 of this subchapter, ``direct
supervision'' means that the physician must be immediately available to
furnish assistance and direction throughout the performance of the
procedure. It does not mean that the physician must be present in the
room where the procedure is performed.
(2) For services furnished under arrangement in nonhospital
locations, ``direct supervision'' means the definition specified in
Sec. 410.32(b)(3)(ii).
* * * * *

0
5. Section 410.152 is amended by revising paragraph (i)(2) to read as
follows:

Sec. 410.152 Amounts of payment.

* * * * *
(i) * * *
(2) For ASC services furnished on or after January 1, 2008, in
connection with the covered surgical procedures specified in Sec.
416.166 of this subchapter, except as provided in paragraphs (i)(2)(i),
(i)(2)(ii), and (l) of this section, Medicare Part B pays the lesser of
80 percent of the actual charge or 80 percent of the prospective
payment amount, geographically adjusted, if applicable, as determined
under Subpart F of Part 416 of this subchapter. Part B coinsurance is
20 percent of the actual charge or 20 percent of the prospective
payment amount, geographically adjusted, if applicable
(i) If the limitation described in Sec. 416.167(b)(3) of this
subchapter applies, Medicare pays 80 percent of the amount determined
under Subpart B of Part 414 of this subchapter and Part B coinsurance
is 20 percent of the applicable payment amount, except as provided in
paragraph (l) of this section.
(ii) Between January 1, 2008 and December 31, 2010, Medicare Part B

[[Page 72260]]

pays 75 percent of the applicable payment amount for screening flexible
sigmoidoscopies and screening colonoscopies, and Part B coinsurance is
25 percent of the applicable payment amount.
* * * * *

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT

0
6. The authority citation for part 411 continues to read as follows:

Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877
of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-
152, 1395hh and 1395nn).

0
7. Section 411.356 is amended by--
0
a. Revising paragraph (c)(1).
0
b. Removing the word ``and'' at the end of paragraph (c)(3)(ii).
0
c. Removing the period at the end of paragraph (c)(3)(iii) and adding
``; and'' in its place.
0
d. Adding a new paragraph (c)(3)(iv).
The revisions and addition read as follows:

Sec. 411.356 Exceptions to the referral prohibition related to
ownership or investment interests.

* * * * *
(c) * * *
(1) A rural provider, in the case of DHS furnished in a rural area
(as defined at Sec. 411.351 of this subpart) by the provider. A
``rural provider'' is an entity that furnishes substantially all (not
less than 75 percent) of the DHS that it furnishes to residents of a
rural area and, for the 18-month period beginning on December 8, 2003
(or such other period as Congress may specify), is not a specialty
hospital, and in the case where the entity is a hospital, the hospital
meets the requirements of Sec. 411.362 no later than September 23,
2011.
* * * * *
(3) * * *
(iv) The hospital meets the requirements described in Sec. 411.362
not later than September 23, 2011.

0
8. A new Sec. 411.362 is added to read as follows:

Sec. 411.362 Additional requirements concerning physician ownership
and investment in hospitals.

(a) Definitions. For purposes of this section--
Physician owner or investor means a physician (or immediate family
member of the physician) with a direct or an indirect ownership or
investment interest in the hospital.
Procedure room means a room in which catheterizations,
angiographies, angiograms, and endoscopies are performed, except such
term shall not include an emergency room or department (exclusive of
rooms in which catheterizations, angiographies, angiograms, and
endoscopies are performed).
(b) General requirements. (1) Physician ownership and provider
agreement. The hospital had physician ownership or investment on
December 31, 2010; and a provider agreement under section 1866 of the
Act in effect on that date.
(2) Prohibition on facility expansion. The hospital may not
increase the number of operating rooms, procedure rooms, and beds
beyond that for which the hospital is licensed on March 23, 2010 (or,
in the case of a hospital that did not have a provider agreement in
effect as of this date, but does have a provider agreement in effect on
December 31, 2010, the effective date of such agreement), unless an
exception is granted by the Secretary pursuant to section 1877(i)(3) of
the Social Security Act.
(3) Disclosure of conflicts of interest.
(i) At such time and in such manner as specified by CMS, the
hospital must submit an annual report to CMS containing a detailed
description of the identity of each owner or investor in the hospital
and the nature and extent of all ownership and investment interests in
the hospital.
(ii) The hospital must--
(A) Require each referring physician owner or investor who is a
member of the hospital's medical staff to agree, as a condition of
continued medical staff membership or admitting privileges, to provide
written disclosure of his or her ownership or investment interest in
the hospital (and, if applicable, the ownership or investment interest
of any treating physician) to all patients whom the physician refers to
the hospital. Disclosure must be required by a time that permits the
patient to make a meaningful decision regarding the receipt of care.
(B) Not condition any physician ownership or investment interests
either directly or indirectly on the physician owner or investor making
or influencing referrals to the hospital or otherwise generating
business for the hospital.
(C) Disclose on any public Web site for the hospital and in any
public advertising that the hospital is owned or invested in by
physicians.
(4) Ensuring bona fide investment. The hospital satisfies the
following criteria:
(i) The percentage of the total value of the ownership or
investment interests held in the hospital, or in an entity whose assets
include the hospital, by physician owners or investors in the aggregate
does not exceed such percentage as of March 23, 2010.
(ii) Any ownership or investment interests that the hospital offers
to a physician owner or investor are not offered on more favorable
terms than the terms offered to a person who is not a physician owner
or investor.
(iii) The hospital (or any owner or investor in the hospital) does
not directly or indirectly provide loans or financing for any
investment in the hospital by a physician owner or investor.
(iv) The hospital (or any owner or investor in the hospital) does
not directly or indirectly guarantee a loan, make a payment toward a
loan, or otherwise subsidize a loan, for any individual physician owner
or investor or group of physician owners or investors that is related
to acquiring any ownership or investment interest in the hospital.
(v) Ownership or investment returns are distributed to each owner
or investor in the hospital in an amount that is directly proportional
to the ownership or investment interest of such owner or investor in
the hospital.
(vi) Physician owners and investors do not receive, directly or
indirectly, any guaranteed receipt of or right to purchase other
business interests related to the hospital, including the purchase or
lease of any property under the control of other owners or investors in
the hospital or located near the premises of the hospital.
(vii) The hospital does not offer a physician owner or investor the
opportunity to purchase or lease any property under the control of the
hospital or any other owner or investor in the hospital on more
favorable terms than the terms offered to an individual who is not a
physician owner or investor.
(5) Patient safety. The hospital satisfies the following criteria:
(i) If the hospital does not have a physician available on the
premises to provide services during all hours in which the hospital is
providing services to the patient, the hospital must disclose this
information to the patient. Before providing services to the patient,
the hospital must receive a signed acknowledgment from the patient
stating that the patient understands that a physician may not be
present during all hours services are furnished to the patient.
(ii) The hospital must have the capacity to provide assessment and
initial treatment for all patients, and the ability to refer and
transfer patients to

[[Page 72261]]

hospitals with the capability to treat the needs of the patient that
the hospital is unable to address. For purposes of this paragraph, the
hospital inpatient stay or outpatient visit begins with the provision
of a package of information regarding scheduled preadmission testing
and registration for a planned hospital admission for inpatient care or
an outpatient service.
(6) Prohibition on conversion from an ambulatory surgery center.
The hospital must not have been converted from an ambulatory surgical
center to a hospital on or after March 23, 2010.

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

0
9. The authority citation for part 412 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), and sec. 124 of Pub. L. 106-113 (113 Stat.
1501A-332).

0
10. Section 412.105 is amended by--
0
a. Revising paragraph (f)(1)(ii).
0
b. Revising paragraph (f)(1)(iii)(C).
0
c. Adding a new paragraph (f)(1)(iii)(D).
0
d. Revising paragraph (f)(1)(iv)(B).
0
e. Revising paragraph (f)(1)(iv)(C).
0
f. Revising paragraph (f)(1)(ix).
The revisions and addition read as follows:

Sec. 412.105 Special treatment: Hospitals that incur indirect costs
for graduate medical education programs.

* * * * *
(f) * * *
(1) * * *
(ii) In order to be counted, the resident must be assigned to one
of the following areas:
(A) The portion of the hospital subject to the hospital inpatient
prospective payment system.
(B) The outpatient department of a hospital that meets provider-
based status as defined at Sec. 413.65(a)(2) of this subchapter.
(C) The portions of a hospital located in Puerto Rico that are
subject to the hospital inpatient prospective payment system, including
off-campus outpatient departments that meet provider-based status as
defined at Sec. 413.65(a)(2) of this subchapter.
(D) The portions of a hospital that are reimbursed under a
reimbursement system authorized under section 1814(b)(3) of the Act.
(E) Effective for discharges occurring on or after October 1, 1997,
the time spent by a resident in a nonprovider setting in patient care
activities, as defined in Sec. 413.75(b) of this subchapter, under an
approved medical residency training program is counted towards the
determination of full-time equivalency if the criteria set forth in
Sec. 413.78(c), (d), (e), (f), or (g) of this subchapter, as
applicable, are met.
(iii) * * *
(C) Effective for cost reporting periods beginning on or after
January 1, 1983, except for research activities described in paragraph
(f)(1)(iii)(B) of this section, the time a resident is training in an
approved medical residency program in a hospital setting, as described
in paragraphs (f)(1)(ii)(A) through (f)(1)(ii)(D) of this section, must
be spent in either patient care activities, as defined in Sec.
413.75(b) of this subchapter, or in nonpatient care activities, such as
didactic conferences and seminars, to be counted. This provision may
not be applied in a manner that would require the reopening of settled
cost reports, except those cost reports on which, as of March 23, 2010,
there is a jurisdictionally proper appeal pending on direct GME or IME
payments.
(D) Effective for cost reporting periods beginning on or after
January 1, 1983, the time spent by a resident in an approved medical
residency program on vacation, sick leave, or other approved leave that
does not prolong the total time the resident is participating in the
approved program beyond the normal duration of the program is
countable. This provision may not be applied in a manner that would
require the reopening of settled cost reports, except those cost
reports on which, as of March 23, 2010, there is a jurisdictionally
proper appeal pending on direct GME or IME payments.
(iv) * * *
(B)(1) Effective for portions of cost reporting periods beginning
on or after July 1, 2005, a hospital's otherwise applicable FTE
resident cap may be reduced if its reference resident level, as
determined under Sec. 413.79(c)(1)(ii)(A) of this subchapter, is less
than its otherwise applicable FTE resident cap in a reference cost
reporting period, in accordance with the provisions of Sec.
413.79(c)(3) of this subchapter. The reduction is 75 percent of the
difference between the otherwise applicable FTE resident cap and the
reference resident level.
(2) Effective for portions of cost reporting periods beginning on
or after July 1, 2011, a hospital's otherwise applicable FTE resident
cap may be reduced if its reference resident level, as determined under
Sec. 413.79(c)(1)(ii)(B) of this subchapter, is less than its
otherwise applicable FTE resident cap in a reference cost reporting
period, in accordance with the provisions of Sec. 413.79(m) of this
subchapter. The reduction shall take into account the hospital's FTE
resident cap as reduced under paragraph (f)(1)(iv)(B)(1). The reduction
is 65 percent of the difference between the otherwise applicable FTE
resident cap and the reference resident level.
(C)(1) Effective for portions of cost reporting periods beginning
on or after July 1, 2005, a hospital may qualify to receive an increase
in its otherwise applicable FTE resident cap (up to 25 additional FTEs)
if the criteria specified in Sec. 413.79(c)(4) of this subchapter are
met.
(2) Effective for portions of cost reporting periods beginning on
or after July 1, 2011, a hospital may qualify to receive an increase in
its otherwise applicable FTE resident cap (up to 75 additional FTEs) if
the criteria specified in Sec. 413.79(n) of this subchapter are met.
* * * * *
(ix)(A) A hospital may receive a temporary adjustment to its FTE
resident cap to reflect residents added because of another hospital's
closure if the hospital meets the criteria specified in Sec. Sec.
413.79(h)(1) and (h)(2) of this subchapter. If a hospital that closes
its residency training program agrees to temporarily reduce its FTE
resident cap according to the criteria specified in Sec. Sec.
413.79(h)(1) and (h)(3)(ii) of this subchapter, another hospital(s) may
receive a temporary adjustment to its FTE resident cap to reflect
residents added because of the closure of the residency training
program if the criteria specified in Sec. Sec. 413.79(h)(1) and
(h)(3)(i) of this subchapter are met.
(B) A hospital may receive a permanent adjustment to its FTE
resident cap as a result of slots that were redistributed from a closed
hospital, as defined at Sec. 413.79(h)(1)(i) of this subchapter, if
the hospital meets the requirements at Sec. 413.79(o) of this
subchapter.
* * * * *

0
11. Section 412.113 is amended by revising paragraph (c)(2)(i)(A) to
read as follows:

Sec. 412.113 Other payments.

* * * * *
(c) * * *
(2)(i) * * *
(A) The hospital or CAH is located in a rural area as defined in
Sec. 412.62(f) and is not deemed to be located in an urban area under
the provisions of Sec. 412.64(b)(3). Effective December 2, 2010, the
hospital or CAH is either located in a rural area as defined at

[[Page 72262]]

Sec. 412.62(f) and is not deemed to be located in an urban area under
the provisions of Sec. 412.64(b)(3) or the hospital or CAH has
reclassified as rural under the provisions at Sec. 412.103.
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
12. The authority citation for part 413 continues to read as follows:

Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and
(n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act
(42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n),
1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Pub.
L. 106-133 (113 Stat. 1501A-332).

0
13. Section 413.75 is amended by--
0
a. Revising paragraph (2) of the definition of ``All or substantially
all of the costs for the training program in the nonhospital setting''.
0
b. Adding a definition of ``Nonprovider setting that is primarily
engaged in furnishing patient care''.
The revision and addition read as follows:

Sec. 413.75 Direct GME payments: General requirements.

* * * * *
(b) * * *
All or substantially all of the costs for the training program in
the nonhospital setting means--
* * * * *
(2) Effective for cost reporting periods beginning on or after July
1, 2007 and before July 1, 2010, at least 90 percent of the total of
the costs of the residents' salaries and fringe benefits (including
travel and lodging where applicable) and the portion of the cost of
teaching physicians' salaries attributable to nonpatient care direct
GME activities.
* * * * *
Nonprovider setting that is primarily engaged in furnishing patient
care means a nonprovider setting in which the primary activity is the
care and treatment of patients.
* * * * *

0
14. Section 413.78 is amended by--
0
a. Revising the introductory text of paragraph (f).
0
b. Revising paragraph (f)(1).
0
c. Adding a new paragraph (g).
0
d. Adding a new paragraph (h).
The revisions and additions read as follows:

Sec. 413.78 Direct GME payments: Determination of the total number of
FTE residents.

* * * * *
(f) For cost reporting periods beginning on or after July 1, 2007,
and before July 1, 2010, the time residents spend in nonprovider
settings such as freestanding clinics, nursing homes, and physicians'
offices in connection with approved programs may be included in
determining the number of FTE residents in the calculation of a
hospital's resident count if the following conditions are met--
(1) The resident spends his or her time in patient care activities
as defined at Sec. 413.75(b), except that for cost reporting periods
beginning on or after July 1, 2009, the time spent training in
nonpatient care activities, such as didactic conferences and seminars,
but excluding research not associated with the treatment or diagnosis
of a particular patient, in a nonprovider setting that is primarily
engaged in furnishing patient care activities, as defined at Sec.
413.75(b), also may be counted.
* * * * *
(g) For cost reporting periods beginning on or after July 1, 2010,
the time residents spend in nonprovider settings such as freestanding
clinics, nursing homes, and physicians' offices in connection with
approved programs may be included in determining the number of FTE
residents in the calculation of a hospital's resident count if the
following conditions are met--
(1) The resident spends his or her time--
(i) In patient care activities as defined at Sec. 413.75(b); or
(ii) In nonpatient care activities, such as didactic conferences
and seminars, but excluding research not associated with the treatment
or diagnosis of a particular patient, in a nonprovider setting that is
primarily engaged in furnishing patient care activities, as defined at
Sec. 413.75(b).
(2) The hospital or hospitals must incur the costs of the salaries
and fringe benefits of the resident during the time the resident spends
in the nonprovider setting. If more than one hospital incurs these
costs, either directly or through a third party, the hospitals must
count a proportional share of the time that residents train at the
nonhospital setting(s) as recorded in a written agreement between the
hospitals.
(i) Hospitals must have a reasonable basis for establishing that
proportion of the cost and the FTE time that each will incur and count.
(ii) If hospitals already arrange payment to the nonhospital site
via a written agreement as described in paragraph (g)(3)(ii) of this
section, the proportion may be recorded in that agreement.
(iii) If hospitals choose to pay the nonhospital site concurrently
as described in paragraph (g)(3)(i) of this section, the hospitals must
record the proportion of cost and FTE time they are incurring and
counting in a written agreement between the hospitals.
(3) The hospital or hospitals must comply with one of the
following:
(i) The hospital or hospitals must incur the costs of the salaries
and fringe benefits of the resident during the time the resident spends
in the nonprovider setting by the end of the third month following the
month in which the training in the nonhospital site occurred.
(ii) There is a written agreement between the hospital or hospitals
and the outside entity that states that the residents' salaries and
fringe benefits (including travel and lodging where applicable) during
the time the resident spends in the nonhospital setting is to be paid
by the hospital(s). Hospitals may modify the amounts specified in the
written agreement by the end of the academic year (that is, June 30) to
reflect that the costs of the training program in the nonhospital site
have been incurred.
(4) The hospital is subject to the principles of community support
and redistribution of costs as specified in Sec. 413.81.
(5) For cost reporting periods beginning on or after July 1, 2010,
a hospital must maintain and make available records of the FTE count
determined for direct GME purposes under this section that its
residents spend in nonprovider sites, in order to compare that time to
the time spent by its residents in nonprovider sites in the base year
of cost reporting periods beginning on or after July 1, 2009, and
before June 30, 2010. The hospital must supply the CMS contractor with
the data for each of its primary care programs on a program-specific
basis, and with data for its nonprimary care programs on an overall
basis.
(6) The provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and
(g)(5) of this section cannot be applied in a manner that would require
the reopening of settled cost reports, except those cost reports on
which there is a jurisdictionally proper appeal pending on direct GME
or IME payments as of March 23, 2010.
(h) Effective for cost reporting periods beginning on or after
January 1, 1983, the time spent by a resident in an approved medical
residency program on vacation, sick leave, or other approved leave that
does not prolong the total

[[Page 72263]]

time the resident is participating in the approved program beyond the
normal duration of the program is countable. This provision cannot be
applied in a manner that would require the reopening of settled cost
reports, except those cost reports on which there is a jurisdictionally
proper appeal pending on direct GME or IME payments as of March 23,
2010.

0
15. Section 413.79 is amended by--
0
a. Revising paragraph (c)(1)(ii).
0
b. Revising the introductory text of paragraph (c)(2).
0
c. Revising paragraph (c)(2)(iv).
0
d. Revising the heading of paragraph (c)(3).
0
e. Revising the heading of paragraph (c)(4).
0
f. Revising the heading of paragraph (c)(5).
0
g. Revising paragraph (d)(6).
0
i. Adding a new paragraph (m).
0
j. Adding a new paragraph (n).
0
k. Adding a new paragraph (o).
The revisions and additions read as follows:

Sec. 413.79 Direct GME payments: Determination of the weighted number
of FTE residents.

* * * * *
(c) * * *
(1) * * *
(ii)(A) For purposes of paragraph (c)(3) of this section, reference
resident level refers to a hospital's resident level in the applicable
reference period specified under paragraph (c)(3) of this section.
(B) For purposes of paragraph (m) of this section, reference
resident level means with respect to a hospital, the highest resident
level for any of the three most recent cost reporting periods ending
before March 23, 2010, for which a cost report has been either settled
or submitted (subject to audit) to the Medicare contractor by March 23,
2010.
* * * * *
(2) Determination of the FTE resident cap. Subject to the
provisions of paragraphs (c)(3) through (c)(6) and (m) through (o) of
this section and Sec. 413.81, for purposes of determining direct GME
payment--
* * * * *
(iv) Hospitals that are part of the same Medicare GME affiliated
group or the same emergency Medicare GME affiliated group (as described
under Sec. 413.75(b)) may elect to apply the limit on an aggregate
basis as described under paragraph (f) of this section.
* * * * *
(3) Determination of the reduction to the FTE resident cap due to
unused FTE resident slots under section 422 of Public Law 108-173. * *
*
(4) Determination of an increase in the otherwise applicable
resident cap under section 422 of Public Law 108-173. * * *
(5) Special rules for hospitals that participate in demonstration
projects or voluntary resident reduction plans for purposes of section
422 of Public Law 108-173. * * *
(d) * * *
(6)(i) Subject to the provisions of paragraph (h) of this section,
FTE residents who are displaced by the closure of either another
hospital or another hospital's program are added to the FTE count after
applying the averaging rules in this paragraph (d), for the receiving
hospital for the duration of the time that the displaced residents are
training at the receiving hospital.
(ii) If a hospital receives a permanent increase in its FTE
resident cap under paragraph (o)(1) of this section due to
redistribution of slots from a closed hospital, the displaced FTE
residents that the hospital receives are added to the FTE count after
applying the averaging rules only in the first cost reporting period in
which the receiving hospital trains the displaced FTE residents. In
subsequent cost reporting periods, the displaced FTE residents are
included in the receiving hospital's rolling average calculation.
* * * * *
(m) Determination of the reduction to the FTE resident cap due to
unused FTE resident slots under section 5503 of Public Law 111-148. If
a hospital's reference resident level, as defined under paragraph
(c)(1)(ii)(B) of this section is less than its otherwise applicable FTE
resident cap as determined under paragraph (c)(2) of this section or
paragraph (e) of this section in the reference cost reporting period
(as described under paragraph (m)(6) of this section), for portions of
cost reporting periods beginning on or after July 1, 2011, the
hospital's otherwise applicable FTE resident cap is reduced by 65
percent of the difference between the otherwise applicable FTE resident
cap and the reference resident level. The reduction shall take into
account the hospital's FTE resident cap as reduced under paragraph
(c)(3) of this section. Under this provision--
(1) Exemption for certain rural hospitals. A rural hospital, as
defined at subpart D of Part 412 of this subchapter, with fewer than
250 beds (as determined at Sec. 412.105(b)) in its most recent cost
reporting period ending on or before March 23, 2010, for which a cost
report has been either settled or submitted (subject to audit) to the
Medicare contractor by March 23, 2010, is exempt from any reduction to
its otherwise applicable FTE resident cap under paragraph (m) of this
section.
(2) Exemption for certain hospitals that participate in
demonstration projects or voluntary residency reduction plans. A
hospital that was participating in a demonstration project under
section 402 of Public Law 90-248 or the voluntary reduction plan under
Sec. 413.88, is exempt from any reduction to its otherwise applicable
FTE resident cap under paragraph (m) of this section if, by January 21,
2011, it submits a plan to CMS for filling all of its unused FTE
resident slots by not later than March 23, 2012.
(3) Exemption for a hospital described at section 1886(h)(4)(H)(v)
of the Act. A hospital described at section 1886(h)(4)(H)(v) of the
Act, is exempt from any reduction to its otherwise applicable FTE
resident cap under paragraph (m) of this section.
(4) Exemptions for certain other hospitals. A hospital training at
or above its otherwise applicable FTE resident cap as determined under
paragraph (c)(2) of this section for all three most recent cost
reporting periods ending prior to March 23, 2010, for which a cost
report has been either settled or submitted (subject to audit) to the
Medicare contractor by March 23, 2010, is exempt from any reduction to
its otherwise applicable FTE resident cap under paragraph (m) of this
section.
(5) New teaching hospital. A new teaching hospital that does not
have an otherwise applicable FTE resident cap as determined under
paragraph (e)(1) of this section for all three most recent cost
reporting periods ending prior to March 23, 2010, for which a cost
report has been either settled or submitted (subject to audit) to the
Medicare contractor by March 23, 2010, is exempt from any reduction to
its otherwise applicable FTE resident cap under paragraph (m) of this
section.
(6) Reference cost reporting period. (i) To determine a hospital's
reference resident level, CMS determines, for a hospital's three most
recent cost reporting periods ending before March 23, 2010, for which a
cost report has been either settled or submitted (subject to audit) to
the Medicare contractor by March 23, 2010, the cost reporting period
with the highest resident level.
(ii) If the cost report that is used to determine a hospital's
otherwise applicable FTE resident cap in the reference period is not
equal to 12 months, the Medicare contractor may make appropriate
modifications to apply the provisions of paragraph (m) of this section
based on the equivalent of a 12-month cost reporting period.

[[Page 72264]]

(7) Affiliated cap. If a hospital is a member of a Medicare GME
affiliated group during its reference cost reporting period, and its
reference resident level is less than its otherwise applicable FTE
resident cap as adjusted by the terms of the Medicare GME affiliation
agreement, the hospital's FTE resident cap will be reduced by 65
percent of the difference between the otherwise applicable FTE resident
cap and the reference resident level. The reduction will take into
account the hospital's FTE resident cap as reduced under the provisions
of paragraph (c)(3) of this section.
(n) Determination of an increase in the otherwise applicable
resident cap under section 5503 of Public Law 111-148. (1) For portions
of cost reporting periods beginning on or after July 1, 2011, a
hospital may receive an increase in its otherwise applicable FTE
resident cap (as determined by CMS) of not more than 75 additional FTEs
if the hospital meets the requirements and qualifying criteria of
section 1886(h)(8) of the Act and implementing instructions issued by
CMS and if the hospital submits an application to CMS within the
timeframe specified by CMS.
(2) A hospital that receives an increase in the otherwise
applicable FTE resident cap under paragraph (n)(1) of this section must
ensure, during the 5-year period beginning on July 1, 2011 and ending
on June 30, 2016, that--
(i) The number of FTE primary care residents, as defined in Sec.
413.75(b), excluding any additional positions under this paragraph, is
not less than the average number of FTE primary care residents (as so
determined) during the three most recent cost reporting periods ending
prior to March 23, 2010 (and submitted to the Medicare contractor by
March 23, 2010); and not less than 75 percent of the positions
attributable to such increase are in a primary care or general surgery
residency programs.
(ii) CMS may determine whether a hospital has met the requirements
under paragraph (n)(1) of this section during the 5-year period of July
1, 2011 through June 30, 2016, in such manner and at such time as CMS
determines appropriate, including at the end of such 5-year period.
(iii) In a case where the Medicare contractor determines that a
hospital did not meet the requirements in a cost reporting period
within the 5-year time period, the Medicare contractor will reduce the
otherwise applicable FTE resident cap of the hospital by the amount by
which such limit was increased under paragraph (n)(1) of this section
from the earliest cost reporting period that is reopenable in which it
would be determined that the hospital did not meet the requirements.
(o) Determination of an increase in the FTE resident cap due to
slots redistributed from a closed hospital. (1) Except in the case of
the closure of the hospital with Medicare Provider Number 05-0578, in
the instance of a hospital closure, as defined at paragraph (h)(1)(i)
of this section, the FTE resident cap of the closed hospital would be
redistributed, and a hospital that meets the requirements and
qualifying criteria of section 1886(h)(4)(H)(vi) of the Act and
implementing instructions issued by CMS, including submission of a
timely application to CMS, may receive an increase in its FTE resident
cap, as determined by CMS.
(2)(i) Except in the case of the closure of the hospital with
Medicare Provider Number 05-0578, in redistributing the FTE resident
cap of a closed hospital, consideration shall be given to ensure that
there is no duplication of FTE slots between FTE slots redistributed
under this paragraph and temporary adjustments to FTE resident caps
provider under paragraph (h)(2) of this section.
(ii) The provisions of this paragraph (o) will not be applied in a
manner that will require the reopening of settled cost reports, except
where the provider has a jurisdictionally proper appeal pending on
direct GME or IME payments as of March 23, 2010.

PART 416--AMBULATORY SURGICAL SERVICES

0
16. The authority citation for part 416 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

0
17. Section 416.160 is amended by--
0
a. Revising paragraph (a)(1).
0
b. Revising paragraph (a)(4).
0
c. Adding a new paragraph (a)(5).
The revisions and addition read as follows:

Sec. 416.160 Basis and scope.

(a) * * *
(1) Section 1833(i)(2)(D) of the Act requires the Secretary to
implement a revised payment system for payment of surgical services
furnished in ASCs. The statute requires that, in the year such system
is implemented, the system shall be designed to result in the same
amount of aggregate expenditures for such services as would be made if
there was no requirement for a revised payment system. The revised
payment system shall be implemented no earlier than January 1, 2006,
and no later than January 1, 2008. The statute also requires that, for
CY 2011 and each subsequent year, any annual update to the ASC payment
system be reduced by a productivity adjustment. There shall be no
administrative or judicial review under section 1869 of the Act,
section 1878 of the Act, or otherwise of the classification system, the
relative weights, payment amounts, and the geographic adjustment
factor, if any, of the revised payment system.
* * * * *
(4) Section 1834(d) of the Act specifies that, when screening
colonoscopies or screening flexible sigmoidoscopies are performed in an
ASC or hospital outpatient department, payment shall be based on the
lesser of the amount under the fee schedule that would apply to such
services if they were performed in a hospital outpatient department in
an area or the amount under the fee schedule that would apply to such
services if they were performed in an ambulatory surgical center in the
same area. Section 1834(d) of the Act also specifies that, in the case
of screening flexible sigmoidoscopy and screening colonoscopy services,
the payment amounts must not exceed the payment rates established for
the related diagnostic services.
(5) Section 1833(a)(1) of the Act requires 100 percent payment for
preventive services described in section 1861(ww)(2) of the Act
(excluding electrocardiograms) to which the United States Preventive
Services Task Force (USPSTF) has given a grade of A or B for any
indication or population. Section 1833(b)(1) of the Act also specifies
that the Part B deductible shall not apply with respect to preventive
services described in section 1861(ww)(2) of the Act (excluding
electrocardiograms) to which the USPSTF has given a grade of A or B for
any indication or population.
* * * * *

0
18. Section 416.171 is amended by adding a new paragraph (a)(2)(iii) to
read as follows:

Sec. 416.171 Determination of payment rates for ASC services.

(a) * * *
(2) * * *
(iii) Productivity adjustment. (A) For calendar year 2011 and
subsequent years, the Consumer Price Index for All Urban Consumers
determined under paragraph (a)(2)(ii) of this section is reduced by the
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of
the Act.
(B) The application of the provisions of paragraph (a)(2)(iii)(A)
of this section may result in the update being less than

[[Page 72265]]

0.0 for a year, and may result in payment rates for a year being less
than the payment rates for the preceding year.
* * * * *

PART 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES

0
19. The authority citation for part 419 continues to read as follows:

Authority: Secs. 1102, 1833(t), and 1871 of the Social Security
Act (42 U.S.C. 1302, 1395(t), and 1395hh).

0
20. Section 419.21 is amended by revising paragraph (e) to read as
follows:

Sec. 419.21 Hospital outpatient services subject to the outpatient
prospective payment system.

* * * * *
(e)(1) Effective January 1, 2005 through December 31, 2008, an
initial preventive physical examination, as defined in Sec. 410.16 of
this chapter, if the examination is performed no later than 6 months
after the individual's initial Part B coverage date that begins on or
after January 1, 2005.
(2) Effective January 1, 2009, an initial preventive physical
examination, as defined in Sec. 410.16 of this chapter, if the
examination is performed no later than 12 months after the date of the
individual's initial enrollment in Part B.
0
21. Section 419.22 is amended by--

0
a. Revising paragraph (m).
0
b. Adding a new paragraph (t).
The revision and addition read as follows:

Sec. 419.22 Hospital outpatient services excluded from payment under
the hospital outpatient prospective payment system.

* * * * *
(m)(1) Services provided on or before December 31, 2010, for
patients with ESRD that are paid under the ESRD composite rate and
drugs and supplies furnished during dialysis but not included in the
composite rate.
(2) Renal dialysis services provided on or after January 1, 2011,
for patients with ESRD that are paid under the ESRD benefit, as
described in Subpart H of Part 413 of this chapter.
* * * * *
(t) Effective January 1, 2011, annual wellness visit providing
personalized prevention plan services as defined in Sec. 410.15 of
this chapter.

0
22. Section 419.32 is amended by revising paragraph (b)(1)(iv) to read
as follows:

Sec. 419.32 Calculation of prospective payment rates for hospital
outpatient services.

* * * * *
(b) * * *
(1) * * *
(iv)(A) For calendar year 2003 and subsequent years, by the
hospital inpatient market basket percentage increase applicable under
section 1886(b)(3)(B)(iii) of the Act.
(B) The percentage increase determined under paragraph
(b)(1)(iv)(A) of this section is reduced by the following for the
specific calendar year:
(1) For calendar year 2010, 0.25 percentage point; and
(2) For calendar year 2011, 0.25 percentage point.
* * * * *

0
23. Section 419.43 is amended by revising paragraph (c) to read as
follows:

Sec. 419.43 Adjustments to national program payment and beneficiary
copayment amounts.

* * * * *
(c) Wage index factor.--(1) CMS uses the hospital inpatient
prospective payment system wage index established in accordance with
Part 412 of this chapter to make the adjustment specified under
paragraph (a) of this section.
(2) For services furnished beginning January 1, 2011, the wage
index factor provided for in paragraph (c)(1) of this section
applicable to any hospital outpatient department that is located in a
frontier State, as defined in Sec. 412.64(m) of this chapter, may not
be less than 1.00.
(3) The additional payments made under the provisions of paragraph
(c)(2) of this section are not implemented in a budget neutral manner.
* * * * *

0
24. Section 419.70 is amended by--
0
a. Revising paragraph (d)(2) introductory text.
0
b. Adding a new paragraph (d)(6).
The revision and addition read as follows.

Sec. 419.70 Transitional adjustments to limit decline in payments.

* * * * *
(d) * * *
(2) Temporary treatment for small rural hospitals on or after
January 1, 2006. For covered hospital outpatient services furnished in
a calendar year from January 1, 2006, through December 31, 2010, for
which the prospective payment system amount is less than the pre-BBA
amount, the amount of payment under this part is increased by 95
percent of that difference for services furnished during 2006, 90
percent of that difference for services furnished during 2007, and 85
percent of that difference for services furnished during 2008, 2009,
and 2010, if the hospital--
* * * * *
(6) Temporary treatment for sole community hospitals on or after
January 1, 2010, and through December 31, 2010. For covered hospital
outpatient services furnished on or after January 1, 2010 through
December 31, 2010, for which the prospective payment system amount is
less than the pre-BBA amount, the amount of payment under this part is
increased by 85 percent of that difference if the hospital is a sole
community hospital as defined in Sec. 412.92 of this chapter or is an
essential access community hospital as described under Sec. 412.109 of
this chapter.
* * * * *

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
25. The authority citation for part 489 continues to read as follows:

Authority: Secs. 1102, 1819, 1820(e), 1861, 1864(m), 1866,
1869, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i-3,
1395x, 1395aa(m), 1395cc, 1395ff, and 1395hh).

0
26. Section 489.20 is amended by revising paragraph (w) to read as
follows:

Sec. 489.20 Basic commitments.

* * * * *
(w)(1) In the case of a hospital as defined in Sec. 489.24(b), to
furnish written notice to all patients at the beginning of their
hospital stay or outpatient visit if a doctor of medicine or a doctor
of osteopathy is not present in the hospital 24 hours per day, 7 days
per week, in order to assist the patients in making informed decisions
regarding their care, in accordance with Sec. 482.13(b)(2) of this
subchapter. The notice must indicate how the hospital will meet the
medical needs of any patient who develops an emergency medical
condition, as defined in Sec. 489.24(b), at a time when there is no
physician present in the hospital. For purposes of this paragraph, the
hospital stay or outpatient visit begins with the provision of a
package of information regarding scheduled preadmission testing and
registration for a planned hospital admission for inpatient care or
outpatient service.
(2) Before admitting a patient or providing an outpatient service,
the hospital must receive a signed acknowledgment from the patient
stating that the patient understands that a physician may not be
present during

[[Page 72266]]

all hours services are furnished to the patient.
* * * * *

[[Page 72267]]

(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778
(Medical Assistance))

Dated: October 26, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Dated: October 29, 2010.
Kathleen Sebelius,
Secretary.

Note: The following addenda will not appear in the Code of
Federal Regulations:

BILLING CODE 4120-01-P

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[FR Doc. 2010-27926 Filed 11-2-10; 4:15 pm]
BILLING CODE 4120-01-C