[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR419.31]

[Page 795-796]
 
                         TITLE 42--PUBLIC HEALTH
 
                             HUMAN SERVICES
 
PART 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES--Table of Contents
 
 Subpart C--Basic Methodology for Determining Prospective Payment Rates 
                    for Hospital Outpatient Services
 
Sec. 419.31  Ambulatory payment classification (APC) system and payment weights.

    (a) APC groups. (1) CMS classifies outpatient services and 
procedures that are comparable clinically and in terms of resource use 
into APC groups. Except as specified in paragraph (a)(2)

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of this section, items and services within a group are not comparable 
with respect to the use of resources if the highest median cost for an 
item or service within the group is more than 2 times greater than the 
lowest median cost for an item or service within the group.
    (2) CMS may make exceptions to the requirements set forth in 
paragraph (a)(1) in unusual cases, such as low volume items and 
services, but 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.
    (3) The payment rate determined for an APC group in accordance with 
Sec. 419.32, and the copayment amount and program payment amount 
determined for an APC group in accordance with subpart D of this part, 
apply to every HCPCS code classified within an APC group.
    (b) APC weighting factors. (1) Using hospital outpatient claims data 
from calendar year 1996 and data from the most recent available hospital 
cost reports, CMS determines the median costs for the services and 
procedures within each APC group.
    (2) CMS assigns to each APC group an appropriate weighting factor to 
reflect the relative median costs for the services within the APC group 
compared to the median costs for the services in all APC groups.
    (c) Standardizing amounts. (1) CMS determines the portion of costs 
determined in paragraph (b)(1) of this section that is labor-related. 
This is known as the ``labor-related portion'' of hospital outpatient 
costs.
    (2) CMS standardizes the median costs determined in paragraph (b)(1) 
of this section by adjusting for variations in hospital labor costs 
across geographic areas.