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Tuesday,

November 27, 2007

Book 2 of 2 Books
Pages 66579–67226

Part III

Department of
Health and Human
Services
Centers for Medicare & Medicaid Services

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


Medicare and Medicaid Programs; Interim
and Final Rule
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66580 Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations

DEPARTMENT OF HEALTH AND 90. In addition, we are changing the 2. By regular mail. You may mail
HUMAN SERVICES provisions in our previously issued FY written comments (one original and two
2008 IPPS final rule and are establishing copies) to the following address ONLY:
Centers for Medicare & Medicaid a new policy, retroactive to October 1, Centers for Medicare & Medicaid
Services 2007, of not applying the Services, Department of Health and
documentation and coding adjustment Human Services, Attention: CMS–1392–
42 CFR Parts 410, 411, 412, 413, 414, to the FY 2008 hospital-specific rates for FC (for OPPS and ASC matters),
416, 419, 482, and 485 Medicare-dependent, small rural Attention: CMS–1531–IFC (for Medicare
hospitals (MDHs) and sole community GME matters), P.O. Box 8013, Baltimore,
[CMS–1392–FC], [CMS–1533–F2], and
hospitals (SCHs). In the interim final MD 21244–1850.
[CMS–1531–IFC2]
rule with comment period in this Please allow sufficient time for mailed
RIN 0938–AO71, RIN 0938–AO70, and RIN document, we are modifying our comments to be received before the
0938–AO35 regulations relating to graduate medical close of the comment period.
education (GME) payments made to 3. By express or overnight mail. You
Medicare Program: Changes to the teaching hospitals that have Medicare may send written comments (one
Hospital Outpatient Prospective affiliation agreements for certain original and two copies) to the following
Payment System and CY 2008 Payment emergency situations. address ONLY: Centers for Medicare &
Rates, the Ambulatory Surgical Center Medicaid Services, Department of
DATES: Effective Date: The provisions of
Payment System and CY 2008 Payment Health and Human Services, Attention:
this rule are effective on January 1,
Rates, the Hospital Inpatient CMS–1392–FC (for OPPS and ASC
2008.
Prospective Payment System and FY matters), Attention: CMS–1531–IFC (for
IPPS Payment Rates: The FY 2008
2008 Payment Rates; and Payments for Medicare GME matters), Mail Stop C4–
IPPS payment rates, provided in section
Graduate Medical Education for 26–05, 7500 Security Boulevard,
XIX of the preamble of this document,
Affiliated Teaching Hospitals in Certain Baltimore, MD 21244–1850.
became effective October 1, 2007.
Emergency Situations Medicare and Comment Period: We will consider 4. By hand or courier. If you prefer,
Medicaid Programs: Hospital comments on the payment you may deliver (by hand or courier)
Conditions of Participation; Necessary classifications assigned to HCPCS codes your written comments (one original
Provider Designations of Critical identified in Addenda B, AA, and BB to and two copies) before the close of the
Access Hospitals this final rule with the ‘‘NI’’ comment comment period to one of the following
indicator, and other areas specified addresses: Room 445–G, Hubert H.
AGENCY: Centers for Medicare & Humphrey Building, 200 Independence
Medicaid Services (CMS), HHS. throughout this rule, at the appropriate
address, as provided below, no later Avenue, SW., Washington, DC 20201; or
ACTION: Interim and final rule with 7500 Security Boulevard, Baltimore, MD
comment period. than 5 p.m. EST on January 28, 2008.
We will also consider comments 21244–1850.
If you intend to deliver your
SUMMARY: This final rule with comment relating to the Medicare GME teaching
comments to the Baltimore address,
period revises the Medicare hospital hospital affiliated agreement provisions,
please call telephone number (410) 786–
outpatient prospective payment system as provided below, no later than 5 p.m.
9994 in advance to schedule your
to implement applicable statutory EST on January 28, 2008.
arrival with one of our staff members.
requirements and changes arising from Application Deadline—New Class of (Because access to the interior of the
our continuing experience with this New Technology Intraocular Lens: Hubert H. Humphrey Building is not
system. We describe the changes to the Requests for review of applications for readily available to persons without
amounts and factors used to determine a new class of new technology Federal Government identification,
the payment rates for Medicare hospital intraocular lenses must be received by commenters are encouraged to leave
outpatient services paid under the 5 p.m. EST on April 1, 2008. their comments in the CMS drop slots
prospective payment system. These Deadline for Submission of Written
located in the main lobby of the
changes are applicable to services Medicare GME Affiliation Agreements:
building. A stamp-in clock is available
furnished on or after January 1, 2008. In Written Medicare GME affiliation
for persons who wish to retain proof of
addition, the rule sets forth the agreements must be received by 5 p.m.
filing by stamping in and retain an extra
applicable relative payment weights and EST on January 1, 2008.
copy of the comments being filed.)
amounts for services furnished in ASCs, ADDRESSES: In commenting, please refer Comments mailed to the addresses
specific HCPCS codes to which the final to file codes CMS–1392–FC (for OPPS indicated as appropriate for hand or
policies of the ASC payment system and ASC matters) or CMS–1531–IFC (for courier delivery may be delayed and
apply, and other pertinent rate setting Medicare GME matters), as appropriate. received after the comment period.
information for the CY 2008 ASC Because of staff and resource For information on viewing public
payment system. Furthermore, this final limitations, we cannot accept comments comments, see the beginning of the
rule with comment period will make by facsimile (FAX) transmission. SUPPLEMENTARY INFORMATION section.
changes to the policies relating to the You may submit comments in one of Applications for a new class of new
necessary provider designations of four ways (no duplicates, please): technology intraocular lenses: Requests
critical access hospitals and changes to 1. Electronically. You may submit for review of applications for a new
several of the current conditions of electronic comments on specific issues class of new technology intraocular
participation requirements. in this regulation to http:// lenses must be sent by regular mail
The attached document also www.cms.hhs.gov/eRulemaking. Click to:ASC/NTIOL, Division of Outpatient
hsrobinson on PROD1PC76 with NOTICES

incorporates the changes to the FY 2008 on the link ‘‘Submit electronic Care, Mailstop C4–05–17, Centers for
hospital inpatient prospective payment comments on CMS regulations with an Medicare and Medicaid Services,7500
system (IPPS) payment rates made as a open comment period.’’ (Attachments Security Boulevard,Baltimore, MD
result of the enactment of the TMA, should be in Microsoft Word, 21244–1850.
Abstinence Education, and QI Programs WordPerfect, or Excel; however, we Submissions of written Medicare
Extension Act of 2007, Public Law 110– prefer Microsoft Word.) GME affiliation agreements: Written

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Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations 66581

Medicare GME affiliation agreements been received: http://www.cms.hhs.gov/ CMS Centers for Medicare & Medicaid
must be sent by regular mail to:Centers eRulemaking. Click on the link Services
for Medicare and Medicaid Services, ‘‘Electronic Comments on CMS CoP [Hospital] Condition of participation
CORF Comprehensive outpatient
Division of Acute Care, Attention: Regulations’’ on that Web site to view
rehabilitation facility
Elizabeth Troung or Renate public comments. CPT [Physicians’] Current Procedural
Rockwell,Mailstop C4–08–06,7500 Comments received timely will also Terminology, Fourth Edition, 2007,
Security Boulevard, Baltimore, MD be available for public inspection as copyrighted by the American Medical
21244–1850. they are received, generally beginning Association
FOR FURTHER INFORMATION CONTACT: approximately 3 weeks after publication CRNA Certified registered nurse anesthetist
Alberta Dwivedi, (410) 786–0378, of a document, at the headquarters of CY Calendar year
DMEPOS Durable medical equipment,
Hospital outpatient prospective the Centers for Medicare & Medicaid
prosthetics, orthotics, and supplies
payment issues. Services, 7500 Security Boulevard, DMERC Durable medical equipment
Dana Burley, (410) 786–0378, Baltimore, MD 21244, on Monday regional carrier
Ambulatory surgical center issues. through Friday of each week from 8:30 DRA Deficit Reduction Act of 2005, Pub. L.
Suzanne Asplen, (410) 786–4558, a.m. to 4 p.m. To schedule an 109–171
Partial hospitalization and community appointment to view public comments, DSH Disproportionate share hospital
mental health center issues. phone 1–800–743–3951. EACH Essential Access Community
Sheila Blackstock, (410) 786–3502, Hospital
Electronic Access E/M Evaluation and management
Reporting of quality data issues.
EPO Erythropoietin
Mary Collins, (410) 786–3189, and This Federal Register document is ESRD End-stage renal disease
Jeannie Miller, (410) 786–3164, also available from the Federal Register FACA Federal Advisory Committee Act,
Necessary provider designations for online database through GPO Access, a Pub. L. 92–463
CAHs issues. service of the U.S. Government Printing FAR Federal Acquisition Regulations
Scott Cooper, (410) 786–9465, and Office. Free public access is available on FDA Food and Drug Administration
Jeannie Miller, (410) 786–3164, Hospital a Wide Area Information Server (WAIS) FFS Fee-for-service
conditions of participation issues. through the Internet and via FSS Federal Supply Schedule
Miechal Lefkowitz, (410) 786–5316, asynchronous dial-in. Internet users can FTE Full-time equivalent
Hospital inpatient prospective payment access the database by using the World FY Federal fiscal year
GAO Government Accountability Office
system issues. Wide Web; the Superintendent of GME Graduate medical education
Tzvi Hefter, (410) 786–4487, Graduate Documents’ home page address is HCPCS Healthcare Common Procedure
medical education program issues. http://www.gpoaccess.gov/index.html, Coding System
SUPPLEMENTARY INFORMATION: by using local WAIS client software, or HCRIS Hospital Cost Report Information
Submitting Comments: We welcome by telnet to swais.access.gpo.gov, then System
comments from the public on the OPPS login as guest (no password required). HHA Home health agency
APC assignments and/or status Dial-in users should use HIPAA Health Insurance Portability and
communications software and modem Accountability Act of 1996, Pub. L. 104–
indicators assigned to HCPCS codes
to call (202) 512–1661; type swais, then 191
identified in Addendum B to this final HOPD Hospital outpatient department
rule with comment period with login as guest (no password required). HOP QDRP Hospital Outpatient Quality
comment indicator ‘‘NI’’ and on the Alphabetical List of Acronyms Data Reporting Program
ASC payment indicators assigned to Appearing in This Final Rule With ICD–9–CM International Classification of
HCPCS codes identified in Addenda AA Comment Period Diseases, Ninth Edition, Clinical
and BB to this final rule with comment Modification
period with comment indicator ‘‘NI’’ in ACEP American College of Emergency IDE Investigational device exemption
order to assist us in fully considering Physicians IME Indirect medical education
AHA American Hospital Association IOL Intraocular lens
issues and developing OPPS and ASC
AHIMA American Health Information IPPS [Hospital] Inpatient prospective
payment policies for those services. You Management Association payment system
can assist us by referencing file code AMA American Medical Association IVIG Intravenous immune globulin
CMS–1392–FC. APC Ambulatory payment classification MAC Medicare Administrative Contractors
We also welcome comments from the AMP Average manufacturer price MedPAC Medicare Payment Advisory
public on all issues set forth regarding ASC Ambulatory Surgical Center Commission
the revised regulations regarding the ASP Average sales price MDH Medicare-dependent, small rural
Medicare GME affiliation agreements to AWP Average wholesale price hospital
assist us in fully considering issues and BBA Balanced Budget Act of 1997, Pub. L. MIEA–TRHCA Medicare Improvements and
105–33 Extension Act under Division B, Title I of
developing policies. You can assist us
BBRA Medicare, Medicaid, and SCHIP the Tax Relief Health Care Act of 2006,
by referencing the file code CMS–1531– [State Children’s Health Insurance Pub. L. 109–432
IFC2 and the specific ‘‘issue identifier’’ Program] Balanced Budget Refinement Act MMA Medicare Prescription Drug,
that precedes the section on which you of 1999, Pub. L. 106–113 Improvement, and Modernization Act of
choose to comment. BCA Blue Cross Association 2003, Pub. L. 108–173
Inspection of Public Comments: All BCBSA Blue Cross and Blue Shield MPFS Medicare Physician Fee Schedule
comments received before the close of Association MSA Metropolitan Statistical Area
the comment period are available for BIPA Medicare, Medicaid, and SCHIP NCCI National Correct Coding Initiative
viewing by the public, including any Benefits Improvement and Protection Act NCD National Coverage Determination
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personally identifiable or confidential of 2000, Pub. L. 106–554 NTIOL New technology intraocular lens
CAH Critical access hospital OCE Outpatient Code Editor
business information that is included in CAP Competitive Acquisition Program OMB Office of Management and Budget
a comment. We post all comments CBSA Core-Based Statistical Area OPD [Hospital] Outpatient department
received before the close of the CCR Cost-to-charge ratio OPPS [Hospital] Outpatient prospective
comment period on the following Web CERT Comprehensive Error Rate Testing payment system
site as soon as possible after they have CMHC Community mental health center PHP Partial hospitalization program

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PM Program memorandum Division B, Title I of the Tax Relief and (1) Background
PPI Producer Price Index Health Care Act of 2006 (2) Low Dose Rate (LDR) Prostate
PPS Prospective payment system F. Summary of the Major Contents of the Brachytherapy Composite APC
PPV Pneumococcal pneumonia vaccine CY 2008 OPPS/ASC Proposed Rule (a) Background
PRA Paperwork Reduction Act 1. Updates Affecting OPPS Payments (b) Payment for LDR Prostate
QIO Quality Improvement Organization 2. OPPS Ambulatory Payment Brachytherapy
RFA Regulatory Flexibility Act Classification (APC) Group Policies (3) Cardiac Electrophysiologic Evaluation
RHQDAPU Reporting Hospital Quality Data 3. OPPS Payment for Devices and Ablation Composite APC
for Annual Payment Update [Program] 4. OPPS Payment for Drugs, Biologicals, (a) Background
RHHI Regional home health intermediary and Radiopharmaceuticals (b) Payment for Cardiac Electrophysiologic
SBA Small Business Administration 5. Estimate of OPPS Transitional Pass- Evaluation and Ablation
SCH Sole community hospital Through Spending for Drugs, Biologicals, e. Service-Specific Packaging Issues
SDP Single Drug Pricer and Devices B. Payment for Partial Hospitalization
SI Status indicator 6. OPPS Payment for Brachytherapy 1. Background
TEFRA Tax Equity and Fiscal Sources 2. PHP APC Update
Responsibility Act of 1982, Pub. L. 97–248 7. OPPS Coding and Payment for Drug 3. Separate Threshold for Outlier Payments
TOPS Transitional outpatient payments Administration Services to CMHCs
USPDI United States Pharmacopoeia Drug 8. OPPS Hospital Coding and Payment for C. Conversion Factor Update
Information Visits D. Wage Index Changes
WAC Wholesale acquisition cost 9. OPPS Payment for Blood and Blood E. Statewide Average Default CCRs
Products F. OPPS Payments to Certain Rural
In this document, we address several 10. OPPS Payment for Observation Hospitals
payment systems under the Medicare Services 1. Hold Harmless Transitional Payment
program: The hospital outpatient 11. Procedures That Will Be Paid Only as Changes Made by Pub. L. 109–171 (DRA)
prospective payment system (OPPS); the Inpatient Services 2. Adjustment for Rural SCHs Implemented
revised ambulatory surgical center 12. Nonrecurring Technical and Policy in CY 2006 Related to Pub. L. 108–173
Changes (MMA)
(ASC) payment system; the hospital 13. OPPS Payment Status and Comment G. Hospital Outpatient Outlier Payments
inpatient prospective payment system Indicators H. Calculation of an Adjusted Medicare
(IPPS); and payments for direct and 14. OPPS Policy and Payment Payment from the National Unadjusted
indirect graduate medical education Recommendations Medicare Payment
(GME). The provisions relating to the 15. Update of the Revised ASC Payment I. Beneficiary Copayments
OPPS are included in sections I. through System 1. Background
XV., XVII., XXI. through XXIV. of this 16. Quality Data for Annual Payment 2. Copayment
final rule with comment period and in Updates 3. Calculation of an Adjusted Copayment
Addenda A, B, C (Addendum C is 17. Changes Affecting Necessary Provider Amount for an APC Group
Critical Access Hospitals (CAHs) and III. OPPS Ambulatory Payment Classification
available on the Internet only; see Hospital Conditions of Participation (APC) Group Policies
section XXI. of this final rule with (CoPs) A. Treatment of New HCPCS and CPT
comment period), D1, D2, E, L, and M 18. Regulatory Impact Analysis Codes
to this final rule with comment period. G. Public Comments Received in Response 1. Treatment of New HCPCS Codes
The provisions related to the revised to the CY 2008 OPPS/ASC Proposed Included in the April and July Quarterly
ASC payment system are included in Rule OPPS Updates for CY 2007
sections XVI., XVII., and XXI. through H. Public Comments Received on the a. Background
XXIV. of this final rule with comment November 24, 2006 OPPS/ASC Final b. Implantation of Interstitial Devices (APC
period and in Addenda AA, BB, DD1, Rule with Comment Period 0156)
II. Updates Affecting OPPS Payments c. Other New HCPCS Codes Implemented
DD2, and EE (Addendum EE is available A. Recalibration of APC Relative Weights in April or July 2007
on the Internet only; see section XXI. of 1. Database Construction 2. Treatment of New Category I and III CPT
this final rule with comment period) to a. Database Source and Methodology Codes and Level II HCPCS Codes
this final rule with comment period. b. Use of Single and Multiple Procedure a. Establishment and Assignment of New
The provisions relating to the IPPS Claims Codes
payment rates are included in section (1) Use of Date of Service Stratification and b. Electronic Brachytherapy (New
XIX., XXIV., and XXV. of this a Bypass List to Increase the Amount of Technology APC 1519)
Data Used to Determine Medians c. Other Mid-Year CPT Codes
document. The provisions relating to (2) Exploration of Allocation of Packaged B. Variations within APCs
policy changes to the Medicare GME Costs to Separately Paid Procedure 1. Background
affiliation provisions for teaching Codes 2. Application of the 2 Times Rule
hospitals in certain emergency c. Calculation of CCRs 3. Exceptions to the 2 Times Rule
situations are included in sections XX., 2. Calculation of Median Costs C. New Technology APCs
XXIV., and XXV. of this document. 3. Calculation of OPPS Scaled Payment 1. Introduction
Weights 2. Movement of Procedures from New
Table of Contents 4. Changes to Packaged Services Technology APCs to Clinical APCs
I. Background for the OPPS a. Background a. Positron Emission Tomography (PET)/
A. Legislative and Regulatory Authority for b. Addressing Growth in OPPS Volume Computed Tomography (CT) Scans (APC
the Hospital Outpatient Prospective and Spending 0308)
Payment System c. Packaging Approach b. IVIG Preadministration-Related Services
B. Excluded OPPS Services and Hospitals (1) Guidance Services (APC 0430)
C. Prior Rulemaking (2) Image Processing Services c. Other Services in New Technology APCs
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D. APC Advisory Panel (3) Intraoperative Services (1) Breast Brachytherapy Catheter
1. Authority of the APC Panel (4) Imaging Supervision and Interpretation Implantation (APC 0648)
2. Establishment of the APC Panel Services (2) Preoperative Services for Lung Volume
3. APC Panel Meetings and Organizational (5) Diagnostic Radiopharmaceuticals Reduction Surgery (LVRS) (APCs 0209
Structure (6) Contrast Agents and 0213)
E. Provisions of the Medicare (7) Observation Services D. APC Specific Policies
Improvements and Extension Act under d. Development of Composite APCs 1. Cardiac Procedures

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a. Cardiac Computed Tomography and 10. Medical Services 2. Emergency Department Visits
Computed Tomographic Angiography a. Single Allergy Tests (APC 0381) C. Visit Reporting Guidelines
(APCs 0282 and 0383) b. Continuous Glucose Monitoring (APC 1. Background
b. Coronary and Non-Coronary Angioplasty 0097) 2. CY 2007 Work on Visit Guidelines
(PTCA/PTA)(APCs 0082, 0083, and c. Home International Normalized Ratio 3. Visit Guidelines
0103) (INR) Monitoring (APC 0097) X. OPPS Payment for Blood and Blood
c. Implantation of Cardioverter- d. Mental Health Services (APC 0322, Products
Defibrillators (APCs 0107 and 0108) 0323, 0324, 0325) A. Background
d. Removal of Patient-Activated Cardiac IV. OPPS Payment for Devices B. Payment for Blood and Blood Products
Event Recorder (APC 0109) A. Treatment of Device Dependent APCs XI. OPPS Payment for Observation Services
e. Stress Echocardiography (APC 0697) 1. Background A. Observation Services (HCPCS Code
2. Gastrointestinal Procedures 2. Payment under the OPPS G0378)
a. Computed Tomographic Colonography 3. Payment When Devices Are Replaced B. Direct Admission to Observation
(APC 0332) with Partial Credit to the Hospital (HCPCS Code G0379)
b. Laparoscopic Neurostimulator Electrode B. Pass-Through Payments for Devices XII. Procedures That Will Be Paid Only as
Implantation (APC 0130) 1. Expiration of Transitional Pass Through Inpatient Procedures
c. Screening Colonoscopies and Screening Payments for Certain Devices A. Background
Flexible Sigmoidoscopies (APCs 0158 a. Background B. Changes to the Inpatient List
and 0159) b. Final Policy XIII. Nonrecurring Technical and Policy
3. Genitourinary Procedures 2. Provisions for Reducing Transitional Changes
a. Cystoscopy with Stent (APC 0163) Pass Through Payments to Offset Costs A. Outpatient Hospital Services and
b. Percutaneous Renal Cryoablation (APC Packaged into APC Groups Supplies Incident to a Physician Service
0423) a. Background B. Interrupted Procedures
c. Prostatic Thermotherapy (APC 0163) b. Final Policy C. Transitional Adjustments—Hold
d. Radiofrequency Ablation of Prostate V. OPPS Payment Changes for Drugs, Harmless Provisions
(APC 0163) Biologicals, and Radiopharmaceuticals D. Reporting of Wound Care Services
e. Ultrasound Ablation of Uterine Fibroids A. Transitional Pass-Through Payment for E. Reporting of Cardiac Rehabilitation
with Magnetic Resonance Guidance Additional Costs of Drugs and Services
(MRgFUS) (APC 0067) Biologicals F. Reporting of Bone Marrow and Stem
f. Uterine Fibroid Embolization (APC 0202) 1. Background Cell Processing Services
4. Nervous System Procedures 2. Drugs and Biologicals with Expiring G. Reporting of Alcohol and/or Substance
Abuse Assessment and Intervention
a. Chemodenervation (APC 0206) Pass-Through Status in CY 2007
Services
b. Implantation of Intrathecal or Epidural 3. Drugs and Biologicals with Pass-
XIV. OPPS Payment Status and Comment
Catheter (APC 0224) Through Status in CY 2008
Indicators
c. Implantation of Spinal Neurostimulators B. Payment for Drugs, Biologicals, and
A. Payment Status Indicator Definitions
(APC 0222) Radiopharmaceuticals without Pass
1. Payment Status Indicators to Designate
5. Nuclear Medicine and Radiation Through Status Services That Are Paid under the OPPS
Oncology Procedures 1. Background 2. Payment Status Indicators to Designate
a. Adrenal Imaging (APC 0391) 2. Criteria for Packaging Payment for Drugs Services That Are Paid under a Payment
b. Injection for Sentinel Node and Biologicals System Other Than the OPPS
Identification (APC 0389) 3. Payment for Drugs and Biologicals 3. Payment Status Indicators to Designate
c. Myocardial Positron Emission without Pass Through Status That Are Services That Are Not Recognized under
Tomography (PET) Scans (APC 0307) Not Packaged the OPPS But That May Be Recognized
d. Nonmyocardial Positron Emission a. Payment for Specified Covered by Other Institutional Providers
Tomography (PET) Scans (APC 0308) Outpatient Drugs 4. Payment Status Indicators to Designate
e. Proton Beam Therapy (APCs 0664 and (1) Background Services That Are Not Payable by
0667) (2) Payment Policy Medicare
6. Ocular and Ear, Nose and Throat (3) Payment for Blood Clotting Factors B. Comment Indicator Definitions
Procedures (a) Background XV. OPPS Policy and Payment
a. Amniotic Membrane for Ocular Surface (b) Payment for Diagnostic Recommendations
Reconstruction (APC 0244) Radiopharmaceuticals A. MedPAC Recommendations
b. Keratoprosthesis (APC 0293) (c) Payment for Therapeutic B. APC Panel Recommendations
c. Palatal Implant (New Technology APC Radiopharmaceuticals XVI. Update of the Revised Ambulatory
1510) b. Payment for Nonpass-Through Drugs, Surgical Center Payment System
7. Orthopedic Procedures Biologicals, and Radiopharmaceuticals A. Legislative and Regulatory Authority for
a. Arthroscopic Procedures (APCs 0041 with HCPCS Codes, But without OPPS the ASC Payment System
and 0042) Hospital Claims Data B. Rulemaking for the Revised ASC
b. Closed Fracture Treatment (APC 0043) VI. Estimate of OPPS Transitional Pass Payment System
c. Insertion of Posterior Spinous Process Through Spending for Drugs, Biologicals, C. Revisions to the ASC Payment System
Distraction Device (APC 0050) Radiopharmaceuticals, and Devices Effective January 1, 2008
d. Intradiscal Annuloplasty (APC 0050) A. Total Allowed Pass Through Spending 1. Covered Surgical Procedures under the
e. Kyphoplasty Procedures (APC 0052) B. Estimate of Pass Through Spending Revised ASC Payment System
8. Vascular Procedures VII. OPPS Payment for Brachytherapy a. Definition of Surgical Procedure
a. Blood Transfusion (APC 0110) Sources b. Identification of Surgical Procedures
b. Endovenous Ablation (APC 0092) A. Background Eligible for Payment under the Revised
c. Insertion of Central Venous Access B. Payment for Brachytherapy Sources ASC Payment System
Device (APC 0625) VIII. OPPS Drug Administration Coding and c. Payment for Covered Surgical
d. Noninvasive Vascular Studies (APC Payment Procedures under the Revised ASC
0267) A. Background Payment System
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9. Other Procedures B. Coding and Payment for Drug (1) General Policies
a. Hyperbaric Oxygen Therapy (APC 0659) Administration Services (2) Office-Based Procedures
b. Skin Repair Procedures (APCs 0133, IX. Hospital Coding and Payments for Visits (3) Device-Intensive Procedures
0134, 0135, 0136, and 0137) A. Background (4) Multiple and Interrupted Procedure
c. Stereotactic Radiosurgery (SRS) B. Policies for Hospital Outpatient Visits Discounting
Treatment Delivery Services (APCs 0065, 1. Clinic Visits: New and Established (5) Transition to Revised ASC Payment
0066, and 0067) Patient Visits and Consultations Rates

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2. Covered Ancillary Services under the D. Implementation of the HOP QDRP and 1. Executive Order 12866
Revised ASC Payment System Request for Additional Suggested 2. Regulatory Flexibility Act (RFA)
a. General Policies Measures 3. Small Rural Hospitals
b. Payment Policies for Specific Items and E. Requirements for HOP Quality Data 4. Unfunded Mandates
Services Reporting for CY 2009 and Subsequent 5. Federalism
(1) Radiology Services Calendar Years B. Effects of OPPS Changes in This Final
(2) Brachytherapy Sources 1. Administrative Requirements Rule with Comment Period
3. General Payment Policies 2. Data Collection and Submission 1. Alternatives Considered
a. Adjustment for Geographic Wage Requirements 2. Limitation of Our Analysis
Differences 3. HOP QDRP Validation Requirements 3. Estimated Impact of This Final Rule
b. Beneficiary Coinsurance F. Publication of HOP QDRP Data with Comment Period on Hospitals and
D. Treatment of New HCPCS Codes Collected CMHCs
1. Treatment of New CY 2008 Category I G. Attestation Requirement for Future 4. Estimated Effect of This Final Rule with
and III CPT Codes and Level II HCPCS Payment Years Comment Period on Beneficiaries
Codes H. HOP QDRP Reconsiderations 5. Conclusion
2. Treatment of New Mid-Year Category III I. Reporting of ASC Quality Data 6. Accounting Statement
CPT Codes J. FY 2009 IPPS Quality Measures under C. Effects of ASC Payment System Changes
3. Treatment of Level II HCPCS Codes the RHQDAPU Program in This Final Rule with Comment Period
Released on a Quarterly Basis XVIII. Changes Affecting Critical Access 1. Alternatives Considered
E. Updates to Covered Surgical Procedures Hospitals (CAHs) and Hospital 2. Limitations on Our Analysis
and Covered Ancillary Services Conditions of Participation (CoPs) 3. Estimated Effects of This Final Rule with
1. Identification of Covered Surgical A. Changes Affecting CAHs Comment Period on ASCs
Procedures 1. Background 4. Estimated Effects of This Final Rule with
a. General Policies 2. Co-Location of Necessary Provider CAHs Comment Period on Beneficiaries
b. Changes in Designation of Covered 3. Provider-Based Facilities of CAHs 5. Conclusion
Surgical Procedures as Office-Based 4. Termination of Provider Agreement 6. Accounting Statement
c. Changes in Designation of Covered 5. Regulation Changes D. Effects of the Requirements for
Surgical Procedures as Device Intensive B. Revisions to Hospital CoPs Reporting of Quality Data for Hospital
2. Changes in Identification of Covered 1. Background Outpatient Settings
Ancillary Services 2. Provisions of the Final Regulation E. Effects of the Policy on CAH Off-Campus
F. Payment for Covered Surgical a. Timeframes for Completion of the and Co-Location Requirements
Medical History and Physical F. Effects of the Policy Revisions to the
Procedures and Covered Ancillary
Examination Hospital CoPs
Services
b. Requirements for Preanesthesia and G. Effects of the Changes to the Hospital
1. Payment for Covered Surgical
Postanesthesia Evaluations Inpatient Prospective Payment System
Procedures
c. Technical Amendment to Nursing (IPPS) Payment Rates
a. Update to Payment Rates
Services CoP 1. Overall Impact
b. Payment Policies When Devices Are XIX. Changes to the FY 2008 Hospital
Replaced at No Cost or with Credit 2. Objectives
Inpatient Prospective Payment System 3. Limitations of Our Analysis
(1) Policy When Devices Are Replaced at (IPPS) Payment Rates
No Cost or with Full Credit 4. Quantitative Effects of the IPPS Policy
A. Background Changes on Operating Costs
(2) Policy When Implantable Devices Are B. Revised IPPS Payment Rates
Replaced with Partial Credit 5. Analysis of Table I
1. MS–DRG Documentation and Coding a. Effects of All Changes with CMI
2. Payment for Covered Ancillary Services Adjustment
G. Physician Payment for Procedures and Adjustment Prior to Estimated Growth
2. Application of the Documentation and (Columns 2a and 2b)
Services Provided in ASC Coding Adjustment to the Hospital
H. Changes to Definitions of ‘‘Radiology b. Effects of All Changes with CMI
Specific Rates Adjustment and Estimated Growth
and Certain Other Imaging Services’’ and XX. Medicare Graduate Medical Education
‘‘Outpatient Prescription Drugs’’ (Column 3)
Affiliation Provisions for Teaching 6. Overall Conclusion
I. New Technology Intraocular Lenses Hospitals in Certain Emergency
(NTIOLs) 7. Accounting Statement
Situations 8. Executive order 12866
1. Background A. Background
2. Changes to the NTIOL Determination H. Impact of the Policy Revisions to the
1. Legislative Authority Emergency Medicare GME Affiliated
Process Finalized for CY 2008 2. Existing Medicare Direct GME and
3. NTIOL Application Process for CY 2008 Groups for Hospitals in Certain Declared
Indirect GME Policies Emergency Areas
Payment Adjustment 3. Regulatory Changes Issued in 2006 to
4. Classes of NTIOLS Approved for 1. Overall Impact
Address Certain Emergency Situations 2. RFA
Payment Adjustment B. Additional Changes in This Interim
5. Payment Adjustment 3. Small Rural Hospitals
Final Rule with Comment Period 4. Unfunded Mandates
6. CY 2008 ASC Payment for Insertion of 1. Summary of Regulatory Changes
IOLs 5. Federalism
2. Discussion of Training in Nonhospital 6. Anticipated Effects
J. ASC Payment and Comment Indicators Settings 7. Alternatives Considered
K. ASC Policy and Payment C. Responses to Comments on the April 12, 8. Conclusion
Recommendations 2006 Interim Final Rule with Comment 9. Executive Order 12866
L. Calculation of the ASC Conversion Period and This Interim Final Rule with XXV. Waiver of Proposed Rulemaking,
Factor and ASC Payment Rates Comment Period Waiver of Delay in Effective Date, and
XVII. Reporting Quality Data for Annual XXI. Files Available to the Public Via the Retroactive Effective Date
Payment Rate Updates Internet
A. Requirements for Waivers and
A. Background A. Information in Addenda Related to the
Retroactive Rulemaking
1. Reporting Hospital Outpatient Quality Revised CY 2008 Hospital OPPS
B. IPPS Payment Rate Policies
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Data for Annual Payment Update B. Information in Addenda Related to the


C. Medicare GME Affiliation Agreement
2. Reporting ASC Quality Data for Annual Revised CY 2008 ASC Payment System
Provisions
Payment Increase XXII. Collection of Information Requirements
3. Reporting Hospital Inpatient Quality XXIII. Response to Comments Regulation Text
Data for Annual Payment Update XXIV. Regulatory Impact Analysis
B. Hospital Outpatient Measures A. Overall Impact of Changes to the OPPS Addenda
C. Other Hospital Outpatient Measures and ASC Payment Systems Addendum A–OPPS APCs for CY 2008

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Addendum AA–ASC Covered Surgical 2000. Implementing regulations for the which we refer to as ‘‘transitional pass
Procedures for CY 2008 (Including OPPS are located at 42 CFR part 419. through payments,’’ for at least 2 but not
Surgical Procedures for Which Payment Under the OPPS, we pay for hospital more than 3 years for certain drugs,
is Packaged) outpatient services on a rate-per-service biological agents, brachytherapy devices
Addendum B–OPPS Payment By HCPCS
Code for CY 2008
basis that varies according to the used for the treatment of cancer, and
Addendum BB–ASC Covered Ancillary ambulatory payment classification categories of other medical devices. For
Services Integral to Covered Surgical (APC) group to which the service is new technology services that are not
Procedures for CY 2008 (Including assigned. We use the Healthcare eligible for transitional pass through
Ancillary Services for Which Payment Is Common Procedure Coding System payments, and for which we lack
Packaged) (HCPCS) codes (which include certain sufficient data to appropriately assign
Addendum D1–OPPS Payment Status Current Procedural Terminology (CPT) them to a clinical APC group, we have
Indicators codes) and descriptors to identify and established special APC groups based
Addendum DD1–ASC Payment Indicators
Addendum D2–OPPS Comment Indicators
group the services within each APC on costs, which we refer to as New
Addendum DD2–ASC Comment Indicators group. The OPPS includes payment for Technology APCs. These New
Addendum E–HCPCS Codes That Would Be most hospital outpatient services, Technology APCs are designated by cost
Paid Only as Inpatient Procedures for CY except those identified in section I.B. of bands which allow us to provide
2008 this final rule with comment period. appropriate and consistent payment for
Addendum L–Out-Migration Adjustment Section 1833(t)(1)(B)(ii) of the Act designated new procedures that are not
Addendum M–HCPCS Codes for Assignment provides for Medicare payment under yet reflected in our claims data. Similar
to Composite APCs for CY 2008 the OPPS for hospital outpatient to pass through payments, an
I. Background for the OPPS services designated by the Secretary assignment to a New Technology APC is
(which includes partial hospitalization temporary; that is, we retain a service
A. Legislative and Regulatory Authority services furnished by community within a New Technology APC until we
for the Hospital Outpatient Prospective mental health centers (CMHCs)) and acquire sufficient data to assign it to a
Payment System hospital outpatient services that are clinically appropriate APC group.
When the Medicare statute was furnished to inpatients who have
originally enacted, Medicare payment exhausted their Part A benefits, or who B. Excluded OPPS Services and
for hospital outpatient services was are otherwise not in a covered Part A Hospitals
based on hospital-specific costs. In an stay. Section 611 of Pub. L. 108–173 Section 1833(t)(1)(B)(i) of the Act
effort to ensure that Medicare and its added provisions for Medicare coverage authorizes the Secretary to designate the
beneficiaries pay appropriately for of an initial preventive physical hospital outpatient services that are
services and to encourage more efficient examination, subject to the applicable paid under the OPPS. While most
delivery of care, the Congress mandated deductible and coinsurance, as an hospital outpatient services are payable
replacement of the reasonable cost- outpatient department service, payable under the OPPS, section
based payment methodology with a under the OPPS. 1833(t)(1)(B)(iv) of the Act excludes
prospective payment system (PPS). The The OPPS rate is an unadjusted payment for ambulance, physical and
Balanced Budget Act (BBA) of 1997 national payment amount that includes occupational therapy, and speech-
(Pub. L. 105–33) added section 1833(t) the Medicare payment and the language pathology services, for which
to the Social Security Act (the Act) beneficiary copayment. This rate is payment is made under a fee schedule.
authorizing implementation of a PPS for divided into a labor-related amount and Section 614 of Pub. L. 108–173
hospital outpatient services. a nonlabor-related amount. The labor- amended section 1833(t)(1)(B)(iv) of the
The Medicare, Medicaid, and SCHIP related amount is adjusted for area wage Act to exclude payment for screening
Balanced Budget Refinement Act differences using the hospital inpatient and diagnostic mammography services
(BBRA) of 1999 (Pub. L. 106–113) made wage index value for the locality in from the OPPS. The Secretary exercised
major changes in the hospital outpatient which the hospital or CMHC is located. the authority granted under the statute
prospective payment system (OPPS). All services and items within an APC to also exclude from the OPPS those
The Medicare, Medicaid, and SCHIP group are comparable clinically and services that are paid under fee
Benefits Improvement and Protection with respect to resource use (section schedules or other payment systems.
Act (BIPA) of 2000 (Pub. L. 106–554) 1833(t)(2)(B) of the Act). In accordance Such excluded services include, for
made further changes in the OPPS. with section 1833(t)(2) of the Act, example, the professional services of
Section 1833(t) of the Act was also subject to certain exceptions, services physicians and nonphysician
amended by the Medicare Prescription and items within an APC group cannot practitioners paid under the Medicare
Drug, Improvement, and Modernization be considered comparable with respect Physician Fee Schedule (MPFS);
Act (MMA) of 2003 (Pub. L. 108 173). to the use of resources if the highest laboratory services paid under the
The Deficit Reduction Act (DRA) of median (or mean cost, if elected by the clinical diagnostic laboratory fee
2005 (Pub. L. 109–171), enacted on Secretary) for an item or service in the schedule (CLFS); services for
February 8, 2006, also made additional APC group is more than 2 times greater beneficiaries with end stage renal
changes in the OPPS. In addition, the than the lowest median cost for an item disease (ESRD) that are paid under the
Medicare Improvements and Extension or service within the same APC group ESRD composite rate; and services and
Act under Division B of Title I of the (referred to as the ‘‘2 times rule’’). In procedures that require an inpatient stay
Tax Relief and Health Care Act (MIEA– implementing this provision, we that are paid under the hospital
TRHCA) of 2006 (Pub. L. 109–432), generally use the median cost of the inpatient prospective payment system
enacted on December 20, 2006, made item or service assigned to an APC (IPPS). We set forth the services that are
hsrobinson on PROD1PC76 with NOTICES

further changes in the OPPS. A group. excluded from payment under the OPPS
discussion of these changes is included For new technology items and in § 419.22 of the regulations.
in sections I.E., VII., and XVII. of this services, special payments under the Under § 419.20(b) of the regulations,
final rule with comment period. OPPS may be made in one of two ways. we specify the types of hospitals and
The OPPS was first implemented for Section 1833(t)(6) of the Act provides entities that are excluded from payment
services furnished on or after August 1, for temporary additional payments, under the OPPS. These excluded

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66586 Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations

entities include Maryland hospitals, but comments are included in the specific 3. APC Panel Meetings and
only for services that are paid under a sections of this final rule with comment Organizational Structure
cost containment waiver in accordance period. The APC Panel first met on February
with section 1814(b)(3) of the Act; 27, February 28, and March 1, 2001.
D. APC Advisory Panel
critical access hospitals (CAHs); Since the initial meeting, the APC Panel
hospitals located outside of the 50 1. Authority of the APC Panel has held 12 subsequent meetings, with
States, the District of Columbia, and the last meeting taking place on
Puerto Rico; and Indian Health Service Section 1833(t)(9)(A) of the Act, as
amended by section 201(h) of the BBRA, September 5 and 6, 2007. Prior to each
hospitals. meeting, we publish a notice in the
and redesignated by section 202(a)(2) of
C. Prior Rulemaking the BBRA, requires that we consult with Federal Register to announce the
On April 7, 2000, we published in the an outside panel of experts to review the meeting, and when necessary, to solicit
Federal Register a final rule with clinical integrity of the payment groups nominations for APC Panel
comment period (65 FR 18434) to and their weights under the OPPS. The membership, and to announce new
implement a prospective payment Act further specifies that the panel will members.
system for hospital outpatient services. act in an advisory capacity. The APC Panel has established an
The hospital OPPS was first operational structure that, in part,
The Advisory Panel on Ambulatory
implemented for services furnished on includes the use of three subcommittees
Payment Classification (APC) Groups
or after August 1, 2000. Section to facilitate its required APC review
(the APC Panel), discussed under
1833(t)(9) of the Act requires the process. The three current
section I.D.2. of this final rule with
Secretary to review certain components subcommittees are the Data
comment period, fulfills these
of the OPPS, not less often than Subcommittee, the Observation and
requirements. The APC Panel is not
annually, and to revise the groups, Visit Subcommittee, and the Packaging
restricted to using data compiled by
relative payment weights, and other Subcommittee. The Data Subcommittee
CMS, and may use data collected or
adjustments that take into account is responsible for studying the data
developed by organizations outside the
changes in medical practices, changes in issues confronting the APC Panel, and
Department in conducting its review.
technologies, and the addition of new for recommending options for resolving
services, new cost data, and other 2. Establishment of the APC Panel them. The Observation and Visit
relevant information and factors. Subcommittee reviews and makes
On November 21, 2000, the Secretary recommendations to the APC Panel on
Since initially implementing the
signed the initial charter establishing all technical issues pertaining to
OPPS, we have published final rules in
the APC Panel. This expert panel, which observation services and hospital
the Federal Register annually to
may be composed of up to 15 outpatient visits paid under the OPPS
implement statutory requirements and
representatives of providers subject to (for example, APC configurations and
changes arising from our continuing
experience with this system. We the OPPS (currently employed full-time, APC payment weights). The Packaging
published in the Federal Register on not as consultants, in their respective Subcommittee studies and makes
November 24, 2006 the CY 2007 OPPS/ areas of expertise), reviews clinical data recommendations on issues pertaining
ASC final rule with comment period (71 and advises CMS about the clinical to services that are not separately
FR 67960). In that final rule with integrity of the APC groups and their payable under the OPPS, but whose
comment period, we revised the OPPS payment weights. For purposes of this payments are bundled or packaged into
to update the payment weights and Panel, consultants or independent APC payments. Each of these
conversion factor for services payable contractors are not considered to be full- subcommittees was established by a
under the CY 2007 OPPS on the basis time employees. The APC Panel is majority vote from the full APC Panel
of claims data from January 1, 2005, technical in nature, and is governed by during a scheduled APC Panel meeting,
through December 31, 2005, and to the provisions of the Federal Advisory and their continuation as
implement certain provisions of Pub. L. Committee Act (FACA). Since its initial subcommittees was last approved at the
108–173 and Pub. L. 109–171. In chartering, the Secretary has renewed September 2007 APC Panel meetings.
addition, we responded to public the APC Panel’s charter three times: On All subcommittee recommendations are
comments received on the provisions of November 1, 2002; on November 1, discussed and voted upon by the full
the November 10, 2005 final rule with 2004; and effective November 21, 2006. APC Panel.
comment period (70 FR 86516) The current charter specifies, among Discussions of the recommendations
pertaining to the APC assignment of other requirements, that the APC Panel resulting from the APC Panel’s March
HCPCS codes identified in Addendum B continue to be technical in nature; be 2007 and September 2007 meetings are
of that rule with the new interim (NI) governed by the provisions of the included in the sections of this final
comment indicator; and public FACA; may convene up to three rule with comment period that are
comments received on the August 23, meetings per year; has a Designated specific to each recommendation. For
2006 OPPS/ASC proposed rule for CY Federal Officer (DFO); and is chaired by discussions of earlier APC Panel
2007 (71 FR 49506). a Federal official designated by the meetings and recommendations, we
On August 2, 2007, we issued in the Secretary. refer readers to previously published
Federal Register (72 FR 42628) a The current APC Panel membership hospital OPPS final rules or the Web
proposed rule for the CY 2008 OPPS/ and other information pertaining to the site mentioned earlier in this section.
ASC to implement statutory APC Panel, including its charter,
requirements and changes arising from Federal Register notices, membership, E. Provisions of the Medicare
hsrobinson on PROD1PC76 with NOTICES

our continuing experience with both meeting dates, agenda topics, and Improvements and Extension Act under
systems. We received approximately meeting reports can be viewed on the Division B of Title I of the Tax Relief
2,180 pieces of timely correspondence CMS Web site at: http:// and Health Care Act of 2006
in response to the proposed rule. A www.cms.hhs.gov/FACA/05_Advisory The Medicare Improvements and
summary of the public comments we PanelonAmbulatoryPayment Extension Act under Division B of Title
received and our responses to those ClassificationGroups.asp#TopOfPage. I of the Tax Relief and Health Care Act

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(MIEA–TRHCA) of 2006, Pub. L. 109– Medicare ASC payment system for CY • The proposed calculation of the
432, enacted on December 20, 2006, 2008 such as adding procedures to the hospital outpatient outlier payment.
included the following provisions list of covered surgical procedures and • The calculation of the proposed
affecting the OPPS: adjusting the ASC rates so that the national unadjusted Medicare OPPS
1. Section 107(a) of the MIEA–TRHCA revised ASC payment system is budget payment.
amended section 1833(t)(16)(C) of the neutral. We also proposed to make • The proposed beneficiary
Act to extend the period for payment of changes to the policies relating to the copayments for OPPS services.
brachytherapy devices based on the necessary provider designations of
hospital’s charges adjusted to cost for 1 2. OPPS Ambulatory Payment
CAHs that are being recertified when a
additional year, through December 31, Classification (APC) Group Policies
CAH enters into a new co-location
2007. arrangement with another hospital or In section III. of the proposed rule, we
2. Section 107(b)(1) of the MIEA– CAH or when the CAH creates or discussed the proposed additions of
TRHCA amended section 1833(t)(2)(H) acquires an off-campus location. new procedure codes to the APCs; our
of the Act by adding stranded and non Further, we proposed changes to several proposal to establish a number of new
stranded devices furnished on or after of the current conditions of APCs; and our analyses of Medicare
July 1, 2007, as additional participation that hospitals must meet to claims data and certain
classifications of brachytherapy devices participate in the Medicare and recommendations of the APC Panel. We
for which separate payment groups Medicaid programs to require the also discussed the application of the 2
must be established for payment under completion and documentation in the times rule and proposed exceptions to
the OPPS. Section 107(b)(2) of the MIEA medical record of medical histories and it; proposed changes to specific APCs;
TRCHA provides that the Secretary may physical examinations of patients and the proposed movement of
implement the section 107(b)(1) conducted after admission and prior to procedures from New Technology APCs
amendment to section 1833(t)(2)(H) of surgery or a procedure requiring to clinical APCs.
the Act ‘‘by program instruction or anesthesia services and for
otherwise.’’ 3. OPPS Payment for Devices
postanesthesia evaluations of patients
3. Section 109(a) of the MIEA–TRHCA before discharge or transfer from the In section IV. of the proposed rule, we
added new paragraph (17) to section postanesthesia recovery area. Finally, discussed proposed payment for device
1833(t) of the Act which authorizes the we set forth proposed quality measures dependent APCs and pass-through
Secretary, beginning in 2009 and each for a Hospital Outpatient Quality Data payment for specific categories of
subsequent year, to reduce the OPPS devices.
Reporting (HOP QDRP) program for
full annual update by 2.0 percentage
reporting quality data for annual 4. OPPS Payment for Drugs, Biologicals,
points if a hospital paid under the OPPS
payment rate updates for CY 2009 and and Radiopharmaceuticals
fails to submit data as required by the
subsequent calendar years. We also
Secretary in the form and manner In section V. of the proposed rule, we
briefly discussed the legislative
specified on selected measures of discussed the proposed CY 2008 OPPS
provisions of the MIEA–TRHCA that
quality of care, including medication payment for drugs, biologicals, and
give the Secretary authority to develop
errors. In accordance with this radiopharmaceuticals, including the
quality measures for reporting data by
provision, the selected measures are proposed payment for drugs,
ASCs. The following is a summary of
those that are appropriate for the biologicals, and radiopharmaceuticals
measurement of quality of care the major changes included in the CY
2008 OPPS/ASC proposed rule: with and without pass-through status.
furnished by hospitals in the outpatient
setting, that reflect consensus among 1. Updates Affecting OPPS Payments 5. Estimate of OPPS Transitional Pass-
affected parties and, to the extent Through Spending for Drugs,
In section II. of the proposed rule, we Biologicals, and Devices
feasible and practicable, that include set forth—
measures set forth by one or more of the • The methodology used to In section VI. of the proposed rule, we
national consensus entities, and that recalibrate the proposed APC relative discussed the estimate of CY 2008 OPPS
may be the same as those required for payment weights. transitional pass-through spending for
reporting by hospitals paid under the • The proposed payment for partial drugs, biologicals, and devices.
IPPS. This provision specifies that a hospitalization services, including the
reduction for 1 year cannot be taken into 6. OPPS Payment for Brachytherapy
proposed separate threshold for outlier Sources
account when computing the OPPS payments for CMHCs.
update for a subsequent year. In • The proposed update to the In section VII. of the proposed rule,
addition, this provision requires the conversion factor used to determine we discussed our proposal concerning
Secretary to establish a process for payment rates under the OPPS. coding and payment for brachytherapy
making the submitted data available for • The proposed retention of our sources.
public review. current policy to use the IPPS wage
7. OPPS Coding and Payment for Drug
F. Summary of the Major Contents of the indices to adjust, for geographic wage
Administration Services
CY 2008 OPPS/ASC Proposed Rule differences, the portion of the OPPS
payment rate and the copayment In section VIII. of the proposed rule,
On August 2, 2007, we published a standardized amount attributable to we set forth our proposed policy
proposed rule in the Federal Register labor related cost. concerning coding and payment for
(72 FR 42628) that set forth proposed • The proposed update of statewide drug administration services.
changes to the Medicare hospital OPPS average default CCRs.
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8. OPPS Hospital Coding and Payments


for CY 2008 to implement statutory • The proposed application of hold
requirements and changes arising from for Visits
harmless transitional outpatient
our continuing experience with the payments (TOPs) for certain small rural In section IX. of the proposed rule, we
system and to implement certain hospitals. set forth our proposed policies for the
statutory provisions. In addition, we • The proposed payment adjustment coding and reporting of clinic and
proposed changes to the revised for rural SCHs. emergency department visits and

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66588 Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations

critical care services on claims paid discussed our proposed changes to our the proposed changes would have on
under the OPPS. regulations at §§ 414.22(b)(5)(i)(A) and affected entities and beneficiaries. (We
(B) regarding physician payment for note that this regulatory impact analysis
9. OPPS Payment for Blood and Blood
performing excluded surgical section is redesignated as section XXIV.
Products
procedures in ASCs. In addition, we set of this final rule with comment period.)
In section X. of the proposed rule, we forth our proposal to revise the
discussed our proposed payment for G. Public Comments Received in
definitions of ‘‘radiology and certain
Response to the CY 2008 OPPS/ASC
blood and blood products. other imaging services’’ and ‘‘outpatient
Proposed Rule
prescription drugs’’ when provided
10. Proposed OPPS Payment for We received approximately 2,180
integral to an ASC covered surgical
Observation Services timely pieces of correspondence
procedure.
In section XI. of the proposed rule, we containing multiple comments on the
discussed the proposed payment 16. Reporting Quality Data for Annual CY 2008 OPPS/ASC proposed rule. We
policies for observation services Payment Rate Updates note that we received some comments
furnished to patients on an outpatient In section XVII. of the proposed rule, that were outside the scope of the CY
basis. we discussed the proposed quality 2008 OPS/ASC proposed rule. These
measures for reporting hospital comments are not addressed in this CY
11. Procedures That Will Be Paid Only outpatient quality data for CY 2009 and 2008 OPPS/ASC final rule with
as Inpatient Services subsequent years and set forth the comment period. Summaries of the
In section XII. of the proposed rule, requirements for data collection and public comments that are within the
we discussed the procedures that we submission for the annual payment scope of the proposals and our
proposed to remove from the inpatient update. We also briefly discussed the responses to those comments are set
list and assign to APCs. legislative provisions of the MIEA– forth in the various sections of this final
TRHCA that give the Secretary authority rule with comment period under the
12. Nonrecurring Technical and Policy appropriate headings.
to develop quality measures for
Changes
reporting by ASCs. (We note that, as
H. Public Comments Received on the
In section XIII. of the proposed rule, discussed in section XVII.J. of this final
November 24, 2006 OPPS/ASC Final
we set forth our proposals for rule with comment period, we are also Rule with Comment Period
nonrecurring technical and policy finalizing a proposal from the FY 2008
changes and clarifications relating to IPPS proposed rule relating to the FY We received approximately 21 timely
outpatient services and supplies 2009 RHQDAPU quality measures. items of correspondence on the CY 2007
incident to physicians’ services; Specifically, we are finalizing the OPPS/ASC final rule with comment
payment for interrupted procedures inclusion of SCIP Infection 4: Cardiac period, some of which contained
prior to and after the administration of Surgery Patients with Controlled 6AM multiple comments on the interim final
anesthesia; transitional adjustments to Postoperative Serum Glucose and SCIP APC assignments and/or status
payments for covered outpatient Infection 6: Surgery Patients with indicators of HCPCS codes identified
services furnished by small rural Appropriate Hair Removal in the FY with comment indicator ‘‘NI’’ in
hospitals and SCHs located in rural 2009 RHQDAPU measure set, bringing Addendum B to that final rule with
areas; and reporting requirements for the total number of measures in that comment period. Summaries of those
wound care services, cardiac measure set to 30.) public comments and our responses to
rehabilitation services, and bone them are set forth in the various sections
17. Changes Affecting Necessary of this final rule with comment period
marrow and stem cell processing
Provider Critical Access Hospitals under the appropriate headings.
services.
(CAHs) and Hospital Conditions of
13. OPPS Payment Status and Comment Participation (CoPs) II. Updates Affecting OPPS Payments
Indicators In section XVIII. of the proposed rule, A. Recalibration of APC Relative
In section XIV. of the proposed rule, we discussed our proposed changes Weights
we discussed proposed changes to the affecting CAHs both when the CAH 1. Database Construction
definitions of status indicators assigned enters into a new co-location
to APCs and presented our proposed arrangement with another hospital or a. Database Source and Methodology
comment indicators for the OPPS/ASC CAH and when the CAH creates or Section 1833(t)(9)(A) of the Act
final rule with comment period. acquires a provider-based off campus requires that the Secretary review and
location. We also discussed our revise the relative payment weights for
14. OPPS Policy and Payment APCs at least annually. In the April 7,
proposed changes relating to several
Recommendations 2000 OPPS final rule with comment
hospital CoPs to require the completion
In section XV. of the proposed rule, of physical examinations and medical period (65 FR 18482), we explained in
we addressed recommendations made histories and documentation in the detail how we calculated the relative
by the Medicare Payment Advisory medical records for patients after payment weights that were
Commission (MedPAC) in its March and admission and prior to surgery or a implemented on August 1, 2000 for each
June 2007 Reports to Congress and by procedure requiring anesthesia services, APC group. Except for some reweighting
the APC Panel regarding the OPPS for and for postanesthesia evaluations of due to a small number of APC changes,
CY 2008. patients after surgery or a procedure these relative payment weights
requiring anesthesia services but before continued to be in effect for CY 2001.
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15. Update of the Revised ASC Payment


discharge or transfer from the This policy is discussed in the
System
postanesthesia recovery area. November 13, 2000 interim final rule
In section XVI. of the proposed rule, (65 FR 67824 through 67827).
we discussed the proposed update of 18. Regulatory Impact Analysis In the CY 2008 OPPS/ASC proposed
the revised ASC payment system In section XXII. of the proposed rule, rule, we proposed to use the same basic
payment rates for CY 2008. We also we set forth an analysis of the impact methodology that we described in the

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April 7, 2000 OPPS final rule with Addenda A and B to this final rule with packaging for drug administration
comment period to recalibrate the APC comment period were calculated using services in the single and multiple bill
relative payment weights for services claims from this period that were claims. Moreover, in many cases, the
furnished on or after January 1, 2008 processed before June 30, 2007, and packaging approach that we proposed
and before January 1, 2009. That is, we continue to be based on the median for the CY 2008 OPPS also allows the
proposed to recalibrate the relative hospital costs for services in the APC use of more claims data by enabling us
payment weights for each APC based on groups. We selected claims for services to treat claims with multiple procedure
claims and cost report data for paid under the OPPS and matched these codes as single claims. We refer readers
outpatient services. We proposed to use claims to the most recent cost report to section II.A.4. of the proposed rule for
the most recent available data to filed by the individual hospitals a full discussion of the packaging
construct the database for calculating represented in our claims data. We approach for CY 2008.
APC group weights. For the purpose of continue to believe that it is appropriate We received several public comments
recalibrating the proposed APC relative to use the most current full calendar on our proposed use of single bills to
payment weights for CY 2008, we used year claims data and the most recently calculate the APC median costs for
approximately 131 million final action submitted cost reports to calculate the ratesetting under the CY 2008 OPPS. A
claims for hospital outpatient median costs which we proposed to summary of the public comments and
department (HOPD) services furnished convert to relative payment weights for our responses follow.
on or after January 1, 2006 and before purposes of calculating the CY 2008 Comment: Some commenters
January 1, 2007. (For exact counts of payment rates. supported the ‘‘natural’’ and ‘‘pseudo’’
claims used, we refer readers to the We did not receive any comments on single methodology but asked that CMS
claims accounting narrative under our proposal to base the CY 2008 APC continue to refine the approach in order
supporting documentation for the relative weights on the most currently to improve the accuracy of the estimates
proposed rule on the CMS Web site at: available cost reports and on claims for because the medians are used to
http://www.cms.hhs.gov/ services furnished in CY 2006. develop payment rates for services on
HospitalOutpatientPPS/HORD/). Therefore, we are finalizing our data both single and multiple procedure
Of the 141 million final action claims source for the recalibration of the CY claims. Other commenters asserted that
for services provided in hospital 2008 APC relative payment weights as continued reliance on single procedure
outpatient settings used to calculate the proposed, without modification, as bills to establish the medians from
CY 2008 OPPS payment rates for this described in this section of this final which the rates were calculated failed to
final rule with comment period, rule with comment period. produce a statistically valid sample of
approximately 103 million claims were services for ratesetting, in particular for
b. Use of Single and Multiple Procedure brachytherapy services that are often
of the type of bill potentially
Claims provided in combination with one
appropriate for use in setting rates for
OPPS services (but did not necessarily For CY 2008, in general, we proposed another in a single encounter. Other
contain services payable under the to continue to use single procedure commenters requested that CMS explore
OPPS). Of the 103 million claims, claims to set the medians on which the additional revisions to the current
approximately 45 million were not for APC relative payment weights would be methodology to ensure that OPPS
services paid under the OPPS or were based, with some exceptions as payment would be based on a
excluded as not appropriate for use (for discussed below. We generally use substantial number of accurate hospital
example, erroneous cost-to-charge ratios single procedure claims to set the claims.
(CCRs) or no HCPCS codes reported on median costs for APCs because we Response: We generally base median
the claim). We were able to use believe that it is important that the costs for services on single procedure
approximately 54 million whole claims OPPS relative weights on which claims to ensure that the median cost
of the approximately 58 million claims payment rates are based be appropriate captures the full cost of a service when
that remained to set the OPPS APC when one and only one procedure is it is the only service furnished. We
relative weights for the CY 2008 OPPS. furnished and because we are, so far, recognize that this approach has
From the 54 million whole claims, we unable to ensure that packaged costs can limitations and, in some cases, prevents
created approximately 97 million single be appropriately allocated across us from using many of the claims for
records, of which approximately 65 multiple procedures performed on the services that are most commonly
million were ‘‘pseudo’’ single claims same date of service. We agree that, furnished at the same time as other
(created from multiple procedure claims optimally, it is desirable to use the data services. For this reason, we have
using the process we discuss in this from as many claims as possible to developed a number of different
section). Approximately 926,000 claims recalibrate the APC relative payment strategies, such as date of service
trimmed out on cost or units in excess weights, including those claims for stratification and the use of the bypass
of +/¥3 standard deviations from the multiple procedures. We engaged in list, that enable us to break multiple
geometric mean, yielding approximately several efforts this year to improve our procedure claims into ‘‘pseudo’’ single
96 million single bills used for median use of multiple procedure claims for procedure claims where we have
setting. Ultimately, we were able to use ratesetting. As we have for several years, confidence that the ‘‘pseudo’’ single
for CY 2008 ratesetting some portion of we continued to use date of service claim contains the full cost of the
93 ercent of the CY 2006 claims stratification and a list of codes to be service, including related packaged
containing services payable under the bypassed to convert multiple procedure costs. In recent years, however, we have
OPPS. This is approximately the same claims to ‘‘pseudo’’ single procedure increasingly used multiple procedure
percentage of CY 2005 claims where claims. We also continued our internal claims to develop median costs for
hsrobinson on PROD1PC76 with NOTICES

some portion could be used for CY 2007 efforts to better understand the patterns individual services or groups of
ratesetting as described in the CY 2007 of services and costs from multiple bills services. We have developed these
OPPS/ASC final rule with comment toward the goal of using more multiple methodologies so that we can use more
period (71 FR 67970). bill information by assessing the amount naturally occurring claims data in cases
As proposed, the final APC relative of packaging in the multiple bills and, in which care is most commonly
weights and payments for CY 2008 in specifically, by exploring the amount of reported with multiple major procedure

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codes on the same date, such as The date of service stratification codes that remained on the bypass list
observation services, hyperbaric oxygen (sorting the lines by date of service and from prior years) was open to public
therapy (HBOT), and single allergy tests. treating all lines with the same date of comment. For the CY 2008 proposed
Similarly, for CY 2008, we developed service as a separate claim) and bypass rule, we explicitly reviewed all
and proposed composite APCs for low list process we used for the CY 2007 ‘‘natural’’ single bills against the
dose rate prostate brachytherapy (APC OPPS (combined with the packaging empirical criteria for all codes on the CY
8001 (LDR Prostate Brachytherapy changes we proposed in section II.A.4. 2007 bypass list because of the proposal
Composite)) and cardiac of the proposed rule) resulted in our for greater packaging discussed in
electrophysiology services (APC 8000 being able to use some part of section II.A.4. of the proposed rule, as
(Cardiac Electrophysiologic Evaluation approximately 92 percent of the total this effort increased the packaging
and Ablation Composite)). These APCs claims that were eligible for use in the associated with some codes. We
are designed to use multiple procedure OPPS ratesetting and modeling for the removed 106 HCPCS codes from the CY
claims to establish a median cost and proposed rule. This process enabled us 2007 bypass list for the CY 2008
APC payment for multiple major to create, for the CY 2008 proposed rule, proposal. In addition, we note that
procedures when they are furnished approximately 58 million ‘‘pseudo’’ many of the codes we proposed to
together. As we discuss in section singles and approximately 30 million newly package for CY 2008 were on the
II.A.4.d. of this final rule with comment ‘‘natural’’ single bills. For the proposed bypass list used for setting the OPPS
period, we intend to explore the rule, ‘‘pseudo’’ single procedure bills payment rates for CY 2007 and were not
creation of additional composite APCs represented 66 percent of all single bills proposed for bypass because we also
for services that frequently are provided used to calculate median costs. This proposed to package them. We proposed
in the same HOPD encounter. We also compared favorably to the CY 2007 to add to the bypass list HCPCS codes
plan to continue to develop and refine OPPS final rule data in which ‘‘pseudo’’ that, using the proposed rule data, met
methods to increase the amount of single bills represented 68 percent of all the same previously established
claims data that we can use for setting single bills used to calculate the median empirical criteria for the bypass list that
OPPS payment rates in a manner that costs on which the CY 2007 OPPS are reviewed below or which our
gives us the most confidence that the payment rates were based. We believed clinicians believed would have little
costs derived from these approaches are that the reduction in the percent of associated packaging if the services
valid reflections of the costs of the ‘‘pseudo’’ single bills and the were coded correctly.
services described by HCPCS codes or, corresponding increase in the The CY 2008 packaging proposal
in the case of composite APCs, proportion of ‘‘natural’’ single bills minimally reduced the percentage of
described by the APCs. We anticipate observed for the CY 2008 proposed rule total claims that we were able to use, in
that the Data Subcommittee of the APC occurred largely because of our proposal whole or in part, from 93 percent for CY
Panel will continue to provide us with to increase packaging as discussed in 2007 to 92 percent for the proposed
valuable advice regarding possible section II.A.4. of the proposed rule. In rule. The proposed packaging approach
methodologies for increasing the OPPS many cases, the packaging proposal for increased the number of ‘‘natural’’
use of multiple procedure claims for CY 2008 enabled us to use claims that single bills, in spite of reducing the
ratesetting. would otherwise have been considered universe of codes requiring single bills
After consideration of the public to be multiple procedure claims and, for ratesetting, but reduced the number
comments received, we are finalizing absent the proposal for additional of ‘‘pseudo’’ single bills. More ‘‘natural’’
our proposal, without modification, to packaging, could have been used for single procedure bills can be created by
calculate median costs for APCs using ratesetting only if we had been able to the packaging of codes that always
single and ‘‘pseudo’’ single procedure create ‘‘pseudo’’ single claims from appear with another procedure because
claims, except where otherwise them. these dependent services are supportive
specified. For CY 2008, we proposed to bypass of and ancillary to the primary
425 HCPCS codes that are identified in independent procedures for which
(1) Use of Date of Service Stratification
Table 1 of the proposed rule. We payment is being made. A claim
and a Bypass List To Increase the
proposed to continue the use of the containing two independent procedure
Amount of Data Used To Determine
codes on the CY 2007 OPPS bypass list codes on the same date of service and
Medians
but to remove codes we proposed to not on the bypass list previously could
Through bypassing specified codes package for CY 2008. We also proposed not be used for ratesetting, but
that we believe do not have significant to remove codes that were on the CY packaging the cost of one of the codes
packaged costs, we are able to use more 2007 bypass list that ceased to meet the on the claim frees the claim to be used
data from multiple procedure claims. In empirical criteria under the proposed to calculate the median cost of the
many cases, this enables us to create packaging changes when clinical review procedure that is not packaged. On the
multiple ‘‘pseudo’’ single claims from confirmed that their removal would be other hand, our proposed packaging
claims that, as submitted, contained appropriate in the context of the full approach reduced the number of codes
numerous separately paid procedures proposal for the CY 2008 OPPS. Since eligible for the bypass list because of the
reported on the same date on one claim. the inception of the bypass list, we have limitation on packaging set by our
We refer to these newly created single calculated the percent of ‘‘natural’’ previously established empirical
procedure claims as ‘‘pseudo’’ single single bills that contained packaging for criteria. A smaller bypass list and the
claims because they were submitted by each code and the amount of packaging presence of greater packaging on claims
providers as multiple procedure claims. in each ‘‘natural’’ single bill for each reduced the final number of ‘‘pseudo’’
hsrobinson on PROD1PC76 with NOTICES

The history of our use of a bypass list code. We retained the codes on the single claims. In prior years, roughly 68
to generate ‘‘pseudo’’ single claims is previous year’s bypass list and used the percent of single bills were ‘‘pseudo’’
well documented, most recently in the update year’s data to determine whether single bills, but based on the CY 2008
CY 2007 OPPS/ASC final rule with it would be appropriate to add proposed rule data, 66 percent of single
comment period (71 FR 67969 through additional codes to the previous year’s bills were ‘‘pseudo’’ singles. Similarly,
67970). bypass list. The entire list (including the for this final rule with comment period,

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66 percent of single bills were ‘‘pseudo’’ result of increased packaging in the bills for high dose rate (HDR)
singles. Moreover, the numbers of ‘‘natural’’ single claims due to the brachytherapy from 62 percent to 48
‘‘natural’’ single bills and ‘‘pseudo’’ proposed packaging approach. The percent of the total frequency. The
single bills were reduced by the volume commenters objected to the removal of commenter believed that the payment
of services that we proposed to package. codes from the bypass list for this for APC 0313 (Brachytherapy) dropped
Hence, our CY 2008 proposal to package reason because they asserted that it from $789.70 in CY 2007 to $739.46 in
payment for some HCPCS codes with caused claims that would otherwise the CY 2008 proposed rule because
relatively high frequencies would have become ‘‘pseudo’’ single claims to there were packaged costs on claims
eliminate for ratesetting the number of not be used and, thereby, reduced the that could no longer be used because the
available ‘‘natural’’ and ‘‘pseudo’’ single number of single bills that were multiple procedure claims included
bills attributable to the codes that we available for ratesetting for certain codes that were removed from the
proposed to package. services. bypass list. The commenter asked that
As in prior years, we proposed to use Response: We agree with the these codes be restored to the bypass list
the following empirical criteria to commenters, so we have reevaluated the so that these claims could be used.
determine the additional codes to add to bypass list for this final rule with Other commenters asked that CMS place
the CY 2007 bypass list to create the CY comment period and restored a number CPT code 93017 (Cardiovascular stress
2008 bypass list. We assumed that the of codes on the bypass list prior to the test using maximal or submaximal
representation of packaging in the single CY 2008 proposal to maximize the treadmill or bicycle exercise,
claims for any given code was creation of single and ‘‘pseudo’’ single continuous electrocardiographic
comparable to packaging for that code in procedure bills. As we discuss later in monitoring, and/or pharmacological
the multiple claims: this section and in section II.A.4. of this
stress; tracing only, without
• There are 100 or more single claims final rule with comment period, we
interpretation and report) on the bypass
for the code. This number of single have made changes to the data process
list because it is typically performed
claims ensures that observed outcomes to ensure that we capture as much data
with single photon emission computed
are sufficiently representative of as possible for services assigned status
tomography (SPECT) procedures (CPT
packaging that might occur in the indicator ‘‘Q.’’ Although we revised the
code 78465 (Myocardial perfusion
multiple claims. process to apply the specific ‘‘Q’’ status
• Five percent or fewer of the single imaging; tomographic (SPECT), multiple
indicator policies before assessment of
claims for the code have packaged costs studies (including attenuation
the bypass list so that additional HCPCS
on that single claim for the code. This codes could be considered for the correction when performed), at rest and/
criterion results in limiting the amount bypass list without risk of losing their or stress (exercise and/or
of packaging being redistributed to the data regarding packaging, we pharmacologic) and redistribution and/
separately payable procedure remaining determined that no codes with status or rest injection, without or without
on the claim after the bypass code is indicator ‘‘Q’’ were appropriate for quantification)). These commenters
removed and ensures that the costs addition to the final CY 2008 bypass list believed that significant data from
associated with the bypass code because of their significant associated multiple procedure claims were lost
represent the cost of the bypassed packaging. because CPT code 93017 was not
service. Comment: Several commenters asked bypassed. Other commenters asked that
• The median cost of packaging that CMS add certain HCPCS codes to CMS add the following drug
observed in the single claims is equal to the bypass list so that more single bills administration CPT codes to the bypass
or less than $50. This limits the amount would be available for median setting. list because doing so would enable use
of error in redistributed costs. Some commenters specifically objected of more multiple procedure claims data
• The code is not a code for an to the removal of the following radiation to establish median costs for drug
unlisted service. oncology services that they indicated administration services: CPT codes
In addition, we proposed to add to the should seldom have any associated 90767 (Intravenous infusion, for
bypass list codes that our clinicians packaging: CPT codes 77280 therapy, prophylaxis, or diagnosis
believe have minimal associated (Therapeutic radiology simulation-aided (specify substance or drug); additional
packaging based on their clinical field setting; simple); 77285 sequential infusion, up to 1 hour (List
assessment of the complete CY 2008 (Therapeutic radiology simulation-aided separately in addition to code for
OPPS proposal. As proposed, this list field setting; intermediate); 77290 primary procedure)); 90768 (Intravenous
contained bypass codes that were (Therapeutic radiology simulation-aided infusion, for therapy, prophylaxis, or
appropriate to claims for services in CY field setting; complex); 77295 diagnosis (specify substance or drug);
2006 and, therefore, included codes that (Therapeutic radiology simulation-aided concurrent infusion (List separately in
were deleted for CY 2007. Moreover, field setting; 3-dimensional); 77332 addition to code for primary procedure);
there were codes on the proposed (Treatment devices, design and 90775 (Therapeutic, prophylactic or
bypass list that were new for CY 2007 construction; simple (simple block, diagnostic injection (specify substance
and which were appropriate additions simple bolus)); 77333 (Treatment or drug); each additional sequential
to the bypass list in preparation for use devices, design and construction; intravenous push of a new substance/
of the CY 2007 claims for creation of the intermediate (multiple blocks, stents, drug (List separately in addition to code
CY 2009 OPPS. bite blocks, special bolus)); 77334 for primary procedure)); 96411
We received a number of public (Treatment devices, design and (Chemotherapy administration;
comments on the use of the bypass list construction; complex (irregular blocks, intravenous, push technique, each
for creation of ‘‘pseudo’’ single special shields, compensators, wedges, additional substance/drug (List
hsrobinson on PROD1PC76 with NOTICES

procedure claims. A summary of the molds or casts)); and 77417 separately in addition to code for
comments and our responses follow. (Therapeutic radiology port film(s)). primary procedure)); and 96417
Comment: Some commenters objected One commenter explained that there (Chemotherapy administration,
to the removal of HCPCS codes from the was an interaction with the packaging of intravenous infusion technique; each
bypass list because the codes ceased to image guided radiation therapy codes additional sequential infusion (different
meet the criteria for the bypass list as a that reduced the percentage of single substance/drug), up to 1 hour (List

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separately in addition to code for assigned to the code for the first hour of and ways that CMS could use data that
primary procedure)). A commenter infusion on the same claim. If we had were more reflective of the real costs for
asked that we add HCPCS code 88307 not placed the codes for additional these procedures. The commenter
(Level V Surgical pathology, gross and hours of infusion on the bypass list, we believed that the median cost of CPT
microscopic examination) because it is would have had a substantial set of drug code 93880 should be based on the cost
so similar to HCPCS codes 88305 (Level administration multiple procedure of the typical patient and not the least
III Surgical pathology, gross and claims that were unusable for ratesetting expensive patient because the OPPS
microscopic examination) and 88306 purposes. However, adding the payment caps payment in the
(Level IV Surgical pathology, gross and sequential drug administration services physician’s office for the service. The
microscopic examination) that were to the bypass list too would force all of commenter explained that using the
already included on the bypass list. the costs of the associated additional bypass list to generate more ‘‘pseudo’’
Response: We have reviewed the drugs and supplies to be packaged into single claims without any packaging
requests to add these codes to the the payment for the initial drug resulted in stagnation in payment that
bypass list and we have made the administration service for another drug, encouraged hospitals to pressure
following decisions for CY 2008 for the which we do not believe is an physicians to order more expensive tests
reasons stated below: appropriate allocation of packaging. and threatened access to care for
We have added the radiation oncology While we understand the concerns of beneficiaries who would be served well
services listed above, with the exception the commenters regarding the by simpler tests that were being
of CPT code 77417, to the bypass list challenges associated with setting underpaid as a result of inclusion of
because we agree that they are of the appropriate payment rates for these CPT code 93880 on the bypass list.
type that should not have packaging sequential services reported on multiple One commenter asked that CMS
associated with them. We recognize that procedure claims, we have very little CY provide a code-specific analysis of the
including them on the bypass list may 2006 claims data for the four codes impact of bypassing each code on the
yield significantly more single because they were not recognized for bypass list because the commenter
procedure bills and may also increase payment under the CY 2006 OPPS. We believed that removing and using the
the number of claims that we can use for will reconsider the treatment of these line item costs for the bypass codes to
calculation of the low dose rate prostate CPT codes for the CY 2009 OPPS update set the median costs for the APCs to
brachytherapy composite APC when CY 2007 data, where these codes which the bypass codes are assigned
(APC8001). We have not added CPT were separately paid under the OPPS, results in understatement of the median
code 77417 to the CY 2008 bypass list are available. We have not added CPT costs for those APCs.
because, based on its final CY 2008 code 90768 to the bypass list because Response: The bypass list has been
unconditionally packaged status, the our final CY 2008 policy very effective in enabling us to use
code would not be a candidate for the unconditionally packages payment for claims data that would not otherwise be
bypass list. Unconditionally packaged this service and, therefore, it is not a available for median calculation. Since
codes are not included on the bypass candidate for the bypass list. its origin for the CY 2004 OPPS, we
list because their presence on a claim We agree that HCPCS code 88307 have been very careful in determining
does not make that claim a multiple (which was on the proposed bypass list the codes to be placed on the bypass
procedure bill. for the CY 2008 OPPS) is appropriate list. As described above, we use a
We have added CPT code 93017 to the and we have added it to the final CY standard set of criteria to select claims
bypass list because we agree that it 2008 bypass list. that seldom have packaging (that is,
should not have significant associated In addition to these responses to fewer than 5 percent of ‘‘natural’’ single
packaging, and we recognize that comments, we have added six other bills); that have little packaging (that is,
including it on the bypass list may yield HCPCS codes to the final CY 2008 less than $50); for which we have at
significantly more single procedure bills bypass list that met the empirical least 100 ‘‘natural’’ single bills; and that
for median setting. criteria for inclusion using the final rule are not unlisted codes (for which there
We have not added the drug data, and we have also added three is no specified service). In addition to
administration services listed above to HCPCS codes for clinical consistency codes that pass these criteria, we also
the bypass list. Four of these five codes with codes that are already on the have added HCPCS codes to the bypass
are for sequential drug infusion services bypass list. New bypass codes for this list that have been recommended to us
or injections of additional drugs and, final rule with comment period are by members of the public, including the
therefore, by definition, new drugs and identified in Table 1 with an asterisk. specialty societies that are most familiar
medical supplies that are associated Comment: One commenter objected to with them, as services with which
with these codes should be reported in the use of the bypass list to create packaging should be seldom, if ever,
all cases in which the services are ‘‘pseudo’’ single claims for median associated. Therefore, we believe that
furnished. We note that, beginning in setting on the basis that it artificially we have been very prudent with regard
CY 2007, we placed the CPT codes for lowers the median cost of the services to our selection of the codes to be added
additional hours of infusion on the on the bypass list by sending all to the bypass list and with our use of the
bypass list, recognizing that all packaging on the claim to the other list. Moreover, we open the criteria and
packaging related to these hours would major separately paid service on the the list to public comment each year
be associated with the initial services on claim. Specifically, the commenter and we respond to comments in the
the claim. We proposed and finalized believed that inclusion of CPT code final rule for the update year.
this approach for CY 2007, because we 93880 (Duplex scan of extracranial We also make available the claims
were unable to accurately assign arteries; complete bilateral study) on the data used to calculate the median costs
hsrobinson on PROD1PC76 with NOTICES

representative portions of packaged bypass list resulted in the use of the cost on which the relative weights are based,
costs to multiple different drug data for the lowest cost services and, and we provide an extensive narrative
administration services. We expected thereby, lowered the cost of this service. description of our data process. Hence,
that the packaging related to additional The commenter stated that CMS should we provide commenters with the tools
hours of infusion of drugs that spanned work with stakeholders on use of the to conduct any further analyses they
several hours would be appropriately bypass list, its impact on median costs, chose with regard to the codes on the

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bypass list or otherwise. In the case of TABLE 1.—CY 2008 FINAL BYPASS TABLE 1.—CY 2008 FINAL BYPASS
CPT code 93880, the median packaged CODES FOR CREATING ‘‘PSEUDO’’ CODES FOR CREATING ‘‘PSEUDO’’
cost on ‘‘natural’’ single procedure SINGLE CLAIMS FOR CALCULATING SINGLE CLAIMS FOR CALCULATING
claims (of which there were 403,106) MEDIAN COSTS MEDIAN COSTS—Continued
was $0 and the percent of natural single
procedure claims on which there was Added for Added for
any packaging was 0.47 percent (1,899 HCPCS HCPCS
Short description this final Short description this final
code code
claims out of 403,106 ). Therefore, the rule rule
code meets the criteria for inclusion on
the bypass list and will remain on it for 11056 ..... Trim skin lesions, 70371 ..... Speech evaluation,
2 to 4. complex.
CY 2008. We have no evidence that
11057 ..... Trim skin lesions, 70450 ..... Ct head/brain w/o
physicians or hospitals are billing more over 4. dye.
expensive tests as a result of the OPPS 11300 ..... Shave skin lesion. 70480 ..... Ct orbit/ear/fossa
payment rate for CPT code 93880, and 11301 ..... Shave skin lesion. w/o dye.
our data show there is very little 11719 ..... Trim nail(s). 70486 ..... Ct maxillofacial w/o
packaging associated with the service in 11720 ..... Debride nail, 1–5. dye.
the typical case. 11721 ..... Debride nail, 6 or 70490 ..... Ct soft tissue neck
In order to keep the established more. w/o dye.
11954 ..... Therapy for con- 70544 ..... Mr angiography
empirical criteria for the bypass list
tour defects. head w/o dye.
constant, we specifically solicited 70551 ..... Mri brain w/o dye.
17003 ..... Destruct premalg
public comment on whether we should les, 2–14. 71010 ..... Chest x-ray.
adjust the $50 packaging cost criterion 31231 ..... Nasal endoscopy, 71015 ..... Chest x-ray.
for inflation each year and, if so, dx. 71020 ..... Chest x-ray.
recommendations for the source of the 31579 ..... Diagnostic laryn- 71021 ..... Chest x-ray.
adjustment. We believed that adding an goscopy. 71022 ..... Chest x-ray.
inflation adjustment factor would 51798 ..... Us urine capacity 71023 ..... Chest x-ray and
ensure that the same amount of measure. fluoroscopy.
packaging associated with candidate 53661 ..... Dilation of urethra * 71030 ..... Chest x-ray.
codes for the bypass list was reviewed 54240 ..... Penis study. 71034 ..... Chest x-ray and
each year relative to nominal costs. 56820 ..... Exam of vulva w/ fluoroscopy.
scope. 71035 ..... Chest x-ray.
We received one public comment on 57150 ..... Treat vagina infec- * 71100 ..... X-ray exam of ribs.
the appropriateness of updating the $50 tion. 71101 ..... X-ray exam of ribs/
packaging cost criteria for inclusion of 67820 ..... Revise eyelashes. chest.
a code on the bypass list to account for 69210 ..... Remove impacted 71110 ..... X-ray exam of ribs.
annual inflation. A summary of the ear wax. 71111 ..... X-ray exam of ribs/
comment and our response follow. 69220 ..... Clean out mastoid chest.
cavity. 71120 ..... X-ray exam of
Comment: One commenter stated that 70030 ..... X-ray eye for for- breastbone.
CMS should update the $50 maximum eign body. 71130 ..... X-ray exam of
‘‘natural’’ single bill median packaging 70100 ..... X-ray exam of jaw. breastbone.
cost criterion for including HCPCS 70110 ..... X-ray exam of jaw. 71250 ..... Ct thorax w/o dye.
codes on the bypass list on the basis of 70120 ..... X-ray exam of 72010 ..... X-ray exam of
empirical criteria. The commenter did mastoids. spine.
not suggest a methodology we might use 70130 ..... X-ray exam of 72020 ..... X-ray exam of
for the update. mastoids. spine.
70140 ..... X-ray exam of fa- 72040 ..... X-ray exam of
Response: We have not changed the cial bones. neck spine.
$50 maximum ‘‘natural’’ bill median 70150 ..... X-ray exam of fa- 72050 ..... X-ray exam of
packaging cost criterion for this final cial bones. neck spine.
rule with comment period. However, we 70160 ..... X-ray exam of 72052 ..... X-ray exam of
will consider whether to update the nasal bones. neck spine.
criterion and, if so, what methodology 70200 ..... X-ray exam of eye 72069 ..... X-ray exam of
would be used, as part of the sockets. trunk spine.
development of the proposals for the CY 70210 ..... X-ray exam of si- 72070 ..... X-ray exam of tho-
2009 OPPS. nuses. racic spine.
70220 ..... X-ray exam of si- 72072 ..... X-ray exam of tho-
After consideration of the public nuses. racic spine.
comments received, we are adopting, as 70250 ..... X-ray exam of skull. 72074 ..... X-ray exam of tho-
final, the proposed ‘‘pseudo’’ single 70260 ..... X-ray exam of skull. racic spine.
claims process and the CY 2008 bypass 70328 ..... X-ray exam of jaw 72080 ..... X-ray exam of
codes listed in Table 1 below. This list joint. trunk spine.
has been modified from the CY 2008 70330 ..... X-ray exam of jaw 72090 ..... X-ray exam of
proposed list, with the addition of joints. trunk spine.
HCPCS codes that meet the empirical 70336 ..... Magnetic image, 72100 ..... X-ray exam of
hsrobinson on PROD1PC76 with NOTICES

jaw joint. lower spine.


criteria based on updated claims data 70355 ..... Panoramic x-ray of 72110 ..... X-ray exam of
and certain HCPCS codes recommended jaws. lower spine.
by commenters, as discussed above. As 70360 ..... X-ray exam of 72114 ..... X-ray exam of
stated earlier, the new bypass codes for neck. lower spine.
this final rule with comment period are 70370 ..... Throat x-ray & flu- 72120 ..... X-ray exam of
identified in Table 1 with an asterisk. oroscopy. lower spine.

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66594 Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations

TABLE 1.—CY 2008 FINAL BYPASS TABLE 1.—CY 2008 FINAL BYPASS TABLE 1.—CY 2008 FINAL BYPASS
CODES FOR CREATING ‘‘PSEUDO’’ CODES FOR CREATING ‘‘PSEUDO’’ CODES FOR CREATING ‘‘PSEUDO’’
SINGLE CLAIMS FOR CALCULATING SINGLE CLAIMS FOR CALCULATING SINGLE CLAIMS FOR CALCULATING
MEDIAN COSTS—Continued MEDIAN COSTS—Continued MEDIAN COSTS—Continued
Added for Added for Added for
HCPCS HCPCS HCPCS
Short description this final Short description this final Short description this final
code code code
rule rule rule

72125 ..... Ct neck spine w/o 73564 ..... X-ray exam, knee, 76078 ..... Radiographic
dye. 4 or more. absorptiometry.
72128 ..... Ct chest spine w/o 73565 ..... X-ray exam of 76100 ..... X-ray exam of
dye. knees. body section.
72131 ..... Ct lumbar spine w/ 73590 ..... X-ray exam of 76400 ..... Magnetic image,
o dye. lower leg. bone marrow.
72141 ..... Mri neck spine w/o 73600 ..... X-ray exam of 76510 ..... Ophth us, b &
dye. ankle. quant a.
72146 ..... Mri chest spine w/ 73610 ..... X-ray exam of 76511 ..... Ophth us, quant a
o dye. ankle. only.
72148 ..... Mri lumbar spine 73620 ..... X-ray exam of foot. 76512 ..... Ophth us, b w/non-
w/o dye. 73630 ..... X-ray exam of foot. quant a.
72170 ..... X-ray exam of pel- 73650 ..... X-ray exam of heel. 76513 ..... Echo exam of eye,
vis. 73660 ..... X-ray exam of water bath.
72190 ..... X-ray exam of pel- toe(s). 76514 ..... Echo exam of eye,
vis. 73700 ..... Ct lower extremity thickness.
72192 ..... Ct pelvis w/o dye. w/o dye. 76516 ..... Echo exam of eye.
72202 ..... X-ray exam sacro- 73718 ..... Mri lower extremity 76519 ..... Echo exam of eye.
iliac joints. w/o dye. 76536 ..... Us exam of head
72220 ..... X-ray exam of 73721 ..... Mri jnt of lwr extre and neck.
tailbone. w/o dye. 76645 ..... Us exam, breast(s).
73000 ..... X-ray exam of col- 74000 ..... X-ray exam of ab- 76700 ..... Us exam, abdom,
lar bone. domen. complete.
73010 ..... X-ray exam of 74010 ..... X-ray exam of ab- 76705 ..... Echo exam of ab-
shoulder blade. domen. domen.
73020 ..... X-ray exam of 74020 ..... X-ray exam of ab- 76770 ..... Us exam abdo
shoulder. domen. back wall, comp.
73030 ..... X-ray exam of 74022 ..... X-ray exam series, 76775 ..... Us exam abdo
shoulder. abdomen. back wall, lim.
73050 ..... X-ray exam of 74150 ..... Ct abdomen w/o 76778 ..... Us exam kidney
shoulders. dye. transplant.
73060 ..... X-ray exam of hu- 74210 ..... Contrast x-ray 76801 ..... Ob us < 14 wks,
merus. exam of throat. single fetus.
73070 ..... X-ray exam of 74220 ..... Contrast x-ray, 76805 ..... Ob us >/= 14 wks,
elbow. esophagus. sngl fetus.
73080 ..... X-ray exam of 74230 ..... Cine/vid x-ray, 76811 ..... Ob us, detailed,
elbow. throat/esoph. sngl fetus.
73090 ..... X-ray exam of 74246 ..... Contrast x-ray uppr 76816 ..... Ob us, follow-up,
forearm. gi tract. per fetus.
73100 ..... X-ray exam of 74247 ..... Contrst x-ray uppr 76817 ..... Transvaginal us,
wrist. gi tract. obstetric.
73110 ..... X-ray exam of 74249 ..... Contrst x-ray uppr 76830 ..... Transvaginal us,
wrist. gi tract. non-ob.
73120 ..... X-ray exam of 76020 ..... X-rays for bone 76856 ..... Us exam, pelvic,
hand. age. complete.
73130 ..... X-ray exam of 76040 ..... X-rays, bone eval- 76857 ..... Us exam, pelvic,
hand. uation. limited.
73140 ..... X-ray exam of fin- 76061 ..... X-rays, bone sur- 76870 ..... Us exam, scrotum.
ger(s). vey. 76880 ..... Us exam, extremity.
73200 ..... Ct upper extremity 76062 ..... X-rays, bone sur- 76970 ..... Ultrasound exam
w/o dye. vey. follow-up.
73218 ..... Mri upper extremity 76065 ..... X-rays, bone eval- 76977 ..... Us bone density
w/o dye. uation. measure.
73221 ..... Mri joint upr 76066 ..... Joint survey, single 76999 ..... Echo examination
extrem w/o dye. view. procedure.
73510 ..... X-ray exam of hip. 76070 ..... Ct bone density, 77280 ..... Set radiation ther- *
73520 ..... X-ray exam of hips. axial. apy field.
73540 ..... X-ray exam of pel- 76071 ..... Ct bone density, 77285 ..... Set radiation ther- *
hsrobinson on PROD1PC76 with NOTICES

vis & hips. peripheral. apy field.


73550 ..... X-ray exam of 76075 ..... Dxa bone density, 77290 ..... Set radiation ther- *
thigh. axial. apy field.
73560 ..... X-ray exam of 76076 ..... Dxa bone density/ 77295 ..... Set radiation ther- *
knee, 1 or 2. peripheral. apy field.
73562 ..... X-ray exam of 76077 ..... Dxa bone density/ 77300 ..... Radiation therapy
knee, 3. v-fracture. dose plan.

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Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations 66595

TABLE 1.—CY 2008 FINAL BYPASS TABLE 1.—CY 2008 FINAL BYPASS TABLE 1.—CY 2008 FINAL BYPASS
CODES FOR CREATING ‘‘PSEUDO’’ CODES FOR CREATING ‘‘PSEUDO’’ CODES FOR CREATING ‘‘PSEUDO’’
SINGLE CLAIMS FOR CALCULATING SINGLE CLAIMS FOR CALCULATING SINGLE CLAIMS FOR CALCULATING
MEDIAN COSTS—Continued MEDIAN COSTS—Continued MEDIAN COSTS—Continued
Added for Added for Added for
HCPCS HCPCS HCPCS
Short description this final Short description this final Short description this final
code code code
rule rule rule

77301 ..... Radiotherapy dose 86880 ..... Coombs test, di- 88331 ..... Path consult
plan, imrt. rect. intraop, 1 bloc.
77315 ..... Teletx isodose 86885 ..... Coombs test, indi- 88342 ..... Immunohistochem-
plan complex. rect, qual. istry.
77326 ..... Brachytx isodose 86886 ..... Coombs test, indi- 88346 ..... Immunofluorescent
calc simp. rect, titer. study.
77327 ..... Brachytx isodose 86890 ..... Autologous blood 88347 ..... Immunofluorescent
calc interm. process. study.
77328 ..... Brachytx isodose 86900 ..... Blood typing, ABO. 88348 ..... Electron micros-
plan compl. 86901 ..... Blood typing, Rh copy.
77331 ..... Special radiation (D). 88358 ..... Analysis, tumor.
dosimetry. 86903 ..... Blood typing, anti- 88360 ..... Tumor
77332 ..... Radiation treat- * gen screen. immunohistoche-
ment aid(s). 86904 ..... Blood typing, pa- m/manual.
77333 ..... Radiation treat- * tient serum. 88361 ..... Tumor *
ment aid(s). 86905 ..... Blood typing, RBC immunohistoche-
77334 ..... Radiation treat- * antigens. m/comput.
ment aid(s). 86906 ..... Blood typing, Rh 88365 ..... Insitu hybridization
77336 ..... Radiation physics phenotype. (fish).
consult. 86930 ..... Frozen blood prep. 88368 ..... Insitu hybridization,
77370 ..... Radiation physics 86970 ..... RBC pretreatment. manual.
consult. 88104 ..... Cytopath fl 88399 ..... Surgical pathology
77401 ..... Radiation treat- nongyn, smears. procedure.
ment delivery. 88106 ..... Cytopath fl 89049 ..... Chct for mal
77402 ..... Radiation treat- nongyn, filter. hyperthermia.
ment delivery. 89230 ..... Collect sweat for
88107 ..... Cytopath fl
77403 ..... Radiation treat- test.
nongyn, sm/fltr.
ment delivery. 89240 ..... Pathology lab pro-
88108 ..... Cytopath, con-
77404 ..... Radiation treat- cedure.
centrate tech.
ment delivery.
88112 ..... Cytopath, cell en- 90761 ..... Hydrate iv infusion,
77407 ..... Radiation treat-
hance tech. add-on.
ment delivery.
88160 ..... Cytopath smear, 90761 ..... Hydrate iv infusion, *
77408 ..... Radiation treat-
other source. add-on.
ment delivery.
88161 ..... Cytopath smear, 90766 ..... Ther/proph/dg iv *
77409 ..... Radiation treat-
other source. inf, add-on.
ment delivery.
88162 ..... Cytopath smear, 90801 ..... Psy dx interview.
77411 ..... Radiation treat-
ment delivery. other source. 90802 ..... Intac psy dx inter-
77412 ..... Radiation treat- 88172 ..... Cytopathology eval view.
ment delivery. of fna. 90804 ..... Psytx, office, 20–
77413 ..... Radiation treat- 88173 ..... Cytopath eval, fna, 30 min.
ment delivery. report. 90805 ..... Psytx, off, 20–30
77414 ..... Radiation treat- 88182 ..... Cell marker study. min w/e&m.
ment delivery. 88184 ..... Flowcytometry/ tc, 90806 ..... Psytx, off, 45–50
77416 ..... Radiation treat- 1 marker. min.
ment delivery. 88185 ..... Flowcytometry/tc, 90807 ..... Psytx, off, 45–50
77418 ..... Radiation tx deliv- add-on. min w/e&m.
ery, imrt. 88300 ..... Surgical path, 90808 ..... Psytx, office, 75–
77470 ..... Special radiation gross. 80 min.
treatment. 88302 ..... Tissue exam by 90809 ..... Psytx, off, 75–80,
77520 ..... Proton trmt, simple pathologist. w/e&m.
w/o comp. 88304 ..... Tissue exam by 90810 ..... Intac psytx, off,
77523 ..... Proton trmt, inter- pathologist. 20–30 min.
mediate. 88305 ..... Tissue exam by 90812 ..... Intac psytx, off,
80500 ..... Lab pathology con- pathologist. 45–50 min.
sultation. 88307 ..... Tissue exam by 90816 ..... Psytx, hosp, 20–30
80502 ..... Lab pathology con- pathologist. min.
sultation. 88311 ..... Decalcify tissue. 90818 ..... Psytx, hosp, 45–50
85097 ..... Bone marrow inter- 88312 ..... Special stains. min.
hsrobinson on PROD1PC76 with NOTICES

pretation. 88313 ..... Special stains. 90826 ..... Intac psytx, hosp, *
86510 ..... Histoplasmosis 88321 ..... Microslide con- 45–50 min.
skin test. sultation. 90845 ..... Psychoanalysis.
86850 ..... RBC antibody 88323 ..... Microslide con- 90846 ..... Family psytx w/o
screen. sultation. patient.
86870 ..... RBC antibody 88325 ..... Comprehensive re- 90847 ..... Family psytx w/pa-
identification. view of data. tient.

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66596 Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations

TABLE 1.—CY 2008 FINAL BYPASS TABLE 1.—CY 2008 FINAL BYPASS TABLE 1.—CY 2008 FINAL BYPASS
CODES FOR CREATING ‘‘PSEUDO’’ CODES FOR CREATING ‘‘PSEUDO’’ CODES FOR CREATING ‘‘PSEUDO’’
SINGLE CLAIMS FOR CALCULATING SINGLE CLAIMS FOR CALCULATING SINGLE CLAIMS FOR CALCULATING
MEDIAN COSTS—Continued MEDIAN COSTS—Continued MEDIAN COSTS—Continued
Added for Added for Added for
HCPCS HCPCS HCPCS
Short description this final Short description this final Short description this final
code code code
rule rule rule

90853 ..... Group psycho- 93005 ..... Electrocardiogram, 93975 ..... Vascular study.
therapy. tracing. 93976 ..... Vascular study.
90857 ..... Intac group psytx. 93017 ..... Cardiovascular * 93978 ..... Vascular study.
90862 ..... Medication man- stress test. 93979 ..... Vascular study.
agement. 93225 ..... ECG monitor/ 93990 ..... Doppler flow test-
92002 ..... Eye exam, new record, 24 hrs. ing.
patient. 93226 ..... ECG monitor/re- 94015 ..... Patient recorded
92004 ..... Eye exam, new port, 24 hrs. spirometry.
patient. 93231 ..... Ecg monitor/ 94690 ..... Exhaled air anal-
92012 ..... Eye exam estab- record, 24 hrs. ysis.
lished pat. 93232 ..... ECG monitor/re- 95115 ..... Immunotherapy,
92014 ..... Eye exam & treat- port, 24 hrs. one injection.
ment. 93236 ..... ECG monitor/re- 95117 ..... Immunotherapy in-
92020 ..... Special eye eval- port, 24 hrs. jections.
uation. 93270 ..... ECG recording. 95165 ..... Antigen therapy
92081 ..... Visual field exam- 93271 ..... Ecg/monitoring and services.
ination(s). analysis. 95250 ..... Glucose moni- *
92082 ..... Visual field exam- 93278 ..... ECG/signal-aver- toring, cont.
ination(s). aged. 95805 ..... Multiple sleep la-
92083 ..... Visual field exam- 93727 ..... Analyze ilr system. tency test.
ination(s). 93731 ..... Analyze pace- 95806 ..... Sleep study, unat-
92135 ..... Ophth dx imaging maker system. tended.
post seg. 93732 ..... Analyze pace- 95807 ..... Sleep study, at-
92136 ..... Ophthalmic biome- maker system. tended.
try. 93733 ..... Telephone analy,
95808 ..... Polysomnography,
92225 ..... Special eye exam, pacemaker.
1–3.
initial. 93734 ..... Analyze pace-
95812 ..... Eeg, 41–60 min-
92226 ..... Special eye exam, maker system.
utes.
subsequent. 93735 ..... Analyze pace-
95813 ..... Eeg, over 1 hour.
92230 ..... Eye exam with maker system.
95816 ..... Eeg, awake and
photos. 93736 ..... Telephonic analy,
drowsy.
92240 ..... Icg angiography. pacemaker.
92250 ..... Eye exam with 93741 ..... Analyze ht pace 95819 ..... Eeg, awake and
photos. device sngl. asleep.
92275 ..... Electroretinography. 93742 ..... Analyze ht pace 95822 ..... Eeg, coma or
92285 ..... Eye photography. device sngl. sleep only.
92286 ..... Internal eye pho- 93743 ..... Analyze ht pace 95869 ..... Muscle test, thor
tography. device dual. paraspinal.
92520 ..... Laryngeal function 93744 ..... Analyze ht pace 95872 ..... Muscle test, one *
studies. device dual. fiber.
92541 ..... Spontaneous nys- 93786 ..... Ambulatory BP re- 95900 ..... Motor nerve con-
tagmus test. cording. duction test.
92546 ..... Sinusoidal rota- 93788 ..... Ambulatory BP 95921 ..... Autonomic nerv
tional test. analysis. function test.
92548 ..... Posturography. 93797 ..... Cardiac rehab. 95925 ..... Somatosensory
92552 ..... Pure tone audiom- 93798 ..... Cardiac rehab/ testing.
etry, air. monitor. 95926 ..... Somatosensory *
92553 ..... Audiometry, air & 93875 ..... Extracranial study. testing.
bone. 93880 ..... Extracranial study. 95930 ..... Visual evoked po-
92555 ..... Speech threshold 93882 ..... Extracranial study. tential test.
audiometry. 93886 ..... Intracranial study. 95950 ..... Ambulatory eeg
92556 ..... Speech audiom- 93888 ..... Intracranial study. monitoring.
etry, complete. 93922 ..... Extremity study. 95953 ..... EEG monitoring/
92557 ..... Comprehensive 93923 ..... Extremity study. computer.
hearing test. 93924 ..... Extremity study. 95970 ..... Analyze neurostim,
92567 ..... Tympanometry. 93925 ..... Lower extremity no prog.
92582 ..... Conditioning play study. 95972 ..... Analyze neurostim,
audiometry. 93926 ..... Lower extremity complex.
92585 ..... Auditor evoke po- study. 95974 ..... Cranial neurostim,
hsrobinson on PROD1PC76 with NOTICES

tent, compre. 93930 ..... Upper extremity complex.


92603 ..... Cochlear implt f/up study. 95978 ..... Analyze neurostim
exam 7 >. 93931 ..... Upper extremity brain/1h.
92604 ..... Reprogram coch- study. 96000 ..... Motion analysis,
lear implt 7 >. 93965 ..... Extremity study. video/3d.
92626 ..... Eval aud rehab 93970 ..... Extremity study. 96101 ..... Psycho testing by
status. 93971 ..... Extremity study. psych/phys.

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Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations 66597

TABLE 1.—CY 2008 FINAL BYPASS TABLE 1.—CY 2008 FINAL BYPASS proposed packaging approach presented
CODES FOR CREATING ‘‘PSEUDO’’ CODES FOR CREATING ‘‘PSEUDO’’ in the CY 2008 OPPS/ASC proposed
SINGLE CLAIMS FOR CALCULATING SINGLE CLAIMS FOR CALCULATING rule. However, we did not expect the
MEDIAN COSTS—Continued MEDIAN COSTS—Continued services newly proposed for packaged
payment to commonly appear with a
Added for Added for drug administration service. Therefore,
HCPCS HCPCS we believed that the analysis conducted
Short description this final Short description this final
code code
rule rule on the CY 2007 final rule with comment
period data was sufficient to inform our
96111 ..... Developmental G0130 .... Single energy x- development of the CY 2008 OPPS/ASC
test, extend. ray study.
proposed rule.
96116 ..... Neurobehavioral G0166 .... Extrnl
In general, we did not believe that the
status exam. counterpulse,
96118 ..... Neuropsych tst by per tx. proportionate amount of packaged costs
psych/phys. G0175 .... OPPS Serv- in the multiple bills relative to the
96119 ..... Neuropsych testing ice,sched team number of primary services would be
by tec. conf. greater than that in the single bills. Our
96150 ..... Assess hlth/be- G0332 .... Preadmin IV findings supported our hypothesis. The
have, init. immunoglobulin. costs in uncoded revenue codes and
96151 ..... Assess hlth/be- G0340 .... Robt lin-radsurg HCPCS codes with a packaged status
have, subseq. fractx 2–5. indicator accounted for 22 percent of
96152 ..... Intervene hlth/be- G0344 .... Initial preventive
observed costs in the universe of all CY
have, indiv. exam.
G0365 .... Vessel mapping 2005 claims that we used to model the
96153 ..... Intervene hlth/be-
hemo access. CY 2007 OPPS (including both the
have, group.
96415 ..... Chemo, iv infusion, G0367 .... EKG tracing for ini- single and multiple procedure bills).
addl hr. tial prev. Similarly, the costs in uncoded revenue
96423 ..... Chemo ia infuse G0376 .... Smoke/tobacco codes and HCPCS codes with a
each addl hr. counseling >10. packaged status indicator accounted for
96900 ..... Ultraviolet light M0064 .... Visit for drug moni- 18 percent of the total cost in the subset
therapy. toring. of CY 2005 single bills that we used to
96910 ..... Photochemothera- Q0091 .... Obtaining screen
calculate the median costs on which the
py with UV–B. pap smear.
relative weights were based.
96912 ..... Photochemothera- However, the bypass methodology
py with UV–A. (2) Exploration of Allocation of creates a ‘‘pseudo’’ single bill for all
96913 ..... Photochemothera- Packaged Costs to Separately Paid claims for services or items on the
py, UV–A or B. Procedure Codes
96920 ..... Laser tx, skin < bypass list, and these ‘‘pseudo’’ single
250 sq cm. During its August 23–24, 2006 bills have no associated packaging, by
98925 ..... Osteopathic ma- meeting, the APC Panel recommended definition of the application of the
nipulation. that CMS provide claims analysis of the bypass list. Excluding the total cost
98926 ..... Osteopathic ma- contributions of packaged costs associated with bypass codes, 28
nipulation. (including packaged revenue code percent of observed costs in the single
98927 ..... Osteopathic ma- charges and charges for packaged bills were attributable to packaged
nipulation. HCPCS codes) to the median cost of services, and 29 percent of observed
98940 ..... Chiropractic ma- each drug administration service. (We costs across all claims were attributable
nipulation.
refer readers to Recommendation #28 in to packaged services. Therefore, we
98941 ..... Chiropractic ma-
nipulation.
the August 23–24, 2006 meeting concluded that, in general, the extent of
98942 ..... Chiropractic ma- recommendation summary on the CMS packaging in all bills was similar to the
nipulation. Web site at: http://www.cms.hhs.gov/ amount of packaging in the single
99204 ..... Office/outpatient FACA/05_Advisory procedure bills we used to set median
visit, new. PanelonAmbulatoryPayment costs for most APCs.
99212 ..... Office/outpatient ClassificationGroups.asp#TopOfPage.) In the CY 2008 proposed rule (72 FR
visit, est. In our continued effort to better 42640), we recognized that aggregate
99213 ..... Office/outpatient understand the multiple claims in order numbers do not address the packaging
visit, est. to extract single bill information from associated with single and multiple
99214 ..... Office/outpatient
them, we examined the extent to which procedure claims for specific services.
visit, est.
99241 ..... Office consultation.
the packaging in multiple procedure In past years, we received comments
99242 ..... Office consultation. claims differs from the packaging in the stating that the amount of packaging in
99243 ..... Office consultation. single procedure claims on which we the single bills for drug administration
99244 ..... Office consultation. base the median costs both in general services was not representative of the
99245 ..... Office consultation. and more specifically for drug typical packaged costs of these drug
0144T ..... CT heart wo dye; administration services. We performed administration services, which were
qual calc. this analysis using the claims data on usually performed in combination with
C8951 .... IV inf, tx/dx, each which we based the CY 2007 OPPS/ASC one another, because the single bills
addl hr. final rule with comment period. We represented less complex and less
hsrobinson on PROD1PC76 with NOTICES

C8955 .... Chemotx adm, IV


examined the amount of packaging in resource-intensive services than the
inf, addl hr.
G0008 .... Admin influenza multiple procedure versus single usual cases.
virus vac. procedure claims in general and in We published a study in the CY 2007
G0101 .... CA screen; pelvic/ claims for drug administration services OPPS/ASC final rule with comment
breast exam. in particular. We conducted this period (71 FR 68120 through 68121) that
G0127 .... Trim nail(s). analysis without taking into account the discussed the amount of packaging on

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66598 Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 / Rules and Regulations

the single bills for drug administration bills as the ‘‘hardcore’’ multiple bills. single and multiple procedure claims
procedure codes, and we promised to For the first subset of ‘‘hardcore’’ for ratesetting. A summary of the public
replicate that study for the APC Panel. multiple bills with only drug comments and our responses follow.
We discussed the results of this study administration codes, that is, where Comment: Several commenters
with the APC Panel at its March 2007 multiple drug administration codes expressed appreciation for CMS’
meeting, in accordance with the APC were the only separately paid procedure analysis of packaged costs included on
Panel’s August 2006 recommendation codes on the claim, we estimated that single and multiple procedure claims
and also published the results in the CY packaged costs were 22 percent of total for drug administration services. One
2008 OPPS/ASC proposed rule (72 FR costs (27 percent, on average), where commenter encouraged CMS to further
42640 through 42641). total costs consisted of costs for all analyze the total amount and percentage
As discussed in the proposed rule, we payable codes. Costs for packaged drug of packaged costs associated with all
found that drug administration services HCPCS codes and pharmacy revenue packaged HCPCS codes, as well as other
demonstrated reasonable single bill codes comprised 13 percent of total cost packaged services reported by hospitals,
representation in comparison with other at the median (19 percent, on average). and examine this information on single
OPPS services. Single bills for drug For the second subset of ‘‘hardcore’’ versus multiple procedure claims in
administration constituted, roughly, 30 multiple bills with any drug order to increase hospitals’
percent of all observed occurrences of administration code, that is, where a understanding of the actual packaged
drug administration services, varying by drug administration code appeared with costs used in the ratesetting process.
code from 7 to 55 percent. The study other payable codes (largely radiology Once again, several commenters
also demonstrated that packaged costs services and visits), we estimated encouraged CMS to consider specific
substantially contributed to median cost packaged costs were 13 percent of total packaging algorithms to allocate
estimates for the majority of drug cost at the median (19 percent, on packaged costs on multiple procedures
administration HCPCS codes (72 FR average). Costs for packaged drugs and claims, in order to create additional
42640 through 42641). pharmacy revenue codes comprised 6 ‘‘pseudo’’ single claims for ratesetting.
For all single bills for CPT code 90780 percent of total cost at the median (10 Response: The packaging of
(Intravenous infusion for therapy/ percent, on average). The amount of associated costs into payment for major
diagnosis, administered by physician or packaging in both proxy measures, but procedures is a longstanding principle
under direct supervision of physician; especially the first subset, closely of the OPPS. The OPPS packages
up to one hour), on average, packaged resembled the packaged costs as a payment for the operating and capital-
costs were 31 percent of total cost percentage of drug administration costs related costs that are directly related
(median 27 percent). For the same code, observed in the single bills for drug and integral to furnishing a service on
packaged drug and pharmacy costs administration services. While finding a an outpatient basis. These packaged
comprised, on average, 23 percent of way to accurately use data from the costs have historically included costs
total costs (median 15 percent). Single ‘‘hardcore’’ multiple bills to estimate related to use of an operating or
bills made up 34 percent of all line-item drug administration median costs treatment room, anesthesia, medical
occurrences of the service, suggesting undoubtedly would impact medians, supplies, implantable devices,
that this single bill median cost was these comparisons suggested that the inexpensive drugs, etc. Our findings
fairly robust and probably captured multiple bill data probably would related to the packaged costs on single
packaging adequately. On the other support current median estimates. and multiple claims for drug
hand, CPT code 90784 (Therapeutic, In the CY 2008 OPPS/ASC proposed administration services confirm that the
prophylactic or diagnostic injection rule (72 FR 42641), we noted that we packaging on the single bills used for
(specify material injected); had received several comments over the ratesetting resembles the drug and
subcutaneous or intramuscular) past few years offering algorithms for pharmacy-related packaged costs on
demonstrated limited packaging packaging the costs associated with multiple procedure claims. The
(median 0 percent and mean 17 specific revenue codes or packaging packaging associated with drug
percent), and the median cost for the drugs with certain drug administration administration services on single and
code was derived from only 7 percent of codes. Because of the complexity of multiple claims has historically been of
all occurrences of the code. Across all even routine OPPS claims, prior particular concern to the public, so we
drug administration codes, over half research suggested that such algorithms are reassured by this finding. We are not
showed significant median packaged have limited power to generate convinced that developing this
costs largely attributable to packaged additional single bill claims and do information for all other HCPCS codes
drug and pharmacy costs. little to change median cost estimates. would provide further useful
By definition, we were unable to In the proposed rule (72 FR 42641), we information to hospitals. Instead, we
precisely assess the amount of explained that we continue to look for prefer to direct our analytic resources
packaging associated with drug simple, but powerful, methodologies toward exploring additional approaches
administration codes in the multiple like the bypass list and packaging of to using more cost data from multiple
bills. As a proxy, we estimated HCPCS codes for additional ancillary procedure claims for ratesetting. If we
packaging as a percent of total cost on and supportive services to assign are eventually able to use all OPPS
each claim for two subsets of claims. packaged costs to all services within the claims in developing median costs, then
Both analyses suggested the presence of ‘‘hardcore’’ multiple bills. Ideally, these all packaged costs on claims would also
moderate packaged costs, especially methodologies should be intuitive to the be incorporated in ratesetting under the
drug and pharmacy costs, associated provider community, easily integrated OPPS. We remind hospitals that they
with drug administration services in the into the complexity of OPPS median should continue to take into
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multiple bills. We calculated measures cost estimation, and simple to maintain consideration all costs associated with
of central tendency for packaging from year to year. We specifically providing HOPD services in establishing
percentages in the multiple bills or solicited methodologies for creation of their charges for the services. In
portions of multiple bills remaining single bills that meet these criteria. addition, hospitals should report
after ‘‘pseudo’’ singles were created. We We received several public comments packaged HCPCS codes and charges,
referred to this group of the multiple with regard to the use of data from consistent with all CPT, OPPS, and local

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contractor instructions, whenever those we calculated CCRs was the hospital- codes demonstrating significant IPPS
services are provided to ensure that the specific departmental level. expenditures and utilization. RTI
associated costs are included in Following the expiration of most assessed the correlation between cost
ratesetting for the major services. medical devices from pass-through report CCRs and the percent of charges
As we have stated previously status in CY 2003, prior to which in a cost center attributable to a set of
regarding our exploration of specific devices were paid at charges reduced to similar services represented by a group
packaging algorithms, we have found cost using the hospital’s overall CCR, we of revenue codes. RTI did not examine
that these approaches, while resource- received comments that our OPPS cost the correlation between CCRs and
intensive on our part, have limited estimates for device implantation revenue codes without significant IPPS
power to generate additional single bill procedures systematically expenditures or a demonstrated
claims and do little to change median underestimate the cost of the devices concentration in a specific Diagnosis
cost estimates. We received no other included in the packaged payment for Related Group (DRG). For example, RTI
specific suggestions for other the procedures because hospitals did not examine revenue code groups
approaches to allocating packaged costs routinely mark up charges for low cost within the pharmacy cost center with
on ‘‘hardcore’’ multiple bills that would items to a much greater extent than they low proportionate inpatient charges that
be intuitive to the provider community, mark up high cost items, and that these might be important to the OPPS, such as
easily integrated into the complexity of items are often combined in a single ‘‘Pharmacy Incident to Radiology.’’ RTI
OPPS median cost estimation, and cost center on their Medicare cost states this limitation in its study and
simple to maintain from year to year. report. This is commonly known as specifically recommends that
We will continue to explore these data ‘‘charge compression.’’ disaggregated CCRs be reestimated for
challenges with the assistance of the In CY 2006, the device industry hospital outpatient charges.
commissioned a study to interpolate a Cost report CCRs combine both
Data Subcommittee of the APC Panel.
device specific CCR from the medical inpatient and outpatient services.
We believe that further progression
supply CCR, using publicly available Ideally, RTI would be able to examine
toward encounter-based or episode-
hospital claims and Medicare cost the correlation between CCRs for
based payment for commonly provided
report data rather than proprietary data Medicare inpatient services and
combinations of services could reduce
on device costs. After reviewing the inpatient claim charges and the
the number of these multiple claims and
device industry’s data analysis and correlation between CCRs for Medicare
incorporate additional claims data, as
study model, CMS contracted with RTI outpatient services and outpatient claim
discussed in section II.A.4.d. of this
International (RTI) to study the impact charges. However, the comprehensive
final rule with comment period
of charge compression on the cost-based nature of the cost report CCR (which
regarding low dose rate prostate weight methodology adopted in the FY combines inpatient and outpatient
brachytherapy and cardiac 2007 IPPS final rule, to evaluate this services) argues for an analysis of the
electrophysiologic evaluation and model, and to propose solutions. For correlation between CCRs and combined
ablation procedures. more information, interested inpatient and outpatient claim charges.
After consideration of the public individuals can view RTI’s report on the As noted, the RTI study accepted some
comments received, we are finalizing CMS Web site at: http:// measurement error in its analysis by
our CY 2008 proposal for the use of www.cms.hhs.gov/reports/downloads/ matching an ‘‘all charges’’ CCR to
single and multiple procedure claims Dalton.pdf. inpatient estimates of charges for groups
for ratesetting. We will continue to Any study of cost estimation in of similar services represented by
pursue additional methodologies that general, and charge compression revenue codes because of short
would allow use of cost data from specifically, has obvious importance for timelines and because inpatient costs
‘‘hardcore’’ multiple claims for both the OPPS and the IPPS. RTI’s dominate outpatient costs in many
ratesetting. research explicitly focused on the IPPS ancillary cost centers. We believe that
c. Calculation of CCRs for several reasons, which include CCR adjustments used to calculate
greater Medicare expenditures under the payment should be based on the
We calculated hospital-specific IPPS, a desire to evaluate the model comparison of cost report CCRs to
overall CCRs and hospital-specific quickly given IPPS regulation deadlines, combined inpatient and outpatient
departmental CCRs for each hospital for and a focus on other components of the charges. An ‘‘all charges’’ model would
which we had claims data in the period new FY 2007 IPPS cost-based weight reduce measurement error and estimate
of claims being used to calculate the methodology (CMS Contract No. 500– adjustments to disaggregated CCRs that
median costs that we converted to 00–0024–T012, ‘‘A Study of Charge could be used in both hospital inpatient
scaled relative weights for purposes of Compression in Calculating DRG and outpatient payment systems.
setting the OPPS payment rates. We Relative Weights,’’ page 5). The study RTI made several short-term
applied the hospital-specific CCR to the first addressed the possibility of cross- recommendations for improving the
hospital’s charges at the most detailed aggregation bias in the CCRs used to accuracy of DRG weight estimates from
level possible, based on a revenue code estimate costs under the IPPS created by a cost-based methodology to address
to cost center crosswalk that contains a the IPPS methodology of aggregating bias in combining cost centers and
hierarchy of CCRs used to estimate costs cost centers into larger departments charge compression that could be
from charges for each revenue code. before calculating CCRs. The report also considered in the context of OPPS
That crosswalk is available for review addressed potential bias created by policy. We discussed each
and continuous comment on the CMS estimating costs using a CCR that recommendation within the context of
Web site at: http://www.cms.hhs.gov/ reflects the combined costs and charges the OPPS and provided our assessment
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HospitalOutpatientPPS/ of services with wide variation in the of its application to the OPPS in the CY
03_crosswalk.asp#TopOfPage. We amount of hospital markup. In its 2008 OPPS/ASC proposed rule (72 FR
calculated CCRs for the standard and assessment of the latter, RTI targeted its 42642). Of the four short term
nonstandard cost centers accepted by attempt to identify the presence of recommendations, we believe that only
the electronic cost report database. In charge compression to those cost centers the recommendation to establish
general, the most detailed level at which presumably associated with revenue regression based estimates as a

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temporary or permanent method for There are several reasons why we did costs of devices, implants, and drugs
disaggregating national average CCRs for not propose to use the under the CY 2008 OPPS. Other
medical supplies, drugs, and radiology intradepartmental regression-based commenters urged CMS not to apply
services under the IPPS has specific CCRs that RTI estimated using IPPS this charge compression adjustment
application to the OPPS (RTI study, charges for the CY 2008 OPPS methodology to diagnostic radiology
pages 11 and 86). Moreover, with regard estimation of median costs. We agree services because the application of the
to radiology services, the OPPS already with RTI that the intradepartmental methodology to these capital intensive
has partially implemented RTI’s CCRs calculated for the IPPS would not procedures has not been fully validated
recommendation to use lower CCRs to always be appropriate for application to and would benefit from additional
estimate costs for those OPPS services the OPPS (RTI study, pages 34 and 35). analysis. The commenters who
allocated to MRI or CT Scan cost centers While RTI recommends that the model supported the application of the
through its use of hospital-specific CCRs be recalibrated for outpatient charges adjustment methodology for CY 2008
for nonstandard cost centers. before it is applied to the OPPS, we asserted that CMS should disregard the
For reasons discussed below and in believed that the combined nature of the fact that the estimated regression-based
more detail in the proposed rule (72 FR CCRs available from the cost report CCRs were calculated using only
42642 through 42643), we proposed to prevents an accurate outpatient inpatient charge data because the
develop an all charges model that would recalibration that would be appropriate commenters had found that using
compare variation in CCRs with for the OPPS alone. Therefore, we inpatient or outpatient charges yielded
variation in combined inpatient and believed that an all charges model similar CCR estimates for implantable
outpatient charges for sets of similar examining an expanded subset of devices and all other supplies. These
services and establish disaggregated revenue codes would be the most commenters believed that CMS should
regression-based CCRs that could be appropriate, and that this model should accept the RTI findings that were based
applied to both inpatient and outpatient be developed before we could apply the on inpatient charges alone and apply
charges. We proposed to evaluate the resulting regression based CCRs to the them to the calculation of median costs
results of that methodology for purposes charges for supplies paid under the for all OPPS weights. They explained
of determining whether the resulting OPPS. that CMS could consider further
regression-based CCRs should be Moreover, we were concerned that refinements to the methodology in
proposed for use in developing the CY implementing the regression-based IPPS future years, such as estimating the
related CCRs in the OPPS that RTI regression-based CCRs using either
2009 OPPS payment rates. As noted in
estimated for CY 2008 could result in outpatient or combined charges, but that
the proposed rule (72 FR 42642), the
greater instability in relative payment CMS should not delay implementing
revised all charges model and resulting
weights for CY 2008 than would this important change as it evaluates an
regression-based CCRs were not
otherwise occur, and that a subsequent all charges model.
available in time for use in developing
change to application of the regression- Some commenters who supported the
this final rule with comment period.
based CCRs resulting from development application of the adjustment for CY
Since publication of the proposed of an all charges model might also result 2008 also stated that the most glaring
rule, we have contracted with RTI to in significant fluctuations in median cases of charge compression occur with
determine whether the statistical model costs and increased instability in high cost implantable devices that are
that RTI recommended in its January payments from CY 2008 to CY 2009. reported by hospitals with low cost
2007 report for adjusting CCRs in Therefore, these sequential changes supplies in the same supply cost center.
inpatient cost computations can be could result in significant increases in They asserted that the need for analysis
expanded to include cost computations median costs in one year and significant of the extent of a problem in other cost
for significant categories of outpatient declines in median costs in the next centers should not stop CMS from
services that are paid under the OPPS year. applying the estimated regression-based
and to assess the impact of any such Therefore, we did not propose to CCRs for CY 2008 to charges for medical
changes on payment under the OPPS adopt the RTI regression-based CCRs supplies, drugs, and radiology services.
(HHSM 500–2005–00029I Task Order under the CY 2008 OPPS. As indicated One commenter submitted a set of
0008, ‘‘Refining Cost-to-Charge Ratios in the proposed rule (72 FR 42643), we revised weights for all APCs reflecting
for Calculating APC and DRG Relative stated that we would consider whether regression-based CCRs for implantable
Payment Weights’’). Under this task it would be appropriate to adopt devices and all other supplies, as well
order, RTI will assess the validity of the regression-based CCRs for the OPPS as its assumptions in developing the
revenue code-to-cost center crosswalk after we received RTI’s comprehensive weights, and asked that CMS review the
used under the OPPS by comparing review of the OPPS cost estimation results. Some commenters stated that if
revenue code and cost center charges, methodology and reviewed the results CMS decides not to implement the RTI
make recommendations for changes to of the use of both inpatient and recommendations for regression-based
the crosswalk, and assess the OPPS use outpatient charges across all payers to CCRs for CY 2008, it should ensure that
of nonstandard cost centers. RTI will reestimate regression-based CCRs. an all charges model is implemented in
estimate regression-based CCRs using We received many public comments both the IPPS and the OPPS for CY 2009
charge data from both inpatient and on the issue of application of the through a joint IPPS/OPPS task force.
outpatient claims for hospital ancillary disaggregated CCRs that RTI estimated Some commenters believed that CMS
departments. RTI will extend its using regression analysis to calculate should either implement the regression-
recommended models to estimate payments for the CY 2008 OPPS. A based adjustments in CY 2008 or begin
regression-based CCRs for cost centers summary of the public comments and a transition to them over a period of 2
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that are particularly relevant to APCs, our responses follow. to 3 years.


working with CMS staff to analyze the Comment: The commenters made a The MedPAC recommended that CMS
sensitivity of APC weights to proposed number of requests for the CY 2008 use the RTI’s estimated disaggregated,
adjustments. RTI also will convene a OPPS. Some commenters asked regression-based CCRs for medical
technical expert panel to review specifically that CMS use the RTI supplies, drugs, and radiology as part of
analyses, as it did for its first study. regression-based CCRs to calculate the the OPPS ratesetting process for CY

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2008. It stated that, although the with significant supply packaging. In conclusion, we believe that it is
application of the regression based CCR Adoption of regression-based CCRs important that the initial RTI estimation
estimates is not a perfect solution to the could interact with other potential of regression-based CCRs be replicated
problem of charge compression, the changes to the APC payment groups with the inclusion of hospital outpatient
possibility of payment inaccuracies is under the OPPS. Budget neutrality charges, that the study examine the
sufficiently serious that CMS should adjustments could further increase the current OPPS revenue code-to-cost
implement this imperfect solution. The magnitude of these observed center crosswalk and the use of
MedPAC also recommended that if CMS differences. We believe that these nonstandard cost centers, and that the
prefers to await the results of the all significant redistributional effects analysis focus on the cost centers that
charges model and chooses not to would have to be confirmed through have significant hospital outpatient
correct for the effects of charge CMS analysis, modeled, and made charges. Regression-based CCRs may
compression under the CY 2008 OPPS, available for public comment should have potential to address issues of
CMS must do so for the CY 2009 OPPS. CMS decide to adopt regression-based charge compression under the OPPS
Response: While the RTI CCRs. and possible mismatches between how
recommendations for regression-based Third, we anticipate overall changes costs and charges are reported in the
CCRs may have the potential to address to our cost estimation methodology in cost reports and on OPPS claims.
issues of charge compression raised in the future, including changes to the However, given the potential resulting
the public comments about OPPS cost- revenue code-to-cost center crosswalk change in APC weights and
based weights, we are not sufficiently and use of nonstandard cost centers. We redistributional impact, we believe we
convinced that we should adopt the believe that a comprehensive review of would need to apply regression-based
regression-based CCR estimates for the cost estimation is an appropriate time to CCRs in all areas eligible for an
CY 2008 OPPS from the January 2007 explore the potential use of adjustment, as well as implement
RTI short-term recommendations for disaggregated CCRs for the OPPS. For appropriate crosswalk refinements, in
several reasons. First, the focus of the example, if we implemented only select order to not under-or overvalue relative
RTI study on inpatient charges did more regression-based CCRs or crosswalk weights within the system. We continue
than just restrict the regression model refinements, we could inappropriately to have concerns about premature
dependent variables to inpatient redistribute weight within the system. adoption of regression-based CCRs
percentages. The study also limited the without the benefit of knowing how
Finally, as noted in the FY 2008 IPPS
cost centers addressed to those where they would interact with other APC
the inpatient charges comprised a final rule (72 FR 47192 through 47200),
despite commenters’ support for the changes. We further believe that such
significant portion of the cost center methodological changes would need to
charges and substantially contributed to disaggregated CCRs developed from
regression analysis, we remain be proposed, including presentation of
the DRGs. The RTI analysis did not our assessment of the possible impact of
examine cost centers that have a much concerned about the accuracy of using
regression-based estimates to determine the methodology and solicitation of
greater proportion of outpatient charges, public comment. Once we have received
and as such, are particularly important relative weights rather than the
Medicare cost report. This is especially the results of RTI’s evaluation, we will
to APC weights, while also potentially analyze the findings and then consider
having a residual import for DRG weight true for the OPPS, given the potential
redistribution of resource costs among whether it could be appropriate to
calculations as well. propose to use regression-based CCRs
Second, adoption of regression-based services. One commenter noted that
poor capital allocation to MRI and CT under the OPPS. Once we have
CCRs in this final rule with comment
Scan revenue code charges could completed our analysis, we will then
period would produce significant
changes to the proposed APC payment explain the observed differences in examine whether the educational
rates beyond those already introduced CCRs for these services, and a activities being undertaken by the
with our CY 2008 packaging approach. regression-based adjustment based on hospital community to improve cost
The lengthy discussion of public incorrect capital allocation would be reporting accuracy under the IPPS
comments to our proposed packaging equally inaccurate. As discussed in the would help to mitigate charge
approach in section II.A.4. of this final FY 2008 IPPS final rule (72 FR 47196), compression under the OPPS, either as
rule with comment period reflects the we fully support voluntary educational an adjunct to the application of
public concern raised by a modest initiatives to improve uniformity in regression-based CCRs or in lieu of such
change in the methodology for reporting costs and charges on the cost an adjustment. After the conclusion of
estimating APC relative weights. report. Participation in these our analysis of the RTI evaluation and
Disaggregating drug and supply cost educational initiatives by hospitals is our review of hospital educational
centers clearly would redistribute voluntary. Hospitals are not required to activities, we will then determine
hospitals’ resource costs among relative change how they report costs and whether any refinements should be
weights for different APCs. Estimated charges if their current cost reporting proposed.
APC median costs calculated using practices are consistent with rules and Comment: One commenter indicated
regression-based CCRs for implantable regulations and applicable instructions. that the standard hospital accounting
devices and all other supplies, which However, both the IPPS and OPPS methodology for treatment of high
were furnished by one commenter, relative weight estimates will benefit capital costs, including the costs of
showed increases for some services of as from any steps taken to improve cost expensive nonmovable radiology
high as 28 percent, such as APC 0418 reporting. To the extent allowed under equipment, results in CCRs for radiology
(Insertion of Left Ventricular Lead). current regulations and cost report services that understate the true costs of
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Others would decline by as much as 11 instructions, we encourage hospitals to radiology services because the high
percent, including APC 0674 (Prostate report costs and charges consistently capital costs are spread over all
Cryoablation) and APC 0086 (Level III with how the data are used to determine departments of the hospital on a square
Electrophysiologic Procedures). An relative weights. We believe this goal is footage basis. The commenter argued
adjusted ‘‘all other supply’’ CCR would of mutual benefit to both Medicare and that this understatement of the costs in
reduce the median cost of any service hospitals. the CCR for radiology-related

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departments results in calculated costs claims and hospital claims for clinical OPPS rates. If the most recent available
for radiology services that are too low laboratory services for persons who are cost report was submitted but not
because flawed CCRs are applied to the neither inpatients nor outpatients of the settled, we looked at the last settled cost
charges for the services provided by the hospital). report to determine the ratio of
radiology department. We then excluded claims with submitted to settled cost using the
Response: We will consider the issue condition codes 04, 20, 21, and 77. overall CCR, and we then adjusted the
as part of our assessment of CCRs over These are claims that providers most recent available submitted but not
the upcoming year, in the context of the submitted to Medicare knowing that no settled cost report using that ratio. We
RTI study as described earlier and the payment would be made. For example, calculated both an overall CCR and cost
ongoing work that the hospital industry providers submit claims with a center-specific CCRs for each hospital.
is undertaking with respect to cost condition code 21 to elicit an official We used the final overall CCR
reporting. denial notice from Medicare and calculation discussed in section II.A.1.c.
document that a service is not covered. of this final rule with comment period
2. Calculation of Median Costs
We then excluded claims for services for all purposes that required use of an
In this section of this final rule with furnished in Maryland, Guam, the U.S. overall CCR.
comment period, we discuss the use of Virgin Islands, American Samoa, and
claims to calculate the final OPPS We then flagged CAH claims, which
the Northern Mariana Islands because are not paid under the OPPS, and claims
payment rates for CY 2008. The hospital hospitals in those geographic areas are
OPPS page on the CMS Web site on from hospitals with invalid CCRs. The
not paid under the OPPS. latter included claims from hospitals
which this final rule with comment We divided the remaining claims into
period is posted provides an accounting without a CCR; those from hospitals
the three groups shown below. Groups
of claims used in the development of paid an all-inclusive rate; those from
2 and 3 comprise the 108 million claims
the final rates on the CMS Web site at: that contain hospital bill types paid hospitals with obviously erroneous
http://www.cms.hhs.gov/ under the OPPS. CCRs (greater than 90 or less than
HospitalOutpatientPPS. The accounting 1. Claims that were not bill types 12X, .0001); and those from hospitals with
of claims used in the development of 13X, 14X (hospital bill types), or 76X overall CCRs that were identified as
this final rule with comment period is (CMHC bill types). Other bill types are outliers (3 standard deviations from the
included on the Web site under not paid under the OPPS and, therefore, geometric mean after removing error
supplemental materials for the CY 2008 these claims were not used to set OPPS CCRs). In addition, we trimmed the
final rule with comment period. That payment. CCRs at the cost center (that is,
accounting provides additional detail 2. Claims that were bill types 12X, departmental) level by removing the
regarding the number of claims derived 13X, or 14X (hospital bill types). These CCRs for each cost center as outliers if
at each stage of the process. In addition, claims are hospital outpatient claims. they exceeded +/-3 standard deviations
below we discuss the files of claims that 3. Claims that were bill type 76X from the geometric mean. We used a
comprise the data sets that are available (CMHC). (These claims are later four tiered hierarchy of cost center CCRs
for purchase under a CMS data user combined with any claims in item 2 to match a cost center to every possible
contract. Our CMS Web site, http:// above with a condition code 41 to set revenue code appearing in the
www.cms.hhs.gov/ the per diem partial hospitalization rate outpatient claims, with the top tier
HospitalOutpatientPPS, includes determined through a separate process.) being the most common cost center and
information about purchasing the For the CCR calculation process, we the last tier being the default CCR. If a
following two OPPS data files: ‘‘OPPS used the same general approach as we hospital’s cost center CCR was deleted
Limited Data Set’’ and ‘‘OPPS used in developing the final APC rates by trimming, we set the CCR for that
Identifiable Data Set.’’ These files are for CY 2007, using the revised CCR cost center to ‘‘missing’’ so that another
available for both the claims that were calculation which excluded the costs of cost center CCR in the revenue center
used to calculate the proposed payment paramedical education programs and hierarchy could apply. If no other cost
rates for the CY 2008 OPPS and also for weighted the outpatient charges by the center CCR could apply to the revenue
the claims that were used to calculate volume of outpatient services furnished code on the claim, we used the
the final payment rates for the CY 2008 by the hospital. We refer readers to the hospital’s overall CCR for the revenue
OPPS. CY 2007 OPPS/ASC final rule with code in question. For example, if a visit
As proposed, we used the following comment period for more information was reported under the clinic revenue
methodology to establish the relative (71 FR 67983 through 67985). We first code, but the hospital did not have a
weights used in calculating the OPPS limited the population of cost reports to clinic cost center, we mapped the
payment rates for CY 2008 shown in only those for hospitals that filed hospital-specific overall CCR to the
Addenda A and B to this final rule with outpatient claims in CY 2006 before clinic revenue code. The hierarchy of
comment period. This methodology is determining whether the CCRs for such CCRs is available for inspection and
as follows: hospitals were valid. comment on the CMS Web site: http://
We then calculated the CCRs for each www.cms.hhs.gov/
a. Claims Preparation cost center and the overall CCR for each HospitalOutpatientPPS. We then
We used hospital outpatient claims hospital for which we had claims data. converted the charges to costs on each
for the full CY 2006, processed before We did this using hospital-specific data claim by applying the CCR that we
June 30, 2007, to set the final relative from the Healthcare Cost Report believed was best suited to the revenue
weights for CY 2008. To begin the Information System (HCRIS). We used code indicated on the line with the
calculation of the relative weights for the most recent available cost report charge. Table 4 of the proposed rule
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CY 2008, we pulled all claims for data, in most cases, cost reports for CY contained a list of the revenue codes we
outpatient services furnished in CY 2005. As proposed, for this final rule proposed to package. Revenue codes not
2006 from the national claims history with comment period, we used the most included in Table 4 were those not
file. This is not the population of claims recently submitted cost reports to allowed under the OPPS because their
paid under the OPPS, but all outpatient calculate the CCRs to be used to services could not be paid under the
claims (including, for example, CAH calculate median costs for the CY 2008 OPPS (for example, inpatient room and

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board charges), and thus charges with groups. We defined major procedures as purposes of median cost calculations.
those revenue codes were not packaged any procedure having a status indicator We proposed to define ‘‘other’’ services
for creation of the OPPS median costs. of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X;’’ defined minor as HCPCS codes that had a status
One exception is the calculation of procedures as any code having a status indicator other than those defined as
median blood costs, as discussed in indicator of ‘‘N;’’ and classified ‘‘other’’ majors or minors.
section X. of this final rule with procedures as any code having a status We received several public comments
comment period. indicator other than ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ ‘‘X,’’ regarding our proposal to continue to
Thus, we applied CCRs as described or ‘‘N.’’ For the CY 2007 OPPS proposed process OPPS claims for a separately
above to claims with bill types 12X, rule limited data set and identifiable paid drug or device that did not also
13X, or 14X, excluding all claims from data set, these definitions excluded report a procedural HCPCS code with a
CAHs and hospitals in Maryland, Guam, claims on which hospitals billed drugs status indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or
the U.S. Virgin Islands, American and devices without also reporting ‘‘X.’’ A summary of the public
Samoa, and the Northern Mariana separately paid procedure codes and, comments and our responses follow.
Islands and claims from all hospitals for therefore, those public use files did not Comment: Several commenters
which CCRs were flagged as invalid. contain all claims used to calculate the requested that we adopt the
We identified claims with condition drug and device frequencies and recommendation of the APC Panel that
code 41 as partial hospitalization medians. We corrected this for the CY CMS edit and return for correction
services of hospitals and moved them to 2007 OPPS/ASC final rule with claims that contained a HCPCS code for
another file. These claims were comment period limited data set and a separately paid drug or device but that
combined with the 76X claims identifiable data set by extracting claims did not also report a HCPCS code with
identified previously to calculate the containing drugs and devices from the a status indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or
partial hospitalization per diem rate. set of ‘‘other’’ claims and adding them ‘‘X.’’ These commenters believed that
We then excluded claims without a to the public use files. this process would generally improve
HCPCS code. We moved to another file hospitals’ coding and charging
claims that contained nothing but At its March 2007 meeting, the APC practices. One commenter indicated
influenza and pneumococcal Panel recommended that CMS edit and that, under some circumstances, a
pneumonia (‘‘PPV’’) vaccines. Influenza return for correction claims that contain hospital may bill for a diagnostic
and PPV vaccines are paid at reasonable a HCPCS code for a separately paid drug radiopharmaceutical that is
cost and, therefore, these claims are not or device but that also do not contain a administered on one day but may not
used to set OPPS rates. We note that the HCPCS code assigned to a procedural report the associated nuclear medicine
separate file containing partial APC (that is, those not assigned status procedure on the same claim because
hospitalization claims is included in the indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X’’). The the procedure would be provided
files that are available for purchase as APC Panel stated that this edit should several days later. In this case, the bill
discussed above. Unlike years past, we improve the claims data and may for the diagnostic radiopharmaceutical
did not create a separate file of claims increase the number of single bills would include no other services with a
containing observation services because available for ratesetting. We noted that status indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X’’
we are packaging all observation care for such an edit would be broader than the because the administration of the
the CY 2008 OPPS. device-to-procedure code edits we radiopharmaceutical would be
We next copied line-item costs for implemented for CY 2007 for selected considered to be a part of the nuclear
drugs, blood, and brachytherapy sources devices, and we solicited comments on medicine study.
(the lines stay on the claim, but are the impact of establishing such edits on Response: We have accepted this
copied onto another file) to a separate hospital billing processes and related recommendation in selective situations.
file. No claims were deleted when we potential improvements to claims data. We currently edit claims in the
copied these lines onto another file. In the CY 2008 proposed rule (72 FR Outpatient Code Editor (OCE) for
These line-items are used to calculate a 42645), we explained that in view of the selected devices for which our data
per unit mean and median and a per day prior public comments and our desire to show that hospitals have a history of
mean and median for drugs, ensure that the public data files reporting the HCPCS device code but
radiopharmaceutical agents, blood and contained all appropriate data, for the not reporting the HCPCS procedure
blood products, and brachytherapy CY 2008 OPPS, we proposed to define code that is necessary for the device to
sources, as well as other information majors as HCPCS codes that have a have therapeutic benefit. See the device-
used to set payment rates, such as a status indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or to-procedure edits on the OPPS Web
unit-to-day ratio for drugs. ‘‘X.’’ We proposed to define minors as page at http://www.cms.hhs.gov/
HCPCS codes that have a status HospitalOutpatientPPS/. Moreover, as
b. Splitting Claims and Creation of indicator of ‘‘F,’’ ‘‘G,’’ ‘‘H,’’ ‘‘K,’’ ‘‘L,’’ or discussed in more detail in section
‘‘Pseudo’’ Single Claims. ‘‘N’’ but, as discussed above, to make II.A.4.c.(5) of this final rule with
We then split the claims into five single bills out of any claims for single comment period, effective for dates of
groups: single majors, multiple majors, procedures with a minor code that also service on or after January 1, 2008, we
single minors, multiple minors, and has an APC assignment. This ensured will implement OCE edits for diagnostic
other claims. (Specific definitions of that the claims that contained only nuclear medicine services that will
these groups follow below.) In years HCPCS codes for drugs and biologicals require that a HCPCS code for a
prior to the CY 2007 OPPS, we made a or devices but that did not contain diagnostic radiopharmaceutical must be
determination about whether each codes for procedures were included in on the claim for the claim to be
HCPCS code was a major code or a the limited data set and the identifiable processed to payment. Claims will be
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minor code or a code other than a major data set. It also ensured that returned to the provider for correction if
or minor code. We used those code- conditionally packaged services they contain a nuclear medicine service
specific determinations to sort claims proposed to receive separate payment but the hospital does not also report a
into the five groups identified above. only when they were billed without any radiopharmaceutical on the same claim.
For the CY 2007 OPPS, we used status other separately payable OPPS services We will continue to assess the need for
indicators to sort the claims into these would be treated appropriately for OCE edits based upon the unique

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circumstances of individual services or proposed rule were those codes that we we changed the status indicator on the
categories of services. identified as ‘‘special’’ packaged codes, line to the status indicator of the APC
In the CY 2008 proposed rule (72 FR where we proposed that a hospital to which the code was assigned,
42645), we explained our continued would receive separate payment for converting the service from a single
belief that using status indicators, with providing one unit of a service when the minor to a single major. This created
the proposed changes, was an ‘‘special’’ packaged code appears on the ‘‘natural’’ single bills for the ‘‘STVX-
appropriate way to sort the claims into same day on a claim without another packaged’’ codes. In the case of multiple
these groups and also to make our service that was assigned status ‘‘STVX-packaged’’ codes reported on a
process more transparent to the public. indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X.’’ We claim on the same date of service but
We further believed that this proposed proposed to package payment for these without a major separately paid
method of sorting claims would HCPCS codes when the code appears on procedure (that is, ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or
enhance the public’s ability to derive the same date of service on a claim with ‘‘X’’), we first identified the ‘‘STVX-
useful information for analysis and any other service that was assigned packaged’’ code with the highest CY
public comment on the proposed rule. status indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X.’’ 2007 OPPS payment weight. We then
We used status indicator ‘‘Q’’ in In response to public comments as changed the status indicator on the line
Addendum B to the proposed rule to discussed in detail in section II.A.4. of to the status indicator of the APC to
identify services that would receive this final rule with comment period, we which this particular code was assigned,
separate HCPCS code-specific payment refined the proposed methodology for converting the service from a single
when specific criteria are met, and paying claims that contain ‘‘special’’ minor to a single major, and we forced
payment for the individual service packaged codes with status indicator the units to be one to conform with our
would be packaged in all other ‘‘Q’’ when there is a major separately policy of paying only one unit of a ‘‘Q’’
circumstances. We proposed several paid procedure on the claim for the status service. We extracted these claims
different sets of criteria to determine same date and when there are multiple from the multiple minors to create
whether separate payment would be ‘‘special’’ packaged codes with status ‘‘pseudo’’ single bills. We summed all
made for specific services. For example, indicator ‘‘Q’’ but no major procedure costs on the claim and associated the
we proposed that HCPCS code G0379 on the claim. This last and largest subset resulting cost with the payable ‘‘STVX-
(Direct admission of patient for hospital of conditionally packaged services, packaged’’ code that had the highest CY
observation care) be assigned status referred to as ‘‘special’’ packaged codes 2007 OPPS payment weight. We used
indicator ‘‘Q’’ in Addendum B to the in the proposed rule, had to be natural and ‘‘pseudo’’ single procedure
proposed rule because we proposed that integrated into the identification of claims for ‘‘STVX-packaged’’ codes to
it receive separate payment only if it is single and multiple bills for ratesetting set the median costs for the APCs to
billed on the same date of service as to ensure that the costs for these which the codes were assigned when
HCPCS code G0378 (Hospital services were appropriately packaged they would be separately paid.
observation service, per hour), without when they appeared with any other
any services with status indicator ‘‘T’’ or separately paid service or paid We modified this methodology for the
‘‘V’’ or Critical Care (APC 0617). We separately when appearing by ‘‘T-packaged’’ codes (imaging
also proposed to assign the specific themselves. supervision and interpretation services
services in the proposed composite We handled these ‘‘special’’ packaged in CY 2008) because our final CY 2008
APCs discussed in section II.A.4.d. of ‘‘Q’’ status codes in the data for this payment policy for these services differs
the proposed rule status indicator ‘‘Q’’ final rule with comment period by from the policy for ‘‘STVX-packaged’’
in Addendum B to the proposed rule assigning the HCPCS code an APC and codes. Although we treated all ‘‘special’’
because we proposed that their payment a data status indicator of ‘‘N.’’ This gives packaged codes as ‘‘STVX-packaged’’
would be bundled into a single all special packaged codes an initial codes in the proposed rule, in this final
composite payment for a combination of status of ‘‘minor’’ that is changed, when rule with comment period, ‘‘T-
major procedures under certain appropriate, through the split process. packaged’’ services are packaged only
circumstances. As proposed, these We identified two subsets of the when they appear with a service with a
services would only receive separate ‘‘special’’ packaged codes for the status indicator of ‘‘T’’ on the same date;
code-specific payment if certain criteria purpose of payment and ratesetting. otherwise, ‘‘T packaged’’ services are
were met. The same is true for those less Imaging supervision and interpretation paid separately. We assessed all claims
intensive outpatient mental health ‘‘special’’ packaged codes are now for the presence of ‘‘T packaged’’
treatment services for which payment named ‘‘T-packaged’’ codes. All other services and determined their final
would be limited to the partial ‘‘special’’ packaged codes are referred to payment disposition, packaged or
hospitalization per diem rate and which as ‘‘STVX-packaged’’ codes. When an separately paid, prior to splitting the
also were assigned status indicator ‘‘Q’’ ‘‘STVX-packaged’’ code appeared with a claims into single and multiple majors
in Addendum B to the proposed rule. HCPCS code with a status indicator of and minors. When a ‘‘T-packaged’’ code
According to longstanding OPPS ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X’’ on the same date appeared with a HCPCS code with a
payment policy (65 FR 18455), payment of service, it retained its minor status status indicator of ‘‘T’’ on the same date
for these individual mental health and was treated as a packaged code and of service, the ‘‘T-packaged’’ code was
services is bundled into a single received a status indicator of ‘‘N.’’ The treated as a packaged code and retained
payment, APC 0034 (Mental Health costs that appeared on the lines with its minor status and a status indicator of
Services Composite), when the sum of these codes were packaged into the cost ‘‘N.’’ Otherwise, we designated a ‘‘T-
the individual mental health service of the HCPCS code with a status packaged’’ service that would be
payments for all of those mental health indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X’’ in the separately paid by identifying the ‘‘T-
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services provided on the same day single bills and contributed to the packaged’’ code on the date of service
would exceed payment for a day of median cost for the primary service with with the highest CY 2007 payment
partial hospitalization services. which they appeared. When the ‘‘STVX weight. We changed the status indicator
However, the largest number of specific packaged’’ code appeared by itself, on the line of the ‘‘T-packaged’’ code
HCPCS codes identified by status without other special packaged codes on with the highest CY 2007 payment
indicator ‘‘Q’’ in Addendum B to the the same claim, and had a unit of one, weight to the status indicator of the APC

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to which the code was assigned, Specifically, we divided the major file, the multiple major file, and
converting it from a single minor to a remaining claims into the following five the multiple minor file.
single major. We forced the units to be groups: We set aside the single minor,
one to conform with our policy of 1. Single Major Claims: Claims with a multiple minor, and non-OPPS claims
paying only one unit of a service with single separately payable procedure (numbers 3, 4, and 5 above) because we
a status indicator of ‘‘Q.’’ Any remaining (that is, status indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ did not use these claims in calculating
‘‘T-packaged’’ codes appearing on the or ‘‘X’’). Claims with one unit of a status median costs of procedural APCs. We
same date of service retained their indicator ‘‘Q’’ code that was an ‘‘STVX- then used the bypass codes listed earlier
minor status and a status indicator of packaged’’ code or ‘‘T-packaged’’ code in Table 1 and discussed in section
‘‘N.’’ In the single and ‘‘pseudo’’ single where there was no code on the claim II.A.1.b. of this final rule with comment
bills, the costs that appeared on the with status indicator ‘‘S,’’ ‘‘T,’’ ‘‘ V,’’ or period to remove separately payable
lines with these codes were packaged ‘‘X,’’ or ‘‘T,’’ respectively. procedures that we determined
2. Multiple Major Claims: Claims with contained limited or no packaged costs
into the cost of the HCPCS code with a
more than one separately payable or that were otherwise suitable for
status indicator of ‘‘T.’’ The remaining
procedure (that is, status indicator ‘‘S,’’ inclusion on the bypass list from a
claims, ‘‘T-packaged’’ services on claims ‘‘T,’’ ‘‘V,’’ or ‘‘X’’), or multiple units of multiple procedure bill. When one of
with another service with a status one payable procedure. As discussed the two separately payable procedures
indicator of ‘‘S,’’ ‘‘V,’’ or ‘‘X’’ on the below, some of these were used in on a multiple procedure claim was on
same date, became multiple majors. The median setting. These claims included the bypass list, we split the claim into
bypass process for breaking multiple those with a status indicator ‘‘Q’’ code two ‘‘pseudo’’ single procedure claim
major claims created additional that was a ‘‘T-packaged’’ code and no records. The single procedure claim
‘‘pseudo’’ single bills for the ‘‘T- procedure with a status indicator ‘‘T’’ record that contained the bypass code
packaged’’ codes that had been on the same date of service. We also did not retain packaged services. The
converted to major status. When the ‘‘T- included in this set claims that single procedure claim record that
packaged’’ code appeared by itself with contained one unit of one code when contained the other separately payable
packaged services and one unit, we the bilateral modifier was appended to procedure (but no bypass code) retained
changed the status indicator on the line the code and the code was conditionally the packaged revenue code charges and
to the status indicator of the APC to or independently bilateral. In these the packaged HCPCS code charges. We
which the code was assigned, cases, the claims represented more than then examined the multiple major
converting the service to a single major one unit of the service described by the claims for dates of service to determine
procedure. In the case of multiple ‘‘T- code, notwithstanding that only one if we could break them into ‘‘pseudo’’
packaged’’ codes reported on a claim on unit was billed. single procedure claims using the dates
the same date of service but without a 3. Single Minor Claims: Claims with a of service on all lines on the claim. If
major separately paid procedure (‘‘S,’’ single HCPCS code that was assigned we could create claims with single
‘‘T,’’ ‘‘V,’’ or ‘‘X’’), we summed all costs status indicator ‘‘F,’’ ‘‘G,’’ ‘‘H,’’ ‘‘K,’’ major procedures by using dates of
on the claim, associated the resulting ‘‘L,’’ or ‘‘N’’ and was not an ‘‘STVX- service, we created a single procedure
cost with the ‘‘T-packaged’’ or ‘‘STVX- packaged’’ or ‘‘T packaged code.’’ claim record for each separately paid
packaged’’ code that had the highest 4. Multiple Minor Claims: Claims with procedure on a different date of service
2007 OPPS payment weight, and forced multiple HCPCS codes that were (that is, a ‘‘pseudo’’ single).
the units to one. We extracted these assigned status indicator ‘‘F,’’ ‘‘G,’’ ‘‘H,’’ We also removed lines that contained
claims from the multiple minors to ‘‘K,’’ ‘‘L,’’ or ‘‘N.’’ This set included multiple units of codes on the bypass
created new single bills. These ‘‘STVX packaged’’ and ‘‘T-packaged’’ list and treated them as ‘‘pseudo’’ single
processes created ‘‘natural’’ and codes with more than one unit of the claims by dividing the cost for the
‘‘pseudo’’ single bills for the ‘‘T- code or more than one line of these multiple units by the number of units
packaged’’ codes that were then used to codes on the same date of service. As on the line. Where one unit of a single,
set the median cost for each specific noted above, we created ‘‘pseudo’’ separately paid procedure code
code and for the APCs to which the singles from some of these claims when remained on the claim after removal of
codes would be assigned when they we broke the claim by date, packaged the multiple units of the bypass code,
were separately paid. the costs into the code with the highest we created a ‘‘pseudo’’ single claim
CY 2007 payment weight, and forced from that residual claim record, which
We added the logic necessary to deal the units to one to match our payment retained the costs of packaged revenue
with these codes as part of the split of policy of paying one unit. codes and packaged HCPCS codes. This
the claims into the five groups defined 5. Non-OPPS Claims: Claims that enabled us to use claims that would
below and in our review of the multiple contained no services payable under the otherwise be multiple procedure claims
minor claims. We evaluated the ‘‘T- OPPS (that is, all status indicators other and could not be used. We excluded
packaged’’ codes that had been on the than those listed for major or minor those claims that we were not able to
bypass list to see if they might be status). These claims were excluded convert to single claims even after
eligible for continuation on the list, as from the files used for the OPPS. Non- applying all of the techniques for
these codes would appear with their OPPS claims have codes paid under creation of ‘‘pseudo’’ singles. Among
final payment disposition in the other fee schedules, for example, those excluded were claims that
multiple majors. However, we durable medical equipment or clinical contained codes that were viewed as
determined that none of these codes laboratory tests, and do not contain independently or conditionally bilateral
should be returned to the bypass list either a code for a separately paid and that contained the bilateral modifier
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because their associated packaging service or a code for a packaged service. (Modifier 50 (Bilateral procedure))
under their CY 2008 ‘‘Q’’ payment The claims listed in numbers 1, 2, 3, because the line-item cost for the code
status exceeded the empirical criteria and 4 above were included in the data represented the cost of two units of the
designed to limit error in the allocation files that can be purchased as described procedure, notwithstanding that the
of packaged costs through the bypass above. ‘‘STVX-packaged’’ and ‘‘T- code appeared with a unit of one.
process. packaged’’ codes appear in the single Therefore, the charge on the line

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represented the charge for two services II.A.4. of this final rule with comment million whole claims (93 percent of
rather than a single service and using period for a more complete discussion approximately 58 million potentially
the line as reported would have of the final packaging changes for CY usable claims) to create approximately
overstated the cost of a single 2008. 97 million single and ‘‘pseudo’’ single
procedure. We also excluded (1) claims that had claims, of which we used 96 million
zero costs after summing all costs on the single bills (after trimming out just over
c. Completion of Claim Records and claim and (2) claims containing 900,000 claims as discussed below) in
Median Cost Calculations packaging flag number 3. Effective for the CY 2008 median development and
We then packaged the costs of services furnished on or after July 1, ratesetting.
packaged HCPCS codes (codes with 2004, the OCE assigned packaging flag We used the remaining claims to
status indicator ‘‘N’’ listed in number 3 to claims on which hospitals calculate the CY 2008 median costs for
Addendum B to the proposed rule and submitted token charges for a service each separately payable HCPCS code
the costs of those lines for ‘‘Q’’ status with status indicator ‘‘S’’ or ‘‘T’’ (a and each APC. The comparison of
services that retained status indicator major separately paid service under the HCPCS and APC medians determines
‘‘N’’ through the split process as OPPS) for which the fiscal intermediary the applicability of the ‘‘2 times’’ rule.
described above) and packaged revenue was required to allocate the sum of Section 1833(t)(2) of the Act provides
codes into the cost of the single major charges for services with a status that, subject to certain exceptions, the
procedure remaining on the claim. indicator equaling ‘‘S’’ or ‘‘T’’ based on items and services within an APC group
The final list of packaged revenue the weight of the APC to which each cannot be considered comparable with
codes is shown in Table 2 below. At its code was assigned. We did not believe respect to the use of resources if the
March 2007 meeting, the APC Panel that these charges, which were token highest median (or mean cost, if elected
recommended that CMS review the final charges as submitted by the hospital, by the Secretary) for an item or service
list of packaged revenue codes for were valid reflections of hospital in the group is more than 2 times greater
consistency with OPPS policy and resources. Therefore, we deleted these than the lowest median cost for an item
ensure that future versions of the OCE claims. We also deleted claims for or service within the same group (‘‘the
edit accordingly. We compared the which the charges equaled the revenue 2 times rule’’). Finally, we reviewed the
packaged revenue codes in the OCE to center payment (that is, the Medicare medians and reassigned HCPCS codes to
the final list of packaged revenue codes payment) on the assumption that where different APCs where we believed that
for the CY 2007 OPPS (71 FR 67989 the charge equaled the payment, to it was appropriate. Section III. of this
through 67990) that we used for apply a CCR to the charge would not final rule with comment period includes
packaging costs in median calculation. yield a valid estimate of relative a discussion of certain HCPCS code
As a result of that analysis, we stated in provider cost. assignment changes that resulted from
the CY 2008 OPPS/ASC proposed rule For the remaining claims, we then examination of the medians and for
(72 RF 42646) that we accepted the APC standardized 60 percent of the costs of other reasons. The APC medians were
Panel’s recommendation and we the claim (which we have previously recalculated after we reassigned the
proposed to change the list of packaged determined to be the labor-related affected HCPCS codes. Both the HCPCS
revenue codes for the CY 2008 OPPS in portion) for geographic differences in medians and the APC medians were
the following manner. First, we labor input costs. We made this weighted to account for the inclusion of
proposed to remove revenue codes 0274 adjustment by determining the wage multiple units of the bypass codes in the
(Prosthetic/Orthotic devices) and 0290 index that applied to the hospital that creation of ‘‘pseudo’’ single bills.
(Durable Medical Equipment) from the furnished the service and dividing the In the CY 2008 proposed rule (72 FR
list of packaged revenue codes because cost for the separately paid HCPCS code 42646), we explained that in our review
we do not permit hospitals to report furnished by the hospital by that wage of median costs for HCPCS codes and
implantable devices in these revenue index. As has been our policy since the their assigned APCs, we had frequently
codes (Internet Only Manual 100–4, inception of the OPPS, we used the pre noticed that some services were
Chapter 4, section 20.5.1.1). We also reclassified wage indices for consistently rarely performed in the
specifically proposed to add revenue standardization because we believed hospital outpatient setting for the
code 0273 (Take Home Supplies) to the that they better reflected the true costs Medicare population. In particular,
list of packaged revenue codes because of items and services in the area in there were a number of services, such as
we believed that the charges under this which the hospital was located than the several procedures related to the care of
revenue code were for the incidental post reclassification wage indices and, pregnant women, that had annual
supplies that hospitals sometimes therefore, would result in the most Medicare claims volume of 100 or fewer
provided for patients who were accurate unadjusted median costs. occurrences. By definition, these
discharged at a time when it was not We also excluded claims that were services also had a small number of
possible to secure the supplies needed outside 3 standard deviations from the single bills from which to estimate
for a brief time at home. We proposed geometric mean of units for each HCPCS median costs. In addition, in some
to conform the list of packaged revenue code on the bypass list (because, as cases, these codes had been historically
codes in the OCE to the OPPS for CY discussed above, we used claims that assigned to clinical APCs where all the
2008. We made these changes in the contain multiple units of the bypass services were low volume. Therefore,
calculation of the CY 2008 OPPS codes). the median costs for these services and
payment rates. The final CY 2008 After removing claims for hospitals APCs often fluctuated from year to year,
packaged revenue codes are displayed with error CCRs, claims without HCPCS in part due to the variability created by
in Table 2 below. codes, claims for immunizations not such a small number of claims. One of
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We packaged the costs of the HCPCS covered under the OPPS, and claims for the benefits of basing payment on the
codes that were shown with status services not paid under the OPPS, median cost of many HCPCS codes with
indicator ‘‘N’’ into the cost of the approximately 58 million claims were sufficient single bill representation in an
independent service to which the left for this final rule comment period. APC is that such fluctuation would be
packaged service was ancillary or Of these 58 million claims, we were able moderated by the increased number of
supportive. We refer readers to section to use some portion of approximately 54 observations for similar services on

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which the APC median cost was also payment rate to change by more than 5 numbers of single bills where we could
based. We considered proposing a percent from one year to the next. do so. We received no public comments
distinct methodology for calculation of Response: There are a number of that objected to our proposal to
the median cost of low total volume factors pertinent to the OPPS that cause eliminate a number of very low volume
APCs in order to provide more stability median costs to change from one year to APCs; therefore, we are adopting these
in payment from year to year for these the next. Some of these are a reflection reconfigurations for CY 2008. We
low total volume services. However, of hospital behavior, and some of them recognize that changes to payment
after examination of the low total are a reflection of fundamental policies, such as the packaging of
volume OPPS services and their characteristics of the OPPS as defined in payment for ancillary and supportive
assigned APCs, we concluded that there statute. For example, the OPPS payment services and the implementation of
were other clinical APCs with higher rates are based on hospital cost report composite APCs, may contribute to
volumes of total claims to which these and claims data. However, hospital volatility in payment rates in the short
low total volume services could be costs and charges change each year and term, but we believe that larger payment
reassigned, while ensuring the this results in both changes to the CCRs packages and bundles will help to
continued clinical and resource taken from the most currently available stabilize payments in future years by
homogeneity of the clinical APCs to cost reports and also differences in the enabling us to use more claims data and
which they would be newly reassigned. charges on the claims that are the basis by establishing payments for larger
Therefore, we believed that it would be of the calculation of the median costs on groups of services.
more appropriate to reconfigure clinical which OPPS rates are based. Similarly, Comment: A commenter stated that
APCs to eliminate most of the low total hospitals adjust their mix of services CMS should crosswalk revenue code
volume APCs. We observed that these from year to year by offering new 0278 (Other implants, under the
low volume services differed from other services and ceasing to furnish services Medical/Surgical Supplies category) to
OPPS services only because they were or changing the proportion of the cost center 3540 (Prosthetic Devices),
not often furnished to the Medicare various services they furnish, which has which generally represents higher cost
population. Therefore, we proposed to impact on the CCRs that we derive from technology, instead of crosswalking it to
reconfigure certain clinical APCs for CY their cost reports. CMS cannot stabilize cost center 5500 (Medical Supplies
2008 as a way to promote stability and these hospital-driven fundamental Charge to Patient), which often
appropriate payment for the services inputs to the calculation of OPPS represents lower cost items. The
assigned to them, including low total payment rates. Moreover, there are other commenter indicated that this change to
volume services. We believed that these essential elements of the OPPS which the revenue code-to-cost center
proposed reconfigurations maintained contribute to the changes in relative crosswalk would result in improved
APC clinical and resource homogeneity. weights each year. These include, but estimates of the costs of the devices
We proposed these changes as an are not limited to, reassignments of billed under revenue code 0278 and,
alternative to developing specific HCPCS codes to APCs to rectify 2 times therefore, would result in more accurate
quantitative approaches to treating low violations as required by the law, to payments.
total volume APCs differently for address the costs of new services, and Response: We will carefully examine
purposes of median calculation. to respond to public comments. the implications of making this change
Specifically, we proposed that 3 APCs Moreover, for some services, we cannot in the future. However, for CY 2008 this
(all of which are New Technology APCs) avoid using small numbers of claims, change would have a negligible effect on
would have a total volume of services either because the volume of services is the median costs for services with
less than 100, and only 17 APCs would naturally low or because the claims data charges reported under revenue code
have a total volume of less than 1,000, do not facilitate the calculation of a 0278. Only 20 providers out of 4,201 in
in comparison with CY 2007 where 9 median cost for a single service. Where the file of the 2005–2006 cost reports
APCs (including 3 New Technology there are small numbers of claims to be used cost center 3540.
APCs) had a total volume of less than used in median calculation, there is Comment: Some commenters asked
100 and 36 APCs had a total volume of more volatility in the median cost from that CMS provide an adjustment for
less than 1,000. In this final rule with one year to the next. Lastly, changes to medical education costs under the OPPS
comment period, 3 APCs (all New OPPS payment policy (for example, because so much of the costs of teaching
Technology APCs) have a total volume changes to packaging) also contribute to services are being incurred in the HOPD
of less than 100 and 15 APCs have a some extent to the fluctuations in the as many of the services previously
total volume of less than 1,000. OPPS payment rates for the same furnished only in the inpatient setting
We received a number of public service from year to year. are now being furnished in the HOPD.
comments on our proposed process for We cannot avoid the naturally The commenters stated that CMS
calculating the median costs on which occurring volatility in the cost report indicated that it would study the costs
our payment rates are based. A and claims data that hospitals submit and payment differential among
summary of the pubic comments and and on which the payment rates are different classes of providers in the
our responses follow. based. Moreover (with limited April 7, 2000 OPPS final rule with
Comment: Some commenters objected exceptions), we are required by law to comment period but has not done so.
to the volatility of the OPPS rates from reassign HCPCS codes to APCs where it The commenters also asserted that
year to year. The commenters asserted is necessary to avoid 2 times violations. section 4523 of the BBA requires the
that the absence of stability in the OPPS However, we have made other changes Secretary to establish adjustments ‘‘as
rates creates budgeting, planning, and to resolve some of the other potential determined to be necessary to ensure
operating problems for hospitals, and reasons for instability from year to year. equitable payments * * * for certain
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that as more care is provided on an Specifically, we continue to seek ways classes of hospitals’’ and, therefore,
outpatient, rather than inpatient basis, to use more claims data so that we have CMS should study whether the hospital
the need for stable payment rates from fewer APCs for which there are small outpatient costs of teaching hospitals
one year to the next becomes more numbers of single bills used to set the are higher than the costs of other
important to hospitals. Some APC median costs. Moreover, we have hospitals for purposes of determining
commenters asked that CMS permit no tried to eliminate APCs with very small whether there should be a teaching

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hospital adjustment. The commenters impacts by class of hospital are between the extent to which efficiencies
explained that their internal analysis of displayed in Table 61 in section are incorporated into the median costs
2004 Medicare cost reports showed that XXIV.B. of this final rule with comment and the degree to which charge
the average outpatient margins were period. Therefore, we do not believe compression affects the median costs for
¥20.2 percent for major teaching that there is sufficient reason to develop imaging services. RTI’s study of charge
hospitals, ¥10.1 percent for other an adjustment to the OPPS payment to compression using inpatient charges
teaching hospitals, and ¥11.8 percent teaching hospitals for the CY 2008 found that use of regression adjusted
for non-teaching hospitals. They OPPS. CCRs would reduce the costs of
believed these findings demonstrated Comment: The MedPAC commented magnetic resonance imaging and
that the hospital outpatient costs of that while CMS proposed to apply a computed tomography services. This is
major teaching hospitals are multiple procedure reduction to one of the categories of hospital services
significantly greater than the costs of imaging services for CY 2006, CMS did that has high outpatient utilization.
other hospitals. The commenters not adopt this proposal as final but Over the coming year, as discussed
requested that CMS conduct its own stated that it would continue to study earlier in this section of this final rule
analysis, and added that if that analysis whether such a reduction was with comment period, we will explore
shows such a difference, CMS should appropriate. The MedPAC asked that through the RTI contract the results of
add a teaching adjustment to the OPPS. CMS continue to examine ways to including hospital outpatient charges to
improve payment accuracy for imaging determine regression-adjusted CCRs for
Response: Unlike payment under the services, including considering applying
IPPS, the law does not provide for calculation of the median costs for
a multiple procedure reduction to these imaging services. We believe that this
payment for indirect medical education services.
costs to be made through the OPPS. information could be useful in the
Response: The question of whether it reassessment of whether it would be
Section 1833(t)(2)(E) of the Act, as would be appropriate to apply a
added by section 4523 of the BBA, states appropriate to apply a multiple
multiple procedure reduction pertains procedure reduction to separately paid
that the Secretary shall establish, in a only to those imaging services for which
budget neutral manner ‘‘ * * * other imaging services.
we make separate payment. It is not an
adjustments as determined to be issue for packaged imaging services, A detailed discussion of the
necessary to ensure equitable payments, including the numerous imaging development of median costs for blood
such as adjustments for certain classes services that we are packaging for CY and blood products is included in
of hospitals.’’ We have not found such 2008 as part of our expanded payment section X. of this final rule with
an adjustment to be necessary to ensure bundles under the OPPS. The concern, comment period. A discussion of the
equitable payments to teaching therefore, is partially mitigated by our calculation of medians for APCs that
hospitals and, therefore, have not final CY 2008 packaging policies. require one or more implantable devices
developed such an adjustment. We do Commenters responding to the CY 2006 when the service is performed is
not believe an indirect medical proposal OPPS indicated that, in provided in section IV.A. of this final
education add-on payment is contrast to the MPFS payment rates, the rule with comment period. The
appropriate in a budget neutral payment hospital cost data used by CMS to set methodology for developing the median
system where such changes would payment rates for imaging services costs for composite APCs is included
result in reduced payments to all other already reflects savings due to the below in section II.A.4.d. of this final
hospitals. Furthermore, in this final rule efficiencies of performing multiple rule with comment period. A
with comment period, we have procedures during the same session and description of the methodology for
developed payment weights that we that the proposal to discount second calculating the median cost for partial
believe provide appropriate and and subsequent procedures would be hospitalization services is presented
adequate payment for the complex tantamount to discounting those below in section II.B. of this final rule
medical services, such as visits procedures twice (70 FR 68707). As we with comment period.
requiring prolonged observation, new indicated in our response to that After consideration of the public
technology services and device- comment, we were unable to disprove comments received, we are finalizing
dependent procedures, which we commenters’ contentions that there are our proposed CY 2008 methodology for
understand are furnished largely by already efficiencies included in calculating the median costs upon
teaching hospitals. Teaching hospitals hospitals’ costs and, therefore, in their which the CY 2008 OPPS payment rates
benefit from the recalibration of the CCRs and in the median costs on which are based, with the modifications
APCs and the changes to packaging that the OPPS payments are based (70 FR described earlier regarding the treatment
are implemented in this final rule with 68708). However, we believe it is of services which are assigned status
comment period. The final CY 2008 possible that there may be a relationship indicator ‘‘Q.’’

TABLE 2.—CY 2008 PACKAGED REVENUE CODES


Revenue code Description

0250 ................................................ PHARMACY.


0251 ................................................ GENERIC.
0252 ................................................ NONGENERIC.
0254 ................................................ PHARMACY INCIDENT TO OTHER DIAGNOSTIC.
0255 ................................................ PHARMACY INCIDENT TO RADIOLOGY.
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0257 ................................................ NONPRESCRIPTION DRUGS.


0258 ................................................ IV SOLUTIONS.
0259 ................................................ OTHER PHARMACY.
0260 ................................................ IV THERAPY, GENERAL CLASS.
0262 ................................................ IV THERAPY/PHARMACY SERVICES.
0263 ................................................ SUPPLY/DELIVERY.

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TABLE 2.—CY 2008 PACKAGED REVENUE CODES—Continued


Revenue code Description

0264 ................................................ IV THERAPY/SUPPLIES.


0269 ................................................ OTHER IV THERAPY.
0270 ................................................ M&S SUPPLIES.
0271 ................................................ NONSTERILE SUPPLIES.
0272 ................................................ STERILE SUPPLIES.
0273 ................................................ TAKE HOME SUPPLIES.
0275 ................................................ PACEMAKER DRUG.
0276 ................................................ INTRAOCULAR LENS SOURCE DRUG.
0278 ................................................ OTHER IMPLANTS.
0279 ................................................ OTHER M&S SUPPLIES.
0280 ................................................ ONCOLOGY.
0289 ................................................ OTHER ONCOLOGY.
0343 ................................................ DIAGNOSTIC RADIOPHARMS.
0344 ................................................ THERAPEUTIC RADIOPHARMS.
0370 ................................................ ANESTHESIA.
0371 ................................................ ANESTHESIA INCIDENT TO RADIOLOGY.
0372 ................................................ ANESTHESIA INCIDENT TO OTHER DIAGNOSTIC.
0379 ................................................ OTHER ANESTHESIA.
0390 ................................................ BLOOD STORAGE AND PROCESSING.
0399 ................................................ OTHER BLOOD STORAGE AND PROCESSING.
0560 ................................................ MEDICAL SOCIAL SERVICES.
0569 ................................................ OTHER MEDICAL SOCIAL SERVICES.
0621 ................................................ SUPPLIES INCIDENT TO RADIOLOGY.
0622 ................................................ SUPPLIES INCIDENT TO OTHER DIAGNOSTIC.
0624 ................................................ INVESTIGATIONAL DEVICE (IDE).
0630 ................................................ DRUGS REQUIRING SPECIFIC IDENTIFICATION, GENERAL CLASS.
0631 ................................................ SINGLE SOURCE.
0632 ................................................ MULTIPLE.
0633 ................................................ RESTRICTIVE PRESCRIPTION.
0681 ................................................ TRAUMA RESPONSE, LEVEL I.
0682 ................................................ TRAUMA RESPONSE, LEVEL II.
0683 ................................................ TRAUMA RESPONSE, LEVEL III.
0684 ................................................ TRAUMA RESPONSE, LEVEL IV.
0689 ................................................ TRAUMA RESPONSE, OTHER.
0700 ................................................ CAST ROOM.
0709 ................................................ OTHER CAST ROOM.
0710 ................................................ RECOVERY ROOM.
0719 ................................................ OTHER RECOVERY ROOM.
0720 ................................................ LABOR ROOM.
0721 ................................................ LABOR.
0732 ................................................ TELEMETRY.
0762 ................................................ OBSERVATION ROOM.
0801 ................................................ HEMODIALYSIS.
0802 ................................................ PERITONEAL DIALYSIS.
0803 ................................................ CAPD.
0804 ................................................ CCPD.
0809 ................................................ OTHER INPATIENT DIALYSIS.
0810 ................................................ ORGAN ACQUISITION.
0819 ................................................ OTHER ORGAN ACQUISITION.
0821 ................................................ HEMODIALYSIS COMP OR OTHER RATE.
0824 ................................................ MAINTENANCE 100%.
0825 ................................................ SUPPORT SERVICES.
0829 ................................................ OTHER HEMO OUTPATIENT.
0942 ................................................ EDUCATION/TRAINING.

3. Calculation of OPPS Scaled Payment APC 0601 a relative payment weight of five levels). We had historically used
Weights 1.00 and divided the median cost for the median cost of the middle level
Using the median APC costs each APC by the median cost for APC clinic visit APC (that is APC 0601
discussed previously, we calculated the 0601 to derive the relative payment through CY 2006) to calculate unscaled
final relative payment weights for each weight for each APC. weights because mid-level clinic visits
APC for CY 2008 shown in Addenda A Beginning with the CY 2007 OPPS, were among the most frequently
and B to this final rule with comment we standardized all of the relative performed services in the hospital
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period. In years prior to CY 2007, we payment weights to APC 0606 (Level 3 outpatient setting. As proposed for CY
standardized all the relative payment Clinic Visits) because we deleted APC 2008, to maintain consistency in using
weights to APC 0601 (Mid Level Clinic 0601 as part of the reconfiguration of the a median for calculating unscaled
Visit) because it was one of the most visit APCs. We chose APC 0606 as the weights representing the median cost of
frequently performed services in the base because APC 0606 was the middle some of the most frequently provided
hospital outpatient setting. We assigned level clinic visit APC (that is, Level 3 of services, we continued to use the

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median cost of the mid-level clinic APC, the recalibration adjustments discussed different approaches to prospective
proposed APC 0606, to calculate in sections II.A.1. and 2. of this final payment for hospital outpatient services
unscaled weights. Following our rule with comment period. were being considered, a variety of
standard methodology, but using the CY Section 1833(t)(14)(H) of the Act, as reports to Congress (June 1988,
2008 median for APC 0606, for CY 2008 added by section 621(a)(1) of Pub. L. September 1990, and March 1995)
we assigned APC 0606 a relative 108–173, states that ‘‘Additional discussed three major issues related to
payment weight of 1.00 and divided the expenditures resulting from this defining the unit of payment for the
median cost of each APC by the median paragraph shall not be taken into payment system, specifically the extent
cost for APC 0606 to derive the unscaled account in establishing the conversion to which clinically similar procedures
relative payment weight for each APC. factor, weighting and other adjustment should be grouped for payment
The choice of the APC on which to base factors for 2004 and 2005 under purposes and the logic that should be
the relative weights for all other APCs paragraph (9) but shall be taken into used for the groupings; the extent to
does not affect the payments made account for subsequent years.’’ Section which payment for minor, ancillary
under the OPPS because we scale the 1833(t)(14) of the Act provides the services associated with a significant
weights for budget neutrality. payment rates for certain ‘‘specified procedure should be packaged into a
Section 1833(t)(9)(B) of the Act covered outpatient drugs.’’ Therefore, single payment for the procedure
requires that APC reclassification and the cost of those specified covered (which we refer to as ‘‘packaging’’); and
recalibration changes, wage index outpatient drugs (as discussed in section the extent to which payment for
changes, and other adjustments be made V. of this final rule with comment multiple significant procedures or
in a manner that assures that aggregate period) is included in the budget multiple units of the same procedure
payments under the OPPS for CY 2008 neutrality calculations for the CY 2008 related to an outpatient encounter or to
are neither greater than nor less than the OPPS. We did not receive any public an episode of care should be bundled
aggregate payments that would have comments on the methodology for into a single unit of payment (which we
been made without the changes. To calculating scaled weights from the refer to as ‘‘bundling’’). Both packaging
comply with this requirement median costs for the CY 2008 OPPS. and bundling were presented as
concerning the APC changes, we Therefore, we are finalizing our approaches to creating incentives for
compared aggregate payments using the proposed methodology, without efficiency, with their potential policy
CY 2007 relative weights to aggregate modification, including updating of the disadvantages including inconsistency
payments using the CY 2008 final budget neutrality scaler for the final rule with other ambulatory fee schedules,
relative weights. This year, we included as proposed. reduced transparency of service-specific
payments to CMHCs in our comparison. payment, and the potential for hospitals
Based on this comparison, we adjusted 4. Changes to Packaged Services
shifting the delivery of packaged or
the relative weights for purposes of a. Background bundled services to delivery settings
budget neutrality. The final unscaled other than the hospital outpatient
relative payment weights were adjusted When the Medicare program was first
implemented, it paid for hospital department (HOPD).
by a weight scaler of 1.3226 for budget
neutrality. In addition to adjusting for services (inpatient and outpatient) based The OPPS, like other prospective
increases and decreases in weight due to on hospital-specific reasonable costs payment systems, relies on the concept
the recalibration of APC medians, the attributable to furnishing services to of averaging, where the payment may be
scaler also accounts for any change in Medicare beneficiaries. Later, the law more or less than the estimated costs of
the base, other than changes in volume was amended to limit payment to the providing a service or package of
which are not a factor in the weight lesser of the hospital’s reasonable cost services for a particular patient, but
scaler. The decline in the weight scaler or customary charges for services with the exception of outlier cases, it is
compared to the proposed weight scaler furnished to Medicare beneficiaries. adequate to ensure access to appropriate
of 1.3665 results largely from the Specific service-based methodologies care. Decisions about packaging and
refinement for this final rule with were then developed for certain types of bundling payment involve a balance
comment period of the proposed services, such as clinical laboratory tests between ensuring some separate
packaging policy to package imaging and durable medical equipment, while payment for individual services and
supervision and interpretation services payments for outpatient surgical establishing incentives for efficiency
only if they are reported on the same procedures and other diagnostic tests through larger units of payment. In
date of service as a HCPCS code that has were based on a blend of the hospital’s many situations, the final payment rate
a status indicator of ‘‘T.’’ This change aggregate Medicare costs for these for a package of services may do a better
both increased the median costs for services and Medicare’s payment for job of balancing variability in the
these imaging supervision and similar services in other ambulatory relative costs of component services
interpretation services and added a settings. While this mix of different compared to individual rates covering a
significant number of units for these payment methodologies was in use, smaller unit of service without
services that would be separately paid hospital outpatient services were packaging or bundling. Packaging
under the final CY 2008 policy. The growing rapidly following the payments into larger payment bundles
other factors that contributed to the implementation of the IPPS in 1983. promotes the stability of payment for
decline of the scaler from the proposed The brisk increase in hospital outpatient services over time, a characteristic that
rule to this final rule with comment services led to an interest in creating reportedly is very important to
period include the creation of the payment incentives to promote more hospitals. Unlike packaged services, the
observation composite APCs and the efficient delivery of hospital outpatient costs of individual services typically
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increase in the final CY 2008 payment services through a Medicare prospective show greater variation because the
rate for partial hospitalization services payment system for hospital outpatient higher variability for some component
compared to the proposed payment rate. services, and the final statutory items and services cannot be balanced
The final relative payment weights requirements for the OPPS were with lower variability for others and
listed in Addenda A and B to this final established by the BBA and the BBRA. because relative weights are typically
rule with comment period incorporate During the period of time when estimated using a smaller set of claims.

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When compared to service-specific percent increase in 4 years. Similarly, to use the least expensive item that
payment, packaging or bundling the percentage of CPT codes for meets the patient’s needs, rather than to
payment for component services may procedural services that receive routinely use a more expensive item.
change payment at the hospital level to packaged payment declined by over 10 Packaging also encourages hospitals to
the extent that there are systematic percent between CY 2003 and CY 2007. negotiate carefully with manufacturers
differences across hospitals in their Currently, the APC groups reflect a and suppliers to reduce the costs of
performance of the services included in modest degree of packaging, including purchased items and services or to
that unit of payment. Hospitals packaged payment for minor ancillary explore alternative group purchasing
spending more per case than payment services, inexpensive drugs, medical arrangements, thereby encouraging the
received would be encouraged to review supplies, implantable devices, capital- most economical health care. Similarly,
their service patterns to ensure that they related costs, operating and recovery packaging encourages hospitals to
furnish services as efficiently as room use, and anesthesia services. establish protocols that ensure that
possible. Similarly, we believe that Bundling payment for multiple services are furnished only when they
unpackaging services heightens the significant services provided in the are important and to carefully scrutinize
hospital’s focus on pricing individual same hospital outpatient encounter or the services ordered by practitioners to
services, rather than the efficient during an episode of care is not maximize the efficient use of hospital
delivery of those services. Over the past currently a common OPPS payment resources. Finally, packaging payments
several years of the OPPS, greater practice, because the APC groups into larger payment bundles promotes
unpackaging of payment has occurred generally reflect only the modest the stability of payment for services over
simultaneously with continued packaging associated with individual time. Packaging and bundling also may
tremendous growth in OPPS procedures or services. Unconditionally
reduce the importance of refining
expenditures as a result of increasing packaged services with HCPCS codes
service-specific payment because there
volumes of individual services, as are identified by the status indicator
is more opportunity for hospitals to
discussed in further detail below. Also ‘‘N.’’ Conditionally packaged services,
average payment across higher cost
discussed in further detail below, most specifically those services whose
cases requiring many ancillary services
recently in its comments to the CY 2007 payment is packaged unless specific
and lower cost cases requiring fewer
OPPS/ASC proposed rule and in the criteria for separate payment are met,
ancillary services.
context of this rapid spending growth, are assigned status indicator ‘‘Q.’’ To the
MedPAC encouraged CMS to broaden extent possible, hospitals may use b. Addressing Growth in OPPS Volume
the payment bundles under the OPPS to HCPCS codes to report any packaged and Spending
encourage providers to use resources services that were performed, consistent
efficiently. with CPT or CMS coding guidelines, but Creating additional incentives for
As permitted under section packaged costs also may be uncoded providing only necessary services in the
1833(t)(2)(B) of the Act, the OPPS and included in specific revenue code most efficient manner is of vital
establishes groups of covered HOPD charges. Hospitals include charges for importance to Medicare today, in view
services, namely APC groups, and uses packaged services on their claims, and of the recent explosion of growth in
them as the basic unit of payment. the costs associated with those packaged program expenditures for hospital
During the evolution of the OPPS over services are then added into the costs of outpatient services paid under the
the past 7 years, significant attention separately payable procedures on the OPPS. As illustrated in Table 3 below,
has been concentrated on service- same claims in establishing payment total spending has been growing at a
specific payment for services furnished rates for the separately payable services. rate of roughly 10 percent per year
to particular patients, rather than on Packaging and bundling payment for under the OPPS, and the Medicare
creating incentives for the efficient multiple interrelated services into a Trustees project that total spending
delivery of services through encounter single payment create incentives for under the OPPS will increase by more
or episode-of-care-based payment. providers to furnish services in the most than $3 billion from CY 2007 through
Overall packaging included in the efficient way by enabling hospitals to CY 2008 to nearly $35 billion.
clinical APCs has decreased, and the manage their resources with maximum Implementation of the OPPS has not
procedure groupings have become flexibility, thereby encouraging long- slowed outpatient spending growth over
smaller as the focus has shifted to term cost containment. For example, the past few years; in fact, double-digit
refining service-level payment. where there are a variety of supplies spending growth has generally been
Specifically, in the CY 2003 OPPS, there that could be used to furnish a service, occurring. We are greatly concerned
were 569 APCs, but by CY 2007, the some of which are more expensive than with this rate of increase in program
number of APCs had grown to 862, a 51 others, packaging encourages hospitals expenditures under the OPPS.

TABLE 3.–GROWTH IN EXPENDITURES UNDER OPPS FROM CY 2001–CY 2008


[Projected expenditures for CY 2006–CY 2008 in billions]

OPPS growth CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008

Incurred Cost ................................... 17.702 19.561 21.156 23.866 26.572 29.741 32.714 36.072
Percent Increase .............................. .................. 10.5 8.2 12.8 11.3 11.9 10.1 10.26
Based on the Midsession Review of the President’s FY 2008 Budget.
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As with the other Medicare fee-for- utilization of services is the major illustrates the increases in the volume
service payment systems that are reason for the current rates of growth in and intensity of hospital outpatient
experiencing rapid spending growth, the OPPS, rather than general price or services over the past several years.
brisk growth in the intensity and enrollment changes. Table 4 below

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TABLE 4.–PERCENTAGE INCREASE IN VOLUME AND INTENSITY OF HOSPITAL OUTPATIENT SERVICES


CY 2006 CY 2007 CY 2008
CY 2002 CY 2003 CY 2004 CY 2005 (Est.) (Est.) (Est.)

Percent Increase .................................................... 3.5 2.5 7.6 7.4 10.1 9.4 5.8
Based on the Midsession Review of the President’s FY 2008 Budget.

For hospital outpatient services, the toward those higher quality services (71 We described the CY 2009 program,
volume and intensity of services are FR 68189 through 68197). We believe which would be based upon CY 2008
estimated to have continued to increase that Medicare payments should hospital reporting of appropriate
significantly in recent years, at a rate of encourage physicians and other measures of the quality of hospital
10.1 percent between CY 2005 and CY providers in their efforts to achieve outpatient care that have been carefully
2006, the last two completed calendar better health outcomes for Medicare developed and evaluated, and endorsed
years. As we discussed in the CY 2007 beneficiaries at a lower cost. In the CY as appropriate, with significant input
OPPS/ASC final rule with comment 2007 OPPS/ASC final rule with from stakeholders. We reiterated our
period (71 FR 68189 through 68190), the comment period, we discussed the belief that ensuring that Medicare
rapid growth in utilization of services concept of ‘‘value-based purchasing’’ in beneficiaries receive the care they need
under the OPPS shows that Medicare is the OPPS as well as in other Medicare and that such services are of high
paying mainly for more services each payment systems. ‘‘Value-based quality are the necessary initial steps to
year, regardless of their quality or purchasing’’ may use a range of budget- incorporating value-based purchasing
impact on beneficiary health. In its neutral incentives to achieve identified into the OPPS. We explained that we are
March 2007 Report to Congress (pages quality and efficiency goals, as a means specifically seeking to encourage care
55 and 56), MedPAC confirmed that of promoting better quality of care and that is both efficient and of high quality
much of the growth in service volume more effective resource use in the in the HOPD.
from 2003 to 2005 resulted from Medicare payment systems. In Subsequent to the publication of the
increases in the number of services per developing the concept of value-based CY 2007 OPPS/ASC final rule with
beneficiary who received care, rather purchasing for Medicare, we have been comment period, section 109(a) of the
than from increases in the number of working closely with stakeholder MIEA–TRHCA, which added section
beneficiaries served. MedPAC found partners. 1833(t)(19) to the Act, specifies that in
that while the rate of growth in service We continue to believe that the the case of a subsection (d) hospital
volume declined over that time period, collection and submission of (defined under section 1886(d)(1)(B) of
the complexity of services, defined as performance data and the public the Act as hospitals that are located in
the sum of the relative payment weights reporting of comparative information the 50 States or the District of Columbia
of all OPPS services divided by the are strong incentives for hospital other than those categories of hospitals
volume of all services, increased, and accountability in general and quality or hospital units that are specifically
that most of the growth was attributable improvement in particular, while excluded from the IPPS, including
to the insertion of devices and the encouraging the most efficient and psychiatric, rehabilitation, long-term
provision of complex imaging services. effective care. Measurement and care, children’s, and cancer hospitals or
MedPAC further found that regression reporting can focus the attention of hospital units) that does not submit to
analysis suggested that relatively hospitals and consumers on specific the Secretary the quality reporting data
complex hospital outpatient services goals and on hospitals’ performance required for CY 2009 and each
may be more profitable for hospitals relative to those goals. Development and subsequent year, the OPPS annual
than less complex services. In addition, implementation of performance update factor shall be reduced by 2.0
its analysis indicated that favorable measurement and reporting by hospitals percentage points. The quality reporting
payments for complex services give can thus produce quality improvement program proposed for CY 2008
hospitals an incentive to provide more in health care delivery. Hospital according to this provision is referred to
of those complex services rather than performance measures may also provide as the Hospital Outpatient Quality Data
fewer basic services, which increases a foundation for performance-based Reporting Program (HOP QDRP) and is
overall service complexity. MedPAC rather than volume-based payments. discussed in detail in section XVII. of
expressed concern about this In the CY 2007 OPPS/ASC final rule this final rule with comment period.
relationship and concluded that the with comment period, as a first step in As the next step in our movement
historically large increases in outpatient the OPPS toward value-based toward value-based purchasing under
volume and service complexity suggest purchasing, we finalized a policy that the OPPS and to complement the HOP
a need to recalibrate the OPPS. In the would employ our equitable adjustment QDRP for CY 2009, with measure
future, MedPAC plans to examine authority under section 1833(t)(2)(E) of reporting beginning in CY 2008, we
options for recalibrating the payment the Act to establish an OPPS Reporting believe it is important to initiate specific
system to accurately match payments to Hospital Quality Data for Annual payment approaches to explicitly
the costs of individual services Payment Update (RHQDAPU) program encourage efficiency in the hospital
(Medicare Payment Advisory based on measures specifically outpatient setting that we believe will
Commission Report to the Congress: developed to characterize the quality of control future growth in the volume of
Medicare Payment Policy, March 2007, outpatient care (71 FR 68197). We OPPS services. While the HOP QDRP
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pages 55 and 56). finalized implementation of the program will encourage the provision of higher
As proposed for the CY 2007 OPPS for CY 2009, when we would implement quality hospital outpatient services that
and finalized for the CY 2009 OPPS, we a 2.0 point reduction to the OPPS lead to improved health outcomes for
developed a plan to promote higher conversion factor update for those Medicare beneficiaries, we believe that
quality services under the OPPS, so that hospitals that do not meet the specific more targeted approaches are also
Medicare spending would be directed requirements of the CY 2009 program. necessary to encourage increased

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hospital efficiency. Two alternatives we growth in volume and program substantial financial risk but which
have considered that would be feasible spending with lower payments. would create incentives for efficiency
under current law include establishing In its October 6, 2006 letter of and volume control, while providing
a methodology to measure the growth in comment on the CY 2007 OPPS/ASC hospitals with flexibility to provide care
volume and reduce OPPS payment rates proposed rule, MedPAC urged us to in the most appropriate way for each
to account for unnecessary increases in establish broader payment bundles in Medicare beneficiary. We are
volume or developing payment both the revised ASC payment system considering the possibility of greater
incentives for hospitals to ensure that and the OPPS to promote efficient bundling of payment for major hospital
they provide necessary services as resource use and better align the two outpatient services, which could result
efficiently as possible. payment systems. In particular, our in establishing OPPS payments for
With respect to the first alternative, proposal for the CY 2008 revised ASC episodes of care, and for this reason we
section 1833(t)(2)(F) of the Act requires payment system proposed to package particularly welcome MedPAC’s
us to establish a methodology for payment for all items and services exploration of how such an approach
controlling unnecessary increases in the directly related to the provision of might be incorporated into the OPPS
volume of covered OPPS services, and covered surgical procedures into the payment methodology. We are
section 1833(t)(9)(C) of the Act ASC facility payment for the associated particularly concerned about the
authorizes us to adjust the update to the surgical procedure (71 FR 49468). These potential for shifting higher cost
conversion factor if, under section other items and services included all bundled services to other ambulatory
1833(t)(2)(F) of the Act, we determine drugs, biologicals, contrast agents, settings. We are currently considering
that there is growth in volume that implantable devices, and diagnostic the complex policy issues related to the
exceeds established tolerances. As we services such as imaging. Because a possible development and
indicated in the September 8, 1998 number of these items and services are implementation of a bundled payment
proposed rule proposing the separately paid under the OPPS and the policy for hospital outpatient services
establishment of the OPPS (63 FR proposal included the establishment of that involves significant services
47585), we considered creating a system most ASC payment weights based on provided over a period of time which
that mirrors the sustainable growth rate the procedures’ corresponding OPPS could be paid through an episode-based
(SGR) methodology applied to the MPFS payment weights, MedPAC encouraged payment methodology, but we consider
update to control unnecessary growth in us to align the payment bundles in the this possible approach to be a long-term
two payment systems by increasing the policy objective.
service volume. However, implementing
size of the payment bundles under the
such a system could have the We also are examining how we might
OPPS.
potentially undesirable effect of Moreover, MedPAC staff indicated in possibly establish payments for same-
escalating service volume as payment testimony at the January 9, 2007 day care encounters, building upon the
rates stagnate and hospital costs rise, MedPAC public meeting that the growth current use of APCs for payment
thus actually resulting in a growth in in OPPS spending and volume raises through greater packaging of supportive
volume rather than providing an questions about whether the OPPS ancillary services. This could include
incentive to control volume. Therefore, should be changed to encourage greater conditional packaging of supportive
this approach to addressing the volume efficiency (page 390 of the January 9, ancillary services into payment for the
growth under the OPPS could 2007 MedPAC meeting transcript procedure that is the reason for the
inadvertently result in the exact available at the Web site at: http:// OPPS encounter (for example,
opposite of our desired outcome. www.medpac.gov). MedPAC staff diagnostic tests performed on the day of
The second alternative we considered explained at that time that MedPAC a scheduled procedure). Another
is to expand the packaging of supportive intends to perform a long term approach could include creation of
ancillary services and ultimately bundle assessment of the design of the OPPS, composite APCs for frequently
payment for multiple independent including considering the bundling of performed combinations of surgical
services into a single OPPS payment. payments for procedures and visits procedures (for example, one APC
We believe that this would create furnished over a period of time into a payment for multiple cardiac
incentives for hospitals to monitor and single payment, assessing whether there electrophysiologic procedures
adjust the volume and efficiency of should be an expenditure target for performed on the same date). Not only
services themselves, by enabling them hospital outpatient services, evaluating could these encounter-based payment
to manage their resources with whether payments for multiple imaging groups create enhanced incentives for
maximum flexibility. Instead of external services provided in the same session efficiency, but they may also enable us
controls on volume, we believe that it is should be discounted, and reviewing to utilize for ratesetting many of the
preferable for the OPPS to create the methodology used by CMS to multiple procedure claims that are not
payment incentives for hospitals to determine relative payment weights for now used in our establishment of OPPS
carefully scrutinize their service hospital outpatient services. We rates for single procedures. (We refer
patterns to ensure that they furnish only welcome MedPAC’s study of these readers to section II.A.1.b. of this final
those services that are necessary for areas, particularly with regard to how rule with comment period for a more
high quality care and to ensure that they we might develop appropriate payment detailed discussion of the treatment of
provide care as efficiently as possible. rates for larger bundles of services. multiple procedure claims in the
Specifically, we believe that increased Because we believe it is important ratesetting process.) In the CY 2008
packaging and bundling are the most that the OPPS create enhanced OPPS/ASC proposed rule, we proposed
appropriate payment strategies to incentives for hospitals to provide only two new composite APCs for CY 2008
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establish such incentives in a necessary, high quality care and to payment of combinations of services in
prospective payment system, and that provide that care as efficiently as two clinical care areas, as discussed in
this approach is clearly preferable to the possible, we have given considerable section II.A.4.d. of this final rule with
establishment of an SGR or other thought to how we could increase comment period. In that section, we
methodology that seeks to control packaging under the OPPS in a manner summarize and respond to the public
spending by addressing significant that would not place hospitals at comments we received on this proposal

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as we explore the possibility of moving As an example of a previous change units of service, in development of the
toward basing OPPS payment on larger in the OPPS packaging status for a proposed rule, we examined whether
packages and bundles of services HCPCS code that is ancillary and there were categories of HCPCS codes
provided in a single hospital outpatient supportive, under the CY 2007 OPPS, that are typically ancillary and
encounter. we note that CPT code 93641 supportive to diagnostic and therapeutic
We intend to involve the APC Panel (Electrophysiologic evaluation of single modalities.
in our future exploration of how we can or dual chamber pacing cardioverter Specifically, as our initial substantial
develop encounter-based and episode- defibrillator leads including step toward creating larger payment
based payment groups, and we look defibrillation threshold evaluation groups for hospital outpatient care, in
forward to the findings and (induction of arrhythmia, evaluate of the CY 2008 OPPS/ASC proposed rule
recommendations of MedPAC in this sensing an pacing for arrhythmia (72 FR 42652), we proposed to package
area. This is a significant change in termination) at the time of initial payment for items and services in the
direction for the OPPS, and we implantation or replacement; with seven categories listed below into the
specifically seek the recommendations testing of single chamber or dual payment for the primary diagnostic or
of all stakeholders with regard to which chamber cardioverter defibrillator) went therapeutic modality to which we
ancillary services could be packaged from separate to packaged payment. believe these items and services are
and those combinations of services This service is only performed during typically ancillary and supportive. We
provided in a single encounter or over the course of a surgical procedure for specifically chose these categories of
time that could be bundled together for implantation or replacement of HCPCS codes for packaging because we
payment. We are hopeful that expanded implantable cardioverter-defibrillator believe that the items and services
packaging and, ultimately, greater (ICD) leads, and these surgical described by the codes in these
bundling under the OPPS may result in implantation procedures are currently categories are the HCPCS codes that are
sufficient moderation of growth in assigned to APC 0106 (Insertion/ typically ancillary and supportive to a
Replacement/Repair of Pacemaker and/ primary diagnostic or therapeutic
volume and spending that further
or Electrodes) and APC 0108 (Insertion/ modality and, in those cases, are an
controls would not be needed. However,
Replacement/Repair of Cardioverter- integral part of the primary service they
if spending were to continue to escalate
Defibrillator Leads). We considered the support. We proposed to assign status
at the current rates, even after we have
electrophysiologic evaluation service indicator ‘‘N’’ to those HCPCS codes
exhausted our options for increased
(CPT code 93641) to be an ancillary that we believe are always integral to
packaging and bundling, we are
supportive service that may be the performance of the primary
considering multiple options under our
performed only in the same operative modality and to package their costs into
authority to address these issues.
session as a procedure that could the costs of the separately paid primary
c. Packaging Approach otherwise be performed independently services with which they are billed. We
of the electrophysiologic evaluation proposed to assign status indicator ‘‘Q’’
With the exception of the two to those HCPCS codes that we believe
composite APCs that we proposed for service. In this particular case, the APC
Panel recommended for CY 2007 that are typically integral to the performance
CY 2008 and discuss in detail in section of the primary modality and to package
II.A.4.d. of this final rule with comment we package payment for this diagnostic
test, and we adopted that payment for their costs into the costs of
period, we indicated in the CY 2008 the separately paid primary services
OPPS/ASC proposed rule that we were recommendation for the CY 2007 OPPS.
with which they are usually billed but
not prepared to propose an episode- Making this payment change in this
to pay them separately in those
based or fully developed encounter- specific case resulted in the availability
uncommon cases in which no other
based payment methodology for CY of significantly more claims data and,
separately paid primary service is
2008 as our next step in value-based therefore, establishment of more valid
furnished in the hospital outpatient
purchasing for the OPPS. However, in and representative estimated median
encounter.
reviewing our approach to revising costs for the lead insertion and For ease of reference in our
payment packages and bundles for the electrophysiologic evaluation services subsequent discussion in each of the
proposed rule, we examined services furnished in the single hospital seven areas, we refer to the HCPCS
currently provided under the OPPS, encounter. codes for which we proposed to package
looking for categories of ancillary items In the case of much of the care (or conditionally package) payment as
and services for which we believed furnished in the HOPD, we believe that dependent services. We use the term
payment could be appropriately it is appropriate to view a complete ‘‘independent service’’ to refer to the
packaged into larger payment packages service as potentially being reported by HCPCS codes that represent the primary
for the encounter. For this first step in a combination of two or more HCPCS therapeutic or diagnostic modality into
creating larger payment groups, we codes, rather than a single code, and to which we are proposing to package
examined the HCPCS code definitions establish payment policy that supports payment for the dependent service. We
(including CPT code descriptors) to see this view. Ideally, we would consider a note that, in future years as we consider
whether there were categories of codes complete HOPD service to be the totality the development of larger payment
for which packaging would be a logical of care furnished in a hospital groups that more broadly reflect services
expansion of the longstanding outpatient encounter or in an episode of provided in an encounter or episode of
packaging policy that has been a part of care. In general, we believe that it is care, it is possible that we might
the OPPS since its inception. In general, particularly appropriate to package propose to bundle payment for a service
we have often packaged the costs of payment for those items and services that we now refer to as ‘‘independent’’
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selected HCPCS codes into payment for that are typically ancillary and in this final rule with comment period.
services reported with other HCPCS supportive into the payment for the Specifically, we proposed to package
codes where we believed that one code primary diagnostic or therapeutic the payment for HCPCS codes
reported an item or service that was modalities in which they are used. As describing the dependent items and
integral to the provision of care that was a significant first step towards creating services in the following seven
reported by another HCPCS code. payment units that represent larger categories into the payment for the

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independent services with which they medians typically do not reflect subtle rule with comment period for an
are furnished: changes in cost distributions. The OPPS’ explanation of the weight scaler.) In a
• Guidance services use of medians rather than means budget neutral system, the monies
• Image processing services usually results in relative weight previously paid for services that were
• Intraoperative services estimates being less sensitive to proposed to be packaged are not lost,
• Imaging supervision and packaging decisions. Specifically, the but are redistributed to all other
interpretation services median cost for a particular services. A higher weight scaler would
• Diagnostic radiopharmaceuticals independent procedure generally will increase payment rates relative to
• Contrast media be higher as a result of added packaging, observed median costs for independent
• Observation services but also could change little or be lower services by redistributing the lost weight
In the proposed rule, we identified
because median costs typically do not of packaged items that historically have
the HCPCS codes we proposed to
reflect small distributional changes and been paid separately and the lost weight
package for CY 2008, explained our
also because changes to the packaged when the median costs of independent
rationale for proposing to package the
HCPCS codes affect both the number services did not completely reflect the
codes in these categories, provided and composition of single bills and the full incremental cost of the packaged
examples of how HCPCS and APC mix of hospitals contributing those services. The impact of the cumulative
median costs and payments would single bills. Such a decline, no change, changes for the CY 2008 OPPS
change under these proposals, and or an increase in the median cost at the payments is discussed in section
discussed the impact of these changes HCPCS code level could result from a XXIV.B. of this final rule with comment
under each category, as follows: change in the number of single bills period.
The median costs of services at the We estimated that our CY 2008
used to set the median cost. With greater
HCPCS level for many separately paid packaging, more ‘‘natural’’ single bills packaging proposal would redistribute
procedures changed as a result of our are created for some codes but fewer approximately 1.2 percent of the
proposal because we proposed to ‘‘pseudo’’ single bills are created. Thus, estimated CY 2007 base year
change the composition of the payment some APCs gain single bills and some expenditures under the OPPS. The
packages associated with the HCPCS lose single bills due to packaging monies associated with this
codes. Moreover, as a result of changes changes, as well as to the reassignment redistribution were in addition to any
to the HCPCS median costs, we of some codes to different APCs. When increases that would otherwise occur
proposed to reassign some HCPCS codes more claims from a different mix of due to a higher median cost for the APC
to different clinical APCs for CY 2008 to providers are used to set the median as a result of the expanded payment
avoid 2 times violations and to ensure cost for the HCPCS code, the median package. If the relative weight for a
continuing clinical and resource cost could move higher or lower within particular APC decreased as a result of
homogeneity of the APCs. Therefore, the the array of per claim costs. the proposed packaging approach, the
proposed APC median costs changed Similarly, revisions to APC increased weight scaler may or may not
not only as a result of the increased assignments that are necessary to result in a relative weight that is equal
packaging itself but also as a result of resolve 2 times violations that could to or greater than the relative weight
the migration of HCPCS codes into and arise as a result of changes in the that would occur without the proposed
out of APCs through APC HCPCS median cost for one or more packaging approach. In general, the
reconfiguration. The file of HCPCS code codes due to additional packaging may packaging that we proposed would have
and APC median costs resulting from also result in increases or decreases to more effect on payment for some
our proposal is found under supporting APC median costs and, therefore, to services than on payment for others
documentation for the proposed rule on increases or decreases in the payments because the dependent items and
the CMS Web site at http:// for HCPCS codes that would not be services that we proposed for packaging
www.cms.hhs.gov/ otherwise affected except for the CY are furnished more often with some
HospitalOutpatientPPS/HORD/ 2008 proposed packaging approach for independent services than with others.
list.asp#TopOfPage. the seven categories of items and However, because of the amount of
Review of the HCPCS median costs services. payment weight that would be
for the proposed rule indicated that, We examined the aggregate impact of redistributed by our proposal, there
while the proposed median costs rise for making these proposed changes on would be some impact on payments for
some HCPCS codes as a result of payment for CY 2008 in the proposed all OPPS services whose rates are set
increased packaging that expands the rule. Because the OPPS is a budget based on payment weights, and the
costs included in the payment packages, neutral payment system in which the impact on any given hospital would
there are also cases in which the amount of payment weight in the vary based on the mix of services
proposed median costs decline as a system is annually adjusted for changes furnished by the hospital.
result of these proposed changes. While in expenditures created by changes in We received many, often widely
it seems intuitive to believe that the APC weights and codes (but is not diverging, public comments on the CY
proposed median costs of the remaining currently adjusted based on estimated 2008 proposed packaging approach. In
separately paid services should rise growth in service volume), the effects of many cases the comments were
when the costs of services previously the packaging changes we proposed generally applicable to the totality of the
paid separately are packaged into larger resulted in changes to scaled weights packaging proposal and, in other cases,
payment groups, it is more challenging and, therefore, to the proposed payment the same general comments were made
to understand why the proposed median rates for all separately paid procedures. but only with regard to a specific
costs of separately paid services would These changes resulted from both shifts category or set of services of interest to
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not change or would decline when the in median costs as a result of increased the commenter. We have addressed all
costs of previously paid services are packaging, changes in multiple similar public comments in the
packaged. procedure discounting patterns, and a discussion of general comments,
Medians are generally more stable higher weight scaler that was applied to whether they were made in general or
than means because they are less all unscaled APC weights. (We refer for specific categories of services,
sensitive to extreme observations, but readers to section II.A.3. of this final because the same response applies

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whether the comment was on packaging Some commenters supported the specified independent service. The
in general or on a specific service. We encounter-based or episode-based commenters stated that items and
have limited the summary of public payment, but asked that this approach services should be packaged only where
comments and our responses in the be based on single encounter only and there are substitutable services that
individual category discussions to not span a period of time, because they could be chosen by the hospital, and
issues that pertain only to the category believed that it would be very difficult that no packaging should occur where
or specific services within the category. to set rates for periods of recurring there is only one dependent service that
During the September 2007 APC services. The commenters supported use would be provided with the
Panel meeting, the APC Panel supported of multiple procedure claims and independent service.
packaging for contrast agents, image payment for combinations of services Some commenters contended that
processing services, guidance (except but encouraged CMS to carefully CMS should not implement the
for radiation oncology guidance evaluate the overall impact of packaging proposed packaging changes until after
procedures), diagnostic on all hospitals. Other commenters it implements an adjustment for charge
radiopharmaceuticals with a median per suggested that CMS package only compression because errors in the
day cost of less than $200, and services that are low cost and furnished proposed rates as a result of charge
intraoperative testing other than at a high frequency with the compression would result in too little
possibly for CPT code 96020 independent service. Several payment being packaged into the
(Neurofunctional testing selection and commenters stated that CMS should not independent service and would create
administration during noninvasive finalize the proposed packaging disincentives for hospital to furnish the
imaging functional brain mapping, with approach because it would lead to packaged services, thus harming
test administered entirely by a inappropriate payment, including both beneficiary access to advanced
physician or psychologist, with review overpayments and underpayments. technologies.
Several commenters asked that CMS Some commenters requested that
of test results and report). The Panel
delay the packaging approach for at CMS develop and propose a set of
recommended a delay in packaging for
least a year because they believed the criteria for packaging services that
imaging supervision and interpretation
proposed rule did not furnish sufficient would be open to public comment and
services because of excessive payment
data analysis in support of the proposal. that would control whether and, if so,
reductions that the Panel believed
They asserted that the aggregate impact when CMS could package payment for
would occur under the CMS proposal,
analysis provided no information that a service. The commenters stated that
particularly with regard to packaging
commenters could use to evaluate the the criteria in the proposed rule were
payment for those supervision and
individual codes proposed to be too vague, undefined, and subjective to
interpretation services that already identify which codes should be
packaged, making it impossible for the
include packaged injection services. The packaged. The commenters provided
public to determine how payment for
Panel did not support packaging of criteria that they believe should govern
services would be affected. Some
observation services, although it whether a service should be packaged.
commenters requested that CMS furnish
suggested that if CMS were to package The suggested criteria included, but
the same level of impact discussion for
observation, it should instead create a were not limited to, requiring that
each of the services in each of the
composite APC (or a group of composite packaging should only be adopted for
categories as it did for the composite
APCs) for observation and the related APCs. Other commenters asked CMS to high volume, low cost, minor and
visit services, without restriction to identify the percent of charges for ancillary services that are very
specific clinical conditions. The APC dependent services that were packaged frequently performed with the specified
Panel also recommended that CMS into each independent procedure, independent service; no packaging of
provide additional information in the identify all independent procedures into services that require specialized
CY 2008 final rule with comment period which cost was packaged from each equipment or devices; no packaging of
about packaging, including crosswalks packaged procedure, and identify the services that are only furnished in a
and information clarifying how newly cost of each procedure code with and small number of hospitals; no packaging
packaged services map back to primary without the proposed packaging. They of add-on services unless the service is
procedures. recommended that, before furnished with its base code at least 50
Comment: MedPAC generally implementing the proposed packaging, percent or 75 percent of the time;
supported the proposed packaging CMS publish all HCPCS and revenue packaging only when a service is being
because the services proposed for codes and the costs for each that enter packaged into a specified service and,
packaging are typically furnished on the into the consideration of packaging for therefore, no general packaging of
same day as a separately paid service every code proposed to be packaged. services into the service with which it
and there is little potential for them to The commenters believed that the lack is performed; no packaging unless CMS
be furnished on another date to avoid of transparency, together with late has provided the public with a full data
the effects of packaging. MedPAC availability of a correct OPPS proposed assessment of the effects of packaging
explained that packaging of observation rule claims data set, made it difficult to each service; and no packaging if the
services is logical because currently 70 determine whether packaged costs were median cost for the code exceeds an
percent of observation care is packaged. retained or lost in the median setting established amount.
MedPAC’s principal concern about the process. Other commenters suggested CMS not
proposed packaging of observation was Other commenters suggested that implement the proposed packaging
that this approach could result in CMS explicitly crosswalk packaged because the 60-day comment period
hospitals’ costs being higher than OPPS services to identified independent provided insufficient time for analysis
hsrobinson on PROD1PC76 with NOTICES

payments in some cases, and thereby services, rather than packaging payment and because the APC Panel
create an incentive for inpatient into the independent service with recommendations and report were not
admissions. It encouraged CMS to which the packaged services is billed on posted on the Web site immediately
carefully monitoring whether hospitals each claim. They asserted that no after the meeting.
change their behavior with regard to service should be packaged unless it is Response: We have reviewed all of the
inpatient admissions. furnished the majority of the time with public comments we received on the

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proposed packaging approach, and we service, and in other cases they are packaging approach because it will
have decided to finalize our proposal furnished with many independent ‘‘overpay’’ some services and
with significant modifications and services. Similarly, in some cases they ‘‘underpay’’ others. Payment based on a
refinements to address some of the are furnished frequently with measure of central tendency is also a
concerns raised by commenters on our independent services, and in some cases principle of any prospective payment
proposal to package payment for they are uncommonly furnished with system. In some cases, payment in an
diagnostic radiopharmaceuticals, independent services. individual case exceeds the average cost
imaging supervision and interpretation We believe that packaging should and in other cases payment is less than
services, contrast agents, and reflect the reality of how the services are the average cost, but on balance,
observation services. We refer readers to furnished and reported on claims by payment should approximate the
sections II.A.4.c.(4), (5), (6), and (7) of hospitals. We believe that nonspecific relative cost of the average case,
this final rule with comment period for packaging (as opposed to selected code recognizing that the OPPS, as created in
detailed discussion of these packaging) based on combinations of the statute, was not intended to pay the
modifications and section II.A.2 of this services observed on hospital claims is full cost of HOPD services.
final rule with comment period for fully appropriate because of the myriad We also do not agree that it would be
discussion of the changes we made to combinations of services that can be beneficial to delay the implementation
the data process in this regard. We are appropriately provided together. This of the proposed packaging approach for
finalizing our proposal for guidance, approach to packaging payment has a year because that would delay the
image processing, and intraoperative long existed in prospective payment implementation of incentives under the
services without substantial systems, including the OPPS. For OPPS for hospitals to look carefully at
modification. Table 10, which appears example, in the IPPS, Medicare’s oldest ways that they could provide care more
in section II.A.4., contains a prospective payment system, payment efficiently. We recognize that, as with
comprehensive list of all codes in the for all services furnished is packaged any payment policy, there will be
final seven categories for which we will into a single payment for an entire affected parties that will ask for changes
package payment either unconditionally hospital inpatient stay that is based on to the policy, and we are always willing
(to which we assign status indicator the diagnosis-related group (DRG) into to hear their concerns and to make
‘‘N’’) or conditionally, providing which the stay is categorized. The DRG changes if the changes are appropriate.
separate payment if certain criteria are payment packages together all payment Moreover, both APC and status
met (to which we assign status indicator for routine care, drugs, biologicals, indicator assignments are open to public
‘‘Q’’). There is a category of medical supplies, diagnostic tests, and comment each year in the proposed
conditionally packaged codes assigned all other covered services that were rule, and hence affected parties may
status indicator ‘‘Q,’’ which we provided to the patient, regardless of the provide their arguments for separate
previously referred to as ‘‘special’’ extent to which different patients in the payment as part of that process in the
packaged codes because their payment same DRG received somewhat different future.
services during their stay. We believe We further disagree that we should
was packaged when provided on the
that a similar approach to nonspecific delay or not finalize the proposed
same date as a service that was assigned
packaging under the OPPS is likewise packaging approach pending provision
status indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X.’’
fully appropriate. We have used this of the extensive data that the
These ‘‘special’’ packaged codes will
packaging approach for ratesetting commenters requested. We make
now be referred to as ‘‘STVX-packaged
throughout the history of the OPPS, and available a considerable amount of data
codes.’’ We have identified a new
note that payment for APC groups for public analysis each year and while
category of conditionally packaged we are not developing and providing the
currently reflects significant nonspecific
codes that are called ‘‘T-packaged extensively detailed information that
packaging in many cases. Similarly, we
codes,’’ whose payment is packaged the commenters request, we provide the
believe that it is appropriate to establish
when provided on the same date as public use files of claims and a detailed
under the OPPS a single payment for
another service that is assigned status narrative description of our data process
multiple independent procedures that
indicator ‘‘T.’’ The rationale for these that the public can use to perform any
are frequently furnished together. For
changes are discussed in detail below in desired analyses. While we
that reason, we are adopting five
section II.A.4.c.(4) of this final rule with composite APCs for CY 2008 and intend acknowledge that we needed to issue a
comment period. to explore developing others. second corrected file of claims data, the
We believe that it is appropriate and We do not agree with the commenters second file differed from the first only
fully consistent with the principles of a that we should not package a service in that it deleted a relatively small
prospective payment system to package unless it is a low cost ancillary and number of duplicate claims for
payment for ancillary and supportive supportive service that appears observation that would have been used
services into the payment for the frequently with an independent service. to calculate an APC rate for separately
independent service with which they To establish that policy would negate payable observation, had we proposed
are furnished as a means of making the concept of averaging that is an to pay separately for observation, and
payment for a more comprehensive underlying premise of a prospective hence we believe that the accidental
service package. Although separate payment system by packaging only inclusion of these duplicate claims for
payment will no longer be made for the services that will increase the payment observation care should have had little
packaged services, the payments for the for the independent service. To do that or no effect on the majority of studies
independent services with which they would also create incentives for of the HCPCS codes we proposed to
are furnished will reflect the costs of the hospitals to provide ancillary and package.
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packaged services to the extent that the dependent services that are higher cost With regard to the request for
packaged services are provided with the or historically were infrequently extensive data on all HCPCS codes we
independent service. We recognize that, furnished with an independent service proposed to package, it would not be
in some cases, certain supportive and and would remain separately paid. possible for us to anticipate the specific
ancillary dependent services are Similarly, we do not agree that we combinations of services of interest to
furnished with only one independent should not finalize the proposed the public. In addition, we believe that

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the commenters must examine the data appropriateness of using regression- certainly, if we were not to adopt
themselves to develop the specific adjusted CCRs to estimate OPPS costs. packaging of the additional services for
arguments to support their requests for We do not agree that we should CY 2008, the APC configurations,
changes to payments under the OPPS. develop and establish criteria with bypass list, single claims available for
We note that we pay hospitals under the stakeholder input before we finalize the ratesetting, and other important features
OPPS, and we showed the impact of the packaging proposal. Nor do we believe upon which the final median costs
CY 2008 packaging proposal on that the specific criteria the commenters depend would differ in significant ways
payment to different classes of hospitals recommended are appropriate for from those aspects under our final CY
in Table 67 of the proposed rule (72 FR determining when services should be 2008 policies.
42822 through 42824). We believe our packaged. The criteria that the Comment: A number of commenters
estimate of the impact of these changes commenters provided are focused disagreed with the CMS estimate of the
provided valuable information to the almost exclusively on preventing amount of payment that would be
hospitals that would receive packaged packaging, rather than on determining redistributed under the proposed rule.
payment for services that had been when packaging would be appropriate. The commenters indicated that the
previously paid separately under the We believe that packaging is appropriate services proposed to be newly packaged
OPPS. when the nature of a service is such that constitute 6 percent of the OPPS costs,
With regard to the public comments it is supportive and ancillary to another although CMS estimated that the
that we should explicitly crosswalk service, whether the dependent service packaging proposal would redistribute
packaged codes to the independent is frequently furnished with the 1.2 percent of the CY 2008 expenditures
codes into which the costs would be independent service or not and under the OPPS. They attributed the
packaged, we do not believe that this is regardless of the cost of the supportive difference in cost estimates to the
feasible, given the myriad combinations ancillary service. This is largely a methodology for applying status
of services that are furnished in the clinical decision based on the nature of indicator ‘‘Q.’’ The commenters
HOPD, nor is it consistent with the the service being considered for believed that the resulting impact
principles of a prospective payment packaging. analysis would be quite different from
Lastly, we do not agree that we should CMS’ estimated impact displayed in the
system, which bases payment on real
not implement the proposed changes proposed rule and, therefore, the
occurrences of services that are
because the commenters believed that implications of the policy are not fully
furnished by hospitals and reported on
the 60 day comment period was understood. They objected to packaging
claims. Moreover, creation of such a
insufficient or because the APC Panel of observation services in particular, but
crosswalk would undoubtedly result in
recommendations and report were not recommended that CMS reevaluate the
omissions of appropriate packaging of posted to the Web site immediately after entire packaging proposal in light of
services and would create a the public meeting. The 60 day methodological and data concerns.
maintenance task that would not be comment period is generally the Response: In the proposed rule, we
sustainable, given the number of standard comment period for the estimated that the proposed packaging
changes to HCPCS codes each year and proposed rule process. The availability approach would redistribute 1.2 percent
the ever changing way in which services of updated claims and cost report data of the CY 2007 base expenditures under
are furnished. Similarly, it is not necessary to develop the proposed rule the OPPS to other OPPS services as part
consistent with the concept of and issue the final rule for the OPPS of our budget neutrality adjustments for
packaging within a prospective payment precludes a longer period for comment. the proposed CY 2008 payment system.
system to package only those services Moreover, we do not believe that the This 1.2 percent is the aggregate
for which there are substitutes that Web site posting of the APC Panel payment weight reduction from the
could be furnished. In contrast, it is recommendations and report is packaging proposal, where the medians
fully consistent with the principles of a necessary for the public to provide are marginally less than the costs for the
prospective payment system for groups meaningful comments, in light of the individual services prior to packaging.
of services to package items and services fact that the APC Panel meeting is open This is not inconsistent with a finding
that are always furnished with an to the public. that the total cost of services proposed
independent service and for which there We are not accepting the to be packaged constitutes 6 percent of
are no substitutes. recommendation of the APC Panel to HOPD costs. These percentages measure
We also do not agree that we should provide information in this final rule different things. The first provides an
delay creation of larger payment with comment period clarifying how estimate of money redistributed to other
bundles through packaging until after newly packaged services map back to services and the second an estimate of
there is adjustment for charge primary procedures because we would the proportion of OPPS spending on
compression under the OPPS. As we be unable to display in a meaningful services addressed by the policy. We
discuss in section II.A.1.c. of this final way all of the many combinations of understand, and intended, that the
rule with comment period, we will services that may be of interest to the packaging proposal affect services
consider whether to use regression- public. Moreover, given the numerous responsible for significant OPPS
adjusted CCRs to adjust for charge new, refined, and interrelated payment spending, in order to provide hospitals
compression under the OPPS after RTI policies finalized for CY 2008 involving with meaningful incentives to examine
reviews the OPPS cost estimation APC reconfiguration, HCPCS migration, their patterns of care delivery and
process, including an assessment of the reduction in the numbers of low volume improve efficiency. The 1.2 percent
revenue code-to-cost center crosswalk APCs, and others, to adopt the APC reflects the difference in total weight
and estimating regression-adjusted CCRs Panel’s example of simulating median with and without the packaging
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from a model that includes outpatient costs holding all other CY 2008 policies proposal relative to the CY 2007 total
charges. There is no reason to delay the constant for HCPCS codes with and base weight. Whether or not the 1.2
creation of incentives for encouraging without the additional packaging of percent of redistributed dollars was
cost-effective utilization and efficiency those services newly packaged for CY entirely attributable to the proposed
in the provision of HOPD services until 2008 would not provide meaningful policy for estimating the median cost for
a decision is made regarding the comparative information. Almost ‘‘Q’’ status indicator services cannot be

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determined. For this final rule with to our longstanding policy, we will Medicare beneficiaries from those
comment period, we made continue to encourage hospitals to restrictions or apply them to Medicare
modifications to the policy governing report the HCPCS codes and associated beneficiaries the same as to all other
the handling of many services assigned charges for all services they provide, persons seeking care. We do not believe
status indicator ‘‘Q,’’ as discussed in taking into consideration all CPT, OPPS, that a hospital would risk termination of
section II.A.4.c.(4) of this final rule with and local contracture instructions, its provider agreement by Medicare by
comment period, that resulted in use of regardless of whether payment for those refusing to furnish a medically
more claims data and significant HCPCS codes is packaged or separately necessary service to a Medicare
changes to the median costs for some provided. Similarly, we do not believe beneficiary, although it provides the
services. We also accepted the public that the implementation of MS–DRGs same service to other patients for the
comments that recommended that we will create operational issues for same clinical indications.
create a composite APC for observation hospitals that would be complicated by As we indicated in the proposed rule,
services, as discussed in section increased packaging under the OPPS. we will examine our claims data for
II.A.4.c.(7) of this final rule with Comment: Some commenters asserted patterns of fragmented care and if we
comment period. that increased packaging will create find a pattern in which a hospital
Comment: Some commenters stated disincentives to provide certain services appears to be fragmenting care across
that CMS must undertake provider and that providers may stop furnishing multiple days, we will refer it for
education and claims monitoring these services to Medicare beneficiaries. investigation to the QIO or to the
because providers will cease to bill The commenters stated that increased program safeguard contractor, as
HCPCS codes and charges for packaged packaging would reduce expenditures, appropriate to the circumstances we
services, which will result in lower but the ultimate result would be find. However, we do not believe that,
payment rates than would otherwise be reduced access to necessary care as the in general, hospitals would routinely,
made if they reported all codes and payment incentives to provide care are and for purposes of financial gain,
charges and thus the costs of packaged reduced. Other commenters believed require patients to return on multiple
services would be lost to the payment that increased packaging will result in days to receive services that could have
system in future years. They indicated services being furnished on multiple been furnished on the same day.
that this presents huge operational days in order to maximize payment, Comment: One commenter objected to
challenges to hospitals to ensure that which will increase, rather than the implication in the proposed rule
they bill and charge for the packaged decrease, volumes of services and that hospitals provide whatever services
codes. Other commenters believed that provide a significant inconvenience to they wish at whatever cost, with their
the implementation of increased beneficiaries. only concern being payment for the
packaging will be particularly difficult Response: We also do not agree that services, and that payment rates could
in CY 2008 because CMS is beneficiary access to care will be motivate hospitals to report services on
simultaneously implementing Medicare- harmed by increased packaging. We separate claims or split the service
Severity DRGs (MS–DRGs) for IPPS believe that packaging will create among different hospitals in order to be
payment, which also poses operational incentives for hospitals and their paid more. The commenter stated that
challenges for hospitals. physician partners to work together to 42 CFR 411.15(m) requires that
Response: We do not believe that establish appropriate protocols that will hospitals must furnish and bill for
there will be a significant change in eliminate unnecessary services where services necessary to complete an
what hospitals charge and report for the they exist and will institutionalize outpatient encounter and that, therefore,
services they furnish to Medicare approaches to providing necessary it would be a violation of CMS
beneficiaries and to others as a result of services more efficiently. Where this regulations for a hospital to deliver part
the increased packaging for the CY 2008 review results in reductions in services of the service at one hospital and the
OPPS. Medicare cost reporting that are only marginally beneficial, we rest at another hospital.
standards specify that hospitals must believe that this could improve rather Response: We believe that hospitals
impose the same charges for Medicare than harm the quality of care for strive to provide the best care they can
patients as for other patients. We are beneficiaries because every service to the patients they serve. However, we
often told by hospitals that many private furnished in a hospital carries some are aware that there are financial
payers pay based on a percentage of level of risk to the patient. Similarly, pressures on hospitals that might
charges and that hospital chargemasters where this review results in the motivate some of them to split services
do not differentiate between the charges concentration of some services in a in such a way as to maximize payments.
to Medicare patients and others. reduced number of hospitals in the While we do not expect that hospitals
Therefore, we have no reason to believe community, we believe that the quality would routinely change the way they
that hospitals will cease to report of care and hospital efficiency may both furnish services or the way they bill in
charges and HCPCS codes for packaged be enhanced as a result. The medical order to maximize payment, we do
services they provide to Medicare literature shows that concentration of believe that it would be possible, and
beneficiaries. We expect that hospitals, services in certain hospitals often hence we offered the cautionary note in
as other prudent businesses, will have a results in both greater efficiency and the proposed rule that we will consider
quality review process that ensures that higher quality of care for patients. that possibility as we review our claims
they accurately and completely report Moreover, we do not believe that data. Other commenters, as described in
the services they furnish, with the packaging will result in Medicare the preceding comment, stated that
appropriate charges for those services to beneficiaries being treated differently volumes of services and expenditures
Medicare and all other payers. from other patients with regard to the would increase because hospitals would
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Therefore, we do not see either the need care they receive in the hospital. A provide services on multiple days to
or the responsibility to undertake a hospital may have its provider maximize payment.
special effort to educate providers to agreement terminated by Medicare We note that 42 CFR 411.15(m)
report and charge Medicare for the under 42 CFR 489.53(a)(2) if it places specifies exclusions from Medicare
services they furnish, whether restrictions on the persons it accepts for coverage in cases in which the hospital
separately paid or packaged. According treatment and either fails to exempt does not furnish a service directly or

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under arrangements as defined in 42 rely on CPT and HCPCS code pays separately for them. The OPPS is
CFR 409.3 and, therefore, would not descriptors because the descriptors are not a fee schedule, but a prospective
prohibit a hospital from discharging a complex and many do not accurately payment system based on relative
patient and sending that patient to describe the services furnished. Some weights derived from costs and charges.
another hospital for a service that would commenters argued that CMS should Packaging of payments into appropriate
otherwise be packaged if furnished pay across settings in the same way and, groups is a fundamental principle that
during the same encounter. However, as therefore, should not package under the distinguishes a prospective payment
noted above, a hospital that does not OPPS services that are paid separately system from a fee schedule and we do
make available the same services to under the MPFS. not believe that we should refrain from
Medicare beneficiaries as to its other Response: Our general process for packaging payment for ancillary and
hospital patients can be terminated from developing the OPPS, including making supportive services into payment for the
Medicare under 42 CFR 489.53(a)(2). major payment policy decisions, is independent services with which they
Additionally, we remind hospitals that prescribed by the Administrative are furnished because they may be
any business models or arrangements Procedure Act (APA) and the Federal treated differently in the MPFS or
they make for the provision of services Advisory Committee Act (FACA). As because of the unlikely possibility that
intended to be billed by that hospital such, proposed payment rates and the this policy may have some influence on
must comply with all applicable laws attendant policies are open to public the AMA CPT Editorial Panel’s
and regulations, including, but not comment both through the Federal decisions regarding creation of codes.
limited to, the Stark law and other anti- Register notice and comment Comment: One commenter stated that
kickback laws, the provider-based rules rulemaking process and through the the concept of creating incentives for
at 42 CFR 413.65, the ‘‘incident-to’’ public meetings of the APC Panel, hospitals to negotiate better prices on
rules at 42 CFR 410.27, and the which is a Federal Advisory Committee goods and services through packaging is
conditions for outpatient diagnostic chartered by the Secretary of Health and not applicable to small rural hospitals
services at 42 CFR 410.28. In regard to Human Services. Therefore, our and, therefore, it should not apply to
hospital services provided under proposed packaging for the CY 2008 them. The commenter argued that
arrangements, as defined in 42 CFR OPPS and the decisions we are smaller rural hospitals cannot negotiate
409.3, we have specified in the announcing in this final rule with for better prices on goods and services
Eligibility and Entitlement Manual that, comment period are neither arbitrary because they buy smaller amounts of
‘‘In permitting providers to furnish nor single-sided, as all stakeholders products and lack the ability that large
services under arrangements, it was not have had the opportunity to comment. urban hospitals have to negotiate for
intended that the provider merely serve In this final rule with comment period, better prices on goods and services.
we are responding to their comments. Response: We believe that the
as a billing mechanism for the other
We note that the AMA, as a member of creation of incentives for hospitals to
party. Accordingly, for services
the public, has the same opportunity to seek more efficient ways of furnishing
provided under arrangements to be
comment on the packaging proposal in services is applicable to all hospitals,
covered, the provider must exercise
the proposed rule as any other member including small rural hospitals. Small
professional responsibility over the
of the public. rural hospitals and their physician
arranged for services’’ (Pub. 100–1,
We believe that it is entirely partners have the same capacity and
Chapter 5, section 10.3). Therefore, we
appropriate to rely on the HCPCS capability as other hospitals to evaluate
would not expect hospitals to send
descriptors, including the AMA’s CPT the appropriateness and efficiency of
patients to a separate entity merely to
descriptors, for the definition of the the packaged services they furnish.
avoid packaged payment, but, as stated services furnished for purposes of the Moreover, small rural hospitals can join
above, we will consider that possibility proposed packaging approach and other in cooperatives and group purchasing
as we review our claims data. payment policies. The OPPS is based on organizations that can achieve
Comment: Some commenters the definitions of services reported with purchasing efficiencies that they could
suggested that CMS work with and HCPCS codes, of which the CPT code not achieve by themselves. We
through the AMA process in making any set is a fundamental part. The HCPCS recognize that some costs are higher for
packaging decisions and not make any codes are the only means by which certain categories of rural hospitals,
arbitrary and single-sided bundling hospitals report the services they therefore we have provided the 7.1
decisions that have not been fully furnish and the charges for those percent rural adjustment for rural SCHs.
reviewed and analyzed for impact by services and, therefore, they are basis of Moreover, the law holds harmless rural
the stakeholders. They suggested that the OPPS. For that reason, we look to hospitals with 100 or fewer beds.
CMS discuss with the AMA CPT the HCPCS definition of the service to However, we also expect that small
Editorial Panel the potential for determine whether a particular service rural hospitals will be motivated by the
unintended consequences of proposed is ancillary and supportive of another packaging approach to seek ways of
packaging or bundling on the service. To the extent that there are furnishing services as efficiently as
establishment of CPT codes. For changes to the HCPCS codes and, by possible and to eliminate services that
example, one commenter believed that extension, to the CPT code descriptors, are essential to the appropriate
packaging add-on codes, which the we will reevaluate the decisions we treatment of the patient in any clinical
commenter viewed as integral to make with regard to packaging payment. case.
maintaining flexibility of CPT coding, However, we do not believe that the Comment: Some commenters
would likely discourage future AMA’s CPT Editorial Board is contended that the proposed packaging
consideration of creating add-on codes influenced by OPPS payment policy in approach has the potential for
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as a means to describe code-specific its deliberations, nor should it be systemwide net savings and
procedures and resources. Other influenced by OPPS payment policy in redistribution of payments away from
commenters objected to what they view its creation of CPT codes. hospitals that invested in high-cost
as a ‘‘codebook’’ approach to Moreover, we disagree that we should equipment and toward hospitals that do
determining what should be packaged. not package payment for ancillary and not have such costs. They believed that
The commenters stated that CMS not supportive services because the MPFS charge compression contributes to this

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problem because hospitals are limited in physicians, and it would be the effects of no longer paying
what they can charge, and the allocation inappropriate to penalize hospitals for separately for the packaged services.
of radiology equipment capital costs performing services whose utilization is Response: We do not agree that we
exacerbates the problem. The not within their control. The should impose a payment floor to limit
commenters suggested that CMS not commenters believed that innovation the amount of decline in any APC
finalize the packaging proposal because and best practices have increased payment as a means of mitigating the
packaging creates incentives for utilization, not the provision of effects of no longer paying separately for
hospitals to divest themselves of excessive services. the packaged services. The purpose of
important but expensive technologies Response: Section 1833(t)(2)(F) of the creating larger payment packages is to
because those technologies have ceased Act requires us to develop a method of create incentives for hospitals to assess
to be profitable. controlling unnecessary increases in the the services they are furnishing to
Response: We agree that there is the volume of covered OPS services and ensure that they are furnishing only
potential for systemwide redistribution section 1833(t)(9)(C) of the Act medically necessary services as
of payments away from hospitals that authorizes us to adjust the update to the efficiently as possible. To establish a
invested in costly equipment for conversion factor if under section payment floor that would artificially
services for which payment will be 1833(t)(2)(F) of the Act, we determine inflate payments for APCs that are
packaged and toward hospitals that do that there is growth in volume that declining would reduce what would
not have such costs. However, to the exceeds established tolerances. As we otherwise be appropriate increases in
extent that packaging payment for indicated in our proposed rule, we payments for other APCs. We believe
ancillary and supportive services prefer not to take the approach of that this would be contrary to the stated
reduces the amount of payment weight creating an SGR-type mechanism that goal of paying appropriately for all
in the system for separately paid could result in a reduced conversion services through larger payment bundles
services, that amount will be factor under the OPPS and that could that are intended to create incentives for
redistributed to all hospitals across all inadvertently result in actually efficiency.
services paid under the OPPS through Comment: Several commenters
increasing the volume of services. We
the budget neutral weight scaler. Any objected to the proposed packaging
prefer to establish larger packages of
reduction in the growth of OPPS approach because they believed that it
services on which to base OPPS
expenditures will result from slower would be more difficult for new services
payment in order to create incentives for
growth in hospital costs in future years to be approved for payment under New
hospitals and their physician partners to
as a result of hospitals reducing the Technology APCs. One commenter
make thoughtful decisions regarding
volume of certain services or finding believed that it would be difficult for
what services are medically necessary new guidance services, in particular, to
more efficient ways to provide care.
for their patients and to continuously be approved for assignment to a New
That potential future savings is one of
reassess how they might be able to Technology APC if CMS considers
the purposes of this packaging initiative
provide care more efficiently. We guidance to be a supportive and
and the exploration of episode-based or
recognize that decisions regarding the ancillary service rather than a separately
encounter-based payments under the
care provided in HOPDs are not made paid complete service. Therefore, the
OPPS. Similarly, if increased packaging
unilaterally by the hospital, nor are they commenter concluded that the proposed
causes hospitals to be more cautious in
made unilaterally by the physician who packaging not only packages existing
their decision making regarding
investing in new equipment or incurring is ordering the care. While physicians, services but creates the potential for
other large capital expenditures, we rather than hospital staff, may order new technologies to not be approved for
view that as a positive result of the specific services for patients, hospitals New Technology APC payment.
policy. Hospitals make decisions decide what HOPD services they will Response: We assess applications for
regarding the equipment they buy for and will not furnish, what drugs and New Technology APC placement on a
general business reasons, of which supplies they will or will not buy and case-by-case basis. The commenter is
payment under the OPPS is only one from whom they will buy them, what correct that, to qualify for New
factor among many, including, but not investments in equipment they will or Technology APC placement, the service
limited to, utilization and payments will not make, and what programs they must be a complete service, by which
from other payers and payments from will open or close. Certainly, they make we mean a comprehensive service that
Medicare for IPPS services, which is the these decisions with significant input stands alone as a meaningful diagnostic
dominant source of Medicare payment from their medical staff, but it is the or therapeutic service. To the extent that
for hospital care. hospital administration that makes the a service for which New Technology
Comment: One commenter asserted final decisions in this regard. Moreover, APC status is being requested is
that linking growth in volume to hospitals control, to some extent, the ancillary and supportive of another
reduced payments is premature, physicians on their medical staff and service, for example, a new
inappropriate, and not supported by increasingly employ physicians to intraoperative service or a new guidance
statutory authority. The commenter was provide services to patients and to service, we might not consider it to be
particularly concerned about any supervise the provision of hospital a complete service because its value is
methodology that would establish services. Hence, we do not agree with as part of an independent service.
different update factors for different the argument that hospitals have no However, if the entire, complete service,
OPPS service categories, where the control over the services they furnish or including the guidance component of
update factor is determined in a manner that they have no influence over the the service, for example, is ‘‘truly new,’’
that takes into account utilization physicians who order the specific as we explained that term at length in
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trends. Many commenters stated that services furnished to their patients. the November 30, 2001 final rule (66 FR
HOPD utilization of services is only Comment: Some commenters asked 59898) which set forth the criteria for
marginally within the control of CMS to impose a payment floor to limit eligibility for assignment of services to
hospitals. They explained that hospitals the amount of decline in any APC New Technology APCs, we would
provide services ordered by their payment in at least the first year of consider the new complete procedure
medical staff and community implementation as a means of mitigating for New Technology APC assignment.

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As stated in the November 30, 2001 payments for the separately paid to be reported in addition to the CPT
final rule, by way of examples provided, services with which it is reported. code for the primary procedure. We also
‘‘The use of a new expensive instrument Payment for a HCPCS code with a status note that there are a number of CPT
for tissue debridement or a new, indicator of ‘‘Q’’ is either packaged or codes describing independent surgical
expensive wound dressing does not in separately paid, depending on the procedures that have code descriptors
and of itself warrant creation of a new services with which it is reported. that indicate that guidance is included
HCPCS code to describe the instrument Payment for a HCPCS code with a status in the code reported for the surgical
or dressing; rather, the existing wound indicator of ‘‘Q’’ that is ‘‘STVX- procedure if it is used and, therefore,
repair code appropriately describes the packaged’’ is packaged unless the packaged payment is already made for
service that is being furnished * * * ’’ HCPCS code is not reported on the same the associated guidance service under
(66 FR 59898). This example may hold day with a service that has a status the OPPS. For example, the
for some new guidance technologies as indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X,’’ in independent procedure described by
well. which case it would be paid separately. CPT code 55873 (Cryosurgical ablation
The following discussions separately Payment for a HCPCS code with a status of the prostate (includes ultrasonic
address each of the seven categories of indicator of ‘‘Q’’ that is ‘‘T-packaged’’ is guidance for interstitial cryosurgical
items and services for which we packaged unless the HCPCS code is not probe placement)) already includes the
proposed to package payment under the reported on the same day with a service ultrasound guidance that may be used.
CY 2008 OPPS as part of our packaging that has a status indicator of ‘‘T,’’ in We believed packaging payment for
proposal and which we are adopting in which case it would be paid separately. every guidance service under the OPPS
this final rule with comment period, Payment for a HCPCS code with a status would provide consistently packaged
with the modifications discussed under indicator of ‘‘Q’’ that is assigned to a payment for all these services that are
the applicable topic. Many codes that composite APC is packaged into the used to direct independent procedures,
we proposed to package for CY 2008 payment for the composite APC when even if they are currently separately
could fit into more than one of those the criteria for payment of the reported.
seven categories. For example, CPT code composite APC are met. Because these dependent guidance
93325 (Doppler echocardiography color procedures support the performance of
flow velocity mapping (List separately (1) Guidance Services an independent procedure and they are
in addition to codes for We proposed to package payment for generally provided in the same
echocardiography)) could be included HCPCS guidance codes for CY 2008, operative session as the independent
in both the intraoperative and image specifically those codes that are procedure, we believed that it would be
processing categories. Therefore, for reported for supportive guidance appropriate to package their payment
organizational purposes, both to ensure services, such as ultrasound, into the OPPS payment for the
that each code appears in only one fluoroscopic, and stereotactic navigation independent procedure performed.
category and to facilitate discussion of services, that aid the performance of an However, guidance services differ from
our CY 2008 proposed and final policy, independent procedure. We performed a some of the other categories of services
we have created a hierarchy of broad search for such services, relying that we proposed to package for CY
categories that determines which upon the AMA’s CY 2007 book of CPT 2008. Hospitals sometimes may have the
category each code appropriately falls codes and the CY 2007 book of Level II option of choosing whether to perform
into. This hierarchy is organized from HCPCS codes, which identified specific a guidance service immediately
the most clinically specific to the most HCPCS codes as guidance codes. preceding or during the main
general type of category. The hierarchy Moreover, we performed a clinical independent procedure, or not at all,
of categories is as follows: guidance review of all HCPCS codes to capture unlike many of the imaging supervision
services; image processing services; additional codes that are not necessarily and interpretation services, for example,
intraoperative services; and imaging identified as ‘‘guidance’’ services but which are generally always reported
supervision and interpretation services. describe services that provide when the independent procedure is
Therefore, while CPT code 93325 may directional information during the performed. Once a hospital decides that
logically be grouped with either image course of performing an independent guidance is appropriate, the hospital
processing services or intraoperative procedure. For example, we proposed to may have several options regarding the
services, it is treated as an image package CPT code 61795 (Stereotactic type of guidance service that can be
processing service because that group is computer-assisted volumetric performed. For example, when inserting
more clinically specific and precedes (navigational) procedure, intracranial, a central venous access device, hospitals
intraoperative services in the hierarchy. extracranial, or spinal (List separately in have the option of using no guidance,
We did not believe it was necessary to addition to code for primary procedure)) ultrasound guidance, or fluoroscopic
include diagnostic because we consider it to be a guidance guidance, and the selection in any
radiopharmaceuticals, contrast media, service that provides three-dimensional specific case will depend upon the
or observation categories in this list information to direct the performance of specific clinical circumstances of the
because those services generally map to intracranial or other diagnostic or device insertion procedure. In fact, as
only one of those categories. We note therapeutic procedures. We also we noted in the CY 2008 proposed rule,
that there is no cost estimation or included HCPCS codes that existed in the historical hospital claims data
payment implications related to the CY 2006 but were deleted and were demonstrated that various guidance
assignment of a HCPCS code for replaced in CY 2007. We included the services for the insertion of these
purposes of discussion to any specific CY 2006 HCPCS codes because we devices, which have historically
category. proposed to use the CY 2006 claims data received packaged payment under the
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Each HCPCS code we discuss in this to calculate the CY 2008 OPPS median OPPS, are used frequently for the
section has a status indicator of either costs on which the CY 2008 payment insertion of vascular access devices.
‘‘N’’ or ‘‘Q.’’ The payment for a HCPCS rates would be based. Many, although Thus, we recognized that hospitals
code with a status indicator of ‘‘N’’ is not all, of the CPT guidance codes we have several options regarding the
unconditionally packaged so that its identified are designated in the CPT performance and types of guidance
payment is always incorporated into the coding scheme as add-on codes that are services they use. However, we believed

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that hospitals utilize the most independent procedure as a function of unconditionally (that is, always)
appropriate form of guidance for the the frequency that guidance is reported packaged under the CY 2007 OPPS,
specific procedure that is performed. with that procedure. As we stated where they have been assigned status
We did not want to create payment previously, the median cost for a indicator ‘‘N.’’ Payment for these
incentives to use guidance for all particular independent procedure services is currently made as part of the
independent procedures or to provide generally will be higher as a result of payment for the separately payable,
one form of guidance instead of another. added packaging, but also could change independent services with which they
Therefore, by proposing to package little or be lower because median costs are billed. No separate payment is made
payment for all forms of guidance, we typically do not reflect small for services that we have assigned to
specifically encouraged hospitals to distributional changes and because status indicator ‘‘N.’’ We did not
utilize the most cost effective and changes to the packaged HCPCS codes propose status indicator changes for the
clinically advantageous method of affect both the number and composition five guidance procedures that were
guidance that is appropriate in each of single bills and the mix of hospitals unconditionally packaged for CY 2007.
situation by providing them with the contributing those single bills. In fact, We proposed to change the status
maximum flexibility associated with a the CY 2007 CPT book indicates that if indicators for 31 guidance procedures
single payment for the independent guidance is performed with CPT code from separately paid to unconditionally
procedure. Similarly, hospitals may 20610, it may be appropriate to bill CPT packaged (status indicator ‘‘N’’) for the
appropriately not utilize guidance code 76942 (Ultrasonic guidance for CY 2008 OPPS. We believed that these
services in certain situations based on needle placement (e.g., biopsy, services are always integral to and
clinical indications. aspiration, injection, localization dependent upon the independent
Because guidance services can be device), imaging supervision and services that they support and,
appropriately reported in association interpretation); 77002 (Fluoroscopic therefore, their payment would be
with many independent procedures, guidance for needle placement (e.g., appropriately packaged because they
under our proposed packaging of biopsy, aspiration, injection, would generally be performed on the
guidance services for CY 2008, the costs localization device)); 77012 (Computed same date and in the same hospital as
associated with guidance services tomography guidance for needle the independent services.
would be mapped to a larger number of placement (e.g., biopsy, aspiration, We proposed to change the status
independent procedures than some injection, localization device), indicator for one guidance procedure
other categories of codes that we radiological supervision and from separately paid to conditionally
proposed to package. For example, CPT interpretation); or 77021 (Magnetic packaged (status indicator ‘‘Q’’), and to
code 76001 (Fluoroscopy, physician resonance guidance for needle treat it as a ‘‘special’’ ‘‘packaged code
time more than one hour, assisting a placement (e.g., for biopsy, needle for the CY 2008 OPPS, specifically, CPT
non-radiologic physician (e.g., aspiration, injection, or placement of code 76000 (Fluoroscopy (separate
nephrostolithotomy, ERCP, localization device) radiological procedure), up to 1 hour physician time,
bronchoscopy, transbronchial biopsy)) supervision and interpretation). The CY other than 71023 or 71034 (e.g., cardiac
can be reported with a wide range of 2007 CPT book also implies that it is not fluoroscopy)). This code was discussed
services. According to the CPT code always clinically necessary to use in the past with the Packaging
descriptor, these procedures include guidance in performing an Subcommittee of the APC Panel, which
nephrostolithotomy, which may be arthrocentesis described by CPT code determined that, consistent with its
reported with CPT code 50080 20610. code descriptor as a separate procedure,
(Percutaneous nephrostolithotomy or The guidance procedures that we this procedure could sometimes be
pyelostolithotomy, with or without proposed to package for CY 2008 vary provided alone, without any other
dilation, endoscopy, lithotripsy, in their resource costs. Resource cost services on the claim. We believe that
stenting, or basket extraction; up to 2 was not a factor we considered when this procedure will usually be provided
cm), and endoscopic retrograde proposing to package guidance by a hospital as guidance in conjunction
cholangiopancreatography, which may procedures. Notably, most of the with another significant independent
be reported with CPT code 43260 guidance procedures are relatively low procedure on the same date of service
(Endoscopic retrograde cost in comparison to the independent but may occasionally be provided
cholangiopancreatography (ERCP); services they frequently accompany. without another independent service.
diagnostic, with or without collection of The codes we proposed to identify as As a ‘‘special’’ packaged code, if the
specimen(s) by brushing or washing guidance codes for CY 2008 that would fluoroscopy service were billed without
(separate procedure)). Therefore, the receive packaged payment were listed in any other service assigned status
cost of the fluoroscopic guidance would Table 8 of the CY 2008 proposed rule indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X’’ reported
be reflected in the payment for each of (72 FR 42657). (Table 10 in this final on the same date of service, under our
these independent services, in addition rule with comment period contains a proposal we would not treat the
to numerous other procedures, rather comprehensive list of all codes in the fluoroscopy procedure as a dependent
than in the payment for only one or two final seven categories for services that service for purposes of payment. If we
independent services, as is the case for are packaged for CY 2008.) were to unconditionally package
some of the other categories of codes Several of these codes, including CPT payment for this procedure, treating it
that we proposed to package for CY code 76937 (Ultrasound guidance for as a dependent service, hospitals would
2008. vascular access requiring ultrasound receive no payment at all when
In addition, because independent evaluation of potential access sites, providing this service alone, although
procedures such as CPT code 20610 documentation of selected vessel the procedure would not be functioning
hsrobinson on PROD1PC76 with NOTICES

(Arthrocentesis, aspiration and/or patency, concurrent real time as a guidance service in that case.
injection; major joint or bursa (e.g., ultrasound visualization of vascular However, according to our proposal, its
shoulder, hip, knee joint, subacromial needle entry, with permanent recording conditionally packaged status with its
bursa)) may be reported with or without and reporting (List separately in designation as a ‘‘special’’ packaged
guidance, the cost for the guidance will addition to code for primary code would allow payment to be
be reflected in the median cost for the procedure)), were already provided for this ‘‘Q’’ status fluoroscopy

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procedure, in which case it would be there is reason to request that QIOs services, as proposed. These services are
treated as an independent service under review the quality of care furnished or ancillary and dependent in relation to
these limited circumstances. On the to request that Program Safeguard the radiation therapy services with
other hand, when the fluoroscopy Contractors review the claims against which they are most commonly
service is furnished as a guidance the medical record. furnished. Moreover, there are no
procedure on the same day and in the During the September 2007 APC unique clinical aspects to these
same hospital as independent, Panel meeting, the Panel recommended radiation oncology guidance services
separately paid services that are that CMS finalize the proposal to that would differentiate them from other
assigned status indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ package guidance services, with the guidance services. Consistent with the
or ‘‘X,’’ we proposed to package exception of radiation oncology principles of a prospective payment
payment for it as a dependent service. guidance procedures. system, in some cases, payment in an
In all cases, we proposed that hospitals We received many public comments individual case exceeds the average
that furnish independent services on the on our proposal to package guidance costs, and in other cases payment is less
same date as dependent guidance services for CY 2008. A summary of the than the average cost, but on balance,
services must bill them all on the same public comments and our responses payment should approximate the
claim. We believed that when follow. relative cost of the average case. We do
dependent guidance services and Comment: Many commenters not believe that beneficiary access to
independent services are furnished on requested that, if CMS elected to finalize care will be harmed by increased
the same date and in the same facility, the packaging status of the guidance packaging. We believe that packaging
they are part of a single complete codes proposed for packaging, CMS will create incentives for hospitals and
hospital outpatient service that is exclude radiation oncology guidance their physician partners to work
reported with more than one HCPCS procedures, in accordance with the APC together to establish appropriate
code, and no separate payment should Panel recommendation. Specifically, protocols that will eliminate
be made for the guidance service that many commenters requested that CMS unnecessary services where they exist
supports the independent service. pay separately for CPT codes 76950 and institutionalize approaches to
The estimated overall impact of these (Ultrasonic guidance for placement of
providing necessary services more
changes presented in section XXII.B. of radiation therapy fields); 76965
efficiently. Therefore, we see no basis
the proposed rule (section XXIV.B. in (Ultrasonic guidance for interstitial
for treating radiation oncology services
this final rule with comment period) radioelement application); 77014
differently from other guidance services
was based on the assumption that (Computed tomography guidance for
that are ancillary and dependent to the
hospital behavior would not change placement of radiation therapy fields);
procedure that they facilitate.
with regard to when these dependent 77417 (Therapeutic radiology port
services are performed on the same date film(s)); and 77421 (Stereoscopic X-ray Comment: Many commenters were
and by the same hospital that performs guidance for localization of target concerned with the proposal to package
the independent services. To the extent volume for the delivery of radiation payment for electrodiagnostic guidance
that hospitals could change their therapy). The commenters were for chemodenervation procedures,
behavior and perform the guidance concerned that packaging radiation specifically, CPT codes 95873 (Electrical
services more or less frequently, on oncology guidance procedures would stimulation for guidance in conjunction
subsequent dates, or at settings outside encourage hospitals to decrease with chemodenervation (List separately
of the hospital, the data would show utilization of advanced technologies for in addition to code for primary
such a change in practice in future years localization used in radiation oncology procedure)), and 95874 (Needle
and that change would be reflected in treatment delivery. The commenters electromyography for guidance in
future budget neutrality adjustments. noted that packaging payment for conjunction with chemodenervation
However, with respect to guidance radiation oncology guidance services (List separately in addition to code for
services in particular, we believe that offers a financial incentive to those primary procedure)). The commenters
hospitals are limited in the extent to hospitals that use little or no daily indicated that chemodenervation
which they could change their behavior localization when providing radiation involves the injection of
with regard to how they furnish these therapy. One commenter believed that chemodenervation agents, such as
services. By their definition, these packaging payment for these guidance botulinum toxin, to control the
guidance services generally must be services encourages hospitals to use symptoms associated with dystonia and
furnished on the same date and at the older, less effective technologies, other disorders. According to the
same operative location as the thereby discouraging development of commenters, physicians often, but not
independent procedure in order for the new, more effective technologies. always, use electromyography or
guidance service to meaningfully Another commenter noted that if electrical stimulation guidance to guide
contribute to the treatment of the patient hospitals are discouraged from using the needle to the most appropriate
in directing the performance of the new technologies due to low payment location. The commenters were
independent procedure. We do not rates, it will take many years to gather concerned that the proposal to package
believe the clinical characteristics of the robust cost data that reflect these new payment for these guidance services
guidance services will change in the technologies, likely even longer than may discourage utilization of this
immediate future. New Technology APC and pass-through particular form of guidance, even when
As we indicated earlier, in all cases, payments are available for new medically appropriate. Several
we proposed that hospitals that furnish technologies. commenters noted that the CY 2008
the guidance service on the same date Response: After reviewing these proposed payment rate for the injection
hsrobinson on PROD1PC76 with NOTICES

as the independent service must bill public comments, considering the and the associated guidance is a 15
both services on the same claim. We recommendation of the APC Panel, and percent decrease from the CY 2007
indicated that we expected to carefully ensuring that CMS clinical staff payment rate. Most commenters
monitor any changes in billing practices analyzed the content of these comments, requested that CMS pay separately for
on a service-specific and hospital- we have decided to finalize our electrodiagnostic guidance, several of
specific basis to determine whether proposal to package these guidance whom specified that CMS assign the

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three chemodenervation procedures to package. In general, each commenter HCPCS codes to capture additional
their own APC. The commenters noted requested that we pay separately for codes that we consider to be image
that even if the median cost for the several of the guidance codes that we processing. For example, we proposed
chemodenervation procedures proposed to package. The commenters to package payment for CPT code 93325
increased, the payment rate would not expressed concern in several areas, (Doppler echocardiography color flow
increase because chemodenervation specifically, that insufficient payment velocity mapping (List separately in
procedures are only a small proportion rates would discourage new addition to codes for echocardiography))
of all claims in their proposed APC 0204 technologies; that guidance services because it is an image processing
(Level I Nervous System Injections). used infrequently with specific services procedure, even though the code
Several other commenters stated that contribute very little to the payment descriptor does not specifically indicate
the median costs for the rates for those services; that the it as such.
chemodenervation procedures do not expected decrease in utilization for An image processing service
reflect the full cost of the guidance guidance services could ultimately lead processes and integrates diagnostic test
because the guidance is performed with to increased costs, as a result of worse data that were captured during another
the procedure infrequently. patient outcomes; that packaged independent procedure, usually one
Response: We note that the cost of the payment under the OPPS and separate that is separately payable under the
chemodenervation guidance services payment under the MPFS leads to OPPS. The image processing service is
will be reflected in the median cost for payment disparity; and, in general, that not necessarily provided on the same
the independent HCPCS code as a the lack of published crosswalks makes date of service as the independent
function of the frequency that it difficult to analyze the specific effects procedure. In fact, several of the image
chemodenervation services are reported of this policy. processing services that we proposed to
with that particular HCPCS code. As Response: We note that we did not package for CY 2008 do not need to be
noted above, we recognize that, in some receive any unique arguments specific provided face-to-face with the patient in
cases, supportive and ancillary to any particular code. We received the same encounter as the independent
dependent services are furnished at high many similar public comments service. While this approach to service
frequency with independent services, regarding all the categories of codes that delivery may be administratively
and in other cases, they are furnished we proposed for packaged payment. advantageous from a hospital’s
with independent services at a low Therefore, we have responded to these perspective, providing separate payment
frequency. We believe that packaging general comments above in section for each image processing service
should reflect the reality of how services II.A.4.c. of this final rule with comment whenever it is performed is not
are furnished. While the commenters period. In light of the public comments consistent with encouraging value-based
are correct that the chemodenervation we received, our clinical advisors purchasing under the OPPS. We
procedures reflect only approximately reassessed every guidance code on the believed it was important to package
10 percent of the services that comprise list to ensure that it was still appropriate payment for supportive dependent
APC 0204, we note that they for packaged payment. services that accompany independent
appropriately map to this APC both For CY 2008, we are finalizing the CY services but that may not need to be
clinically and in terms of resource use. 2008 proposal, without modification, to provided face-to-face with the patient in
If the median costs for the individual package payment for all guidance the same encounter because the
chemodenervation procedures were to services for CY 2008. We are partially supportive services utilize data that
change dramatically, based on resource accepting the APC Panel were collected during the preceding
cost data, we would review these recommendation. Specifically, we are independent services and packaging
services as part of our annual review packaging all guidance services for CY their payment encourages the most
process to determine if a different APC 2008, including radiation oncology efficient use of hospital resources. We
were more appropriate. We also note services. The guidance codes that are are particularly concerned with any
that if these three chemodenervation packaged for CY 2008 are identified and continuance of current OPPS payment
procedures were mapped to their own displayed in Table 10 of this final rule policies that could encourage certain
APC, the estimated median cost of the with comment period. These services inefficient and more costly service
APC would be in the same general cost are assigned status indicator ‘‘N’’ to patterns. As stated above, packaging
range as the current median cost for indicate their unconditional packaging, encourages hospitals to establish
APC 0204. Therefore, it is unnecessary with the exception of CPT code 76000, protocols that ensure that services are
to map these three services to their own which is an ‘‘STVX-packaged’’ code furnished only when they are medically
APC for CY 2008. assigned status indicator ‘‘Q.’’ necessary and to carefully scrutinize the
Comment: Several commenters services ordered by practitioners to
(2) Image Processing Services
requested that CMS clarify how the DRA minimize unnecessary use of hospital
imaging cap for services paid under the We proposed to package payment for resources. Our standard methodology to
MPFS would be applied to services that ‘‘image processing’’ HCPCS codes for calculate median costs packages the
are packaged under the OPPS. CY 2008, specifically those codes that costs of dependent services with the
Response: If an imaging service is are reported as supportive dependent costs of independent services on
packaged under the OPPS, the DRA cap services to process and integrate ‘‘natural’’ single claims across different
on the technical component payment for diagnostic test data in the development dates of service, so we are confident that
that service under the MPFS is not of images, performed concurrently or we would capture the costs of the
applicable. after the independent service is supportive image processing services for
Comment: Many commenters complete. We performed a broad search ratesetting when they are packaged
hsrobinson on PROD1PC76 with NOTICES

supported the proposal to package each for such services, relying upon the according to our CY 2008 proposal, even
of the guidance services that we AMA’s CY 2007 book of CPT codes and if they were provided on a different date
identified in the proposed rule. The the CY 2007 book of Level II HCPCS than the independent procedure.
commenters also gave specific codes, which identified specific codes We listed the image processing
comments related to almost every as ‘‘processing’’ codes. In addition, we services that we proposed to be
guidance code that we proposed to performed a clinical review of all packaged for CY 2008 in Table 10 in the

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CY 2008 proposed rule (72 FR 42659). services with which they are billed. No revise this CPT code for CY 2009, and
As these services support the separate payment is made for services that changing the payment status of this
performance of an independent service, that we have assigned status indicator code may confuse hospital coding staff.
we believe it would be appropriate to ‘‘N.’’ We did not propose status Some commenters requested that CMS
package their payment into the OPPS indicator changes for the four image make no changes to the payment status
payment for the independent service processing services that were of this code until this code’s descriptor
provided. unconditionally packaged for CY 2007. has been revised by the AMA, while
As many independent services may be We proposed to change the status others requested that CMS instruct
reported with or without image indicator for seven image processing hospitals not to use the new CPT code
processing services, the cost of the services from separately paid to that will be created by the AMA.
image processing services will be unconditionally packaged (status Response: We acknowledge that this
reflected in the median cost for the indicator ‘‘N’’) for the CY 2008 OPPS. service may be an important clinical
independent HCPCS code as a function We believe that these services are tool that is critical to decisionmaking.
of the frequency that image processing always integral to and dependent upon However, we continue to believe that
services are reported with that the independent service that they packaged payment is appropriate for
particular HCPCS code. Again, while support and, therefore, their payment this dependent service that must, per
the median cost for a particular would be appropriately packaged. the CY 2007 CPT book, be provided in
independent procedure generally will The estimated overall impact of these conjunction with echocardiography. In
be higher as a result of added packaging, changes presented in section XXII.B. of fact, packaging the status of this code
it could also change little or be lower the proposed rule (section XXIV.B. of may make it easier to crosswalk the data
because median costs typically do not this final rule with comment period) from this code to the new CPT code that
reflect small distributional changes and was based on the assumption that the AMA may create for CY 2009. We
because changes to the packaged HCPCS hospital behavior would not change see no compelling reason to postpone
codes affect both the number and with regard to when these dependent packaging this service until CY 2009.
composition of single bills and the mix image processing services are performed Comment: One commenter requested
of hospitals contributing those single on the same date and by the same that CMS pay separately for HCPCS
bills. For example, CPT code 70450 hospital that performs the independent code G0288 (Reconstruction, computed
(Computed tomography, head or brain; services. To the extent that hospitals tomographic angiography of aorta for
without contrast material) may be could change their behavior and surgical planning for vascular surgery)
provided alone or in conjunction with perform the image processing services because it is different than the other
CPT code 76376 (3D rendering with more or less frequently, the data would image processing codes proposed for
interpretation and reporting of show such a change in practice in future packaged payment. The commenter
computed tomography, magnetic years and that change would be stated that the service is often an out-
resource imaging, ultrasound, or other reflected in future budget neutrality sourced service purchased by the
tomographic modality; not requiring adjustments. hospital. The commenter was
image post-processing on an As we indicated earlier, in all cases, particularly concerned that hospitals
independent workstation). In fact, CPT we provided that hospitals that furnish would no longer continue to purchase
code 70450 was provided approximately the image processing procedure in this service if insufficient payment was
1.5 million times based on CY 2008 association with the independent provided. Another commenter requested
proposed rule claims data. CPT code service must bill both services on the separate payment for CPT code 95957
76376 was provided with CPT code same claim. We indicated that we (Digital analysis of
70450 less than 2 percent of the total expected to carefully monitor any electroencephalogram (EEG) (eg, for
instances that CPT code 70450 was changes in billing practices on a service- epileptic spike analysis)). The
billed. Therefore, as the frequency of specific and hospital-specific basis to commenter stated that this service is
CPT code 76376 provided in determine whether there is reason to often performed on a different day than
conjunction with CPT code 70450 request that QIOs review the quality of the EEG and by a technologist other
increases, the median cost for CPT code care furnished or to request that than the one who performed the EEG.
70450 would be more likely to reflect Program Safeguard Contractors review Response: As noted above, we believe
that additional cost. the claims against the medical record. it is important to package payment for
The image processing services that we The APC Panel recommended that all supportive dependent services that may
proposed to package vary in their image processing services be packaged not need to be provided face-to-face
hospital resource costs. Resource cost as proposed in the proposed rule. with the patient in the same encounter
was not a factor we considered when we We received a number of public as the independent service. Packaging
proposed to package supportive image comments on our proposal to package payment for supportive services that
processing services. Notably, the image processing service for CY 2008. A utilize data that were collected during
majority of image processing services summary of the public comments and the preceding independent services
that we proposed to package have our responses follow. encourages the most efficient use of
modest median costs in relationship to Comment: Many commenters were hospital resources. In fact, as part of our
the cost of the independent service that concerned with the proposal to package proposed CY 2008 packaging approach,
they typically accompany. payment for CPT code 93325 (Doppler we also proposed to unconditionally
Several of these codes, including CPT echocardiography color flow velocity package payment in CY 2008 for several
code 76350 (Subtraction in conjunction mapping (List separately in addition to other image processing services that are
with contrast studies), are already codes for echocardiography)). The not always performed face-to-face,
hsrobinson on PROD1PC76 with NOTICES

unconditionally (that is, always) commenters noted that this service is including CPT codes 0174T (Computer
packaged under the CY 2007 OPPS, often critical to decisionmaking and aided detection (CAD) (computer
where they have been assigned status consumes significantly greater resources algorithm analysis of digital image data
indicator ‘‘N.’’ Payment for these than the general echocardiography for lesion detection) with further
services is made as part of the payment study process. Several commenters physician review for interpretation and
for the separately payable, independent noted that the AMA is planning to report, with or without digitization of

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film radiographic images, chest proposed rule. However, Table 10 of the for all imaging processing codes listed
radiograph(s), performed concurrent proposed rule listed the accurate in Table 10 of this final rule with
with primary interpretation); 0175T proposed payment status of HCPCS comment period. We are accepting the
((Computer aided detection (CAD) code G0288. APC Panel recommendation to package
(computer algorithm analysis of digital Comment: Many commenters all image processing services. These
image data for lesion detection) with supported the proposal to package each services are assigned status indicator
further physician review for of the image processing services that ‘‘N’’ to indicate their unconditional
interpretation and report, with or was identified in the proposed rule. packaging.
without digitization of film radiographic Numerous other commenters requested
that CMS postpone packaging all the (3) Intraoperative Services
images, chest radiograph(s), performed
remote from primary interpretation); packaged codes included in all We proposed to package payment for
and CPT code 76377 (3D rendering with categories of the proposal until ‘‘intraoperative’’ HCPCS codes for CY
interpretation and reporting of additional data were provided to the 2008, specifically those codes that are
computed tomography, magnetic public. These commenters also reported for supportive dependent
resource imaging, ultrasound, or other submitted specific comments related to diagnostic testing or other minor
tomographic modality; requiring image almost every image processing code that procedures performed during
postprocessing on an independent CMS proposed to package. The independent procedures. We performed
workstation). commenters expressed concern in a broad search for possible
We also believe it is likely that a several areas, specifically, that what intraoperative HCPCS codes, relying
hospital that performed the computed they considered to be insufficient upon the AMA’s CY 2007 book of CPT
tomographic angiography diagnostic payment rates would discourage new codes and the CY 2007 book of Level II
procedure but does not have the technologies; that image processing HCPCS codes, to identify specific codes
technology necessary to provide the services used infrequently with specific as ‘‘intraoperative’’ codes. Furthermore,
preoperative image reconstruction services contribute very little to the we performed a clinical review of all
would send the results to another payment rates for those services; that HCPCS codes to capture additional
hospital for performance of the the expected decrease in utilization for supportive diagnostic testing or other
reconstruction. In this situation, the image processing services could minor intraoperative or intraprocedural
second hospital would be providing the ultimately lead to increased costs, as a codes that are not necessarily identified
reconstruction under arrangement and, result of worse patient outcomes; and in as ‘‘intraoperative’’ codes. For example,
therefore, at least one service provided general, that the lack of published we proposed to package payment for
by the first hospital would be separately crosswalks makes it difficult to analyze CPT code 95955 (Electroencephalogram
paid. We believe that packaged payment the specific effects of this policy. (EEG) during nonintracranial surgery
for image reconstruction under a Several commenters requested a (e.g., carotid surgery)) because it is a
prospective payment methodology for crosswalk that specified how the minor intraoperative diagnostic testing
hospital outpatient services is most packaged costs were allocated from each procedure even though the code
appropriate. The same situation occurs dependent code to each independent descriptor does not indicate it as such.
when hospitals provide the service code. Other commenters requested that Although we use the term
described by CPT code 95957. We CMS create edits to ensure that costs are ‘‘intraoperative’’ to categorize these
proposed to unconditionally package appropriately mapped to independent procedures, we also have included
payment for HCPCS code G0288 and codes. Several commenters requested supportive dependent services in this
CPT code 95957 for CY 2008, fully that CMS consider resource cost when group that are provided during an
consistent with the packaging approach determining which codes to package. independent procedure, although that
for the CY 2008 OPPS. Because HCPCS The commenters were concerned that procedure may not necessarily be a
code G0288 and CPT code 95957 are what they considered to be insufficient surgical procedure. These dependent
supportive ancillary services that fit into payment would create a disincentive for services clearly fit into this category
the image processing category, and we hospitals to adopt new technology. because they are provided during, and
proposed to package payment for all Response: We note that we did not are integral to, an independent
image processing services for CY 2008, receive any unique arguments specific procedure, like all the other
we believe it is appropriate to to any particular code. These comments intraoperative codes, but the
unconditionally package payment are similar to those received for all the independent procedure they accompany
associated with these codes. categories of codes that we proposed for may not necessarily be a surgical
Specifically, we determined that these packaged payment. Therefore, we have procedure. For example, we proposed to
services are dependent services that are responded to these general comments package HCPCS code G0268 (Removal
integral to independent services, in this above in section II.A.4.c. of this final of impacted cerumen (one or both ears)
case, the computed tomographic rule with comment period. In light of by physician on same date of service as
angiography and the EEG that we would the public comments we received, our audiologic function testing). While
expect to be provided. Even if the clinical advisors reassessed every image specific audiologic function testing
imaging process services were provided processing code on the list to ensure procedures are not surgical procedures
on another day than the independent that it was still appropriate for packaged performed in an operating room, they
services, our packaging methodology payment. are independent procedures that are
packages costs across dates of service on We received one comment related to separately payable under the OPPS, and
‘‘natural’’ single claims, so that the costs CPT codes 0174T and 0175T. The HCPCS code G0268 is a supportive
of image process services would be comment summary and response related dependent service always provided in
hsrobinson on PROD1PC76 with NOTICES

captured. to those codes are located in section association with one of these
For CY 2008, we are finalizing the II.A.4.e. of this final rule with comment independent services. All references to
packaged status of HCPCS code G0288 period. ‘‘intraoperative’’ below refer to services
and CPT code 95957, as listed in Table For CY 2008, we are finalizing our that are usually or always provided
10 of the proposed rule. We note an proposal, without modification, to during a surgical procedure or other
inadvertent error in Addendum B to the unconditionally package the payment independent procedure.

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By definition, a service that is services that they support and, complete hospital outpatient service
performed intraoperatively is provided therefore, their payment would be that is reported with more than one
during and, therefore, on the same date appropriately packaged because they HCPCS code, and no separate payment
of service as another procedure that is would generally be performed on the should be made for the intraoperative
separately payable under the OPPS. same date and in the same hospital as procedure that supports the
Because these intraoperative services the independent services. independent service.
support the performance of an We also proposed to change the status The estimated overall impact of these
independent procedure and they are indicator for one intraoperative changes presented in section XXII.B. of
provided in the same operative session procedure from unconditionally the proposed rule (section XXIV.B. of
as the independent procedure, we packaged to conditionally packaged this final rule with comment period)
believed it would be appropriate to (status indicator ‘‘Q’’) as a ‘‘special’’ was based on the assumption that
package their payment into the OPPS packaged code for the CY 2008 OPPS, hospital behavior would not change
payment for the independent procedure specifically, CPT code 0126T (Common with regard to when these intraoperative
performed. Therefore, we did not carotid intima-media thickness (IMT) dependent services are performed on
propose to package payment for CY study for evaluation of atherosclerotic the same date and by the same hospital
2008 for those diagnostic services, such burden or coronary heart disease risk that performs the independent services.
as CPT code 93005 (Electrocardiogram, factor assessment). This code was To the extent that hospitals could
routine ECG with at least 12 leads; discussed in the past with the Packaging change their behavior and perform the
tracing only, without interpretation and intraoperative services more or less
Subcommittee of the APC Panel, which
report) that are sometimes or only rarely frequently, on subsequent dates, or at
determined that, consistent with its
performed and reported as supportive settings outside of the hospital, the data
code descriptor as a separate procedure,
services in association with other would show such a change in practice
this procedure could sometimes be
independent procedures. Instead, we in future years and that change would
provided alone, without any other OPPS
proposed to include those HCPCS codes be reflected in future budget neutrality
services on the claim. We believed that
that are usually or always performed adjustments. However, with respect to
this procedure would usually be
intraoperatively, based upon our review intraoperative services in particular, we
provided by a hospital in conjunction
of the codes described above. The believed that hospitals are limited in the
with another independent procedure on
intraoperative services that we proposed extent to which they could change their
the same date of service but may behavior with regard to how they
to package vary in hospital resource
occasionally be provided without furnish these services. By their
costs. Resource cost was not a factor we
another independent service. As a definition, these intraoperative services
considered when determining which
‘‘special’’ packaged code, if the study generally must be furnished on the same
supportive intraoperative procedures to
were billed without any other service date and at the same operative location
package.
The codes we proposed to identify as assigned status indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ as the independent procedure in order
intraoperative services for CY 2008 that or ‘‘X’’ reported on the same date of to be considered intraoperative. For
would receive packaged payment under service, under our proposal we these codes, we assume that both the
the OPPS were listed in Table 12 of the proposed not to treat the IMT study as dependent and independent services
proposed rule (72 FR 42661 through a dependent service for purposes of would be furnished on the same date in
42662). payment. If we were to continue to the same hospital, and hospitals should
Several of these codes, including CPT unconditionally package payment for bill them on the same claim with the
code 93640 (Electrophysiologic this procedure, treating it as a same date of service.
evaluation of single or dual chamber dependent service, hospitals would As we indicated earlier, in all cases
pacing cardioverter-defibrillator leads receive no payment at all when we provided that hospitals that furnish
including defibrillation threshold providing this service alone, although the intraoperative procedure on the
evaluation (induction of arrhythmia, the procedure would not be functioning same date as the independent service
evaluation of sensing and pacing for as an intraoperative service in that case. must bill both services on the same
arrhythmia termination) at the time of However, according to our proposal, its claim. We expect to carefully monitor
initial implantation or replacement), are conditionally packaged status as a any changes in billing practices on a
already unconditionally (that is, always) ‘‘special’’ packaged code would allow service-specific and hospital-specific
packaged under the CY 2007 OPPS, payment to be provided for this ‘‘Q’’ basis to determine whether there is
where they have been assigned status status IMT study when provided alone, reason to request that QIOs review the
indicator ‘‘N.’’ Payment for these in which case it would be treated as an quality of care furnished or to request
services is made through the payment independent service under these limited that Program Safeguard Contractors
for the separately payable, independent circumstances. On the other hand, when review the claims against the medical
services with which they are billed. No this service is furnished as an record.
separate payment is made for services intraoperative procedure on the same During the September 2007 APC
that we have assigned status indicator day and in the same hospital as Panel meeting, the Panel recommended
‘‘N.’’ We did not propose status independent, separately paid services that CMS finalize the proposal to
indicator changes for the five diagnostic that are assigned status indicator ‘‘S,’’ package intraoperative services and that
intraoperative services that were ‘‘T,’’ ‘‘V,’’ or ‘‘X,’’ we proposed to CMS consider assigning status indicator
unconditionally packaged for CY 2007. package payment for it as a dependent ‘‘Q’’ to CPT code 96020
We proposed to change the status service. In all cases, we proposed that (Neurofunctional testing selection and
indicator for 34 intraoperative services hospitals that furnish independent administration during noninvasive
hsrobinson on PROD1PC76 with NOTICES

from separately paid to unconditionally services on the same date as this IMT imaging functional brain mapping, with
packaged (status indicator ‘‘N’’) for the procedure must bill them all on the test administered entirely by a
CY 2008 OPPS. As stated in the CY 2008 same claim. We believed that when physician or psychologist, with review
proposed rule, we believe that these dependent and independent services are of test results and report).
services are always integral to and furnished on the same date and in the We received many public comments
dependent upon the independent same facility, they are part of a single on our proposal to package

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intraoperative services for CY 2008. A vessel) during diagnostic evaluation OPPS data included a median cost of
summary of the public comments and and/or therapeutic intervention; each $2,000 for IVUS, with approximately
our responses follow. additional vessel (List separately in $800 of those costs related solely to the
Comment: Several commenters addition to code for primary device component. One commenter
requested that CMS change the status of procedure)); 75946 (Intravascular stated that IVUS may be performed in
CPT code 96020 to conditionally ultrasound (non coronary vessel), conjunction with a diagnostic procedure
packaged or separately payable instead radiological supervision and that maps to an APC such as 0080
of finalizing the proposal to interpretation; each additional non- (Diagnostic Cardiac Catheterization);
unconditionally package this code. coronary vessel (List separately in 0267 (Level III Diagnostic and Screening
According to the commenters, addition to code for primary Ultrasound); or 0280 (Level III
functional brain mapping is often procedure)); 92978 (Intravascular Angiography and Venography), rather
performed prior to epilepsy surgery. The ultrasound (coronary vessel or graft) than a major therapeutic procedure such
commenters noted that functional brain during diagnostic evaluation and/or as stenting or angioplasty, resulting in a
mapping is performed by staff other therapeutic intervention including total payment of $150 to $2,500, which
than the neurologist or imaging supervision, interpretation and would not cover the hospital’s costs.
neuropsychologist who performs the report; initial vessel (List separately in Other commenters elaborated on the
accompanying functional MRI, reported addition to code for primary costs associated with ICE, which is
with CPT code 70555 (Magnetic procedure)); 92979 (Intravascular reported with the corresponding
resonance imaging, brain, functional ultrasound (coronary vessel or graft) independent services described by CPT
MRI; requiring physician or during diagnostic evaluation and/or codes 93621 (Comprehensive
psychologist administration of entire therapeutic intervention including electrophysiologic evaluation including
neurofunctional testing). One imaging supervision, interpretation and insertion and repositioning of multiple
commenter clarified that functional MRI report; each additional vessel (List electrode catheters with induction or
is more commonly performed without separately in addition to code for attempted induction of arrhythmia; with
functional brain mapping. If CPT code primary procedure)); 93571 left atrial pacing and recording from
96020 were conditionally packaged, the (Intravascular Doppler velocity and/or coronary sinus or left atrium (List
commenter believed that separate pressure derived coronary flow reserve separately in addition to code for
payment should be made for CPT code measurement (coronary vessel or graft) primary procedure)); 93622
96020 when it was provided with the during coronary angiography including
functional MRI. Another commenter (Comprehensive electrophysiologic
pharmacologically induced stress; evaluation including insertion and
stated that functional brain mapping is initial vessel (List separately in addition
a separate service from the functional repositioning of multiple electrode
to code for primary procedure)); 93572 catheters with induction or attempted
MRI, and therefore should not be (Intravascular Doppler velocity and/or
packaged. induction of arrhythmia; with left
pressure derived coronary flow reserve ventricular pacing and recording (List
Response: The AMA 2007 CPT book
measurement (coronary vessel or graft) separately in addition to code for
specifically states that CPT code 70555
during coronary angiography including primary procedure)); 93651
can only be reported if CPT code 96020
pharmacologically induced stress; each (Intracardiac catheter ablation of
is also performed. CPT code 70555 is
additional vessel (List separately in arrhythmogenic focus; for treatment of
separately payable under the CY 2008
addition to code for primary supraventricular tachycardia by ablation
OPPS. Therefore, whenever CPT code
procedure)); and 93662 (Intracardiac of fast or slow atrioventricular
70555, the independent procedure, is
echocardiography during therapeutic/ pathways, accessory atrioventricular
billed with CPT code 96020, the
dependent procedure, the payment diagnostic intervention, including connections or other atrial foci, singly or
associated with CPT code 96020 is imaging supervision and interpretation in combination); and 93652
appropriately packaged into the (List separately in addition to code for (Intracardiac catheter ablation of
payment for CPT code 70555. Even if primary procedure)). arrhythmogenic focus; for treatment of
CPT code 96020 were conditionally The commenters noted that, while use ventricular tachycardia), in only 5
packaged, separate payment would not of these procedures often results in percent of the claims involving the
be made when it was billed with CPT better patient outcomes and reduced above procedures. The commenters also
code 70555. In addition, we believe that need for subsequent procedures, they noted that only 14 percent of hospitals
functional brain mapping is never are only provided to a small proportion billed ICE with the CPT codes listed
provided to a patient as a sole service. of patients who undergo stenting, above, indicating that the impact of
Instead, it is always provided in angioplasty, and other related services. packaged payment will affect a subset of
conjunction with a functional MRI. A number of commenters specified that hospitals who invested in this capital
Therefore, we continue to believe that IVUS is performed on 1 to 20 percent of equipment. One commenter noted that
unconditional packaging is appropriate patients who undergo a related IVUS and ICE are clearly not integral to
for CPT code 96020. diagnostic or therapeutic intervention, any independent procedure because
Comment: Many commenters using Medicare claims and internal they are used infrequently. Other
requested that CMS continue to pay hospital assessments. Therefore, the commenters noted that costs will be
separately for intravascular ultrasound commenters stated that the costs for improperly allocated to hospitals that
(IVUS), fractional flow reserve (FFR), IVUS, FFR, and ICE do not affect the perform the independent procedure,
and intracardiac echocardiography (ICE) payment rates for the independent regardless of whether they purchased
reported with CPT codes 37250 procedures in a significant way, if at all. the equipment for the dependent
hsrobinson on PROD1PC76 with NOTICES

(Intravascular ultrasound (non-coronary In addition, the commenters noted that procedure. One commenter disputed
vessel) during diagnostic evaluation IVUS, in particular, involves high describing FFR services as ‘‘ancillary’’
and/or therapeutic intervention; initial resource costs because of expensive and stated that they are ‘‘decisional’’
vessel (List separately in addition to capital equipment, significant labor and therefore should not be packaged.
code for primary procedure)); 37251 cost, and disposable supplies. Several The commenters expressed concern that
(Intravascular ultrasound (non-coronary commenters noted that the CY 2005 packaged payment will create a

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significant financial disincentive to procedure. In this case, IVUS, FFR, and Comment: Many commenters
provide these services. The commenters ICE are not the services themselves that supported the proposal to package
also noted that these procedures should must be mapped to contrast or payment for all intraoperative services
not be described as ‘‘intraoperative’’ noncontrast APCs for payment. Instead, and recommended that CMS finalize the
because they precede the independent independent services must map to proposal without modification. Several
procedure, and may even result in contrast or noncontrast APCs, as we commenters requested that CMS pay
canceling the independent procedure. have done. IVUS, FFR, and ICE are separately for other intraoperative
One commenter requested that CMS similar to other supportive packaged services that it proposed to package for
assign status indicator ‘‘Q’’ to CPT codes services, including drugs and CY 2008, but did not present unique
93571 and 93572. On the other hand, anesthesia. Packaged codes never map arguments specific to any code.
several commenters specified that these to an APC, and, therefore, it is Response: We agree with commenters
services are not stand alone procedures. unnecessary to distinguish whether they that packaging payment for
One commenter stated that it is illegal require contrast agents or not. Instead, intraoperative services is consistent
under section 1833(t)(2)(G) of the Act to the independent procedure must map to with the principles of the OPPS and will
package payment for IVUS and FFR, a contrast or noncontrast APC. help contain costs while creating an
which do not use contrast agents, into For the reasons stated above, we are incentive for hospitals to utilize
payment for coronary or peripheral finalizing our proposal to resources in a cost efficient manner. We
angiography, which require contrast unconditionally package payment for understand that hospitals would prefer
agents. Specifically, the commenter IVUS, FFR, and ICE services for CY if certain intraoperative services were
summarized the Act which states that 2008. paid separately. In light of the public
CMS must create payment groups under Comment: One commenter requested comments we received, our clinical
the OPPS that ‘‘classify separately those that CMS conditionally package advisors reassessed each intraoperative
procedures that utilize contrast agents payment for CPT code 75898 code on the list to ensure that it was still
from those that do not.’’ (Angiography through existing catheter appropriate for packaged payment.
Response: We appreciate the many for follow-up study for transcatheter However, we did not see any
thoughtful comments related to the therapy, embolization or infusion), compelling reason to pay separately for
packaged status of IVUS, FFR, and ICE instead of finalizing the proposal to any of the intraoperative services that
services. We acknowledge that the costs unconditionally package payment for were not already discussed and revised
associated with packaged services may this service. The commenter clarified above.
contribute more or less to the median For CY 2008, we are finalizing our CY
that this is often the only service
cost of the independent service, 2008 proposal, with modification, to
performed when a patient has lengthy
depending on how often the dependent package the payment for all
thrombolytic therapy.
service is billed with the independent intraoperative HCPCS codes with three
Response: We agree with the exceptions. Specifically, we are
service. It is our goal to adhere to the
commenter that this code should be finalizing all of the packaging changes
principles inherent in a prospective
conditionally packaged rather than we proposed, with the exception of
payment system and to encourage
unconditionally packaged, so that conditionally packaging CPT code
hospitals to utilize resources in a cost-
effective manner. In this case, hospitals separate payment is made when this 75898 as an ‘‘STVX-packaged’’ code and
must choose whether to utilize IVUS, service is provided without any other paying separately for CPT codes 67299
FFR, and ICE, balancing the needs of the separately payable services on the same and 95999. Except as otherwise
patient with the costs associated with date of service. We are changing the specified above, we are fully adopting
the services. status indicator for CPT code 75898 to the APC Panel recommendation to
We continue to believe that IVUS, ‘‘Q’’ for CY 2008 and including it as an package all intraoperative services and
FFR, and ICE are dependent services ‘‘STVX-packaged’’ code. When provided to review the status indicator of CPT
that are always provided in association on the same date of service as other code 96020. Table 10 of this final rule
with independent services. This is separately payable services, payment for with comment period includes the final
different than stating that every CPT code 75898 will be packaged into comprehensive list of all codes in the
angioplasty or other related payment for the other services. seven categories that are packaged for
independent procedure utilizes IVUS, Comment: One commenter requested CY 2008.
FFR, or ICE. In fact, all of the codes that CMS continue to pay separately for
CPT codes 67299 (Unlisted procedure, (4) Imaging Supervision and
about which we received comment are
posterior segment) and 95999 (Unlisted Interpretation Services
listed as add-on codes in the CY 2007
CPT book. While we agree that some of neurological or neuromuscular We proposed to change the packaging
these services may contribute to diagnostic procedure). These codes status of many imaging supervision and
decisionmaking, we still believe that describe unlisted procedures, and the interpretation codes for CY 2008. We
these services are never provided commenter explained that it would be define ‘‘imaging supervision and
without another independent service on impossible to know whether the interpretation codes’’ as HCPCS codes
the same day. Therefore, we do not services they describe should be for services that are defined as
believe it is appropriate to assign status appropriately packaged or separately ‘‘radiological supervision and
indicator ‘‘Q’’ to CPT codes 93571 and paid. interpretation’’ in the radiology series,
93572, or any of the other IVUS, FFR, Response: We agree with the 70000 through 79999, of the AMA CY
or ICE services. commenter that CPT codes 67299 and 2007 book of CPT codes, with the
While the statute requires us to 95999 should not be packaged under the addition of some services in other code
hsrobinson on PROD1PC76 with NOTICES

establish separate APCs for those OPPS for CY 2008 because they are ranges of CPT, Category III CPT tracking
services that require contrast and those unlisted procedures. Therefore, we are codes, or Level II HCPCS codes that are
that do not require contrast, the statute finalizing a separately payable status clinically similar or directly crosswalk
does not state a similar requirement for indicator and APC assignment for them to codes defined as radiological
the packaged services that are ancillary in Addendum B to this final rule with supervision and interpretation services
and supportive to the main independent comment period. in the CPT radiology range. We also

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included HCPCS codes that existed in CPT code 93555 describes an imaging were to unconditionally package
CY 2006 but were deleted and were supervision and interpretation service payment for these imaging supervision
replaced in CY 2007. We included the in support of the cardiac catheterization and interpretation services as dependent
CY 2006 HCPCS codes because we procedure, and this dependent service is services, hospitals would receive no
proposed to use the CY 2006 claims data clinically quite similar to radiological payment at all for providing the imaging
to calculate the CY 2008 OPPS median supervision and interpretation codes in supervision and interpretation service
costs on which the CY 2008 payment the radiology range of CPT. Payment for and the other minor procedure(s).
rates would be based. the cardiac catheterization imaging However, according to our proposal,
In its discussion of ‘‘radiological supervision and interpretation services their conditional packaging status as
supervision and interpretation,’’ CPT has been packaged since the beginning ‘‘special’’ packaged codes would allow
indicates that ‘‘when a procedure is of the OPPS. Therefore, in developing payment to be provided for these ‘‘Q’’
performed by two physicians, the the proposal for the CY 2008 proposed status imaging supervision and
radiologic portion of the procedure is rule, we conducted a comprehensive interpretation services as independent
designated as ‘radiological supervision clinical review of all Category I and services in these limited circumstances,
and interpretation’.’’ In addition, CPT Category III CPT codes and Level II and for which payment for the
guidance notes that, ‘‘When a physician HCPCS codes to identify all codes that accompanying minor procedure would
performs both the procedure and describe imaging supervision and be packaged. However, when these
provides imaging supervision and interpretation services. The codes we imaging supervision and interpretation
interpretation, a combination of proposed to identify as imaging dependent services are furnished on the
procedure codes outside the 70000 supervision and interpretation codes for same day and in the same hospital as
series and imaging supervision and CY 2008 that would receive packaged independent separately paid services,
interpretation codes are to be used.’’ In payment were listed in Table 14 of the specifically, any service assigned status
the hospital outpatient setting, the proposed rule (72 FR 42665–42667). indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X,’’ we
concept of one or more than one Several of these codes, including CPT proposed to package payment for them
physician performing related code 93555 discussed above, are already as dependent services. In all cases, we
procedures does not apply to the unconditionally (that is, always) proposed that hospitals that furnish the
reporting of these codes, but the packaged under the CY 2007 OPPS, independent services on the same date
radiological supervision and where they have been assigned status as the dependent services must bill
interpretation codes clearly are indicator ‘‘N.’’ Payment for these them all on the same claim. We believe
established for reporting in association services is made as part of the payment that when the dependent and
with other procedural services outside for the separately payable, independent independent services are furnished on
the CPT 70000 series. Because these services with which they are billed. No the same date and in the same hospital,
imaging supervision and interpretation separate payment is made for services they are part of a single complete
codes are always reported for imaging that we have assigned to status indicator hospital outpatient service that is
services that support the performance of ‘‘N.’’ We did not propose status reported with more than one HCPCS
an independent procedure and they are, indicator changes for the six imaging code, and no separate payment should
by definition, always provided in the supervision and interpretation services be made for the imaging supervision
same operative session as the that were unconditionally packaged for and interpretation service that supports
independent procedure, we believe that CY 2007. the independent service.
it is appropriate to package their We proposed to change the status In the case of services for which we
payment into the OPPS payment for the indicator for 33 imaging supervision proposed conditional packaging, we
independent procedure performed. and interpretation services from indicated that we would expect that,
In addition to radiological supervision separately paid to unconditionally although these services would always be
and interpretation codes in the packaged (status indicator ‘‘N’’) for the performed in the same session as
radiology range of CPT codes, there are CY 2008 OPPS. We believed that these another procedure, in some cases that
CPT codes in other series that describe services are always integral to and other procedure’s payment would also
similar procedures that we proposed to dependent upon the independent be packaged. For example, CPT code
include in the group of imaging services that they support and, 73525 (Radiological examination, hip,
supervision and interpretation codes therefore, their payment would be arthrography, radiological supervision
proposed for packaging under the CY appropriately packaged because they and interpretation) and CPT code 27093
2008 OPPS. For example, CPT code would generally be performed on the (Injection procedure for hip
93555 (Imaging supervision, same date and in the same hospital as arthrography; without anesthesia) could
interpretation and report for injection the independent services. be provided in a single hospital
procedure(s) during cardiac We proposed to change the status outpatient encounter and reported as
catheterization; ventricular and/or atrial indicator for 93 imaging supervision the only two services on a claim. In the
angiography) whose payment under the and interpretation services from case where only these two services were
OPPS is currently packaged, is separately paid to conditionally performed, the conditionally packaged
commonly reported with an injection packaged (status indicator ‘‘Q’’) as status of CPT code 73525 would
procedure code, such as CPT code ‘‘special’’ packaged codes for the CY appropriately allow for its separate
93543 (Injection procedure during 2008 OPPS. These services may payment as an independent imaging
cardiac catheterization; for selective left occasionally be provided at the same supervision and interpretation
ventricular or left atrial angiography), time and at the same hospital with one arthrography service, into which
whose payment is also currently or more other procedures for which payment for the dependent injection
hsrobinson on PROD1PC76 with NOTICES

packaged under the OPPS, and a cardiac payment is currently packaged under procedure would be packaged.
catheterization procedure code, such as the OPPS, most commonly injection The estimated overall impact of these
CPT code 93526 (Combined right heart procedures, and in these cases we changes presented in section XXII.B. of
catheterization and retrograde left heart would not treat the imaging supervision the proposed rule (section XXIV.B. of
catheterization), that is separately paid. and interpretation services as dependent this final rule with comment period)
In the case of cardiac catheterization, services for purposes of payment. If we was based on the assumption that

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hospital behavior would not change model for these services and present it sufficiently analyzed prior to being
with regard to when these dependent at the next APC Panel meeting. proposed and should not be made final.
services are performed on the same date We received many public comments The commenters cited several examples
and by the same hospital that performs on our proposal to package imaging of packaging with minor services or
the independent services. To the extent supervision and interpretation services packaged services that they view as
that hospitals could change their for CY 2008. A summary of the public common, which they believe illuminate
behavior and perform the imaging comments and our response follows. the problems with packaging imaging
supervision and interpretation services Comment: Many commenters objected supervision and interpretation services.
more or less frequently, on subsequent to the packaging of imaging supervision The commenters asserted that CMS
dates, or at settings outside of the and interpretation services. They should ensure that no service is
hospital, the data would show such a asserted that the proposal would, in packaged into a service that is already
change in practice in future years and many cases, excessively reduce packaged. Some commenters believed
that change would be reflected in future payments because the proposal that the proposed policy would reduce
budget neutrality adjustments. However, packaged the cost of the service into one payment for important interventional
with respect to the imaging supervision or more services that are already imaging services by 25 percent in the
and interpretation services in particular, packaged or would inappropriately aggregate, would cause CMS to use
we believed that hospitals are limited in package the cost of expensive imaging fewer claims for ratesetting, and would
the extent to which they could change supervision and interpretation services result in access problems for patients.
their behavior with regard to how they into more minor services, like visits or Some commenters stated that the
furnish these services. By their minor diagnostic tests. The commenters methodology reduces the number of
definition, these imaging and believed that this would result in little records that could be used to value
supervision services generally must be or no payment being made for the more these imaging codes for separate
furnished on the same date and at the expensive services provided in an payment, thereby resulting in costs that
same operative location as the encounter. Other commenters suggested would be much lower than would be the
independent procedure in order for the that CMS package only the 33 codes for case if the medians were calculated with
imaging service to meaningfully which the associated surgical service is a higher number of claims.
contribute to the diagnosis or treatment separately paid but not package the 93 The commenters explained that some
of the patient. For those radiological codes proposed to be conditionally of the most common scenarios for the
supervision and interpretation codes in packaged because payments would be services that are assigned to APC 0280
the radiology range of CPT in particular, excessively reduced. As an alternative, (Level III Angiography and Venography)
if the same physician is able to perform one commenter suggested that CMS and are proposed for packaging are
review claims data for the 93 imaging comparable to cardiac catheterization
both the procedure and the supervision
supervision and interpretation codes (APC 0080 (Diagnostic Cardiac
and interpretation as stated by CPT, we
proposed to be assigned status indicator Catheterization)) in time, equipment,
assume that both the dependent and
‘‘Q’’ to identify high volume supply, and labor but under the CMS
independent services would be
combinations of services and evaluate proposal, the payment made under APC
furnished on the same date in the same
the combinations for creation of 0280 would be significantly less than
hospital, and hospitals should bill them
composite APCs. For example, the the payment for APC 0080. Therefore,
on the same claim with the same date
commenter suggested that CMS could the commenters asked that the proposal
of service.
create a composite APC for CPT codes to package services in APCs 0279 (Level
As we indicated earlier in this 72265 (Myelography, lumbosacral, II Angiography and Venography), 280,
section, in all cases, we are providing radiological supervision and and 668 (Level I Angiography and
that hospitals that furnish the imaging interpretation) and 72132 (Computed Venography) not be adopted in CY 2008
supervision and interpretation service tomography lumbar spine, with contrast because the packaging would result in
on the same date as the independent material) that would ensure that the full payments that are much less than the
service must bill both services on the payment for CPT code 72265 would cost of furnishing the services. One
same claim. We expect to carefully always be made when furnished with commenter added that it is
monitor any changes in billing practices CPT code 72132. The commenter was methodologically circular and
on a service-specific and hospital- concerned that CMS could ‘‘overpay’’ unreasonable to package payment for
specific basis to determine whether lumbar CT when no myelography was services that already include other
there is reason to request that QIOs furnished but could ‘‘underpay’’ when packaged services.
review the quality of care furnished or myelography is performed without Response: We have carefully
to request that Program Safeguard lumbar computed tomography (CT) but considered the comments of the APC
Contractors review the claims against in addition to another minor services Panel and the many thoughtful public
the medical record. such as an emergency department visit comments we received on the proposal
During the September 2007 APC or other radiological service. Like to package imaging supervision and
Panel meeting, the APC Panel others, the commenter was concerned interpretation services for the CY 2008
recommended that CMS delay that, as proposed, if an expensive OPPS. We spent considerable time and
packaging the imaging supervision and imaging supervision and interpretation effort in analysis of the data as we
interpretation services because of the service is billed on the same date as a developed our proposed rule, and we
reductions in payment that would occur visit, the visit would be paid and the appreciate the helpful comments we
for services that would only be paid expensive service would not be paid. received on this issue. We have decided
separately if they occurred with other Some commenters believed that the to finalize our proposal to package these
hsrobinson on PROD1PC76 with NOTICES

minor procedures that are already absence of consideration of how services after refining our methodology
packaged. The Panel was concerned payment would be made when for estimating the median cost of
about the proposed reductions in unrelated services or packaged services conditionally packaged codes assigned
payment for typical combinations of were the only other services on the status indicator ‘‘Q’’ to address concerns
expensive imaging services. The Panel claim demonstrated that the CMS that packaging significant services into
asked that CMS develop an alternative proposal was not carefully or services that either are already packaged

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or are minor services leads to a status indicator ‘‘Q’’ on the same date, Furthermore, the refinements, especially
underpayment and concerns that the we would pay one unit of the ‘‘T- those creating single bills from multiple
proposal reduced the number of claims packaged’’ service with the highest minor claims, allowed us to use many
available for setting APC medians for relative payment weight. We discuss more claims to estimate a median cost
these services. We agree that we should how we split the claims to acquire ‘‘T- for these conditionally packaged codes
not pay for a more minor service, such packaged’’ single bills that represent all and, therefore, to develop an APC
as a visit or minor diagnostic procedure, of the resource costs associated with the median cost estimate that better reflects
when the conditionally packaged conditionally packaged service in the resources consumed by these
imaging supervision and interpretation greater detail in section II.A.2. of this services that are commonly performed
services require more resources. We final rule with comment period. The
in combination with one another.
have modified the conditionally ratesetting methodology specifically
packaged status of these services to be includes single bill claims for T-packed We believe that our changes have
specific to surgical procedures and services that represent the costs of resulted in resolution of many of the
called them ‘‘T-packaged services.’’ The multiple services with status indicator concerns raised by the commenters and
payment for these imaging supervision ‘‘Q’’ and other packaged services. We the APC Panel. There were a number of
and interpretation codes will be believe that this resolves many of the specific examples cited by the
packaged into the payment for services payment concerns with regard to our commenters to illustrate their concerns
with a status indicator ‘‘T’’ when they proposal to treat the majority of on this issue. We include the
appear on the same date as the surgical supervision and interpretation codes as commenters’ examples below, expanded
procedure. When these imaging conditionally packaged codes. These to add the CY 2008 final rule payment.
supervision and interpretation services refinements to our methodology In the examples below, ‘‘pkg’’ means
appear with other codes that have any significantly raised the median costs for payment is packaged; ‘‘na’’ means not
other payable status indicator (‘‘S,’’ ’’V,’’ a number of these services compared to applicable.
or ’’X’’) or with other services that have the proposed rule median costs.

EXAMPLE 1.—MYLEOGRAPHY AND LUMBOSACRAL CT WITH CONTRAST


CY 2008 CY 2008
CY 2007 CY 2007 CY 2007 CY 2008 CY 2008
HCPCS Code Descriptor Proposed Final
APC SI Payment APC SI
payment payment

72265 ................ Contrast X-ray lower spine ................ 0274 S ........... $157.01 ... pkg ........... 0274 Q .......... $481.46
72132 ................ CT lumbar spine w/dye ...................... 0283 S ........... $250.94 ... $751.09 .... 0283 S ........... $277.48

Sum ........... ............................................................ ................ .............. $407.95 ... $751.09 .... ................ .............. $758.94

EXAMPLE 2.—ANGIOGRAPHY, CAROTID, CERVICAL, VERTEBRAL AND/OR INTRACRANIAL


CY 2008 CY 2008
CY 2007 CY 2007 CY 2007 CY 2008 CY 2008
HCPCS Code Descriptor Proposed Final
APC SI Payment APC SI
payment payment

36216 ................ Place catheter in artery ...................... ................ N .......... pkg ........... pkg ........... na N .......... pkg
36215 ................ Place catheter in artery ...................... ................ N .......... pkg ........... pkg ........... na N .......... pkg
36217 ................ Place catheter in artery ...................... ................ N .......... pkg ........... pkg ........... na N .......... pkg
36216–59 .......... Place catheter in artery ...................... ................ N .......... pkg ........... pkg ........... na N .......... pkg
75671 ................ Artery Xrays head and neck .............. 0280 S ........... $1,279.92 pkg ........... 0280 Q .......... $2,847.85
75680 ................ Artery Xrays, neck ............................. 0280 S ........... $1,279.92 pkg ........... 0279 Q .......... pkg
75685X2 ........... Artery Xrays, spine ............................ 0280 S ........... $2,559.84 $1,442.28 0279 Q .......... pkg

Sum ........... ............................................................ ................ .............. $5,119.68 $1,442.28 ................ .............. $2,847.85
Note: Several commenters submitted this example or this example with minor variation. The final payment for this service in its entirety is simi-
lar to the payment for cardiac catheterization (APC 0080), to which the commenters compared this service.

EXAMPLE 3.—EVALUATION AND PERCUTANEOUS REVASCULARIZATION OF GRAFT


CY 2008 CY 2008
CY 2007 CY 2007 CY 2007 CY 2008 CY 2008
HCPCS Code Descriptor Proposed Final
APC SI Payment APC SI
payment payment

36145X2 ........... Place catheter in artery ...................... na N .......... pkg ........... pkg ........... na N .......... pkg
75790 ................ Visualize A–V shunt ........................... 0279 S ........... $584.32 ... pkg ........... 0668 Q .......... pkg
G0393 ............... A–V fistula or graft venous ................ 0081 T ........... $2,639.19 $2,934.24 0083 T ........... $2,890.72
75978X2 ........... Repair venous blockage .................... 0668 S ........... $767.90 ... pkg ........... 0083 Q .......... pkg
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35476 ................ Repair venous blockage .................... 0081 T ........... $1,319.60 $1,467.37 0083 T ........... $1,445.36

Sum ........... ............................................................ ................ .............. $5,311.01 $4,401.61 ................ .............. $4,336.08

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EXAMPLE 4.—DIAGNOSTIC ANGIOGRAPHY WITH BALLOON ANGIOPLASTY OF SUPERFICIAL FEMORAL ARTERY


CY 2008 CY 2008
CY 2007 CY 2007 CY 2007 CY 2008 CY 2008
HCPCS Code Descriptor Proposed Final
APC SI Payment APC SI
payment payment

75625 ................ Contrast Xray exam of aorta ............. 0280 S ........... $1,279.92 pkg ........... 0279 Q .......... pkg
75716 ................ Artery Xrays, arms/legs ..................... 0280 S ........... $1,279.92 pkg ........... 0279 Q .......... pkg
75774 ................ Artery Xray, each vessel .................... 0279 S ........... $584.32 .... pkg ........... na N .......... pkg
75774 ................ Artery Xray, each vessel .................... 0279 S ........... $584.32 .... pkg ........... na N .......... pkg
36247 ................ Place catheter in artery ...................... ................ N .......... pkg ........... pkg ........... na N .......... pkg
35474 ................ Repair arterial blockage ..................... 0081 T ........... $2,639.19 $2,934.24 0083 T ........... $2,890.72
35474 ................ Repair arterial blockage ..................... 0081 T ........... $1,319.60 $1,467.37 0083 T ........... $1,445.36
75962 ................ Repair atrial blockage ........................ 0668 S ........... $383.95 ... pkg ........... 0083 Q .......... pkg
75964 ................ Repair artery blockage, each ............. 0668 S ........... $383.95 ... pkg ........... na N .......... pkg

Sum ........... ............................................................ ................ .............. $8,455.17 $4,401.61 ................ .............. $4336.08

Comment: Some commenters believed therefore, their median cost calculation imaging supervision and interpretation
that CMS should not package imaging is highly suspect. packaging proposal would present huge
supervision and interpretation services Response: We do not view the operational challenges for hospitals to
because CMS did not conduct a unknown amount of error that occurs as ensure that the codes and charges
sufficiently thorough analysis of the a result of a theoretical conflict between continue to be billed so that future
many ways that CPT codes can be the revenue code reported for a service claims will contain the necessary costs
reported for services where there could and the CCR used to reduce that charge for setting relative weights for the OPPS.
be more than one surgical CPT code to an estimated cost as justification to Hospitals need only continue to report
associated with a single imaging not package these services. The costs we the codes and charges for all of the
supervision and interpretation service. calculate for purposes of establishing services they furnish. There are no new
The commenters stated that these codes median costs for ratesetting are billing requirements associated with
are created on a ‘‘component’’ basis to estimated costs and as such, in general, this change in payment policy.
deal effectively with the huge variation there is error in them to the extent that Moreover, hospitals are required to
in the combinations of services that the charges are reported under a charge the same amount to all payers for
could occur. revenue code that maps to a cost center the same services. We understand that
in which the costs for the services are many private payers continue to pay a
Response: We disagree with the
not found. Hospitals select the revenue percent of charges, creating incentives
commenters. We acknowledge that the
codes with which they report services to for hospitals to report and charge for all
APC Panel and the commenters raised
Medicare and other payers for a wide services furnished to all patients.
concerns about the packaging of these
range of reasons over which CMS Comment: Some commenters
services that we did not fully anticipate
generally exercises no control. The CMS suggested that CMS update the OPPS
in development of the proposed rule.
crosswalk of revenue codes to cost packaging policies to address newly
However, the purpose of the APC Panel
centers is available for inspection and added or deleted codes.
and the exposure of the proposal to
comment at the CMS Web site at: http://
public comment are to raise issues for Response: We routinely review all
www.cms.hhs.gov/
our consideration as we develop final new or revised HCPCS codes each year
HospitalOutpatientPPS/. Hospitals that
policies for the final rule. We appreciate to determine what status indicator to
want to ensure that the correct CCR is
the assistance of the APC Panel and the assign and whether other changes to our
applied to a service could, if they chose,
many thoughtful public comments we files are needed. We also indicate new
use this crosswalk to select either the
received on the proposal to package codes with a change indicator in
revenue codes to report or the cost
these codes. We recognize that the codes Addendum B to this final rule with
center to use for costs reported with a
are created as they exist, in order to comment period, and we solicit public
particular revenue code.
describe many different treatment Comment: Some commenters believed comments on the interim APC
scenarios through the use of multiple that implementation of the imaging and placement and status indicator we
and varied combinations of codes. As supervision packaging would present assign to them for those HCPCS codes
we discuss above, we have developed a huge operational challenges for designated with comment indicator
methodology that addresses the hospitals to ensure that codes and ‘‘NI’’ in the final rule with comment
concerns raised by the commenters and, charges continue to be billed so that the period. We do not review deleted codes
as such, continue to believe that it is data in future years will be acceptable because they naturally fall out of the
appropriate to package these services for as the basis for setting relative weights system, beginning in the claims for the
CY 2008. for the OPPS. The commenters stated period in which they are deleted,
Comment: Some commenters believed that hospitals will cease to report the although we continue to assign their
that the revenue code to CCR mapping codes and charges for the services that claims data for ratesetting purposes.
for these services is problematic because are no longer separately paid and that Comment: Some commenters
most are billed with revenue code 0361 the costs of the services will then be lost expressed concerns with the treatment
hsrobinson on PROD1PC76 with NOTICES

and revenue code 0361 is mapped to the to the payment system and the median of the claims data for imaging
surgery cost center. However, as the costs for the services that should carry supervision and interpretation codes
commenters pointed out, most of these the packaging will be inappropriately with status indicator ‘‘Q’’ with regard to
procedures are performed in the low. the impact on the number of multiple
imaging department or the heart Response: The commenters did not procedure claims. Some commenters
catheterization laboratory and, articulate how implementation of the stated that reporting packaged services

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will create more multiple procedure conditionally packaged codes are packaged costs in the calculation of the
bills that will not be used to set rates. assigned. medians for these costs codes.
Response: The reporting of packaged Comment: One commenter believed Response: The commenter is correct
services will not result in more multiple that the data for many single bills for the in that we inadvertently erred and did
procedure claims because the packaged services with status indicator ‘‘Q’’ will not include the packaged costs of ‘‘Q’’
service, which has a status indicator of be lost because CMS assesses the status status procedures in the calculation of
‘‘N’’ for data purposes, unless it is of the status indicator ‘‘Q’’ code before the medians for these codes and their
changed to be separately paid, will not applying the bypass list. The related APCs in the proposed rule. We
by itself cause a claim to be viewed as commenters stated that where there are have packaged these costs with the ‘‘Q’’
a multiple major procedure claim. three services on the claim, two of procedures for this final rule with
Moreover, if packaged services and their which are on the bypass list, the status comment period, in addition to making
charges are not reported, the payment indicator ‘‘Q’’ service will be changed to the other modifications to the
for the services into which their cost is packaged before the bypass list is calculation of the median costs for these
packaged may be understated. applied and the two bypass codes will codes as discussed in detail above and
Therefore, it is important that hospitals leave the claim without packaging. The in section II.A.2. of this final rule with
report all services furnished and the commenter added that there will then comment period.
associated charges. be no code to which to package the cost For CY 2008, we are finalizing our
of the status indicator ‘‘Q’’ code and the proposal, with modification as
Comment: Some commenters
data will neither be used nor packaged discussed above, to unconditionally or
indicated that where there are multiple
into anything (because nothing is left for conditionally packaged imaging
codes with status indicator ‘‘Q’’ on a
it to be packaged with). The commenter supervision and interpretation services.
claim and no separately paid services,
believed that if CMS had made the These codes, with their assigned status
they are assigned status indicator ‘‘N’’
assignment of the ‘‘Q’’ after the bypass indicator ‘‘N’’ as unconditionally
and sent to multiple minors because the
codes were removed, the data could be packaged or ‘‘Q’’ as ‘‘T-packaged’’
assignment of the status indicator ‘‘N’’
used to set the APC median for the ‘‘Q’’ codes, are listed in Table 10 of this final
happens before the split. They suggested
service and more claims could have rule with comment period. We are not
that if the assignment happened after
been used. accepting the APC Panel
the split and after the ‘‘pseudo’’ single Response: The commenter accurately recommendation to delay packaging of
creation, they could be used in the described the treatment of a code with these services and provide an
median calculation for the APC. status indicator ‘‘Q’’ if it is on the same alternative model at the next Panel
Response: The commenter correctly claim with two codes that are on the meeting, because we are finalizing a
describes how codes with status bypass list. However, we disagree with modified model. We will review the
indicator ‘‘Q’’ were treated in this the commenter’s recommendation. First, final CY 2008 policy, including the
circumstance for the proposed rule data. by definition, codes on the bypass list ratesetting methodology, with the APC
We agree that claims with multiple do not have significant packaging. We Panel at its 2008 winter meeting.
occurrences of codes with status specifically reassessed the codes
indicator ‘‘Q’’ should be used to (5) Diagnostic Radiopharmaceuticals
included on the bypass list in light of
estimate the APC median cost through this packaging proposal to ensure For CY 2008, we proposed to change
which they will be separately paid. In removal of any services with significant the packaging status of diagnostic
response to the public comments we packaging. The circumstances where radiopharmaceuticals as part of our
received, we have revised the data ‘‘Q’’ service data would remain on a overall enhanced packaging approach
process in several places to address the claim as ‘‘packaging’’ after removing the for the CY 2008 OPPS. Packaging costs
estimation of costs for services with a other two codes as bypass codes should into a single aggregate payment for a
status indicator of ‘‘Q.’’ (See section be very limited. Second, we would not service, encounter, or episode of care is
II.A.2.b. of this final rule with comment want to use that data to set the median a fundamental principle that
period for further discussion of the cost for the ‘‘Q’’ status service because distinguishes a prospective payment
changes to the data process.) With the final payment disposition of the system from a fee schedule. In general,
regard to this particular comment, we code with status indicator ‘‘Q’’ on the packaging the costs of supportive items
continue to assign claims with multiple claim would be packaged. Under this and services into the payment for the
‘‘Q’’ procedure or packaged services to commenter’s recommendation, we independent procedure or service with
the multiple minor file. We then create would be sending the data for the status which they are associated encourages
additional single bills from the multiple indicator ‘‘Q’’ codes to the APC to hospital efficiencies and also enables
minor file by identifying which which it is assigned even though, when hospitals to manage their resources with
conditionally packaged code will be the the claim was processed, no separate maximum flexibility. As we stated in
prime code that will carry the packaging payment would be made for the status the CY 2007 OPPS/ASC final rule with
by selecting the conditionally packaged indicator ‘‘Q’’ code. comment period, we believe that a
code with the highest payment for CY Comment: One commenter found that policy to package payment for
2007 and packaging all costs of the other its calculation of median costs using additional radiopharmaceuticals (other
codes into the cost for that code. We proposed rule data for the imaging than those already packaged when their
also set the units to one for the prime supervision and interpretation services per day costs are below the packaging
code to reflect our policy of only paying to which CMS proposed to assign status threshold for OPPS drugs, biologicals,
one unit of a service for codes with a indicator ‘‘Q’’ resulted in median costs and radiopharmaceuticals based on data
status indicator of ‘‘Q.’’ That claim then for these codes and the APCs to which for the update year) is consistent with
hsrobinson on PROD1PC76 with NOTICES

becomes a single procedure claim they were assigned that were OPPS packaging principles and would
assigned to the APC to which the prime significantly higher than the median provide greater administrative
code is assigned. These modifications costs calculated by CMS for these codes simplicity for hospitals (71 FR 68094).
have resulted in the use of many more and their APCs. The commenter was All nuclear medicine procedures
claims than were used for the proposed concerned that CMS may have require the use of at least one
rule to set APC medians where inadvertently failed to include the radiopharmaceutical, and there are only

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a small number of radiopharmaceuticals the payment for diagnostic nuclear outpatient drugs identified in section
that may be appropriately billed with medicine procedures for CY 2008. We 1833(t)(B) of the Act.
each diagnostic nuclear medicine expect that packaging would encourage Diagnostic radiopharmaceuticals are
procedure. While examining the CY hospitals to use the most cost efficient always intended to be used with a
2005 hospital claims data in preparation diagnostic radiopharmaceutical diagnostic nuclear medicine procedure.
for the CY 2007 OPPS/ASC proposed products that are clinically appropriate. In examining our CY 2006 claims data,
rule, we identified a significant number We anticipate that hospitals would we were able to match most diagnostic
of diagnostic nuclear medicine continue to provide care that is aligned radiopharmaceuticals to their associated
procedure claims that were missing with the best interests of the patient. diagnostic procedures and most
HCPCS codes for the associated Furthermore, we believe that it would diagnostic nuclear medicine procedures
radiopharmaceutical. At that time, we be the intent of most hospitals to to their associated diagnostic
believed that there could be two reasons provide both the diagnostic radiopharmaceuticals in the vast
for the presence of these claims in the radiopharmaceutical and the associated majority of single bills used for
data. One reason could be that the diagnostic nuclear medicine procedure ratesetting. We estimate that less than 5
radiopharmaceutical used for the at the time the diagnostic percent of all claims with a diagnostic
procedure was packaged under the radiopharmaceutical is administered radiopharmaceutical had no
OPPS and, therefore, some hospitals and not to send patients to a different corresponding diagnostic nuclear
may have decided not to include the provider for administration of the medicine procedure. In addition, we
specific radiopharmaceutical HCPCS radiopharmaceutical. As we indicated found that only about 13 percent of all
code and an associated charge on the in the proposed rule, we do not believe single bills with a diagnostic nuclear
claim. A second reason could be that the that our packaging proposal would limit medicine procedure code had no
hospitals may have incorporated the beneficiaries’ ability to receive clinically corresponding diagnostic
cost of the radiopharmaceutical into the appropriate diagnostic procedures. radiopharmaceutical billed. These
charges for the associated nuclear Again, the OPPS is a system of averages, statistics indicate that, in a majority of
medicine procedures. A third possibility and payment in the aggregate is our single bills for diagnostic nuclear
not offered in the CY 2007 OPPS/ASC intended to be adequate, although medicine procedures, a diagnostic
proposed rule is that hospitals may have payment for any one service may be radiopharmaceutical HCPCS code is
included the charges for higher or lower than a hospital’s actual included on the single bill. Table 15 in
radiopharmaceuticals on an uncoded costs in that case. the proposed rule (72 FR 42668)
revenue code line. presented the top 20 diagnostic nuclear
In the CY 2007 OPPS/ASC proposed For CY 2008, we have separated medicine procedures in terms of the
rule, we did not propose packaging radiopharmaceuticals into two overall frequency with which they are
payment for radiopharmaceuticals with groupings. The first group includes reported in the OPPS claims data.
per day costs above the $55 CY 2007 diagnostic radiopharmaceuticals, while Among these high volume diagnostic
packaging threshold because we the second group includes therapeutic nuclear medicine procedures, their
indicated that we were concerned that radiopharmaceuticals. We identified all single bills included a HCPCS code for
payments for certain nuclear medicine diagnostic radiopharmaceuticals as a diagnostic radiopharmaceutical at
procedures could potentially be less those Level II HCPCS codes that include least 84 percent of the time for 19 of the
than the costs of some of the packaged the term ‘‘diagnostic’’ along with a top 20 procedures. More specifically, 84
radiopharmaceuticals, especially those radiopharmaceutical in their long code to 86 percent of the single bills for 4
that are relatively expensive. At the descriptors. Therefore, we were able to diagnostic nuclear medicine procedures
same time, we also noted the GAO’s distinguish therapeutic included a diagnostic
comment in reference to the CY 2006 radiopharmaceuticals from diagnostic radiopharmaceutical, 87 to 89 percent of
OPPS proposed rule that stated a radiopharmaceuticals as those Level II the single bills for 8 diagnostic nuclear
methodology that includes packaging all HCPCS codes that have the term medicine procedures included a
radiopharmaceutical costs into the ‘‘therapeutic’’ along with a diagnostic radiopharmaceutical, and 90
payments for the nuclear medicine radiopharmaceutical in their long code percent or more of the single bills for 7
procedures may result in payments that descriptors. There currently are no diagnostic nuclear medicine procedures
exceed hospitals’ acquisition costs for HCPCS C-codes used to report included a diagnostic
certain radiopharmaceuticals because radiopharmaceuticals under the OPPS. radiopharmaceutical.
there may be more than one For CY 2008, we proposed to package Among the lower volume diagnostic
radiopharmaceutical that may be used payment for all diagnostic nuclear medicine procedures (which
for a particular procedure. We also radiopharmaceuticals that are not were outside the top 20 in terms of
expressed concern that packaging otherwise packaged according to the CY volume), there was still good
payment for additional 2008 packaging threshold for drugs, representation of diagnostic
radiopharmaceuticals could provoke biologicals, and radiopharmaceuticals radiopharmaceutical HCPCS codes on
treatment decisions that may not reflect that we proposed. We proposed this the single bills for most procedures.
use of the most clinically appropriate packaging approach for diagnostic About 40 percent of the low volume
radiopharmaceutical for a particular radiopharmaceuticals, while we diagnostic nuclear medicine procedures
nuclear medicine procedure in any proposed to continue to pay separately had at least 80 percent of the single bills
specific case (71 FR 68094). for therapeutic radiopharmaceuticals for that diagnostic procedure that
After considering this issue further with an average per day cost of more included a diagnostic
and examining our CY 2006 claims data than $60 as discussed in section radiopharmaceutical HCPCS code; about
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for the CY 2008 OPPS update, as we V.B.3.a.(c) of this final rule with 37 percent of the low volume diagnostic
indicated in the CY 2008 OPPS/ASC comment period. In that section, we procedures had between 50 to 79
proposed rule, we believe that it is most review our reasons for treating percent of the single bills that included
appropriate to package payment for diagnostic radiopharmaceuticals (as a diagnostic radiopharmaceutical
some radiopharmaceuticals, specifically well as contrast media) differently from HCPCS code; and about 23 percent of
diagnostic radiopharmaceuticals, into other types of specified covered the low volume diagnostic procedures

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had less than 50 percent of the single with stakeholders on issues related to percentages of extended half-life
bills that include a diagnostic payment for radiopharmaceuticals, diagnostic radiopharmaceuticals with
radiopharmaceutical HCPCS code. For including evaluating claims data for same day diagnostic nuclear medicine
the few diagnostic nuclear medicine different classes of scans and the ability of ‘‘natural’’
procedures where less than 50 percent radiopharmaceuticals and ensuring that singles to package costs across days, we
of the single bills included a diagnostic a nuclear medicine procedure claim indicated in the proposed rule that we
radiopharmaceutical HCPCS code, we always includes at least one reported believe that our standard OPPS
believed there could be several reasons radiopharmaceutical agent. In the ratesetting methodology of using
why the percentage of single bills for the proposed rule, we noted that we median costs calculated from claims
diagnostic nuclear medicine procedure planned to accept the APC Panel’s data would adequately capture the costs
with a diagnostic radiopharmaceutical recommendation, and we specifically of diagnostic radiopharmaceuticals
HCPCS code was low. welcomed public comment on the associated with diagnostic nuclear
As noted earlier, it is possible that hospitals’ burden involved should we medicine procedures that are not
hospitals may have included the charge require such precise reporting. We also provided on the same date of service.
for the radiopharmaceutical in the sought public comment on the The packaging proposal we presented
charge for the diagnostic nuclear importance of such a requirement in would have reduced the overall
medicine procedure itself or on an light of our above discussion on the frequency of single bills for diagnostic
uncoded revenue code line instead of representation of diagnostic nuclear medicine procedures, but the
reporting charges for a specific radiopharmaceuticals in the single bills percent of single bills out of total claims
diagnostic radiopharmaceutical HCPCS for diagnostic nuclear medicine remained robust for the majority of
code. We found that 24 percent of all procedures, the presence of uncoded diagnostic nuclear medicine procedures.
single bills for a diagnostic nuclear revenue code charges specific to Typically, packaging more procedures
medicine procedure but without a diagnostic radiopharmaceuticals on should improve the number of single
coded diagnostic radiopharmaceutical claims without a coded diagnostic bill claims from which to derive median
had uncoded costs in a revenue code radiopharmaceutical, and our proposal cost estimates because packaging
that might contain diagnostic to package payment for all diagnostic reduces the number of separately paid
radiopharmaceutical costs, specifically, radiopharmaceuticals. procedures on a claim, thereby creating
revenue codes 0254 (Drugs Incident to
As we indicated in the proposed rule, more single procedure bills. In the case
Other Diagnostic Services), 0255 (Drugs
Incident to Radiology), 0343 (Diagnostic we are aware that several diagnostic of diagnostic nuclear medicine
Radiopharmaceuticals), 0621 (Supplies radiopharmaceuticals may be used for procedures, packaging diagnostic
Incident to Radiology), and 0622 multiple day studies; that is, a particular radiopharmaceuticals reduced the
(Supplies Incident to Other Diagnostic diagnostic radiopharmaceutical may be overall number of single bills available
Services). In comparison, we found that administered on one day and a related to calculate median costs by increasing
only 2 percent of diagnostic nuclear diagnostic nuclear medicine procedure packaged costs that previously were
medicine single bills with a nuclear may be performed on a subsequent day. ignored in the bypass process. In prior
medicine procedure and a coded While we understand that multiple day years, we did not consider the costs of
diagnostic radiopharmaceutical had episodes for diagnostic radiopharmaceuticals when we used our
uncoded costs in these revenue codes. It radiopharmaceuticals and the related bypass methodology to extract ‘‘pseudo’’
is also possible that some of these diagnostic nuclear medicine procedures single claims because we assumed that
procedures typically used a diagnostic occur, we expect that this would be a the cost of radiopharmaceutical
radiopharmaceutical subject to small proportion of all diagnostic overhead and handling would be
packaged payment under the CY 2006 nuclear medicine imaging procedures. included in the line-item charge for the
OPPS, and hospitals may have chosen We estimate that, roughly, 15 diagnostic radiopharmaceutical, and the diagnostic
not to report a separate charge for the radiopharmaceuticals have a half-life radiopharmaceuticals were subject to
diagnostic radiopharmaceutical. longer than one day such that they potential separate payment if their mean
Payment for diagnostic could support diagnostic nuclear per day cost fell above the packaging
radiopharmaceuticals commonly used medicine scans on different days. We threshold. The bypass process sets
with some diagnostic nuclear medicine believe these diagnostic empirical and clinical criteria for
procedures would already be packaged radiopharmaceuticals would be minimal packaging for a specific list of
because these diagnostic concentrated in a specific set of procedures and services in order to
radiopharmaceuticals’ average per day diagnostic procedures. Excluding the 5 assign packaged costs to other
costs were less than $50 in CY 2006. We percent of diagnostic procedures on a claim and is discussed
stated in the proposed rule that the CY radiopharmaceutical claims with no at length in section II.A.1. of the