Rule: Medicare: Hospital Outpatient Prospective Payment System and 2006 CY Payment Rates

Thursday,
November 10, 2005
Book 2 of 2 Books
Pages 68515–69040
Part II
Department of
Health and Human
Services
Centers for Medicare & Medicaid Services
42 CFR Parts 419 and 485

Medicare Program; Changes to the
Hospital Outpatient Prospective Payment
System and Calendar Year 2006 Payment
Rates; Final Rule
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68516 Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Rules and Regulations
DEPARTMENT OF HEALTH AND You may submit comments in one of generally beginning approximately 3
HUMAN SERVICES four ways (no duplicates, please): weeks after publication of a document,
1. Electronically. You may submit at the headquarters of the Centers for
Centers for Medicare & Medicaid electronic comments on specific issues Medicare & Medicaid Services, 7500
Services in this final rule with comment period Security Boulevard, Baltimore, MD
to http://www.cms.hhs.gov/regulations/ 21244–1850, Monday through Friday of
42 CFR Parts 419 and 485 ecomments. (Attachments should be in each week from 8:30 a.m. to 4 p.m. To
Microsoft Word, WordPerfect, or Excel; schedule an appointment to view public
[CMS–1501–FC]
however, we prefer Microsoft Word).
comments, phone 1–800–743–3951.
RIN 0938–AN46 2. By regular mail. You may mail
written comments (one original and two Requirements for Issuance of
Medicare Program; Changes to the copies) to the following address ONLY: Regulations: Section 902 of the
Hospital Outpatient Prospective Centers for Medicare & Medicaid Medicare Prescription Drug,
Payment System and Calendar Year Services, Department of Health and Improvement, and Modernization Act of
2006 Payment Rates Human Services, Attention: CMS–1501– 2003 (MMA), Pub. L. 108–173, amended
AGENCY: Centers for Medicare & FC, P.O. Box 8016, Baltimore, MD section 1871(a) of the Act and requires
Medicaid Services (CMS), HHS. 21244–8018. the Secretary, in consultation with the
3. By express or overnight mail. You Director of the Office of Management
ACTION: Final rule with comment period. may send written comments (one and Budget, to establish and publish
SUMMARY: This final rule with comment original and two copies) to the following timelines for the publication of
period revises the Medicare hospital address ONLY: Medicare final regulations based on the
outpatient prospective payment system Centers for Medicare & Medicaid
Services, Department of Health and previous publication of a Medicare
to implement applicable statutory proposed or interim final regulation.
requirements and changes arising from Human Services, Attention: CMS–1501–
FC, Mail Stop C4–26–05, 7500 Security Section 902 of Pub. L. 108–173 also
our continuing experience with this states that the timelines for these
system and to implement certain related Boulevard, Baltimore, MD 21244–1850.
4. By hand or courier. If you prefer, regulations may vary but shall not
provisions of the Medicare Prescription exceed 3 years after publication of the
you may deliver (by hand or courier)
Drug, Improvement, and Modernization preceding proposed or interim final
your written comments (one original
Act (MMA) of 2003. In addition, the regulation except under exceptional
and two copies) before the close of the
final rule with comment period circumstances.
comment period to one of the following
describes changes to the amounts and
addresses. If you intend to deliver your This final rule with comment period
factors used to determine the payment
comments to the Baltimore address, finalizes provisions set forth in the CY
rates for Medicare hospital outpatient
please call telephone number (410) 786– 2006 OPPA proposed rule (70 FR 42674,
services paid under the prospective
7195 in advance to schedule your July 25, 2005). In addition, this final
payment system. This final rule with
arrival with one of our staff members. rule has been published within the 3-
comment period also changes the
Room 445–G, Hubert H. Humphrey
requirement for physician oversight of year time limit imposed by section 902
Building, 200 Independence Avenue,
mid-level practitioners in critical access of Pub. L. 108–173. This final rule also
SW., Washington, DC 20201, or 7500
hospitals (CAHs). finalizes the November 15, 2004 final
Security Boulevard, Baltimore, MD
In this final rule with comment rule with comment period (69 FR
21244–1850.
period, we also are responding to public (Because access to the interior of the 65681) to address public comments
comments received on the November Hubert H. Humphrey Building is not pertaining to the APC group assignment
15, 2004, final rule with comment readily available to persons without of HCPCS codes identified in
period pertaining to the ambulatory Federal Government identification, Addendum B of that rule with the NI
payment classification (APC) group commenters are encouraged to leave comment indicator. Again, we finalized
assignment of Healthcare Common their comments in the CMS drop slots the rule within the 3-year timeframe
Procedure Coding System (HCPCS) located in the main lobby of the imposed under section 902 of Pub. L.
codes identified in Addendum B of that building. A stamp-in clock is available 108–173. Therefore, we believe that the
rule with the new interim (NI) comment for persons wishing to retain proof of final rule is in accordance with the
indicator. These changes are applicable filing by stamping in and retaining an Congress’ intent to ensure timely
to services furnished on or after January extra copy of the comments being filed.)
1, 2006. publication of final regulations.
Comments mailed to the addresses
DATES: Effective Date: This final rule indicated as appropriate for hand or FOR FURTHER INFORMATION, CONTACT:
with comment period is effective on courier delivery may be delayed and Rebecca Kane, (410) 786–0378,
January 1, 2006. received after the comment period. Outpatient prospective payment issues
Comment Date: We will consider Inspection of Public Comments: All and Suzanne Asplen, (410) 786–4558,
comments on the payment classification comments received before the close of Partial hospitalization and community
assigned to HCPCS codes identified in the comment period are available for mental health centers issues.
Addendum B with the NI comment code viewing by the public, including any
and other areas specified through the SUPPLEMENTARY INFORMATION:
personally identifiable or confidential
preamble if we receive them at the business information that is included in Electronic Access
appropriate address, as provided below, a comment. CMS posts all electronic
no later than 5 p.m. on January 9, 2006. comments received before the close of This Federal Register document is
ADDRESSES: In commenting, please refer the comment period on its public Web available from the Federal Register
to file code CMS–1501–FC. Because of site as soon as possible after they have online database through GPO Access, a
staff and resource limitations, we cannot been received. Hard copy comments service of the U.S. Government Printing
accept comments by facsimile (FAX) received timely will be available for Office. The Web site address is: http://
transmission. public inspection as they are received, www.gpoaccess.gov/fr/index.html.
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Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Rules and Regulations 68517
Alphabetical List of Acronyms MDH Medicare-dependent hospital b. Use of Single and Multiple Procedure
Appearing in the Final Rule With MMA Medicare Prescription Drug, Claims
Comment Period Improvement, and Modernization Act of 2. Calculation of Median Costs for CY 2006
2003, Pub. L. 108–173 3. Calculation of Scaled OPPS Payment
ACEP American College of Emergency MSA Metropolitan Statistical Area Weights
Physicians NCCI National Correct Coding Initiative 4. Changes to Packaged Services
AHA American Hospital Association NCD National Coverage Determination a. Background
NP Nurse practitioner b. Responses to the APC Panel
AHIMA American Health Information
OCE Outpatient Code Editor Recommendations
Management Association
OMB Office of Management and Budget B. Payment for Partial Hospitalization
AMA American Medical Association
OPD (Hospital) Outpatient department 1. Background
APC Ambulatory payment classification
OPPS (Hospital) Outpatient prospective 2. PHP APC Update for CY 2006
AMP Average manufacturer price
payment system 3. Separate Threshold for Outlier Payments
ASP Average sales price
PA Physician assistant to CMHCs
ASC Ambulatory surgical center
PHP Partial hospitalization program C. Conversion Factor Update for CY 2006
AWP Average wholesale price
PM Program memorandum D. Wage Index Changes for CY 2006
BBA Balanced Budget Act of 1997, Pub. L. E. Statewide Average Default Cost-to-
105–33 PPI Producer Price Index
PPS Prospective payment system Charge Ratios (CCRs)
BIPA Medicare, Medicaid, and SCHIP F. Expiring Hold Harmless Provision for
Benefits Improvement and Protection Act PPV Pneumococcal pneumonia (virus)
PRA Paperwork Reduction Act Transitional Corridor Payments for
of 2000, Pub. L. 106–554 Certain Rural Hospitals
BBRA Medicare, Medicaid, and SCHIP QIO Quality Improvement Organization
RFA Regulatory Flexibility Act G. Adjustment for Rural Hospitals
Balanced Budget Refinement Act of 1999, 1. Factors Contributing to Unit Cost
Pub. L. 106–113 RRC Rural referral center
SBA Small Business Administration Differences Between Rural Hospitals and
CAH Critical access hospital Urban Hospitals and Associated
CBSA Core-Based Statistical Areas SCH Sole community hospital
SDP Single drug pricer Explanatory Variables
CCR (Cost center specific) Cost-to-charge 2. Results
ratio SI Status indicator
TEFRA Tax Equity and Fiscal H. Hospital Outpatient Outlier Payments
CMHC Community mental health center I. Calculation of the National Unadjusted
CMS Centers for Medicare & Medicaid Responsibility Act of 1982, Pub. L. 97–248
TOPS Transitional outpatient payments Medicare Payment
Services (formerly known as the Health J. Beneficiary Copayments for CY 2006
Care Financing Administration) USPDI United States Pharmacopoeia Drug
Information 1. Background
CNS Clinical nurse specialist 2. Copayment for CY 2006
CORF Comprehensive outpatient To assist readers in referencing 3. Calculation of the Unadjusted
rehabilitation facility sections contained in this document, we Copayment Amount for CY 2006
CPT [Physicians’] Current Procedural are providing the following outline of III. Ambulatory Payment Classification (APC)
Terminology, Fourth Edition, 2005, Group Policies
contents:
copyrighted by the American Medical A. Introduction
Association Outline of Contents 1. Treatment of New HCPCS Codes
CRNA Certified registered nurse anesthetist Discussed in the CY 2006 OPPS
CY Calendar year I. Background Proposed Rule
DMEPOS Durable medical equipment, A. Legislative and Regulatory Authority for 2. Treatment of New CY 2006 HCPCS
prosthetics, orthotics, and supplies the Hospital Outpatient Prospective Codes
DMERC Durable medical equipment Payment System 3. Treatment of New Mid-Year Category III
regional carrier B. Excluded OPPS Services and Hospitals CPT Codes
DRGY Diagnosis-related group C. Prior Rulemaking B. Variations within APCs
DSH Disproportionate share hospital D. APC Advisory Panel 1. Background
EACH Essential Access Community 1. Authority for the APC Panel 2. Application of the 2 Times Rule
Hospital 2. Establishment of the APC Panel a. APC 0146: Level I Sigmoidoscopy
E/M Evaluation and management 3. APC Panel Meetings and Organizational b. APC 0342: Level I Pathology
EPO Erythropoietin Structure c. Other Comments on the Proposed List of
ESRD End-stage renal disease E. Provisions of the Medicare Prescription APC Assignments to Address 2 Times
FACA Federal Advisory Committee Act, Drug, Improvement, and Modernization Violations
Pub. L. 92–463 Act of 2003 That Will Be Implemented 3. Exceptions to the 2 Times Rule
FDA Food and Drug Administration in CY 2006 C. New Technology APCs
FI Fiscal intermediary 1. Hold Harmless Provisions 1. Introduction
FSS Federal Supply Schedule 2. Study and Authorization of Adjustment 2. Refinement of New Technology Cost
FY Federal fiscal year for Rural Hospitals Bands
GAO Government Accountability Office 3. Payment for ‘‘Specified Covered 3. Requirements for Assigning Services to
HCPCS Healthcare Common Procedure Outpatient Drugs’’ New Technology APCs
Coding System 4. Adjustment in Payment Rates for 4. New Technology Services
HCRIS Hospital Cost Report Information ‘‘Specified Covered Outpatient Drugs’’ a. Ablation of Bone Tumors
System for Overhead Costs b. Breast Brachytherapy
HHA Home health agency 5. Budget Neutrality Adjustment c. Enteryx Procedure
HIPAA Health Insurance Portability and F. CMS’ Commitment to New Technologies d. Extracorporeal Shock Wave Treatment
Accountability Act of 1996, Pub. L. 104– G. Summary of the Provisions of the CY e. GreenLight Laser
191 2006 OPPS Proposed Rule f. Magnetoencephalography (MEG)
ICD–9–CM International Classification of H. Public Comments Received on the CY g. Positron Emission Tomography (PET)
Diseases, Ninth Edition, Clinical 2006 OPPS Proposed Rule Scans
Modification I. Public Comments Received on the h. Proton Beam Treatment
IME Indirect medical education November 15, 2004 OPPS Final Rule i. Smoking Cessation Counseling
IPPS (Hospital) Inpatient prospective With Comment Period j. Stereoscopic Kv X-ray
payment system II. Updates Affecting Payments for CY 2006 k. Stereotactic Radiosurgery (SRS)
IVIG Intravenous immune globulin A. Recalibration of APC Relative Weights D. APC-Specific Policies
LTC Long-term care for CY 2006 1. Cardiac and Vascular Procedures
MedPAC Medicare Payment Advisory 1. Database Construction a. Acoustic Heart Sound Recording and
Commission a. Database Source and Methodology Analysis
b. Cardiac Electrophysiologic Services h. Pathology Services (2) Changes for CY 2006 Related to Pub. L.
(APC 0087) i. Photodynamic Therapy of the Skin (APC 108–173
c. Cardioverter-Defibrillator Implantation 0013) (3) Data Sources Available for Setting CY
(APCs 0107 and 0108) j. Wound Care 2006 Payment Rates
d. Endovenous Ablation (APC 0092) IV. Payment Changes for Devices (4) CY 2006 Payment Policy for
e. External Counterpulsation Therapy (APC A. Device-Dependent APCs Radiopharmaceutical Agents
0678) 1. Public Comments and Our Responses on (5) MedPAC Report on APC Payment Rate
f. Intracardiac Echocardiography (APC the November 15, 2004 Final Rule With Adjustment of Specified Covered
0670) Comment Period Outpatient Drugs
g. Percutaneous Thrombectomy and 2. CY 2006 Proposal, APC Panel b. CY 2006 Payment for Nonpass-Through
Thrombolysis (APC 0676) Recommendations, and Responses to Drugs, Biologicals, and
h. Coronary Flow Reserve (APCs 0416 and Public Comments Received Radiopharmaceutical Agents With
0670) a. APC Panel Recommendations HCPCS Codes But Without OPPS
i. Vascular Access Procedures (APCs 0621, b. Public Comments Received and Our Hospital Claims Data
0622, and 0623) Responses C. Coding and Billing Changes for
2. Radiology, Radiation Oncology, and (1) Adjustment of Median Costs Specified Covered Outpatient Drugs
Nuclear Medicine (2) Effects of Inconsistent Markup of 1. Background
a. Angiography and Venography (APCs Charges 2. CY 2006 Payment Policy
0279, 0280, and 0668) (3) Effects of Multiple Procedure Reduction D. Payment for New Drugs, Biologicals,
b. Brachytherapy (APCs 0312, 0313, (4) Impact of Proposed Rates on Access to and Radiopharmaceutical Agents Before
and0651) Care HCPCS Codes Are Assigned
c. Computed Tomography (APCs 0283 and (5) Addition of Other APCs as Device- 1. Background
0333) Dependent APCs 2. CY 2006 Payment Policy
d. Computed Tomographic Angiography (6) Instructions on Reporting Device E. Payment for Vaccines
(APC 0333) Charges F. Changes in Payments for Single
e. Computed Tomographic Guidance (APC (7) Application of Wage Index to Package Indication Orphan Drugs
0332) Containing Device VI. Estimate of Transitional Pass-Through
f. Computerized Reconstruction (APC (8) Recalls of High Cost Devices Spending in CY 2006 for Drugs,
0417) (9) Separate Payment for High Cost Devices Biologicals, and Devices
g. Diagnostic Computed Tomographic B. Pass-Through Payments for Devices A. Total Allowed Pass-Through Spending
Colonography (APC 0333) 1. Expiration of Transitional Pass-Through B. Estimate of Pass-Through Spending for
h. Intensity Modulated Radiation Therapy
Payments for Certain Devices CY 2006
(IMRT) (APCs 0310 and 0412)
2. Proposed and Final Policy for CY 2006 VII. Brachytherapy Payment Changes
i. Kidney Imaging (APC 0267)
C. Other Policy Issues Relating to Pass- A. Background
j. Magnetic Resonance Guided Focused
Through Device Categories B. Changes Related to Pub. L. 108–173
Ultrasound Ablation (APC 0193)
1. Provisions for Reducing Transitional C. CY 2006 Payment Policy
k. Non-Imaging Nuclear Medicine Studies
(APC 0389) Pass-Through Payments to Offset Costs VIII. Coding and Payment for Drug
l. Therapeutic Radiation Treatment (APC Packaged into APC Groups Administration
0304) a. Background A. Background
m. Urinary Bladder Study (APC 0340) b. Policy for CY 2006 B. Policy Changes for Drug Administration
3. Gastrointestinal and Genitourinary 2. Criteria for Establishing New Pass- for CY 2006
Procedures Through Device Categories C. Policy Changes for Vaccine
a. Cystourethroscopy with Lithotripsy a. Surgical Insertion and Implantation Administration for CY 2006
(APC 0163) Criterion IX. Hospital Coding for Evaluation and
b. GI Stenting (APC 0384) (1) Public Comments Received on Management (E/M) Services
c. Insertion of Uterine Tandems and/or November 15, 2004 OPPS Final Rule X. Payment for Blood and Blood Products
Vaginal Ovoids for Clinical with Comment Period and Our A. Background
Brachytherapy (APC 0192) Responses B. Policy Changes for CY 2006
d. Laparoscopic Ablation Procedures (APC (2) Public Comments Received on the CY XI. Payment for Observation Services
0131) 2006 OPPS Proposed Rule and Our A. Background
e. Plicator Procedure (APC 0422) Responses B. CY 2006 Coding Changes for
f. Prostate Cryosurgery (APC 0674) b. Existing Device Category Criterion Observation Services and Direct
g. Stretta Procedure (APC 0422) V. Payment Changes for Drugs, Biologicals, Admission to Observation
h. Urological Stenting Procedures (APCs and Radiopharmaceutical Agents C. Criteria for Separate Payment for Direct
0163 and 0164) A. Transitional Pass-Through Payment for Admission to Observation
4. Other Surgical Services Additional Costs of Drugs and D. Criteria for Separately Payable
a. Excision-Malignant Lesions (APCs 0019 Biologicals Observation Services (APC 0339)
and 0020) 1. Background 1. Diagnosis Requirements
b. External Fixation (APCs 0046 and 0050) 2. Expiration in CY 2005 of Pass-Through 2. Observation Time
c. Intradiscal Annuloplasty (APC 0203) Status for Drugs and Biologicals 3. Additional Hospital Services
d. Kyphoplasty (APC 0051) 3. Drugs and Biologicals With Pass- 4. Physician Evaluation
e. Neurostimulator Electrode Implantation Through Status in CY 2006 XII. Procedures That Will Be Paid Only as
(APCs 0040 and 0225) B. Payment for Drugs, Biologicals, and Inpatient Procedures
f. Neurostimulator Generator Implantation Radiopharmaceutical Agents Without A. Background
(APC 0222) Pass-Through Status B. Policy Changes to the Inpatient List
g. Thoracentesis/Lavage (APC 0070) 1. Background C. Ancillary Outpatient Services When
5. Other Services 2. Criteria for Packaging Payment for Patient Expires
a. Allergy Testing (APC 0370) Drugs, Biologicals, and XIII. Indicator Assignments
b. Apheresis (APC 0112) Radiopharmaceutical Agents A. Status Indicator Assignments
c. Audiology (APCs 0364, 0365, and 0366) 3. Payment for Drugs, Biologicals, and B. Comment Indicators for the CY 2006
d. Bone Marrow Harvesting (APC 0111) Radiopharmaceutical Agents Without OPPS Final Rule
e. Computer Assisted Navigational Pass-Through Status That Are Not XIV. Nonrecurring Policy Changes
Procedures Packaged A. Payment for Multiple Diagnostic
f. Hyperbaric Oxygen Therapy (APC 0659) a. Payment for Specified Covered Imaging Procedures
g. Ophthalmology Examinations (APC Outpatient Drugs B. Interrupted Procedure Payment Policies
0601) (1) Background (Modifiers –52, –73, and –74)
XV. OPPS Policy and Payment based on hospital-specific costs. In an community mental health centers
Recommendations effort to ensure that Medicare and its (CMHCs).
A. MedPAC Recommendations beneficiaries pay appropriately for The OPPS rate is an unadjusted
1. Report to the Congress: Medicare national payment amount that includes
Payment Policy (March 2005)
services and to encourage more efficient
delivery of care, the Congress mandated the Medicare payment and the
2. Report to the Congress: Issues in a
Modernized Medicare Program— replacement of the reasonable cost- beneficiary copayment. This rate is
Payment for Pharmacy Handling Costs in based payment methodology with a divided into a labor-related amount and
Hospitals prospective payment system (PPS). The a nonlabor-related amount. The labor-
B. APC Panel Recommendations Balanced Budget Act of 1997 (BBA) related amount is adjusted for area wage
C. GAO Recommendations (Pub. L. 105–33), enacted on August 5, differences using the inpatient hospital
XVI. Physician Oversight of Nonphysician 1997, added section 1833(t) to the Social wage index value for the locality in
Practitioners in Critical Access Hospitals which the hospital or CMHC is located.
A. Background Security Act (the Act) authorizing
All services and items within an APC
B. Proposed Policy Change in Proposed implementation of a PPS for hospital
group are comparable clinically and
Rule outpatient services. The Medicare,
with respect to resource use (section
C. Public Comments Received on Proposed Medicaid, and SCHIP Balanced Budget 1833(t)(2)(B) of the Act). In accordance
Rule and Our Responses Refinement Act of 1999 (BBRA) (Pub. L.
D. Final Policy
with section 1833(t)(2) of the Act,
106–113), enacted on November 29, subject to certain exceptions, services
XVII. Files Available to the Public via the 1999, made major changes that affected
Internet and items within an APC group cannot
XVIII. Collection of Information
the hospital outpatient PPS (OPPS). The be considered comparable with respect
Requirements Medicare, Medicaid, and SCHIP to the use of resources if the highest
XIX. Regulatory Impact Analysis Benefits Improvement and Protection median (or mean cost, if elected by the
A. OPPS: General Act of 2000 (BIPA) (Pub. L. 106–554), Secretary) for an item or service in the
1. Executive Order 12866 enacted on December 21, 2000, made APC group is more than 2 times greater
2. Regulatory Flexibility Act (RFA) further changes in the OPPS. Section than the lowest median cost for an item
3. Small Rural Hospitals 1833(t) of the Act was also amended by or service within the same APC group
4. Unfunded Mandates the Medicare Prescription Drug,
5. Federalism
(referred to as the ‘‘2 times rule’’). In
B. Impact of Changes in this Final Rule
Improvement, and Modernization Act of implementing this provision, we use the
with Comment Period 2003 (MMA), Pub. L. 108–173, enacted median cost of the item or service
C. Alternatives Considered on December 8, 2003. (Discussion of assigned to an APC group.
1. Option Considered for Payment Policy provisions related specifically to the CY Special payments under the OPPS
for Separately Payable Drugs and 2006 OPPS is included in sections II.C., may be made for new technology items
Biologicals II.F., II.G., and V.B.3.a.(2) of this final and services in one of two ways. Section
2. Payment Adjustment for Rural SCHs rule with comment period.) The OPPS 1833(t)(6) of the Act provides for
3. Change in the Percentage of Total OPPS was first implemented for services temporary additional payments or
Payments Dedicated to Outlier Payments ‘‘transitional pass-through payments’’
D. Limitations of Our Analysis
furnished on or after August 1, 2000.
Implementing regulations for the OPPS for certain drugs, biological agents,
E. Estimated Impacts of this Final Rule
with Comment Period on Hospitals are located at 42 CFR Part 419. brachytherapy devices used for the
F. Estimated Impact of the Change in treatment of cancer, and categories of
Under the OPPS, we pay for hospital
Outlier Policy medical devices for at least 2 but not
outpatient services on a rate-per-service
G. Accounting Statement more than 3 years. For new technology
basis that varies according to the
H. Estimated Impacts of this Final Rule services that are not eligible for pass-
with Comment Period on Beneficiaries ambulatory payment classification
through payments and for which we
XX. Waiver of Proposed Rulemaking (APC) group to which the service is lack sufficient data to appropriately
assigned. We use Healthcare Common assign them to a clinical APC group, we
Regulation Text Procedure Coding System (HCPCS) have established special APC groups
Addenda codes (which include certain Current based on costs, which we refer to as
Addendum A—List of Ambulatory Procedural Terminology (CPT) codes) ‘‘APC cost bands.’’ These cost bands
Payment Classification (APCs) with and descriptors to identify and group allow us to price these new procedures
Status Indicators, Relative Weights, the services within each APC group. more appropriately and consistently.
Payment Rates, and Copayment The OPPS includes payment for most
Amounts—CY 2006
Similar to pass-through payments, these
hospital outpatient services, except special payments for new technology
Addendum B—Payment Status by HCPCS those identified in section I.B. of this
Code and Related Information—CY 2006 services are also temporary; that is, we
final rule with comment period. Section retain a service within a new technology
Addendum D1—Payment Status Indicators
for the Hospital Outpatient Prospective 1833(t)(1)(B)(ii) of the Act provides for APC group until we acquire adequate
Payment System Medicare payment under the OPPS for data to assign it to a clinically
Addendum D2—Comment Indicators certain services designated by the appropriate APC group.
Addendum E—CPT Codes That Are Paid Secretary that are furnished to
Only as Inpatient Procedures inpatients who have exhausted their B. Excluded OPPS Services and
Addendum L-Out-Migration Wage Part A benefits or who are otherwise not Hospitals
Adjustment for CY 2006 in a covered Part A stay. Section 611 of Section 1833(t)(1)(B)(i) of the Act
I. Background Pub. L. 108–173 provided for Medicare authorizes the Secretary to designate the
coverage of an initial preventive hospital outpatient services that are
A. Legislative and Regulatory Authority physical examination, subject to the paid under the OPPS. While most
for the Hospital Outpatient Prospective applicable deductible and coinsurance, hospital outpatient services are payable
Payment System as an outpatient department service, under the OPPS, section
When the Medicare statute was payable under the OPPS. In addition, 1833(t)(1)(B)(iv) of the Act excluded
originally enacted, Medicare payment the OPPS includes payment for partial payment for ambulance, physical and
for hospital outpatient services was hospitalization services furnished by occupational therapy, and speech-
language pathology services, for which changes to the OPPS, we refer readers to This expert panel, which may be
payment is made under a fee schedule. these Federal Register final rules.1 composed of up to 15 representatives of
Section 614 of Pub. L. 108–173 On November 15, 2004, we published hospitals and other Medicare providers
amended section 1833(t)(1)(B)(iv) of the in the Federal Register a final rule with subject to the OPPS (currently employed
Act to exclude OPPS payment for comment period (69 FR 65681) that full-time and in their respective areas of
screening and diagnostic mammography revised the OPPS to update the payment expertise), reviews and advises CMS
services. The Secretary exercised the weights and conversion factor for about the clinical integrity of the APC
broad authority granted under the services payable under the calendar year groups and their weights. For purposes
statute to exclude from the OPPS those (CY) 2005 OPPS on the basis of claims of this Panel, consultants or
services that are paid under fee data from January 1, 2003 through independent contractors are not
schedules or other payment systems. December 31, 2003, and to implement considered to be full-time employees.
Such excluded services include, for certain provisions of Pub. L. 108–173. In The APC Panel is not restricted to using
example, the professional services of addition, we responded to public our data and may use data collected or
physicians and nonphysician comments received on the January 6, developed by organizations outside the
practitioners paid under the Medicare 2004 interim final rule with comment Department in conducting its review.
Physician Fee Schedule (MPFS); period relating to Pub. L. 108–173
2. Establishment of the APC Panel
laboratory services paid under the provisions that were effective January 1,
clinical diagnostic laboratory fee 2004, and finalized those policies. On November 21, 2000, the Secretary
schedule; services for beneficiaries with Further, we responded to public originally signed the charter
end-stage renal disease (ESRD) that are comments received on the November 7, establishing the APC Panel. The APC
paid under the ESRD composite rate; 2003 final rule with comment period Panel is technical in nature and is
services and procedures that require an pertaining to the APC assignment of governed by the provisions of the
inpatient stay that are paid under the HCPCS codes identified in Addendum B Federal Advisory Committee Act
hospital inpatient prospective payment of that rule with the NI comment (FACA), as amended (Pub. L. 92–463).
system (IPPS); and certain services indicator; and public comments Since its initial chartering, the Secretary
furnished to inpatients of hospitals that received on the August 16, 2004 OPPS has twice renewed the APC Panel’s
do not submit claims for outpatient proposed rule (69 FR 50448). charter: on November 1, 2002, and on
services under Medicare Part B. We set Subsequent to publishing the November 1, 2004. The renewed charter
forth the services that are excluded from November 15, 2004 final rule with indicates that the APC Panel continues
payment under the OPPS in § 419.22 of comment period, we published a to be technical in nature; is governed by
the regulations. correction of final rule with comment the provisions of FACA with a
Under § 419.20 of the regulations, we period on December 30, 2004 (69 FR Designated Federal Official (DFO) to
specify the types of hospitals and 78315). This document corrected oversee the day-to-day administration of
entities that are excluded from payment technical errors that appeared in the the FACA requirements and to provide
under the OPPS. These excluded November 15, 2004 final rule with to the Committee Management Officer
entities include Maryland hospitals, but comment period. It also provided all committee reports for forwarding to
only for services that are paid under a additional information about the CY the Library of Congress; may convene
cost containment waiver in accordance 2005 wage indices for the OPPS that up to three meetings per year; and is
with section 1814(b)(3) of the Act; was not published in the November 15, chaired by a Federal official who also
critical access hospitals (CAHs); 2004 final rule with comment period. serves as a CMS medical officer.
hospitals located outside of the 50 Originally, in establishing the APC
States, the District of Columbia, and D. APC Advisory Panel Panel, we solicited members in a notice
Puerto Rico; and Indian Health Service 1. Authority of the APC Panel published in the Federal Register on
hospitals. December 5, 2000 (65 FR 75943). We
Section 1833(t)(9)(A) of the Act, as received applications from more than
C. Prior Rulemaking amended by section 201(h) of the BBRA 115 individuals who nominated either
On April 7, 2000, we published in the of 1999, requires that we consult with colleagues or themselves. After carefully
Federal Register a final rule with an outside panel of experts to review the reviewing the applications, we chose 15
comment period (65 FR 18434) to clinical integrity of the payment groups highly qualified individuals to serve on
implement a prospective payment and weights under the OPPS. The the APC Panel. Because four APC Panel
system for hospital outpatient services. Advisory Panel on Ambulatory Payment members’ terms of office expired on
The hospital OPPS was first Classification (APC) Groups (the APC March 31, 2004, we published a Federal
implemented for services furnished on Panel), discussed under section I.D.2. of Register notice on January 23, 2004 (69
or after August 1, 2000. Section this preamble, fulfills this requirement. FR 3370) that solicited nominations for
1833(t)(9) of the Act requires the The Act further specifies that the APC APC Panel membership. From the 24
Secretary to review certain components Panel will act in an advisory capacity. nominations that we received, we chose
of the OPPS not less often than annually four new members. Six members’ terms
1 Interim final rule with comment period, August
and to revise the groups, relative expired on March 31, 2005; therefore, a
3, 2000 (65 FR 47670); interim final rule with
payment weights, and other adjustments comment period, November 13, 2000 (65 FR 67798);
Federal Register notice was published
to take into account changes in medical final rule and interim final rule with comment on February 25, 2005, requesting
practice, changes in technology, and the period, November 2, 2001 (66 FR 55850 and 55857); nominations to the APC Panel. We
addition of new services, new cost data, final rule, November 30, 2001 (66 FR 59856); final received only 13 nominations before the
rule, December 31, 2001 (66 FR 67494); final rule,
and other relevant information and March 1, 2002 (67 FR 9556); final rule, November
nomination period closed on March 15,
factors. Since implementing the OPPS, 1, 2002 (67 FR 66718); final rule with comment 2005. Consequently, we extended the
we have published final rules in the period, November 7, 2003 (68 FR 63398); correction deadline for nominations to May 9,
Federal Register annually to implement of the November 7, 2003 final rule with comment 2005, and announced the extension in
period, December 31, 2003 (68 FR 75442); interim
statutory requirements and changes final rule with comment period, January 6, 2004 (69
the Federal Register on April 8, 2005
arising from our experience with this FR 820); and final rule with comment period, (70 FR 18028). From a total of 26
system. For a full discussion of the November 15, 2004 (69 FR 65681). nominees from the two notices, we
chose 6 new members who were to services that are not separately 2. Study and Authorization of
announced in the Federal Register on payable under the OPPS but are Adjustment for Rural Hospitals
August 26, 2005 (70 FR 50358). The bundled or packaged APC payments. Section 411(b) of Pub. L. 108–173
entire APC Panel membership and Each of these subcommittees was added a new paragraph (13) to section
information pertaining to it, including established by a majority vote of the 1833(t) of the Act to authorize an
Federal Register notices, meeting dates, APC Panel during a scheduled APC ‘‘Adjustment for Rural Hospitals.’’ This
agenda topics, and meeting reports are Panel meeting. All subcommittee provision requires us to conduct a study
identified on the CMS Web site: recommendations are discussed and to determine if costs incurred by
http://www.cms.hhs.gov/faca/apc/ voted upon by the full APC Panel. hospitals located in rural areas by APCs
apcmem.asp. exceed those costs incurred by hospitals
For a detailed discussion of the APC
3. APC Panel Meetings and Panel meetings, refer to the hospital located in urban areas. This provision
Organizational Structure OPPS final rules cited in section I.C. of further requires us to provide for an
this preamble. Full discussion of the appropriate adjustment by January 1,
The APC Panel first met on February
2006, if we find that the costs incurred
27, February 28, and March 1, 2001. recommendations resulting from the
by hospitals located in rural areas
Since that initial meeting, the APC APC Panel’s February 2005 and August
exceed those costs incurred by hospitals
Panel has held seven subsequent 2005 meetings are included in the located in urban areas. In accordance
meetings. The most recent meeting took sections of this preamble that are with these provisions, effective January
place on August 17 and 18, 2005, which specific to each recommendation. 1, 2006, as we proposed, we are
was announced in the meeting notice
E. Provisions of the Medicare implementing an adjustment for rural
published on July 8, 2005 (70 FR
Prescription Drug, Improvement, and sole community hospitals (SCHs), as
39514). Prior to each of these biennial
Modernization Act of 2003 That Will Be discussed below.
meetings, we published a notice in the
Federal Register to announce each Implemented in CY 2006 3. Payment for ‘‘Specified Covered
meeting and, when necessary, to solicit Outpatient Drugs’’
On December 8, 2003, the Medicare
and announce nominations for APC Section 621(a)(1) of Pub. L. 108–173
Panel membership. For a more detailed Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), Pub. added section 1833(t)(14) to the Act that
discussion about these announcements, specifies payments for certain
refer to the following Federal Register L. 108–173, was enacted. Pub. L. 108–
173 made changes to the Act relating to ‘‘specified covered outpatient drugs’’
notices: December 5, 2000 (65 FR beginning in 2006. Specifically, section
75943), December 14, 2001 (66 FR the Medicare OPPS. In the January 6,
2004 interim final rule with comment 1833(t)(14)(A)(iii)(I) of the Act states
64838), December 27, 2002 (67 FR that such payment shall be equal to
79107), July 25, 2003 (68 FR 44089), period and the November 15, 2004 final
rule with comment period, we what we determine to be the average
December 24, 2003 (68 FR 74621), acquisition cost for the drug, taking into
August 5, 2004 (69 FR 47446), December implemented provisions of Pub. L. 108–
account hospital acquisition cost survey
30, 2004 (69 FR 78464), and July 8, 2005 173 relating to the OPPS that were
data furnished by the Government
(70 FR 39514). effective for CY 2004 and CY 2005,
Accountability Office (GAO). Section
During these meetings, the APC Panel respectively. Provisions of Pub. L. 108– 1833(t)(14)(A)(iii)(II) of the Act further
established its operational structure 173 that were implemented in CY 2004 notes that if hospital acquisition cost
that, in part, includes the use of three or CY 2005, and that are continuing in data are not available, payment for
subcommittees to facilitate its required CY 2006, are discussed throughout this specified covered outpatient drugs shall
APC review process. Currently, the final rule with comment period. equal the average price for the drug
three subcommittees are the Data Moreover, in this final rule with established under section 1842(o),
Subcommittee, the Observation comment period, we finalize our section 1847(A), or section 1847(B) of
Subcommittee, and the Packaging proposal to implement the following the Act as calculated and adjusted by
Subcommittee. The Data Subcommittee provisions of Pub. L. 108–173 that affect the Secretary as necessary. Both
is responsible for studying the data the OPPS beginning in CY 2006: payment approaches are subject to
issues confronting the APC Panel and adjustments under section 1833(t)(14)(E)
for recommending viable options for 1. Hold Harmless Provisions
of the Act as discussed below.
resolving them. This subcommittee was
initially established on April 23, 2001, Section 411 of Pub. L. 108–173 4. Adjustment in Payment Rates for
as the Research Subcommittee and amended section 1833(t)(7)(D)(i) of the ‘‘Specified Covered Outpatient Drugs’’
reestablished as the Data Subcommittee Act and extended the hold harmless for Overhead Costs
on April 13, 2004, February 11, 2005, provision for small rural hospitals
Section 621(a)(1) of Pub. L. 108–173
and August 15, 2005. The Observation having 100 or fewer beds through
added section 1833(t)(14)(E) to the Act.
Subcommittee, which was established December 31, 2005. Section 411 of Pub.
Section 1833(t)(14)(E)(ii) of the Act
on June 24, 2003, and reestablished with L. 108–173 further amended section
authorizes us to make an adjustment to
new members on March 8, 2004, 1833(t)(7) of the Act to provide that hold payments for ‘‘specified covered
February 11, 2005, and August 15, 2005, harmless transitional corridor payments outpatient drugs’’ to take into account
reviews and makes recommendations to shall apply through December 31, 2005 overhead and related expenses such as
the APC Panel on all issues pertaining to sole community hospitals (SCHs) (as pharmacy services and handling costs,
to observation services paid under the defined in section 1886(d)(5)(D)(iii) of based on recommendations contained in
OPPS, such as coding and operational the Act) located in a rural area. In a report prepared by the Medicare
issues. The Packaging Subcommittee, accordance with these provisions, Payment Advisory Commission
which was established on March 8, effective January 1, 2006, we proposed (MedPAC).
2004, and reestablished with new to discontinue transitional corridor
members on February 11, 2005, and payments for small rural hospitals 5. Budget Neutrality Adjustment
August 15, 2005, studies and makes having 100 or fewer beds and for SCHs Section 621(a)(1) of Pub. L. 108–173
recommendations on issues pertaining located in a rural area. amended the Act by adding section
1833(t)(14)(H), which requires that of that rule and the qualifying process payment rates under the OPPS for CY
additional expenditures resulting from for assignment of new services to New 2006.
adjustments in APC payment rates for Technology APCs or regular clinical • The proposed retention of our
specified covered outpatient drugs be APCs discussed in section III.C.3. of that current policy to apply the IPPS wage
taken into account beginning in CY rule. In the CY 2006 OPPS proposed indices to wage adjust the APC median
2006 and continuing in subsequent rule, we proposed to make device pass- costs in determining the OPPS payment
years, in establishing the OPPS through eligibility available to a broader rate and the copayment standardized
conversion, weighting, and other range of qualifying devices. We also amount for CY 2006.
adjustment factors. proposed to change the application and • The proposed update of statewide
review process for assignment of new average default cost-to-charge ratios.
F. CMS’ Commitment to New • Proposed changes relating to the
Technologies services to New Technology APCs to
promote thoughtful review of the expiring hold harmless payment
As we indicated in the CY 2006 coding, clinical use and efficacy of new provision.
proposed rule, CMS is committed to services by the wider medical • Proposed changes to payment for
ensuring that Medicare beneficiaries community, encouraging appropriate rural SCHs for CY 2006.
will have timely access to new medical • Proposed changes in the way we
dissemination of new technologies.
treatments and technologies that are calculate hospital outpatient outlier
We received a large number of public payments for CY 2006.
well-evaluated and demonstrated to be comments generally supporting our
effective. We launched the Council on • Calculation of the proposed
commitment to new technologies. Many national unadjusted Medicare OPPS
Technology and Innovation (CTI) to of these comments in support of this
provide the Agency with improved payment.
commitment were stated in the context • The proposed beneficiary
methods for developing practical of our proposals to enhance the OPPS
information about the clinical benefits copayment for OPPS services for CY
pass-through payment criteria for 2006.
of new medical technologies to result in
devices or the application requirements
faster and more efficient coverage and 2. Ambulatory Payment Classification
for assignment of a service to a New
payment of these medical technologies. (APC) Group Policies
Technology APC. Specific comments are
The CTI supports CMS efforts to
addressed in those respective sections. In the proposed rule, we discussed
develop better evidence on the safety,
establishing a number of new APCs and
effectiveness, and cost of new and G. Summary of the Provisions of the CY
making changes to the assignment of
approved technologies to help promote 2006 OPPS Proposed Rule
HCPCS codes under a number of
their more effective use.
We want to provide doctors and On July 25, 2005, we published a existing APCs based on our analyses of
patients with better information about proposed rule in the Federal Register Medicare claims data and
the benefits of new medical treatments (70 FR 42674) that set forth proposed recommendations of the APC Panel. We
or technologies, or both, especially changes to the Medicare hospital OPPS also discussed the application of the 2
compared to other treatment options. for CY 2006 to implement statutory times rule and proposed exceptions to
We also want beneficiaries to have requirements and changes arising from it; proposed changes for specific APCs;
access to valuable new medical our continuing experience with the the proposed refinement of the New
innovations as quickly and efficiently as system, to implement provisions of Pub. Technology cost bands; the proposed
possible. We note there are a number of L. 108–173 specified in sections II.C., movement of procedures from the New
payment mechanisms in the OPPS and II.F., II.G., and V.B.3.a.(2) of this Technology APCs; and the proposed
the IPPS designed to achieve preamble, and to change the additions of new procedure codes to the
appropriate payment of promising new requirement for physician oversight of APC groups.
technologies. In the OPPS, qualifying nonphysician practitioners in CAHs that 3. Payment Changes for Devices
new medical devices may be paid on a will be effective for services furnished
on or after January 1, 2006. Subsequent In the proposed rule, we discussed
cost basis by means of transitional pass- proposed changes to the device-
through payments, in addition to the to publishing the proposed rule, we
published a correction of the proposed dependent APCs, to related regulations
APC payments for the procedures which under §§ 419.66(b)(3) and 419.66(c)(1),
utilize the devices. In addition, rule on August 26, 2005 (70 FR 50679)
that corrected technical errors that and to the pass-through payment for
qualifying new services may be assigned three categories of devices.
for payment to New Technology APCs appeared in the proposed rule. The
or, if appropriate, to regular clinical following is a summary of the major 4. Payment Changes for Drugs,
APCs. In the IPPS, qualifying new changes included in the CY 2006 OPPS Biologicals, and Radiopharmaceutical
technologies may receive add-on proposed rule that we proposed to Agents
payments to the standard diagnosis- make: In the proposed rule, we discussed
related group (DRG) payments. We also 1. Updates to Payments for CY 2006 proposed payment changes for drugs,
note that collaborative efforts are biologicals, radiopharmaceutical agents,
underway to facilitate coordination In the proposed rule, we set forth— and vaccines.
between the Food and Drug • The methodology used to
Administration (FDA) and CMS with recalibrate the proposed APC relative 5. Estimate of Transitional Pass-Through
regard to streamlining the CMS coverage payment weights and the proposed Spending in CY 2006 for Drugs,
process by which new technologies recalibration of the relative payment Biologicals, and Devices
come to the marketplace. weights for CY 2006. In the proposed rule, we discussed
To promote timely access to new • The proposed payment for partial the proposed methodology for
medical treatments and technologies, in hospitalization, including the proposed estimating total pass-through spending
the CY 2006 OPPS proposed rule, we separate threshold for outlier payments and whether there should be a pro rata
proposed enhancements to both the for CMHCs. reduction for transitional pass-through
OPPS pass-through payment criteria for • The proposed update to the drugs, biologicals, radiopharmacials,
devices as discussed in section IV.D.2. conversion factor used to determine and categories of devices for CY 2006.
6. Brachytherapy Payment Changes H. Public Comments Received on the CY neutral payment system where such
2006 OPPS Proposed Rule changes would result in reduced
In the proposed rule, we included a
We received over 1,000 timely pieces payments to all other hospitals.
discussion of our proposal concerning
of correspondence containing multiple Moreover, in the final rule, we have
coding and payment for the sources of
comments on the CY 2006 OPPS developed payment weights that we
brachytherapy.
proposed rule. Summaries of the public believe resolve many of the public
7. Coding and Payment for Drug comments and our responses to those concerns regarding appropriate
Administration comments are set forth in the various payments for new technology services
sections under the appropriate and device-dependent procedures,
In the proposed rule, we discussed
which we believe are furnished largely
our proposed coding and payment headings.
Comment: One commenter objected to by teaching hospitals. In addition, the
changes for drug administration application of the wage index
services. the short time between the end of the
comment period and the effective date adjustment to 60 percent of the APC
8. Hospital Coding for Evaluation and payment package (especially for APCs
of the final rule. The commenter stated
Management (E/M) Services into which expensive devices are
that the brief time period gives
packaged) tends to benefit teaching
In the proposed rule, we discussed inadequate time for systems and
hospitals, which are predominantly
our proposal for developing coding software changes. The commenter asked
located in hgh-cost areas. These and
guidelines for evaluation and that the proposed rule be published July
other payment changes should help
management services. 1 and that the final rule be published no
ensure equitable payment for all
later than October 1 of each year. The
9. Payment for Blood and Blood hospitals within the constraints of the
commenter indicated that hospitals
Products statute.
need the extra month to implement the
In the proposed rule, we discussed OPPS because it is much more complex I. Public Comments Received on the
our proposed payment changes for for hospitals to implement than the November 15, 2004 Final Rule With
blood and blood products. IPPS. Comment Period
Response: We understand the We received approximately 55 timely
10. Payment for Observation Services commenter’s concern about the pieces of correspondence on the
In the proposed rule, we discussed difficulty of implementing the annual November 5, 2004 final rule with
our proposed criteria and coding OPPS update in 60 days. We do our best comment period, some of which
changes for observation services. to issue the proposed rule and the final contained multiple comments on the
rule as promptly as possible and to APC assignment of HCPCS codes
11. Procedures That Will Be Paid Only make all of the supporting
as Inpatient Services identified with the NI comment
documentation available on the CMS indicator in Addendum B of that final
In the proposed rule, we discussed Web site as soon as we can. However, rule with comment period and on the
the procedures that we proposed to factors such as the use of the most surgical insertion and implantation
remove from the inpatient list and recent claims data and cost report data device criterion. Summaries of those
assign to APCs. on which we base the proposed and public comments and our responses to
final rates delay the issuance of the those comments are set forth in the
12. Indicator Assignments
proposed rule and the final rule. various sections under the appropriate
In the proposed rule, we discussed Hospital delays in submission of headings.
proposed changes to the list of status hospital bills are an important factor in
indicators assigned to APCs and timing of the OPPS updates as well, II. Updates Affecting Payments for CY
presented our comment indicators that because we want to use as many claims 2006
we proposed to use in this final rule as possible in setting the OPPS rates. A. Recalibration of APC Relative
with comment period. Moreover, we cannot issue the final rule Weights for CY 2006
until the HCPCS code files for the
13. Nonrecurring Policy Changes 1. Database Construction
forthcoming year are final because we
In the proposed rule, we discussed assign a stataus indicator to each HCPCS a. Database Source and Methodology.
proposed changes in payments for code in the OPPS OCE. The HCPCS files Section 1833(t)(9)(A) of the Act requires
multiple diagnostic imaging procedures are not final until they are published in that the Secretary review and revise the
and proposed changes in payment October. relative payment weights for APCs at
policy for interrupted procedures. Comment: Commenters asked that least annually. In the April 7, 2000
CMS include an indirect medical OPPS final rule (65 FR 18482), we
14. OPPS Policy and Payment
education adjustment in the OPPS explained in detail how we calculated
Recommendations
because it is the only major Medicare the relative payment weights that were
In the proposed rule, we addressed payment system that does not include a implemented on August 1, 2000, for
recommendations made by MedPAC, teaching adjustment. One commenter each APC group. Except for some
the APC Panel, and the GAO regarding asked that CMS conduct a study to reweighting due to a small number of
the OPPS for CY 2006. determine the special roles and costs APC changes, these relative payment
related to medical education and the weights continued to be in effect for CY
15. Physician Oversight in Critical
appropriateness of including a teaching 2001. This policy is discussed in the
Access Hospitals
hospital adjustment. November 13, 2000 interim final rule
In the proposed rule, we discussed Response: We have not developed an (65 FR 67824 through 67827).
physician oversight for services indirect medical education add-on In the CY 2005 OPPS proposed rule
provided by nonphysician practitioners payment made under the OPPS because (70 FR 42680), we proposed to use the
such as physician assistants, nurse the statute does not provide for this same basic methodology that we
practitioners, and clinical nurse adjustment, and we are not convinced described in the April 7, 2000 final rule
specialists in CAHs. that it would be appropriate in a budget- to recalibrate the APC relative payment
weights for services furnished on or contract effectively with hospitals to established, the rules concerning budget
after January 1, 2006, and before January provide a stable purchasing neutrality, and subsequent out-year
1, 2007. That is, we would recalibrate environment and, thereby, impede adjustments such as annual reductions
the relative payment weights for each innovation and adversely impact in coinsurance and adjustments to
APC based on claims and cost report beneficiaries. outlier and pass-through payment
data for outpatient services. We Response: We understand the allocations are established in statute
proposed to use the most recent commenters’ concerns about the need and, as such, would require legislation
available data to construct the database for sufficient stability in the OPPS so to amend.
for calculating APC group weights. For that hospitals can plan and budget. We Comment: Commenters supported use
the purpose of recalibrating APC have given this issue much of the most recent claims data for
relative payment weights for CY 2006, consideration. We recognize that recalibrating the APC relative weights
we used approximately 137 million reliance on single procedure claims may but in many cases wanted CMS to adjust
final action claims for hospital OPD result in fewer claims for some services the claims data for particular services of
services furnished on or after January 1, than for others. For example, median interest to them in ways that will result
2004, and before January 1, 2005. Of the costs for services such as office visits, in higher payment for those specified
137 million final action claims for for which the volume of single bills is services. Other commenters supported
services provided in hospital outpatient very high, would generally be more use of proprietary, confidential external
settings, 109 million claims were of the stable than the median costs for services data in lieu of claims data to set the
type of bill potentially appropriate for for which we have very few single median costs on which the rates are
use in setting rates for OPPS services procedure claims. We will continue to based for selected services because they
(but did not necessarily contain services explore changes we could effectuate to believe that the use of claims data
payable under the OPPS). Of the 109 enable us to use even more claims on results in median costs that are less than
million claims, we were able to use 52.7 the premise that using more claims data the costs of the services being furnished.
million whole claims to set the will enhance stability. Some commenters asked CMS to
proposed OPPS APC relative weights for However, we note that the statutory establish a representative sample of
CY 2006 OPPS. From the 52.7 million design of the OPPS and the rapid hospitals from which data would be
whole claims, we created 87.9 million evolution in the delivery of outpatient collected for use in place of claims data
single records, of which 54.9 million hospital services include many elements or to validate the data derived from
were ‘‘pseudo’’ single claims (created that may be responsible for some of the claims.
from multiple procedure claims using fluctuation in rates from year to year. Response: We believe that, in a budget
the process we discuss in this section). For example, the ‘‘2 times rule’’ neutral relative payment system such as
As we proposed, the final APC imposed by the law requires the the OPPS, it is important that the
relative weights and payments for CY movement of some procedures from one relative weights be based on a uniform
2006 in Addenda A and B to this final APC to another each year. Moreover, the source of data processed in a
rule with comment period were OPPS is based on procedure coding for standardized way. We believe that
calculated using claims from this period which there are hundreds of changes Medicare claims data are the most
that had been processed before June 30, each year. In addition, the entry of new uniform data source available to us.
2005, and continue to be based on the technology into a budget neutral Moreover, the weights derived from
median hospital costs for services in the payment system results in a shift of such a system are the vehicles for
APC groups. We selected claims for funds away from previously existing distributing Medicare payments for
services paid under the OPPS and services to provide payments for new outpatient hospital services fairly
matched these claims to the most recent services. These systemic factors are among all hospitals that furnish
cost report filed by the individual valid reflections of the changes in outpatient hospital services to Medicare
hospitals represented in our claims data. services in the outpatient department, beneficiaries. We are committed to
We received numerous public and shifts in payment legitimately using claims data in a uniform manner,
comments concerning our proposed mirror those changes. to the maximum extent possible, to
data source and methodology for Comment: Commenters stated that the develop the relative weights from which
recalibrating the APC relative weights entire OPPS is underfunded because it payment rates are calculated. We do not
for CY 2006. A summary of the pays only 87 percent of the costs of see a compelling need to use external
comments and our responses are services to Medicare beneficiaries. One data to set or adjust median costs for
discussed below. commenter indicated that the device-dependent APCs for the CY 2006
Comment: Commenters stated that underfunding of services to Medicare OPPS. Therefore, for the CY 2006 OPPS,
many APC rates fluctuate dramatically, patients is particularly severe for we have not substituted external data
and the instability in the system makes disproportionate share hospitals and for Medicare claims data for the purpose
it very hard for hospitals to budget and hospitals with level I trauma centers of setting the median costs on which the
plan services from year to year. Among and, therefore, will inhibit access to care relative weights are based.
the services identified as issues of for Medicare beneficiaries and other After carefully considering all
specific concern were clinic visits, individuals. comments received, we are finalizing
application of brachytherapy sources, Response: Our early analyses our data source and methodology for the
drugs and biologicals, and device- indicated that the OPPS was, in its recalibration of CY 2006 APC relative
intensive APCs. Some commenters inception, based on payment that was weights as proposed without
recommended that CMS limit increases less than cost due to statutory modification.
and decreases for all APCs to no more reductions in payment for hospital b. Use of Single and Multiple
than a 5-percent shift (increase or outpatient costs prior to the enactment Procedure Claims. For CY 2006, we
decrease) from one year to another. of the BBA, which authorized the proposed to continue to use single
Commenters emphasized that current OPPS. Certain fundamental procedure claims to set the medians on
fluctuations in payment rates for device- statutory features of the OPPS dictate which the APC relative payment
dependent procedures from year to year such a finding. For example, the base weights would be based. As noted in the
impact manufacturers’ abilities to amounts upon which the OPPS was November 15, 2004 final rule with
comment period, we have received We selected these codes based on a adding those codes that, using data
many requests asking that we ensure clinical review of the services and presented to the APC Panel at its
that the data from claims that contain because it was presumed that these February 2005 meeting, met the same
charges for multiple procedures are codes had only very limited packaging empirical criteria as those used in CY
included in the data from which we and could appropriately be bypassed for 2005 to create the bypass list. Our
calculate the relative payment weights the purpose of creating ‘‘pseudo’’ single examination of the data against the
(69 FR 65730 through 65731). claims. The APCs to which these codes criteria for inclusion on the bypass list,
Requesters believe that relying solely on were assigned were varied and included as discussed below for the addition of
single procedure claims to recalibrate mammography, cardiac rehabilitation, new codes, shows that the empirically
APC relative payment weights fails to and Level I plain film x-rays. To derive selected codes used for bypass for the
take into account data for many more ‘‘pseudo’’ single claims, we also CY 2005 OPPS generally continue to
frequently performed procedures, split the claims where there were dates meet the criteria or come very close to
particularly those commonly performed of service for revenue code charges on meeting the criteria, and we have
in combination with other procedures. that claim that could be matched to a received no comments against bypassing
They believe that, by depending upon single procedure code on the claim on them.
single procedure claims, we base the same date. As we proposed, in this final rule
relative payment weights on the least As in CY 2003, we did not include the with comment period, we used the
costly services, thereby introducing claims data for the bypassed codes in following empirical criteria that were
downward bias to the medians on the creation of the APCs to which the developed by reviewing the frequency
which the weights are based. 269 codes were assigned because, again, and magnitude of packaging in the
We agree that, optimally, it is we had not established that such an single claims for payable codes other
desirable to use the data from as many approach was appropriate and would than drugs and biologicals. We assumed
claims as possible to recalibrate the APC aid in accurately estimating the median that the representation of packaging on
relative payment weights, including costs for those APCs. For CY 2004, from the single claims for any given code is
those with multiple procedures. We about 16.3 million otherwise unusable comparable to packaging for that code in
generally use single procedure claims to claims, we used about 9.5 million the multiple claims:
set the median costs for APCs because multiple procedure claims to create • There were 100 or more single
we are, so far, unable to ensure that about 27 million ‘‘pseudo’’ single claims for the code. This number of
packaged costs can be appropriately claims. For CY 2005, we identified 383 single claims ensured that observed
allocated across multiple procedures bypass codes and from approximately outcomes were sufficiently
performed on the same date of service. 24 million otherwise unusable claims, representative of packaging that might
However, by bypassing specified codes we used about 18 million multiple occur in the multiple claims.
that we believe do not have significant procedure claims to create about 52 • Five percent or fewer of the single
packaged costs, we are able to use more million ‘‘pseudo’’ single claims. claims for the code had packaged costs
data from multiple procedure claims. In For CY 2006, we proposed to continue on that single claim for the code. This
many cases, this enables us to create using date of service matching as a tool criterion results in limiting the amount
multiple ‘‘pseudo’’ single claims from for creation of ‘‘pseudo’’ single claims of packaging being redistributed to the
claims that, as submitted, contained and to continue the use of a bypass list payable procedure remaining on the
multiple separately paid procedures on to create ‘‘pseudo’’ single claims. The claim after the bypass code is removed
the same claim. We have used the date process we proposed for CY 2006 OPPS and ensures that the costs associated
of service on the claims and a list of resulted in our being able to use some with the bypass code represent the cost
codes to be bypassed to create ‘‘pseudo’’ part of 90 percent of the total claims that of the bypassed service.
single claims from multiple procedure are eligible for use in OPPS rate-setting • The median cost of packaging
claims the same as we did in and modeling in developing this final observed in the single claim was equal
recalibrating the CY 2005 APC relative rule with comment period. This process to or less than $50. This limits the
payment weights. We refer to these enabled us to use, for CY 2006, 88 amount of error in redistributed costs.
newly created single procedure claims million single bills for rate-setting: 55 • The code is not a code for an
as ‘‘pseudo’’ singles because they were million ‘‘pseudo’’ singles and 34 million unlisted service.
submitted by providers as multiple ‘‘natural’’ single bills (bills that were As stated in the proposed rule (70 FR
procedure claims. submitted containing only one 42681), we also added to the bypass list
For CY 2003, we created ‘‘pseudo’’ separately payable major HCPCS code). three codes (CPT codes 51701, 51702,
single claims by bypassing HCPCS (These numbers do not sum to 88 and 51703 for bladder catheterization)
codes 93005 (Electrocardiogram, million because more than 800,000 which do not meet these criteria. These
tracing), 71010 (Chest x-ray), and 71020 single bills were removed when we codes have been packaged and have
(Chest x-ray) on a submitted claim. trimmed at the HCPCS level at +/¥3 never been paid separately. For that
However, we did not use claims data for standard deviations from the geometric reason, when these were the only
the bypassed codes in the creation of the mean.) services provided to the beneficiary, no
median costs for the APCs to which We proposed to bypass the 404 codes payment was made to the hospital. The
these three codes were assigned because identified in Table 1 of the proposed APC Panel’s Packaging Subcommittee
the level of packaging that would have rule (70 FR 42682) to create new single recommended that we make separate
remained on the claim after we selected claims and to use the line-item costs payment when they are the only service
the bypass code was not apparent and, associated with the bypass codes on on the claim. See section II.A.4. of this
therefore, it was difficult to determine if these claims in the creation of the preamble for further discussion of our
the medians for these codes would be median costs for the APCs into which policy to pay these services separately.
correct. they are assigned. Of the codes on that We added these codes to the bypass list
For CY 2004, we created ‘‘pseudo’’ list, 385 were used for bypass in CY because changing them from packaged
single claims by bypassing these three 2005. For CY 2006, we proposed to to separately paid would result in a
codes and also by bypassing an continue the use of the codes on the CY reduction of the number of single bills
additional 269 HCPCS codes in APCs. 2005 OPPS bypass list and expand it by on which we could base median costs
for other major separately paid setting. Many commenters objected to the incremental costs of the add-on
procedures that are billed on the same the use of single procedure claims as the services. We also expect to explore other
claim with these procedure codes. basis for setting the relative weights generally applicable strategies, such as
Single bills which contain other because they believed that using single apportioning packaging based on
procedures would become multiple procedure claims limits the claims data submitted charges that would enable us
procedure claims when these bladder to the simplest and least costly cases. to use multiple procedure claims.
catheterization codes were converted They proposed CPT code or APC We are disinclined to focus on
from packaged to separately paid status. specific strategies for using multiple service-specific strategies for using
As explained in the CY 2006 procedure claims in ways that would multiple procedure claims because
proposed rule (70 FR 42682), we apply only to the services of interest to those that have been suggested to us are
examined the packaging on the single them that could not be generalized not generally applicable to multiple
procedure claims in the CY 2004 data across multiple procedure claims for all procedure claims across all services, but
for these codes. We found that none of services. The commenters indicated that rather are focused on increasing the
these three codes met the empirical the use of single procedure claims median costs of particular services to
standards for the bypass list. However, greatly limits the number of claims that the exclusion of all other services. As
we believe that when these services are are used for setting median costs and we indicated above, we believe that it is
performed on the same date as another weights, and that the OPPS relative important in a relative weight system
separately paid procedure, any weights would be greatly improved if that, to the maximum extent possible,
packaging that appears on the claim we could use all of the claims data. the same claims and the same
would appropriately be associated with They indicated that the use of single processing rules apply to all services so
the other procedures and not with these procedure claims causes medians to be that the resulting relative weights are
codes. Therefore, we believe that set based on incorrectly coded claims uniformly created and serve all
bypassing them does not adversely for the many add-on codes that can only hospitals fairly.
affect the medians for other procedures. be billed properly when they are billed Comment: One commenter asked why
Moreover, future separate payment for with the base code to which they are
these codes does not harm the hospitals only some of the office visit and
attached. In addition, they indicated consultation services are included in the
that furnish these services, in view of that many services are so routinely
the historical absence of separate bypass list (for example, CPT codes
furnished in combination with other 99213 and 99214 are on the list) but
payment for them under the OPPS in services that use of single procedure
the past. Hence, we proposed to pay CPT codes 99211, 99212 and 99215 are
claims will never result in appropriate not. The commenter believed that the
separately for these codes and to add median costs for these procedures.
them to the bypass list for the CY 2006 cited unlisted codes should also be on
OPPS. Response: We share the commenters’ the list. Other commenters did not
In the CY 2006 proposed rule, we desire to use as much claims data as believe that CPT codes 99213 and 99214
specifically invited public comments on possible to set the relative weights for met the criteria for inclusion as bypass
the proposed ‘‘pseudo’’ single process, the OPPS services. We continue to codes and believed that they should be
including the bypass list and the explore ways to use more data from removed from the list.
criteria. A summary of the many multiple procedure claims. Specifically, Response: We have included below
comments we received and our we are looking at the extent to which data calculated from the APC Panel data
responses follow: the many add-on codes (codes that are for use in setting the bypass list for the
Comment: Some commenters reported for services furnished only as CY 2006 proposed rule and this final
supported use of multiple procedure an adjunct to another service) can be rule with comment period. These data
claims through application of the bypass packaged to create more single claims. show that CPT codes 99213 and 99214
list and date of service stratification. We are also exploring strategies for meet the criteria for inclusion as bypass
Other commenters stated that these using data from correctly coded codes, and that CPT codes 99211, 99212
processes may result in more claims but multiple procedure claims containing and 99215 exceed the 5-percent limit for
not necessarily better data for rate- both base and add-on codes to ascertain single bills containing packaging:
Percent of
Median single bills for
amount of
HCPCS Short descriptor the code con-
packaging on taining pack-
single bills aging
99211 ................ Office/outpatient visit, est ......................................................................................................... $11.98 6.15

99212 ................ Office/outpatient visit, est ......................................................................................................... 10.88 5.43
Comment: Commenters supported the any potential adverse impact on the medians for services on the bypass list.
use of the bypass list but were medians for the services on the bypass We have received no comments on the
concerned that the inclusion of services list. We believe that the requirement appropriateness or inappropriateness of
on the bypass list may systematically that a code cannot be placed on the the bypass criteria, and thus, we have
result in lower costs for the procedures bypass list if more than 5 percent of the not changed them for the CY 2006
that are included on the list than if they single bills for that code contain OPPS.
had not been included on the list. packaging or if the median packaging for Comment: Commenters asked CMS to
Response: We established the bypass the code exceeds $50, is a strong carefully consider the impact of add-on
list criteria for the purpose of limiting deterrent to systematic reduction of codes on the creation of multiple
procedure claims and urged CMS to not furnished in conjunction with a base Comment: Commenters asked CMS to
disqualify a claim because of the service. If we were to include CPT code assign a flag to claims that became
presence of an add-on code that is 33225 on the bypass list, only the line- pseudo singles in the claims included in
packaged. In the case of add-on codes item charge for the CPT code would be the public use files so that it would be
that are separately paid, one commenter attributed to the procedure code. easier for commenters to model future
urged CMS to apportion the packaged Neither the device cost (which is proposed policies.
charges between the base code and the packaged), nor the share of other costs Response: The public use files (the
add-on code so that the data from the attributable to the service (for example, limited data set and the beneficiary
multiple procedure claim can be used. drugs, supplies, and extended operating encrypted data set) contain claims as
Some commenters asked CMS to place room time) would be attributed to CPT submitted to CMS. Therefore, to flag the
all add-on codes, both packaged and code 33225. They would both be pseudo single claims in the public use
separately paid, on the bypass list to packaged into the base code. The single file is not possible because the pseudo
create more single procedure claims. procedure claims for CPT code 33225 single claims may be part, but not all,
Response: The presence of an add-on would not reflect the costs of the device of the submitted claim. Even if we did
code with a status indicator of ‘‘N’’ or extended operating room time. In flag the claim, the user would still have
because it is a packaged service does not addition, the single procedure claims for to replicate the process to create pseudo
currently disqualify the claim as a the base code would reflect packaging single claims. We note that we have
multiple procedure claim. The claim is that is not properly associated with that greatly increased the information we
considered to be a single procedure procedure. issued regarding how we process the
claim and the cost of the packaged add- claims to acquire the median costs, and
on code is treated like any other However, we recognize that the add- we understand that outside replication
packaged drug, device, or supply or on codes present a significant data of our medians has improved.
other packaged cost. However, the problem because they can never be Comment: Commenters asked
presence of an add-on code that is correctly billed unless they are also whether CMS disregards line item
separately paid but not on the bypass billed on the same claim with a base charges for drugs, biologicals, and
list does currently cause the claim to be code to which they add services. We are radiopharmaceutical agents and items
a multiple procedure claim that is not undertaking a study of add-on codes to with status indicators ‘‘K’’ and ‘‘G’’ for
used because of the difficulties in determine whether there are add-on purposes of creating pseudo singles
determining how to apportion the codes that are now separately paid that claims.
packaging on the claim between the two should become packaged, and thus Response: The presence on a claim of
separately paid procedure codes. would provide more single procedure a code and charge for a drug, biological,
We disagree that all add-on codes claims. With respect to the add-on codes or radiopharmaceutical agent, whether
could safely be added to the bypass list. for which packaging is not appropriate, separately paid or packaged, has no
Many add-on codes use significant we will be exploring methods that impact on determining whether the
resources that are reported as packaged would enable us to systematically claim is a single procedure claim.
charges in support of the add-on code. calculate valid median costs for the add- After carefully considering all public
For example, CPT code 33225 (Left on codes from multiple procedure comments received, we are adopting as
ventricular lead add-on) requires more claims and thus create a more robust set final the proposed ‘‘pseudo’’ single
than an hour of additional operating of valid claims for rate-setting. We process and the bypass codes listed in
room time and also requires a device anticipate working with the APC Panel Table 1 without modification.
with significant cost when the service is members on this issue. BILLING CODE 4120–01–P
ER10NO05.000</GPH>
ER10NO05.001</GPH>
ER10NO05.002</GPH>
ER10NO05.003</GPH>
ER10NO05.004</GPH>
ER10NO05.005</GPH>
ER10NO05.006</GPH>
ER10NO05.007</GPH>
ER10NO05.008</GPH>
BILLING CODE 4120–01–C 2 and 3 comprise the 109 million claims hospitals with obviously erroneous
2. Calculation of Median Costs for CY that contain hospital bill types paid CCRs (greater than 90 or less than
2006 under the OPPS. .0001); and those from hospitals with
1. Claims that were not bill types 12X, CCRs that were identified as outliers (3
In this section of the preamble, we 13X, 14X (hospital bill types), or 76X standard deviations from the geometric
discuss the use of claims to calculate the (CMHC bill types). Other bill types are mean after removing error CCRs). In
OPPS payment rates for CY 2006. The not paid under the OPPS and, therefore, addition, we trimmed the CCRs at the
hospital outpatient prospective payment these claims were not used to set OPPS departmental level by removing the
page on the CMS Web site on which this payment. CCRs for each cost center as outliers if
final rule with comment period is 2. Claims that were bill types 12X, they exceeded +/¥3 standard
posted provides an accounting of claims 13X, or 14X (hospital bill types). These deviations of the geometric mean. This
used in the development of the final claims are hospital outpatient claims. is the same methodology that we used
rates: http://www.cms.hhs.gov/ 3. Claims that were bill type 76X in developing the final CY 2005 CCRs.
providers/hopps. The accounting of (CMHC). (These claims are later For CY 2006, as proposed, we trimmed
claims used in the development of this combined with any claims in item 2 at the departmental CCR level to
final rule with comment period is above with a condition code 41 to set eliminate aberrant CCRs that, if found in
included on the Web site under the per diem partial hospitalization rate high volume hospitals, could skew the
supplemental materials for the CY 2006 determined through a separate process.) medians. We used a four-tiered
final rule with comment period. That For the cost-to-charge ratio (CCR) hierarchy of cost center CCRs to match
accounting provides additional detail calculation process, we used the same a cost center to a revenue code, with the
regarding the number of claims derived approach as we used in developing the top tier being the most common cost
at each stage of the process. In addition, final APC rates for CY 2005 (69 FR center and the last tier being the default
below we discuss the files of claims that 65744). That is, we first limited the CCR. If a hospital’s departmental CCR
comprise the data sets that are available population of cost reports to only those was deleted by trimming, we set the
for purchase under a CMS data user for hospitals that filed outpatient claims departmental CCR for that cost center to
contract. Our CMS Web site, http:// in CY 2004 before determining whether ‘‘missing,’’ so that another departmental
www.cms.hhs.gov/providers/hopps, the CCRs for such hospitals were valid. CCR in the revenue center hierarchy
includes information about purchasing This initial limitation changed the could apply. If no other departmental
the following two OPPS data files: distribution of CCRs used during the CCR could apply to the revenue code on
‘‘OPPS Limited Data Set’’ and ‘‘OPPS trimming process discussed below. the claim, we used the hospital’s overall
Identifiable Data Set.’’ We then calculated the CCRs at a CCR for the revenue code in question.
As we proposed, we used the departmental level and overall for each The hierarchy of CCRs is available for
following methodology to establish the hospital for which we had claims data. inspection and comment at the CMS
relative weights to be used in We did this using hospital-specific data Web site: http://www.cms.hhs.gov/
calculating the OPPS payment rates for from the Healthcare Cost Report providers/hopps/default.asp.
CY 2006 shown in Addendum A and in Information System (HCRIS). We used We then converted the charges on the
Addendum B to this final rule with the most recent available cost report claim by applying the CCR that we
comment period. This methodology is data, in most cases, cost reports for CY believed was best suited to the revenue
as follows: 2002 or CY 2003. For this final rule with code indicated on the line with the
We used outpatient claims for the full comment period, we used the most charge. Table 2 of the proposed rule (70
CY 2004 to set the relative weights for recent cost report available, whether FR 42690) contained a list of the
CY 2006. To begin the calculation of the submitted or settled. If the most recent allowed revenue codes. Revenue codes
relative weights for CY 2006, we pulled available cost report was submitted but not included in Table 2 are those not
all claims for outpatient services not settled, we looked at the last settled allowed under the OPPS because their
furnished in CY 2004 from the national cost report to determine the ratio of services cannot be paid under the OPPS
claims history file. This is not the submitted to settled cost, and we then (for example, inpatient room and board
population of claims paid under the adjusted the most recent available charges) and, thus charges with those
OPPS, but all outpatient claims submitted but not settled cost report revenue codes were not packaged for
(including, for example, CAH claims, using that ratio. creation of the OPPS median costs. If a
and hospital claims for clinical The overall hospital-specific CCR is hospital did not have a CCR that was
laboratory services for persons who are the total of costs and charges in those appropriate to the revenue code
neither inpatients nor outpatients of the cost centers where we believe that a reported for a line-item charge (for
hospital). significant portion of the costs and example, a visit reported under the
We then excluded claims with charges are for services paid under the clinic revenue code, but the hospital did
condition codes 04, 20, 21, and 77. OPPS. We have included the list of the not have a clinic cost center), we
These are claims that providers cost centers that we use in our overall applied the hospital-specific overall
submitted to Medicare knowing that no CCR calculation on our Web site along CCR, except as discussed in section X.
payment will be made. For example, with our cost center to revenue code of this preamble for calculation of costs
providers submit claims with a crosswalk, which we discuss below. We for blood.
condition code 21 to elicit an official do not include the costs and charges Thus, we applied CCRs as described
denial notice from Medicare and generated by nursing schools or above to claims with bill types 12X,
document that a service is not covered. paramedical education programs in our 13X, or 14X, excluding all claims from
We then excluded claims for services cost and charge totals. CAHs and hospitals in Maryland, Guam,
furnished in Maryland, Guam, and the We then flagged CAH claims, which and the U.S. Virgin Islands, and claims
U.S. Virgin Islands because hospitals in are not paid under the OPPS, and claims from all hospitals for which CCRs were
those geographic areas are not paid from hospitals with invalid CCRs. The flagged as invalid.
under the OPPS. latter included claims from hospitals We identified claims with condition
We divided the remaining claims into without a CCR; those from hospitals code 41 as partial hospitalization
the three groups shown below. Groups paid an all-inclusive rate; those from services of CMHCs and moved them to
another file. These claims were pathology code and its associated costs listed in Addendum B to this final rule
combined with the 76X claims on each day. These ‘‘pseudo’’ singles for with comment period) and packaged
identified previously to calculate the the pathology codes would then be revenue codes into the cost of the single
partial hospitalization per diem rate. considered a separately payable code major procedure remaining on the
We then excluded claims without a and would be used the same as claims claim. The list of packaged revenue
HCPCS code. We also moved claims for in the single major claim file. codes is shown below in Table 2. These
observation services to another file. We 5. Non-OPPS Claims: Claims that are the same as those published in Table
moved to another file claims that contain no services payable under the 2 of the proposed rule (70 FR 42690).
contained nothing but flu and OPPS. These claims are excluded from After removing claims for hospitals
pneumococcal pneumonia (‘‘PPV’’) the files used for the OPPS. Non-OPPS with error CCRs, claims without HCPCS
vaccine. Influenza and PPV vaccines are claims have codes paid under other fee codes, claims for immunizations not
paid at reasonable cost and, therefore, schedules, for example, durable medical covered under the OPPS, and claims for
these claims are not used to set OPPS equipment or clinical laboratory. services not paid under the OPPS, 58.4
rates. We note that the two above We note that the claims listed in million claims were left. Of these
mentioned separate files containing numbers 1, 2, 3, and 4 above are million claims, we were able to use
partial hospitalization claims and the included in the data files that can be some portion of 52.7 million whole
observation services claims are included purchased as described above. claims (90.24 percent of the potentially
in the files that are available for We set aside the single minor claims usable claims) to create the 88 million
purchase as discussed above. and the non-OPPS claims (numbers 3 single and ‘‘pseudo’’ single claims for
We next copied line-item costs for and 5 above) because we did not use use in the CY 2006 median payment
drugs, blood, and devices (the lines stay either in calculating median cost. We rate-setting.
on the claim, but are copied off onto then examined the multiple major and We also excluded (1) claims that had
another file) to a separate file. No claims multiple minor claims (numbers 2 and zero costs after summing all costs on the
were deleted when we copied these 4 above) to determine if we could claim and (2) claims containing token
lines onto another file. These line-items convert any of them to single major charges (charges of less than $1.01) or
are used to calculate the per unit claims using the process described for which intermediary systems had
median for drugs, radiopharmaceutical previously. We first grouped items on allocated charges as if the charges were
agents, and blood and blood products. the claims by date of service. If each submitted on the claim. We deleted
The line-item costs were also used to major procedure on the claim had a claims containing token charges because
calculate the per administration cost of different date of service and if the line- we do not believe that a charge of less
drugs, biologicals (other than blood and items for packaged HCPCS and than $1.01 would yield a cost that
blood products), and packaged revenue codes had dates of would be valid to set weights for a
radiopharmaceutical agents. service, we split the claim into multiple significant separately paid service.
We then divided the remaining claims ‘‘pseudo’’ single claims based on the Moreover, effective for services
into five groups. date of service. furnished on or after July 1, 2004, the
1. Single Major Claims: Claims with a After those single claims were OCE assigns payment flag number 3 to
single separately payable procedure, all created, we used the list of ‘‘bypass claims on which hospitals submitted
of which would be used in median codes’’ listed in Table 1 of the proposed token charges for a service with status
setting. rule and this final rule with comment indicator ‘‘S’’ or ‘‘T’’ (a major separately
2. Multiple Major Claims: Claims with period to remove separately payable paid service under OPPS) for which the
more than one separately payable procedures that we determined contain intermediary is required to allocate the
procedure or multiple units for one limited costs or no packaged costs from sum of charges for services with a status
payable procedure. As discussed below, a multiple procedure bill. A discussion indicator equaling ‘‘S’’ or ‘‘T’’ based on
some of these can be used in median of the creation of the list of bypass codes the weight for the APC to which each
setting. used for the creation of ‘‘pseudo’’ single code is assigned. We do not believe that
3. Single Minor Claims: Claims with a claims is contained in section II.A.1.b. these charges, which were token charges
single HCPCS code that is not separately of this preamble. as submitted by the hospital, are valid
payable. These claims may have a single When one of the two separately reflections of hospital resources.
packaged procedure or a drug code. payable procedures on a multiple Therefore, we deleted these claims.
4. Multiple Minor Claims: Claims with procedure claim was on the bypass code For the remaining claims, we then
multiple HCPCS codes that are not list, we split the claim into two single wage adjusted 60 percent of the cost of
separately payable without examining procedure claims records. The single the claim (which we have previously
dates of service. For example, pathology procedure claim record that contained determined to be the labor-related
codes are not used unless the pathology the bypass code did not retain packaged portion), as has been our policy since
service is the single code on the bill or services. The single procedure claim the initial implementation of the OPPS,
unless the pathology code is on a record that contained the other to adjust for geographic variation in
separate date of service from the other separately payable procedure (but no labor-related costs. We made this
procedure on the claim. The multiple bypass code) retained the packaged adjustment by determining the wage
minor file has claims with multiple revenue code charges and the packaged index that applied to the hospital that
occurrences of pathology codes, with HCPCS charges. This enables us to use furnished the service and dividing the
packaged costs that cannot be a claim that would otherwise be a cost for the separately paid HCPCS code
appropriately allocated across the multiple procedure claim and could not furnished by the hospital by that wage
multiple pathology codes. However, by be used. index. As has been our policy since the
matching dates of service for the code We excluded those claims that we inception of the OPPS, we use the pre-
and the reported costs through the were not able to convert to singles even reclassified wage indices for
‘‘pseudo’’ single creation process after applying both of the techniques for standardization because we believe that
discussed earlier, a claim with multiple creation of ‘‘pseudo’’ singles. We then they better reflect the true costs of items
pathology codes may become several packaged the costs of packaged HCPCS and services in the area in which the
‘‘pseudo’’ single claims with a unique codes (codes with status indicator ‘‘N’’ hospital is located than the post-
reclassification wage indices, and would estimating the payments individual packaged with the charge for the OR
result in the most accurate adjusted hospitals will receive. While we wish to time for the surgical procedure and that
median costs. make available to the public as much claim will incorrectly and inadvertently
We then excluded claims that were hospital-specific information as lower the median cost for that surgical
outside 3 standard deviations from the possible, there are limits to the procedure. This is especially the case if
geometric mean cost for each HCPCS resources available to us to provide the service is a low volume service.
code. We used the remaining claims to hospital-specific information. Generally, Also, this revised billing policy cannot
calculate median costs for each we provide a broad range of information apply to services for which we use
separately payable HCPCS code; first, to to the public. We make available our claim-specific OCE logic to determine
determine the applicability of the ‘‘2 claims data in the form of both a limited payments, such as drug administration
times’’ rule, and second, to determine data set and a beneficiary encrypted and observation services, because the
APC medians based on the claims data set for use by the public, including OCE claim-by-claim logic cannot
containing the HCPCS codes assigned to hospitals. In addition, in both the OPPS function properly if all services
each APC. As stated previously, section proposed and final rules each year, we provided by a hospital that are related
1833(t)(2) of the Act provides that, give a detailed description of how we to the services subject to the OCE logic
subject to certain exceptions, the items process the paid claims to derive the are not reported on the same claim.
and services within an APC group median costs and how we create relative Comment: One commenter supported
cannot be considered comparable with weights from the median costs. Many deletion of claims with token or
respect to the use of resources if the different organizations with a broad nominal charges (for example, a very
highest median (or mean cost, if elected range of divergent interests currently small charge such as $1) but was
by the Secretary) for an item or service use this information provided to the concerned about exclusion of claims
in the group is more than 2 times greater public to generate extraordinarily containing multiple surgical or cardiac
than the lowest median cost for an item detailed reports and data of interest to catheterization services because such
or service within the same group (‘‘the them. As this is public information, we exclusions may significantly reduce the
2 times rule’’). Finally, we reviewed the would expect that hospital associations number of claims used for rate-setting.
medians and reassigned HCPCS codes to and hospitals could do the same, either The commenter noted that CMS has
different APCs as deemed appropriate. directly or using alternative sources to long permitted hospitals to show a
Section III.B. of this preamble includes determine the impact of various policy token charge on the line-item with
a discussion of the HCPCS code options. separately paid procedures when they
assignment changes that resulted from Comment: One commenter strongly
were performed at the same session as
examination of the medians and for opposed the requirement that all OPPS
a surgical procedure for which a charge
other reasons. The APC medians were encounters furnished on the same day
is shown as operating room time.
recalculated after we reassigned the must be billed on a single claim. Some
Another commenter wanted claims that
affected HCPCS codes. commenters believed that this increases
A detailed discussion of the medians contain a single payable APC line to be
the number of claims that cannot be
for blood and blood products is included even if there are token charges
used for ratesetting by creating multiple
included in section X. of this preamble. on other nonpayable lines on the claim.
procedure claims and creates a needless
A discussion of the medians for APCs burden on hospitals to ensure that all Response: The submission of claims
that require one or more devices when encounters on the same date of service for multiple separately paid procedures
the service is performed is included in are billed on the same claim. with the same date of service on which
section IV.A. of this preamble. A Response: We agree and we have there is a charge for operating room time
discussion of the median for observation revised our policy governing how for one of the HCPCS codes and token
services is included in section XI. of this services on the same date of service charges on the lines for the other
preamble and a discussion of the must be billed. See Change Request separately paid HCPCS codes reflects a
median for partial hospitalization is 4047, Transmittal 711, dated October difficulty with using multiple procedure
included below in section II.B. of this 14, 2005 for a complete discussion of claims. (For example, a claim contains
preamble. our current policy. Under this change in three separately paid surgical services,
We received a number of public policy, there are instances where with a charge of $2,000 for one and
comments concerning our proposed nonrepetitive OPPS services that are charges of $1 for each of the others, plus
data processes for calculating the CY furnished on the same date of service a single charge each for drugs, sterile
2006 OPPS relative weights and median may be billed on different claims as long supplies, and recovery room time.) We
costs. A summary of the comments and as all charges that pertain to each note if we were to use such claims and
our responses follow: service are also reported on the same allocate packaging to each separately
Comment: Commenters stated that the claim as the HCPCS code that describes paid procedure (on some basis yet to be
proposed rule did not provide adequate that service. We emphasize that it is determined) and then divide the claim
information for hospitals to evaluate the vitally important to us that all of the into multiple claims, we would be using
impact of each of the proposed policy charges that pertain to a separately paid claims records that would contain
changes independently or in service be included on the same claim nothing but packaged costs and a token
combination. They requested that CMS with the service being billed so that the charge for some of those services.
provide a public use file that shows the claim will accurately reflect the full cost Similarly, if we were to focus solely on
impact of each individual proposed of the service. If, for example, charges the procedure with the line charge of
change in methodology so that for a packaged drug, recovery room $2,000 and attribute all the packaging to
providers can determine how the time, and sterile supplies that were used it, we would be overstating the
changes would affect their own in providing a surgical service are not packaging for that service because some
operations and provide a basis for included on the claim with the HCPCS of it rightfully belongs with the other
comments. code and line-item charge for the use of two separately paid procedures for
Response: We currently provide the operating room for the surgical which there was a token charge. We
provider-specific tables that we procedure, those charges for drugs, acknowledge the commenters’ concern
understand are very accurate in recovery room, and supplies will not be and we will continue to pursue an
appropriate way to allocate the costs on without modification. Table 2 contains relative weight calculations specific to
these types of claims. the list of packaged services by revenue particular services or particular
After carefully reviewing all public code that we used in developing the categories of services are also found in
comments received, we are finalizing APC relative weights listed in Addenda specifically identified sections of this
the process for calculating median costs A and B of this final rule with comment preamble.
and the list of packaged services shown period. BILLING CODE 4120–01–C
in Table 2 for OPPS services furnished We note that comments and responses
on or after January 1, 2006, as proposed regarding aspects of median cost and
ER10NO05.009</GPH>
BILLING CODE 4120–01–P seeds (or radioactive source) is to be Hospitals may use CPT codes to report
3. Calculation of Scaled OPPS Payment made at charges adjusted to cost for any packaged services that were
Weights services furnished on or after January 1, performed, consistent with CPT coding
2004, and before January 1, 2006. As we guidelines.
Using the median APC costs As a result of requests from the
stated in our January 6, 2004 interim
discussed previously, we calculated the public, a Packaging Subcommittee to the
final rule, charges for the brachytherapy
final relative payment weights for each APC Panel was established to review all
sources will not be used in determining
APC for CY 2006 shown in Addenda A the procedural CPT codes with a status
outlier payments and payments for
and B to this final rule with comment indicator of ‘‘N.’’ Providers have often
these items will be excluded from
period. As in prior years, we scaled all suggested that many packaged services
budget neutrality calculations for the CY
the relative payment weights to APC could be provided alone, without any
2006 OPPS. (We provide a discussion of
0601 (Mid Level Clinic Visit) because it brachytherapy payment issues at section other separately payable services on the
is one of the most frequently performed VII. of this final rule with comment claim, and requested that these codes
services in the hospital outpatient period.) not be assigned status indicator ‘‘N.’’ As
setting. We assigned APC 0601 a relative Comment: One commenter indicated stated in the proposed rule, the
payment weight of 1.00 and divided the that CMS should convene a panel to Packaging Subcommittee reviewed
median cost for each APC by the median look at additional data submission every code that was packaged in the CY
cost for APC 0601 to derive the relative requirements that the panel believes 2004 OPPS (70 FR 42691). Based on
payment weight for each APC. Using CY would greatly enhance both the comments we have received and their
2004 data, the median cost for APC 0601 reliability of the data and its subsequent own expert judgment, the subcommittee
is $60.19 for CY 2006. use for ratesetting. Specifically, the identified a set of packaged codes that
Section 1833(t)(9)(B) of the Act commenter urged CMS to consider are often provided separately and
requires that APC reclassification and whether to require hospitals to identify subsequently reviewed utilization and
recalibration changes, wage index the APCs that apply to multiple median cost data for these codes. One of
changes, and other adjustments be made procedure claims or develop a system the main criteria utilized by the
in a manner that assures that aggregate that groups multiple procedure claims Packaging Subcommittee to determine
payments under the OPPS for CY 2006 in a fashion that is analogous to the whether a code should become
are neither greater than nor less than the inpatient prospective payment system. unpackaged was how likely it was for
aggregate payments that would have Response: We fail to understand how the code to be billed without any other
been made without the changes. To hospital reporting of the APCs that separately payable services on the
comply with this requirement apply to services on claims would claim. Another criterion used to
concerning the APC changes, we resolve the issue of how to distribute determine whether a code should
compared aggregate payments using the packaged costs, such as drugs and become unpackaged was how likely it
CY 2005 relative weights to aggregate recovery room time, among multiple was for the costs of the packaged code
payments using the CY 2006 final procedures billed on the same claim. to be appropriately mapped to the
relative weights. Based on this Therefore, we do not support imposing separately payable codes with which it
comparison, we adjusted the relative this reporting burden on hospitals. With was performed. The Packaging
weights for purposes of budget respect to grouping procedures into Subcommittee also examined median
neutrality. The unscaled relative combination APCs for purposes of costs from hospital claims for packaged
payment weights were adjusted by dealing effectively with services that services.
1.012508103 for budget neutrality. The commonly appear in specific The Packaging Subcommittee
final relative payment weights are listed combinations together on claims, we identified areas for change for some
in Addenda A and B to this final rule proposed creation of combination APCs packaged CPT codes that they believed
with comment period. The final relative for the CY 2004 OPPS to deal with very could frequently be provided to patients
payment weights incorporate the frequent combinations of services. as the sole service on a given date and
recalibration adjustments discussed in While we chose not to implement this that required significant hospital
sections II.A.1. and 2. of this preamble. approach for the CY 2004 OPPS, largely resources as determined from hospital
Section 1833(t)(14)(H) of the Act, as in response to public comments, we claims data. During the February 2005
added by section 621(a)(1) of Pub. L. have not ruled out such an approach in meeting, the APC Panel accepted the
108–173, states that ‘‘Additional the future as a way to effectively report of the Packaging Subcommittee
expenditures resulting from this calculate median costs and set payment and recommended:
paragraph shall not be taken into rates for services for which the norm is (1) That packaged codes be reviewed
account in establishing the conversion provision in combinations with other by the Panel individually.
factor, weighting and other adjustment services. (2) That the Packaging Subcommittee
factors for 2004 and 2005 under continue to meet throughout the year to
paragraph (9) but shall be taken into 4. Changes to Packaged Services
discuss problematic packaged codes.
account for subsequent years.’’ Section a. Background. Payments for (3) That CMS assign a modifier to CPT
1833(t)(14) of the Act provides the packaged services under the OPPS are codes 36540 (Collect blood, venous
payment rates for certain ‘‘specified bundled into the payments providers device); 36600 (Withdrawal of arterial
covered outpatient drugs.’’ Therefore, receive for separately payable services blood); and 51701 (Insertion of non-
the cost of those specified covered provided on the same day. Packaged indwelling bladder catheter), for use
outpatient drugs (as discussed in section services are identified by the status when there are no other separately
V. of this preamble) is included in the indicator ‘‘N.’’ Hospitals include payable codes on the claim. The
budget neutrality calculations for CY charges for packaged services on their modifier would flag the OCE to assign
2006 OPPS. claims, and the costs associated with payment to the claim.
Under section 1833(t)(16)(C) of the these packaged services are then (4) That CMS maintain the current
Act, as added by section 621(b)(1) of bundled into the costs for separately packaged status indicator for CPT code
Pub. L. 108–173, payment for devices of payable procedures on the claims for 76937 (Ultrasound guidance for vascular
brachytherapy consisting of a seed or purposes of median cost calculations. access).
(5) That CMS change the status consideration by the Packaging that CMS assign the ‘‘Q’’ status indicator
indicators for CPT immunization Subcommittee. to CPT code 36600.
administration codes 90471 and 90472 (5) No change to the CY 2005 status Response: We continue to believe that
to allow separate payment and ensure indicator of CPT code 0069T (N- the services described by CPT codes
consistency with other injection codes. packaged), acoustic heart sound 36540 and 36600 are almost always
(6) That CMS gather more data on services. provided in conjunction with other
CPT code 94762 (Overnight pulse (6) That CMS collect additional data separately payable services in the
oximetry) to determine how often this on CPT 94762, overnight pulse hospital outpatient department setting.
code is billed without any other oximetry, including a list of other codes Our data do not support making these
separately payable codes and whether it with which this code is most frequently services separately payable. We
is performed more frequently alone in billed, for consideration by the proposed the new ‘‘Q’’ status indicator
rural settings than other settings. Packaging Subcommittee. for services that may be separately
(7) No changes to the packaged status b. Responses to the APC Panel payable or packaged depending on
of CPT codes 77790 (Radiation source Recommendations special circumstances for CY 2006 only
handling) and 94760 and 94761 (both for observation services. Codes assigned
For CY 2006, we proposed to this status indicator will require the
codes are for procedures to measure
maintain CPT codes 36540 (Collect application of OCE logic to determine
blood oxygen levels).
blood venous device) and 36600 the codes’ payment status and identify
(8) That CMS provide education and (Withdrawal of arterial blood) as
consistent guidelines to providers and separate payment if appropriate, and
packaged services and not adopt the then application of the same logic in our
fiscal intermediaries on correct billing APC Panel’s recommendation to assign
for packaged codes in general, and in data processing to develop median costs
a modifier to the codes. We noted in our for those services for future OPPS
particular for CPT codes 36540, 36600, proposed rule that CPT code 36540 was
51701, and the recommended modifier, updates. We seek to gain some
also bundled under the Medicare experience with such logic in the OCE
if approved. Physician Fee Schedule (MPFS), and
(9) That the Packaging Subcommittee and our data processing for observation
our data demonstrated that the service services prior to considering any
review CPT codes 42550 (Injection for was generally billed with other
salivary x-ray) and 38792 (Sentinel node expansion of the use of status indicator
separately payable services (70 FR ‘‘Q.’’ Use of the ‘‘Q’’ modifier for
imaging). 42691). We also had relatively few procedures that are sometimes packaged
(10) That CPT code 97602 single claims for CPT code 36600, would require ongoing maintenance of a
(Nonselective wound care) be referred to compared to the procedure’s overall list of codes for which this status
the Physician Payment Group within frequency. Both of these codes had indicator may be used and their APC
CMS for evaluation of its bundled status relatively low hospital resource assignments if separately paid, as well
as it relates to services provided under utilization. As these procedures were as additional claims and data processing
the OPPS and that the Physician almost always provided with other activities.
Payment Group report its conclusions separately payable services, hospitals’ After carefully reviewing all
back to the Panel. payments for those other services comments received, for CY 2006 we are
In addition, during its August 2005 included the costs of CPT codes 36540 adopting as final without modification
meeting, the APC Panel accepted the and 36600. With respect to the APC our proposal to retain CPT codes 36540
report of the Packaging Subcommittee Panel’s recommendation that the OPPS and 36600 as packaged services and not
and made the following make payment for one of these services adopt the APC Panel’s recommendation
recommendations: if the code had a modifier appended to assign a modifier for use when the
(1) No change to the CY 2005 status signifying that it was the only service services are provided with no other
indicator of 76937 (N-packaged), provided on a day, there is currently no separately payable services on the same
ultrasound guidance for vascular access, appropriate CPT modifier that could be day.
but requested that CMS collect available appended to signal this circumstance. A For CY 2006, we proposed to pay
hospital claims data on that code for new HCPCS modifier would not be separately for CPT code 51701 (Insertion
further consideration by the Packaging appropriate because the packaged codes of non-indwelling bladder catheter), and
Subcommittee at the next available recommended by the APC Panel for to map it to APC 0340 (Minor Ancillary
meeting. separate payment when billed alone are Procedures), with status indicator ‘‘X’’,
(2) No change to the CY 2005 status CPT codes. and a median cost of $39.00. The APC
indicator of CPT code 38792 (N- We received a few public comments Panel recommended that we pay
packaged), sentinel node identification, concerning this proposal. separately for this code only when there
but requested that CMS collect available Comment: Commenters stated that are no other separately payable services
hospital claims data on that code for CPT 36540 should not be assigned on the claim. However, we proposed to
further consideration by the Packaging status indicator ‘‘N’’ because drawing pay separately for this code every time
Subcommittee by the next scheduled blood for laboratory work from a venous it is billed. We believed that it was more
meeting. access device requires that a registered appropriate to make payment for each
(3) No change to the CY 2005 status nurse assess the patient and then use a procedure, rather than increase
indicator of CPT code 42550 (N- sterile kit to perform the blood draw. hospitals’ administrative burden by
packaged), injection for salivary x-ray. They objected to having to report an requiring specific coding changes to
(4) That CMS collect additional data E/M visit code in order to receive indicate that there were no other
on CPT code 36500, venous payment for the service when it is the separately payable procedures on the
catheterization for selective blood organ only service provided. The commenters claim. Based on our review of the data,
sampling, and the corresponding requested that CMS assign the proposed the cost for this procedure was not
radiological supervision and status indicator ‘‘Q’’ for CPT code 36540 insignificant, and the volume of single
interpretation code, 75893, including a so that the OPPS could make payment and multiple claims was modest. When
list of other codes with which these when it is the only service provided. we reviewed related codes, including
codes are most frequently billed, for Similarly, at least one commenter asked CPT code 51702 (Insertion of temporary
indwelling bladder catheter, simple) appropriate way to prevent unnecessary ultrasound guidance and $73.00 for
and CPT code 51703 (Insertion of utilization. In addition, the commenters fluoroscopic guidance for vascular
temporary indwelling bladder catheter, cited a finding published in a June 2001 access. The costs for these guidance
complicated), we noted that these codes report by the Agency for Healthcare procedures are relatively low compared
also had substantial median costs and a Research and Quality, that use of with the CY 2006 payment rates for the
moderate volume of single claims. ultrasound guidance reduces relative separately payable services they most
Therefore, for CY 2006, we proposed to risk for complications during a central frequently accompany, which range
pay separately for CPT codes 51702 and venous catheter insertion by 78 percent, from almost $500 to about $1,600. We
51703, mapping them to APC 0340 with as a reason that separate payment note that, in general, our payment rates
a median cost of $39.00 and APC 0164 should be made for CPT code 76937. for vascular access device services for
(Level I Urinary and Anal Procedures) The commenters also stated that CY 2006 are significantly greater than
with a median cost of $72.00, assignment of packaged status to these our CY 2005 payment rates for the same
respectively. We proposed that CPT codes conflicts with CMS’ policy as services because more specific CY 2004
codes 51701, 51702, and 51703 be stated in its CY 2003 OPPS final rule, to data available for CPT codes that were
placed on the bypass list, as discussed pay separately for all radiology guidance new in CY 2004 permitted us to
in section II.A.1.b. of this final rule with codes. reconfigure the APCs containing
comment period. Response: OPPS hospital claims data vascular access device procedures to
The comments we received supported reveal that out of the total instances of improve clinical and resource
our proposal. Accordingly, we are CPT code 76937 appearing on claims coherence. In addition, our hospital
finalizing our proposal to pay separately used for setting payment rates for CY claims data demonstrate that in CY 2004
for CPT codes 51701 and 51702, and to 2006, CPT code 76937 was billed with guidance services were used frequently
assign them to APC 0340 with status four separately payable codes for for the insertion of vascular access
indicator ‘‘X,’’ and a median cost of insertion of central venous access devices, and we have no evidence that
$36.00 for CY 2006. We are also devices 84 percent of the time. This patients lacked appropriate access to
finalizing our proposal to pay separately indicates, as might be expected, that the guidance services necessary for the safe
for CPT code 51703, and to assign it to costs for CPT code 76937 are typically insertion of vascular access devices in
APC 0164 with status indicator ‘‘T,’’ and packaged into four CPT codes, 36556, the hospital outpatient setting. We
a median cost of $69.00 for CY 2006. 36558, 36561, and 36569, the most believe the increased CY 2006 payment
For CY 2006, we proposed to accept commonly billed codes under the OPPS rates for insertion of vascular access
the APC Panel recommendation that for vascular access device insertion. The devices should result in preservation of
CPT code 76937 (Ultrasound guidance data for CPT code 75998 reveal similar appropriate access to medically
for vascular access) remain packaged. patterns of utilization and packaging. Of reasonable and necessary ultrasound
We were concerned that there might be the total instances of CPT code 75998 and fluoroscopic guidance procedures
unnecessary overuse of this procedure if appearing on claims used for setting used to facilitate the insertion of the
it were separately payable. In addition, payment rates for CY 2006, code 75998 devices.
we believed that the service would was billed with the same four separately
always be provided with another payable codes for insertion of central If we were to unpackage CPT codes
separately payable procedure, so its venous access devices 70 percent of the 76937 and 75998, single bills available
costs would be appropriately bundled time. This indicates that the costs for to develop median costs for vascular
with the definitive vascular access fluoroscopic guidance for central access device insertion services would
service. As stated in the CY 2005 final venous access device placement are be significantly reduced. In addition,
rule with comment period (69 FR typically packaged into the same CPT separate payment for an ancillary
65697), CMS and the Packaging codes as the costs for ultrasound guidance service always performed in
Subcommittee reviewed CY 2004 claims guidance for vascular access. Of single conjunction with other separately
data for CPT code 76937 and claims used for setting payment rates for payable services could lead to
determined that this code should CY 2006 for those four CPT codes overutilization of the ancillary service,
remain packaged. describing the insertion of vascular for which payment is more
We received several public comments access devices, ultrasound guidance was appropriately bundled into the
in response to our proposal. reported from 16 to 34 percent of the prospectively established payment for
Comment: A few commenters time, and fluoroscopic guidance was the procedure to insert the vascular
requested that some radiologic guidance billed from 29 to 52 percent of the time. access device. Our statement regarding
codes, such as CPT code 76937 for For the same four CPT codes, one or paying separately for radiology guidance
ultrasound guidance for vascular access more forms of guidance (fluoroscopic services in the CY 2003 final rule with
and CPT code 75998 for fluoroscopic and/or ultrasound) were reported on 41 comment period was made in the
guidance for central venous access to 64 percent of the single claims context of our explanation regarding our
device placement, become separately utilized for rate-setting. Thus, overall for decision to unpackage certain radiology
payable instead of packaged. The these vascular access device insertion guidance procedures that had first been
commenters stated that each guidance services, guidance was used in at least packaged for CY 2002, and does not
code could be reported with several 41 percent of the single claim cases, a necessarily apply to all radiology
separately payable procedure codes, very significant proportion of the time. guidance services. As for all HCPCS
thereby skewing the median costs for If anything, this percentage may codes, we will continue to evaluate each
the procedures and not providing underestimate the utilization of service, including radiology guidance
appropriate payment for the procedures guidance for the insertion of vascular services, for its most appropriate OPPS
when radiologic guidance was used. In access devices, as we have been told payment status, including packaged
addition, one commenter expressed that hospitals may not always code versus separately payable designation,
concern that the codes have been separately for packaged services for on a case-by-case basis according to the
packaged due to concern over which no separate payment is made. clinical and resource characteristics of
unnecessary utilization. The commenter Hospital claims data from CY 2004 the procedure and the other services
stated that an audit is a more yield a median cost of $61.00 for with which it would likely be billed.
We will share the CY 2004 and early Comment: Several comments 94760 and 94761 than multiple
CY 2005 hospital claims data requested that CMS change the status procedure claims that included CPT
concerning these vascular access indicator for CPT code 94762 from ‘‘N’’ codes 94760 and 94761. CPT codes
guidance services with the APC Panel to ‘‘X’’ and that the service be assigned 94760 and 94761 describe services that
Packaging Subcommittee, as to APC 0369, (Level III Pulmonary were very commonly performed in the
recommended by the APC Panel, for Tests). They stated that because hospital outpatient setting, and
their review prior to the next biannual noninvasive ear or pulse oximetry for unpackaging these codes would likely
APC Panel meeting. oxygen saturation, by continuous significantly decrease the number of
After carefully considering the public overnight monitoring, is a prerequisite single claims available for use in
comments received, we are adopting as for proving the medical necessity for calculating median costs for other
final without modification our proposal home oxygen therapy, this is often the services.
to accept the APC Panel’s only service provided to beneficiaries We did not receive any public
recommendation that CPT code 76937 during their hospital outpatient visits. comments concerning our proposal.
remains a packaged service for CY 2006. The commenters stated that no E/M Therefore, for CY 2006 we are finalizing,
In addition, we are finalizing our service is necessary and that it should without modification, our proposal to
proposal to continue to package CPT be possible to receive payment for CPT accept the APC Panel’s
code 75998 for CY 2006. code 94762 when it is the only service recommendations to retain as packaged
We refer the reader to section VIII. of provided. services CPT codes 77790, 94760, and
this preamble on drug administration Response: We continue to believe that 94761.
regarding the APC Panel’s the packaged status of CPT code 94762 For CY 2006, we proposed to accept
recommendation concerning CPT codes is appropriate. As discussed during the the APC Panel recommendation to
August 2005 APC Panel meeting, our gather data and review CPT codes 42550
90471 and 90472.
data do not support separate payment (injection for salivary x-ray), and 38792
For CY 2006, we proposed to accept
for this service because 98.5 percent of (sentinel node identification) with the
the APC Panel recommendation to
the time, it is provided with separately Packaging Subcommittee. In the
gather data and review CPT code 94762
payable services, and is rarely the only proposed rule, we stated that this would
to determine how often this code was include analyzing single and multiple
service provided in hospital settings on
billed without any other separately procedure claims volume and resource
a single date of service to a Medicare
payable codes on the same date of utilization data, and reviewing those
beneficiary.
service and whether it was performed After carefully considering the public studies with the Packaging
more frequently alone in rural settings comments received, for CY 2006 we are Subcommittee. During the August 2005
than other settings. During the August accepting the APC Panel’s APC Panel meeting, the Panel
2005 APC Panel meeting, we presented recommendations to retain as a recommended that we continue to
data to the APC Panel regarding CPT packaged service CPT code 94762. We package CPT codes 42550 and 38792 for
code 94762. CY 2004 OPPS hospital will share the CY 2004 and early CY CY 2006. We believed that CPT code
claims data indicated at that time that 2005 hospital claims data concerning 42550 was appropriately packaged, as
CPT code 94762 was billed only 1,145 CPT code 94762 with the APC Panel were other injection codes that were
times without any separately payable Packaging Subcommittee as integral to the provision of some
codes on the claim, which was only 1.5 recommended by the APC Panel, for its separately payable procedures. In
percent of all units of code 94762 billed. review during the next biannual APC addition, we agreed with the APC Panel
Fifty-two percent of the 1,145 single Panel meeting. that CPT code 38792 was appropriately
occurrences of CPT code 94762 were For CY 2006, we proposed to accept packaged because we believed that it
provided by rural hospitals. Fifty-two the APC Panel recommendations that would almost always be provided with
percent was particularly high CPT codes 77790 (Radiation handling), other separately payable procedures on
considering that, when reviewing both 94760 (Pulse oximetry for oxygen the same date of service, such as nuclear
single and multiple procedure claims, saturation, single determination), and medicine services or surgical
the data indicated that CPT code 94762 94761 (Pulse oximetry for oxygen procedures.
was provided by rural hospitals only 12 saturation, multiple determinations) We received a few public comments
percent of the time. The data revealed remain packaged. We state our belief regarding our proposal to retain as
that rural hospitals were more likely that CPT code 77790 was integral to the packaged CPT code 38792.
than urban hospitals to bill CPT code provision of brachytherapy and should Comment: The commenters stated
94762 without any separately payable always be billed on the same day with that CPT 38792 is sometimes the only
codes on the claim. For purposes of this brachytherapy sources and their service provided in the hospital
analysis, a rural hospital was defined as loading, ensuring that the provider outpatient department, and that separate
any hospital that is considered rural for would receive appropriate payment for payment under the OPPS should be
payment purposes. In general, this the radiation source handling bundled allowed. They stated that there are
included geographically rural providers with the payment for the brachytherapy instances in which the injection for the
as well as providers that were service. The small number of single X-ray is provided in the hospital
reclassified to rural areas for wage index claims for this code in our data verified outpatient department, and then the
classification. that this code was rarely billed alone beneficiary goes to a different setting
We recognize that the data used in the without other payable services on the outside the hospital for the surgery. The
analysis are somewhat limited. Because claim, and those few single claims commenters requested that CMS assign
CPT 94762 is a packaged code and does might be miscoded claims. Our data the proposed ‘‘Q’’ status indicator to
not receive separate payment, it is review of CPT codes 94760 and 94761 this procedure code to make separate
possible that an unknown number of revealed that these codes had low payment possible under the OPPS.
hospitals chose not to submit claims to resource utilization, and were most Response: We believe that the most
CMS when CPT code 94762 was frequently provided with other services. appropriate course of action with regard
provided without other separately Similar to CPT code 77790, there were to CPT code 38792 is to retain its
payable services on their claims. many fewer single claims for CPT codes packaged status and to collect
additional data and, as recommended by services are the only services on the EKGs that include the acoustic heart
the APC Panel, to then present those claim. The commenter stated that there sound recording. If the hospital uses the
data to the Packaging Subcommittee are many times that these are the only test according to the manufacturer’s
during our next meeting with them. procedures performed during a hospital guidelines, the costs will be distributed
Based on our CY 2004 claims data, we outpatient encounter. over the large number of EKGs that are
had only four single claims for CPT Response: Our data do not support performed in the hospital outpatient
code 38792. We continue to believe that separate payment for these procedures department and, over time, the
payment for the injection service is most at this time. After considering the additional costs will be recognized in
appropriately packaged with other comment and the APC Panel’s the OPPS rates as increased payments
separately payable services provided on recommendation, we will collect and for other services provided on the same
the same date of service, most likely review additional data to determine day, likely EKGs. We are accepting the
imaging or surgical procedures. which codes are most frequently billed Panel’s recommendation that we
After carefully reviewing and on claims with CPT codes 36500 and maintain the packaged status of CPT
considering the public comments 75893. We will share the CY 2004 and code 0069T for CY 2006. We will review
received for CY 2006, we are accepting early CY 2005 hospital claims data for claims data as they become available for
the APC Panel’s recommendations to these venous catheterization and the CY 2007 OPPS update.
retain as packaged services CPT codes radiological supervision services as We also received several comments
38792 and 42550. Payment for those recommended by the APC Panel, for its that requested status indicator changes
injection services is most appropriately review prior to the next biannual APC for other CPT codes, not previously
bundled with the payments for other Panel meeting. brought before the Packaging
separately payable services provided on During the August 2005 APC Panel Subcommittee.
the same day. meeting, the Panel recommended that Comment: Commenters suggested that
We will share the CY 2004 and early CMS maintain the packaged status of the following packaged procedures
CY 2005 hospital claims data CPT 0069T (Acoustic heart sound should be made separately payable: CPT
concerning CPT 38792 with the APC recording and computer analysis only). code 96523 (Irrigation of implanted
Panel Packaging Subcommittee as This code is indicated as an add-on venous access device for drug delivery
recommended by the APC Panel, for its code to an electrocardiography service, systems (new code for CY 2006)); CPT
review during the next biannual APC according to the American Medical code 76001 (Fluoroscopy, physician
Panel meeting. Association’s CY 2005 CPT book. time more than one hour); CPT code
As we proposed, we referred CPT Therefore, we believed this code was 76003 (Fluoroscopic guidance for
code 97602 (Nonselective wound care) appropriately packaged because it was needle placement); CPT code 76005
for MPFS evaluation of its bundled integrally related to the provision of (Fluoroscopic guidance and location of
status as CPT code 97602 relates to electrocardiography, and should never needle or catheter tip); CPT code 74328
services provided under the OPPS. be performed alone. (Endoscopic catheterization of the
We received several public comments We received several comments biliary ductal system, radiological
concerning our proposed treatment of regarding CPT 0069T in response to the supervision and interpretation); CPT
CPT code 97602 for CY 2006, with code’s new interim designation in the code 74329 (Endoscopic catheterization
assignment of status indicator ‘‘A.’’. CY 2005 final rule with comment period of the pancreatic ductal system,
Those comments and others related to and to our proposal for CY 2006. radiological supervision and
wound care services are addressed in Comment: Several commenters interpretation); CPT code 74330
section III.D.5.j. of this preamble. requested that CMS change the status (Combined endoscopic catheterization
During the August 2005 APC Panel indicator for CPT code 0069T (Acoustic of the biliary and pancreatic ductal
meeting, the Panel recommended that heart sound recording and computer systems, radiological supervision and
CMS collect additional data on CPT analysis only). The commenters interpretation); HCPCS code P9612
code 36500 (Venous catheterization for requested that CMS assign the (Catheterization for collection of
selective blood organ sampling) and the procedure to APC 0099 with an ‘‘S’’ specimen); and HCPCS code G0269
corresponding radiological supervision status indicator rather than ‘‘N,’’ as was (Placement of occlusive device into
and interpretation code, 75893. We the CY 2005 and proposed CY 2006 either a venous or arterial access site,
received several clinical scenarios from status indicator for code 0069T. The post surgical or interventional
a provider, indicating that CPT codes commenters indicated that the test’s procedure).
36500 and 75893, both packaged status as a packaged procedure results Response: We believe that the
services, were frequently provided on a in inequitable payment to hospitals. commenters’ suggestions bear closer
claim without any separately payable They stated that the cost of an EKG with examination. We will not make any
codes. In those cases, the provider did the acoustic heart sound recording is changes to the packaged status of these
not receive any payment. We believed it $55, whereas the cost of an EKG without services at this time. Rather, we will
was unlikely that these two procedures such recording is only $31. They added collect data related to the costs and
would be reported without any other that because CMS has packaged the utilization of these services for
separately payable codes on the claim. procedure, the hospital is underpaid by presentation to the Packaging
Our early review of several clinical $24 for each test it performs. Subcommittee of the APC Panel. We
scenarios revealed that other separately Response: It is our understanding that note that the status indicator of CPT
payable codes would likely be provided the acoustic heart sound recording and code 96523, a new CPT code for CY
on the same claim. analysis is intended for a specific, 2006, is subject to comment in this final
We received one comment in targeted group of patients to enhance rule with comment period. We will
response to our proposal to retain the provider’s ability to diagnose heart discuss with the Packaging
packaged status for CPT codes 36500 failure. The technology always is Subcommittee, on an ongoing basis,
and 75893. performed in conjunction with an EKG packaged procedures for which status
Comment: One commenter requested and as such is ideal for packaging. It is indicator changes have been suggested
that CMS allow separate payment for up to hospitals to increase their charges by the public. The ongoing process
CPT codes 36500 and 75893 when these to reflect the additional costs for those allows members some additional time to
consider the issues we bring to them 2003 through December 31, 2003). We cost for hospital-based PHPs was again
prior to the twice yearly meetings where used data from all hospital bills $225. After applying the .583
the subcommittee makes its reporting condition code 41, which adjustment factor to the median CMHC
recommendations to the full APC Panel. identifies the claim as partial per diem cost, the median CMHC per
Additional issues and new data hospitalization, and all bills from diem cost was $605. Since the CMHC
concerning the packaging status of CMHCs because CMHCs are Medicare median per diem cost exceeded the
codes will be shared with the APC Panel providers only for the purpose of average per diem cost of inpatient
Packaging Subcommittee for its providing partial hospitalization psychiatric care, we proposed a per
consideration as information becomes services. We used CCRs from the most diem rate for CY 2004 based solely on
available. We continue to encourage recently available hospital and CMHC hospital-based PHP data. The proposed
submission of common clinical cost reports to convert each provider’s PHP per diem for CY 2004, after scaling,
scenarios involving currently packaged line-item charges as reported on bills, to was $208.95. However, by the time we
HCPCS codes to the Packaging estimate the provider’s cost for a day of published the OPPS final rule with
Subcommittee for its ongoing review. PHP services. Per diem costs were then comment period for CY 2004, we had
Additional detailed suggestions for the computed by summing the line-item received updated CCRs for CMHCs.
Packaging Subcommittee should be costs on each bill and dividing by the Using the updated CCRs significantly
submitted to APCPanel@cms.hhs.gov, number of days on the bill. lowered the CMHC median per diem
with ‘‘Packaging Subcommittee’’ in the In a Program Memorandum issued on cost to $440. As a result, we determined
subject line. January 17, 2003 (Transmittal A–03– that the higher per diem cost for CMHCs
004), we directed fiscal intermediaries was not due to the difference between
B. Payment for Partial Hospitalization to recalculate hospital and CMHC CCRs ‘‘as submitted’’ and ‘‘final settled’’ cost
1. Background using the most recently settled cost reports, but were the result of excessive
reports by April 30, 2003. Following the increases in charges which may have
Partial hospitalization is an intensive initial update of CCRs, fiscal
outpatient program of psychiatric been done in order to receive higher
intermediaries were further instructed outlier payments. Therefore, in
services provided to patients as an to continue to update a provider’s CCR
alternative to inpatient psychiatric care calculating the PHP median per diem
and enter revised CCRs into the cost for CY 2004, we did not apply the
for beneficiaries who have an acute outpatient provider specific file.
mental illness. A partial hospitalization .583 adjustment factor to CMHC costs to
Therefore, for CMHCs, we used CCRs compute the PHP APC. Using the
program (PHP) may be provided by a from the outpatient provider specific
hospital to its outpatients or by a updated CCRs for CMHCs, the combined
file. hospital-based and CMHC median per
Medicare-certified CMHC. Section Historically, the median per diem cost
1833(t)(1)(B)(i) of the Act provides the diem cost for PHP was $303. After
for CMHCs has greatly exceeded the
Secretary with the authority to designate scaling, we established the CY 2004
median per diem cost for hospital-based
the hospital outpatient services to be PHP APC of $286.82.
PHPs and has fluctuated significantly
covered under the OPPS. Section from year to year while the median per Then, in the CY 2005 OPPS update,
419.21(c) of the Medicare regulations diem cost for hospital-based PHPs has the CMHC median per diem cost was
that implement this provision specifies remained relatively constant ($200– $310 and the hospital-based PHP
that payments under the OPPS will be $225). We believe that CMHCs may have median per diem cost was $215. No
made for partial hospitalization services increased and decreased their charges in adjustments were determined to be
furnished by CMHCs. Section response to Medicare payment policies. necessary and, after scaling, the
1883(t)(2)(C) of the Act requires that we As discussed in more detail in the next combined median per diem cost of $289
establish relative payment weights section and in the final rule establishing was reduced to $281.33. We believed
based on median (or mean, at the the CY 2004 OPPS (68 FR 63470), we that the reduction in the CMHC median
election of the Secretary) hospital costs believe that some CMHCs manipulated per diem cost indicated that the use of
determined by 1996 claims data and their charges in order to inappropriately updated CCRs had accounted for the
data from the most recent available cost receive outlier payments. previous increase in CMHC charges, and
reports. Payment to providers under the In the CY 2003 update, the difference represented a more accurate estimate of
OPPS for PHPs represents the provider’s in median per diem cost for CMHCs and CMHC per diem costs for PHP.
overhead costs associated with the hospital-based PHPs was so great, $685 As discussed in the proposed rule (70
program. Because a day of care is the for CMHCs and $225 for hospital-based FR 42693), for CY 2006, we analyzed 12
unit that defines the structure and PHPs, that we applied an adjustment months of data for hospital and CMHC
scheduling of partial hospitalization factor of .583 to CMHC costs to account PHP claims for services furnished
services, we established a per diem for the difference between ‘‘as between January 1, 2004, and December
payment methodology for the PHP APC, submitted’’ and ‘‘final settled’’ cost 31, 2004. The data indicated that the
effective for services furnished on or reports. By doing so, the CMHC median median per diem cost for CMHCs had
after August 1, 2000. For a detailed per diem cost was reduced to $384, dropped to $143, while the median per
discussion, refer to the April 7, 2000 resulting in a combined hospital-based diem cost for hospital-based PHPs was
OPPS final rule (65 FR 18452). and CMHC PHP median per diem cost $209. It appears that CMHCs
of $273. As with all APCs in the OPPS, significantly reduced their charges in
2. PHP APC Update for CY 2006 the median cost for each APC was CY 2004 compared to CY 2003. The
To calculate the final CY 2006 PHP scaled to be relative to the cost of a mid- average charge per day for CMHCs in CY
per diem payment, we initially used the level office visit and the conversion 2003 was $1,184 and in CY 2004, the
same methodology that was used to factor was applied. The resulting per CMHC average charge per day dropped
compute the CY 2005 PHP per diem diem rate for PHP for CY 2003 was to $765. We have determined that a
payment. For CY 2005, the per diem $240.03. combination of lower charges and
amount was based on 12 months of In the CY 2004 OPPS update, the slightly lower CCRs for CMHCs resulted
hospital and CMHC PHP claims data median per diem cost for CMHCs grew in a significant decline in the CMHC
(for services furnished from January 1, to $1038, while the median per diem median per diem cost.
Following the methodology used for certain CMHC data will provide an the approach we have used to calculate
the CY 2005 OPPS update, the incentive for CMHCs to stabilize their payments in other areas of the OPPS.
combined hospital-based and CMHC charges so that we can use their data in We received 58 public comments in
median per diem cost would be $149, a future updates of the PHP APC. response to this proposal. A summary of
decrease of 48 percent compared to the However, we believe that the trimming the comments is provided below along
CY 2005 combined median per diem methods described above will also with our responses.
amount. We believed that after scaling result in an unacceptably large decrease Comment: In general, the commenters
this amount to the cost of a mid-level in payment. In addition, the trimming expressed concern that a reduction in
office visit, the resulting APC rate method we used was based on the PHP rate of 15 percent would lead
would be too low to cover the per diem percentage change in cost per day, and to the closure of many PHPs and that
cost for all PHPs. may not have identified all the CMHCs limited access to this crucial service
As stated in the proposed rule (70 FR that may have manipulated their would result in more costly inpatient
42693), we considered three alternatives charges in order to receive more outlier hospital care as the only alternative.
to our update methodology for the PHP payments, for example, CMHCs with CMHCs commented that their costs are
APC for CY 2006 that would mitigate high charges and no reduction in higher than hospitals’, with most in the
this drastic reduction in payment for charges compared to CY 2003. $300 to $400 range. Another commenter
PHP. One alternative was to base the Although we prefer to use both CMHC indicated that a per diem rate of $300
PHP APC on hospital-based PHP data and hospital data to establish the PHP to $350 was more appropriate than our
alone. The median per diem cost of APC, as stated in the proposed rule (70 proposed amount.
hospital-based PHPs has remained in A few commenters also suggested
FR 42693) we continue to be concerned
the $200–225 range over the last 5 years, alternatives such as including prior
about the volatility of the CMHC data.
while the median per diem cost for years’ CMHC data trended forward
The analyses we conducted for the
CMHC PHPs has fluctuated significantly based on medical inflation, using a
proposed rule seem to indicate that
from a high of $1,037 to a low of $143. rolling-average or maintaining the CY
eliminating aberrant CMHC data results 2005 payment rate for PHP services
Under this alternative, we would have in a median per diem cost more in line
used $209, the median per diem cost for furnished in CY 2006.
with hospital data. We stated in the Response: For the final rule, we
hospital-based PHPs during CY 2004 to proposed rule that we would continue
establish the PHP APC for CY 2006. analyzed 12 months of more current
to analyze the CMHC data in developing data for hospital and CMHC PHP claims
However, we believed using this payment rates, and cautioned that we
amount would also result in an for services furnished between January
may use only hospital data in the future 1, 2004 and December 31, 2004. This
unacceptable drop in Medicare
if the data continue to be unstable. claims data is more current in that it
payments for all PHPs in CY 2006
compared to payments in CY 2005. In the proposed rule, we stated that includes claims paid through June 30,
The second alternative we considered we considered a third alternative that 2005. We also used the most currently
was to apply a different trimming would lessen the PHP payment available cost-to-charge ratios to
methodology to CMHC costs in an effort reduction for CY 2006, yet provide an estimate costs. Using this updated data,
to eliminate the effect of data for those adequate payment amount to promote we recreated the analysis performed for
CMHCs that appeared to have access to the partial hospitalization this year’s proposed rule to determine if
excessively increased their charges in benefit for Medicare beneficiaries (70 FR the significant factors we used in
order to receive outlier payments. We 42694). Using this approach, for CY determining the proposed PHP rate had
compared CMHC per diem costs in CY 2006, we proposed to apply a 15-percent changed. The median per diem cost for
2003 to CMHC per diem costs in CY reduction in the combined hospital- CMHCs increased slightly to $154,
2004 and determined the percentage based and CMHC median per diem cost while the median per diem cost for
change. Initially, we trimmed CMHCs that was used to establish the CY 2005 hospital-based PHPs decreased slightly
claims where the CMHC’s per diem PHP APC. We scaled that amount to $201. The CY 2004 average charge per
costs changed by 50 percent or more relative to the cost of a mid-level office day for CMHCs was $760 similar to the
from CY 2003 to CY 2004. After visit to establish the PHP APC for CY figure noted in the proposed rule ($765)
combining the remaining CMHC claims 2006. We believed a reduction in the CY but still significantly lower than what is
with the hospital-based PHP claims, we 2005 median per diem cost would strike noted for CY 2003 ($1,184). We
calculated a median per diem cost of an appropriate balance between using continue to believe that a combination
$160.75. We then analyzed the resulting the best available data and providing of reduced charges and slightly lower
median per diem cost if we trimmed adequate payment for a program that CCRs for CMHCs resulted in a
CMHC claims where the difference in often spans 5–6 hours a day. We significant decline in the CMHC median
CMHC per diem costs from 2003 to 2004 believed 15 percent was an appropriate per diem cost between CY 2003 and CY
was 25 percent. This trimming approach reduction because it recognizes 2004.
resulted in a combined CMHC and decreases in median per diem costs in Following the methodology used for
hospital-based PHP median per diem both the hospital data and the CMHC the CY 2005 OPPS update, the
cost of $176. We also trimmed the data, and also reduces the risk of any combined hospital-based and CMHC
CMHC claims from the CY 2003 data to adverse impact on access to these median per diem cost would be $161, a
see how trimming aberrant data would services that might result from a large decrease of 44 percent compared to the
have affected the combined hospital/ single-year rate reduction. However, we CY 2005 combined median per diem
CMHC median per diem cost. We found proposed that the reduction in amount. While this figure is somewhat
that trimming the claims from the payments for PHP be a transitional higher than the $149 combined median
CMHCs with a 25 percent difference in measure, and proposed to continue to in the proposed rule, we believe that
per diem cost from CY 2003 to CY 2004 monitor CMHC costs and charges for this amount is still too low to cover the
reduced the $289 median per diem cost these services and work with CMHCs to cost for all PHPs.
to $218. improve their reporting so that As we did in the proposed rule, we
We believe it is important to eliminate payments can be calculated based on again considered three alternatives to
aberrant data and we believe trimming better empirical data, consistent with our update methodology for the PHP
APC for CY 2006 that would mitigate 2006. We have conducted further Response: The Medicare bad debt
the payment differences for PHP analysis of more complete CY 2004 policy and Medicaid payment policies
services. The first alternative was to claims data combined with more are beyond the scope of the July 25,
base the PHP APC on hospital-based recently available cost-to-charge ratios. 2005 OPPS proposed rule. We note the
PHP data alone. Using the most recent The newer data continue to produce a bad debt policy can be located in the
years available data, the median per combined hospital-based and CMHC Medicare Provider Reimbursement
diem cost of hospital-based PHPs for CY median per diem cost that is an Manual, Pub. 15, Chapter 3 or through
2004 is $201, somewhat less than the unacceptable decrease from CY 2005 the following link: http://
$209 median per diem cost of hospital- PHP APC rate. We continue to believe www.cms.hhs.gov/manuals/pub151/
based PHP using the proposed rule CY that 15 percent is an appropriate PUB_15_1.asp.
2004 data. We continue to believe that reduction because it recognizes Comment: With respect to the
using $201 would be too low for all decreases in median per diem costs in methodology used to establish the PHP
PHPs in CY 2006. However, we do the hospital data and the CMHC data, APC amount, commenters expressed
believe the decrease from $209 to $201 and also reduces the risk of adverse concern that data from settled cost
from the proposed rule to this final rule impact on access to these services that reports fails to include costs reversed on
with comment continues the trend in might result from a large single-year rate appeal and that there are inherent
lower per diem costs for hospital-based reduction. problems in using claims data from a
PHPs. To apply this methodology, we reduce different time period like available cost-
The second alternative we considered $289 (the CY 2005 combined hospital- to-charge ratios on settled cost reports.
was to apply the same trimming based and CMHC median per diem cost) These commenters also stated that
methodology noted in the proposed rule by 15 percent, resulting in a combined this can only artificially lower the actual
to CMHC costs in an effort to eliminate median per diem cost of $245.65. After median costs. The commenters claims
the effect of data for those CMHCs that scaling, the resulting APC final rate for that when cost reports are settled,
appeared to have excessively increased PHP of $246.04 for CY 2006, of which generally 2 years or more after the actual
their charges in order to receive outlier $49.21 is the beneficiary’s coinsurance. year of services, they have operated on
payments. Again, using the most recent Comment: A few commenters stated actual revenues of 80 percent of the per
available data, we compared CMHC per that CMHC facility costs increased in diem.
diem costs in CY 2003 to CMHC per virtually every area including salaries, Response: We use the best available
diem cost in CY 2004 and determined benefits, supplies, insurance, dietary data in computing the APCs. With
the percentage change. Initially, we support, transportation, respect to PHP services, we specifically
trimmed CMHC claims where the communications and administrative issued a Program Memorandum on
CMHC’s per diem costs changed by 50 support and that they experienced January 17, 2003 directing FIs to update
percent or more from CY 2003 to CY overall increases in expenses of more the cost-to-charge ratios on an on-going
2004. After combining the remaining than 5 percent in most areas. These basis whenever a more recent full year
CMHC claims with the hospital-based commenters requested that CMS cost report is available. In this way, we
PHP claims, we calculated a median per increase the per diem rate paid for PHP hoped to minimize the time lag between
diem cost of $165, slightly more than services consistent with the inflation the cost-to-charge ratios and claims
noted in the proposed rule. Again, this rate for the medical industry. Another data.
approach still produced a per diem cost commenter suggested we use inpatient Comment: One commenter related
we believe is too low. We then trimmed costs per day as the basis for the PHP that administrative costs for CMHCs
CMHC claims where the difference in median per diem cost. This commenter continue to be a major impediment to
CMHC per diem costs from 2003 to 2004 suggested that CMS develop an operating PHPs for Medicare
were 25 percent or more. This trimming adjustment factor relative to the beneficiaries. Medicare does not cover
variant produced a CMHC median per inpatient psychiatric facility prospective transportation to and from programs and
diem cost of $172 for CY 2004. payment system per diem base rate to does not cover meals. Almost all
We continue to believe that trimming form the basis for the PHP per diem rate. programs offer transportation because in
certain aberrant CMHC data will Response: The statute does not most cases Medicare beneficiaries with
provide an incentive for CMHCs to provide for the update strategies serious mental illnesses would not be
stabilize their charges so that we can use suggested by these commenters and is able to access these programs without
their data in future updates of the PHP specific as to the update methdology. the transportation.
APC. However, the two trimming Comment: A few commenters Response: The services that are
methods described above produce indicated that the methodology used to covered as part of a PHP are specified
median per diem costs that we believe compute the PHP APC distorts per diem in section 1861(ff) of the Act. Meals and
are too low for the CY 2006 PHP APC costs because the claims include non- transportation are specifically excluded
rate. paid days. under section 1861(ff)(2)(I) of the Act.
The CY 2004 claims data coincides Response: If a provider has charges on Comment: Several commenters
with the effective date of the separate a bill for which they do not receive simply summed the payment rates for
CMHC outlier threshold policy which payment, this will be reflected in that three Group Therapy Sessions (APC
became effective January 1, 2004. We provider’s cost-to-charge ratio. This 0325) and one Extended Individual
believe that this policy may have, in lower cost-to-charge ratio will be Therapy Session (APC 0323) and
part, contributed to the rapid decreases applied to the larger charges and will requested that amount as the minimum
in CMHC’s per diem charges in CY result in the appropriate cost per diem. for a day of PHP. These same
2004. If so, we may see charges stabilize Comment: A few commenters stated commenters then questioned why the
in the CY 2005 claims data which that they are unable to collect per diem amount is considerably less
would enable us to use the CMHC data coinsurance from their patients, that than the combined cost of these
to compute the CY 2007 rate. Medicaid cuts have made it more services.
We proposed a 15 percent reduction difficult to stay viable, and that the Response: We do not believe this is an
to the combined hospital-based and proposed rate reduction would cause appropriate comparison. It is important
CMHC median per diem cost for CY PHP programs to close. to note that the APC services cited by
the commenter (APC 0325 and APC acuity as CMHCs in order to receive a separate outlier threshold for CMHCs.
0323) are not PHP services, but rather payment. We designated a portion of the
single outpatient therapeutic sessions. Comment: A few commenters estimated 2.0 percent outlier target
PHP is a complete program of services requested that CMS revise the CMHC amount specifically for CMHCs,
with efficiencies and economies of scale cost report form (CMS–2088) to include consistent with the percentage of
provided in contrast to individual a field which allows the CMHC to report projected payments to CMHCs under the
psychotherapy services. We also believe its Medicare PHP days. They also OPPS in each of those years, excluding
that the commenters used only the recommended that we revise settlement outlier payments.
median cost from single bills, for worksheet D on the CMS–2088 to As stated in the November 15, 2004
example, where group psychotherapy include new fields that display the final rule with comment period, CMHCs
was the only service furnished. As Medicare PHP cost per day and separate were projected to receive 0.6 percent of
stated earlier, we used data from PHP PHP reimbursement between outlier and the estimated total OPPS payments in
programs (both hospitals and CMHCs) to non-outlier reimbursement (since the CY 2005 (69 FR 65848). The CY 2005
determine the median cost of a day of current cost report form commingles CMHC outlier threshold is met when the
PHP. PHP is a complete program of both types of reimbursement). Finally, cost of furnishing services by a CMHC
services with efficiencies and the commenters recommended that we exceeds 3.5 times the PHP APC payment
economies of scale provided in contrast revise the CMHC Provider Statistical & amount. The current outlier payment
to individual psychotherapy services. Reimbursement Report Type: 76P to percentage is 50 percent of the amount
The PHP APC (0033) reflects the include a field which reports actual of costs in excess of the threshold.
program of services provided in that it paid Medicare PHP days. CMS and the Office of the Inspector
consists of the cost of all services Response: We appreciate the General are continuing to monitor the
provided each day and does not reflect commenters suggestions for improving excessive outlier payments to CMHCs.
a sole service. Although we require that the Medicare cost report for CMHCs. We As previously stated, we used CY 2004
each PHP day include a psychotherapy plan to explore these and other claims data to calculate the CY 2006 per
service, we do not specify the specific modifications to improve CMHC cost diem payment. These data show the
mix of other services provided and have reporting so that we may use CMHC effect of the separate outlier threshold
focused our analysis on the cost per day data in future ratesetting. for CMHCs that was effective January 1,
rather than the cost of each service Comment: A few commenters stated 2004. During CY 2004, the separate
furnished within the day. that hospitals that offer partial outlier threshold for CMHCs resulted in
Comment: One commenter requested hospitalization services should not be $1.8 million in outlier payments to
that the same provisions given to rural penalized for the instability in data CMHCs, within the 2.0 percent of total
hospital outpatient departments also be reporting that stems from CMHCs. OPPS payments identified for CMHCs.
given to rural CMHCs. Response: We believe hospitals-based In contrast, for CY 2003, more than $30
Response: We believe the commenter PHPs have actually benefited from our million was paid to CMHCs in outlier
may be referring to the statutory hold combining hospital and CMHC data to payments. We believe this difference in
harmless provisions. Section compute the PHP APC rate. The median outlier payments indicates that the
1833(t)(7)(D) of the Act authorizes such calculated from hospital outpatient separate outlier threshold for CMHCs
payments, on a permanent basis, for department PHPs has consistently been has been successful in keeping outlier
children’s hospitals and cancer far less then the median amount that is payments to CMHCs in line with the
hospitals and, through CY 2005, for computed for CMHCs. percentage of OPPS payments made to
rural hospitals having 100 or fewer beds Comment: One commenter who CMHCs.
and sole community hospitals in rural represents CMHCs expressed frustration In the proposed rule, CMHCs were
areas. Section 1866(t)(7)(D) of the Act over several unsuccessful attempts at projected to receive 0.6 percent of the
does not authorize hold harmless becoming a member of the APC panel. estimated total OPPS payments in CY
payments to CMHC providers. Response: The qualifications and 2006. As noted in section II.H. of this
Comment: We received several selection of the APC Panel members is preamble, for CY 2006, we proposed to
comments from CMHCs stating that outside the scope of this regulation. We set the target for hospital outpatient
their costs are higher as hospitals can refer the commenter to http:// outlier payments at 1.0 percent of total
share and spread their costs to other www.cms.hhs.gov/faca/apc/default.asp OPPS payments. We also proposed
departments. These commenters also for information on the APC panel. allocate a portion of that 1.0 percent, 0.6
indicated that the CMHC patient acuity percent (or 0.006 percent of total OPPS
level is more intense than the hospital 3. Separate Threshold for Outlier payments), to CMHCs for PHP services.
patients as hospital outpatient Payments to CMHCs As discussed in section II.G. below, we
departments need only provide 1 or 2 In the November 7, 2003 final rule proposed to set a dollar threshold in
therapies, yet still receive the full per with comment period (68 FR 63469), we addition to an APC multiplier threshold
diem. indicated that, given the difference in for hospital OPPS outlier payments.
Response: By definition, a PHP bill PHP charges between hospitals and However, because PHP is the only APC
must have at least 3 partial CMHCs, we did not believe it was for which CMHCs may receive payment
hospitalization HCPCS codes for each appropriate to make outlier payments to under the OPPS, we would not expect
day of service, one of which must be a CMHCs using the outlier percentage to redirect outlier payments by
psychotherapy HCPCS code (other than target amount and threshold established imposing a dollar threshold. Therefore,
brief psychotherapy). This requirement for hospitals. There was a significant we did not set a dollar threshold for
is applied to all partial hospitalization difference in the amount of outlier CMHC outliers. We proposed to set the
bills, whether provided in an outpatient payments made to hospitals and CMHCs outlier threshold for CMHCs for CY
hospital department or in a CMHC. for PHP. Further analysis indicated the 2006 at 3.45 percent times the APC
Therefore, hospital outpatient use of OPPS outlier payments for payment amount and the CY 2006
departments must provide the same CMHCs was contrary to the intent of the outlier payment percentage applicable
level of program intensity and must general OPPS outlier policy. Therefore, to costs in excess of the threshold at 50
provide for the same level of patient for CYs 2004 and 2005, we established percent. As we did with the hospital
outlier threshold, we used hospital using the FY 2006 IPPS final wage index with comment period demonstrates a
charge inflation factor to inflate charges values to those payments using the similar loss. The market basket increase
to CY 2006. current (FY 2005) IPPS wage index update factor of 3.7 percent is offset by
We received no comments on our values. In addition, to accommodate the the drug payments in CY 2006 that were
proposal. As discussed in section II.H, rural adjustment discussed in section made outside the system in CY 2005, to
using more recent data for this final II.G. of this preamble, we calculated a result in an overall increase of 2.2
rule, we set the target for hospital budget neutrality factor of 0.99614506 percent.
outpatient outlier payments at 1.0 by comparing payments with the rural Accordingly, we are finalizing the
percent of total OPPS payments. We adjustment to those without. For CY conversion factor update for CY 2006 of
also allocate a portion of that 1.0 2006, we estimate that allowed pass- $59.511.
percent, 0.6 percent (or 0.006 percent of through spending will equal D. Wage Index Changes for CY 2006
total OPPS payments), to CMHCs for approximately $45.5 million, which
PHP services. As we proposed, we set a represents 0.17 percent of total OPPS Section 1833(t)(2)(D) of the Act
dollar threshold in addition to an APC projected spending for CY 2006. The requires the Secretary to determine a
multiplier threshold for hospital OPPS conversion factor is also adjusted by the wage adjustment factor to adjust, for
outlier payments. However, because difference between the 2.0 percent pass- geographic wage differences, the portion
PHP is the only APC for which CMHCs through set-aside and the 0.17 percent of the OPPS payment rate and the
may receive payment under the OPPS, estimate of pass-through spending. copayment standardized amount
we would not expect to redirect outlier Finally, decreasing payments for attributable to labor and labor-related
payments by imposing a dollar outliers to 1.0 percent of total payments, cost. This adjustment must be made in
threshold. Therefore, we did not set a as proposed, returned 1.0 percent to the a budget neutral manner. As we have
dollar threshold for CMHC outliers. For conversion factor. done in prior years, we proposed to
CY 2006, we set the outlier threshold for The market basket increase update adopt the IPPS wage indices and extend
CMHCs at 3.40 percent times the APC factor of 3.7 percent for CY 2006, the these wage indices to TEFRA hospitals
payment amount and the CY 2006 required wage index budget neutrality that participate in the OPPS but not the
outlier payment percentage applicable adjustment of approximately IPPS.
to costs in excess of the threshold at 50 1.001485209, the return of 1.0 percent As discussed in section II.A. of this
percent. As we did with the hospital in total payments from a reduced outlier preamble, we standardize 60 percent of
outlier threshold, we used hospital target, the return of 1.83 percent of the estimated costs (labor-related costs) for
charge inflation factor to inflate charges pass-through set-aside, and the geographic area wage variation using the
to CY 2006. adjustment for the rural payment IPPS wage indices that are calculated
adjustment of 0.99614506 result in a prior to adjustments for reclassification
C. Conversion Factor Update for CY to remove the effects of differences in
conversion factor for CY 2006 of
2006 area wage levels in determining the
$59.511.
Section 1833(t)(3)(C)(ii) of the Act We received several public comments OPPS payment rate and the copayment
requires us to update the conversion on the proposed conversion factor standardized amount.
factor used to determine payment rates update for CY 2006. As published in the original OPPS
under the OPPS on an annual basis. Comment: Several commenters April 7, 2000 final rule (65 FR 18545),
Section 1833(t)(3)(C)(iv) of the Act requested CMS to revise the market OPPS has consistently adopted the final
provides that, for CY 2006, the update basket update included in the final IPPS wage indices as the wage indices
is equal to the hospital inpatient market OPPS rule to include a 3.7 percent for adjusting the OPPS standard
basket percentage increase applicable to market basket update, consistent with payment amounts for labor market
hospital discharges under section the IPPS final rule. differences. As initially explained in the
1886(b)(3)(B)(iii) of the Act. Response: We have used a 3.7 percent September 8, 1998 OPPS proposed rule,
The forecast of the hospital market market basket increase update factor in we believed and continue to believe that
basket increase for FY 2006 published our conversion factor calculation for the using the IPPS wage index as the source
in the IPPS final rule on August 12, CY 2006 OPPS update. of an adjustment factor for OPPS is
2005, is 3.7 percent (70 FR 47392), Comment: One commenter suggested reasonable and logical, given the
rather than the 3.2 percent forecast that CMS increase total payments to inseparable, subordinate status of the
published in the IPPS proposed rule on hospitals by 3.2 percent and not the 1.9 hospital outpatient within the hospital
May 4, 2005 (70 FR 23384) and percent total payment increase overall. In accordance with section
referenced in the CY 2006 OPPS indicated in the regulatory impact 1886(d)(3)(E) of the Act, the IPPS wage
proposed rule. To set the OPPS analysis section of the proposed rule. index is updated annually. In the CY
proposed conversion factor for CY 2006, Response: The 1.9 percent reported in 2006 OPPS proposed rule, in
we increased the CY 2005 conversion column 6 of Table 33 in the regulatory accordance with our established policy,
factor of $56.983, as specified in the analysis section of the proposed rule is we proposed to use the FY 2006 final
November 15, 2004 final rule with not the 3.2 percent that appears in version of these wage indices with any
comment period (69 FR 65842), by 3.7 column 5 because it models all corrections posted on the CMS Web site,
percent. payments to hospitals. The 1.9 percent to determine the wage adjustments for
In accordance with section reflects the loss of payment for drugs the OPPS payment rate and copayment
1833(t)(9)(B) of the Act, we further outside of OPPS authorized by Pub. L. standardized amount that we will
adjusted the conversion factor for CY 108–173, that expires in CY 2006. The publish in our final rule for CY 2006.
2005 to ensure that the revisions we are statute requires CMS to take into We note that the FY 2006 IPPS wage
making to our updates by means of the account, for purposes of establishing a indices continue to reflect a number of
wage index are made on a budget budget neutral CY 2006 update, the changes implemented in FY 2005 as a
neutral basis. We calculated a budget additional costs associated with result of the new OMB standards for
neutrality factor of 1.001485209 for payments for specified covered defining geographic statistical areas, the
wage index changes by comparing total outpatient drugs. The regulatory impact implementation of an occupational mix
payments from our simulation model analysis accompanying this final rule adjustment as part of the wage index,
and new wage adjustments provided for compared to their FY 2004 wage index status. For OPPS purposes, we are
under Pub. L. 108–173. The following is due solely to the changes in labor continuing our policy from CY 2005 to
a brief summary of the proposed market definitions. These hospitals apply the same 505 criterion to TEFRA
changes in the FY 2005 IPPS wage received 50 percent of their wage hospitals paid under the OPPS but not
indices, continued for FY 2006, and any indices based on the new MSA paid under the IPPS. Because TEFRA
adjustments that we are applying to the configurations and 50 percent based on hospitals cannot reclassify under
OPPS for CY 2006. We refer the reader the FY 2004 labor market areas. In the sections 1886(d)(8) and 1886(d)(10) of
to the FY 2006 IPPS final rule (70 FR FY 2006 IPPS final rule, we discussed the Act or section 508, they are eligible
47363 through 47387, August 12, 2005) the cessation of the 1-year transition and for the out-migration adjustment.
for a detailed discussion of the changes announced that hospitals will receive Therefore, TEFRA hospitals located in a
to the wage indices. In this final rule 100 percent of their wage index based qualifying section 505 county will also
with comment period, we are not upon the new CBSA configurations receive an increase to their wage index
reprinting the FY 2006 IPPS wage beginning in FY 2006. Again, for the under OPPS. Addendum L to this final
indices referenced in the discussion sake of consistency with IPPS, TEFRA rule with comment period lists all
below, with the exception of the out- hospitals will receive 100 percent of hospitals that will receive an out-
migration wage adjustment table their wage index based upon the new migration adjustment to their wage
(Addendum L of this final rule with CBSA configurations beginning in CY index in 2006 including TEFRA
comment period). We refer readers to 2006. hospitals that will receive an out-
the CMS Web site for the OPPS at 2. We are applying the occupational migration adjustment under this OPPS
http://www.cms.hhs.gog/providers/ mix adjustment for FY 2006 IPPS to 10 final rule with comment period. (See
hopps. At this Web site, the reader will percent of the average hourly wage and also Table 4J of the Addendum to the
find a link to the FY 2006 IPPS wage leave 90 percent of the average hourly FY 2006 IPPS final rule).
indices tables and any corrections made wage unadjusted for occupational mix. We used the final FY 2006 IPPS
to them. As noted in the FY 2006 IPPS final rule, indices to adjust the payment rates and
we are, essentially, using the same CMS coinsurance amounts that are included
1. The continued use of the new Core
Wage Index Occupational Mix Survey in this OPPS final rule with comment
Based Statistical Areas (CBSAs) issued
and Bureau of Labor Statistics data to period for CY 2006. With the exception
by the Office of Management and
calculate the adjustment. Because there of reclassifications resulting from the
Budget (OMB) as revised standards for are no significant differences between implementation of the one-time appeal
designating geographical statistical areas the FY 2005 and the FY 2006 process under section 508 of Pub. L.
based on the 2000 Census data, to define occupational mix survey data and 108–173, all changes to the wage index
labor market areas for hospitals for results, we believe it is appropriate to resulting from geographic labor market
purposes of the IPPS wage index. The adopt the IPPS rule and apply the same area reclassifications or other
OMB revised standards were published occupational mix adjustment to 10 adjustments must be incorporated in a
in the Federal Register on December 27, percent of the FY 2006 wage index. budget neutral manner. Accordingly, in
2000 (65 FR 82235), and OMB 3. The reclassifications of hospitals to calculating the OPPS budget neutrality
announced the new CBSAs on June 6, geographic areas for purposes of the estimates for CY 2006, we have
2003, through an OMB bulletin. In the wage index. For purposes of the OPPS included the wage index changes that
FY 2005 hospital IPPS final rule, CMS wage index, we are adopting all of the result from MGCRB reclassifications,
adopted the new OMB definitions for IPPS reclassifications for FY 2006, implementation of section 505 of Pub. L.
wage index purposes. In the FY 2006 including reclassifications that the 108–173, and other refinements made in
IPPS final rule, we again stated that Medicare Geographic Classification the FY 2006 IPPS final rule, such as the
hospitals located in MSAs will be urban Review Board (MGCRB) approved under hold harmless provision for hospitals
and hospitals that are located in the one-time appeal process for changing status from urban to rural
Micropolitan Areas or Outside CBSAs hospitals under section 508 of Pub. L. under the new CBSA geographic
will be rural. To help alleviate the 108–173. We note that section 508 statistical area definitions. However,
decreased payments for previously reclassifications will terminate March section 508 set aside $900 million to
urban hospitals that became rural under 31, 2007. implement the section 508
the new MSA definitions, we allowed 4. We are continuing to apply an reclassifications. We considered the
these hospitals to maintain their adjustment to the wage index to reflect increased Medicare payments that the
assignment to the MSA where they the ‘‘out-migration’’ of hospital section 508 reclassifications would
previously had been located for the 3- employees who reside in one county but create in both the IPPS and OPPS when
year period from FY 2005 through FY commute to work in a different county we determined the impact of the one-
2007. To be consistent with IPPS, we with a higher wage index, in accordance time appeal process. Because the
will continue the policy we began in CY with section 505 of Pub. L. 108–173 (FY increased OPPS payments already
2005 of applying the same criterion to 2006 IPPS final rule (70 FR 47383 and counted against the $900 million limit,
TEFRA hospitals paid under the OPPS 47384, August 12, 2005)). Hospitals paid we did not consider these
but not under the IPPS and to maintain under the IPPS located in the qualifying reclassifications when we calculated the
that MSA designation for determining a section 505 ‘‘out-migration’’ counties OPPS budget neutrality adjustment.
wage index for the specified period. receive a wage index increase unless We received two public comments on
Beginning in FY 2008, these hospitals they have already been reclassified the application of the FY 2006 IPPS
will receive their statewide rural wage under section 1886(d)(10) of the Act, wage indices under the OPPS.
index, although those hospitals paid redesignated under section Comment: One commenter supported
under the IPPS will be eligible to apply 1886(d)(8)(B) of the Act, or reclassified our proposal to extend the IPPS wage
for reclassification. In addition to this under section 508. As discussed in the indices to OPPS because this simplifies
‘‘hold harmless’’ provision, the FY 2005 FY 2006 IPPS final rule, we finalized payment for hospitals.
IPPS final rule implemented a 1-year our policy that reclassified hospitals not One commenter suggested that OPPS
transition for hospitals that experienced receive the out-migration adjustment use different labor share percentages for
a decrease in their FY 2005 wage index unless they waive their reclassified hospitals with a wage index below 1.0
and hospitals with a wage index above CY 2006 OPPS as proposed without with additional submitted cost reports
1.0. The commenter specifically cited modification. for CY 2004. For the final rule, 51.66
the requirement in Pub. L. 108–173 that percent, the majority of the submitted
E. Statewide Average Default Cost-to-
IPPS use a larger labor share percentage reports utilized in the default ratio
Charge Ratios (CCRs)
for hospitals with wage indexes over 1.0 calculation, were for CY 2003. We only
and a relatively smaller labor share CMS uses CCRs to determine outlier used valid CCRs to calculate these
percentage for hospitals with wage payments, payments for pass-through default ratios. That is, we removed the
indexes less than 1.0. This commenter devices, and monthly interim CCRs for all-inclusive hospitals, CAHs,
specifically requested that CMS use a transitional corridor payments under and hospitals in Guam and the U.S.
labor share of 50 percent for hospitals the OPPS. Some hospitals do not have Virgin Islands because these entities are
with wage indexes less than 1.0. a valid CCR. These hospitals include, not paid under the OPPS, or in the case
but are not limited to, hospitals that are of all-inclusive hospitals, because their
Response: Section 403 of Pub. L. 108–
new and have not yet submitted a cost CCRs are suspect. We further identified
173 requires that IPPS hospitals be paid
report, hospitals that have a CCR that and removed any obvious error CCRs
using a labor-related share of 62 percent
falls outside predetermined floor and and trimmed any outliers. We limited
unless this labor-related share would
ceiling thresholds for a valid CCR, or the hospitals used in the calculation of
result in lower payments than would hospitals that have recently given up
otherwise be made. Unlike IPPS, OPPS the default CCRs to those hospitals that
their all-inclusive rate status. Last year, billed for services under the OPPS
has no mandate to reduce the labor- we updated the default urban and rural
related share. The OPPS labor-related during CY 2003.
CCRs for CY 2005 in our final rule, Finally, we calculated an overall
share was determined through published on November 15, 2004 (69 FR
regression analyses conducted for the average CCR, weighted by a measure of
65821 through 65825). As we proposed, volume for CY 2003, for each State
initial OPPS proposed rule (63 FR in this final rule with comment period,
47581, September 8, 1998). Those except Maryland. This measure of
we have updated the default ratios using
analyses identified 60 percent as the volume is the total lines on claims and
the most recent cost report data for CY
appropriate labor share for outpatient is the same one that we use in our
2006.
services. We confirmed that this labor- We calculated the statewide default impact tables. For Maryland, we used an
related share is still appropriate during CCRs using the same CCRs that we use overall weighted average CCR for all
our regression analysis for the payment to adjust charges to costs on claims data. hospitals in the Nation as a substitute
adjustment for rural hospitals in this Table 3 of the proposed rule (70 FR for Maryland CCRs, which appeared in
final rule. In these regression equations, 42696) listed the proposed CY 2006 Table 3. Very few providers in Maryland
the coefficient of the hospital wage default urban and rural CCRs by State. are eligible to receive payment under
index is the estimated percentage These CCRs are the ratio of total costs the OPPS, which limits the data
change in unit costs attributable to a 1 to total charges from each provider’s available to calculate an accurate and
unit percent increase in the wage index, most recently submitted cost report, for representative CCR. The overall
which is an estimate of the share of those cost centers relevant to outpatient decrease in default statewide CCRs can
outpatient unit costs attributable to services. We also adjusted these ratios to be attributed to the general decline in
labor. Both Table 5 and Table 6 in reflect final settled status by applying the ratio between costs and charges
section II.G. of this preamble indicate a the differential between settled to widely observed in the cost report data.
coefficient of 63 percent for the wage submitted costs and charges from the We did not receive any public
index. In light of both analyses, we most recent pair of settled to submitted comments concerning the proposed
believe that the current 60 percent cost reports. statewide average default CCRs.
labor-related share remains appropriate For the proposed rule, 80.79 percent Therefore, we are finalizing them as
for OPPS payment purposes. of the submitted cost reports shown in Table 3 below for OPPS
After carefully considering the public represented data for CY 2003. We have services furnished on or after January 1,
comments received, we are finalizing since updated the cost report data we 2006.
our wage index adjustment policy for use to calculate cost to charge ratios BILLING CODE 4120–01–C
ER10NO05.010</GPH>
BILLING CODE 4120–01–P reasonable cost-based system (section provided for transitional corridor
F. Expiring Hold Harmless Provision for 1833(t)(7) of the Act). Section 1833(t)(7) payments to rural hospitals with 100 or
Transitional Corridor Payments for of the Act provides that the transitional fewer beds for covered OPD services
Certain Rural Hospitals corridor payments are temporary furnished before January 1, 2004.
payments for most providers, with two However, section 411 of Pub. L. 108–
When the OPPS was implemented, exceptions, to ease their transition from 173 amended section 1833(t)(7)(D)(i) of
every provider was eligible to receive an the prior reasonable cost-based payment the Act to extend these payments
additional payment adjustment
system to the OPPS system. Cancer through December 31, 2005, for rural
(transitional corridor payment) if the
hospitals and children’s hospitals hospitals with 100 or fewer beds.
payments it received for covered OPD
services under the OPPS were less than receive the transitional corridor Section 411 also extended the
the payments it would have received for payments on a permanent basis. Section transitional corridor payments to SCHs
1833(t)(7)(D)(i) of the Act originally located in rural areas for services
ER10NO05.011</GPH>
the same services under the prior
furnished during the period that begins under new section 1833(t)(13)(B) of the of rural hospitals, if any, is significantly
with the provider’s first cost reporting Act, the Secretary is given authorization more costly than urban hospitals. In a
period beginning on or after January 1, to provide an appropriate adjustment to ‘‘payment model’’ approach, the only
2004, and ends on December 31, 2005. rural hospitals by January 1, 2006, if independent variables included in the
Accordingly, the authority for making rural hospital costs are determined to be cost regression are those variables
transitional corridor payments under greater than urban hospital costs. considered for payment adjustments.
section 1833(t)(7)(D)(i) of the Act, as As described in our CY 2006 OPPS We used the payment model to
amended by section 411 of Pub. L. 108– proposed rule, we used regression determine the amount of the adjustment
173, will expire for rural hospitals analysis to study the differences in for any class of hospitals identified as
having 100 or fewer beds and SCHs outpatient cost per unit between rural significantly more costly in the
located in rural areas on December 31, and urban hospitals because we explanatory model. The regression
2005. For CY 2006, transitional corridor believed that a simple comparison of equations for both models were
payments will continue to be available unit costs would not capture the myriad specified in double logarithmetic form.
to cancer and children’s hospitals. (We of factors that contribute to observed The dependent variable in the
note that the succeeding section II.G. of costs, including labor supply, explanatory regression equation was
this preamble discusses an additional complexity, and volume of services. For unit outpatient cost. The dependent
provision of section 411 of Pub. L. 108– this final rule with comment period, we variable in the payment regressions was
173 that related to a study to determine reran these regression analyses that we standardized unit outpatient costs, that
appropriate adjustment to payments for conducted in the proposed rule and is, unit outpatient costs adjusted to
rural hospitals under the OPPS conducted additional analyses in reflect unit payment by dividing
beginning January 2006.) response to issues raised in public through by the provider’s service-mix
We received four public comments comments. index which was adjusted by the
concerning this hold harmless policy. For this final rule with comment provider’s wage index. The service-mix
Comment: The commenters expressed period, our regression analysis included index is a measure of the resource
concern about the impact that the all 4,088 hospitals billing under OPPS intensity of services provided by each
expiration of the transitional corridor for which we could model accurate cost hospital. Both regression equation
hold harmless payments would have on per unit estimates. For each hospital, models included quantitative
small rural hospitals because these are total outpatient costs and descriptive independent variables transformed into
vulnerable facilities that provide information were derived from a more natural logarithms and categorical
important access to care in their complete set of CY 2004 Medicare independent variables. Categorical
communities. claims than was used in the analysis for independent (dummy) variables
One commenter recommended that the proposed rule and the hospital’s included hospital characteristics such as
the provision be expanded to most recently submitted cost report. The rural location or type of hospital (short
permanently extend the hold harmless description of claims used, our stay or specialty hospital). In regression
payments to small rural hospitals and methodology for creating costs from analysis, dummy variables capture the
rural SCHs, as is currently the case for charges, and a description of the difference in means of the dependent
cancer hospitals and children’s specific hospitals included in our variable in the class of hospitals of
hospitals. Two commenters referenced modeling are discussed in section II. A. interest and all other hospitals, holding
efforts by a large hospital association to of this preamble. We excluded all other variables in the equation
work with Congress on legislation to separately payable drugs and constant.
provide for this expansion. biologicals, services receiving pass-
Response: We appreciate the through payments, and any service paid 1. Factors Contributing to Unit Cost
comments that were submitted and we under a separate payment system from Differences Between Rural Hospitals
have carefully reviewed each of them. our analysis. We excluded the 49 and Urban Hospitals and Associated
As the commenters acknowledge, hospitals in Puerto Rico because their Explanatory Variables
section 1833(t)(7)(D) of the Act, as wage indices and unit costs are so For this final rule with comment
amended by section 411 of Pub. L. 108– different that they would have skewed period, we retained the same set of
173, provides that OPPS transitional results. Finally, we excluded facilities explanatory variables as used in the
corridor payments will expire for rural whose unit outpatient costs were regression analysis for the proposed rule
hospitals having 100 or fewer beds and outside of 3 standard deviations from because we believe that these variables
SCHs located in rural areas on the geometric mean unit outpatient cost. capture the most important factors
December 31, 2005. Therefore, we are We calculated the total unit contributing to differences in unit costs
providing for the termination of these outpatient cost for each hospital by between rural and urban hospitals.
payments in this final rule with dividing total outpatient cost by the • First, unit outpatient costs are
comment period. However, as noted in total number of APC units discounted expected to vary directly with the prices
section II.G. of this final rule with for the joint performance of multiple of inputs used to produce outpatient
comment period, we are providing a 7.1 surgical procedures. (See section II.G.1. services, especially labor. Wage rates
percent adjustment for rural sole below for a definition of discounted tend to be lower in rural areas than in
community hospitals in accordance units.) As in the analysis for the urban areas. We used the OPPS hospital
with section 411 of Pub. L. 108–173. proposed rule, we modeled both wage index for CY 2006 as our measure
explanatory and payment regression of relative differences in labor input
G. Adjustment for Rural Hospitals models. In an ‘‘explanatory model’’ costs.
Section 411 of Pub. L. 108–173 added approach, all variables that are • Second, there may be economies of
a new paragraph (13) to section 1833(t) hypothesized to be important scale in producing outpatient services,
of the Act. New section 1833(t)(13)(A) determinants of cost are included in the which imply that unit costs will vary
specifically instructs the Secretary to cost regression, whether or not they are inversely with the volume of outpatient
conduct a study to determine if rural going to be used as payment services provided. We used the total
hospital outpatient costs exceed urban adjustments. We used the explanatory number of discounted units as our
hospital outpatient costs. Moreover, regression models to assess which class indicator of volume. Discounted units
are the total number of units after we number of beds captures variation in effects, noted above, or scale economies
adjust for the multiple procedure unit costs attributable to the additional are more important.
reduction of 50 percent that applies to complexity of services performed by a • In addition to the above factors, we
payment for surgical services when two hospital that is not explained by their included additional categorical
surgical procedures are performed service mix index. variables to indicate the types of
during the same operative session. For • Fourth, the size of a hospital may specialty hospitals that participate in
example, if a procedure is paid at 100 influence the volume and service-mix of OPPS, specifically cancer, children’s,
percent of payment 1,000 times and the outpatient services. Large hospitals long-term care, rehabilitation, and
same procedure is paid at 50 percent of generally provide a wider range of more psychiatric hospitals because we do not
payment 100 times, the discounted complex services than do small believe that the costs, volume, and
units for that procedure equal 1,050 hospitals. Large hospitals may also have service-mix associated with these
units (the sum of 1,000 units at full larger volumes in ancillary departments hospitals looks like the costs, volume,
payment plus 100 units at 50 percent that are shared between outpatient and and service mix of a typical OPPS
payment). inpatient services, and as a result, provider.
• Third, independent of the volume benefit from greater economies of scale • Finally, we included several
of outpatient services, hospitals that than do small hospitals. Rural hospitals categorical variables for rural/urban
provide more complex outpatient tend to be smaller than urban hospitals. location and type of rural hospital to
services are expected to have higher Our primary measure of outpatient capture variation unexplained by the
unit costs than hospitals with less volume is discounted units of APCs, other independent variables in the
complex service-mixes. Typically, which only reflects the volume of model. Urban hospitals are the reference
greater complexity involves a Medicare services paid under the group for all of the different types of
combination of higher equipment and outpatient PPS. This measure does not hospitals examined included in the
labor costs. Rural hospitals usually have include the inpatient utilization of regressions equations below. Table 4
less volume and perform less complex shared ancillary departments or non- provides descriptive statistics for the
services than urban hospitals. We used Medicare outpatient services. For all of dependent variables and key
a service-mix index defined as the ratio these reasons, it seems appropriate to independent variables by urban and
of the number of discounted units include a broader measure of facility rural status. Without controlling for the
weighted by APC relative weights size in the explanatory regression other influences on per unit cost, rural
divided by the number of unweighted model. Therefore, as explained below, hospitals have a lower cost per unit than
discounted units as our measure of we used the total number of facility urban hospitals. However, when
complexity. The service-mix index beds to measure facility size. Unit standardized for the service-mix wage
reflects the average APC weight of each outpatient costs may be positively or indices, average unit costs are nearly
facility’s outpatient services. From our negatively related to facility size identical between urban and rural
analysis, we also believe that the depending on whether complexity hospitals.
TABLE 4.—MEANS AND STANDARD DEVIATIONS (IN PARENTHESIS) FOR KEY VARIABLES BY RURAL AND URBAN LOCATION
Rural Urban
Variable Standard Standard
Means Means
Deviation Deviation
Unit Outpatient Cost ........................................................................................................ $157.57 ($64.94) $188.76 ($93.53)

Standardized Unit Outpatient Cost .................................................................................. $75.51 ($55.70) $73.54 ($40.98)
Wage Index ...................................................................................................................... 0.8807 (0.1012) 1.0212 (0.1479)
Service-Mix Index ............................................................................................................ 2.3636 (0.9357) 2.7544 (1.6037)
Outpatient Volume ........................................................................................................... 21,021 (21,770) 38,469 (46,925)
Beds ................................................................................................................................. 78 (56) 196 (170)
Number of Hospitals ........................................................................................................ 1,206 .................... 2,882
2. Results observing a value as extreme as or more model fits the data. The regression
extreme than 2.4 percent would be coefficients of the key explanatory
For this final rule with comment approximately 6 percent or less. This variables all move in the expected
period, we began our analysis by suggests that rural hospitals are direction: positive for the wage index,
rerunning the regression models that we
approximately 2.4 percent more costly indicating that rural hospitals can be
had examined for the proposed rule. As
than urban hospitals after accounting for expected to have lower unit outpatient
a group, all rural hospitals continue to
demonstrate weak evidence of slightly the impact of other explanatory costs because they tend to be located in
higher unit costs than urban hospitals, variables. This is the same coefficient areas with lower wage rates; positive for
after controlling for labor input prices, observed in the regression analyses for the outpatient service-mix index,
service-mix complexity, volume, facility the proposed rule. The results of this consistent with the hypothesis that rural
size, and type of hospital. In the regression appear in Table 5. This hospitals’ less complex outpatient
explanatory model, regressing unit costs regression demonstrated reasonably service-mixes result in lower unit costs
on all of the independent variables good explanatory power with an than those of the typical urban hospital;
discussed above, the coefficient for the adjusted R2 of 0.54 (rounded). Adjusted negative for outpatient service volume,
rural categorical variable was 0.024 R2 is the percentage of variation in the implying that, on average, rural
(p=0.0613). If the unit costs of rural dependent variable explained by the hospitals’ lower service volumes are a
hospitals are the same as the unit costs independent variables and is a standard source of higher unit cost compared to
of urban hospitals, the probability of measure of how well the regression urban hospitals; and positive for the
facility size variable (beds), suggesting The payment regression that indicates an adjustment for all rural
that facility size is more reflective of accompanies this explanatory model hospitals of 4.3 percent.
complexity than any economies of scale. BILLING CODE 4120–01–P
BILLING CODE 4120–01–C urban hospitals after controlling for Notably, we observe no significant
As we did for our proposed rule, we labor input prices, service-mix difference between all small rural
divided rural hospitals into categories complexity, volume, facility size, and hospitals with 100 or fewer beds and
that reflected their eligibility for the type of hospital. The results of this urban hospitals or between other rural
expiring hold harmless provision under regression appear in Table 6. With the hospitals and urban hospitals. In the
section 1833(t)(7)(D) of the Act in order exception of the new rural variables, the explanatory regression presented in
to determine whether the small independent variables have the same Table 6, the dummy variable for small
difference in costs was uniform across sign and significance as in Table 5. rural hospitals has an observed
classes of rural hospitals or whether all Rural SCHs have a positive and coefficient of 0.01203 and an associated
of the variation was attributable to a significant coefficient. The rural SCH probability of 0.4748. If the unit costs of
specific type of rural hospitals. variable has an explanatory regression small rural hospitals are the same as
Specifically, we divided rural hospitals coefficient of 0.06044 and an observed those of urban hospitals, the probability
into rural SCHs, rural hospitals with 100 probability of 0.0003. If the unit costs of of observing a value as extreme or more
or fewer beds that are not rural SCHs, rural SCHs are the same as those of extreme than 1.2 percent would be less
and other rural hospitals. The first two urban hospitals, the probability of than 50 percent. With such a high
categories of rural hospitals are observing a value as extreme or more probability, there is insufficient
currently eligible for payments under extreme than 6.2 percent would be less evidence to conclude that rural
the expiring hold harmless provision. than 0.1 percent. This is sufficient hospitals with 100 or fewer beds are
As indicated in the proposed rule, we evidence to accept that rural SCHs are more costly than urban hospitals,
found that rural SCHs demonstrated more costly than urban hospitals, holding all other variables constant. The
ER10NO05.012</GPH>
significantly higher cost per unit than holding all other variables constant. results are almost identical when
volume and facility size are not the probability of observing a value as evidence to conclude that other rural
included in the equation. Finally, the extreme or more extreme than ¥1.7 hospitals are more costly than urban
dummy variable for other rural hospitals percent would be less than 50 percent. hospitals. Further, for this group of rural
has an observed coefficient of ¥0.01646 These results are also present when hospitals, the coefficient is negative,
and an associated probability of 0.4545. facility size and volume are not indicating lower cost per unit.
If the unit costs of other rural hospitals included in the equation. As with small
are the same as those of urban hospitals, rural hospitals, this is insufficient
Based on the above analysis, we neutral, and will be applied before analysis, we are implementing an
continue to believe that a payment calculating outliers and coinsurance. adjustment of 7.1 percent in this final
adjustment for rural SCHs is warranted. We will not reestablish the adjustment rule with comment period. We believe
The accompanying payment regression, amount on an annual basis, but we may that an adjustment at this level remains
also appearing in Table 6, indicates a review the adjustment in the future, and consistent with the views expressed by
cost impact of 7.1 percent. Thus, in if appropriate, may revise the the commenters.
accordance with the authority provided adjustment. Additional descriptive Comment: Several commenters
in section 1833(t)(13)(B) of the Act, as statistics are available on the CMS Web expressed concern that the regression
added by section 411 of Pub. L. 108– site. analysis, as presented, does not
173, we are implementing a 7.1 percent We received 19 public comments separately set out the regression results
payment increase for rural SCHs for CY concerning these results. for rural hospitals with 100 or fewer
2006. This adjustment will apply to all Comment: Several commenters beds that are not rural SCHs. They
services and procedures paid under the supported our proposed payment indicate that, while CMS stated that this
OPPS, excluding drugs, biologicals, and increased for rural SCHs of 6.6 percent. class of hospitals did not demonstrate
services paid under the pass-through Response: We appreciate the significance in the explanatory
payment policy. As stated in the commenters’ support. As we discussed regression analyses, it did not
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proposed rule, this adjustment is budget above, based on our most recent definitively display these results. The
commenters highlighted the importance purposes of the rural adjustment in this location and a variable for SCH status in
of showing these results because these rule. addition to the other variables used in
are the facilities that will be losing their Comment: One commenter asked if CMS’ explanatory model. The
hold harmless protection in CY 2006. rural SCHs that are participating in the commenter reported that the SCH
One of the commenters cited MedPAC’s Rural Community Hospital variable is significant, suggesting that
2005 Report to Congress, which noted Demonstration Program would be SCHs are more costly than other non-
that previous MedPAC research eligible for the rural adjustment. SCHs controlling for rural or urban
indicated higher costs for low-volume Response: Rural SCHs participating in status. The commenter concluded that
hospitals which are predominantly the Rural Community Hospital the results indicated SCHs are
rural. The commenters urged CMS to Demonstration Program are eligible to significantly more costly than hospitals
specifically report the regression results receive this rural adjustment. The Rural that are not SCHs and that geographic
with small rural hospitals with 100 or Community Hospital Demonstration location does not influence this finding.
fewer beds identified separately. Program, authorized under section 410A The same commenter also examined
Response: We agree with the of Pub. L 108–173, assesses whether an explanatory model that resembled
commenters that we should identify rural hospitals will benefit from cost- CMS’ explanatory model. The
small rural hospitals with 100 or fewer based reimbursement and is limited to commenter indicated that this model
beds separately in the analysis. The payment for inpatient services. included separate variables for urban
results in Table 6 demonstrate that Although SCHs participating in the SCHs, rural SCHs, and all other rural
small rural hospitals with 100 or fewer demonstration program are not eligible hospitals in order to isolate the unit cost
beds do not appear to have unit costs to receive traditional SCH payments differences between urban SCHs and
different from those of urban hospitals made under the IPPS, these hospitals other hospitals. The commenter
after controlling for other contributors to retain their SCH status. reported that, in this model, the unit
Comment: Several commenters costs of urban SCHs were not
unit cost, including volume.
requested clarification of whether CMS significantly different from urban, non-
Comment: Several commenters
intends to make this adjustment SCH unit costs. With regard to this last
requested clarification on the definition
available beyond CY 2006, and whether finding, the commenter suggested that
of rural in order to assess which
it intends to reestablish the adjustment the lack of significance is less important
hospitals would be eligible for the rural
amount on an annual basis. than the comparability in the magnitude
adjustment. The commenters asked: Response: We will not reestablish the of the coefficient for rural and urban
Would a SCH located in a rural area that adjustment amount on an annual basis, SCHs, and that both types of hospitals
has been reclassified for wage index but we may review the adjustment in have coefficients at 6 percent. Finally,
purposes into an urban area be eligible the future and, if appropriate, revise the the commenter examined the
for the SCH adjustment? Would a SCH adjustment. significance of the rural indicator in an
located in an urban area that has been Comment: A few commenters explanatory regression model conducted
reclassified for wage index purposes requested that CMS extend the rural only with SCH hospitals. Within this
into a rural area be eligible for the SCH adjustment to CMHCs or make some population, the commenter reported
adjustment? other special allowance or provision for that all explanatory variables are
Response: SCHs will be considered their rural location. statistically significant, except an
rural for the rural adjustment, and for Response: Section 1833(t)(13)(A) of indicator for rural status, and suggested
purposes of the OPPS rural adjustment the Act limits the scope of this analysis that this finding further supports
only, under section 1833(t)(13)(B) of the and any adjustment to comparing rural extending the adjustment to urban
Act if a hospital is geographically and urban hospitals costs. SCHs. The commenter concluded by
located in a rural area or has been Comment: Several commenters requesting that CMS repeat its
reclassified to a rural area for wage requested that CMS extend the proposed regression to confirm that SCH status,
index purposes. Therefore, a SCH rural adjustment to all SCHs, not just and not geographic location, is
located in a rural area that has been rural hospitals, under its equitable indicative of higher costs, and if it finds
reclassified for wage index purposes adjustment authority in section this to be true, to appropriately adjust
into an urban area will be eligible for 1833(t)(2)(E) of the Act. The for higher costs.
the adjustment, regardless of whether commenters described the necessary Response: We do not believe it is
the SCH has been reclassified to an access to services that urban SCHs sufficient to confirm that all SCHs are
urban area for wage index purposes. In provide and highlighted that both urban significantly more costly than non-
addition, a SCH located in an urban area and rural SCHs have been recognized SCHs, as the commenter demonstrated
that has been reclassified for wage index for special protections by Congress in in its first regression model because the
purposes into a rural area also will be other payment systems because they are statutory authority for this adjustment is
eligible for the adjustment. New the sole source of inpatient hospital to be based upon the comparison
§ 419.43(g)(1)(ii) of the regulations, services reasonably available to between urban and rural hospitals. The
which we are finalizing in this final rule Medicare beneficiaries. regression model that includes a
with comment period, will provide that One commenter used the public use variable for SCH status and a variable
an SCH is eligible for the adjustment if file that CMS provided on its Web site for rural location only confirms that all
the hospital is ‘‘located in a rural area and conducted detailed analyses to SCHs have higher costs than hospitals
as defined in § 412.64(b) of this chapter assess the appropriateness of an that are not SCHs and that, having
or is treated as being located in a rural adjustment for urban SCHs. The controlled for SCH status, rural and
area under § 412.103.’’ To clarify the commenter compared urban SCHs, rural urban hospitals are not different. Rural
text in response to the comments SCHs, other urban hospitals, and other SCHs comprise 90 percent of all SCH,
received, we are referencing § 412.103 rural hospitals on the number of beds, and are the basis for the observed
in the final regulation text instead of the their service mix, and wage index. The significance on the SCH variable.
reference to section 1886(d)(8)(E) of the commenter also conducted regression Notwithstanding the mandate for this
Act. This definition of a ‘‘SCH located analysis. The first model the commenter rural adjustment, we believe that urban
in a rural area’’ only will apply for the examined included a variable for rural SCHs would have to demonstrate strong
empirical evidence that they are hospitals. We also included all of the few, sources of care for beneficiaries.
significantly more costly than other other variables in Table 6 above, For example, these hospitals may be the
urban hospitals. We do not find the including rural SCHs and other rural only immediately available source of
strong empirical evidence supporting an hospitals. In these results, the emergency services for Medicare
adjustment for urban SCHs, as we do for coefficient associated with rural MDHs beneficiaries.
rural SCHs. was ¥0.01955, with an associated In accordance with the authority
In many respects, urban SCHs look probability of 0.4438. If the unit costs of provided in section 1833(t)(13)(B) of the
like urban hospitals on some of the key MDHs are the same as those of urban Act, as added by section 411 of Pub. L.
variables presented in Table 4. Urban hospitals, the probability of observing a 108–173, we are finalizing our policy by
SCHs have a mean cost per unit of value as extreme or more extreme than including a payment adjustment for
$183.89, and urban hospitals have a 2 percent would be less than 50 percent. rural SCHs of 7.1 percent and finalizing
mean cost per unit of $188.76. Urban Comment: One commenter argued the regulation text at § 419.43(g) as
SCHs have a mean standardized unit that CMS excluded variables from the noted above.
cost of $74.01, and all urban hospitals regression model that control for
H. Hospital Outpatient Outlier
have a mean standardized cost of ‘‘financial pressure’’ and ‘‘market
Payments
$73.54. Finally, urban SCHs have a structure.’’ The commenter argued that
mean volume of 36,714, and urban higher costs can be the result of Currently, the OPPS pays outlier
hospitals have a mean volume of 38,469. inefficient operations as much as they payments on a service-by-service basis.
Similar to the commenter, we also ran could also be the result of higher input For CY 2005, the outlier threshold is
an explanatory regression analysis that costs created by rural location, and that met when the cost of furnishing a
included urban SCHs as a separate class measures of financial pressure or market service or procedure by a hospital
of hospitals in addition to rural SCHs, structure would capture any variation in exceeds 1.75 times the APC payment
small rural hospitals, and other rural unit cost attributable to a lack of local amount and exceeds the APC payment
hospitals. In these results, the competition. The commenter suggested rate plus a $1,175 fixed-dollar
coefficient associated with urban SCHs that SCHs may be inefficient because threshold. We introduced a fixed-dollar
was 0.05960 and the associated they already have special payment threshold in CY 2005 in addition to the
probability was 0.1624. If the unit costs status under the IPPS and the OPPS. traditional multiple threshold in order
of urban SCHs are the same as those of Finally, the commenter suggested that, to better target outliers to those high
urban hospitals, the probability of because beneficiaries’ access to care is cost and complex procedures where a
observing a value as extreme or more the central objective of any payment very costly service could present a
extreme than 6.1 percent would be less policy, CMS should consider a low- hospital with significant financial loss.
than 20 percent. We acknowledge the volume adjustment that better captures If a provider meets both of these
commenter’s statement that the size of higher costs that the hospital cannot conditions, the multiple threshold and
the coefficient on the urban SCH control. At the same time, the the fixed-dollar threshold, the outlier
dummy variable is comparable to that commenter acknowledged that section payment is calculated as 50 percent of
on the dummy variable for rural SCHs. 1833(t)(13)(A) of the Act specifically the amount by which the cost of
However, we do not believe that the size requires an analysis of urban and rural furnishing the service exceeds 1.75
of the coefficient is sufficient evidence. costs. times the APC payment rate. For a
The lack of significance associated with Response: While it is not discussion on CMHC outliers, see
such a large coefficient is attributable to inappropriate to include additional section II.B.3. of this final rule with
the much higher standard error variables in the explanatory regression comment period.
accompanying urban SCHs compared to analysis, we first note that section As explained in our CY 2005 final
rural SCHs. Higher standard error 1833(t)(13)(A) of the Act specifically rule with comment period (69 FR
indicates that there is large variability in calls a determination of whether costs 65844), we set our projected target for
unit costs for urban SCHs after faced by rural hospitals are higher than aggregate outlier payments at 2.0
controlling for all other variables in the those faced by urban hospitals. For this percent of aggregate total payments
equation. Some urban SCHs may have reason, we believe that the model in under the OPPS. Our outlier thresholds
unit costs as high as rural SCHs, but Table 6 ably controls for scale were set so that estimated CY 2005
clearly many do not. We believe that efficiencies in a comparison of urban aggregate outlier payments would equal
this observation accounts for the lack of and rural costs. Our adjusted R2 of 54 2.0 percent of aggregate total payments
significance on the rural variable in the percent also demonstrates a relatively under the OPPS.
commenter’s regression analyses, which good fit. We acknowledge that some of For CY 2006, we proposed to set our
was limited to the population of SCHs. the SCHs eligible for the adjustment projected target for aggregate outlier
Comment: One commenter requested may also be more costly because of payments at 1.0 percent of aggregate
that CMS examine whether the inefficiencies due to limited total payments under the OPPS. A
outpatient costs of Medicare-Dependent competition or because they currently portion of that 1.0 percent, an amount
Small Rural Hospitals (MDHs), a receive special payment status under equal to 0.6 percent of outlier payments,
subgroup of rural hospitals, are higher the IPPS and the OPPS. However, we would be allocated to CMHCs for partial
than urban hospitals’ outpatient costs, also agree with the commenter that hospitalization program service outliers.
and provide an adjustment to payments beneficiary access is an important goal. In support of this decision, we cited
if appropriate. We believe that the current model is MedPAC’s March 2004 Report to
Response: We did not find any sufficiently robust to identify hospitals Congress, in which MedPAC
evidence that rural MDHs are more with significantly higher costs such that recommended that Congress pursue the
costly than urban hospitals. We ran an payment under the OPPS alone might statutory change needed to eliminate the
explanatory regression analysis that impact beneficiary access. The SCH outlier policy under the OPPS. We
included rural MDHs as a separate class status of these hospitals suggests that specifically highlighted several of the
of small rural hospitals from other small they are important to beneficiary access. reasons given by MedPAC for the
rural hospitals because 90 percent of Rural SCHs receive their designation elimination of the outlier policy because
rural MDHs were also small rural because they are the only, or one of a they are equally applicable to any
reduction in the size of the percentage costs because this methodology closely for this procedure, the provider must
of OPPS payments dedicated to outlier captures how actual outlier payments determine whether the cost for the
payments. One of MedPAC’s arguments are made and calculated (70 FR 47495, service exceeds both the APC outlier
included the very narrow definition of August 12, 2005). We then applied the cost threshold (1.75 × APC payment)
many APCs with limited packaging overall cost-to-charge ratio (CCR) that and the fixed-dollar threshold ($1,250 +
frequently resulting in multiple service we calculate from each Hospital’s Cost APC payment). In this example, the
payments for any given claim. In Report (CMS–2552–96) as part of our provider meets both criteria:
addition, we noted that outlier policies process for estimating median APC (1) $7,800 exceeds $5,250 (1.75 ×
are susceptible to ‘‘gaming’’ through costs. The calculation of this overall $3,000)
charge inflation and that the OPPS is the CCR is discussed in greater detail in (2) $7,800 exceeds $4,250 ($1,250 +
only ambulatory payment system with section II.A. of this preamble. We $3,000)
an outlier policy. Finally, we cited estimated outlier payments using these To calculate the outlier payment,
MedPAC’s observation that the costs for several different fixed-dollar which is 50 percent of the amount by
distribution of outlier payments benefits thresholds, holding the 1.75 multiple which the cost of furnishing the service
some hospital groups more than others. constant until the aggregated outlier exceeds 1.75 times the APC rate,
In order to ensure that estimated CY payments equaled 1.0 percent of subtract $5,250 (1.75 × $3,000) from
2006 aggregate outlier payments would aggregated total payments under the $7,800 (resulting in $2,550). The
equal 1.0 percent of estimated aggregate OPPS. In addition, for CY 2006, we provider is eligible for 50 percent of the
total payments under the OPPS, we proposed an outlier threshold for difference, in this case $1,275 ($2,550/
proposed that the outlier threshold be CMHCs of 3.45 times the APC payment 2). The formula is (cost¥(1.75 × APC
modified so that outlier payments are rate. payment rate))/2.
triggered when the cost of furnishing a For this final rule with comment For CMHCs, in CY 2005, the outlier
service or procedure by a hospital period, we recalculated the fixed-dollar threshold is met when the cost of
exceeds 1.75 times the APC payment threshold in light of updated claims furnishing a service or procedure by a
amount and exceeds the APC payment data, a revised charge inflation estimate, CMHC exceeds 3.5 times the APC
rate plus a $1,575 fixed-dollar and more timely CCRs. As in the payment rate. If a CMHC provider meets
threshold. Ultimately, we chose to proposed rule, we did not change the this condition, the outlier payment is
modify the fixed dollar threshold to multiple threshold of 1.75 times the calculated as 50 percent of the amount
target 1.0 percent of estimated aggregate APC payment rate, but concentrated on by which the cost exceeds 3.5 times the
total payment under the OPPS and not adjusting the fixed-dollar threshold. We APC payment rate. For this final rule
to modify the current 1.75 multiple in again used the same inflation factor that with comment period, updated data
order to further our policy of targeting we used to estimate the IPPS fixed- reduces the multiple outlier threshold
outlier payments to complex and dollar threshold. Because the charge for CMHCs to 3.4. The outlier threshold
expensive procedures with sufficient inflation factor for the IPPS was revised for a CMHC is met when the cost of
variability to pose a financial risk for to 14.94 percent for 2 years in the IPPS furnishing a service or procedure by a
hospitals. We note that modifying the FY 2006 final rule (70 FR 47493, August CMHC exceeds 3.4 times the APC
multiple threshold would have done 12, 2005), we inflated charges on all CY payment rate. If a CMHC provider meets
less to target outlier payments to 2004 OPPS claims by 1.1494. this condition, the outlier payment is
complex and expensive procedures. We then applied the hospital specific calculated as 50 percent of the amount
We calculated the fixed-dollar overall CCR which we calculated for by which the cost exceeds 3.4 times the
threshold for the proposed rule using purposes of our APC cost estimation. APC payment rate.
the same methodology as we did in CY We simulated aggregated outlier We received 25 public comments
2005. The claims that we use to model payments using these costs for several concerning our proposed outlier policy.
each OPPS lag by 2 years. For this final different fixed dollar thresholds holding Comment: One commenter supported
rule with comment period, we used CY the 1.75 multiple constant until the total CMS’ decision to reduce the percentage
2004 claims to model the CY 2006 outlier payments equaled 1.0 percent of of total payments set aside for outlier
payment system. In order to estimate CY aggregated total OPPS payments. We payments from 2.0 percent to 1.0
2006 outlier payments for the proposed estimate that a threshold of $1,250 percent.
rule, we inflated the charges on the CY combined with the multiple threshold Response: We appreciate the
2004 claims using the same inflation of 1.75 times the APC payment rate will commenter’s support. Although the
factor of 1.0865 that we used to estimate allocate 1.0 percent of aggregated total fixed-dollar threshold has changed due
the IPPS fixed-dollar outlier threshold OPPS payments to outlier payments. We to more accurate data than in the
for the IPPS FY 2006 proposed rule. For used a lower charge inflation factor of proposed rule, we do not believe that
2 years, the inflation factor is 1.1804. 14.94 percent to increase charges to this change would impact the views
The methodology for determining this reflect 2006 dollars. The proposed fixed expressed by the commenter.
charge inflation factor was discussed at dollar threshold declined to $1,250 from Comment: Several commenters
length in the IPPS proposed rule (70 FR $1,575 in the proposed rule primarily expressed concern that, in light of an
47493, August 12, 2005). As we stated because we used the lower charge increase in the threshold from $1,175 to
in our final rule for 2005, we believe inflation factor of 1.1494. $1,575, CMS may have set the threshold
that the use of this charge inflation The following is an example of an for outlier payments too high. They
factor is appropriate for OPPS because, outlier calculation for CY 2006 under requested clarification as to how CMS
with the exception of the routine service our final policy. A hospital charges determined that a $400 increase in the
cost centers, hospitals use the same cost $26,000 for a procedure. The APC fixed-dollar threshold was appropriate
centers to capture costs and charges payment for the procedure is $3,000, and how the $1,575 fixed-dollar
across inpatient and outpatient services including a rural adjustment, if threshold was calculated. The
(69 FR 65845, November 15, 2004). As applicable. Using the provider’s CCR of commenters specifically noted that in
also noted in the IPPS final rule, we 0.30, the estimated cost to the hospital the IPPS final rule CMS reduced the
believe that a charge inflation factor is is $7,800. To determine whether this charge inflation factor used to set the
more appropriate than an adjustment to provider is eligible for outlier payments fixed-dollar threshold from 18.04
percent to 14.94 percent, and suggested aggregated outlier payments were 2.5 payments. As noted above, MedPAC
that CMS make a similar adjustment to percent of aggregated total OPPS argued that the fairly narrow definition
the OPPS methodology. payments. In the final set of CY 2003 of the APC groups makes outlier
Response: As discussed above, for the OPPS claims, aggregated outlier payments less necessary for the OPPS,
proposed rule, we used a charge payments were 3.1 percent of aggregated that the limited packaging in OPPS
inflation factor of 1.1804 to inflate the total OPPS payments. For both years, frequently resulting in multiple service
charges on CY 2004 claims to CY 2006 the estimated outlier payments were set payments for any given claim, and that
dollars. We then applied the overall at 2 percent of total aggregated OPPS the susceptibility to ‘‘gaming’’ through
CCR that we calculate as part of our payments. At this time, we cannot make charge inflation continues. MedPAC’s
APC median estimation process to those accurate estimates about aggregated total 2004 Report to Congress also suggested
inflated charges to estimate costs. We outlier payments for CY 2005, but we that our outlier policy could be
compared these estimated costs to 1.75 intend to provide this information in redistributing outlier payments among
times the proposed APC payment our proposed rule for CY 2007. We hospitals based on cost structures or
amount and to the APC payment intend to continue reporting the charging patterns rather than differences
amount plus a number of fixed-dollar percentage of total payments made in in case-mix. We agree with the
thresholds until we identified a outlier payments for the most recent and commenters that an unequal
threshold that produced total outlier complete set of claims in future rules. distribution of outlier payments
payments equal to 1.0 percent of total We note above our reasons for according to differences in case mix is
aggregated OPPS payments. This proposing to reduce the projected target appropriate, the concern is that different
methodology increased the fixed-dollar percent of total aggregated OPPS case mix does not account for outlier
threshold by $400. payments attributable to outlier payment distributions.
We repeated the same estimation payments. We do not believe that the moderate
process for this final rule, using a Comment: Several commenters fluctuation in APC payment rates that
complete set of CY 2004 claims, the suggested that CMS did not provide continues to be present in the OPPS is
updated charge inflation estimate of sufficient analytic support to justify a an adequate argument against reducing
14.94 percent from the IPPS final rule, reduction in outlier payments from 2.0 the percentage of aggregated total OPPS
as requested by commenters, and each percent to 1.0 percent, relying only on payments set aside for outlier payments
hospital’s overall CCR, as calculated for MedPAC’s recommendations. The for several reasons: changes in payment
our APC median setting process. The commenters urged CMS not to change rates appropriately reflect changes in
final fixed dollar threshold for OPPS its outlier policy or to delay costs, the variability of costs is less for
2006 is $1,250 plus the APC payment implementation until greater technical complex and expensive procedures, and
rate, and the final multiple threshold is analyses could be conducted. One outlier payments in OPPS target services
1.75 times the APC payment rate. commenter suggested that, without not cases. As discussed in section II.A.
Comment: Commenters expressed CMS’ technical analyses, stakeholders of this preamble, we believe that the
concern that CMS has never reported cannot conduct their own analyses. The moderate changes in the payment rates
the actual amount of outlier payments commenters frequently questioned our remaining after the system has been
for the OPPS made in past years. They reference to the March 2004 MedPAC operating for several years is, in large
noted that CMS routinely reports prior Report to Congress and stated that part, a function of the small APC group
year outlier payments for the IPPS. The outlier payments are not evenly size and service basis. The small group
commenters also expressed concern that distributed among hospitals as size of the APCs makes changes in
CMS may not spend the percentage of justification for reducing the percentage service costs more transparent than if
total aggregated OPPS payment set aside of total payments dedicated to outlier groups were larger. Aggregation
each year for outlier payments. One payments. They noted that differences generally reduces variation. Changes in
commenter hypothesized that outlier in outlier payments would be expected payment rates from year to year
payments had been underspent in for hospitals serving different appropriately reflect true changes in the
previous years, and that the proposed populations. Several commenters cited cost of a specific service. Changes in
reduction in outlier payments was the continued instability in rates as a cost and charging patterns captured in
designed to realign the policy with reason for continuing at 2.0 percent. a provider’s cost report will lead to
actual payment. The commenters urged One commenter specifically changes in the median cost of services
CMS to publish data on actual outlier hypothesizes that instability in payment from year to year. In addition, we are
payments made in CY 2004 and prior rates may be attributable to a lack of required to adjust the APCs each year to
years in the final rule. They also stability in unit costs, suggesting a ensure that groups are comparable with
recommended that actual outlier continued need for outlier payments. ‘‘respect to the use of resources.’’ The ‘‘2
payments for CY 2005 OPPS be reported Another commenter acknowledged that times’’ rule requires that the highest
as soon as CMS is able to obtain the variability in costs for APCs was median cost for an item or service
accurate data and that CMS continue to clearly less than that for DRGs, but that within the group not be greater than two
report these data in the future. the current policy of setting aside two times the lowest median cost. The ‘‘2
Response: As we have stated in prior percent of total payments, already times’’ rule specifically limits the
rules (see for example 69 FR 65847, accounted for this difference. amount of variability of unit costs in
November 15, 2004), we have not Response: Our decision to reduce the any group, forcing the APC payment
provided aggregate outlier payments for projected target amount of total rates to reflect changes in costs. It
past years because we do not use those payments set aside for outlier payments embeds some fluctuation into APC
estimates to set the outlier thresholds is based on the technical analyses that payment rates, but also reduces the need
and because we make outpatient claims MedPAC conducted in its March 2004 for an expansive outlier policy.
available. However, we understand that Report to Congress demonstrating that The observed variability in unit costs
providers might wish to know this the CY 2004 OPPS outlier policy was is greater for low cost and simple
information, especially in light of recent ineffective at addressing complex cases procedures and smaller for complex,
changes in the OPPS outlier policy. In of financial risk and on the arguments expensive procedures. In its 2004
the final set of CY 2004 OPPS claims, that MedPAC made against outlier Report to Congress, MedPAC found that
the highest variability in estimated costs continue to have this effect within a Comment: One commenter
was associated with the lowest cost smaller amount of outlier payments. recommended a new methodology for
items. This observation continues to be Comment: Several commenters estimating the fixed-dollar outlier
true in the CY 2004 claims. On average, suggested that CMS did not sufficiently threshold for both the OPPS and the
HCPCS codes with low median costs demonstrate the impact on hospitals of IPPS. The commenter suggested that, in
demonstrate greater variability, as reducing the percentage of estimated addition to inflating charges from CY
measured by the coefficient of variation, total payments dedicated to outlier 2004 to CY 2006, CMS also should
than HCPCS codes with high median payments 2.0 percent to 1.0 percent and adjust CCRs to reflect proportionally
costs. The coefficient of variation is the requested this analysis. The commenters slower inflation in costs. The
percent of the standard deviation expressed concern that hospitals commenter believed that this would
accounted for by the mean and enables providing sophisticated and expensive result in deflating overall CCRs. The
a relative comparison of variation across technologies to very sick patients would commenter specifically recommended
groups. This trend also is evident in the be placed at greater risk of financial that CMS update the CCRs for the OPPS
APC coefficient of variation. The bottom loss. Most of the commenters suggested to the latest available hospital-specific
50 percent of APCs arrayed by median that the reduction in the outlier data.
costs have an average coefficient of percentage be delayed until CMS can Response: We agree with the
variation of 82 percent, whereas the top fully evaluate the impact, while other commenter that the CCRs that we use to
50 percent of APCs, arrayed by median commenters simply urged for a return to set the outlier thresholds should be as
cost, have an average coefficient of the 2-percent target amount. recent as possible. We also believe that
variation of 63 percent. Response: For the proposed rule, we these CCRs should reflect, as closely as
Finally, OPPS outlier payments are did not include a specific analysis of the possible, the actual CCRs that the fiscal
targeted to services, rather than cases. redistributive impact of outliers because intermediary will use to determine
Unlike the IPPS, outlier payments are the fixed-dollar threshold policy did not outlier payments in CY 2006. As we did
not for extremely costly patients but change, only the aggregate amount of for the IPPS final rule (70 FR 47493,
dollars paid. We did include outlier August 12, 2005), we used the overall
extremely costly services. In many
payments in our impact tables, and we CCRs from the most recent provider-
cases, an extremely costly case in the
made the amount of outlier payment specific file, in this case, the July 2005
outpatient setting may not warrant an
estimated for each hospital available on OPSF, to estimate costs from inflated
outlier payment because no specific
our Web site. However, we appreciate charges on CY 2004 claims. The OPSF
service was excessively costly. The
commenters’ desire to more fully view contains CCRs from each provider’s
small number of services included in
the impact of the outlier policy. For this most recent tentatively settled cost
any APC group means that the provider
final rule with comment period, we report. Because of the time it takes to
will receive payment for most services
have provided a separate table in our complete cost reports and upload them
billed on a claim. Reducing total outlier
regulatory impact analysis, section XIX in the fiscal intermediaries’ standard
payments to 1.0 percent of total OPPS of this preamble, showing the systems, for at least part of CY 2006, the
payments effectively raises the payment differences in total aggregated OPPS CCRs on the OPSF are the same ones
for all other services because the payment for CY 2006 attributable to the that the fiscal intermediaries will use to
foregone 1.0 percent of total spending is change in the outlier policy. We determine outlier payments. However,
returned to the conversion factor. We estimate that no class of hospital will unlike the IPPS, the overall CCRs on the
acknowledge the comment stating that experience more than a 1 percent OPSF are higher than those that we use
the comparative difference in cost change in total payments due to outlier to estimate APC medians. The median
variability between the IPPS and the payments and many classes of hospitals overall CCR that we calculate from each
OPPS is already accounted for in the receive greater payments. hospital’s cost report as a default CCR
difference between the 5 to 6 percent Comment: Several commenters in estimating costs from charges in order
estimated outlier target under IPPS and suggested that CMS pay outlier claims at to set relative weights is 0.305, whereas
the 2 percent projected outlier estimate the same rate at which inpatient outlier the median overall CCR on the OPSF is
under OPPS. However, we believe that claims are paid, that is, 80 percent of 0.32. Were we to use the CCRs from the
setting total outlier payments at 1.0 cost. Various rationales were provided, OSPF, the fixed dollar threshold would
percent of total aggregated OPPS including consistency with the IPPS, increase, from $1,250 to $1,800.
payments sets aside an appropriate ensuring that hospitals can recoup the We will consider using the CCRs
amount of dollars for unexpected and variable costs of providing expensive found in the OSPF for the CY 2007
costly services. care, and improving the adequacy of OPPS outlier calculations, similar to our
Comment: One commenter indicated payments. calculations under IPPS. However, in
concern that CMS proposed an Response: We believe that the view of the newness of a fixed-dollar
additional change to the outlier payment percentage of 50 percent is threshold for OPPS outlier payments
payments before having one year of appropriate for the OPPS because, in and our concern that using the OSPF
experience with the fixed-dollar general, a costly OPPS service poses less CCRs for this final rule would result in
threshold introduced in CY 2005. of a financial risk for hospitals than a an $1,800 fixed dollar threshold that is
Response: We do not believe that costly case under the IPPS. If we did considerably higher than the proposed
these two policies are related. The increase the payment percentage to 80 threshold, we have decided to use the
amount of total aggregated OPPS percent, we would have to compensate CCRs that we calculated for the APC
payments set aside for outlier payments elsewhere to maintain the 1.0 percent median setting process for our outlier
is an entirely different policy from the set aside for outlier payments, probably calculations as we have in past years.
manner in which those payments are by raising the fixed-dollar threshold. These CCRs are timely, as the majority
distributed to hospitals. We did not Changing the payment percentage to 80 of them are created from cost reports
institute the fixed-dollar threshold to percent would merely concentrate a with fiscal years beginning in 2004 and
reduce outlier payments, but rather to more generous outlier payment on a 2003.
target payments to expensive and costly much smaller number of extremely Comment: One commenter requested
cases. The fixed-dollar threshold will costly services each year. that CMS reverse its decision to reduce
the percentage of total payments I. Calculation of the National counties that have a relatively high
attributable to outlier payments to 1 Unadjusted Medicare Payment percentage of hospital employees who
percent and return outlier payments to The basic methodology for reside in the county, but who work in
the target level of 3 percent established determining prospective payment rates a different county with a higher wage
under the Balanced Budget Act (BBA) of for OPD services under the OPPS is set index, in accordance with section 505 of
1997. forth in existing regulations at § 419.31 Pub. L. 108–173. Addendum L contains
Response: For all of the reasons stated and § 419.32. The payment rate for the qualifying counties and the final
above, we do not believe that outlier services and procedures for which wage index increase developed for the
payments should be increased to 3 payment is made under the OPPS is the FY 2006 IPPS. This step is to be
percent of total payments. We further product of the conversion factor followed only if the hospital has chosen
note that the BBA, as revised by the calculated in accordance with section not to accept reclassification under Step
Balanced Budget Refinement Act II.C. of this final rule with comment 2 above.
(BBRA) of 1999, set an upper limit of period and the relative weight Step 4. Multiply the applicable wage
‘‘no more than’’ 3.0 percent for outlier determined under section II.A. of this index determined under Steps 2 and 3
policies, giving the Secretary the final rule with comment period. by the amount determined under Step 1
discretion to set a lower estimated target Therefore, the national unadjusted that represents the labor-related portion
percent. payment rate for APCs contained in of the national unadjusted payment rate.
Comment: One commenter expressed Addendum A to this final rule with Step 5. Calculate 40 percent (the
concern that decreasing the outlier pool comment period and for HCPCS codes nonlabor-related portion) of the national
and increasing the fixed dollar to which payment under the OPPS has unadjusted payment rate and add that
threshold may encourage greater been assigned in Addendum B to this amount to the resulting product of Step
packaging in order to increase final rule with comment period 4. The result is the wage index adjusted
procedure charges. (Addendum B is provided as a payment rate for the relevant wage
Response: We do not believe that convenience for readers) was calculated index area.
greater packaging is an issue for the by multiplying the final CY 2006 scaled Step 6. If a provider is a SCH, as
OPPS outlier policy. Should providers weight for the APC by the final CY 2006 defined in § 419.92, and located in a
choose to package more services into the conversion factor. rural area, as defined in § 412.63(b), or
charges for payable procedures and not However, to determine the payment is treated as being located in a rural area
report packaged services, over time, that will be made in a calendar year under § 412.103 of the Act, multiply the
those higher costs would lead to higher under the OPPS to a specific hospital for wage index adjusted payment rate by
payment rates for payable procedures. an APC for a service other than a drug, 1.071 to calculate the total payment.
This would, in turn, increase the fixed in a circumstance in which the multiple We received no public comments
dollar outlier threshold. Further, rolling procedure discount does not apply, we concerning our proposal for calculating
the charges for packaged services into take the following steps: the national unadjusted Medicare
the charges for payable procedures is Step 1. Calculate 60 percent (the payment rate. Therefore; we are
expected under OPPS. labor-related portion) of the national adopting as final, for OPPS services
unadjusted payment rate. Since initial furnished on or after January 1, 2006,
Comment: One commenter requested
implementation of the OPPS, we have our proposed methodology for
that CMS describe the services that
used 60 percent to represent our calculating the national unadjusted
qualify for outlier payments.
estimate of that portion of costs Medicare payment amount.
Response: The actual services that attributable, on average, to labor. (Refer
qualify for outlier payments under the to the April 7, 2000 final rule with J. Beneficiary Copayments for CY 2006
fixed dollar threshold policy introduced comment period (65 FR 18496 through
in CY 2005 will likely be quite similar 1. Background
18497) for a detailed discussion of how
to those receiving payments under 2005 we derived this percentage.) Section 1833(t)(3)(B) of the Act
OPPS. As noted above, at this time, we Step 2. Determine the wage index area requires the Secretary to set rules for
do not have a complete set of CY 2005 in which the hospital is located and determining copayment amounts to be
claims. However, in our analysis identify the wage index level that paid by beneficiaries for covered OPD
replicating the analysis done by applies to the specific hospital. The services. Section 1833(t)(8)(C)(ii) of the
MedPAC in its March 2004 Report to wage index values assigned to each area Act specifies that the Secretary must
Congress, we estimate that costly reflect the new geographic statistical reduce the national unadjusted
services such as APC 0246 (Cataract areas as a result of revised OMB copayment amount for a covered OPD
Procedures with IOL Insert), APC 0080 standards (urban and rural) to which service (or group of such services)
(Diagnostic Cardiac Catheterization), hospitals are assigned for FY 2006 furnished in a year in a manner so that
and APC 0131 (Level II Laparoscopy) under the IPPS, reclassifications the effective copayment rate
would receive a large percentage of through the Medicare Classification (determined on a national unadjusted
outlier payments under the fixed-dollar Geographic Review Board, section basis) for that service in the year does
threshold policy. 1866(d)(8)(B) ‘‘Lugar’’ hospitals, and not exceed specified percentages. For all
Accordingly, after considering the section 401 of Pub. L. 108–173, and the services paid under the OPPS in CY
public comments received, for CY 2006, reclassifications of hospitals under the 2006, and in calendar years thereafter,
we are finalizing the OPPS outlier one-time appeals process under section the specified percentage is 40 percent of
policy of two thresholds for hospitals of 508 of Pub. L. 108–173. The wage index the APC payment rate. Section
a multiple threshold of 1.75 times the values include the occupational mix 1833(t)(3)(B)(ii) of the Act provides that,
APC payment amount and a fixed dollar adjustment described in section II.D. of for a covered OPD service (or group of
threshold of $1,250 plus the APC this final rule with comment period that such services) furnished in a year, the
payment amount and one threshold for was developed for the FY 2006 IPPS. national unadjusted coinsurance
CMHCs of 3.4 times the APC payment Step 3. Adjust the wage index of amount cannot be less than 20 percent
amount. hospitals located in certain qualifying of the OPD fee schedule amount.
2. Copayment for CY 2006 lower than the CY 2005 payment rate services to the appropriate level. By
For CY 2006, we proposed to when adjusted for inflation. ‘‘appropriate,’’ we assume the
determine copayment amounts for new Response: We appreciate the commenter means that coinsurance for
and revised APCs using the same commenter’s recommendation but note all OPPS services should be 20 percent,
methodology that we implemented for that the statute does not provide for this. which is the coinsurance rate for other
CY 2004 (see the November 7, 2003 Section 1833(t)(8)(C)(ii) of the Act services paid under Medicare Part B.
OPPS final rule with comment period, specifies that the Secretary must reduce Response: We appreciate the
68 FR 63458). We used the same the national unadjusted copayment commenter’s recommendation and will
methodology to determine the final amount for a covered OPD service (or take it into consideration. However,
unadjusted copayment amounts for group of such services) furnished in a until the statute at section
services payable under the OPPS that year in a manner so that the effective 1833(t)(8)(C)(ii) of the Act is revised, the
will be effective January 1, 2006. These copayment rate (determined on a Secretary must adhere to the current
copayment amounts are shown in national unadjusted basis) for that requirements of the law, which caps the
Addendum A and Addendum B of this service in the year does not exceed beneficiary coinsurance payment at 40
final rule with comment period. specified percentages. For all services percent of the APC payment rate. In
paid under the OPPS in CY 2006, and addition, the law requires that the
3. Calculation of the Unadjusted in calendar years thereafter, that coinsurance amount be no less than 20
Copayment Amount for CY 2006 specified percentage is 40 percent of the percent of the APC rate.
To calculate the unadjusted APC payment rate. Accordingly, we are adopting as final,
copayment amount for an APC group, Comment: One commenter objected to for OPPS services furnished on or after
take the following steps: beneficiaries being liable for more than January 1, 2006, our proposed
Step 1. Calculate the beneficiary 20 percent of the Medicare payment rate methodology for calculating the
payment percentage for the APC by for services paid under the OPPS. The beneficiary unadjusted copayment
dividing the APC’s national unadjusted commenter acknowledged that the law amount.
copayment by its payment rate. For limits the copayment for a single service
example, using APC 0001, $7.00 is 29 to the amount of the inpatient III. Ambulatory Payment Classification
percent of $23.79. deductible, but objected to there being (APC) Group Policies
Step 2. Calculate the wage adjusted no limit to the amount of coinsurance A. Introduction
payment rate for the APC, for the that a beneficiary can incur per year or
provider in question, as indicated in even for a single outpatient encounter. 1. Treatment of New HCPCS Codes
section II.I. of this preamble. The commenter acknowledged that the Discussed in the CY 2006 OPPS
Step 3. Multiply the percentage amount of beneficiary copayment Proposed Rule
calculated in Step 1 by the payment rate liability is set in statute but urged CMS During the second quarter of CY 2005,
calculated in Step 2. The result is the to work with Congress to restore we created 11 HCPCS codes that were
wage-adjusted copayment amount for beneficiary coinsurance of hospital not addressed in the November 15, 2004
the APC. outpatient services to the level it views final rule with comment period that
We received two public comments as appropriate. updated the CY 2005 OPPS. (Table 14
concerning our proposed methodology Response: As the commenter of the CY 2006 OPPS proposed rule.)
for calculating the beneficiary indicated, the level of beneficiary We have designated the payment status
unadjusted copayment amount. coinsurance is set based on specific of those codes and added them to the
Comment: One commenter statutory criteria. April update of the CY 2005 OPPS
recommended that CMS maintain the Comment: One commenter (Transmittal 514). In the proposed rule,
coinsurance amount above 40 percent of recommended that CMS work with we also solicited public comments on
the APC payment amount as the Congress to restore the beneficiary the proposed APC assignments of these
proposed payment rate for CY 2006 is coinsurance for hospital outpatient services.
TABLE 7.—NEW HCPCS CODES IMPLEMENTED IN APRIL 2005

HCPCS code Description
C9127 .................... Injection, paclitaxel protein-bound particles, per 1 mg.

C9128 .................... Injection, pegaptamib sodium, per 0.3 mg.
C9223 .................... Injection, adenosine for therapeutic or diagnostic use, 6 mg (not to be used to report any adenosine phosphate com-
pounds, instead use A9270).
C9440 .................... Vinorelbine tartrate, brand name, per 10 mg.
C9723 .................... Dynamic infrared blood perfusion imaging (DIRI).
C9724 .................... Endoscopic full-thickness plication in the gastric cardia using endoscopic plication system (EPS); includes endoscopy.
Q4079 .................... Injection, natalizumab, 1 mg.
Q9941 .................... Injection, Immune Globulin, Intravenous, Lyophilized, 1 g.
Q9942 .................... Injection, Immune Globulin, Intravenous, Lyophilized, 10 mg.
Q9943 .................... Injection, Immune Globulin, Intravenous, Non-Lyophilized, 1 g.
Q9944 .................... Injection, Immune Globulin, Intravenous, Non-Lyophilized, 10 mg.
Further, consistent with our annual incorporate them into our final rule APC assignments for the two new OPPS
APC updating policy, we proposed to with comment period for CY 2006. procedures (C9723 and C9724)
assign the new HCPCS codes for CY We did not receive any public implemented in April 2005. Therefore,
2006 to the appropriate APCs and comments on the new procedural C we are adopting as final our proposal to
codes, their status indicators, or their assign these HCPCS codes C9723 and
C9724 for CY 2006 to the appropriate January, for implementation beginning what we estimate is an appropriately
APCs, as shown in Addendum B of this the following July, and in July, for priced New Technology APC. In other
final rule with comment period, without implementation beginning the following cases, we may assign a Category III CPT
modification. January. In the past, CMS has treated code one of several non-separately
We received a number of public new Category III CPT codes payable status indicators, including N,
comments related to drugs described by implemented in July of the previous C, B, or E, which we feel is appropriate
new HCPCS codes implemented in year or January of the OPPS update year for the specific code. We expect that we
April 2005 in the OPPS; specifically, in the same manner that new Category will already have received applications
HCPCS codes C9127, C9128, C9223, I CPT codes and new Level II HCPCS for New Technology status for some of
C9440, Q4079, Q9941, Q9942, Q9943, codes implemented in January of the the services described by new Category
and Q9944. See section V. of this OPPS update year are treated; that is, we III CPT codes, which may assist us in
preamble (Payment Changes for Drugs, provide APC and/or status indicator determining appropriate APC
Biologicals, and Radiopharmaceutical assignments in the final rule updating assignments. If the AMA establishes a
Agents) for a discussion of these the OPPS for the following calendar Category III CPT code for a service for
comments, including comment year. New Category I and Category III which an application has been
summaries, our responses and a CPT codes, as well as new Level II submitted to CMS for New Technology
description of our final OPPS payment HCPCS codes, are flagged with status, CMS may not have to issue a
policies. In addition, our final payment Comment Indicator ‘‘NI’’ in Addendum temporary Level II HCPCS code to
policy for CY 2006 is included in B of the final rule to indicate that we are describe the service, as has often been
Addendum B of this final rule with assigning them an interim payment the case in the past when Category III
comment period. status which is subject to public CPT codes were only recognized by the
2. Treatment of New CY 2006 HCPCS comment following publication of the OPPS on an annual basis.
Codes final rule that implements the annual Therefore, beginning in July 2006,
OPPS update. CMS will implement in the regular
In the proposed rule, we proposed We are concerned that not recognizing quarterly update of the OPPS the
that we would assign new HCPCS codes for 6 months (from July to January) the Category III CPT codes that the AMA
for CY 2006 to appropriate APCs and/ Category III codes that the AMA releases releases in January 2006 for
or status indicators and that we would each January for implementation in July implementation in July 2006. CMS will
implement them in our final rule. may hinder timely collection of data implement in the January 2007 update
However, we received some comments pertinent to the services described by of the OPPS the Category III CPT codes
regarding individual new HCPCS codes the codes. Moreover, delay in that the AMA releases in July 2006, and
that commenters expect to be recognizing these codes could inhibit so forth.
implemented for the first time in the CY access to the services they describe
2006 OPPS. We do not specifically because of provider reluctance to B. Variations Within APCs
respond to those comments in this final furnish a service that defaults to the 1. Background
rule. We could not discuss APC and/or OPPS payment assigned to unlisted
status indicator assignments for new CY codes. Also, we have on occasion found Section 1833(t)(2)(A) of the Act
2006 HCPCS codes in the proposed rule redundancy between Category III CPT requires the Secretary to develop a
because the new CY 2006 HCPCS codes codes and some of the C-codes, which classification system for covered
were not available when we issued the are only payable under the OPPS and hospital outpatient services. Section
proposed rule. Rather, as has been our created by us in response to 1833(t)(2)(B) provides that this
practice in the past, we implement new applications for New Technology classification system may be composed
HCPCS codes in the OPPS final rule, at services. Therefore, beginning in CY of groups of services, so that services
which time we invite public comment 2006, we are modifying this process and within each group are comparable
about our treatment of the new codes. recognizing Category III CPT codes that clinically and with respect to the use of
We subsequently respond to those are released by the AMA in January to resources. In accordance with these
comments in the final rule for the be effective beginning July of the same provisions, we developed a grouping
following year’s OPPS update. calendar year in which they are issued, classification system, referred to as the
New 2006 HCPCS codes are rather than deferring recognition of Ambulatory Payment Classification
designated in Addendum B with those codes to the following calendar Groups (or APCs), as set forth in
Comment Indicator ‘‘NI.’’ The status year update of the OPPS. Adopting this § 419.31 of the regulations. We use
indicator and/or APC assignments for approach means that new Category III Level I and Level II HCPCS codes and
all HCPCS codes flagged with Comment CPT codes will be recognized under the descriptors to identify and group the
Indicator ‘‘NI’’, which are new 2006 OPPS biannually rather than annually. services within each APC. The APCs are
HCPCS codes, are subject to public Some of the new Category III CPT organized such that each group is
comment. codes may describe services that our homogeneous both clinically and in
medical advisors determine to be terms of resource use. Using this
3. Treatment of New Mid-Year Category similar in clinical characteristics and classification system, we have
III CPT Codes resource use to HCPCS codes in an established distinct groups of surgical,
Twice each year, the AMA issues existing APC. In these instances, we diagnostic, partial hospitalization
Category III CPT codes, which the AMA may assign the Category III CPT code to services, and medical visits. We also
defines as temporary codes for emerging the appropriate clinical APC. Other have developed separate APC groups for
technology, services, and procedures. Category III CPT codes may describe certain medical devices, drugs,
The AMA established these codes to services that our medical advisors biologicals, radiopharmaceuticals, and
allow collection of data specific to the determine are not compatible with an brachytherapy devices.
service described by the code which existing clinical APC, yet are We have packaged into each
otherwise could only be reported using appropriately provided in the hospital procedure or service within an APC
a Category I CPT unlisted code. The outpatient setting. In these cases, we group the cost associated with those
AMA releases Category III CPT codes in may assign the Category III CPT code to items or services that are directly related
and integral to performing a procedure unusual cases, such as low-volume to remove these APCs from the list of
or furnishing a service. Therefore, we do items and services. exceptions. The APC Panel
not make separate payment for packaged recommended maintaining CPT codes
2. Application of the 2 Times Rule
items or services. For example, 45303 (Proctosigmoidoscopy, rigid; with
packaged items and services include: In accordance with section 1833(t)(2) dilation) and 45305
use of an operating, treatment, or of the Act and § 419.31 of the (Proctosigmoidoscopy, rigid; with
procedure room; use of a recovery room; regulations, we annually review the biopsy, single or multiple) in APC 0146
use of an observation bed; anesthesia; items and services within an APC group because the median cost for these codes
medical/surgical supplies; to determine, with respect to appeared too high, and they believed
pharmaceuticals (other than those for comparability of the use of resources, if that the CY 2004 claims were aberrant.
which separate payment may be the median of the highest cost item or In addition, the APC Panel
allowed under the provisions discussed service within an APC group is more recommended that CMS move CPT code
in section V of this preamble); and than 2 times greater than the median of 45309 (Proctosigmoidoscopy, rigid; with
incidental services such as the lowest cost item or service within removal of single tumor, polyp, or other
venipuncture. Our packaging that same group (‘‘2 times rule’’). We lesion by snare technique) from APC
methodology is discussed in section make exceptions to this limit on the 0147 and assign it to a new proposed
II.A. of this final rule with comment variation of costs within each APC APC 0428. Based on the results of our
period. group in unusual cases such as low- review of several years of claims data
Under the OPPS, we pay for hospital volume items and services. The statute and our study of hospital resource
outpatient services on a rate-per-service provides no exception in the case of a homogeneity, we disagreed that those
basis that varies according to the APC drug or biological that has been claims data were aberrant. We proposed
designated as an orphan drug under to move CPT codes 45303 and 45305 to
group to which the service is assigned.
section 526 of the Federal Food, Drug, APC 0147 and to keep CPT 45309 in
Each APC weight represents the hospital
and Cosmetic Act because these drugs APC 0147, to resolve the 2 times rule
median cost of the services included in
are assigned to individual APCs. violation.
that APC relative to the hospital median During the APC Panel’s February 2005
cost of the services included in APC We received no public comments
meeting, we presented median cost and concerning our proposed APC
0601 (Mid-Level Clinic Visits). The APC utilization data for the period of January
weights are scaled to APC 0601 because assignments for CPT codes 45303, 45305
1, 2004, through September 30, 2004, and 45309 and are making final our
a mid-level clinic visit is one of the concerning a number of APCs that
most frequently performed services in proposal, without modification.
violated the 2 times rule and asked the b. APC 0342: Level I Pathology, APC
the outpatient setting. APC Panel for its recommendation. 0433: Level II Pathology, APC 0343:
Section 1833(t)(9)(A) of the Act After carefully considering the Level III Pathology. To resolve a 2 times
requires the Secretary to review the information and data we presented, the rule violation, the APC Panel
components of the OPPS not less than APC Panel recommended moving a total recommended moving CPT codes 88108
annually and to revise the groups and of 65 HCPCS codes from their currently (Cytopathology, concentration
relative payment weights and make assigned APCs to different APCs to technique, smears and interpretation)
other adjustments to take into account resolve the 2 times rule violations. Of and 88112 (Cytopathology, selective
changes in medical practice, changes in the 65 HCPCS code reassignments cellular enhancement technique with
technology, and the addition of new recommended by the APC Panel, we interpretation, except vaginal or
services, new cost data, and other concurred with 58 of the recommended cervical) from APC 0343 to a proposed
relevant information and factors. reassignments. Therefore, we proposed new APC 0433. The APC Panel also
Section 1833(t)(9)(A) of the Act, as to reassign the HCPCS codes as recommended moving CPT codes 88319
amended by section 201(h) of the BBRA indicated in Table 7 of the proposed (Determinitive histochemistry or
of 1999, also requires the Secretary, rule (70 FR 42703). cytochemistry to identify enzyme
beginning in CY 2001, to consult with The seven HCPCS code movements constituents) and 88321 (Consultation
an outside panel of experts to review the that the APC Panel recommended, but and report on referred slides prepared
APC groups and the relative payment upon further review we proposed not to elsewhere) from APC 0342 to a
weights (the APC Panel accept, are discussed below. We include proposed new APC 0433. Based on the
recommendations for CY 2006 OPPS in our discussion the assignments we results of our review of several years of
and our responses to them are discussed also proposed and the final assignments hospital claims data and our study of
in sections III.B. and III.C.4. of this for CY 2006. hospital resource homogeneity, we
preamble). a. APC 0146: Level I Sigmoidoscopy, proposed a different way to resolve the
Finally, as discussed earlier, section APC 0147: Level II Sigmoidoscopy, APC 2 times rule violation. We proposed to
1833(t)(2) of the Act provides that, 0428: Level III Sigmoidoscopy. APCs place CPT codes 88319 and 88112 in
subject to certain exceptions, the items 0146 and 0147 were exceptions to the 2 APC 0343 and to place CPT codes 88108
and services within an APC group times rule in CY 2005. At the time of the and 88321 in new APC 0433.
cannot be considered comparable with proposed rule, our analysis of those two We received no public comments
respect to the use of resources if the APCs based on partial year CY 2004 concerning our proposal.
highest median (or mean cost, if elected data revealed greater violations of the 2 We will finalize, without modification
by the Secretary) for an item or service times rule and changing relative our proposal to assign CPT codes 88112
in the group is more than 2 times greater frequencies of simple and complex and 88319 to APC 0343 and to assign
than the lowest median cost for an item procedures in these two APCs. Thus, for CPT codes 88108 and 88321 to new APC
or service within the same group CY 2006 the APC Panel assisted us in 0433.
(referred to as the ‘‘2 times rule’’). We reconfiguring these two APCs into three c. Other Comments on the Proposed
use the median cost of the item or related APCs to resolve the two times List of APC Assignments to Address 2
service in implementing this provision. violations and improve their clinical Times Violations. We received a few
The statute authorizes the Secretary to and resource homogeneity based on the comments concerning our proposed
make exceptions to the 2 times rule in partial CY 2004 hospital claims data and reassignments for several of the other
HCPCS codes (for example, CPT codes • Opportunity for upcoding and code based on data from January 1, 2004
57155, 75790, and 88187) indicated in fragments. through September 30, 2004. For this
Table 7 of the proposed rule (70 FR For a detailed discussion of these final rule with comment period, we
42703) and the responses are included criteria, refer to the April 7, 2000 OPPS used data from January 1, 2004 through
in clinically relevant sections, final rule with comment period (65 FR December 31, 2004. Thus, after
elsewhere in this preamble. 18457). responding to all of the comments on
After carefully reviewing our final Table 8 published in the proposed the proposed rule and making changes
data and all comments received rule (70 FR 42705) listed the APCs that
to APCs based on those comments, we
concerning our proposed assignments of we proposed to exempt from the 2 times
rule based on the criteria cited above. analyzed the full CY 2004 data to
the 58 HCPCS codes, we are finalizing identify APCs with 2 times rule
those assignments as proposed. For cases in which a recommendation
by the APC Panel appeared to result in violations.
3. Exceptions to the 2 Times Rule or allow a violation of the 2 times rule, Based on those final data, we found
As discussed earlier, we may make we generally accepted the APC Panel’s that there were 41 APCs with 2 times
exceptions to the 2 times limit on the recommendation because those violations. We were able to remedy two
variation of costs within each APC recommendations were based on violations of the 2 times rule that
group in unusual cases such as low- explicit consideration of resource use, appeared in the final data for APC 0363
volume items and services. At the time clinical homogeneity, hospital (Level I Otorhinolaryngologic Function
of the proposed rule, taking into account specialization, and the quality of the Tests) and APC 0010, (Level I
the APC changes that we proposed for data used to determine the APC Destruction of Lesion). We moved CPT
CY 2006 based on the APC Panel payment rates that we proposed for CY code 92588 (Evoked otoacoustic
recommendations discussed in section 2006. The median costs for hospital emissions; comprehensive or diagnostic
III.B.1. of this preamble and the use of outpatient services for these and all
evaluation) from APC 0363 to APC 0660
CY 2004 claims data to calculate the other APCs can be found on the CMS
(Level II Otorhinolaryngologic Function
median costs of procedures classified in Web site: http//www.cms.hhs.gov.
We received a number of comments Tests) to address a 2-times violation in
the APCs, we reviewed all the APCs to
about some of the procedures assigned APC 0363. We applied the criteria as
determine which APCs would not
satisfy the 2 times rule criteria. We used to APCs that we proposed to make described earlier to finalize the APCs
the following criteria to decide whether exempt from the 2 times rule for CY that are exceptions to the 2 times rule
to propose exceptions to the 2 times rule 2006. Those discussions are elsewhere for CY 2006.
for affected APCs: in the preamble, in sections related to Listed below in Table 8 is the final
• Resource homogeneity the types of procedures that were the revised list of APCs that are exceptions
• Clinical homogeneity subject of the comments. to the 2 times rule for CY 2006.
• Hospital concentration For the proposed rule the listed
• Frequency of service (volume) exceptions to the 2 times rule were BILLING CODE 4120–01–P
ER10NO05.014</GPH>
BILLING CODE 4120–01–C their business decisions regarding increase over the past 2 years, we
C. New Technology APCs acquisition of high cost capital recognized that the $0 to $50 cost band
equipment taking into consideration represented by ‘‘S’’ status APC 1501
1. Introduction their knowledge about their entire (New Technology, Level I, $0–$50) and
In the November 30, 2001 final rule patient base (Medicare beneficiaries ‘‘T’’ status APC 1538 (New Technology,
(66 FR 59903), we finalized changes to included) and an understanding of Level I, $0–$50) spanned too broad of a
the time period a service was eligible for Medicare’s and other payors’ payment cost interval to accurately represent the
payment under a New Technology APC. policies. lower costs of an ever-increasing
Beginning in CY 2002, we retain As stated earlier, in a budget neutral number of procedures that are
services within New Technology APC environment we do not make payments appropriate for New Technology APC
groups until we gather sufficient claims that fully cover hospitals’ costs, assignment. Therefore, we proposed to
data to enable us to assign the service including those for the purchase and refine this cost band to five $10
to a clinically appropriate APC. This maintenance of capital equipment. We increments, resulting in the creation of
policy allows us to move a service from rely on providers to make their an additional 10 New Technology APCs
a New Technology APC in less than 2 decisions regarding the acquisition of to accommodate the two parallel sets of
years if sufficient data are available. It high cost equipment with the New Technology APCs, one set with a
also allows us to retain a service in a understanding that the Medicare status indicator of ‘‘S’’ and the other set
New Technology APC for more than 3 program must be careful to establish its with a status indicator of ‘‘T.’’ We also
years if sufficient data upon which to initial payment rates for new services proposed to eliminate the two $0 to $50
base a decision for reassignment have that lack hospital claims data based on cost band New Technology APCs 1501
not been collected. realistic utilization projections for all and 1538, so that the cost bands of all
Every year we receive many requests such services delivered in cost efficient New Technology APCs would continue
for higher payment amounts for specific hospital outpatient settings. As the to be mutually exclusive. Table 9
procedures under the OPPS because OPPS acquires claims data regarding published in the proposed rule (70 FR
they require the use of expensive hospital costs associated with new 42706) contained a listing of the 10
equipment. We are taking this procedures, we will regularly examine additional New Technology APCs that
opportunity to respond in general to the the claims data and any available new we proposed for CY 2006.
issue of hospitals’ capital expenditures information regarding the clinical As we explained in the November 30,
as they relate to the OPPS and Medicare. aspects of new procedures to confirm
Under the OPPS, our goal is to make 2001 final rule (66 FR 59897), we
that our OPPS payments remain generally keep a procedure in the New
payments that are appropriate for the appropriate for procedures as they
services that are necessary for treatment Technology APC to which it is initially
transition into mainstream medical assigned until we have collected data
of Medicare beneficiaries. The OPPS practice.
and most other Medicare payment sufficient to enable us to move the
systems are budget neutral and so, 2. Refinement of New Technology Cost procedure to a clinically appropriate
although we do not pay full hospital Bands APC. However, in cases where we find
costs for procedures, we believe that our In the November 7, 2003 final rule that our original New Technology APC
payment rates generally reflect the costs with comment period, we last assignment was based on inaccurate or
that are associated with providing care restructured the New Technology APC inadequate information, or where the
to Medicare beneficiaries in cost- groups to make the cost intervals more New Technology APCs are restructured,
efficient settings. Further, we believe consistent across payment levels (68 FR we may, based on more recent resource
that our rates are adequate to assure 63416). We established payment levels utilization information (including
access to services for most beneficiaries. in $50, $100, and $500 intervals and claims data) or the availability of refined
For many emerging technologies there expanded the number of New New Technology APC bands, reassign
is a transitional period during which Technology APCs. We also retained two the procedure or service to a different
utilization may be low, often because parallel sets of New Technology APCs, New Technology APC that most
providers are first learning about the one set with a status indicator of ‘‘S’’ appropriately reflects its cost. Therefore,
techniques and their clinical utility. (Significant Procedure, Not Discounted we proposed to discontinue New
Quite often, the requests for higher When Multiple) and the other set with Technology APCs 1501 and 1538, and
payment amounts are for new a status indicator of ‘‘T’’ (Significant reassign the procedures currently
procedures in that transitional phase. Procedures, Multiple Reduction assigned to them to proposed New
The requests, and their accompanying Applies). We did this restructuring Technology APCs 1491 through 1500.
estimates for expected Medicare because the number of procedures Table 10 published in our proposed rule
beneficiary or total patient utilization, assigned to New Technology APCs had (70 FR 42707) summarized these
often reflect very low rates of patient increased, and narrower cost bands proposed New Technology APC
use, resulting in high per use costs for were necessary to avoid significant reassignments.
which requestors believe Medicare payment inaccuracies for new We received no public comments in
should make full payment. Medicare technology services. Therefore, we response to our proposed refinement of
does not, and we believe should not, dedicated two new series of APCs to the the New Technology APC cost bands.
assume responsibility for more than its restructured New Technology APCs, Therefore, for CY 2006, we are finalizing
share of the costs of procedures based which allowed us to narrow the cost our proposal to discontinue New
on Medicare beneficiary projected bands and afforded us the flexibility to Technology APCs 1501 and 1538, and
utilization and does not set its payment create additional bands as future needs reassign the procedures currently
rates based on initial projections of low dictated. assigned to them to New Technology
utilization for services that require As the number of procedures that APCs 1491 through 1500. Table 9 lists
expensive capital equipment. For the qualify for placement in the New the final New Technology APCs 1491
OPPS, we rely on hospitals to make Technology APCs has continued to through 1500 for CY 2006.
TABLE 9.—NEW TECHNOLOGY APCS FOR CY 2006

Final CY
Status Indi-
APC Descriptor 2006 pay-
cator ment rate
1491 ........ New Technology—Level IA ($0–$10) ......................................................................................................... S $5

1492 ........ New Technology—Level IB ($10–$20) ....................................................................................................... S 15
1493 ........ New Technology—Level IC ($20–$30) ...................................................................................................... S 25
1494 ........ New Technology—Level ID ($30–$40) ...................................................................................................... S 35
1495 ........ New Technology—Level IE ($40–$50) ....................................................................................................... S 45
1496 ........ New Technology—Level IA ($0–$10) ......................................................................................................... T 5
1497 ........ New Technology—Level IB ($10–$20) ....................................................................................................... T 15
1498 ........ New Technology—Level IC ($20–$30) ...................................................................................................... T 25
1499 ........ New Technology—Level ID ($30–$40) ...................................................................................................... T 35
1500 ........ New Technology—Level IE ($40–$50) ....................................................................................................... T 45
3. Requirements for Assigning Services helps to assure such access, and that an technology services across delivery
to New Technology APCs enhancement to the New Technology settings and bring to light other needed
APC application process might further coding changes or clarifications. We
In the April 7, 2000, final rule (65 FR
encourage appropriate dissemination of further proposed that a copy of the
18477), we created a set of New
and Medicare beneficiary access to new submitted CPT application be filed with
Technology APCs to pay for certain new
technology services. us as part of the application for a New
technology services under the OPPS. We We are interested in promoting review Technology APC assignment under the
described a group of criteria for use in of the coding, clinical use, and efficacy OPPS, along with CPT’s letter
determining whether a service is eligible of new technology services by the acknowledging or accepting the coding
for assignment to a New Technology greater medical community through our application. We reminded the public
APC. We subsequently modified this set New Technology APC application and that we do not consider an application
of criteria in our November 30, 2001, review process for the OPPS. Therefore, complete until all informational
final rule (66 FR 59897 to 59901), in addition to our current information requirements are provided. In addition,
effective January 1, 2002. These requirements at the time of application, we reminded the public that when we
modifications were based on changes in we proposed to require that an assign a new service a HCPCS code and
the data (we were no longer required to application for a code for a new provide for payment under the OPPS,
use CY 1996 data to set payment rates) technology service be submitted to the these actions do not imply coverage by
and on our continuing experience with American Medical Association’s the Medicare program, but indicate only
the assignment of services to New (AMA’s) CPT Editorial Panel before we how the procedure or service may be
Technology APCs. accept a New Technology APC paid if covered by the program. Fiscal
In the course of reviewing application for review. In making this intermediaries must determine whether
applications for New Technology APC proposal, we specifically indicated that a service meets all program
assignments under the OPPS, we have we would not change our current requirements for coverage, for example,
encountered many situations in which criteria for assignment of a service to a that it is reasonable and necessary to
there is extremely limited clinical New Technology APC. Rather, the intent treat the beneficiary’s condition and
experience with new technology of the proposed new requirement was to whether it is excluded from payment.
services regarding their use and efficacy encourage timely review of a new CMS may also make National Coverage
in the typical Medicare population. In service or procedure by the wider Determinations (NCDs) on new
some cases, there has been ambiguity medical community as CMS is technology procedures.
regarding how the new technology reviewing it for possible new coding We received a large number of public
services fit within the standard coding and assignment to a New Technology comments concerning our proposal.
framework for established procedures, APC under the OPPS. The AMA’s CPT Comment: Many commenters
and there may be no specific coding Editorial Panel has only one CPT code suggested that the AMA CPT Editorial
available for the new technology application that is used by applicants Panel may not be the most appropriate
services in other settings or for use by requesting consideration for either forum for a federally mandated
other payers. Nevertheless, applicants Category I or III codes. We indicated decision. Some of these commenters
requesting assignment of services to that we would accept either a Category pointed out that meetings of the panel
New Technology APCs request that we I or Category III code application to the and the considerations on which it
provide billing and payment CPT Editorial Panel. The application bases decisions are not open to the
mechanisms under the OPPS for the requests relevant clinical information public. Other commenters questioned
new technology services through the regarding new services, including their whether there is an inherent conflict in
establishment of codes, descriptors, and appropriate use and the patient the proposal, as CMS and the AMA are
payment rates. As stated in section I.F. populations expected to benefit from the distinctly separate organizations with
of this preamble, we remain committed services, which would provide us with different objectives and constituencies,
to the overarching goal of ensuring that useful additional information. CPT code so that it may not be in the interest of
Medicare beneficiaries have timely applications are reviewed by the CPT Medicare beneficiaries to tie CMS policy
access to the most effective new medical Editorial Panel, whose members bring to proceedings of the AMA. Other
treatments and technologies in diverse clinical expertise to that review. commenters suggested that even the
clinically appropriate settings. In the CY In the proposed rule, we indicated our requirement that the AMA acknowledge
2006 proposed rule, we indicated that belief that consideration by the CPT receipt of the coding application
we believed that our current New Editorial Panel might facilitate suggests that the AMA has potential
Technology APC assignment process appropriate dissemination of the new ‘‘veto’’ power over CMS authority and
may thus constitute an unlawful delaying our decision beyond the point compliance has great potential for
delegation of federal decision making. at which a New Technology APC causing confusion among providers.
Response: We wish to clarify that it assignment is appropriate. Our proposal Comment: One commenter stated that
was not our proposal to rely upon the was meant only to encourage the our concern about limited experience
decisions of the CPT Editorial Panel. appropriate dissemination of with new technologies in the Medicare
Nor did we propose to adopt the information, data collection, and review population is more appropriately related
objectives or policies of the AMA or the by the wider medical community to coverage of new procedures, rather
CPT Editorial Panel. Rather, we concerning new technologies. Finally, it than to coding issues. Assignment of a
proposed only to require initiation of is worth emphasizing that while our service to a New Technology APC is
the process for obtaining a CPT code in objective is to consider for assignment meant to create a mechanism for
order to foster the common objective of to New Technology APCs services that gathering utilization data, and does not
appropriately recognizing new represent technologies that are ‘‘truly guarantee coverage and payment of a
technology services and properly coding new,’’ for designation under the OPPS technology. Coverage for new
those services. Under our proposal, we we specifically rely on our criteria technologies remains the discretion of
would continue to make determinations which require that a service or Medicare contractors, unless CMS
about the need for new HCPCS codes procedure not be described by any makes a national coverage
and about appropriate assignments to existing HCPCS code or combination of determination. This commenter claimed
New Technology APCs to establish codes, that it cannot be adequately that the proposal to require a CPT
payment rates completely represented in the claims data being coding application implies that CMS
independently of the CPT Editorial used for the most current annual OPPS would be effectively removing the
Panel. We also proposed only that the update, and that there is no appropriate Medicare contractors from the coverage
applicant show us a letter of clinical APC for its assignment. We do decision-making process.
acknowledgement or receipt from the not believe that our proposal to require Response: We do not believe that our
AMA, not that the AMA would send us initiation of the CPT application process proposal would have the effect of
such a letter or withhold such a letter would result in delays beyond the point removing Medicare contractors from the
as a way to exercise veto power. at which these criteria could still be process of making coverage decisions, or
Comment: One commenter stated that met. otherwise usurp the role of the coverage
while it is possible for manufacturers to Comment: One commenter stated that decision-making process. Rather, the
file CPT applications to the AMA, the there are only three submission proposal would serve merely to promote
AMA has usually discouraged this deadlines per year for CPT applications, evaluation of new services by the wider
practice and specialty societies have which do not comport to the quarterly medical community, so that the results
been slow to support CPT applications schedule for filing New Technology of this evaluation could serve to assist
not vetted through them. Another applications to CMS. in broader distribution of new clinical
commenter indicated that Response: The filing dates for New information, establishment of
manufacturers are often not in receipt of Technology applications are appropriate standard coding, and wider
letters from the AMA indicating receipt informational dates published on our dissemination of promising
of a CPT coding application, and hence website as reference points for technologies. Even when the CPT
may not be able to provide these letters application receipt related to the earliest Editorial Panel establishes a new code,
with their application for New date for adding a new code for an Medicare contractors have discretion to
Technology APC assignment. Other approved service to a New Technology make local coverage decisions, and CMS
commenters claimed that if a APC, that is, the beginning of the retains the right to make national
manufacturer waits to gather clinical following quarter. The actual dates for coverage determinations with regard to
and utilization information sufficient to adding new services, if approved, are the procedure or service.
support a Category I code, the often later than the next quarter, Comment: Some commenters
application may no longer meet CMS’s depending on specific issues related to indicated that there are unique payment
definition of ‘‘truly new’’ and may be comprehensive evaluation of a specific concerns related to applying for a
ineligible for a New Technology APC application, which often involves Category III CPT code, asserting that
assignment. requests for additional information. many Medicare contractors view
Response: Our proposal did not Comment: One commenter Category III CPT codes as an indication
specifically require that manufacturers recommended as an alternative that that a technology is experimental or
submit applications to the CPT Editorial CMS create codes for qualifying services investigational. One commenter
Panel. In fact, we specifically proposed and assign them to a New Technology provided as an example a proposed and
only that such an application ‘‘be APC and stipulate that those applicants final policy of one CMS contractor not
submitted,’’ and did not stipulate the must apply to the CPT Editorial Panel to cover any technologies described by
identity of the applicant. In addition, we for a new code within one year. Category III CPT codes, ‘‘since these
were not proposing to require that Response: We do not believe that it codes have been created to track new,
manufacturers provide us with copies of would be advisable to accept this unproven therapies and tests.’’ Another
letters they had received directly from recommendation. First, we do not have commenter claimed that assignment of a
the AMA. We understand, however, that a policy of making contingent approvals Category III CPT code often results in
manufacturers ordinarily work in for payment. All requirements for non-coverage decisions by both local
concert with the actual applicants for Medicare payment must be met at the carriers and fiscal intermediaries.
new CPT codes, and expect that it is time a code and payment rate are Response: The example provided by
reasonable for a manufacturer to be able established. In addition, this commenters about the implications of
to obtain such a letter. We also recommendation would require Category III CPT codes for coverage
specifically required only the initiation establishing a mechanism to monitor decisions by Medicare contractors
of the application process, not the compliance with the condition of appears to be relevant outside the
receipt of a positive (or negative) approval. Finally, the necessity of context of the OPPS, mainly within the
decision by the CPT Editorial Panel, in withdrawing some HCPCS codes from physician payment context. We have
order to prevent the process from coding and payment because of non- been unable to identify any fiscal
intermediary that has adopted any such investigational, and therefore refuse to societies, which indicates the level of
broad noncoverage policy regarding cover procedures or services described acceptance of a new technology in the
Category III CPT codes. by Category III CPT codes. These medical community, relevant to the
Comment: One group of commenters commenters asserted that because of the OPPS because physicians perform new
urged us not to adopt the proposed risk of non-coverage of Category III CPT technology procedures in the hospital
requirement that a CPT application codes, manufacturers may forego setting. One commenter indicated that
submission to the AMA’s CPT Editorial applying for New Technology APC there may be specific occasions when it
Panel be required before we accept a assignments, or will be hesitant to apply is necessary to submit applications to
New Technology APC application for for both a New Technology APC the CPT Editorial Panel and CMS
review. These commenters asserted that assignment and CPT code simultaneously. Another commenter
a CPT coding application, in and of simultaneously. Without unique service requested that we recognize potential
itself, will not provide us with input codes, it will be more difficult for CMS delays resulting from this additional
from the greater medical community, to track new services and eventually to step and expedite our review of New
unless we wait until the CPT Editorial assign them to clinically appropriate Technology APC applications. Finally,
Panel has made a coding decision and APCs. The result will be fewer New one commenter indicated appreciation
that decision has been made public. Technology APC applications, and less of the reasons for the proposal, but
Because of the timing of the CPT code beneficiary access to new technologies. asked that this new requirement remain
review process, it is not reasonable for A few commenters asserted that little as stated, that an application needs to be
CMS to wait until the CPT Editorial would be gained by the mere filing of submitted to the AMA CPT Editorial
Panel has made a public coding a CPT application without a coding Panel, but that it did not necessarily
decision, which can take 6–12 months determination from the CPT Editorial need to be reviewed and processed by
for an internal decision, and 6–24 Panel, because the information in both the CPT Editorial Panel prior to CMS’s
months before publishing a coding applications is similar. One commenter consideration of the New Technology
decision for a Category I code. These suggested that if there is information APC application.
from the CPT application that CMS Response: In light of the strong
commenters also believed that this
requires to evaluate the New division among the commenters on the
requirement would delay access to new
Technology APC application, we should merits of our proposal to require that a
services, asserting that applying for a
add such questions to our application. CPT coding request be submitted prior
CPT code is a lengthy process and In lieu of using the CPT coding to submission of a New Technology
involves months of gathering process to encourage review by the APC application, we have decided not
information on the technology and its wider medical community, a few to adopt this proposal at this time. Many
use, working with relevant specialty commenters recommend that CMS of the comments reflect confusion about
societies to obtain support for a new appoint a standing advisory committee the specifics of the proposal. Therefore,
code and to develop a clinical vignette, of clinical representatives, or another we are concerned that, because the
and consulting within the CPT Editorial independent group of medical experts commenters did not understand some
Panel. In order to obtain a Category I from specialties and hospitals, to review specifics of this proposal during their
code, the new technology must have New Technology APC applications and review of the CY 2006 proposed rule,
widespread usage across the country provide input to CMS. Other we may similarly not be in a position to
and in multiple locations, and its commenters also suggested that we understand all the implications of the
efficacy must be documented in U.S. convene an independent group of concerns noted by the commenters. In
peer-reviewed journal articles. Other medical experts to assist in the review particular, we did not intend to tie our
commenters stated that a number of of applications as necessary. decision-making regarding applications
issues regarding the CPT coding process A number of other commenters, for New Technology APC assignment to
make our proposal impractical, in principally from hospitals and hospital the CPT Editorial Panel process, but
addition to the lack of a guaranteed associations, supported our proposal to wished to promote review of the coding,
timely review by the CPT Editorial require a CPT application prior to our clinical use, and efficacy of new
Panel. The AMA does not have consideration of a New Technology APC technology services by the wider
‘‘official’’ evidence and utilization application because they favored less medical community to facilitate the
thresholds for coding applications. ambiguity in the coding framework. swift spread of promising new
However, commenters indicated that Some of these commenters said that technologies into medical practice.
physician specialty societies often there is a proliferation of C-codes and G- While we are deferring our proposal,
require certain thresholds of utilization codes, which are burdensome to we continue to believe that timely
or clinical evidence be met before a hospitals as such codes are often not review of potential new services by the
Category I CPT application for a new recognized by other payers, and our wider medical community is valuable,
service is submitted, and there is proposal will minimize the need for given our experience that many services
considerable variation in such expedited issuance of C-codes or G- that have requested OPPS coding and
thresholds among the specialty codes. They asserted that hospitals assignment to a New Technology APC
societies. If a manufacturer submits an would benefit by reduced duplication of have demonstrated limited clinical
application without society support or codes for services recognized by efficacy. We also continue to believe
before there is widespread utilization, Medicare and other payers. Other that new technology services deserve
the application is more likely to be commenters claimed that the correct timely standard and comprehensive
denied or assigned a Category III CPT process for coding new services is to coding established through the CPT
code, even if that was not requested. start by way of the CPT Editorial Panel Editorial Panel review process to permit
Some commenters indicated that there review process rather than the New appropriate payment and data collection
are payment concerns in applying for a Technology APC application process. regarding their utilization patterns and
Category III CPT code, asserting that Other commenters also supported the clinical outcomes. We also do not agree
most private payers view Category III requirement on the grounds that the with many of the criticisms directed
CPT codes as indication that a CPT review process is rigorous, against the proposal. For example, as
technology is experimental or including input by physician specialty stated previously, we do not agree that
our proposal to have applicants file a 4. New Technology Services believe that claims for CPT code 20982
CPT coding request before submission a. Ablation of Bone Tumors without a separate supply charge do not
of a New Technology APC application contain charges for all costs associated
would make the CPT coding process a Comment: One commenter requested with the procedure. The catheter
Federal decisionmaking forum. This is that we reassign CPT code 20982 charges may be wrapped into the charge
because we would not require a (Ablation, bone tumor(s) (eg, osteoid for the procedure itself. The code-
decision to be made by the CPT osteoma, metastasis) radiofrequency, specific median indicates that even the
Editorial Panel. However, in light of the percutaneous, including computed current New Technology APC payment
numerous and considered comments tomographic guidance) from New at $1,850 may be too high, but given the
Technology Level XX, APC 1557 to New information provided by the commenter
opposed to the proposal, we are not
Technology Level XXII, APC 1559. The and the relatively low number of CY
proceeding with it at this time.
commenter stated that the procedure 2004 claims available for calculating the
At the same time, we remain has been in New Technology APC 1557 median cost for CPT code 20982, we are
committed to the general goal of for 2 years, and that the payment rate for finalizing our proposal for CY 2006 and
promoting review of the coding, clinical that APC is not adequate to cover the are retaining CPT code 20982 for at least
use, and efficacy of new technology hospitals’ costs. The commenter 1 more year in New Technology APC
services by the wider medical asserted that assignment to that APC 1557.
community. We continue to believe that was based on inadequate information.
such broad and early review of new The commenter used physician practice b. Breast Brachytherapy
technology procedures would enhance expense data to estimate costs to Comment: In response to the
our ability to make appropriate initial perform the ablation procedure, and November 15, 2004 final rule with
and subsequent decisions on stated that the costs far surpass the comment period (69 FR 65682), one
assignments of new services to New OPPS payment amount, largely due to commenter applauded our assignment
Technology APCs and would facilitate the high cost of the necessary of CPT codes 19296 (Placement of
the more rapid dissemination of radiofrequency probe. Further, the radiotherapy afterloading balloon
promising new technologies to all commenter added that its analysis catheter into the breast for interstitial
service settings and appropriate patient found that 2 of the 16 single claims CMS radioelement application) and 19298
populations. Therefore, we will used to calculate the median cost for (Placement of radiotherapy afterloading
continue to study how to best achieve CPT code 20982 for the proposed rule balloon catheters, multiple tube and
these goals of timely review of new were inaccurate because no charge for button type, into the breast for
technologies by the general medical the ablation device, as indicated by the interstitial radioelement application) to
community to validate their clinical absence of a separate supply charge, was New Technology APC 1524 (Level XIV
worth and distinctiveness in included. The commenter believed that $3000–$3500), and CPT code 19297
comparison with existing services and those two claims had a significant effect (Placement of radiotherapy afterloading
to promote more rapid dissemination of on the median cost for CPT code 20982, balloon catheter into the breast for
effective new procedures throughout because of the small number of claims interstitial radioelement application;
standard medical practice. In doing so, for the procedure. The commenters’ concurrent with partial mastectomy) to
we will continue to consider whether analysis further showed that the median New Technology APC 1523 (Level XXIII
the proposal we advanced would serve cost for these procedures was $2,156 $2500–$3000) for CY 2005. The
that goal. We would specifically based on 14 claims that included a commenter stated that these payment
welcome further input on this proposal supply charge. amounts adequately cover the costs of
Response: As we have stated in this the applicator devices involved in the
or alternatives to it. We may reintroduce
preamble, we are committed to relying procedures.
this proposal or advance alternative
on our claims data for making APC Response: We agree with the
approaches at a later date.
assignments as much as possible. While commenter’s acknowledgement that the
As a preliminary matter, we are not we appreciate the external data payment amounts that we assigned to
inclined to accept one alternative provided by the commenter regarding CPT codes 19296, 19297, and 19298 for
recommended by some commenters. the costs of supplies associated with the CY 2005 adequately cover the resource
Specifically, we are not inclined to practice expense inputs for the costs associated with these procedures.
establish a standing advisory committee Medicare Physician Fee Schedule, that Therefore, for CY 2006, we are
to provide input on New Technology payment system utilizes a different maintaining CPT codes 19296 and
applications to the OPPS, as some have methodology for establishing payment 19298 in New Technology APC 1524
suggested. A standing committee for services that is not directly and CPT code 19297 in New
involving outside experts would add applicable to payment rates under the Technology APC 1523.
additional review time that would OPPS. In the case of CPT code 20982,
impede upon our application process, as we believe that our hospital claims data c. Enteryx Procedure
well as prevent us from evaluating New are adequate to support our proposal to A new CPT code, 0133T (Upper
Technology applications for addition to maintain the service in New Technology gastrointestinal endoscopy, including
the OPPS on a quarterly basis, as APC 1557 for CY 2006. CPT code 20982 esophagus, stomach, and either the
appropriate. We prefer to maintain the was a new code for CY 2004 so we have duodenum and/or jejunum as
flexibility that our current process 1 year of hospital data for this appropriate, with injection of implant
provides. In addition, the specific procedure. For CPT code 20982, we material into and along the muscle of
medical expertise required to evaluate have 17 single claims from CY 2004 the lower esophageal sphincter (e.g., for
new technologies would likely vary with a procedure-specific median cost treatment of gastroesophageal reflux
widely from application to application. of $1,578. As we do not require that disease)), was created for
This factor would render consultation hospitals bill a separate supply charge implementation January 1, 2006 to
with a standing advisory committee for the probe that is used for this service describe the procedure currently coded
with fairly stable membership more because there is no specific device C- under the OPPS as HCPCS code C9704
difficult to maintain. code available, we have no reason to (Injection or insertion of inert substance
for submucosal/intramuscular d. Extracorporeal Shock Wave stated that high energy ESWT has a
injections(s) into the upper Treatment similar technology and cost structure,
gastrointestinal tract, under fluoroscopic Comment: Several commenters to including technological devices,
guidance). For CY 2005, C9704 was both the November 15, 2004 final rule maintenance contracts, and specialized
assigned to New Technology APC 1556, with comment period and to our July technical personnel, to extracorporeal
with a payment rate of $1,750. As 25, 2005 proposed rule opposed our shock wave lithotripsy, for the
discussed below, we determined an placement of new HCPCS codes for high fragmentation of kidney stones. These
appropriate APC assignment for this energy Extracorporeal Shock Wave commenters proposed that high energy
procedure for CY 2006. However, in the Therapy (ESWT) services into New ESWT be placed in APC 1559. One
period between publication of the Technology APC 1547. In response to a hospital indicated that its average cost
proposed rule and the end of the New Technology application for ESWT, for ESWT is $2,100. Another commenter
comment period, the product we created new codes for high energy who compared high energy ESWT with
manufacturer recalled this product and ESWT for chronic lateral epicondylitis lithotripsy stated that if we wished to
the Food and Drug Administration has (C9720-tennis elbow) and for chronic compare ESWT with the costs of other
warned physicians about the danger of plantar fasciitis (C9721) effective procedures, then we should use
its use. January 1, 2005, and placed them into lithotripsy, which also employs high
In our analyses to determine the most New Technology APC 1547, with a energy extracorporeal shock waves, but
appropriate APC assignment for the new payment rate of $850 for CY 2005. A for the treatment of kidney stones. The
CPT code, we found that the most number of commenters requested that commenter claimed that many of the
accurate payment will be made by these ESWT services be placed in New other costs associated with the two
retaining the procedure’s current APC Technology APC 1559, which has a procedures were similar as well, with
assignment. We did not automatically payment rate of $2,250. A manufacturer the exception of an imaging component
assign CPT code 0133T to APC 1556 of ESWT equipment, who commented, used with lithotripsy. The commenter
because that CPT code explicitly cited our regulations (42 CFR § 419.31) noted that lithotripsy’s APC assignment,
includes the endoscopy that is integral in stating that APC groups ‘‘must be’’ APC 0169, has a payment rate close to
to the service, whereas the current C- comparable in terms of clinical use and that of New Technology APC 1559.
code does not. For that reason we resources required. This commenter, as Another commenter, commenting only
calculated the claims-based median cost well as another manufacturer, claimed on HCPCS code C9721, recommended
for the procedure by using single claims that New Technology APC 1547 does that high energy ESWT for treatment of
for HCPCS code C9704, on the premise not cover the costs of the ESWT chronic plantar fasciitis be placed in
that if the procedure required procedures for chronic lateral either clinical APC 0055 (Level I Foot
endoscopy and the endoscopy was not epicondylitis and for chronic plantar Musculoskeletal Procedures) or APC
separately billed then the endoscopy fasciitis. The commenters provided their 0056 (Level II Foot Musculoskeletal
charges were reflected in the charges for estimated costs of the procedure at Procedures), claiming that it fits most
HCPCS code C9704 as well as claims for about $2,300 per service for both closely clinically to procedures in APC
HCPCS code C9704 that had a charge for clinical indications. One commenter 0055, and that high energy ESWT is
an endoscopy included to assure us that also indicated that it understood that more homogeneous to either APC 0055
we were capturing the charges for the the AMA’s CPT Editorial Panel intended or 0056 clinically and economically
entire procedure from as many claims as to issue new codes for the two high than to its assigned New Technology
possible. Thus, to determine an energy ESWT services beginning in CY APC. The commenter also stated that
appropriate APC placement for CPT 2006. It stated that when these new CPT any new CPT code beginning in CY
code 0133T we analyzed all single codes become effective, providers and 2006 for high energy ESWT for chronic
claims for HCPCS code C9704, as well payers will be faced with two different plantar fasciitis should replace HCPCS
as claims that had HCPCS code C9704 sets of codes for high energy ESWT, the code C9721 and should be placed in
combined with either CPT code 43234 CPT codes and the HCPCS C-codes, and APC 0055 or 0056.
(Upper gastrointestinal endoscopy, this will cause difficulties with provider Response: When we determine that a
simple primary examination (e.g., with billing and reimbursement. new service is eligible for placement
small diameter flexible endoscope)), or Commenting parties expressed their into a New Technology APC, we then
CPT code 43235 (Upper gastrointestinal belief that our placement of ESWT did perform our own cost analysis and cost
endoscopy including esophagus, not cover the costs of ESWT for plantar estimate, in addition to taking the
stomach, and either the duodenum and/ fasciitis, claiming that the ESWT projected costs submitted in a New
or jejunum as appropriate; diagnostic, equipment costs between $250,000 and Technology APC application into
with or without collection of $400,000 for each unit, varying by consideration. As we stated in our
specimen(s) by brushing or washing). manufacturer, and summarizing other November 30, 2001 final rule (66 FR
The median cost from these claims additional costs, such as those for an 59900) concerning placement of new
which would crosswalk to the new CPT annual maintenance contract, a services into APCs, ‘‘* * * we will not
code is $1,660. Therefore, we believe specialized technician, and anesthesia, limit our determination of the cost of
that it is still appropriate to retain the along with a specialized transport the procedure to information submitted
procedure, coded for CY 2006 as CPT vehicle for the ESWT equipment. by the applicant. Our staff will obtain
code 0133T, in New Technology APC Commenters asserted that high energy information on cost from other
1556 rather than assigning it to a ESWT is comparable to the resource appropriate sources before making a
different New Technology APC or a costs of services in Level II Foot determination of the cost of the
clinical APC at this time. We will be Musculoskeletal Procedures, APC 0056 procedure to hospitals.’’ We compared
deleting HCPCS code C9704. As with all with a CY 2005 payment rate of the necessary hospital resources such as
procedures assigned to New Technology $2,380.72, except that ESWT includes procedure room time, personnel,
APCs, we will reevaluate it for next year the capital costs for the equipment, anesthesia and other resources of the
to determine whether assignment to a transport vehicle, and technician ESWT procedure to various other
clinical APC is more appropriate. mentioned earlier. The commenters also procedures for which we have historical
hospital claims data. Additionally, we methodology made proper comments with other services assigned to the same
took into consideration projected costs difficult if not impossible. The New Technology APC. We also note that
submitted in the New Technology APC commenting party claimed that we could not have included these two
application, including the capital costs finalizing a rule without explanation is C-codes in the proposed rule for CY
and equipment utilization assumptions, unlawful. The commenter furthermore 2005, since we had not yet completed
concluding that HCPCS codes C9720 claimed that the placement of ESWT in our evaluation of the New Technology
and C9721 should be assigned to New APC 1547 was arbitrary, capricious, and APC application and rendered a
Technology APC 1547. New Technology in excess of statutory authority in decision until well after that proposed
APCs, by their very definition, do not violation of the Administrative rule was published. As we have
contain services that are clinically Procedure Act. The commenter claimed announced numerous times elsewhere,
homogeneous, but instead, based solely that it appeared that CMS ignored the we will add New Technology service
on hospital resource considerations, the applicant’s data that it submitted codes and assign their payment rates in
services have estimated costs that place regarding resource use, instead our quarterly updates, where applicable
them into the same New Technology comparing the resource costs for ESWT and available, to facilitate timely
payment band. In contrast, services with entirely different procedures, integration of new codes into the OPPS.
assigned to the same clinical APC are resulting in inaccurate conclusions The timing of the ESWT procedures
homogeneous with respect to both their regarding the costs of ESWT services. decision made the addition of the codes
clinical characteristics and hospital Moreover, the commenter claimed that and payment rates coincident with our
resource utilization. we have improperly classified ESWT CY 2005 final rule publication. In order
There are new CPT codes for CY 2006 into the same APC as endoscopic to have provided a discussion of the
that describe high energy ESWT epidural lysis, which it claims violated codes in a proposed rule,
services, and hospitals providing these the statutory requirement to group implementation of the codes would
services in CY 2006 will use the CPT procedures based on both costs and have been delayed a full year.
codes to report them instead of the two clinical and resource comparability.
predecessor C codes. In particular, CPT e. GreenLight Laser
Response: We disagree that our During the August 2005 APC Panel
code 0102T (Extracorporeal shock wave,
assignment of ESWT to New meeting, the Panel recommended
high energy, performed by a physician,
Technology APC 1547 was arbitrary, accepting CMS’ proposed creation of
requiring anesthesia other than local,
capricious, and in violation of the APA APC 0429 for CY 2006 and the inclusion
involving lateral humeral epicondyle)
will replace HCPCS code C9720. In or the Medicare statute. As stated in our of HCPCS C9713, which describes use of
addition, CPT code 28890 response above, we perform our own the GreenLight Laser System, in this
(Extracorporeal shock wave, high cost analysis and estimate the cost of APC. We received several public
energy, performed by a physician, any eligible new service, while taking comments concerning the reassignment
requiring anesthesia other than local, the projected hospital costs submitted in of HCPCS codes C9713, 52647, 52648,
including ultrasound guidance, the New Technology APC application 50080, and 50081 to APC 0429.
involving the plantar fascia) will replace into consideration. As we have Comment: Several commenters
HCPCS code C9721. We have closely indicated above, our November 30, 2001 requested that CMS maintain HCPCS
reviewed the hospital cost information final rule concerning placement of new code C9713 in its New Technology APC
provided by the commenters, along with services into APCs states that we do not for one more year, which would give
our CY 2004 hospital claims data for limit our determination of the cost of hospitals more time to learn how to
other outpatient hospital services. We the procedure to information submitted correctly code for this service. The
are not confident yet, in the absence of by the applicant. We obtain information commenters stated that our proposed
hospital claims data for the predecessor on costs from other appropriate sources reassignment of the procedure to a
C codes or the new CPT codes, that we before making a determination of the clinical APC was premature because the
can appropriately place CPT codes cost of the procedure to hospitals. In the decision was based on only 9 months of
0102T and 28890 in clinical APCs case of the ESWT procedures, our claims data. They suggested that many
where they would share clinical and clinical review team of physicians hospitals may not even have known
resource homogeneity with other compared the resources such as about the new HCPCS code C9713
services. Therefore, for CY 2006 we are procedure room time, anesthesia, and because it was not implemented until
assigning CPT codes 0102T and 28890 other resources of the ESWT procedure April 5, 2004, and, therefore, CMS
to New Technology APC 1547 with a to the resources of various other received even fewer correctly coded
payment rate of $850. We believe that outpatient hospital procedures for claims than the true number of
the payment rate is appropriate based which we have historical hospital outpatient hospital services actually
on all cost and utilization information claims data. We believe that our claims described by HCPCS code C9713 that
available to us regarding high energy data on other procedures in terms of were performed on Medicare
ESWT and other services provided in a hospital resource use yield relevant cost beneficiaries during the 9 month period.
hospital outpatient setting. information for use in developing cost The commenters pointed out that
Comment: One commenter, the estimates for new procedures without a there is evidence that hospitals have not
applicant for assignment of high energy claims history. As explained above, we been using the HCPCS code properly
ESWT to a New Technology APC, took the New Technology APC and reminded us that some members of
claimed that our assignment of ESWT to applicant’s costs into account as we the APC Panel stated that their hospitals
a New Technology APC violates the reviewed its projected hospital costs were not coding these procedures
Administrative Procedure Act (APA). thoroughly and, in particular, utilized correctly.
The commenter asserted that the OPPS information regarding expected service The commenters stated that the short
proposed rule published August 16, frequency, capital equipment, and other period of time for collection of claims
2004 (69 FR 50448) failed to mention costs in our total cost estimate for the data and the low median cost calculated
ESWT or its placement in an APC. procedures. As discussed earlier, for HCPCS code C9713 based on those
Moreover, the commenter claimed that assignment to a New Technology APC claims support their conjecture that the
our lack of discussion of our does not imply clinical homogeneity claims are not correct, and that the
procedure should remain in its CY 2005 Genitourinary Procedures, the level to MEG for evoked magnetic fields, each
New Technology APC for at least one which we assigned the CY 2004 data for additional modality to be listed
more year to allow for collection of the prostate laser procedures described separately in addition to CPT code
more accurate claims data. by HCPCS code C9713 and CPT codes 95965 for primary procedure. Each of
Response: For CY 2006, CPT revised 52647 and 52648, along with cost data those procedures is currently assigned
the descriptors of two procedure codes for two other procedures also reassigned to a separate New Technology APC, and
for prostate laser procedures described to that APC, resulted in tighter median the commenters believed that they
by CPT codes 52647 and 52648. The cost distributions within all levels of the should remain in those APCs for CY
revised CPT code descriptors are as APCs for cystouresthroscopy and other 2006. The commenters believed that
follows: 52647 (Laser coagulation of genitourinary procedures. We are assignment to APC 0430 was
prostate, including control of confident in the median costs for all of inappropriate because the proposed
postoperative bleeding, complete these prostate procedures because we payment level of $674 was inadequate
(vasotomy, meatotomy, have over 1,000 single claims for each to cover the costs of the procedures and
cystourethroscopy, urethral calibration of those procedures. because the procedures should not be
and /or dilation, and internal Although HCPCS code C9713 was assigned to only one level as their
urethrotomy are included if performed); placed in a New Technology APC for required hospital resources differ
and 52648 (Laser vaporization of only one year, assignment to an significantly.
prostate, including control of appropriate clinical APC is always our The commenters stated that the
postoperative bleeding, complete goal for procedures that spend time median costs based on CMS’ hospital
(vasectomy, meatotomy, assigned to New Technology APCs. In claims data are erroneous because
cystourethroscopy, urethral calibration this case, the creation of a Category I hospitals are not providing accurate
and/or dilation internal urethrotomy CPT code that describes the procedure charges for the procedures. Further, they
and transurethral resection of prostate reported by HCPCS code C9713 during stated that our data did not represent
are included if performed). These CY 2004 and CY 2005 in the OPPS the true costs of the procedures because
descriptors for the CPT codes will be occurred more quickly than is often the MEG procedures are performed on very
implemented on January 1, 2006. Our case. We believe that the procedure’s few Medicare patients.
policy in the OPPS is to maintain only assignment with similar procedures to a In addition to the written comments
one HCPCS code that describes a new clinical APC is appropriate and we received on our proposed rule,
specific procedure, and to the extent will result in accurate payment. Also, hospital and manufacturer
possible adopt CPT coding for services we expect that adoption of a revised representatives made presentations to
provided under the OPPS. In this case CPT code for reporting the noncontact the APC Panel during its August 2005
we determined, based on our review of laser vaporization of the prostate meeting. At that time, the Panel
the new descriptors, that procedures procedure will reduce hospitals’ recommended that CMS retain the MEG
reported using HCPCS code C9713 in administrative burden as they will be procedures in their current New
CY 2005 could be appropriately billed able report CPT codes for prostate Technology APCs and that we collect
with CPT codes for CY 2006. services provided in CY 2006, rather more external data and provide a
We also concluded that the resource than C-codes specific to the OPPS. detailed review of the data for the
use and clinical aspects of the laser After carefully considering all Panel’s consideration at its next
vaporization procedure reported with comments we received, we are meeting.
HCPCS code C9713 and of the prostate finalizing, without modification, our Response: The MEG procedures have
procedures reported using CPT codes proposal to assign CPT codes 52647, been assigned to New Technology APCs
52647 and 52648 prior to revision were 52648, 50080, and 50081 to new APC for 4 years. In CY 2002, all three
so similar that it was appropriate to 0429, Level V Cystourethroscopy and services were assigned a payment rate of
move, as proposed, the CY 2004 Other Genitourinary Procedures. The $150 in a single New Technology APC.
hospital claims data for HCPCS code CY 2004 hospital claims data for HCPCS As these CPT codes were new for CY
C9713 to APC 0429 to contribute to the code C9713 have been assigned to APC 2002 and, therefore, first open to
APC’s median cost calculation for CY 0429 for purposes of establishing the comment in the CY 2002 final rule, we
2006. In addition, there was no reason final CY 2006 payment rate for that received several comments regarding
to postpone adoption of the revised CPT APC. the costs of the services. For CY 2003,
codes for use in the OPPS. Although we all three services were assigned to
had less than a full year of hospital f. Magnetoencephalography (MEG) higher paying New Technology APCs,
claims data available for HCPCS code We proposed to reassign MEG with a rate of $2,250 for CPT code
C9713, we had well over 1,600 single procedures to clinical APC 0043, using 95965, $1,375 for CPT code 95966, and
claims upon which to calculate median CY 2004 claims data to establish median $875 for CPT code 95967. For CY 2004
costs for the procedure, and those costs on which payments would be and CY 2005, the procedures were again
claims data confirmed the resource based. assigned to higher paying New
similarity of this service to the services We received a number of public Technology APCs, with CPT code 95965
coded by CPT codes 52647 and 52648. comments concerning the reassignment moving to a rate of $5,250; CPT code
The medians for these three procedures of CPT codes 95965, 95966, 95967. 95966 to a rate of $1,450; and CPT code
only range from $2,475 to $2,602 and Comment: A number of commenters 95967 to a rate of $950.
the clinical indications for the addressed our proposal to assign For CY 2006, we proposed to assign
procedures are also similar. For CY 2006 magnetoencephalography (MEG) these procedures to one new clinical
we are adopting the newly available procedures to APC 0430. There are three APC because assignment to New
revised CPT codes for reporting the MEG procedures affected by our Technology APCs is generally
procedure previously described by proposal: CPT code 95965, MEG temporary while we are gathering
HCPCS code C9713 and deleting HCPCS recording and analysis for spontaneous hospitals claims data, and we now have
code C9713, effective January 1, 2006. brain magnetic activity; CPT code 3 years of data upon which to base
Creation of a new Level V APC 0042 95966, MEG for evoked magnetic fields, clinical APC assignments. Over the
for Cystourethroscopy and Other single modality; and CPT code 95967, entire 3-year period, the median costs
for all 3 services, especially CPT code for the procedures from various sources, confident in our claims data for MEG
95965, have generally been far less than and the estimates of costs varied procedures and there are no clinical
the OPPS payment rates. In fact, the CY considerably. For example, we were APCs containing other services that
2005 median cost (based on CY 2003 provided with estimates of hospital share clinical and hospital resource
claims data) for CPT code 95965 was costs per case for CPT code 95965 that characteristics with MEG procedures,
only 16 percent of the payment rate, and ranged from $8,321 to $4,054. We we believe that it is most appropriate to
for CY 2006 the median cost (based on believe that some of that variation may place MEG services in New Technology
CY 2004 claims) was only 12 percent of be due to differences in the number of APCs for CY 2006 to accommodate these
the rate. cases used in amortization estimates, as adjusted costs. We agree with the
These procedures are rarely the costs of the equipment used in MEG commenters that these APCs should be
performed on Medicare beneficiaries procedures are significant. However, the ‘‘S’’ status so no multiple procedure
and, therefore, we have a small number fact that volume varies from one reduction will apply, as we are
of claims now and have no expectation provider to another does not mean that determining an adjusted cost for each
that the volume will increase. Patients we will base our payments on the high specific MEG service. For CPT codes
targeted for MEG investigation cost per case that results from allocating 95965 and 95966, we averaged the
procedures are typically between 17 and costs over only a few cases. In the case services’ median costs from CY 2004
32 years old. Furthermore, industry of MEG, we are especially sensitive to claims data with their CY 2005 payment
expectations are that the technology’s this given the very low level of rates to determine adjusted costs for the
growth will be in installations outside of Medicare beneficiary participation in procedures and, therefore, their
hospitals. Nevertheless, almost all the technology because of the clinical appropriate New Technology APC
services with ongoing expectations of circumstances in which MEG services assignments. There were no CY 2004
low volume for Medicare beneficiaries, are typically provided. The OPPS claims for CPT code 95967, and thus, no
including obstetrical services, reside in payment rates for services need to make median cost to use for such an
clinical APCs, not New Technology appropriate payments for the services
adjustment. For that procedure, we
APCs. From CY 2003 claims data we provided to Medicare beneficiaries,
based the New Technology APC
were able to use 20 of the 21 claims recognizing that, as a budget neutral
assignment on the historical
submitted for CPT code 95965, 7 of the payment system, the OPPS does not pay
relationship (66 percent in CY 2005)
7 claims submitted for CPT code 95966, the full hospital costs of services. We
between the New Technology APC
and 4 of the 6 submitted for CPT code expect that our payment rates generally
payment for that procedure and the New
95967 to calculate median costs of the will reflect the costs that are associated
Technology APC payment for CPT code
procedures. For CY 2006 based on CY with providing care to Medicare
2004 hospital claims data, we were able beneficiaries in cost-efficient settings. 95966, the code to which CPT code
to use 10 of the 10 claims submitted for We agree with the APC Panel and the 95967 is an add-on. We used 66 percent
CPT code 95965 and 3 of the 4 commenters that there are no currently of our CY 2006 payment rate for CPT
submitted for CPT code 95966, while we existing clinical APCs containing other code 95966 to determine the adjusted
had no claims for CPT code 95967. services where MEG services could be cost of CPT code 95967 and establish
In contrast to the comments, we are appropriately assigned, based on the New Technology payment amount
committed to relying increasingly on clinical and resource homogeneity with for CPT code 95967 for CY 2006. The
those data, especially in a case like this other OPPS services. We carefully table below provides the CY 2006
where the few hospitals that offer this considered our claims data, information payment rates and the resulting APC
technology have been billing these provided by commenters, and the APC assignments for MEG services.
procedures for at least four years and Panel recommendation that we retain As suggested by the APC Panel, we
the technology is no longer new. the MEG procedures in New Technology will continue to study the APC
However, we also are sensitive to the APCs. As a result of this analysis, we assignments for these procedures over
potential access effects of relying on a determined that using a 50/50 blend of the coming year and invite members of
low volume of claims to establish the code-specific median costs from our the public to submit any information
payment rates, as well as to the APC most recent CY 2004 hospital claims they believe will be helpful to us. We
Panel’s recommendation regarding these data and the CY 2005 code-specific have given these procedures special
procedures as noted by the commenters. payment amounts as the basis for consideration through this adjustment
Therefore, for CY 2006 we considered assignment of the procedures for CY methodology for CY 2006 to help assure
charge and cost information provided to 2006 would be one way to recognize that Medicare beneficiaries have
us during the comment period in both the current payment rates for the appropriate access to MEG services.
addition to our claims data. A procedures, which were originally based With an additional year of data and
commenter provided total charge on the theoretical costs to hospitals of improved consistency of billing by
information billed to multiple payers, providing MEG services, and the hospitals providing MEG services, we
including Medicare, for MEG services median costs based upon our hospital are hopeful that the claims-based
from one hospital which showed claims data regarding actual MEG median costs of these services in future
charges of about $10,500. Also included services provided to Medicare years will more consistently and
in the information we received during beneficiaries by hospitals. Accordingly, appropriately reflect hospitals’ costs of
the comment period were cost estimates for CY 2006, because we are not fully providing MEG procedures.
TABLE 10.—CY 2006 APC ASSIGNMENTS FOR MEG SERVICES

CPT CY 2006 median cost CY 2005 payment Adjusted cost CY 2006 payment amount/APC
95965 ..... $644.71 $5,250 $2,947.35 $2,750/1523

95966 ..... 1,013.34 1,450 1,231.67 1,250/1514
95967 ..... N/A 950 818.97 850/1510
g. Positron Emission Tomography (PET) 2004 New Technology APC to which New Technology APC to lower paying
Scans they were assigned. Therefore, clinical APC 0285 could impede
nonmyocardial PET scans were assigned beneficiary access to this technology,
to New Technology APC 1513 (New similar to concerns articulated by
(1) Nonmyocardial PET Scans Technology—Level XIV ($1,000–$1,200) commenters in previous years.
Positron emission tomography (PET) for a blended payment rate of $1,150 in
serves an important role in the clinical As a result of a recent Medicare
CY 2005.
care of many Medicare beneficiaries. As At the February 2005 APC Panel national coverage determination
stated in the November 15, 2004 final meeting, the Panel agreed with a (Publication 100–3, Medicare Claims
rule with comment period (69 FR presenter’s assertion that the resource Processing Manual section 220.6),
65716), we believe there are sufficient costs associated with nonmyocardial effective January 28, 2005, we
claims data to assign nonmyocardial PET scans are similar to the costs discontinued the PET G-codes listed in
PET scans to a single clinical APC. associated with myocardial PET scans, Table 10, and activated the CPT codes
However, to minimize any potential and recommended that myocardial PET listed below in Table 11 for myocardial
impact that a payment reduction scans be placed in the same New and nonmyocardial PET scans and
resulting from this move might have had Technology APC 1513 in which the concurrent PET/CT scans for anatomical
on beneficiary access to this technology, nonmyocardial PET scans currently localization. These lists of codes along
we set the CY 2005 OPPS payment for reside. Furthermore, presenters at the with claims processing instructions, are
nonmyocardial PET scans based on a February 2005 APC Panel meeting provided in Change Request 3756,
50/50 blend of their CY 2005 median expressed concern that movement of Transmittal 514, Publication 100–04,
cost and the payment rate of the CY nonmyocardial PET scans from their Medicare Claims Processing Manual.
TABLE 12.—CPT CODES FOR COVERED PET SCAN INDICATIONS EFFECTIVE FOR DATES OF SERVICE ON OR AFTER
JANUARY 28, 2005
CPT code Description
78459 ..................... Myocardial imaging, positron emission tomography (PET), metabolic evaluation.
78491 ..................... Myocardial imaging, positron emission tomography (PET), perfusion, single study at rest or stress.
78492 ..................... Myocardial imaging, positron emission tomography (PET), perfusion, multiple studies at rest and/or stress.
78608 ..................... Brain imaging, positron emission tomography (PET); metabolic evaluation.
78811 ..................... Tumor imaging, positron emission tomography (PET); limited area (e.g., chest, head/neck).
78812 ..................... Tumor imaging, positron emission tomography (PET); skull base to mid thigh.
78813 ..................... Tumor imaging, positron emission tomography (PET); whole body.
78814 ..................... Tumor imaging, positron emission tomography (PET) with concurrently acquired computed tomography (CT) for attenu-
ation correction and anatomical localization; limited area (e.g., chest, head/neck).
ation correction and anatomical localization; skull base to mid thigh.
ation correction and anatomical localization; whole body.
In the CY 2006 OPPS proposed rule, for nonmyocardial PET scans in New at a payment rate of $1,150, the same
we proposed to maintain CPT codes Technology APC 1513 (New APC placement as their predecessor G-
ER10NO05.015</GPH>
78608, 78609, 78811, 78812, and 78813 Technology—Level XIII, $1,100–$1,200) codes, to ensure continuing beneficiary
access to this technology. We also predecessor G-codes, as discussed in attenuation correction and anatomical
proposed to maintain CPT codes 78814, more detail below. However, we are localization in the management of
78815, and 78816, which describe changing the status indicator for CPT patients with cancer may be clinically
concurrent PET/CT scans for anatomical code 78609 (Brain imaging, PET; useful, we have received no convincing
localization, in New Technology APC perfusion evaluation) from ‘‘S’’ data that support the assignment of
1514 (New Technology—Level XIV, (separately paid under the OPPS) to ‘‘E’’ PET/CT scans (CPT codes 78814, 78815,
$1,200–$1,300) at a payment rate of (not paid under the OPPS) retroactive to and 78816) to an APC paying higher
$1,250, based on input claiming that the January 28, 2005, as historically there than $1,250. The external data and
costs associated with PET/CT has been and currently there remains no economic analysis submitted by one of
technology are higher than the costs of coverage for this service under the the commenters failed to meet the
PET technology alone. Medicare program. criterion for consideration of external
Comment: Several commenters to the Comment: Numerous comments data that we proposed in our August 12,
November 15, 2004 final rule with applauded our recognition of the newly 2003 proposed rule (68 FR 47987) and
comment period (69 FR 65682) urged established CPT codes for concurrent finalized in our November 7, 2003 final
that we replace the G-codes for PET PET/CT scans and acknowledgement of rule (68 FR 63424). The external data
procedures with the established CPT the clinical usefulness of concurrent and analysis was not provided with the
codes for PET scans, while commenters PET/CT scans for attenuation correction level of detail that would have allowed
to the July 25, 2005 proposed rule (70 and anatomical localization in the us to verify the claims data nor to have
FR 42674) applauded our transition to management of patients with cancer. adjusted the claims data should we have
the CPT codes for PET scans. These However, several commenters expressed determined an adjustment was
commenters stated that movement to the concern that the proposed assignment of necessary. Furthermore, one commenter
established CPT codes for PET scans PET/CT scans (CPT codes 78814, 78815, reported an average cost of $1,485 for
would greatly reduce the burden on and 78816) to New Technology APC providing a PET/CT scan, which
hospitals of tracking and billing the G 1514 (paying $1,250) may not included FDG, among other related
codes which are not recognized by other adequately cover the costs of providing costs. Considering that FDG will be paid
payors, and would allow for more PET/CT services. These commenters separately at charges adjusted to cost for
uniform hospital billing of these scans. explained that hospitals incur more CY 2006 (estimated typically to be about
Furthermore, while a few commenters capital and maintenance costs with $250), the payment rate of $1,250 for
urged that we increase the payment for PET/CT than with conventional PET. PET/CT scans (not including FDG)
PET scans, the majority of commenters For instance, a large trade association adequately covers the cost of $1,485 that
supported our proposal to maintain commented that a new PET/CT scanner this commenter reported for providing
nonmyocardial PET scans in New costs approximately $1.8 million, PET/CT scans (including FDG). While
Technology APC 1513 (paying $1,150), compared to $1.2 million for a we acknowledge that PET/CT scanners
consistent with the payment level under conventional PET scanner. Another may be more costly to purchase and
their predecessor G-codes. Commenters commenter quoted annual maintenance maintain than dedicated PET scanners,
stated that hospital claims data do not costs of approximately $240,000 for a a PET/CT scanner is versatile and may
accurately reflect the costs of providing new PET/CT scanner, compared to also be used to perform individual CT
these services, and beneficiary access to $120,000 for a conventional PET scans, thereby potentially expanding its
this technology would be threatened if scanner. These commenters asserted use if PET/CT scan demand is limited.
hospital claims data alone were used to that the proposed payment rate for PET/
Therefore, for CY 2006, we are
set the CY 2006 payment rates. CT scans does not recognize the
maintaining CPT codes 78814, 78815,
Response: We agree with commenters additional diagnostic benefits provided
that movement from the G-codes to the and 78816, which describe concurrent
by concurrent PET/CT scans over
established CPT codes for PET scans PET/CT scans for attenuation correction
traditional diagnostic PET and CT scans.
allows for more uniform billing of these and anatomical localization, in New
These commenters further explained
scans. Furthermore, we concur, in Technology APC 1514 (New
that the CT scan performed during a
general, with commenters’ Technology—Level XIV, $1,200–$1,300)
PET/CT is not limited to one part of the
recommendations that the payment at a payment rate of $1,250.
body but includes the entire area
levels under the established CPT codes imaged by the PET scan and, therefore, Comment: One commenter expressed
for PET scans be consistent with the is more efficient than performing one concern that the proposed payment rate
payment levels under their predecessor PET scan plus several separate CT scans of $1,250 for a PET/CT scan may not
G-codes. Therefore, we are maintaining for different regions of the body. Several cover the costs of a diagnostic CT when
newly established CPT codes 78608, commenters recommended that we performed in conjunction with a PET/
78811, 78812, and 78813 for assign the newly established CPT codes CT scan. The commenter stated that
nonmyocardial PET scans in New for PET/CT scans (CPT codes 77814, although many of the technical
Technology APC 1513 (New 78815, and 78816) to New Technology resources for acquiring diagnostic CT
Technology—Level XIII, $1,100–$1,200) APC 1519 (paying $1,750) based on data when performed as a single
at a payment rate of $1,150. In addition, external data and an economic analysis acquisition with a PET/CT scan are the
for myocardial PET scans we are submitted by one of the commenters, same as for the CT for attenuation
assigning CPT codes 78459 and 78491 to which reported the costs of providing a correction and anatomical localization,
newly established APC 0306 PET/CT scan at approximately $1,717. the initial capital costs are greater for a
(Myocardial Positron Emission In contrast, a leading mobile provider of PET/CT scanner capable of performing a
Tomography (PET) imaging, single PET/CT scans reported an average cost diagnostic CT. In addition, there are
study, metabolic evaluation) and CPT of $1,485 for providing a PET/CT scan, added costs for acquiring the diagnostic
code 78492 to newly established APC which included FDG, mileage to sites, CT data such as for the contrast agent
0307 (Myocardial Positron Emission technologists, supplies, equipment and appropriate personnel. This
Tomography (PET) imaging, multiple maintenance, and scheduling. commenter expressed interest in a
studies), where the APC medians have Response: While we acknowledge that continued dialogue with CMS on the
been calculated based on data from their concurrent PET/CT scans for issue of appropriate payment for the
technical costs of performing a for CY 2006. Furthermore, the splitting of $950 for CY 2005, arguing that the
diagnostic CT acquired simultaneously of APC 0285 resolves the two times proposed payment rate of $678 for CY
with a PET/CT scan. violation that occurred in the CY 2006 2005 would halt diffusion of this
Response: We appreciate the proposed rule configuration of APC technology and negatively impact
commenter’s concerns regarding 0285. Therefore, we are assigning single- patient access to this cancer treatment.
appropriate billing and OPPS payment study myocardial PET imaging Commenters explained that the low
for a PET scan with CT for attenuation procedures and metabolic evaluation of volume of claims submitted by only two
correction and anatomical localization myocardial PET imaging to APC 0306 facilities provided volatile and
and a diagnostic CT scan performed as (Myocardial Positron Emission insufficient data for movement into the
a single acquisition. We will consider Tomography (PET) imaging, single proposed clinical APC 0419. They
this issue should we issue more specific study, metabolic evaluation) with a further explained that the extraordinary
hospital billing guidance regarding median cost of $800, based on the CY capital expense of between $70 and
various combinations of medically 2004 hospital claims data for the $125 million and high operating costs of
reasonable and necessary PET and CT predecessor G-codes that have been a proton beam facility necessitate
scans. replaced with CPT codes 78459 and adequate payment for this service to
(2) Myocardial PET Scans 78491. In addition, we are assigning protect the financial viability of this
multiple-study myocardial PET imaging emerging technology.
Comment: Two commenters to the procedures to APC 0307 (Myocardial In the November 15, 2004 final rule
November 15, 2004 final rule with Positron Emission Tomography (PET) with comment period (69 FR 65719
comment period (69 FR 65682) urged imaging, multiple studies) with a through 65720), we considered the
CMS to delete HCPCS code G0230 (PET median cost of $2,482, based on the CY concerns expressed by numerous
imaging, metabolic assessment for 2004 hospital claims data for the commenters that patient access to
myocardial viability following predecessor G-codes that have been proton beam therapy might be impeded
inconclusive SPECT study) and replaced with CPT code 78492. by a significant reduction in OPPS
recognize CPT code 78459 (myocardial Comment: One commenter explained payment. Therefore, we set the CY 2005
imaging, positron emission tomography, that myocardial PET perfusion studies payment rate for CPT codes 77523 and
metabolic evaluation) by changing its may be performed with or without 77525 by calculating a 50/50 blend of
status indicator from ‘‘B’’ to ‘‘S.’’ gating similar to myocardial SPECT the median cost for intermediate and
Response: As a result of a recent procedures. However, for myocardial complex proton beam therapies of $690
Medicare national coverage PET perfusion studies, there are no derived from CY 2003 claims and the
determination Publication 100–3, additional codes to describe gating; CY 2004 New Technology payment rate
Medicare Claims Processing Manual therefore, the provider receives the same of $950. We used the result of this
section 220.6), effective January 28, payment regardless of having performed calculation ($820) to assign intermediate
2005, we discontinued HCPCS code a gated study versus a non-gated study. and complex proton beam therapies
G0230 and activated CPT code 78459, The commenter requested that the (CPT codes 77523 and 77525) to New
changing its status indicator from ‘‘B’’ to payment rate for myocardial PET Technology APC 1510 (New
‘‘S.’’ For CY 2006, we are maintaining perfusion studies be adjusted to assure Technology—Level X ($800–$900) for a
CPT code 78459 as the active code for proper payment for gated studies. blended payment rate of $850 for CY
billing ‘‘myocardial imaging, positron Response: While we recognize that 2005.
emission tomography, metabolic the CPT codes describing myocardial Our examination of the CY 2004
evaluation.’’ PET scans make no distinction between claims data has revealed a second year
Comment: Several commenters to the gated and non-gated studies, we of a stable, albeit modest, number of
November 15, 2004 final rule with received numerous comments urging claims on which to set the CY 2006
comment period (69 FR 65682) and the that we discontinue the G-codes for PET payment rates for CPT codes 77523 and
CY 2006 OPPS proposed rule (70 FR scans and recognize these CPT codes for 77525. However, unlike the median of
42674) stated that the payment rate for PET scans. Furthermore, the splitting of $690 for the proposed CY 2005 Level II
APC 0285 does not accurately reflect the the myocardial PET scans into two proton beam radiation therapy clinical
costs associated with performing APCs to distinguish single-study APC containing CPT codes 77523 and
multiple studies of PET myocardial imaging from multiple-study imaging, as 77525 derived from the CY 2003 claims
perfusion imaging. They noted that, as discussed in detail above, may improve data, the median for a comparable Level
configured, APC 0285 violated the two payment for certain gated studies that II proton beam radiation therapy clinical
times rule for CY 2005 and was involve multiple studies and address APC was $934 derived from partial CY
proposed as an exception to the two the commenter’s concern for adequate 2004 claims data at the time of
times rule for CY 2006. These payment for gated studies. development of the CY 2006 proposed
commenters suggested that CMS split rule. This more recent median appears
myocardial PET scans into two APCs to h. Proton Beam Treatment to more accurately reflect the significant
distinguish the resource consumption In the CY 2005 OPPS proposed rule capital expense and high operating costs
differences between single-study and (69 FR 50467), we proposed to reassign of a proton beam therapy facility, and
multiple-study PET imaging. CPT codes 77523 (Proton treatment supports patient access to proton beam
Response: We agree with commenters delivery, intermediate) and 77525 therapy. Therefore, we proposed to
that the significant cost differences (Proton treatment delivery, complex) move CPT codes 77523 and 77525 from
between single study and multiple from New Technology APC 1511 (New New Technology APC 1510 to clinical
studies myocardial PET imaging Technology, Level XI, $900–$1,000) to APC 0667 (Level II Proton Beam
services reflected in our historical clinical APC 0419 (Proton Beam Radiation Therapy) based on a median
hospital claims data for the G-code Therapy, Level II). In response to this cost of $934 for CY 2006.
myocardial PET scan services support proposal, we received numerous Comment: Numerous commenters
the splitting of APC 0285 into two comments urging that we maintain CPT applauded our proposal to reassign CPT
myocardial PET scan APCs for more codes 77523 and 77525 in New codes 77523 (Proton treatment delivery,
accurate rate-setting for these services Technology APC 1511 at a payment rate intermediate) and 77525 (Proton
treatment delivery, complex) from New minutes) and G0376 (Smoking and most appropriate clinical APC in terms
Technology APC 1510 (New tobacco-use cessation counseling visit; of hospital resource requirements. At
Technology—Level X ($800–$900) to greater than 10 minutes) from their this time, we lack any data that would
clinical APC 0667 (Level II Proton Beam current New Technology APC 1501 justify placing these codes in the
Radiation Therapy), setting payment on (Level I, $0–$50) with a payment rate of clinical APC recommended by the
the median cost of $1,133 derived from $25, to New Technology APC 1491 commenter or in any other clinical APC.
the CY 2004 claims, an increase from (Level IA, $0–$10) with a payment rate We believe that these smoking cessation
the median cost of $934 in the proposed of $5. Both commenters contended that services, because they are so specifically
rule. Commenters also supported our the current payment rate of $25 is not defined with respect to coding and
proposal to maintain CPT codes 77520 sufficient to cover resources associated coverage, may not require similar
(Proton treatment delivery; simple, with this type of visit. Both commenters hospital resources as those required of
without compensation) and 77522 expressed the conviction that, once other services assigned to APC 0600. As
(Proton treatment delivery; simple, with claims data reflecting the costs of the two specific G-codes were developed for
compensation) in APC 0664 (Level I service become available, it would these new smoking cessation services,
Proton Beam Radiation Therapy), setting become clear that a payment rate closer the specific services likely bear little
the payment on the median cost of $947 to $52 is warranted. One commenter clinical resemblance to many of the
derived from the full year CY 2004 urged us to maintain these codes in evaluation and management services
claims. Commenters stated that these their current New Technology APC until assigned to APC 0600, whose median
proposed payments more accurately provider claims data become available. cost currently reflects CY 2004 claims
reflect the significant capital expense The other commenter took the position from hospitals. We also cannot agree
and operating costs of a proton beam that placement in a New Technology with the commenter recommending
therapy center. Commenters also were APC is not appropriate, as the services placement of these codes in one or more
pleased with our proposal to maintain could reasonably be placed in an higher-paying New Technology APCs.
separate APCs for distinguishing simple existing clinical APC. Specifically, this Our proposal to reassign these codes
from intermediate and complex proton commenter recommended that HCPCS from their current New Technology APC
beam therapies, stating that the codes G0375 and G0376 be assigned 1501 (with a payment rate of $25) to
distinction is necessary to differentiate immediately to APC 0600 (Low Level New Technology APC 1491 (with a
between the resource demands of the Clinic Visits), which the commenter payment rate of $5) was based on our
different treatment levels. Commenters considers appropriate in terms of assessment that the hospital facility
urged CMS to continue protecting resource costs and clinical resources required for this service are
beneficiary access to this technology, characteristics. Finally, both likely to be very limited. At the time of
especially during this early stage of commenters pointed out that there was activation of these new G-codes in CY
clinical adoption to ensure economic an inconsistency in our tables in the 2005, New Technology APC 1501 was
viability of both existing facilities and proposed rule with regard to the APC the New Technology APC applicable to
those in various stages of construction assignments of codes G0375 and G0376. new OPPS services with expected
and development. Specifically, Table 10 in the proposed hospital costs of between $0 and $50. As
Response: We agree with commenters rule (70 FR 42706) showed HCPCS code we proposed to refine the New
that the CY 2004 median cost data for G0375 assigned to New Technology Technology cost bands for CY 2006 and
proton beam therapy services more APC 1491 (with a payment rate of $5), are finalizing that proposal in this final
accurately reflect the significant capital rule, we believe that for CY 2006
while HCPCS code G0376 was assigned
expense and high operating costs of a assignment of the smoking cessation G-
to New Technology APC 1492 (with a
proton beam therapy facility. codes to New Technology APC 1491
payment rate of $15). However,
Furthermore, our reassignment of CPT now more appropriately reflects the
Addendum B of the proposed rule (70
codes 77523 and 77525 from New hospital resources required for these
FR 42936) showed both HCPCS codes
Technology APC 1510 to clinical APC services. Therefore, for CY 2006, we are
G0375 and G0376 assigned to New
0667 based on the improved median finalizing that proposal in this final
Technology APC 1491 (with a payment
cost data and stable frequency is rule. However, for CY 2007 rate-setting,
rate of $5).
consistent with our policy of we will reassess the APC placement of
transitioning New Technology services Response: We thank the commenters these codes in light of the available
into a clinically appropriate APC with for bringing to our attention a partial year CY 2005 hospital claims
payment based on median cost data typographical error that appeared in data.
once the data for these services become Table 10 of the proposed rule (70 FR
sufficiently stable to protect patient 42706). This error did not come to our j. Stereoscopic Kv X-ray
access to such services. Therefore, we attention in time for correction. Our Comment: A number of commenters
are finalizing our proposal to reassign intent, as indicated in Addendum B, addressed our creation of a new code for
intermediate and complex proton beam was to assign both HCPCS codes G0375 stereoscopic kilovolt x-ray imaging,
therapy services (CPT codes 77523 and and G0376 to APC 1491 (with a HCPCS code C9722 (Stereoscopic
77525) from New Technology APC 1510 payment rate of $5). We regret the error. kilovolt x-ray imaging with infrared
to clinical APC 0667, and to maintain We do not agree with the commenter tracking for localization of target
simple proton beam therapy services who suggested that it is appropriate at volume), and assignment of the service
(CPT codes 77520 and 77522) in APC this time to remove HCPCS codes G0375 to a New Technology APC. Commenters
0664 for CY 2006. and G0376 from assignment to a New stated that the ‘‘definition,’’ which
Technology APC and to assign them to appears to refer to the code descriptor,
i. Smoking Cessation Counseling clinical APC 0600 (Low Level Clinic combines two technologies into one
Comment: Two commenters Visits). One purpose of assignment to a HCPCS code. A commenter claimed that
expressed concern about our proposal to New Technology APC is to provide an this descriptor excludes other superior
move smoking cessation HCPCS codes opportunity to collect claims data from technologies to acquire kilovolt (kV) x-
G0375 (Smoking and tobacco-use our system, in order to allow for the ray images for localization of target
cessation counseling visit; 3–10 ultimate placement of a code in the volume that do not rely on infrared
tracking. Commenters asserted that the day. We responded to the commenter’s reduce the burden on hospitals of
key feature of the service is the use of request by explaining that several other maintaining duplicative codes for the
kV x-ray imaging for localization of commenters stated that HCPCS code same services to accommodate different
target volume, while the infrared G0242 was being misused to code for payers. Lastly, one presenter urged that
tracking feature is used for patient the planning phase of linear accelerator- we combine HCPCS codes G0242
monitoring only to ensure based stereotactic radiosurgery (Cobalt 60-based stereotactic
immobilization, not for positioning and planning. Because the claims data for radiosurgery planning) and G0243
localization. A commenter stated that HCPCS code G0242 represented costs (Cobalt 60-based stereotactic
many kV x-ray systems do not use for linear accelerator-based stereotactic radiosurgery delivery) into a single
infrared tracking. The commenters, radiosurgery planning (due to misuse of procedure code to reflect that the
including a number of cancer centers, the code), in addition to Cobalt 60-based majority of patients receive the planning
recommended modifying the descriptor stereotactic radiosurgery planning, we and delivery of this treatment on the
of HCPCS code C9722 to ‘‘Stereoscopic were uncertain of how to combine these same day as a single fully integrated
kV x-ray imaging with or without data with HCPCS code G0243 to service.
infrared tracking for localization of determine an accurate payment rate for The APC Panel recommended that we
target volume,’’ claiming that this would a combined code for planning and make no changes to the coding or APC
allow hospitals equal reimbursement for delivery of Cobalt 60-based stereotactic placement of SRS delivery codes G0173,
providing the service regardless of the radiosurgery. G0243, G0251, G0339, and G0340 for CY
vendor from whom they bought the kV In consideration of the misuse of 2006. We first established the above full
x-ray equipment. One commenter stated HCPCS code G0242 and the potential for group of delivery codes in CY 2004, so
that the kV x-ray is part of Image Guided causing greater confusion by combining we have only one year of hospital
Radiation Therapy (IGRT), a new HCPCS codes G0242 and G0243 into a claims data reflecting costs of all of the
generation of conformal radiation single procedure code, for CY 2004 we services. In addition, presenters to the
therapy techniques, and that it was created a planning code for linear APC Panel described current ongoing
working with the CPT Editorial Panel to accelerator-based stereotactic deliberations amongst interested
submit CPT applications for radiosurgery (HCPCS code G0338) to professional societies around the
stereoscopic x-ray guidance, as well as distinguish this service from Cobalt 60- descriptions and coding for SRS. The
other IGRT technologies. A commenter based stereotactic radiosurgery APC Panel and presenters suggested that
stated that there is a new CPT code for planning. We maintained both HCPCS we wait for the outcome of these
stereoscopic x-ray guidance effective codes G0242 and G0243 for the deliberations prior to making any
January 1, 2006, and recommended that planning and delivery of Cobalt 60- significant changes to SRS delivery
we crosswalk HCPCS code C9722 to the based stereotactic radiosurgery, coding or payment rates.
new CPT code. consistent with the use of the two G- In an effort to balance the
Response: The AMA’s CPT Editorial codes for planning (HCPCS code G0338) recommendations of the APC Panel with
Panel created new CPT code 77421, and delivery (HCPCS codes G0173, the recommendations of presenters at
‘‘Stereoscopic X-ray guidance for G0251, G0339, G0340, as applicable) of the APC Panel meeting, in accordance
localization of target volume for the each type of linear accelerator-based with the APC Panel recommendations,
delivery of radiation therapy’’, which stereotactic radiosurgery (SRS). We we proposed to make no changes to the
will be effective January 1, 2006. We indicated that we intended to maintain APC placement of the following SRS
will replace HCPCS code C9722 with these new codes in their current New treatment delivery codes for CY 2006:
CPT code 77421 for CY 2006, mapping Technology APCs until we had HCPCS codes G0173, G0243, G0251,
the new code to the same New sufficient hospital claims data reflecting G0339, and G0340.
Technology APC as for CY 2005—APC the costs of the services to consider In the CY 2006 proposed rule, we
1502. As with the instructions moving them to clinical APCs. acknowledged concerns expressed by
embedded in the descriptor for HCPCS During the February 2005 APC Panel some presenters urging that we
code C9722, CPT code 77421 should not meeting, the APC Panel discussed the discontinue the use of the G-codes for
be reported with the five G-codes for clinical and resource cost similarities SRS planning, and instead, recognize
stereotactic radiosurgery treatment to be between planning for Cobalt 60-based the current CPT codes that describe the
billed under the OPPS in CY 2006. As and linear accelerator-based SRS. The specific component services involved in
CPT code 77421 makes no reference to APC Panel also discussed the use of SRS planning to reduce the burden on
infrared tracking, the commenters’ CPT codes instead of specific G-codes to hospitals of maintaining duplicative
concerns are addressed by the use of describe the services involved in SRS codes for the same services to
this CPT code and its descriptor. planning, noting the clinical similarities accommodate different payers. In
in radiation treatment planning addition, we indicated that we had no
k. Stereotactic Radiosurgery (SRS) regardless of the mode of treatment need to separately track SRS planning
In a correction to the November 7, delivery. Acknowledging the possible services, which share clinical and
2003 final rule with comment period, need for CMS to separately track resource homogeneity with other
issued on December 31, 2003 (68 FR planning for SRS, the APC Panel radiation treatment planning services
75442), we considered a commenter’s eventually recommended that we create described by current CPT codes.
request to combine HCPCS codes G0242 a single HCPCS code to encompass both When HCPCS code G0242 was
(Cobalt 60-based stereotactic Cobalt 60-based and linear accelerator- established for SRS planning, several
radiosurgery planning) and HCPCS code based SRS planning. However, a radiology planning services were
G0243 (Cobalt 60-based stereotactic hospital association and other considered in determining its APC
radiosurgery delivery) into a single presenters at the APC Panel meeting placement. In the November 30, 2001
procedure code in order to capture the urged that we discontinue the use of G- final rule, in which we described our
costs of this treatment in single codes for SRS planning, and instead, determination of the total cost for SRS
procedure claims because the majority recognize the current CPT codes that planning based on our claims
of patients receive the planning and describe the specific component experience, we added together the
delivery of this treatment on the same services involved in SRS planning to median costs of the following CPT codes
that we found to be regularly billed with various timeframes for planning that treatment delivery of Cobalt 60-based
SRS delivery (CPT code 61793 in the may occur with linear accelerator-based SRS. Commenters expressed concern
available hospital data): 77295, 77300, SRS. that combining the planning code
77370, and 77315. In the CY 2006 As discussed in detail above, the APC (HCPCS code G0242) and treatment
proposed rule, our examination of the Panel recommended that CMS create a delivery code (HCPCS code G0243) for
costs from the CY 2004 claims data single HCPCS code to encompass both Cobalt 60-based SRS into a single
available to us at that time for the above- Cobalt 60-based and linear accelerator- combination code would necessitate the
mentioned CPT codes closely based SRS planning. Furthermore, the use of a modifier when they are not
approximated the CY 2004 median costs Panel recommended that we make no performed on the same date of service
reported for HCPCS codes G0242 and changes to the coding or APC placement and would complicate the billing of
G0338. The APC median costs for the of SRS treatment delivery HCPCS codes these services and increase the
above-mentioned CPT codes based on G0173, G0243, G0251, G0339, and administrative burden on hospitals. One
the CY 2004 claims data utilized for the G0340 for CY 2006. commenter suggested that, if we decide
proposed rule totaled $1,297, while the For reasons discussed below, we are to maintain HCPCS code G0242 for
median cost for HCPCS code G0242 was discontinuing HCPCS codes G0242 and Cobalt 60-based SRS planning rather
$1,366 and the median cost for HCPCS G0338 for the reporting of charges for than transition to the CPT codes, we
code G0338 was $1,100 based on the SRS planning under the OPPS for CY consider placing the planning code
partial year CY 2004 claims data. In 2006, and instructing hospitals to bill (HCPCS code G0242) on the bypass list
addition, three of the above-mentioned charges for SRS planning, regardless of as an alternative solution to generating
CPT codes were included on the the mode of treatment delivery, using all more single bills for future rate-setting,
proposed bypass list for CY 2006, so we of the available CPT codes that most rather than combining the planning and
did not anticipate that the billing of accurately reflect the services provided. treatment delivery codes for Cobalt 60-
these codes on the same day as an SRS In addition, while we are reassigning based SRS into a single combination
treatment service would cause HCPCS code G0243 to clinical APC code.
significant problems with multiple bills 0127 for CY 2006, we are making no
In contrast, a few commenters urged
for SRS services. Therefore, we changes to the APC placement of SRS
that we continue to recognize HCPCS
proposed to discontinue HCPCS codes treatment delivery HCPCS codes G0173,
codes G0242 and G0338 for the
G0242 and G0338 for the reporting of G0251, G0339, and G0340.
We received a number of public reporting of SRS planning rather than
charges for SRS planning under the transition to the available CPT codes
comments on these SRS issues.
OPPS, and to instruct hospitals to bill Comment: We received numerous that describe these services. These
charges for SRS planning using all of the comments supporting our proposal to commenters predicted that another year
available CPT codes that most discontinue HCPCS codes G0242 of stability would allow CMS to collect
accurately reflect the services provided. (Cobalt 60-based stereotactic more reliable data for use in setting the
We acknowledged one APC Panel radiosurgery planning) and G0338 CY 2008 payment rates for SRS
presenter’s concern that the coding (Linear accelerator-based SRS planning) planning services.
structure of Cobalt 60-based SRS, using for the reporting of charges for SRS Many commenters urged that we
either the current SRS planning G-code planning, and to instruct hospitals to refrain from treating various forms of
or the appropriate CPT codes for bill charges for SRS planning using SRS (i.e., Cobalt 60-based and linear
planning services as we proposed for CY available CPT codes that most accelerator-based) differently by
2006, might not necessarily reflect the accurately reflect the services provided. ‘‘bundling’’ planning into the treatment
same day, integrated Cobalt 60-based These commenters agreed that available delivery for Cobalt 60-based SRS by
SRS service furnished to the majority of CPT codes more accurately describe the creating a single combination code,
patients receiving Cobalt 60-based SRS. services involved in SRS planning and while ‘‘unbundling’’ planning and
Thus, we specifically requested public are less administratively burdensome treatment delivery for linear accelerator-
comment on the clinical, administrative, for providers because other payors based SRS by paying separately for
or other concerns that could arise if we recognize them. Some commenters these services. These commenters
were to bundle Cobalt 60-based SRS urged that we retain separate codes for asserted that the planning and treatment
planning services, currently reported reporting the planning and treatment delivery of SRS, regardless of the form
using HCPCS code G0242 and proposed delivery of Cobalt 60-based SRS, of delivery, are clinically distinct
for CY 2006 to be billed using the whether through the use of existing G- services that should be reported
appropriate CPT codes for planning codes (HCPCS codes G0242 and G0243) separately to distinguish their distinct
services, into the Cobalt 60-based SRS or through available CPT codes. Several resource requirements. One commenter
treatment service, currently reported of these commenters explained that refuted claims that the administration of
under the OPPS using HCPCS code although the planning and treatment the planning and treatment delivery of
G0243. Under such a scenario, the SRS delivery of Cobalt 60-based SRS most SRS on the same date of service is
treatment service described by HCPCS often occur on the same date of service, unique to Cobalt 60-based SRS, arguing
code G0243 would be placed in a higher there are instances in which the that the planning and treatment delivery
paying New Technology APC to reflect planning and treatment are not of LINAC-based SRS likewise are
payment for the costs of the SRS delivered on the same date of service typically performed on the same day,
planning and delivery as an integrated due to an unanticipated problem that and that a mere time proximity of the
service. Hospitals would be prohibited arises during the planning that two services does not necessitate a
from billing other radiation planning precludes the treatment delivery. In single combination code for either form
services along with the Cobalt 60-based such instances where only planning for of SRS. Several commenters cautioned
SRS treatment delivery code. In contrast the Cobalt 60-based SRS is performed, against establishing different coding
to Cobalt 60-based SRS coding, we did commenters stated that CMS would schemes for various SRS services that
not consider bundling the planning for need to clarify how providers should would likely cause confusion for coders,
linear accelerator-based SRS with the bill these services if separate codes are inaccurate coding, and unreliable data
treatment delivery services, given the not maintained for the planning and for future rate setting.
Numerous other commenters urged in one session, stating that the proposed Furthermore, our analysis of the CY
CMS to combine the planning code payment of $5,250 for all single session 2004 claims data revealed that the
(HCPCS code G0242) and treatment SRS treatment services for CY 2006 is median costs for HCPCS codes G0242
delivery code (HCPCS code G0243) for appropriate based on the hospital and G0338 closely approximated the
Cobalt 60-based SRS into a single resources involved in furnishing these sum of the median costs for the CPT
surgical code, preferably CPT code services. codes (77295, 77300, 77315, 77370) that
61793 (stereotactic radiosurgery, Response: We thank the many were most commonly billed under the
particle beam, gamma ray, or linear commenters for their insightful thoughts OPPS for SRS planning prior to the
accelerator, one or more sessions), and recommendations for the reporting establishment of HCPCS codes G0242
which would replace all of the SRS G of hospital charges for SRS services and G0338. In addition, we remind
codes regardless of the mode of under the OPPS for CY 2006. In commenters that three of the above-
delivery. These commenters stated that recognition of the heightened level of mentioned CPT codes are included on
the planning and treatment delivery of diligence that the current coding the bypass list for CY 2006, so we do not
Cobalt 60-based SRS are always scheme for SRS services requires of anticipate that the billing of these codes
performed on the same day and that a hospital coders to ensure that charges on the same day as an SRS treatment
single combination code would be less for these services are reported under the delivery service will cause significant
confusing for coders, provide more appropriate G-code, we carefully problems with multiple bills for SRS
accurate claims data, and result in a considered several options for services, eliminating any need for
more appropriate payment for Cobalt simplifying the coding scheme for SRS recognizing a single combination G-code
60-based SRS. While some of these services while maintaining a certain or CPT code which describes both
commenters urged that we assign this level of data specificity to reflect the planning and treatment delivery SRS
single combination code to a higher differential clinical considerations and services for the purpose of generating
paying New Technology APC consistent hospital resource utilization that are more single bills. Finally, based on
with its CY 2004 median cost data until necessary to inform future rate setting. additional confirmation from
more accurate cost data are available for First, we considered several commenters that the similarities in
determining an appropriate clinical recommendations by commenters to clinical characteristics and resource
APC, other commenters strongly bundle the planning for Cobalt 60-based costs associated with treatment
opposed the designation of Cobalt 60- SRS into the treatment delivery (HCPCS planning for services delivering
based SRS as a new technology service, code G0243) for Cobalt 60-based SRS by radiation, regardless of the mode of
noting that Cobalt 60-based SRS became either establishing a single combination treatment delivery, dispel the need to
a standard of care for treating cancer G-code describing both the planning separately track planning services for
and delivery of Cobalt 60-based SRS or SRS, we are discontinuing HCPCS codes
patients over two decades ago and a
by instructing providers to report CPT G0242 and G0338 for the reporting of
new technology label is no longer
code 61793 for such services. However, charges for SRS planning under the
appropriate. Commenters stated that
we agree with the majority of OPPS for CY 2006, and instructing
CMS’ designation of Cobalt 60-based
commenters who expressed strong hospitals to bill charges for SRS
SRS as a new technology service has led
opposition to a single combination G- planning, regardless of the mode of
other insurers to consider the treatment
code or CPT code to report the planning treatment delivery, using all of the
to be experimental, which frequently
and treatment delivery of Cobalt 60- available CPT codes that most
delays, and sometimes prevents, access
based SRS, noting the following accurately reflect the services provided.
to treatment for critically ill patients.
concerns: (1) The administrative burden We also agree with the majority of
These commenters urged that we assign on providers of maintaining duplicative commenters who strongly urged that we
this new combination code reflecting codes for SRS planning to accommodate reassign HCPCS code G0243 (Cobalt 60-
planning and delivery of Cobalt 60- various payors (that is, G-codes for based treatment delivery) from New
based SRS to a surgical APC and set the Medicare and CPT codes for non- Technology APC 1528 to a clinical APC,
payment based on the median cost Medicare payors); (2) the added pointing out that Cobalt 60-based SRS
calculated from the CY 2004 hospital complexity of attaching a modifier to became a standard of care for treating
claims data. Some of these commenters the code for instances when planning cancer patients over two decades ago
recommended that this single and delivery are not provided on the and, therefore, a new technology label
combination code describe all forms of same date of service because treatment no longer appropriately describes the
SRS, while other commenters does not proceed due to an service. Furthermore, the median costs
emphasized the importance of unanticipated problem; (3) the from hospital claims for HCPCS code
maintaining separate combination codes confusion for coders and unreliable data G0243 based on a significant number of
for Cobalt 60-based SRS and LINAC- that could emanate from inconsistent single claims each year have been quite
based SRS to distinguish the significant coding schemes for different forms of stable over the past three years,
clinical and resource cost differences SRS (that is, Cobalt 60-based and supporting movement of this service out
associated with these services. LINAC-based SRS); and (4) the of a New Technology APC and into a
One commenter urged that if CMS nonspecificity of the descriptor for CPT clinical APC based on its median cost
replaces the G-codes for SRS planning code 61793 which describes all forms of data from CY 2004. Therefore, we are
with available CPT codes describing SRS treatment delivery and makes no reassigning HCPCS code G0243 from
these services, we should not assign mention of SRS planning services. We New Technology APC 1528 to clinical
HCPCS code G0243 (Cobalt 60-based also agree with the majority of APC 0127 and setting its payment rate
SRS treatment delivery) to a New commenters who stated that the G-codes based on a median cost of $7,297 for CY
Technology APC paying higher than its (G0242 and G0338) for SRS planning are 2006.
CY 2005 payment rate of $5,250. This duplicative of existing CPT codes that Lastly, we agree with commenters
commenter supported our proposal to adequately describe such services and who emphasized the significant clinical
make no changes to the APC placement that are much less administratively and resource cost differences associated
of SRS treatment delivery codes that burdensome on hospitals because they with the treatment delivery of Cobalt 60-
describe a complete course of treatment are recognized by non-Medicare payors. based SRS and LINAC-based SRS, and
that establishment of a single code to services assigned to the APCs for which comparable to the payment rate for
describe all forms of SRS treatment providers should report their hospital HCPCS code G0339. As the SRS
delivery would result in a loss of costs and charges. In addition, as treatment delivery G-codes are national
essential data specificity for discussed above, we agree with the Level II HCPCS codes that we utilize for
determining appropriate future payment majority of commenters who opposed billing SRS treatments in the OPPS, we
rates for these services. For instance, the recognition of a single combination are uncertain what changes the
based on the CY 2004 claims data, the code (that is, CPT code 61793) for the commenter would like us to make for
median costs for the various forms of planning and delivery of Cobalt 60- the codes to be ‘‘permanent.’’ Therefore,
SRS treatment delivery ranged from based SRS services, for reasons stated for CY 2006, we are maintaining HCPCS
$2,502 to $7,296. These significant previously, i.e. the administrative code G0339 in New Technology APC
differences in median cost data burden of maintaining duplicative 1528, and HCPCS code G0340 in New
emphasize the importance of codes, the added complexity of Technology APC 1525.
maintaining different codes that attaching a modifier to the code for Comment: One commenter urged
distinguish the various forms of SRS instances when planning and delivery CMS to assign HCPCS codes G0251 and
treatment delivery for the purpose of are not provided on the same date of G0340, for fractionated non-robotic and
setting the most appropriate payment service because treatment does not image-guided robotic LINAC-based SRS
rates for these services. We believe it proceed due to an unanticipated respectively, to the same APC,
would be premature, as well, to move problem, the confusion for coders and contending that these procedures
the LINAC-based SRS treatment unreliable data that could emanate from involve similar resources and should be
delivery procedures to clinical APCs for inconsistent coding schemes for paid equally. In contrast, another
CY 2006 because we have only one year different forms of SRS (that is, Cobalt commenter asserted that image-guided
of claims data reflecting their current 60-based and LINAC-based SRS), and robotic LINAC-based SRS is
coding structure, although we have the nonspecificity of the descriptor for substantially more resource intensive
hundreds of single claims for some of CPT code 61793 which describes all than non-robotic LINAC-based SRS, and
the services. We will be examining our forms of SRS treatment delivery and that CMS should maintain HCPCS code
claims data carefully for the next OPPS makes no mention of SRS planning G0251 in a separate APC from HCPCS
update, because we will then have 2 services. Therefore, as discussed code G0340 to distinguish their levels of
years of data for these LINAC-based SRS elsewhere in this section, for CY 2006, resource requirements.
treatment delivery services now we are discontinuing HCPCS code Response: We began recognizing
assigned to New Technology APCs. G0242 and recognizing existing CPT HCPCS code G0251 to describe
Therefore, we are maintaining HCPCS codes for the reporting of Cobalt 60- fractionated sessions of non-robotic
codes G0173 and G0339 in New based SRS planning, and moving LINAC-based SRS treatment delivery in
Technology APC 1528, HCPCS code HCPCS code G0243 (Cobalt 60-based CY 2004, which yielded no single
G0251 in New Technology APC 1513, SRS treatment delivery) from New procedure claims data for HCPCS code
and HCPCS code G0340 in New Technology APC 1528 to clinical APC G0251 to substantiate a similarity or
Technology APC 1525 for CY 2006. And 0127 based on a median cost of $7,296. lack of similarity of its resource costs in
as mentioned elsewhere in this section, Comment: Several commenters comparison with HCPCS code G0340
we are reassigning HCPCS code G0243 recommended that we make HCPCS (fractionated, 2nd–5th sessions, image-
from New Technology APC 1528 to code G0339 (Image guided, robotic, guided robotic LINAC-based SRS
clinical APC 0127. linear accelerator-based (LINAC) SRS treatment delivery). However, the large
Comment: One commenter urged that treatment delivery, complete session, divergence in the median cost of $2,802
we create a new CPT code titled first session of fractionated treatment) a for the complete session of non-robotic
‘‘Surgeon-based Gamma Stereotactic permanent code and continue to pay LINAC-based SRS treatment delivery
Radiosurgery, complete course, one this service at the CY 2005 payment rate (HCPCS code G0173), in comparison
procedure, per lesion’’ to describe of $5,250. These commenters also with the median cost of $4,917 for the
Cobalt 60-based SRS planning and recommended that we eliminate HCPCS complete and first fractionated sessions
treatment delivery and assign this CPT code G0340 (Image guided, robotic, of image-guided robotic LINAC-based
code to a new surgical APC titled linear accelerator-based (LINAC) SRS SRS treatment delivery (HCPCS code
‘‘Surgeon-based Gamma Stereotactic treatment delivery, fractionated G0339), indicates that fractionated
Radiosurgery.’’ This commenter treatment, 2nd–5th sessions) and image-guided robotic LINAC-based SRS
recommended that we set the payment instruct hospitals to report HCPCS code treatment delivery is likely substantially
rate of this new APC based on the G0339 for all fractionated treatment more resource intensive than
combined median costs from claims sessions, stating that the resource costs fractionated non-robotic LINAC-based
data for HCPCS codes G0242 and are the same for each session regardless SRS treatment delivery. Therefore, for
G0243. of the number of treatment sessions that CY 2006, we are maintaining HCPCS
Response: We appreciate the the patient receives. code G0251 in New Technology APC
commenter’s suggestion; however, CMS Response: We disagree with the 1513 and HCPCS code G0340 in New
does not possess the authority to create commenters’ assertions that the resource Technology APC 1525. However, for CY
CPT codes, which are established and costs are the same for each session of 2007, we will reexamine our APC
maintained by the American Medical image-guided, robotic LINAC-based SRS placement of HCPCS codes G0251 and
Association. Furthermore, under the treatment delivery regardless of the G0340 based on CY 2005 hospital
OPPS, we do not label APCs according number of treatment sessions that the claims data.
to the type of clinician delivering the patient receives. Based on CY 2004 Comment: One commenter to the
service (that is, surgeon versus non- claims data, the median cost for HCPCS November 15, 2004 final rule with
surgeon) because such categorization is code G0339 ($4,917) was considerably comment period (69 FR 65682)
irrelevant to establishing payment for higher than the median cost for HCPCS disagreed with CMS’ statement that CPT
hospital services billed under the OPPS. code G0340 ($2,502), and does not codes 0082T (Stereotactic body
Rather, we provide titles for clinical support the elimination of HCPCS code radiation, treatment delivery, one or
APCs that describe the actual hospital G0340 or its payment at a rate more treatment areas, per day) and
0083T (Stereotactic body radiation Response: We discussed this policy in Response: It is our understanding that
therapy, treatment management, per the CY 2005 OPPS proposed rule which the acoustic heart sound recording and
day) are bundled into the current G- we published on August 16, 2004 (69 FR analysis is intended for a specific,
codes for SRS treatment delivery. The 50448), and we made our existing policy targeted group of patients to enhance
commenter stated that stereotactic body final in the November 15, 2004 final the provider’s ability to diagnose heart
radiation treatment delivery and rule (69 FR 65682). We proposed no failure. The technology, as described by
management are new technologies and, changes to this policy in the CY 2006 CPT code 0069T, always is performed in
thus, are not included in the current G- OPPS proposed rule (which we conjunction with an EKG and as such is
codes for SRS treatment delivery; published on July 25, 2005 (70 FR ideal for packaging. It is the hospitals
however, the commenter provided no 42674)) and, therefore, we have not responsibility to increase their charges
cost data nor any explanation as to how changed the policy. The HCPCS codes to reflect the additional costs for those
stereotactic body radiation treatment for unlisted services should be used EKGs that include the acoustic heart
differs from the current procedures only if there is no existing code that can sound recording. If the hospital uses the
described by the G-codes for SRS be used alone or with existing modifiers test according to the manufacturer
treatment delivery. Instead, the to report the service that was furnished. guidelines, the costs will be distributed
commenter simply requested that CMS We believe that their use should be very over the large number of EKGs that are
designate these new tracking codes for rare. We do not believe that examination performed in the hospital outpatient
stereotactic body radiation treatment of the diagnoses on claims for unlisted department and, over time, the
delivery and management as new procedures would enable us to properly additional costs may be recognized in
technology services and assign these place the codes into APCs because there the OPPS rates as increased median
codes to a New Technology APC. are so many different types of services costs for EKGs in general.
Response: We disagree with the at different levels of resource use that Comment: One commenter requested
commenter’s unsubstantiated assertion could apply to a single diagnosis. There that CPT code 0069T (Acoustic heart
that the current G-codes for SRS is a 2-year lag between the year of sound recording and computer analysis
treatment delivery do not already hospital claims data and the OPPS only) become separately payable. The
describe or include some services that payment rates that are established based commenter was concerned that CMS
could also be identified as stereotactic on the data. New procedure-specific interpreted the code to be an add-on
body radiation treatment delivery and HCPCS codes are developed on an code to an EKG procedure. The
management described by CPT codes annual basis, and there are continuous commenter clarified that CPT code
0082T and 0083T, respectively. changes in procedures for many 0069T is often used as a stand-alone
Furthermore, we received no evidence diagnoses as medical practice evolves. procedure, provided without an EKG
to support the commenter’s assertion Therefore, we have no confidence that procedure.
that these services represent new Response: We are accepting the APC
the array of unlisted services billed by
technologies that could not be Panel’s recommendations that CPT code
hospitals, and by implication their
represented in our hospital claims data. 0069T remain packaged for CY 2006.
median costs, in a given year for
Therefore, for CY 2006, we are The Panel reviewed this code and
patients with certain diagnoses would
maintaining CPT code 0082T with a determined it to be an add-on code to
necessarily have any relationship to
status indicator of ‘‘B’’ because we an electrocardiography service, as
unlisted services, and their median
consider an alternate code to be indicated by the American Medical
costs, billed 2 years later for patients
available for billing this service under Association’s descriptor of this code. In
with the same diagnoses. Moreover,
the OPPS. Likewise, for CY 2006, we are addition, we are concerned that there
placing unlisted services in the lowest may be unnecessary utilization of this
maintaining CPT code 0083T with a level APC encourages use of existing
status indicator of ‘‘N’’, indicating that procedure if it is separately payable
codes where it is possible and also because it is an add-on code to EKG
the charges for this service are packaged encourages development of new HCPCS
into the payment for other services paid services, for which there were almost 6
codes for services for which codes do million claims under the OPPS in CY
separately under the OPPS. not exist. 2004. Lastly, we continue to believe that
D. APC—Specific Policies 1. Cardiac and Vascular Procedures this service is a minor procedure that
We received many comments on our may be performed quickly accompanied
a. Acoustic Heart Sound Recording and
proposed changes to specific groups of by an EKG and likely other separately
Analysis
services as discussed in the CY 2006 payable services, and thus is
OPPS proposed rule preamble and Comment: One commenter requested appropriately packaged.
displayed in Addendum B. We have that CMS change the status indicator for
CPT code 0069T (Acoustic heart sound b. Cardiac Electrophysiologic Services
grouped these comments, and our
recording and computer analysis only). (APC 0087)
responses, into five general clinical
categories as shown below. The commenter requested that we Comment: Commenters objected to
We received one comment that assign the procedure to APC 0099 with the decline in proposed payment rate
generally addresses our APC assignment an ‘‘S’’ status indicator rather than ‘‘N,’’ for APC 0087 from prior years. They
methodology. as is currently assigned to CPT code also objected to what they view as a two
Comment: One commenter objected to 0069T. The commenter stated that the times violation in APC 0087 and asked
the placement of codes for unlisted test’s current status as a packaged that we move electrophysiologic
services in the lowest APC that is procedure results in inequitable ‘‘mapping’’ CPT codes 93609, 93613,
clinically appropriate and to the lack of payment to the hospital. They stated and 93631 to APC 0086 because the CPT
discussion of this policy in the CY 2006 that the cost of an EKG with the acoustic code median costs for these codes are
OPPS proposed rule. The commenter heart sounds recording is $55 whereas, much higher than the median costs for
asked that CMS examine claims data the cost of an EKG without is $31, and the other codes in APC 0087. They state
and match unlisted services to the that because we have packaged the that because ‘‘mapping’’ CPT codes
diagnosis to determine if there is a more procedure, the hospital is underpaid by 93609, 93613, and 93631 are billed with
appropriate APC than the lowest level. $24 for each test it performs. other cardiac electrophysiologic services
already assigned to APC 0086, then payment medians. Moreover, because bypassing charges for this code only
these ‘‘mapping’’ services should also be we use single procedure claims to set when it appeared on the same claim
assigned to the same clinical APC. They the median costs, the median costs for with codes in APC 0107 or APC 0108,
also asked that we use only claims that these APCs have always been set on a because when a cardioverter
contain the device codes required for relatively small number of claims as defibrillator (ICD) is removed and
these CPT codes in setting the median compared to the total frequency of replaced in the same operative session,
cost for the APC into which CMS places claims for the services under the OPPS. it is appropriate to attribute all of the
these codes. For example, for the CY 2006 OPPS packaged costs on the claim to the
Response: We disagree that there is a proposed rule, the unadjusted median implantation of the device rather than to
2 times violation, under our rules, in cost for APC 0107 was set based on 445 the removal of the device. The line costs
APC 0087. The law permits an single procedure claims, which is 5.5 for CPT code 33241 that are removed
exception to the two times rule for ‘‘low percent of the 8,073 claims on which a from the claims in this case would be
volume items and services.’’ We define procedure code in the APC was billed. discarded and would not be used to set
any service that does not meet our test Similarly, the unadjusted median cost the median cost for APC 0105 (the APC
as a ‘‘significant service’’ to be a ‘‘low for APC 0108 was set based on 520 in which the code is located).
volume item or service.’’ A significant single procedure claims, which is 8.7 We modeled the median costs that
service is a service with a single bill percent of the 6,003 claims on which a would be calculated for APCs 0107 and
frequency greater than 1,000 (which no procedure code in the APC was billed. 0108, if we were to make the changes
services in APC 0087 meet) or a service Commenters have frequently told us recommended by the APC Panel for
with a single bill frequency greater than that using the single procedure median these APCs, under four possible
99 and more than 2 percent of the single costs for these APCs does not accurately scenarios: (1) The cardioverter-
bills (which no services in APC 0087 reflect the costs of the procedures defibrillator device is inserted without
meet). Because APC 0087 does not have because claims from typical clinical removal or testing; (2) the device is
any codes which meet the test of being circumstances involving multiple inserted and tested with no removal; (3)
significant, all of the codes in APC 0087 procedures, which constitute the the device is removed and inserted but
are ‘‘low volume’’ under our definition, majority of claims under these APCs, are not tested; and (4) the device is
and there is no two times violation. not used to establish the medians. removed, inserted, and tested. For each
Notwithstanding the absence of a 2 At the February 2005 APC Panel unique scenario, we then compared the
times violation under our rules, we meeting, the APC Panel recommended sum of the unadjusted median costs, the
acknowledge the commenter’s concerns, that CMS package CPT codes 93640 and sum of the proposed adjusted median
and we will ask for the APC Panel’s 93641 (electrophysiologic evaluation at costs and the sum of the costs that we
views regarding the assignment of these time of initial implantation or modeled using the APC Panel
codes to APC 0087 in preparation for replacement of cardioverter-defibrillator recommendations. These results were
the CY 2007 OPPS update. We also leads). The APC Panel recommended shown in the proposed rule in Tables 16
recognize that, for many of the that we always package the costs for and 17.
procedures assigned to APC 0087, these codes because the definitions of We proposed to set the medians for
multiple procedure claims are the norm. the codes state that these evaluations are these APCs at 85 percent of their CY
We will also work with the APC Panel done at the time of lead implantation. 2005 payment medians and based our
to develop potential strategies which Therefore, CPT codes 93640 and 93641 modeling of the scalar and the impact
could enable us to use more claims for would never be correctly reported analysis on that proposal, although we
rate setting for these cardiac without a code in APC 0107 or APC believed that the APC Panel
electrophysiologic services. We 0108 also being reported. In addition, recommendations have significant
disagree, however, that because the when a service assigned to APC 0107 or merit, particularly when we move to
electrophysiology ‘‘mapping’’ codes are APC 0108 is provided, we would expect complete reliance on claims data in
performed with other cardiac that CPT codes 93640 or 93641 for updating the OPPS for CY 2007.
electrophysiology studies, the clinical electrophysiologic evaluation and Although we proposed to adjust the
and resource characteristics of the testing would also be performed median costs for these APCs in the same
‘‘mapping’’ procedures necessarily are frequently, and CY 2004 claims data for manner as other device-dependent
similar to the base services provided. services in APC 0107 and APC 0108 APCs, we stated in the proposed rule
See section IV.A. for our discussion of confirm this. The APC Panel believed that we will consider, based on the
adjustments to median costs for device- that packaging the costs of CPT codes public comments, whether it would be
dependent APCs for the CY 2006 OPPS. 93640 and 93641 would result in more appropriate to apply the multiple
See Table 16 for the adjusted median single bills available for setting the procedure claims methodology to these
cost for APC 0087 for the CY 2006 median costs for APC 0107 and APC APCs for the CY 2006 OPPS. We
OPPS. 0108, and thus would likely yield more specifically invited public comments on
appropriate median costs for those the APC Panel recommendations
c. Cardioverter-Defibrillator
APCs. Those medians would then regarding packaging and bypassing
Implantation (APC 0107, 0108)
include the costs of the services frequently performed with
The median costs for APC 0107 electrophysiologic testing commonly procedures assigned to APC 0107 and
(Implantation of Cardioverter- performed at the time of the implantable APC 0108, with the goal of increasing
Defibrillator) and APC 0108 (Insertion/ cardioverter-defibrillator (ICD) single bills available for rate-setting in
Replacement/Repair of Cardioverter- insertion. order to improve the accuracy of median
Defibrillator Leads and Insertion of The APC Panel further recommended costs based upon hospital claims.
Cardioverter-Defibrillator) have been that CMS treat CPT code 33241 We received many public comments
adjusted each year since CY 2003 when (Subcutaneous removal of cardioverter- concerning our proposal.
pass-through payment expired for defibrillator) as a bypass code when the Comment: Many commenters stated
cardioverter-defibrillators, because the code appeared on the same claims with that the payments CMS proposed for
unadjusted medians have differed services assigned to APC 0107 or APC APCs 0107 and 0108 are inadequate to
significantly from the prior year’s 0108. The APC Panel recommended cover the acquisition costs of the
devices, much less the full hospital The APC Data Subcommittee will a new APC with a payment amount of
costs of providing the services. They continue to advise us on efforts to approximately $2,800. The commenter
asserted that the proposed payments for increase the amount of usable claims also recommended that we assign new
APCs 0107 and 0108 are only 84 percent data for services that very frequently are CPT codes 36478 (Endovenous ablation
of the cost of the device alone, leaving provided along with other separately therapy of incompetent vein, extremity,
the hospital with an out of pocket loss payable procedures. inclusive of all imaging guidance and
for the device and no payment for the As noted above, consistent with monitoring, percutaneous, laser; first
service costs. They indicated that if the payment for other device-dependent vein treated) and 36479 (Endovenous
proposed payment rates are made final, APCs, the CY 2006 OPPS payment for ablation therapy of incompetent vein,
APCs 0107 and 0108 will have incurred APCs 0107 and 0108 is set based on 90 extremity, inclusive of all imaging
reductions of 20.5 percent and 29.4 percent of the CY 2005 OPPS adjusted guidance and monitoring, percutaneous,
percent respectively since CY 2002. median cost. See Table 16 for a laser; second and subsequent veins
They urged that CMS use external data complete listing of device-dependent treated in a single extremity, each
for the device portion of the median cost APCs and the adjusted median costs on through separate access sites) to the
or at a minimum, accept the APC Panel which the payment rates are based. lower level of the two new endovascular
recommendation to set the payment rate d. Endovenous Ablation (APC 0092) ablation procedure APCs that they
for APCs 0107 and 0108 at no less than requested, with a payment rate of
the CY 2005 OPPS payment rate Comment: One commenter addressed approximately $2,300.
updated by the full market basket our final rule (November 15, 2004) In its proposed rule comments, the
increase. They say that beneficiary regarding the APC assignment of new commenter provided detailed
access to care will be inhibited by CPT codes 36475 (Endovenous information about the costs of the
continued inadequate payments for radiofrequency ablation, first vein) and endovenous ablation procedures from
these services. 36476 (Endovenous radiofrequency the practice expense cost inputs for the
Response: We have considered the ablation, vein add-on). The commenter Medicare Physician Fee Schedule. The
comments and, as proposed, will adjust asserted that the assignment to APC commenter based its recommendations
the medians for the services in APCs 0092 (Level I Vascular Ligation) was for OPPS payment on those data and
0107 and 0108 under the same policy inappropriate and results in payment provided prices for the RF ablation
being applied to other device-dependent that is inadequate to cover the costs of catheter ($680) and the laser fiber kit
APCs. See section IV.A. of this preamble the procedure. The commenter ($325), as well as for the capital
for our discussion of the use of external recommended creation of two new equipment for each procedure type.
data, and requests to update the CY APCs, Level I and Level II endovenous Response: Prior to the CY 2005
2005 OPPS median costs and payment ablation procedures, and advocated implementation of CPT codes 36475 and
rates by the market basket for purposes assignment of both CPT codes 36475 36476 for radiofrequency ablation and
of setting the CY 2006 OPPS payments. and 36476 to the higher of the two CPT codes 36478 and 36479 for laser
Also see section IV. A. of this preamble levels. The commenter stated that ablation, the radiofrequency ablation
for our discussion of adjustments to radiofrequency (RF) ablation procedures device used in the endovenous ablation
median costs for device-dependent are quite different from other vein procedure was coded using HCPCS code
APCs. See Table 16 for the CY 2006 stripping methods and require C1888 (Catheter, ablation, non-cardiac,
adjusted median costs for device- substantially more operating room time endovascular) and was separately paid
dependent APCs, including APCs 0107 and hospital resources than do vein as a pass-through until December 31,
and 0108. stripping or endovenous laser 2004 when the pass-through status
Comment: One commenter supported procedures. expired.
the recommendations of the APC Panel Further, the commenter stated that We received a significant number of
that CMS package CPT codes 93640 and our assignment of CPT codes 36475 and bills for HCPCS code C1888 (1787 units)
93641 (electrophysiologic evaluation at 36476 to APC 0092 was inconsistent in CY 2004 and considered the median
time of initial implantation or with the cost data CMS analyzed for cost ($636) based on those bills, along
replacement of cardioverter- making pass-through payments for the with clinical information and historical
defibrillator) and treat CPT code 33241 ablation catheter (HCPCS code C1888, hospital claims data for other OPPS
(subcutaneous removal of cardioverter- which expires December 31, 2005). The services in making the APC assignments
defibrillator) as a bypass code when it commenter asserted that we failed to of the new CPT codes. We assigned all
appears on claims with services add the costs for the ablation device into RF and laser endovenous ablation
assigned to APCs 0107 or 0108. The the procedure when we made the procedures for the first vein and second
commenter believed that these changes assignment to APC 0092. The and subsequent veins to APC 0092,
would result in a more robust set of commenter also stated that hospitals status indicator ‘‘T,’’ with other vein
claims to be used to set the median costs and the manufacturer have submitted procedures and a CY 2005 payment rate
for APCs 0107 and 0108. Other cost information and charge data to of $1,538. However, in response to the
commenters indicate that with or CMS that support assignment of the comment we reconsidered our decision.
without these changes, the increased procedures to an APC with a payment While there are no two times rule
volume of claims is unlikely to result in rate of about $2,500. violations for APCs 0092 and 0091 for
adequate median costs for these We received one comment, from the CY 2006, the median costs for
procedures. same commenter, on our proposed rule. individual procedures assigned to those
Response: We believe that it may be The commenters stated that the RF APCs significantly overlap.
appropriate to package CPT codes 93640 ablation procedures are more like those Nevertheless, APC 0091 has a somewhat
and 93641 into the services assigned to assigned to APC 0086, Ablate Heart higher payment rate for CY 2006. Given
APCs 0107 and 0108, and that it may be Dysrythm Focus, than those in APC the costs for the disposables and other
appropriate to bypass CPT code 33241 0092 (Level I Vascular Ligation). Similar resources used in delivery of both laser
only when it appears on the same claim to its comment on the final rule, the and RF endovenous ablation services,
with codes in APCs 0107 or 0108, and commenter recommended that CMS we determined that assignment to the
we will explore doing this in the future. reassign CPT codes 36475 and 36476 to higher paying of these APCs was a more
accurate placement than APC 0092 as diagnostic intervention, including or intrabronchial catheters or wires with
we proposed. Therefore, for CY 2006, imaging supervision and interpretation). complex capabilities to provide clinical
CPT codes 36475, 36476, 36478, and The commenter objected to the information, such as images or flow
36479 will be assigned to APC 0091. procedure’s assignment to APC 0670 data. The hospital resources required for
The ‘‘T’’ status of the APC should (Level II Intravascular and Intracardiac all of these services are highly related to
ensure appropriate payment when Ultrasound and Flow Reserve) for the costs of the technologies used for the
ablation of more than one vein is several reasons. First among those procedures. In general, our hospital
performed in an operative session. For reasons was that the procedure should claims data are quite consistent with
CY 2007 we will have hospital claims not be assigned to the same APC as is assignment of CPT code 93662 to APC
data for those codes for the first time, CPT code 92978, Intravascular 0670 with a median cost of $1,505 for
and, with the assistance of the APC ultrasound (coronary vessel or graft) CY 2006, along with the other services
Panel, we will reconsider the APC during diagnostic evaluation and/or previously described. We note that our
assignments for them and the other therapeutic intervention including CY 2004 total claims volume for CPT
procedures assigned to APCs 0091 and imaging supervision, interpretation and code 93662 almost doubled between CY
0092 because we believe that for report. The commenter stated that the 2003 and CY 2004, providing no
procedures assigned to APCs 0091 and two procedures are dissimilar clinically evidence that Medicare beneficiaries are
0092 CY 2007 APC reconfiguration may and with respect to resource having trouble accessing this service.
be advisable. consumption. The differences between As discussed elsewhere in this
the two procedures listed by the preamble, we are working on alternative
e. External Counterpulsation Therapy strategies for determining the costs for
commenter were: the intracardiac
(APC 0678) procedures that are reported as CPT
echocardiography (ICE) procedure can
Comment: One commenter submitted be used to image the entire heart rather ‘‘add-on’’ codes. When we are better
comments about external than just a coronary vessel as does the able to identify those costs, we will
counterpulsation therapy (EECP, HCPCS intravascular ultrasound (IVUS) reevaluate the assignment of the ICE and
code G0166). The commenter requested procedure; ICE is closely associated IVUS procedures. At this time, however,
that we base the CY 2006 payment for with electrophysiology and we believe that APC 0670 is the most
this procedure on the OPPS relative interventional cardiology procedures; appropriate assignment for CPT codes
weight for the procedure from CY 2005. IVUS is an imaging technique used as 93662 and 92978.
The commenter was concerned because an adjunct to coronary/peripheral stent
the OPPS rate for this procedure has g. Percutaneous Thrombectomy and
deployment; IVUS catheters cost from Thrombolysis (APC 0676)
decreased every year since CY 2000, and $500 to $700 whereas ICE catheters cost
they believed that the lower payments from $900 to $2,800; and the mean and Comment: One commenter submitted
might result in diminished beneficiary median costs for the procedures are very comments regarding the APC
access to the therapy. The commenter different. assignment for CPT code 92973,
believed that the low costs in the CMS Response: The ICE procedure is a CPT Percutaneous transluminal coronary
data may be due to hospitals filing code ‘‘add-on,’’ and so normally is not thrombectomy and CPT code 37195
inaccurate claims. reported alone on OPPS bills. For that (Thrombolysis, cerebral, by intravenous
Response: Although the OPPS reason, only 10 of the 541 claims for the infusion). The commenter stated that
payment rate for EECP has decreased procedure were single claims that we the payment rate for APC 0676
every year since CY 2000 as noted by could use to calculate its procedure- (Thrombolysis and Thrombectomy) was
the commenter, we are committed to specific median cost of $1,815. In fact, based largely on only one of the
relying on our hospital claims data for all four of the procedures assigned to procedures assigned to the APC, CPT
this APC. In addition, we note that the APC 0670 are ‘‘add-on’’ codes, and two code 36550 (Declotting by thrombolytic
total numbers of OPPS claims for this of the procedures had no single claims agent of implanted vascular access
service have increased over the past for CY 2004 because one of the codes, device or catheter), and that it was
several years, from 26,836 in CY 2002, CPT code 31620 (Endobronchial inappropriately low for CPT codes
to 37,568 in CY 2003, and again to ultrasound (EBUS) during 92973 and 37195. The commenter stated
40,362 in our most recent claims data bronchoscopic diagnostic or therapeutic that the procedures coded by CPT codes
for CY 2004. We have no reason to intervention(s)), was new for CY 2005 92973 and 37195 require a mechanical
believe that Medicare beneficiaries are and CPT code 93571 (Intravascular device costing hundreds of dollars or
having trouble accessing this therapy. Doppler velocity and/or pressure significant quantities of expensive lytic
Hospitals have been billing Medicare for derived coronary flow reserve agents, respectively. The comment also
EECP since CY 2000 and so should be measurement (coronary vessel or graft) suggested that the difficulty that CMS
filing accurate bills. The procedure is in during coronary angiography including has in obtaining accurate cost data for
an APC that has no other procedures pharmacologically induced stress; these procedures is due to the fact that
that can affect its median, and the initial vessel) was packaged under the they are rarely reported as single claims,
median cost for the CY 2006 OPPS is OPPS in CY 2004 and when unpackaged and that next year there will be new
based on more than 38,000 single for CY 2005, no single claims were codes for percutaneous thrombectomy
claims. Therefore, we will finalize our available. The fourth code in APC 0670, that will help to remedy that situation.
proposed CY 2006 APC assignment and CPT code 92978, the IVUS procedure, Response: For CY 2006, we proposed
payment rate for APC 0678, based on had a median cost of $1,505 and 115 to retain CPT code 92973 in APC 0676
our standard OPPS methodology. single claims and, therefore, had a and to remove CPT code 37195 from the
disproportionate influence on the inpatient list and assign it to APC 0676
f. Intracardiac Echocardiography (APC median cost for the APC. as well. The median cost for each of
0670) We do not agree that there are no these procedures was based on one
Comment: One comment submitted significant clinical similarities among single claim each, out of 149 and 28
comments about the APC assignment for the procedures assigned to APC 0670. total claims respectively. The very low
CPT code 93662 (Intracardiac These similarities include their ‘‘add- volume of single claims is expected for
echocardiography during therapeutic/ on’’ status and their use of intravascular these two procedures because CPT code
92973 is an ‘‘add-on’’ code and would Intravascular and Intracardiac appropriate charge for the device used
not be expected to be reported alone, Ultrasound and Flow Reserve), as in the procedure.
and CPT code 37195 was on the presented in the November 15, 2004 The new requirement for device
inpatient list in CY 2004, and therefore, final rule. In addition, the commenter coding is one technique that we believe
we do not have many outpatient requested that we reactivate will help us to address the ongoing
hospital claims for it. discontinued HCPCS code C3556 which problem of hospitals inadvertently
The commenter’s point that the APC was used previously for three specific failing to accurately and fully bill the
0676 payment rate was based mainly on brands of sensors, including guidewire- charges for all hospital resources
one of the other procedures assigned to mounted coronary flow reserve sensors. utilized to perform procedures. By
that APC is correct. The procedure The commenter believed that the requiring that the device code be on the
coded with CPT code 36550 (Declotting requirement to report HCPCS device claim, we are more confident that the
by thrombolytic agent of implanted codes for device-dependent APCs would device costs have been included in the
vascular access device or catheter) had result in inaccurate cost information for hospital’s bill and that we will capture
a very high volume of single claims with the flow reserve sensors because these accurate costs for rate setting for the
a procedure-specific median cost of devices are currently coded using procedure as a whole.
$128 so that its claims HCPCS code C1769 which is also used
disproportionately influenced the APC to code all types of guidewires. i. Vascular Access Procedures (APCs
median cost of $135. There were 5,099 Response: We appreciate the 0621, 0622, and 0623)
single claims for that procedure and the comment concerning these new and Many of the codes that currently
next highest volume of single claims in revised APCs as we published them in describe vascular access procedures
APC 0676 was only 439 claims for CPT the November 15, 2004 final rule. We were new in the CY 2004 version of CPT
code 37201 (Transcatheter therapy, have made those changes final. and were assigned into APC groups by
infusion for thrombolysis other than Beginning April 1, 2001, many crosswalking the newly created CPT
coronary). manufacturer and device-specific codes to the deleted codes’ APC
While we acknowledge the small HCPCS codes established for device assignments. Although the new codes
number of claims for CPT code 92973, pass-through payment purposes were were implemented in January 2004,
we agree with the commenter than its discontinued in favor of more general because of the delay between a bill
continued assignment to APC 0676 codes to describe categories of devices. being submitted to Medicare and when
could lead to significant underpayment HCPCS code C3556 was discontinued as the bill data are viable for analysis, we
for this service that utilizes a costly of April 1, 2001 as part of that action. did not have cost and utilization data
catheter. Therefore, we will reassign The guidewire-mounted coronary flow for the new codes available for analysis
CPT code 92973 to APC 0088 reserve sensors previously reported with until this year in preparation for the CY
(Thrombectomy) with an APC median of HCPCS code C3556 were cross-walked 2006 OPPS.
$2,171 for CY 2006, where other to HCPCS code C1769, which was Since those original APC assignments
procedures that are more clinically and established for coding guidewires. The were made, we have received requests
resource coherent with CPT code 92973 Medicare, Medicaid and SCHIP Benefits from the public for specific APC
reside. As this service is an ‘‘add-on’’ Improvement and Protection Act (BIPA) assignment changes. We were reluctant
code to other surgical procedures and is of 2000 required us to establish to make changes without data to support
assigned status indicator ‘‘T,’’ we expect categories, or types, of devices and no reassignments and, therefore, made few
that its payment rate will be reduced by longer create codes to describe each changes to those original APC
50 percent when it is correctly billed device specifically. Further, we do not assignments.
with other surgical procedures. create new device codes unless one is As an outcome of an analysis of
With respect to CPT code 37195, we needed to support accurate payment for procedure-specific median costs and 2
will finalize its assignment to APC 0676 devices that meet our criteria for times rule violations in preparation for
for CY 2006. We expect that the lytic transitional pass-through payment. the CY 2006 update of the OPPS, for the
drugs that will be administered to a There is no such need in this case as the proposed rule we developed a new APC
patient during this procedure will guidewire-mounted coronary flow configuration for vascular access
generally be separately payable under reserve sensor received its full period of procedure codes and several other
the OPPS, as well as some of the other device pass-through payments. related codes. The proposed new
services that typically will be provided We do not believe that use of HCPCS assignments were supported by CY 2004
to a patient receiving cerebral code C1769 will result in inaccurate hospital claims data and are based on
thrombolysis by intravenous infusion. cost data for coronary flow reserve median cost and clinical considerations.
While we expect that performance of measurement services. Reporting the Thus, for CY 2006 we proposed to
this procedure in the hospital outpatient device code on claims for device- reassign many of the CPT codes that are
setting will remain rare, we believe that dependent procedures is meant to currently in the following APCs:
APC 0676 should make appropriate ensure that the bills upon which we rely • APC 0032 (Insertion of Central
payment for CPT code 37195 for CY for calculation of the median costs Venous/Arterial Catheter)
2006. As always, we will examine the include the device costs integral to the • APC 0109 (Removal of Implanted
costs from hospital claims as new data procedures. We base this policy on our Devices)
become available to ensure that the belief that if a hospital includes the • APC 0115 (Cannula/Access Device
OPPS payment is appropriate. code for the device on the bill, even Procedures)
though there is no separate payment for • APC 0119 (Implantation of Infusion
h. Coronary Flow Reserve (APCs 0416 the device, the bill is more likely to be Pump)
and 0670) an accurate and complete report of • APC 0124 (Revision of Implanted
Comment: One commenter requested hospital charges (and thereby, costs). Infusion Pump)
that CMS make permanent the revised We expect that hospitals reporting the • APC 0187 (Miscellaneous
APC 0670 (Level II Intravascular and required guidewire device C-code along Placement/Repositioning)
Intracardiac Ultrasound and Flow with a coronary flow reserve The configuration that we proposed
Reserve) and new APC 0416 (Level I measurement service will provide an placed all of the procedures currently
assigned to APC 0187 into more more clinically appropriate APCs. We The APC Panel was supportive of the
clinically appropriate APCs. We also proposed to reassign CPT code 75940 to proposed reassignments and
proposed to reassign all of the vascular APC 0297 (Level II Therapeutic recommended that we make these
access procedure codes currently Radiologic Procedures) and CPT code changes. Therefore, for the stated
assigned to any of the identified APCs 76095 to APC 0264 (Level II reasons we proposed the APC
to existing or newly reconfigured Miscellaneous Radiology Procedures). modifications for CY 2006 OPPS as
clinical APCs to create more clinical We proposed to create three new summarized in Table 13 of the proposed
and median cost homogeneity. As a clinical APCs, APC 0621 (Level I rule (70 FR 42713).
result of the proposed reassignments, Vascular Access Codes), APC 0622 We received a few comments on our
those clinical APCs were comprised of (Level II Vascular Access Codes), and proposal.
a different mix of codes than is APC 0623 (Level III Vascular Access Comment: All of the comments were
currently the case for the CY 2005 Codes) and assign procedures to each of supportive of our reconfiguration of the
OPPS. There were no codes assigned to these based on median cost and clinical APCs and encouraged us to make the
APC 0187 because the only procedures homogeneity. We also proposed to proposal final.
that remained in APC 0187 after rename APCs 0109 and 0115 as follows: Response: We appreciate the
reassigning the vascular access APC 0109 (Removal of Implanted commenters’ support.
procedures as we proposed were CPT Devices); and APC 0115 (Cannula/ Therefore, we are finalizing our
code 75940 (X-ray placement of vein Access Device Procedures). proposal without modification for FY
filter) and CPT code 76095 (Stereotactic We presented this proposal to the 2006.
breast biopsy), which we reassigned to APC Panel at its February 2005 meeting. BILLING CODE 4120–01–P
ER10NO05.016</GPH>
BILLING CODE 4120–01–C characteristics of CPT code 75790 and confidential data to determine median
2. Radiology, Radiation Oncology, and provides appropriate payment to costs for rate-setting. They said that
Nuclear Medicine hospitals for this service. because brachytherapy sources are
In contrast, CPT code 75720 has a required to furnish these services, they
a. Angiography and Venography (APCs median cost of only $258, based on should be treated like device dependent
0279, 0280, and 0668) almost 3,500 single claims that APCs with regard to adjustment of
Comment: One commenter supported represent over half of the total claims for medians and required editing for the
our proposal to reassign CPT code the service. Similarly, CPT code 75722 presence of sources on the claims.
75790 (Angiography, arteriovenous has a median cost of $349, based on Response: We have not accepted the
shunt, radiological supervision and over 2,400 claims that represent more commenters’ recommendations to use
interpretation) from APC 0281 than half of the total claims for the external data for the reasons we cite in
(Venography of Extremity) to APC 0279 service. Both of these procedures are the discussion of external data in
(Level II Angiography and Venography assigned to APC 0668 which has a section II. of this preamble. Moreover,
except Extremity). However, this same median cost of $375. We believe that we have not accepted the
commenter objected to our proposal to APC 0668 appropriately reflects the recommendation that we use only
move CPT codes 75820 (Venography, clinical and hospital resource claims that contain a brachytherapy
extremity, unilateral, radiological characteristics of both of these source on the claim to calculate the
supervision and interpretation) and procedures. Thus, although these three median costs for APCs 0312, 0313, and
75822 (Venography, extremity, codes were assigned to the same clinical 0651 because we believe that the
unilateral, radiological supervision and APC 0281 for CY 2005, when we presence of a source on the claim is not
interpretation) from APC 0281 eliminated that APC and reassigned the relevant, since sources are paid
(Venography of Extremity) to APC 0668 three services, we were able to place separately. While the median costs
(Level I Angiography and Venography them in such a way as to provide more presented by the commenters based on
except Extremity). The commenter accurate payments for each of the claims that contain sources resulted in
contended that CPT codes 75790, 75820, services. higher median costs, we do not see a
and 75822 share similar clinical We appreciate the commenter’s valid reason to limit the claims to
characteristics and resource drawing our attention to the phrase claims with sources because the
requirements and, therefore, should be ‘‘Except Extremity’’ that remained in the presence of the source is not relevant to
mapped to the same APC 0279. For APC titles for APCs 0668, 0279, and the median cost of the procedural APC.
instance, the commenter stated that all 0280 after we eliminated the CY 2005 We have no reason to believe that the
three services require the use of APC for extremity venography services. claims without sources on the claim do
guidewires, catheters, local anesthetic, For CY 2006, we have removed the not contain the full charges for the
and contrast. Furthermore, the phrase ‘‘Except Extremity’’ from the procedural services furnished. We have
commenter asserted that CPT code APC title for APCs 0668, 0279, and applied adjustments to the median costs
75822 involves a bilateral procedure 0280, so they are now renamed Levels for device dependent APCs for CY 2006
which requires much higher resource I, II, and III Angiography and because of the difficulties in ensuring
costs than other services assigned to Venography, respectively. device charges are fully reflected on
APC 0668. Lastly, the commenter stated b. Brachytherapy (APCs 0312, 0313, and claims for these services, thus allowing
that CPT codes 75790, 75820, and 75822 0651) appropriate packaging of the device
share similar clinical characteristics costs into the APC payments. This
with CPT code 75658 (Angiography, Comment: Commenters objected to rationale does not apply to the APCs for
brachial, retrograde, radiological the proposed reduction in the payment application of brachytherapy sources, so
supervision and interpretation), which rates for APCs 0312, 0313 and 0651 for we have not applied the device
currently resides in APC 0279, differing the CY 2006 OPPS. They indicated that dependent APC median adjustment
only with respect to whether a vein is the reductions could result in decreased policy to APCs 0312, 0313, and 0651 for
accessed versus an artery in an access to care. They recommended that CY 2006.
extremity. The commenter urged that CMS use only claims on which a We disagree that these services should
CMS reassign CPT codes 75790, 75820, brachythearpy source appears with the be treated like device dependent APCs
and 75822 to APC 0279 for CY 2006. In procedure code, which they describe as solely because they require
addition, the commenter recommended ‘‘correctly coded’’ claims, as the basis brachytherapy sources. The critical
that CMS modify the title of APC 0668 for the median cost calculations for distinction is that the APC payment for
to exclude language referring to these APCs. They indicated that using device dependent APCs includes
extremities based on the commenter’s only claims on which the brachytherapy payment for the packaged devices,
belief that none of the other CPT codes source code was billed results in while payment for these brachytherapy
assigned to APC 0668 relate to median costs that are higher than the source application APCs is exclusive of
extremities. median costs calculated using all single payment for the sources, which are paid
Response: Based on our analysis of procedure claims. At its August 2005 on the basis of charges reduced to cost.
our CY 2004 claims data we disagree meeting, the APC Panel recommended The editing for the presence of key
with the commenter that services that we evaluate this proposal. The devices on claims for services assigned
described by CPT codes 75790, 75820, commenters also asked that CMS device dependent APCs is not ‘‘correct
and 75822 require similar hospital expand the adjustment proposed for coding’’ editing. Instead, the edit is
resources. CPT code 75790 has a median selected device dependent APCs to made to maximize the likelihood that
cost of $548, based on over 18,000 APCs 0312, 0313 and 0651. They asked the charge for the principle device
single claims from CY 2004, and is that CMS consider alternative required to perform the service is
assigned to APC 0279 (Level II methodologies to utilize single and included on the claim so that we will
Angiography and Venography), which multiple procedure claims for rate capture the cost of the device in setting
has a median cost of $517. We believe setting purposes so that more claims the median cost for the APC.
that this APC appropriately reflects the could be used. They also asked that Although the brachytherapy
clinical and hospital resource CMS use external proprietary and procedure comments have largely
focused on the payment for CPT code by treating these three codes as if they services and, therefore, should be
77778, the application of the were grouped into one comprehensive deleted from the claims used to set the
brachytherapy sources, we note that all service by adding the costs of these median costs for these APCs.
the related procedures, such as needle codes to the costs on the claim for CPT Response: We have no basis to believe
or catheter use and placement, must be codes 55859 and 77778 and all other that the charges for the procedure code
considered for a full analysis of packaged costs. This ‘‘combination are not all-inclusive charges for all
payment for brachytherapy services. group median’’ is $3,187.86. This packaged items and services associated
The brachytherapy source application ‘‘combination group median’’ overstates with the procedure when a single charge
service is but one component of the the costs of CPT codes 55859 and 77778 appears for a procedure code. Again, we
entire procedure. The hospital also bills by the extent to which the costs of the encourage hospitals to bill all relevant
for the placement of the needles or three ancillary services and the HCPCS codes that appropriately reflect
catheters, the imaging and planning packaging that is associated with them the services provided.
services, and is paid separately for the are reflected in it. We then calculated a c. Computed Tomography (APCs 0283
sources at charges reduced to costs. second combination median cost in and 0333)
Because of the particularly large drop which we treated these three ancillary
in median cost from the median based codes as if they were on the bypass list Comment: One commenter supported
on CY 2003 data compared to the by removing the line item charges for our proposal to pay separately for low
median cost based on CY 2004 claims these codes and associated all packaging osmolar contrast material (LOCM) and
data for APC 0651, we extensively on the claim with CPT codes 55859 and most magnetic resonance contrast
reviewed the cost of APC 0651, which 77778. This ‘‘combination bypass agents. However, the commenter
is most commonly billed for the median’’ is $2,968.64. This expressed concern that the separate
provision of interstitial prostate ‘‘combination bypass median’’ payment for these agents will not
brachytherapy and frequently appears overstates the costs of CPT codes 55859 adequately compensate for the reduced
on the same claim with CPT code and 77778 to the extent that the payment which CMS proposed for APCs
55859, the code for placement of packaged costs associated with the 3 0283 (CT with contrast) and 0333 (CT
needles or catheters into the prostate. ancillary services are reflected in it. and CTA without contrast followed by
Contrary to the commenters’ belief that We then compared the sum of the contrast). The commenter stated that
‘‘correctly coded’’ claims for CPT code single bill medians calculated from our they did not understand CMS’ rationale
77778 also contain brachytherapy OPPS stated methodology for CPT codes for proposing to reduce payments for
sources, in most cases of prostate 55859 and 77778 to both of these APCs 0283 and 0333 to a level that
brachytherapy both CPT codes 55859 combination medians. The sum of the results in an overall net loss for
and 77778 are found on the same claim single bill medians for these codes contrast-enhanced CT studies.
with a radiologic guidance code (often (without any costs from the three Response: We do not agree with the
CPT codes 76000 or 76965) and/or with ancillary procedures) is $2,662.62. We commenter’s assertion that the proposed
a radiation planning code (usually CPT then summed the medians for CPT CY 2006 payment rates for APCs 0283
code 77290). This results in a correctly codes 55859, 77778, 76000, and 77290, and 0333 will necessarily reduce overall
coded claim for interstitial a typical combination of codes for these payments for contrast-enhanced CT
brachytherapy designated as a multiple services, resulting in a sum of $2,975.50, studies. First, the proposed CY 2006
procedure claim. Furthermore, these similar in range to both the payments for APCs 0283 and 0333
claims not only contain the two major ‘‘combination group median’’ and the decreased by less than 3 percent
procedures (CPT codes 55859 and ‘‘combination bypass median.’’ compared to their CY 2005 payment
77778), but they also often contain the Under our analysis, the sum of the rates. Second, our proposal to pay
three ancillary procedures (CPT codes single bill medians for insertion of separately for LOCM products (HCPCS
76000, 76965 and/or 77290), which are needles or catheters in the prostate and codes Q9945 through Q9951) as a result
not on the bypass list because they have the application of brachytherapy of the mean costs per day of their
packaging in excess of $50 or they have sources is well within the range of the predecessor codes (HCPCS codes A4644
packaging on more than 5 percent of combination medians we calculated through A4646) exceeding $50, may
single bills. based on the multiple procedure claims. increase overall payments for some
In our review, we identified 11,341 Accordingly, we have no reason to contrast-enhanced CT studies while
claims containing both CPT codes 55859 believe that the single bill median costs decreasing overall payments for other
and 77778 on the same date of service. for the services reported by CPT codes contrast-enhanced CT studies,
We then looked for claims in this 55859 and 77778 do not otherwise depending on the volume and
subgroup that contained no separately appropriately reflect the costs for those concentration of the LOCM used. The
paid codes other than the three ancillary services. Therefore, we have used the CY 2006 final payment rates for APCs
services (after we applied the bypass list standard OPPS methodology for clinical 0283 and 0333 were calculated from CY
and removed any codes on it). This gave brachytherapy services to set the 2004 hospital claims data utilizing the
us 7,533 claims containing CPT codes payment rates for the CY 2006 OPPS. standard OPPS methodology based on
55859 and 77778 with no other major Comment: One commenter stated that our comprehensive payment policies for
procedures except for the 3 ancillary date of service stratification results in CY 2006, which include unpackaging
services. We believe that claims with pseudo single claims for APCs 0312 and LOCM.
CPT codes 55859, 77778 and one or 0651 that lack packaging because all Therefore, hospital charges for LOCM
more of these 3 ancillary services packaging on the claim has the same in association with single claims for
represent the most typical combinations date of service as the other procedure on services assigned to APCs 0283 and
of services furnished when the claim (i.e. not the procedure code in 0333 were not packaged into the median
brachytherapy sources are applied. We APC 0312 or 0651). The commenter cost calculations for these APCs. As a
then calculated two combination indicated that the median costs for these result, we would expect the APC
median costs: a combination package ‘‘pseudo no package’’ claims is payment rates for APCs 0283 and 0333
and combination bypass. The first significantly lower than the medians for to decline slightly for CY 2006. For CY
combination median cost was calculated other single procedure bills for these 2006, we are applying our standard
OPPS rate setting methodology using CY these services in the hospital outpatient payment for the other separately
2004 hospital claims data to set the setting. To the contrary, our number of payable procedure on the claim. The
payment rates for APCs 0283 and 0333, claims for CTA procedures increased commenter indicated that it simulated
and are paying separately for LOCM steadily between CY 2002 and CY 2003 removing the exception (although they
based on the payment methodology and nearly doubled from CY 2003 to CY did not specify what they did) and by
described in section V.B.3.a.(3) of this 2004. Furthermore, we used over 50 doing so found 202 single bills with a
preamble. percent (99,000 single claims out of median cost of $580 for the code. The
nearly 180,000 total claims) of the CY commenter asked that we place CPT
d. Computed Tomographic Angiography
2004 claims for CTA procedures to code 76362 in New Technology APC
(APC 0333)
calculate the CY 2006 payment rate for 1507 (Level VII $500–$600) so that
In Addendum B of the CY 2006 these services. payment would be set at $550. The
proposed rule (70 FR 42776), we We now have several years of robust commenter also requested that CMS add
proposed to maintain a number of claims data for CTA procedures and CPT code 76362 to the bypass list in
imaging procedures discussed below in have no reason to doubt this data. Based future years.
their CY 2005 APCs. on the full year of CY 2004 data, the Response: We do not agree that CPT
Comment: Several comments median costs for the APCs 0333 (CT) code 76362 would be appropriately
expressed concern that the CY 2006 and 0662 (CTA) are about equal, and assigned to New Technology APC 1507
proposed payment rate for have decreased minimally from their because CT is not a new technology.
Computerized Tomographic median costs based on CY 2003 claims The use of CT guidance for and
Angiography (CTA) procedures (APC data. Because hospitals set their own monitoring of visceral tissue ablation is
0662) continues to be lower than the charges for services, which we then a more recent application of this well-
proposed payment rate for conventional convert to costs, we still see no reason established technology. We
CT procedures. These commenters why adding the costs for CT alone plus acknowledge that we have few single
recommended that CMS set the payment the costs for image reconstruction bills upon which to base our calculation
rate for CTA procedures at a level equal would necessarily provide a better of the median cost of this service, but
to the payment for a CT scan (APC 0333) estimate of costs for CTA than our this is consistent with our expectations
plus a three-dimensional image analysis of our specific CTA claims. based on the nature of the service. We
reconstruction (APC 0282) by either Furthermore, no other existing clinical believe that all correctly coded claims
increasing the payment for APC 0662 or APC appears to contain services that would also include a CPT code for the
reassigning CTA procedures to an share more clinical and resource cost specific ablation service that was
existing APC whose payment rate more homogeneity with CTA procedures than monitored using CT and billed along
closely reflects the resource costs of APC 0662, whose median cost reflects with CPT code 76362.
performing CTA procedures. solely the claims data from 8 CTA We believe that the primary costs
Response: As we stated in the procedures. For this reason, we are not directly attributable to CTP code 76362,
November 15, 2004 final rule with reassigning CTA procedures to any as opposed to the accompanying
comment period (69 FR 65722), accurate other clinical APC(s) for CY 2006. ablation procedure, are the hospital
cost information about the cost of image Instead, for CY 2006, we are applying resources required for the lengthy
reconstruction for CTA specifically, and our standard OPPS rate-setting operation of the necessary CT scanner.
for CT alone as utilized with CTA, methodology for calculating the In examining the clinical characteristics
would be required in order to payment rate for CTA procedures of the use of CT for visceral tissue
implement the commenter’s suggestion residing in APC 0662. Once again, we ablation, we believe that the CT use
that we make the payment rate for CTA encourage all hospitals to take all time for the procedure, although
(APC 0662) equal to the sum of the rates actions necessary to ensure that they are variable depending on the specific
for CT alone (APC 333) plus image billing accurately and including in their ablation procedure provided, would
reconstruction (APC 282). Such cost charges all resources utilized to deliver typically be longer than the CT use time
information is not available. The CY CTA services. for most noncontrast CTs assigned to
2004 image reconstruction CPT code APC 0332.
76375 (coronal, sagittal, multiplanar, e. Computed Tomographic Guidance Because the commenter indicated
oblique, 3-dimensional and/or (APC 0332) their comfort with CPT code 76362
holographic reconstruction of computed Comment: One commenter objected to being added to the bypass list, we
tomography, magnetic resonance the proposed payment rate of $194 for analyzed the line item charges for all
imaging, or other tomographic modality) CPT code 76362 (Computed tomography units of service of CPT code 76362
is not limited to image reconstruction guidance for, and monitoring of, visceral billed by hospitals in CY 2004. The
performed for CTA and may be used in tissue ablation), which was proposed to median charge per unit based on over
a number of other procedures. Based on be assigned to APC 0332 (Computerized 1,000 units was $1,165. Application of
the available CPT codes for CTA, we Axial Tomography and Computerized a hospital average CCR of 0.28 for the
would not expect any current utilization Angiography without Contrast) for CY diagnostic radiology cost center to the
of CPT code 76375 to be for CTA post- 2006. The commenter said that, median charge of $1,165 for CPT code
image processing, unless there was no although CMS included only 9 single 76362 yielded a procedure-specific line
appropriate CTA code to describe the claims in the calculation of the $371 item cost of approximately $325 for this
body region imaged, which we believe median cost for CPT code 76362 in the service. This is quite consistent with our
would rarely be the case. In addition, proposed rule, they identified 202 single final single claim median cost of $363
we would not expect our current cost bills with a median cost of $580 for CPT based on 9 single claims.
data for CTA alone to necessarily reflect code 76362. The commenter indicated Therefore, we are reassigning CPT
the resources utilized for the CT portion that it found that CPT code 76362 was code 76362 to APC 0333 (Computerized
of CTA. not being treated as a major procedure Axial Tomography and Computerized
Commenters provided no evidence in CMS’ median cost calculations, and Angiography Without Contrast
suggesting that Medicare beneficiaries it could not determine if CMS packaged Followed by Contrast) with an APC
have experienced difficulty accessing the cost for CPT code 76362 into the median cost of $303 for CY 2006, where
CT procedures that include both that the procedure should have very Other than this one comment, we have
noncontrast and contrast studies in one little associated packaging. had no indication that there is
examination session reside. We believe confusion among providers about when
f. Computerized Reconstruction (APC
that, although the ablation monitoring to use the code. In addition, we
0417)
service is not necessarily provided both generally allow hospitals to allocate
without and with contrast, the longer Comment: One comment expressed their charges across revenue codes as
time of use of the CT scanner for CPT concern about the payment rate for they feel is appropriate to their specific
code 76362 is more consistent with the HCPCS code G0288 (Reconstruction, institutional settings, and we see no
scanner use time for services assigned to computed tomographic angiography of reason to deviate from this policy for the
APC 0333. In addition, the median cost aorta for preoperative planning and service described by HCPCS code
of APC 0333 is similar to the median evaluation post vascular surgery). The G0288. We do not understand how
cost of CPT code 76362 based on single commenter was concerned because the specifying a revenue code for reporting
claims and to the other cost estimate proposed rule indicated that the rate for would necessarily ensure adequate
based on our analysis of all billed units HCPCS code G0288 would decrease for hospital charges for the service.
of the code. CY 2006, continuing a trend of In response to the commenter’s
With respect to the commenter’s data decreases that began in CY 2004. The recommendations regarding our hospital
findings, CPT code 76362 is considered commenter made several cost data, we conducted a detailed
to be a minor procedure recommendations to CMS that it examination of our CY 2004 claims data
believed would help to limit the and, like the commenter, found that
(notwithstanding the status indicator of
decreased rate for CY 2006 and to
‘‘S’’), because it so frequently occurs on hospitals used 17 different revenue
prevent continuation of the downward
the same claim as other separately paid codes to report HCPCS code G0288.
trend for coming years. The first
procedures and is ancillary to them. As However, we also found that although 8
recommendation was for CMS to
such, when a minor procedure is on the different cost centers for HCPCS code
mandate which revenue code hospitals
same claim as a major procedure, the G0288 were used in our conversion of
are to use to report HCPCS code G0288.
claim is considered to be a single major charges to costs for the service, for 83
The commenter recommended use of
procedure claim and the costs of the percent of the approximately 5,300
revenue code 0780, Telemedicine. This
minor procedure are not used to set the single bills utilized for rate setting we
was based on their finding that hospitals
median for the minor procedure, nor are converted hospital charges to costs
used 17 different revenue codes to
they packaged into the payment for the report HCPCS code G0288. The using one cost center, namely
major procedure. The only single claims commenter stated that more consistent Diagnostic Radiology. Therefore, while
that are used in the calculation of the use of a revenue code would alleviate we acknowledge that utilizing an overall
median cost for the minor procedure the effects of providers not billing hospital CCR for HCPCS code G0288
code and, therefore, for the APC to charges high enough to result in cost yields a higher median cost, $335 for
which the code is assigned are single findings near the acquisition costs. APC 0417 based on our analysis, as
minor procedure claims which are Next, the commenter recommended opposed to a median cost of $235
derived from circumstances in which that for CY 2006, CMS use the hospital utilizing our standard revenue code to
the minor procedure appears alone on a overall CCRs to calculate the median for cost center crosswalk, we do not believe
claim or when it appears as one of HCPCS code G0288. The commenter that it would be appropriate to
several multiple minor procedures on a believed use of the overall CCRs would substitute specific hospital overall CCRs
claim and can be split off because the increase the median for APC 0417 to in our calculation of this APC’s median.
services have different dates of service. approximately $415. We utilize one hospital-specific
We considered making CPT code Third, the commenter recommended departmental CCR for the conversion of
76362 a major procedure and adding the as a fallback measure, in case the first charges to costs for most of the single
service to the bypass list. However, the two recommendations could not be claims, and we have no reason to
code does not meet the empirical implemented, that CMS should use the believe that the CCR in this case is
criteria we have established for CY 2005 rate, adjusted upward in inappropriate. Also, hospitals should
considering new additions to the bypass accordance with the CY 2006 bill adequate and complete charges for
list. Of the total claims for CPT code conversion factor, for APC 0417 in CY the service to account for all of the
76362, we had only 9 single procedure 2006. hospital resources required.
claims (less than the 100 required for a Finally, the commenter requested that Additionally, we see no reason to
code to go onto the bypass list); 6 of the the descriptor for HCPCS code G0288 be adjust the payment rate for APC 0417 to
9 claims (67 percent) contained revised to read, ‘‘Three-dimensional the CY 2005 rate adjusted upward in
packaged services (more than the 5 pre-operative and post-operative accordance with the CY 2006
percent limit) that yielded a median of computer-aided measurement planning conversion factor. We note that despite
$1,231 (considerably above the $50 and simulation in accordance with reductions in payment rates over the
median limit). Hence, because the data measurements and modeling last several years, the number of total
for CPT code 76362 from CY 2004 do specifications of the Society for procedures billed under the OPPS for
not meet any of the criteria for addition Vascular Surgery.’’ They stated that the HCPCS code G0288 has continued to
of the code to the bypass list, we will revised descriptor would ensure that the rise from 2,065 in CY 2002, to 4,733 in
not convert it to a major procedure and code would be used more accurately. CY 2003, and most recently to 8,421 in
add it to the bypass list for CY 2006. Response: Regarding the commenter’s CY 2004. We have no evidence that
However, we will consider for CY 2007 last request, that we revise the Medicare beneficiaries are having
whether we should make an exception descriptor for HCPCS code G0288, we trouble accessing this service based on
to our empirical criteria for additions to do not believe that is necessary. HCPCS our hospital claims information.
the bypass list for services such as CPT code G0288 was revised in CY 2004 to Therefore, we believe that it is
code 76362. We will continue to clarify that the service can be provided appropriate for us to use our historical
develop a more appropriate median cost for both treatment planning prior to hospital cost data as the basis for the CY
for the procedure and it seems plausible surgery and for postsurgical monitoring. 2006 payment amount, and we are
finalizing our payment rate for APC h. Intensity Modulated Radiation for the service. We believe these data
0417 at $235.66 for CY 2006. Therapy (IMRT) (APCs 0310 and 0412) represent, on average, the resources
In Addendum B of the CY 2006 consumed by hospitals for the provision
g. Diagnostic Computed Tomographic
proposed rule, we proposed to maintain of IMRT planning services. We note that
Colonography (APC 0333)
CPT code 77301 (Radiotherapy dose the OPPS does not provide payment for
We proposed to reassign CPT 0067T physicians’ professional services that
(diagnostic computed tomographic plan, intensity modulated radiation
therapy (IMRT)) in APC 0310 (Level III may be required for procedures.
colonography (CTC-Dx)) to APC 0333 Therefore, for CY 2006, we are
(CT and CTA without contrast followed Therapeutic Radiation Treatment
Preparation) based on the CY 2004 maintaining CPT code 77301 in APC
by contrast) for CY 2006. 0310 with an APC median cost of $825,
Comment: One commenter responded hospital claims data submitted for CPT
higher than the final code-specific
to the November 15, 2004 final rule with code 77301. In addition, we proposed to
median cost of CPT code 77301 of $786.
comment period (69 FR 65682), maintain CPT codes 0073T
Comment: In response to the
explaining that CPT code 0067T (Compensator-based IMRT treatment November 15, 2004 final rule with
(diagnostic computed tomographic delivery) and 77418 (Multileaf comment period (69 FR 65682) and the
colonography (CTC-Dx)) was established collimator-based intensity modulated CY 2006 OPPS proposed rule (70 FR
in CY 2005 to replace the previous treatment delivery) in APC 0412 (IMRT 42674), several commenters applauded
coding scheme for CT colonography treatment delivery) for CY 2006. our decision to establish a national
involving two computed tomography We received several public comments payment rate for category III CPT code
(CT) scans (i.e., abdomen and pelvis) related to IMRT issues. 0073T for compensator-based IMRT
and three-dimensional image Comment: One commenter expressed
treatment delivery. These commenters
reconstruction. Furthermore, the concern that the proposed payment rate
stated that our decision to pay for
commenter explained that the two CT for CPT code 77301 does not reflect the
compensator-based IMRT treatment
components of a CTC-Dx may be actual physics planning time and delivery will encourage patient access
administered in a variety of ways: (1) CT resources for this procedure. The and diffusion of this cost-effective
without contrast, (2) CT with contrast, commenter recommended that we take technology. Furthermore, these
or (3) CT without contrast followed by into consideration the costs associated commenters agreed with our rationale to
a CT scan with contrast. The commenter with IMRT planning for a typical head assign CPT codes 0073T (Compensator-
stated that CMS’ assignment of CPT and neck case, including the time spent based IMRT treatment delivery) and
code 0067T to APC 0332 (CT and CTA by the dosimetrists, physicists, and 77418 (Multileaf collimator-based IMRT
without contrast) for CY 2005 failed to physicians, when setting the payment treatment delivery) to the same APC
recognize the cost differential between a for CPT code 77301. 0412 (IMRT treatment delivery) for rate
CT scan and the variety of ways in Response: The proposed procedure- setting purposes, noting that the IMRT
which a CTC-Dx scan is administered, specific median cost of $827 for CPT treatment delivery costs are virtually
along with the costs associated with the code 77301 was calculated using 16,417 identical for both modalities. In
three-dimensional image reconstruction. single procedure claims out of 16,885 contrast, one commenter to the
The commenter urged CMS to total claims (97 percent of the total November 15, 2004 final rule with
reconsider the APC placement of CPT claims). We proposed to maintain CPT comment period (69 FR 65682) was
code 0067T, taking into account its code 77301 in APC 0310 (Level III opposed to the assignment of CPT code
advantages as a less invasive and less Therapeutic Radiation Treatment 0073T to APC 0412. This commenter
costly alternative to a colonoscopy. Preparation) grouped with only one explained that CPT code 0073T was
Response: Due to the recent other service, CPT code 77295 (Set created specifically to distinguish
establishment of CPT code 0067T in CY radiation therapy field), whose compensator-based IMRT treatment
2005, we will have no hospital claims proposed median procedure-specific delivery from multileaf collimator-based
data for determining its resource cost of $844 had the effect of increasing IMRT treatment delivery, described by
requirements until CY 2007. For CY the proposed payment for CPT code CPT code 77418. The commenter
2005, we assigned CPT code 0067T to 77301 due to its significantly higher believed that the assignment of CPT
APC 0332 (CT and CTA without single frequency of claims used to set codes 0073T and 77418 to the same APC
contrast) because we considered the the payment for APC 0310. We have no 0412 precludes CMS from collecting
clinical characteristics of CTC-Dx to be reason to believe that the single distinct claims data for each code, and
relatively similar to other services procedure claims for CPT code 77301 urged CMS to assign CPT code 0073T to
assigned to APC 0332. We thank the that represent IMRT planning for head a New Technology APC and reserve
commenter for bringing to our attention and neck treatment reflect more APC 0412 for CPT code 77418.
the variety of ways in which a CTC-Dx accurate costs and charges than those Response: Our decision to place CPT
can be administered, notably a CT scan claims for CPT 77301 that represent codes 0073T and 77418 in the same
without contrast followed by a CT scan IMRT planning for other body areas. APC 0412 supports the clinical
with contrast. In light of this additional Thus, we would have no justification for homogeneity of APC 0412. Because we
information, for CY 2006 we proposed discarding such a subset of claims that had no CY 2003 claims data for the
to reassign CPT 0067T to APC 0333 (CT appear to be accurately reported under newly established Category III CPT code
and CTA without contrast followed by CPT code 77301, but merely require less 0073T, we concluded that its resource
contrast), where similar services reside resource utilization for certain covered costs were likely reflected to some
involving a CT scan without contrast clinical indications. Rather, the high degree in the costs and charges reported
followed by a CT scan with contrast. We percentage of single procedure claims for CPT code 77418, considering that
are finalizing our proposal to reassign for this service, which remains at 97 this was the only CPT code available to
CPT 0067T to APC 0333 for CY 2006. percent for the final rule data, along providers for the billing of compensator-
However, in preparation for CY 2007 with its relatively stable median cost for based IMRT treatment delivery prior to
rate setting, we will reexamine the APC several years, confirms our belief that January 1, 2005. Contrary to a belief
placement of CPT code 0067T based on the CY 2006 median cost for CPT code held by one of the commenters, the
available CY 2005 hospital claims data. 77301 accurately reflects hospitals’ costs assignment of CPT codes 0073T and
74418 to the same APC 0412 for proposed rule, the more recent median Response: In light of the additional
payment purposes does not preclude cost data from CY 2004 for CPT code information that has been presented to
CMS from collecting distinct claims 78700 do not preclude its return to APC us, we agree that it would be more
data for these two codes. Once the CY 0404. Therefore, in the interest of accurate to assign the two procedures to
2005 claims data for CPT code 0073T preserving the clinical homogeneity of separate APCs to account for the higher
become available for setting the CY 2007 APCs 0267 and 0404, we are not level of resources required to ablate the
payment rate, we will reexamine the adopting our proposed reassignment larger growths. However, we do not
APC placement of CPT code 0073T. In and will retain CPT code 78700 in APC agree that it is most appropriate to
the meantime, for CY 2006 we will 0404 for CY 2006. assign MRgFUS procedures to New
maintain CPT codes 0073T and 77418 in Technology APCs 1528 and 1532.
j. Magnetic Resonance Guided Focused
the same APC 0412. Although FDA approval of one specific
Comment: One commenter explained Ultrasound Ablation (APC 0193)
ablation technology was relatively
that, effective January 1, 2005, the We received one public comment on recent, MRgFUS therapy bears a
descriptor for CPT code 77418 the CY 2006 OPPS proposed rule significant relationship to technologies
(Multileaf collimator-based intensity concerning the APC assignments for already in widespread use in hospitals,
modulated treatment delivery) was HCPCS codes 0071T and 0072T, along in particular MRI and ultrasound
changed to explicitly exclude with several related comments on the services. The use of focused ultrasound
compensator-based IMRT treatment November 15, 2004 final rule with for thermal tissue ablation has been in
delivery and a new Category III code comment period. development for decades, and the recent
0073T was created to describe Comment: Several commenters application of MRI to focused
compensator-based IMRT delivery. This submitted comments on the November ultrasound therapy provides monitoring
commenter requested that we either 15, 2004 final rule regarding the APC capabilities that may make the therapy
update the December 19, 2003 Medicare assignments of magnetic resonance
more clinically useful. We believe that
Program Transmittal 32 (CR 3007) or guided focused ultrasound (MRgFUS)
MRgFUS therapy is a new and
issue a new Medicare Program therapy for uterine fibroids. We
integrated application of existing
Transmittal to include compensator- proposed to retain magnetic resonance
technologies (MRI and ultrasound) and,
based IMRT treatment delivery code guided focused ultrasound (MRgFUS)
therefore, is not necessarily most
0073T. The commenter provided CMS procedures in APC 0193 for CY 2006.
accurately assigned to a New
with recommended language to clarify The commenters believed that the
Technology APC. We believe that the
the billing of compensator-based IMRT procedure’s assignment to APC 0193
technology used in this service fits as
treatment delivery under the OPPS for (Level V Female Reproductive
well into existing clinical APCs for
CY 2006. Procedures) resulted in significant
underpayment. They asserted that female reproductive services, as do
Response: We appreciate the
MRgFUS is a new technology and that many other modalities that are currently
commenter bringing to our attention the
CMS should assign the two Category III assigned to those clinical groups. In
need to update our billing guidance to
CPT codes to two separate New addition, MRgFUS procedures are most
reflect the newly established Category
Technology APCs, based on external often performed on younger women and
III CPT code 0073T for the billing of
cost data, until adequate claims data are are only seldom performed on Medicare
compensator-based IMRT treatment
available upon which to base beneficiaries. We believe that placing
delivery. We thank the commenter for
assignments to clinical APCs. them in clinical APCs with other female
providing CMS with recommended
More recently, hospital and reproductive procedures will enable us
language and will consider such
manufacturer representatives made a both to set accurate payment amounts
language as we revise our guidance on
presentation at the August 2005 meeting and to maintain appropriate clinical
the billing of compensator-based IMRT
of the APC Panel and also commented homogeneity of the APCs.
treatment delivery under the OPPS for
CY 2006. on our July 25, 2005 proposed rule. The Cost data for MRgFUS procedures
Panel recommended that CMS work provided to us for two hospitals showed
i. Kidney Imaging (APC 0267) with stakeholders to assign CPT codes high, but disparate costs. The costs per
Comment: One commenter expressed 0071T and 0072T, focused ultrasound case reported by each of the hospitals
concern that CMS’s proposed ablation of uterine leiomyomata were significantly different from one
reassignment of CPT code 78700 including magnetic resonance guidance, another and were much higher than
(Kidney imaging, static) from APC 0404 to an appropriate New Technology reports of costs from other publicly
(Level I Renal and Genitourinary APC(s). available sources. We suspect that much
Studies) to APC 0267 (Level III The procedures are coded with of the variation reflects differences in
Diagnostic Ultrasound) disrupts the Category III CPT codes 0071T (Focused capital costs and projections of
clinical homogeneity of the two APCs. ultrasound ablation of uterine utilization and procedure times, as well
The commenter stated that the resource leiomyomata, including MR guidance; as in the types of personnel used to
requirements and clinical characteristics total leiomyomata volume less than 200 perform the procedures. We understand
of kidney imaging have not changed in cc of tissue) and 0072T (Focused that the MRI equipment can also be
the past year and urged CMS to ultrasound ablation of uterine used to perform conventional MRI
maintain CPT code 78700 in APC 0404 leiomyomata, including MR guidance; procedures, and the MRI equipment
for CY 2006. total leiomyomata volume greater or costs should be allocated accordingly so
Response: We agree with the equal to 200 cc of tissue). These codes that amortization of the costs will be
commenter’s observation that the were new CPT codes in CY 2006. The shared by those tests. The OPPS
clinical attributes of CPT code 78700 commenters and the presenters at the payment rates for services need to make
more closely resemble the services APC Panel suggested that we assign CPT appropriate payments for the services to
assigned to APC 0404 rather than APC code 0071T to New Technology APC Medicare beneficiaries, recognizing that,
0267. Although our proposal to reassign 1528 (Level XXV) and CPT code 0072T as a budget neutral payment system, the
CPT code 78700 to APC 0267 was based to New Technology APC 1532 (Level OPPS does not pay the full hospital
on its median cost data collected for the XXVI). costs of services. We expect that our
payment rates generally will reflect the intrinsic factor), and 78272 (Vitamin B– CPT codes 78271 (209 single claims)
costs that are associated with providing 12 absorption study; with and without and 78272 (133 single claims) based on
care to Medicare beneficiaries in cost- intrinsic factor) far exceed the median the CY 2003 hospital claims data
efficient settings. cost of APC 0389 (Non-imaging Nuclear yielded lower median costs for CPT
We compared the necessary hospital Medicine) in which they reside. The codes 78271 ($98) and 78272 ($159).
resources for the MRgFUS procedures, commenter noted that the exceptionally These lower median costs may have
including specialized equipment, MRI/ low single claim counts for these been due to separate CY 2005 payments
procedure room time, personnel, procedures have little or no impact on for the required radiopharmaceuticals,
anesthesia and other required resources, the overall median cost for APC 0389 in comparison with the median costs
to various other procedures for which due to the thousands of other single from CY 2004 claims developed based
we have historical hospital claims data. claim counts for lower cost CPT codes on the CY 2006 payment policy of
Additionally, we took into that reside in APC 0389. To protect packaging the radiopharmaceuticals.
consideration projected costs for the beneficiary access to these services, the In reviewing the claims data for all of
MRgFUS procedures submitted to us, commenter requested that CMS consider the CPT codes assigned to APC 0389 for
and other available information either freezing the payment rate for APC CY 2005, we noted that, in addition to
regarding the clinical characteristics and 0389 at its CY 2005 payment rate or CPT codes 78271 and 78272, several
costs of those services. Upon buffering the proposed 12 percent other services had consistently higher
consideration of all of the information decrease from its CY 2005 payment rate. procedure-specific median costs than
available to us, we have determined that The commenter noted that, in addition the CY 2006 APC median cost ($86),
a higher level of payment would be to underpayment for the nuclear including CPT code 78003 (Thyroid
more appropriate for the MRgFUS medicine procedures, the three uptake; stimulation, suppression or
procedures. However, we are rejecting radiopharmaceuticals that could be used discharge); CPT code 78190 (Kinetics,
the recommendation of the APC Panel, in the tests ( C1079—Supply of study or platelet survival, with or
and we will assign CPT codes 0071T radiopharmaceutical diagnostic imaging without differential organ/tissue
and 0072T to APC 0195 (Level IX agent, cyanocobalamin Co-57/58, per 0.5 localization); CPT code 78270 (Vitamin
Female Reproductive Procedures) and mCi; C9013—Supply of Co-57 cobaltous B–12 absorption study; without intrinsic
0202 (Level X Female Reproductive chloride, radiopharmaceutical factor); and CPT code 78191 (Platelet
Procedures), respectively for CY 2006. diagnostic imaging agent; and Q3012— survival study) with median costs of
These new APC assignments provide Supply of oral radiopharmaceutical $167, $170, $186, and $384,
significantly higher payment rates than diagnostic imaging agent, respectively. As these services were all
we proposed for these services in CY cyanocobalamin cobalt Co-57, per 0.5 low volume, with fewer than 100 claims
2006. We believe that these placements mCi) were proposed to change from each, there was no two times violation
in APCs 0195 and 0202 will provide status indicator ‘‘K’’ in CY 2005 to in APC 0389, despite the finding that
appropriate payments for MRgFUS status indicator ‘‘N’’ for CY 2006. The the least expensive procedure assigned
services to provide access for Medicare commenter was concerned that the to APC 0389 had a median cost of $76.
beneficiaries who need them. packaging of the necessary The higher level of hospital resources
k. Non-Imaging Nuclear Medicine radiopharmaceuticals, in addition to the required for the more costly non-
Studies (APC 0389) reduced payment rate for the tests, imaging nuclear medicine procedures
could threaten Medicare beneficiaries’ was notable.
In Addendum B of the CY 2006
access to these procedures. While we will not adjust the CY 2006
proposed rule (70 FR 42776), we
proposed to maintain CPT codes 78270 Response: While we acknowledge the median cost of APC 0389 by using its
(Vitamin B–12 absorption study; commenter’s concern that the CY 2005 median cost or dampening the
without intrinsic factor), 78271 (Vitamin procedure-specific median costs for CPT decline between CY 2005 and CY 2006
B–12 absorption study; with intrinsic codes 78271 ($244) and 78272 ($310) as suggested by the commenter, we
factor), and 78272 (Vitamin B–12 appear to far exceed the median cost of acknowledge that the structure of the
absorption study; with and without APC 0389 ($86) for CY 2006 based on APC would benefit from
intrinsic factor) in APC 0389 (Non- the CY 2004 hospital claims data, we reconfiguration. Therefore, we are
Imaging Nuclear Medicine) for CY 2006. remind the commenter that the splitting the services assigned to APC
We received one public comment exceptionally low single claim counts 0389 for CY 2005 into two groupings for
related to the above-mentioned nuclear that they brought to our attention for CY 2006: APC 0389, Level I Non-
medicine procedures. CPT codes 78271 (9 single claims) and Imaging Nuclear Medicine; and newly
Comment: One commenter expressed 78272 (5 single claims) significantly created APC 0392, Level II Non-Imaging
concern that the resource requirements increase the volatility of their median Nuclear Medicine. The assignment of
associated with CPT codes 78271 costs from year-to-year. Moreover, the CPT codes to these two APCs is shown
(Vitamin B–12 absorption study; with higher CY 2005 single claim counts for in Table 14 below.
TABLE 14.—ASSIGNMENT OF CPT CODES TO APCS 0389 AND 0392 FOR CY 2006
APC 0389 APC 0392
78725, Kidney function study ................................................................... 78003, Thyroid, stimulation, suppression.

78000, Thyroid, single uptake .................................................................. 78190, Platelet survival, kinetics.
78001, Thyroid, multiple uptakes ............................................................. 78191, Platelet survival.
78999U, Nuclear diagnostic exam ........................................................... 78270, Vitamin B–12 absorption exam; without intrinsic factor.
78271, Vitamin B–12 absorption exam; with intrinsic factor.
78272, Vitamin B–12 absorption exam; with and without intrinsic factor.
In this reconfiguration, the median procedure claims out of 42,985 total our hospital claims data so that we
cost of APC 0389 for CY 2006 is $85, claims). The robust claims data reported could reexamine the appropriate APC
and the median cost for APC 0392 is by hospitals over the past several years placement of CPT code 78730 for CY
$209. We believe that these new APC support the placement of CPT code 2006. While we acknowledge the
configurations will result in more 77370 in APC 0304 for CY 2006. commenter’s repeated concern that the
accurate payments for non-imaging Furthermore, the commenter provided median cost for CPT code 78730 may
nuclear medicine studies, by improving no supporting evidence that the reflect miscoded claims, the commenter
clinical and resource homogeneity proposed payment of $105 for CY 2006 again provided no supporting evidence
within the groupings. We note that for would jeopardize beneficiary access to of what they believe to be the true
the purposes of any studies this service. Therefore, for CY 2006 we resource costs associated with CPT code
contemplated by the commenter, are maintaining CPT code 77370 in APC 78730. If some of the reported claims
different codes will be available for 0304. data are inaccurate, we have no way to
reporting the required determine which claims are more or less
m. Urinary Bladder Study (APC 0340)
radiopharmaceuticals in the CY 2006 accurate than others. Rather, a relatively
OPPS. Specifically HCPCS code C9013 At the February 2005 APC panel stable number of single procedure
will be deleted, HCPCS code A9546 meeting, the APC Panel recommended claims has generated a consistent
(Cobalt CO–57/58, cyanocobalamin, that we move CPT code 78730 (Urinary median cost for CPT code 78730 over
diagnostic, per study dose, up to 1 bladder residual study) from APC 0340 the past four years (that is, ranging from
microcurie) will replace HCPCS code (Minor Ancillary Procedures) to APC $39 based on the CY 2001 claims data
C1079, and HCPCS code A9559 (Cobalt 0404 (Level I Renal and Genitourinary to $53 based on the CY 2004 claims
CO–57 cyanocobalamin, oral, Studies) for CY 2006, suggesting that the data) and supports our assignment of
diagnostic, per study dose, up to 1 CY 2003 data for CPT code 78730 may CPT code 78730 to APC 0340 with an
microcurie) will replace HCPCS code have been derived from incorrectly APC median cost of $36, as opposed to
Q3012. We anticipate that these new coded hospital claims. For reasons APC 0404 with an APC median cost of
permanent HCPCS codes for discussed in detail below, we are $217. Therefore, we are maintaining
radiopharmaceuticals will simplify maintaining CPT code 78730 in APC CPT code 78730 in APC 0340 for CY
billing and provide more accurate 0340 for CY 2006. 2006. However, in preparation for the
hospital claims data as the basis for We received a number of public
CY 2007 OPPS update, we will
potential packaging determinations in comments related to such imaging
reexamine the APC placement of CPT
future years. With the transition to these procedures.
Comment: One commenter stated that code 78730 by reviewing any resource
new radiopharmaceutical HCPCS codes, data submitted by commenters in the
we will closely monitor the claims data the resource requirements of CPT code
78730 (Urinary bladder residual study) context of our CY 2005 hospital claims
for APCs 0389 and 0392 in the future, data. Commenters may wish to identify
as any changes in the packaging status do not resemble other services assigned
to APC 0340 (Minor Ancillary approaches to distinguishing correctly
of required radiopharmaceuticals could coded claims so that we could develop
affect the median costs of services Procedures). The commenter explained
that the high volume and low median a procedure-specific median cost based
assigned to them and alter the resource on correctly coded hospital claims data.
homogeneity of the groupings. cost data for CPT code 78730 resulted
from inappropriate use of this code to As the commenter believes the vast
l. Therapeutic Radiation Treatment report other services unrelated to majority of claims for CPT code 78730
(APC 0304) nuclear medicine. The commenter noted were miscoded over many years, they
Comment: One commenter objected to that during the February 2005 APC may wish to explore a change in the
our proposal to maintain CPT code Panel meeting, the APC Panel code with the AMA’s CPT Editorial
77370 (Radiation physics consult) in recommended that CMS move CPT code Panel or request their dissemination of
APC 0304 (Level I Therapeutic 78730 from APC 0340 to APC 0404 guidance on use of the code, to clarify
Radiation Treatment Preparation) for CY (Level I Renal and Genitourinary the code’s intended use and assist
2006, noting that the procedure Studies), suggesting that the CY 2003 providers in correctly billing for
experienced over a 50 percent decrease data for CPT code 78730 may have been services provided.
in its payment rate between CYs 2004 derived from incorrectly coded hospital 3. Gastrointestinal and Genitourinary
and 2005. The commenter explained claims. The commenter urged CMS to Procedures
that this procedure often involves a recognize the full costs associated with
significant amount of time spent by the the nuclear medicine aspects of the a. Cystourethroscopy With Lithotripsy
physics department in developing the procedure by reassigning CPT code (APC 0163)
treatment planning, immobilization, and 78730 to APC 0404 for CY 2006. Comment: A few commenters
proper beam placement for the patient. Response: In the November 15, 2004 requested that CMS assign CPT code
The commenter requested that CMS final rule with comment period (69 FR 52353 (Cystourethroscopy, with
consider the amount of time spent by 65705), we noted that CPT code 78730 ureteroscopy and/or pyeloscopy; with
the physicists and dosimetrists in was originally created and valued for lithotripsy) to the new APC 0429 (Level
collaborating with the physician when the MPFS as a procedure requiring the V Cystourethroscopy and other
determining the APC placement of CPT services of a nuclear medicine Genitourinary Procedures). The
code 77370 for CY 2006. technician, but that the use of the code commenters stated that this procedure
Response: The CY 2006 median cost subsequently had changed to be used has been grouped into the same APC
of $140 for CPT code 77370 is based on primarily by urologists rather than by (0163, Level IV Cystourethroscopy and
96 percent of the CY 2004 total claims nuclear medicine physicians. While we other Genitourinary Procedures) with
(41,123 single procedure claims out of reassigned CPT code 78730 to APC 0340 many of the procedures that we
42,753 total claims). Similarly, the CY for CY 2005 based on robust CY 2003 reassigned into APC 0429 and that CPT
2005 median cost of $136 for CPT code claims data, we solicited other code 52353 should also be assigned to
77370 was based on 95 percent of the physician specialties to submit resource that APC. They stated that the
CY 2003 total claims (40,723 single data for us to review in the context of procedure described by CPT code 52353
is used for the same indications as are contains some procedures that have single claims remaining in APC 0384 to
those in APC 0429, and that much of the different clinical characteristics and establish that APC’s median cost.
same capital equipment is used to services with higher median costs.
We will reevaluate the APC c. Insertion of Uterine Tandems and/or
perform CPT code 52353 and those in
assignment for CPT code 52353 for CY Vaginal Ovoids for Clinical
APC 0429.
The commenters asserted that 2007 and finalize our proposal, without Brachytherapy (APC 0192)
although the median cost in CMS’s modification, to retain it in APC 0163 Comment: Several commenters
hospital claims data for CPT code 52353 for CY 2006. disagreed with our proposal to reassign
is lower than those for procedures in CPT code 57155 (Insertion of uterine
b. GI Stenting (APC 0384) tandems and/or vaginal ovoids for
APC 0429, its median cost is the highest
in APC 0163 and its costs are actually Comment: Commenters, including the clinical brachytherapy) from APC 0193
higher than reflected in the claims data APC Panel, asked that we use only (Level V Female Reproductive
since hospitals are failing to report all claims containing devices to set the APC Procedures) to 0192 (Level IV Female
of the costs associated with the flexible median cost for APC 0384, or Reproductive Procedures). The
ureteroscope required for the procedure. alternatively, freeze the 2006 CY OPPS commenters were concerned that the
Based on their analysis of the payment rate at the CY 2005 OPPS reassignment would result in a 66
proposed rule data, the commenters payment. percent decrease in payment, and that
found that assignment of CPT code Response: We considered the there was no discussion of the
52353 to APC 0429 would only result in comments and have decided to apply reassignment in the proposed rule. They
small decreases in the median costs for the same policy to these services that we requested that the procedure be retained
both APCs 0163 and 0429. They will apply to other device-dependent in its current CY 2005 APC assignment,
estimated that the median cost for APC APCs. In the case of this APC, the and that in the future CMS discuss all
0163 would drop by approximately $19 median on which the CY 2006 OPPS changes to APC assignments in the
and that the median cost for APC 0429 payments will be based was calculated preambles of their proposed rules. They
would decrease by approximately $100. using claims that contain the device asserted that there have been no changes
They stated that these drops would not codes applicable to the services in the technology or provision of these
represent payment disruptions for the assigned to APC 0384. See the services that would justify a reduction
other procedures in the APCs. discussion of payment for device in payment and that the dramatic
Response: The median cost for CPT dependent APCs in section VI.A for our decrease in payment amount proposed
code 52353, $2,117, is the highest in discussion of adjustments to median by CMS would have a negative effect on
APC 0163, but the procedure-specific costs for device-dependent APCs. See Medicare beneficiaries’ access to this
median costs in APC 0163 vary from Table 16 for the median cost on which important treatment for vaginal and/or
lowest to highest by very little. The the CY 2006 payment rate for APC 0384 uterine cancer.
median cost for APC 0163 is $1,997, is based. Response: The procedure described
only $120 lower than the code-specific Comment: Some commenters, by CPT code 57155 is for the insertion
median cost for CPT code 52353. including the APC Panel, recommended of the ‘‘holders’’ for brachytherapy
The median cost for APC 0429 is that we establish a separate APC for CPT sources when brachytherapy is to be
$2,502, and the median costs of the codes 43268 and 43269 for endoscopic delivered to specific sites. The
individual procedures with more than retrograde cholangiopancreatography procedure to load the radioactive
50 single claims assigned to that APC (ERCP) services because they believed elements and the brachytherapy sources
(representing a total of 13,200 claims) that these services use fluoroscopy themselves are separately payable under
vary from $2,475 to $2,602, a difference while the other codes in APC 0384 do the OPPS. CPT code 57155 was first
of only $127. We believe that the not. Other commenters opposed this reassigned from APC 0192 to APC 0193
decrease in the APC 0429 median that change because they said that all for CY 2004 Hospital claims data from
would result from assignment of CPT services in APC 0384 require use of CY 2002, utilized for the CY 2004 OPPS
code 52353 (14,570 claims) would similar supplies, equipment, and update, yielded a code-specific median
unfairly disadvantage the procedures fluoroscopic assistance. They indicated cost for CPT code 57155 of about $743,
that we proposed to assign there, and that the hospital resources that are based on 132 single claims. However,
that the $100 drop that the commenters required to furnish a specific GI stenting CY 2003 data, utilized for the CY 2005
referred to as not representing payment service are determined more by nuances OPPS update, provided a code-specific
disruptions would not be viewed arising from gaining access to the site at median for CPT code 57155 of
similarly by hospitals billing for the which the stent will be placed, sedating approximately $232 based on 350 single
procedures we proposed for assignment the patient, and providing fluoroscopic claims, creating a 2 times violation in
to APC 0429. In addition, we have no monitoring, than by the specific location APC 0193. For CY 2005, our final OPPS
reason to doubt the accuracy of our where the stent is being placed. payment policy specifically excepted
median cost for CPT code 52353 based Response: We did not create a new APC 0193 from the two times rule in
on thousands of CY 2004 single hospital APC for ECRP-related stent procedures light of this violation.
claims, nor do we understand why because those procedures are While we did not propose to reassign
hospitals would differentially not be appropriately placed with the other CPT code 57155 for the CY 2005 OPPS,
including charges for the costs of all services in APC 0384, both with respect we now have a second year of hospital
required equipment and supplies for to clinical characteristics and resources claims data from CY 2004 that indicate
this procedure on their hospital claims used, particularly in view of the clinical that CPT code 57155 should be assigned
in comparison with their billing for rationale provided by the commenters. to a lower level Female Reproductive
other procedures. Any small In addition, the number of single claims Procedures APC. Therefore, in
underpayment that would result from available for establishing payment rates addendum B of the proposed rule, we
the continued assignment of CPT code for APC 0384 is already relatively small. proposed to reassign CPT code 57155 to
52353 to APC 0163 would be less than We are concerned that if we were to APC 0193. The median cost for CPT
the potential for overpayment if the move the two ERCP procedures to code 57155 of $353 based on 867 single
code were moved to APC 0429, which another APC, there would be very few claims is in the same range as the
medians for other procedures assigned Laparoscopy). The procedure is specific information available to us
to APC 192 for CY 2006, making it an currently assigned to APC 0131 (Level II about the plicator service and hospital
appropriate placement for CPT code Laparoscopy), and the commenter stated cost and clinical information regarding
57155. If CPT code 57155 were to be that the costs for the procedure far other services payable under the OPPS,
assigned to APC 0193 which has a exceed the payment rate in that APC. that APC 0422 was an appropriate
median cost of about $870, we would The commenter analyzed OPPS claims assignment for HCPCS code C9724. We
once again have to except APC 0193 and found that two of the 11 single continue to believe that is the most
from the two times rule for CY 2006. claims available for the proposed rule appropriate APC placement for the
Based on stable claims data for the past did not reflect separate charges for the procedure. We will reevaluate that
2 years and significant numbers of ablation device and was concerned that assignment when we have claims data
single bills, we used our standard OPPS with so few claims, these two on which to base a reassignment.
methodology and the updated CY 2004 apparently incorrect claims may have a We find that there is no basis for the
claims data to determine that hospital significant effect on the median cost. suggestion that assignment of HCPCS
claims data for CPT code 57155 are Response: We examined our median code C9724 represents a two times rule
accurate and appropriate to use for cost data for CY 2005 and CY 2006. For violation because there are no data for
making the CY 2006 APC assignment for CY 2005, there were 11 single claims HCPCS code C9724 to compare to
CPT code 57155. Therefore, we will used for the final rule median and the median costs for the other significant
finalize our proposal to assign CPT code assignment of the procedure to APC procedures assigned to that APC.
57155 to APC 0192. 0131 was appropriate. For CY 2006, we We are finalizing our proposal to
have 16 single claims and the median assign HCPCS code C9724 to APC 0422
d. Laparoscopic Ablation Procedures cost is significantly higher than the for CY 2006.
(APC 0131) median costs for most of the procedures f. Prostate Cryosurgery (APC 0674)
Comment: One commenter requested assigned to APC 131. The median cost
that CMS reassign CPT code 47370 for CPT code 50542 is $3,940, within For CY 2006 OPPS, we proposed to
(Laparoscopy, surgical; ablation of one the range of median costs for procedures set the payment rate for APC 0674
or more liver tumor(s); radiofrequency) assigned to APC 0132 for CY 2006. We (Prostate Cryoablation) based on an
to APC 0132 (Level III Laparoscopy). will assign CPT code 50542 to APC 0132 unadjusted median cost of $5,780. We
The procedure is currently assigned to (Level III Laparoscopy) for CY 2006. received many public comments
APC 0131, Level II Laparoscopy, and the concerning the payment for prostate
commenter stated that the costs for the e. Plicator Procedure (APC 0422) cryoablation.
procedure far exceed the payment rate Comment: One commenter submitted Comment: Commenters objected to
in that APC. The commenter analyzed comments about the APC assignment for the proposed payment rate for
OPPS claims for CYs 2002, 2003, and new HCPCS code C9724 (EPS gastric cryoablation of the prostate (APC 0674)
2004 and found that the median cost for cardia plicator) used in the treatment of because they believed that the proposed
that procedure has been more than ‘‘two gastroesophageal reflux disease (GERD). payment was not sufficient to cover the
times greater than the median of the The commenter suggested that the cost of the procedure. The commenters
lowest cost item or service’’ in APC procedure’s assignment to APC 0422 indicated that a hospital incurs costs of
0131 during all of those years. Further, (Level II Upper GI Procedures) is greater than $9,000 to furnish the
they asserted that the procedure’s inappropriate because it is a new service. Commenters furnished copies of
median cost is actually more similar to technology and that placement violates bills, invoices and cancelled checks
those of the procedures assigned to APC the OPPS two times rule. The intended to substantiate their claims
0132. commenter recommended that we that the total costs are in excess of
Response: We examined our median assign the procedure to an APC with a $9,000 because the costs of the probes
cost data for the years referenced in the higher payment rate and suggested that alone are no less than $4,000. They
comment and concur with their findings we may want to create a level III upper indicated that the proposed Medicare
that the median cost for CPT code 47370 GI procedures APC. They reported that payment rate, if implemented, would
has been notably higher than those for the cost of the Plicator Procedure kit result in a shortfall of over $3,000 per
other procedures in APC 0131 for ($1,795), in addition to the endoscopy case. Commenters said that hospitals
several years. For CY 2006, we have 28 (approximately $460) is two times more tend to under report and under charge
single claims, and the procedure- costly than CPT 43228 (Esophagoscopy, their true costs for cryosurgery
specific median cost of $5,088 is rigid or flexible; with ablation of procedures, and that there are
significantly higher than the median tumor(s), polyp(s), or other lesion(s), not incentives to resist billing changes that
costs for most of the procedures amenable to removal by hot biopsy would result in higher charges for the
assigned to APC 0131. The median cost forceps, bipolar cautery or snare procedures. Commenters said that CMS
for CPT code 47370 also is higher than technique), a high volume procedure should recalculate the median cost for
the median costs for other procedures that is also assigned to APC 0422. APC 0674 by excluding claims that do
currently assigned to APC 0132. We Response: In April 2004, CMS not have a charge of at least $6,000
believe that for purposes of clinical received an application for this under either HCPCS code C2618 or
homogeneity, APC 0132 is the most procedure to qualify for payment as a revenue codes 270, 272 or 278 because
appropriate APC assignment for the New Technology under the OPPS. In any charge for cryoablation probes less
procedure but we will continue to April 2005, CMS assigned it to HCPCS than $6,000 would be inadequate to
monitor it for future APC assignment code C9724 and placed it in APC 0422 result in a reasonable cost for the
changes. For CY 2006, we will assign for payment under the OPPS. We have device. Commenters indicated that, at a
CPT code 47370 to APC 0132 (Level III no claims data for the procedure due to minimum, CMS should not set the
Laparoscopy). its very recent HCPCS code assignment. payment rate for APC 0674 at less than
Comment: One commenter requested We assigned it to APC 0422 because the CY 2005 payment rate plus inflation.
that CMS reassign CPT code 50542 there are other endoscopic procedures Response: We share the commenters’
(Laparoscopy, surgical; ablation of renal for the treatment of GERD assigned to concern that these services continue to
mass lesion(s)) to APC 0132 (Level III that APC and we believed, based on be available to Medicare beneficiaries
and we will pay APC 0674 under the including use of the Stretta System and For CY 2006, we proposed to use both
general policy which we apply to all endoscopies associated with the CY 2004 single claims for HCPCS code
device-dependent APCs. Under this Stretta procedure. Prior to CY 2005, the C9701 and multiple procedure claims
general policy, we have set the median Stretta procedure was recognized under containing one unit of HCPCS code
cost for APC 0674 using only claims that HCPCS code C9701 in the OPPS. For the C9701 and one unit of either CPT code
contain the device code for the CY 2005 OPPS, HCPCS code C9701 was 43234 or CPT code 43235 to calculate
cryoablation probes used in this service. deleted and CPT code 43257 was the Stretta procedure’s contribution to
See section IV.A. for our discussion of utilized for the Stretta procedure. In CY the median for APC 0422. Claims
adjustments to median costs for device 2005, the Stretta procedure was reporting one endoscopy code (CPT
dependent APCs. See Table 16 for the transitioned from a New Technology code 43234 or CPT code 43235) along
adjusted median cost for APC 0674 for APC to clinical APC 0422 (Level II with HCPCS code C9701 were included
CY 2006. Upper GI Procedures) based on several in the proposed median calculation
Comment: Commenters indicated that years of hospital cost data. Procedures because, in CY 2002, CMS authorized
the proposed Medicare payment rate within APC 0422 were similar to the the separate and additional billing of a
would result in reduced or no access for Stretta procedure in terms of clinical single endoscopy code with HCPCS
Medicare beneficiaries. One commenter characteristics and resource use. code C9701, while CPT code 43257 now
stated that in the past 2 years, a total of We received several public comments includes all endoscopies performed
29 hospitals either ceased performing or in response to the CY 2005 methodology during the procedure.
elected not to start a cryosurgery for calculating the median cost for APC Using this proposed methodology, we
program due to inadequate Medicare 0422 set forth in our CY 2005 OPPS calculated a median cost for CPT code
payment. Commenters stated that final rule with comment period. 43257 (HCPCS code C9701 in the CY
inadequate payment under the OPPS Comment: Commenters objected to 2004 claims data) of $1,669. Using these
would result in hospitals providing the APC assignment of the Stretta claims in the calculation of the median
more expensive care in the inpatient procedure (HCPCS code C9701 in 2003; cost for APC 0422, we calculated a
setting under DRG 315 that could be CPT code 43257 beginning in 2004) to
median cost of $1,386. We proposed to
much more costly to Medicare. use this methodology, applied to the
APC 0422. Commenters indicated that
Response: Our review of the claims more complete final rule with comment
CMS should recalculate the median cost
from hospitals used to set the median period claims set, to calculate the final
costs for APC 0674 shows that from CYs for the procedure by packaging in the
CY 2006 OPPS median cost for APC
2003 to 2004, the number of claims for costs of all endoscopies (regardless of
0422.
APC 0674 grew from 1,516 to 2,328 or CPT code) that were performed on the We received several public comments
by 35 percent in one year. Similarly, the same date as the Stretta procedure and on our proposed methodology for
number of hospital providers furnishing assigning the procedure to a New calculating the median cost for APC
the service grew from 222 to 317 or by Technology APC based on the 0422.
30 percent in one year. Neither the recalculated median cost. They said that Comment: One commenter objected to
growth in the number of claims or the absent this change, CMS should clarify the proposed payment for CPT code
number of hospitals furnishing the that hospitals may bill and will be paid 43257, the Stretta procedure for the CY
service indicates that there is a barrier for each endoscopy done at the time of 2006 OPPS. The commenter indicated
to access to care. Moreover, while 29 the Stretta procedure. Commenters that the payment would create
hospitals may have ceased performing asked that we make these changes economic disincentives to the
the procedure or decided not to begin a effective January 1, 2005. utilization of the service and might
cryosurgery program, the growth in Response: We did not make these ultimately impose greater costs on
hospitals furnishing the service from changes for CY 2005 because we believe Medicare and its beneficiaries. The
CYs 2003 to 2004 is substantial. This is that we correctly calculated the median commenter asked that CMS create a new
particularly meaningful because the cost for the Stretta procedure by APC to which we would assign CPT
device came off of pass-through incorporating the cost of a single code 43257 and CPT code 0008T, and
payment in CY 2004 and the payment endoscopy (CPT codes 43234 and that we use a different methodology
for the device was packaged into the 43235) when billed into the reported from that proposed to calculate the
payment for the procedure in CY 2004, median cost for Stretta in the median cost. The commenter indicated
rather than being paid separately under calculation of the final rule median cost that because CPT codes 43228 and
the pass-through payment methodology. for the new CPT code 43257 for CY 43830 have higher volumes but lower
We see no reason to believe that 2005, based on the codes hospitals costs, the inclusion of them in the same
Medicare beneficiaries have problems in correctly reported in CY 2004 for the APC as CPT code 43257 does not enable
accessing this service. Moreover, as full Stretta service. Moreover, we payment of CPT code 43257 at a level
commenters indicate in the discussion believe that assignment of the procedure that is appropriate to pay the costs of
of calculation of payment weights, to the APC that contains similar the service. Therefore, the commenter
hospitals take many factors into procedures for the treatment of requested that we create a new clinical
consideration in determining whether to gastroesophageal reflux disease is APC to enable higher payment for CPT
offer a service, only one of which is the appropriate. Therefore, we believe that code 43257. The commenter believed
rate of Medicare payment. the Stretta procedure is placed in an that creating the new APC is analogous
APC for CY 2005 which is appropriate to what CMS proposed to do for
g. Stretta Procedure (APC 0422) both with regard to clinical vascular access devices for the CY 2006
CPT code 43257, effective January 1, characteristics and resource use. As the OPPS.
2005, is used for esophagoscopy with code descriptor for CPT code 43257 The commenter also asked that CMS
delivery of thermal energy to the muscle includes upper gastrointestinal undertake special claims manipulation
of the lower esophageal sphincter and/ endoscopy, we do not expect that to establish the median cost for the new
or gastric cardia for the treatment of hospitals would separately bill for each APC. The commenter’s preference was
gastresophageal reflux disease. This endscopy done at the time of the Stretta that we add the median cost for CPT
code describes the Stretta procedure, procedure. code 43235 to the cost of all claims for
HCPCS code C9701 (CPT code 43257 in h. Urological Stenting Procedures (APCs ‘‘prosthetic’’ in the title. Instead,
2005) which did not also contain at least 0163 and 0164) urological procedures that do, or do not,
one unit of an endoscopy code on the Comment: A few commenters utilize prosthetics, like other services
claim. These inflated claims costs requested reassignment of two urology paid under the OPPS, are assigned to
would then be combined with all claims procedures to newly created APC 0429 APCs based on clinical and resource
for HCPCS code C9701 which also (Level V Cystourethroscopy). The homogeneity with other services in
contain at least one unit of an commenters requested that CPT codes those clinical APCs. CPT code 52282 for
endoscopy code and with the claims for 0084T (Insertion of a temporary cystourethroscopy with insertion of a
CPT code 0008T to set the median cost prostatic urethral stent) and 52282 urethral stent shares common clinical
for the APC they wanted us to create. (Cystourethroscopy, with insertion of characteristics with other
The commenter offered a less preferred urethral stent) be assigned to the new cystourethrscopy services also assigned
alternative of using only claims that APC. to APC 0163. Therefore, we continue to
contained both HCPCS code C9701 and CPT 52282 is currently assigned to believe that APC 0163 is the most
CPT codes 43234, 42235 or any other APC 0163 (Level IV Cystourethroscopy appropriate APC assignment for CPT
endoscopy code to calculate the median and other Genitourinary Procedures) code 52282 for CY 2006.
cost, which would not yield as robust a and the commenters stated that it is
set of claims for median setting. In addition, we have no claims data
neither clinically similar to the other for CPT code 0084T because it was a
Response: We have not created a new procedures in that APC nor is it similar
new code for CY 2005. We assigned it
APC for CPT code 43257 and CPT code in terms of hospital resources. Those
to APC 0164 based on available
0008T, and we have kept them both in commenters also stated that CPT code
APC 0422 for the CY 2006 OPPS. The information regarding the specific
0084T is better suited for assignment to
services reported by these CPT codes are APC 0429 than to APC 0164 (Level I service, as well as clinical and cost
clinically similar to the other Urinary and Anal Procedures), to which information for other hospital services
procedures in APC 0422. In addition the it is currently assigned. payable under the OPPS. CPT Changes:
resources used to furnish the services The commenters requested that if we An Insider’s View 2005, describes CPT
are very similar to the other services in do not reassign CPT codes 52282 and code 0084T as the prepping of a patient
APC 0442 based on hospital claims data. 0084T to APC 0429, that we at least for a typical sterile urethral device
We see no reason to create a new APC move CPT code 52282 to APC 0385 insertion procedure, followed by
for CPT codes 43257 and 0008T. (Level I Prosthetic Urological activities to select and deploy the stent
Procedures), where it was assigned for in the prostatic urethra, and assessment
We also have not undertaken the
special claims manipulation that the CY 2004. They stated that CMS moved of the patient’s ability to void prior to
commenter requested. We do not it from APC 0385 for CY 2005 because discharge from the clinic. As stated
believe that it is valid to add the median CMS determined that the urethral stent earlier, we based our assignment for
cost for an endoscopy to the costs for being implanted was not a prosthetic CPT code 0084T on the expected
claims for which an endoscopy is not device, a decision with which they clinical and hospital resource
billed on the same claim. Similarly, we strongly disagree. They asserted that the characteristics of the service, rather than
do not believe that it is valid to include urethral stent, like collagen implants on whether or not the procedure
all of the charges for endoscopies other injected into the urethra and other required a prosthetic. Procedures
than a single unit of CPT code 43234 or devices, meets the Medicare definition utilizing urological prosthetics do not
43235 in the calculation of the median of a prosthetic device and should be necessarily show the most clinical and
cost for the Stretta procedure. As the assigned to an APC in line with that resource compatability with other
commenter indicates, endoscopy is a designation. services assigned to APCs with
fundamental part of the Stretta service Response: Based on careful prosthetic urological procedures in their
described by CPT code 43257. examination of the claims data and the APC titles, as such individual
Therefore, there is every reason to comments, we continue to find that procedures may exhibit a wide range of
believe that a hospital included all assignment for these procedures to clinical and cost differences. We
charges pertaining to the service in the APCs 0163 and 0164 is appropriate. The assigned CPT code 0084T to a clinical
charge for C9701 (the predecessor of median cost for CPT code 52282, APC that includes other urinary and
CPT code 43257). $1,955, is considered within the range anal procedures. We do not agree that
of median costs for the other procedures its assignment to APC 0429, the highest
To set the median cost for APC 0422, assigned to APC 0163. The APC median
we used all single procedure claims for level cytourethroscopy APC that
cost is $1,997, and the narrow contains complex laser prostate and
CPT code 43257, and we also used procedure-specific range of median
claims with CPT code 43257 which percutaneous nephrostolithotomy
costs within the APC is $1,730 to procedures with a median cost of
contained one and only one unit of $2,117. In contrast, the median cost for
either CPT codes 43234 or 43235 on the $2,502, is an appropriate placement for
APC 0385, $4,384, is more than twice CPT code 0084T for CY 2006. We
same date of service. We packaged the that of the median cost of CPT code
costs of the single unit of the additional continue to believe that APC 0164 is the
52282. In addition, the median cost for
endoscopy and used these claims most appropriate APC assignment for
APC 0429 of $2,501 is significantly
records in the calculation of the median CPT code 0084T for CY 2006. We will
higher that the median cost for CPT
cost for APC 0422. have CY 2005 claims data for CPT code
code 52282.
For CY 2006 OPPS, the payment for While APC 0385 (Level I Prosthetic 0084T and will reassess its APC
APC 0422 is based on the median cost Urological Procedures), as its title assignment based on those data for the
of $1,434 that was derived from this suggests, was established as an APC for CY 2007 OPPS update.
process. The median for CPT code some urological procedures requiring We are finalizing, without
43257 which we derived from this prosthetics, it is not required that all modification, our proposal to retain CPT
process is $1,669. CPT codes 43257 and procedures utilizing urological code 52282 in APC 0163 and CPT code
0008T remain assigned to APC 0422. prosthetics be assigned to an APC with 0084T in APC 0164 for CY 2006.
4. Other Surgical Services b. External Fixation (APCs 0046 and procedures in this APC range from a low
0050) of about $1,231 to a high of
a. Excision-Malignant Lesions (APCs
Comment: One commenter suggested approximately $3,460. We will ask the
0019 and 0020)
that the current configuration of APC APC Panel at its next biannual meeting
Comment: One commenter submitted 0046 (Open/Percutaneous Treatment to consider whether this APC could be
comments regarding CPT codes 11620 Fracture or Dislocation) significantly reconfigured to improve its clinical and
(Excision, malignant lesion, excised underpays procedures that involve resource homogeneity.
diameter 0.5 cm or less) and the code external fixation devices. The c. Intradiscal Annuloplasty (APC 0203)
11621 (excised diameter 0.6 to 1.0 cm). commenter gave several Comment: During the August 2005
The commenter, representing a hospital, recommendations on ways to realign the meeting of the APC Panel, there was one
stated that there appeared to be an error procedures. First, they recommended presentation by a provider in support of
in the placement of CPT code 11620 in that CMS distinguish procedures that a higher payment amount for intradiscal
APC 0020 (Level II Excision/Biopsy) involve external fixation devices by annuloplasty procedures. The presenter
and CPT code 11621 in APC 0019 (Level allowing hospitals to bill either CPT provided clinical and cost information
I Excision/Biopsy) because CPT code code 20690 (Application of a uniplane, to the Panel and stated that the
11621 is the more invasive procedure of unilateral, external fixation system) or procedures’ current assignments to APC
the two, yet it had been placed in an CPT code 20692 (Application of 0203 (Level IV Nerve Injections) did not
APC with a lower payment rate for CY multiplane, unilateral, external fixation describe the clinical features or hospital
system) together with a fracture resources associated with CPT codes
2006.
procedure code, and that these 0062T (Percutaneous intradiscal
Response: This is not an error. APCs combinations of codes would be placed annuloplasty, any method, unilateral or
are arranged based on a combination of in a new APC specifically for ‘‘fracture bilateral including fluoroscopic
considerations, including clinical procedures with fixation devices.’’ The guidance; single level) and 0063T
homogeneity and median costs from commenter reasoned that establishing (Percutaneous intradiscal annuloplasty,
hospital claims data reflecting hospital one or two new APCs for these any method, unilateral or bilateral
resources used. We have several procedures when billed together would including fluoroscopic guidance; one or
hundred single claims for CY 2003 and eliminate the ongoing two times rule more additional levels). Further, the
CY 2004 for each of the services. Our violation, preserve clinical presenter suggested that a more
data for these years consistently show homogeneity, and more appropriately appropriate APC assignment that would
that CPT code 11621 was performed reimburse hospitals. Second, if CMS achieve more clinical and hospital
almost twice as often as CPT code were to establish two new APCs, one resource homogeneity would be either
11620, but it also had a consistently should be for lower extremity fractures APC 0050 (Level II Musculoskeletal
lower median cost, reflecting less and the second should include upper Procedures except Hand and Foot), or
hospital resources required for the extremity fractures. APC 0051 (Level III Musculoskeletal
excision of a larger lesion in comparison Response: CPT codes 20690 and Procedures except Hand and Foot). The
20692 are currently in APC 0050, and APC Panel agreed with the presenter
with a smaller lesion. Based on CY 2004
no changes were proposed for the CY and recommended that CMS assign the
hospital claims data, CPT code 11621
2006 OPPS. There are no 2 times procedure to either APC 0050 or 0051.
has a median cost of about $314 based
violations in the APC in which they are Commenters on our proposed rule
on 659 single claims and is located, and each of these codes also requested that CMS assign CPT
appropriately assigned to APC 0019, represents 1 percent or less of the total codes 0062T and 0063T to an APC that
with a median cost of about $247. To volume in the APC. Therefore, we see more accurately reflects the level of the
place CPT code 11621 in APC 0020 no reason to create a new APC for these procedures’ resource use. The
(median cost of about $413) would codes as we believe APC 0050 provides commenters also suggested that
create a significant overpayment. appropriate payment to hospitals when placement in either APC 0050 or 0051
Conversely, CY 2004 claims data reveal services described by CPT codes 20690 would be the most appropriate from
a median cost of about $511 for CPT and 20692 are provided and billed in both clinical and payment aspects.
code 11620, based on 347 single claims, accordance with correct coding They, like the presenter to the APC
and therefore, the code is appropriately guidelines. However, the CPT codes for Panel, believed that a musculoskeletal
placed in APC 0020. treatment of a fracture often include APC was a more clinically accurate
There could be many reasons why the ‘‘with’’ or ‘‘without fixation’’ in the description of the procedure than its CY
hospital claims data reflect greater definition of the code. Where fixation is 2005 assignment with nerve injections
resource utilization for the procedure included in the definition of the code, in APC 0203.
it would be miscoding to also report Response: CPT codes 0062T and
that the commenter believes is ‘‘less
20690 or 20692; these codes should be 0063T were new for January 2005. Thus,
invasive,’’ such as different supplies or
reported if, and only if, fixation is not we had no hospital claims data upon
equipment used for smaller excisions or which to base our APC assignment of
included in the CPT code for treatment
variations in surgical techniques and these procedures, and we were
of the fracture. Providers should review
related procedural times depending on the CPT instructions and look to the interested in the additional information
the size of the lesion. We feel confident AMA’s guidance on coding if they have that was provided to us for our CY 2006
that our stable median cost data questions about when these codes update to the OPPS. Commenters
accurately reflect that the hospital should be reported. indicated that performance of the
resources are greater for the excision We do acknowledge, however, that we procedures requires a single use
procedure described by CPT code have excepted APC 0046 from the two electrothermal catheter that costs more
11620, and therefore, will finalize our times rule for several years, as we will than $1,000 and operating room time of
proposed CY 2006 APC assignments for again for CY 2006. This is a large APC one hour. In addition, other more costly
CPT code 11620 in APC 0020 and for to which many procedures are assigned, capital equipment is required in
CPT code 11621 in APC 0019. and the median costs of the significant comparison with procedures assigned to
APC 0203. The presenter to the APC services in APC 0425; however, one procedure, and we note that these
Panel stated that the procedure costs commenter suggested that this should fluoroscopic services were packaged for
range from $4,000 to about $7,000. only be a ‘‘stop gap measure’’ for one CY 2005. Thus, for CY 2005 payment to
We found the information provided in year until CMS can gather claims data. a hospital providing a single level
the APC Panel presentation and the This commenter also recommended that kyphoplasty procedure and billing
public comments to the proposed rule, if the CPT codes for kyphoplasty have packaged fluoroscopic guidance that
in addition to the APC Panel’s a status indicator of ‘‘T,’’ they should was also accompanied by a bone biopsy
recommendation and historical hospital then be placed in the same APC, as the would be about $2,260.
claims data regarding other services add-on code would be subject to the For CY 2006, several new CPT codes
payable under the OPPS, to be multiple procedure reduction. The were created to describe the
convincing in favor of assignment of commenters reasoned that movement to kyphoplasty procedure. These codes
this procedure to APC 0050, with an a new APC would better reflect the are:
APC median cost of $1,423 for CY 2006. clinical resources used and referenced • CPT 22523—Percutaneous vertebral
We agree that placement in APC 0050 outside data showing hospital median augmentation, including cavity creation
will result in more accurate payment charges that range from $4,500 to (fracture reduction and bone biopsy
and more APC clinical homogeneity for $41,000, with an average charge of included when performed) using
the procedure. For our CY 2007 update, approximately $15,700. mechanical device, one vertebral body,
we will have hospital claims data for the A third individual commenter unilateral or bilateral cannulation (e.g.,
procedure and we will reevaluate the representing a hospital recommended kyphoplasty); thoracic
assignment. that CMS either increase reimbursement • CPT 22524—Percutaneous vertebral
for kyphoplasty, or change its status augmentation, including cavity creation
d. Kyphoplasty (APC 0051) (fracture reduction and bone biopsy
indicator to ‘‘C’’ to be more consistent
Comment: Two commenters on the with InterQual ‘‘Guidelines for Surgery included when performed) using
November 15, 2004 final rule with and Procedures in the Inpatient Setting’’ mechanical device, one vertebral body,
comment period (69 FR 65681), a device and the Ingenix Cross Coder. unilateral or bilateral cannulation (e.g.,
manufacturer and an orthopedic Response: For CY 2005, CMS created kyphoplasty); lumbar
surgeon, commended CMS for creating two C-codes for the kyphoplasty • CPT 22525—Percutaneous vertebral
C-codes (HCPCS codes C9718 procedure: C9718 Kyphoplasty, one augmentation, including cavity creation
Kyphoplasty, one vertebral body, vertebral body, unilateral or bilateral (fracture reduction and bone biopsy
unilateral or bilateral injection; and injection and HCPCS code C9719 included when performed) using
C9719, Kyphoplasty, each additional Kyphoplasty, one vertebral body, mechanical device, one vertebral body,
vertebral body) for this procedure in the unilateral or bilateral injection; each unilateral or bilateral cannulation (e.g.,
hospital outpatient setting. The additional vertebral body (List kyphoplasty); each additional thoracic
commenters stated, however, that separately in addition to code for or lumbar vertebral body (List separately
placement in APC 0051, Level III primary procedure). These procedures in addition to code for primary
Musculoskeletal Procedures Except were placed in APC 0051 with a ‘‘T’’ procedure)
Hand and Foot, (CY 2005 payment rate status indicator because we believed CPT codes 22523 and 22524 generally
of $2,043) does not appropriately reflect that this APC was appropriate for these correspond to C code C9718, and CPT
the hospital resources used in procedures in terms of clinical code 22525 generally corresponds to C
performing these procedures, and that characteristics and resource costs. code C9719. We will be deleting the two
these assignments violate the two times Though we do not yet have claims kyphoplasty C-codes for CY 2006, and
rule because the resources associated data, we have been told that a bone hospitals will use the appropriate CPT
with kyphoplasty are more than two biopsy is performed more than half the codes to bill for kyphoplasty services.
times the cost of the resources for time in addition to the kyphoplasty The new CPT codes include a bone
procedures in APC 0051. Both procedure. For CY 2005, under the biopsy when performed so hospitals
commenters recommended that OPPS the bone biopsy could be billed will no longer separately bill CPT code
kyphoplasty procedures be placed in separately along with one or more of the 20225 when a bone biopsy accompanies
APC 0425, Level II Arthroplasty with kyphoplasty C-codes. The typical deep a kyphoplasty procedure.
Prosthesis, at a CY 2005 payment rate of bone biopsy code used for a vertebral CPT code 76012 (Radiological
$5,562 in order to better reflect the body procedure, CPT code 20225, was supervision and interpretation,
clinical features and resources needed assigned to APC 0020 (Level II Excision/ percutaneous vertebroplasty or vertebral
to perform the procedures. One Biopsy), which had a ‘‘T’’ status augmentation including cavity creation,
commenter alternatively suggested indicator and a payment rate of $434 for per vertebral body; under fluoroscopic
creating a new APC solely for CY 2005. Both the biopsy and guidance) for fluoroscopic guidance also
kyphoplasty. kyphoplasty procedures had a status has changed in definition for CY 2006
Additionally, these two commenters indicator of ‘‘T’’; therefore, when to include specific reference to vertebral
also submitted new comments to the performed together the hospital would augmentation including cavity creation,
July 25, 2005 proposed rule containing receive fifty percent of the payment rate which is characteristic of the
new recommendations pertaining to the for the bone biopsy ($217). We have kyphoplasty procedure. For CY 2006,
same issues. The commenters been told that hospitals typically also hospitals using fluoroscopic guidance
recommended that CMS either reassign bill one or more fluoroscopy codes for for kyphoplasty would bill CPT code
kyphoplasty procedures to APC 0681 necessary guidance, such as CPT codes 76012, which has a status indicator S
(Knee Arthroplasty) with a payment rate 76003 (Fluroscopic guidance for needle and is assigned to APC 0274 for
of $8,103 or create a new APC for placement), or 76005 (Fluroscopic calendar year CY 2006 with a payment
kyphoplasty titled ‘‘Vertebral spinal guidance and localization of needle or rate of $173.53. Thus, while a hospital
augmentation and stabilization using catheter tip for spine or paraspinous providing a kyphoplasty service in CY
balloon inflation’’ with a payment rate diagnosis or therapeutic injection 2006 will no longer receive separate
of $8,750. They also repeated their prior procedures, including neurolytic agent payment under the OPPS for an
recommendation to place kyphoplasty destruction), along with the kyphoplasty accompanying bone biopsy, hospitals
will be able to bill for and receive e. Neurostimulator Electrode payment of nonrechargeable devices,
separate payment for necessary Implantation (APCs 0040 and 0225) and that hospitals will not permit
fluoroscopic guidance. Thus, if there Comment: Commenters, including the implantation of the rechargeable
were no change for CY 2006 in the APC Panel, recommended that the neurostimulators for this inadequate
assignment of kyphoplasty services to services currently assigned to APCs payment. They stated that CMS
APC 0051, as they were initially placed 0040 (percutaneous implantation of recognized the need for additional
for CY 2005, payment to a hospital neurostimulators electrodes, excluding payment for rechargeable
providing a single level kyphoplasty neurostimulators when it provided a
cranial nerve) and 0225 (implantation of
procedure and billing separately new technology add-on payment under
neurostimulators electrodes, cranial
payable fluoroscopic guidance that was the IPPS for 2006, and that CMS should
nerve) be reorganized into three APCs,
also accompanied by a bone biopsy create a new category for rechargeable
based on clinically coherent groupings
would be about $2,352. neurostimulators and should grant pass-
of percutaneous, laminectomy or
through status for rechargeable
Based on modifications in coding incision, and cranial neurostimulator
neurostimulators for the CY 2006 OPPS.
associated with the change from C-codes electrode implantation. They indicated Response: CMS does not announce
to new CPT codes and additional that such a realignment would enhance decisions regarding pass-through status
clinical and hospital resource clinical and cost congruence of the in regulations. There are many new
information, we believe it is appropriate procedure groupings. Other commenters items and services that fall under
to move the kyphoplasty procedures objected to the reassignment of CPT existing categories and pass-through
from APC 0051 to another APC for CY code 63655 from APC 0225 to APC status for each is determined on the
2006. As we originally developed C- 0040. merits of the specific application. When
codes for outpatient hospital billing of Response: We agree with the proposal and if pass-through status for
kyphoplasty services after extensive for creation of a new neurostimulator rechargeable neurostimulators is
clinical review, we do not agree with electrode implantation APC and have granted, it will be implemented through
one commenter that kyphoplasty should made the change. CPT codes 63655 the OCE with creation of an appropriate
by placed on the OPPS inpatient list. In (from APC 0225), 64575 (from APC category and status indicator
addition, as kyphoplasty procedures do 0040), 64577 (from APC 0225), 64580 assignment. Additions to the items
not entail implantation of a prosthesis, (from APC 0225) and 64581 (from APC qualifying for pass-through status are
we do not agree with the commenters 0040) have been reassigned to newly announced in quarterly updates of the
that kyphoplasty is comparable to created APC 0061 (Laminectomy or OPPS claims processing and billing
services that require a prosthesis and, incision for implantation of instructions sent to our contractors and
therefore, we will not place the new neurostimulators electrodes, excluding posted on the CMS Web site.
CPT codes in APC 0425 (Level II cranial nerve).
See section IV. A. for our discussion g. Thoracentesis/Lavage (APC 0070)
Arthroplasty with prosthesis). We also
will not place the new CPT codes in of adjustments to median costs for Comment: One commenter said that
APC 0681 (Knee arthroplasty) because device-dependent APCs. See Table 16 CPT code 32019 (Insert pleural catheter)
we do not believe that the services are for the adjusted median costs for APCs should be assigned to APC 0652
clinically coherent with knee 0040, 0225 and 0061 for CY 2006. (Insertion of intraperitoneal catheters)
arthroscopy procedures, and because we because the clinical and resource
f. Neurostimulator Generator
do not believe that resources required characteristics of APC 0652 are more
Implantation (APC 0222)
for kyphoplasty warrant that level of appropriate to CPT code 32019 than are
Comment: Commenters indicated that the characteristics of APC 0070, the
payment. We also will not create a
the proposed payment for code’s placement for CY 2005. The
separate APC solely for kyphoplasty
neurostimulator generator implantation commenter indicated that APC 0070 is
procedures because we have no claims
is inadequate and that CMS should use not an appropriate placement for CPT
data from CY 2004 upon which to base
external data to set the payment rates. code 32019 because it is not like CPT
a calculation of median cost for such an
They explained that if payment rates code 32020 (tube thoracostomy with or
APC.
were not increased, providers would without water seal) to which it is often
After considering the additional cease providing the services. They asked compared and is assigned to APC 0070.
comments submitted, we have decided that CMS set the median cost at the CY The commenter stated that CPT code
to place CPT codes 22523, 22524, and 2005 OPPS payment median inflated by 32020 is a short term procedure,
22525 in APC 0052 (Level IV the market basket. typically done at bedside with a single
Musculoskeletal Procedures Except Response: The proposed payment for percutaneous incision, and uses a
Hand and Foot) for CY 2006, based on APC 0222 (Implantation of neurological catheter with a simpler and different
clinical and resource compatibility with device) was based on a median cost that design. The commenter stated that CPT
other procedures assigned to that APC. was set at 85 percent of the CY 2005 code 32019 is a long term procedure,
We agree with the commenters that the payment median. As with some other typically done in a treatment room,
initial level procedures and the add-on device-dependent APCs, the median using multiple incisions and
code for each additional level should be cost on which the CY 2006 OPPS subcutaneous tunneling, and a catheter
assigned to the same ‘‘T’’ status APC. payment rate will be based will be set with a more complex design. The
Although we received outside data on at 90 percent of the CY 2005 OPPS commenter did not specifically describe
hospital charges and costs for this payment median. See the discussion of the clinical or resource characteristics of
procedure, the data that was presented device-dependent APCs in section IV.A APC 0652 that justify the conclusion
to us was highly variable in terms of of this preamble. that CPT code 32019 is more
charges and presented cost data for only Comment: Commenters objected to appropriately placed in APC 0652.
one hospital. We will examine the the payment for rechargeable Response: We agree that the
median costs from hospital claims data neurostimulators under APC 0222 procedure reported by CPT code 32019
for these services when it becomes because they said that the payment rate is likely more resource intensive than
available for the CY 2007 OPPS update. for APC 0222 is inadequate for the CPT code 32020 and other higher
volume codes in APC 0070. Therefore, of an allergy test reported a charge many CPT codes into two APC configurations
we are reassigning CPT code 32019 to times greater than the ‘‘per test’’ charge to differentiate between CPT codes that
APC 0427 (level III tube changes and reported by providers billing multiple represent ‘‘per visit’’ and ‘‘per test’’
repositioning) for the CY 2006. We do units of an allergy test. services.
not agree that it is necessarily similar in Our analysis of the claims data Response: We agree with the
resource use to the insertion of appeared to validate reports made by a commenter that differentiating single
intraperitoneal catheter or cannula number of providers that the charges allergy tests (‘‘per test’’) from multiple
procedures currently assigned to APC reported on many of the single allergy tests (‘‘per visit’’) by assigning
0652. We will examine the claims data procedure claims represent a ‘‘per visit’’ these services to two different APCs
for this code and review that decision charge, rather than a ‘‘per test’’ charge, provides hospital coders with better
when there are claims data for the code, including claims for the allergy test clarity for billing these services and
which was new for CY 2004 and for codes that instruct providers to specify more accurately places these tests with
which no cost data are available for use the number of tests. Because the OPPS like services sharing similar resource
in the CY 2006 OPPS. relies only on these single procedure costs. Therefore, for CY 2006, we are
claims in establishing payment rates, we finalizing our proposal to assign single
5. Other Services
believed that this inaccurate coding allergy tests to newly established APC
a. Allergy Testing (APC 0370) would have resulted in an inflated CY 0381 and maintaining multiple allergy
A number of providers have 2006 median cost for services that were tests in APC 0370. We expect that the
expressed confusion related to the in the CY 2005 configuration of APC improved clinical and resource
reporting of units for allergy testing 0370. homogeneity of these APCs, along with
described by CPT codes 95004 through Therefore, we proposed to move the improved hospital coding of these
95078. Most of the CPT codes in the allergy test CPT codes that instruct services, will result in more accurate
code range are assigned to APC 0370 providers to specify the number of tests claims data for setting the CY 2008
(Allergy Tests) for the CY 2005 OPPS. or use the singular word ‘‘test’’ in their payment rates for these services. In the
Nine of those CPT codes instruct descriptors from APC 0370 to proposed meantime, for CY 2006, we are
providers to specify the number of tests APC 0381 (Single Allergy Tests) for CY finalizing our proposal to calculate a
or use the singular word ‘‘test’’ in their 2006. We proposed to calculate a ‘‘per ‘‘per unit’’ median cost for APC 0381
descriptors, while five of them do not unit’’ median cost for proposed APC using a total of 340 claims containing
contain such an instruction or do not 0381 using a total of 306 claims multiple units or multiple occurrences
contain ‘‘tests’’ or ‘‘testing’’ in their containing multiple units or multiple of a single CPT code. Using this ‘‘per
descriptors. Some providers have stated occurrences of a single CPT code. unit’’ methodology, we are setting the
that the lack of clarity related to the Packaging on the claims was allocated payment rate for APC 0381 based on a
reporting of units has resulted in equally to each unit of the CPT code. median cost of $11 for CY 2006. Because
erroneous reporting of charges for Using this ‘‘per unit’’ methodology, we we believe the single procedure claims
multiple allergy tests under one unit proposed a median cost for APC 0381 of for the codes remaining in APC 0370
(that is, ‘‘per visit’’) for the CPT codes $11 for CY 2006. Because we believed reflect accurate coding of these services,
that instruct providers to specify the the single procedure claims for the we are finalizing our proposal to use the
number of tests. codes remaining in APC 0370 reflected standard OPPS methodology to
In light of the variable hospital billing accurate coding of these services, we calculate the median for APC 0370.
that may be inconsistent with the CPT proposed to use the standard OPPS Table 15 lists the assignment of CPT
code descriptors, we carefully examined methodology to calculate the median for codes to APCs 0370 and 0381 for CY
the CY 2004 single and multiple APC 0370. Table 12 as published in the 2006. We will be providing billing
procedure claims data for the allergy proposed rule (70 FR 42711) listed the guidance to hospitals in CY 2006
test codes that reside in APC 0370 to set proposed assignment of CPT codes to clarifying the billing of allergy testing
the CY 2006 payment rates. Our APC 0370 and proposed APC 0381 for services under the OPPS that should be
examination of the CY 2004 claims data CY 2006. reported with charges per test rather
revealed that many of the services for We received one public comment than per visit, so that the accuracy of
which providers billed multiple units of concerning our proposed policy changes hospital claims data improves and
an allergy test reported a consistent for allergy test procedures. allows us in the future to calculate
charge for each unit. Conversely, some Comment: One commenter supported median costs for both APCs 0370 and
providers that billed only a single unit our proposal to move the allergy test 0381 using our standard OPPS process.
TABLE 15.—ASSIGNMENT OF CPT CODES TO APC 0370 AND APC 0381 FOR CY 2006
APC 0370 APC 0381
95056, Photosensitivity tests .................................................................... 95004, Percutaneous allergy skin tests.

95060, Eye allergy tests ........................................................................... 95010, Percutaneous allergy titrate test.
95078, Provocative testing ....................................................................... 95015, Intradermal allergy titrate-drug/bug.
95180, Rapid desensitization ................................................................... 95024, Intradermal allergy test, drug/bug.
95199U, Unlisted allergy/clinical immunologic service or procedure ....... 95027, Intradermal allergy titrate-airborne.
95028, Intradermal allergy test-delayed type.
95044, Allergy patch tests.
95052, Photo patch test.
95065, Nose allergy test.
b. Apheresis (APC 0112) CPT code 36522, which comprised 83 selectively remove agents from the
Comment: Several commenters percent of the single claims used to set blood, these services should be treated
commended our proposal to reassign the proposed payment rate for APC in a manner similar to either device
CPT code 36515 (Therapeutic apheresis; 0112. dependent APCs or blood and blood
with extracorporeal immunoadsorption One commenter noted that CPT code products. For instance, commenters
and plasma reinfusion) from APC 0111 36516 is utilized for billing LDL- recommended that we apply the same
(Blood product exchange) to APC 0112 apheresis treatments, and expressed methodology to APC 0112 as we
(Apheresis, Photopheresis, and concern that only 40 percent of the CY proposed to apply to blood and blood
Plasmapheresis) for CY 2006. These 2004 claims used to calculate the products, limiting the decrease in
commenters stated that the resource proposed payment for CPT code 36516 median cost to 10 percent on the basis
requirements and the clinical actually reported diagnoses consistent that the services assigned to APC 0112
characteristics of CPT code 36515 more with LDL-apheresis treatments on the could be considered closely related to
closely resemble the services assigned to claim. This commenter provided a list blood and blood products.
APC 0112. However, these commenters of hospitals which the commenter Alternatively, these commenters
expressed concern that the proposed 25 believed to be misreporting CPT code suggested that we should consider
percent reduction in payment for APC 36516, based on the commenter’s treating APC 0112 as a device
0112 (from $2,127 in CY 2005 to $1,590 experience as a distributor and dependent APC, limiting the decrease in
proposed for CY 2006) will not cover knowledge of the market, and requested median cost to 15 percent on the basis
that we exclude the claims for CPT that the device systems are integral to
the costs associated with the disposable
codes 36515 and 36516 submitted by the procedures assigned to APC 0112
supplies, specially trained medical staff,
these providers when calculating the and comprise a significant cost
and equipment used in conjunction
payment rate for APC 0112. Another component of these procedures. One of
with the services assigned to APC 0112
commenter provided a detailed analysis these commenters urged that we add
and described by CPT codes 36515,
of the claims for CPT codes 36515, APC 0112 to the list of device
36516 (Therapeutic apheresis; with
36516, and 36522 that we used to dependent APCs, and set the payment
extracorporeal selective adsorption or
calculate the proposed payment rate for floor at 100 percent of the CY 2005
selective filtration and plasma
APC 0112. Based on this claims payment rate plus the market basket
reinfusion), and 36522 (Photopheresis,
analysis, of the 24 providers that billed update for all device dependent APCs.
extracorporeal). For example, CPT code 36515, 29 percent reported Response: We appreciate commenters’
commenters explained that the cost of costs for the entire procedure at or concerns that we use accurate and
the disposable supplies alone for CPT below $170, and 67 percent reported complete claims data to develop the
codes 36515 and 36516 nearly equals medical supply costs at or below $1,412. median cost to set the payment rate for
the proposed payment for APC 0112. The commenter also noted that nearly APC 0112 for CY 2006. In response to
One commenter provided practice half of the single claims for CPT code requests by several commenters that we
expense information from the Medicare 36515 were not billed with ICD–9 codes reexamine our calculation of the median
Physician Fee Schedule to substantiate that supported the medical necessity of cost for APC 0112, we closely studied
supply costs of over $1,400 for CPT protein A column apheresis, leading the the single claims charge and cost
codes 36515 and 36516 and over $900 commenter to conclude that such distributions for CPT codes 36515,
for CPT code 36522. Many commenters providers were miscoding the services 36516, and 36522, those single claims
alleged that over half the hospitals they performed. For instance, the we used to set the payment rate for APC
reporting claims for CPT codes 36515 commenter suspected that several 0112. First, we noted that we had 4,828
and 36516 in CY 2004 did not fully hospitals may have incorrectly billed single bills drawn from a total of 6,071
reflect the costs of the disposables in CPT code 36515 when reporting the bills for services in APC 0112, allowing
their charges for the procedure. Some of collection of venous blood by us to use approximately 80 percent of
these commenters stated that hospitals venipuncture (CPT code 36415) based all claims in establishing the median
that charge separately for the on the charges reported by these cost for APC 0112. This large percentage
disposables are likely to charge more hospitals matching a typical charge for of single bills held true for each of the
accurately for the full procedure than venipuncture. Further claims analysis 3 CPT codes assigned to the APC as
hospitals that bundle the entire costs of also revealed that, of the 46 providers well. The availability of almost 5,000
the disposable supplies into their charge that billed CPT code 36516, 63 percent single bills for rate setting, a 15 percent
for the procedure. These commenters reported medical supply costs at or increase over the number of single bills
urged that CMS set the payment rate for below $1,485. Furthermore, the available for the CY 2005 OPPS update,
APC 0112 based only on claims where commenters said that only 44 percent of increases our confidence in the accuracy
separate charges for supplies have been the single claims for CPT code 36516 of the median cost of APC 0112
identified. Other commenters were billed with ICD–9 diagnosis codes calculated for CY 2006.
recommended that we exclude the CY that supported the medical necessity of Next, we confirmed that we made no
2004 claims data for CPT codes 36515 LDL-apheresis. The commenter errors in the calculation of the APC
and 36516 and set the payment rate for concluded that the underreporting of median cost. The apparent
APC 0112 based solely on the claims for costs and assignment of inappropriate inconsistency between the relatively
CPT code 36522, whose proposed CPT ICD–9 diagnosis codes to claims high median cost of CPT code 36522,
code median cost appeared to be reporting CPT codes 36515 and 36516 which provided the majority of single
accurate to the majority of commenters. were strong indicators that many claims for APC 0112, and the relatively
In addition, several commenters urged providers failed to include the charges lower APC median cost was explained
that we reexamine our calculation of the for medical supplies on the claims for by the observed distribution of costs of
median cost for APC 0112 for errors in CPT codes 36515 and 36516 or single claims for all of the services
the computation, due to their miscoded the services they provided. assigned to APC 0112. Almost half of
observation that the proposed median Several commenters suggested that the costs of single claims for CPT code
cost of APC 0112 was significantly because the procedures assigned to APC 36522 are closer to the APC median.
lower than the proposed median cost for 0112 utilize device systems to modify or The cost of single claims for CPT code
36522 at the 45th percentile is associated with those revenue codes the variable costs of all services
$1,597.45. We applied all of our usual was only $349. Because this median assigned to it. Consistent with details
processes, including standard trimming, cost is well below the approximately provided in the comments, we do not
to the calculation of the APC median $900–1,400 cost commenters expected believe that the costs of procedures
cost. for the disposable supplies, we are not described by CPT codes 36515, 36516,
In our analysis of the distributions of convinced that the bills with separate and 36522 are the same, as the services
costs from claims for all three CPT revenue code charges are truly more are each provided using very specific
codes assigned to APC 0112, we reflective of the full costs of the disposable supplies for patients with
observed that CPT code 36515, in apheresis procedures. Finally, we different clinical conditions. In
particular, had some claims with very observed that there were actually higher addition, we do not agree with those
low costs of less than $200 up through total costs in the distribution of those commenters who argued that the
the 50th percentile of claims costs. claims without separate billing of services described by CPT codes 36515,
While, in the commenters’ opinions, revenue code charges, up to $12,296 in 36516, and 36522 should be treated in
claims with even higher costs could not comparison with a maximum of $10,131 a manner similar to either device
have represented the full costs of the for those claims with separate revenue dependent APCs or blood and blood
procedures, we were not confident that codes charges. Considering the small products by mitigating their payment
we had reason to exclude claims with percentage of providers reporting reductions. We do not consider a
higher costs in calculating the median separate supply charges for CPT codes procedure requiring a disposable supply
cost of APC 0112. Therefore, we 36515, 36516, and 36522 under revenue to be a device dependent APC, which
identified 12 hospital providers codes 0270 and 0272, and the low utilizes implantable devices. In
submitting claims for CPT code 36515 median cost for such revenue code addition, we do not believe that the data
with the lowest fifteen percent of costs charges, the majority of providers concerns regarding these procedures
and then recalculated the median cost appear more likely to have included that treat the blood are similar to the
for APC 0112, excluding all claims for their disposable supply charges in their supply and availability challenges
CPT code 36515 reported by these 12 overall charges for the procedures rather associated with maintaining the nation’s
providers. We found essentially no than to have reported such charges blood supply. Therefore, for CY 2006,
change in the median cost of APC 0112 under a supply revenue code. We have we are applying our standard OPPS rate-
in this recalculation, as compared with no reason to believe, based on our setting methodology to all single claims
its median cost based on all single analysis, that the claims with separate for APC 0112, setting the payment rate
claims. charges for supplies are more correctly for APC 0112 based on a median cost of
Because commenters suggested that coded or more accurately reflective of $1,568.
we set the APC median cost using only the costs of services assigned to APC
claims with medical supply revenue c. Audiology (APCs 0364, 0365, and
0112. 0366)
code charges, we proceeded to analyze
all single claims for APC 0112 for the In conclusion, we are not making any Comment: One commenter, an
presence of separate line item charges adjustments to our standard processes association representing audiologists,
under revenue codes 270 (Medical/ for developing APC median costs for CY requested more detailed explanation for
Surgical Supplies) and 272 (Sterile 2006 for APC 0112. We will not screen several proposed movements of CPT
Supplies) that could most likely claims for the presence of specified codes among APCs. We proposed for CY
represent separate charges for the costly diagnoses that the commenters feel are 2006 to make the following APC
disposables that commenters indicated appropriately treated with these migrations: CPT codes 92533
are required for all 3 CPT codes procedures and assume that all other (audiometry, air & bone) and 92572
assigned to the APC. The median cost claims are miscoded. The three services (staggered spondaic word test) from
for claims with medical supply revenue treat a number of different medical APC 0364 to APC 0365; CPT code 92561
code charges is higher, at $2,800, conditions, and while there are some (Bekesy audiometry, diagnosis) from
compared with the median cost for local coverage policies for the APC 0365 to APC 0364; and CPT code
claims without medical supply revenue procedures, it would be difficult to 92577 (Stenger test, speech) from APC
code charges, $1,400. However, we do identify the correct ICD–9 diagnosis 0365 to APC 0366. The commenter did
not believe it is appropriate to subset coding for those claims reflecting all of not object to the changes.
the claims based on the presence of the cases of appropriate utilization of Response: With respect to proposed
medical supply revenue code charges these services. We are not calculating APC reassignments of services that are
for calculating the median APC cost for the payment rate for APC 0112 based not specifically discussed in the
several reasons. First, we noted that solely on those claims where separate proposed rule, in general we proposed
between 80 and 90 percent of the single charges for supplies have been changes to improve the clinical and
claims for each CPT code and, identified. Although we recognize that resource homogeneity of the involved
consequently, of all single bills used to some of the charges reported for CPT APCs, and, in particular, to address
estimate the median cost for APC 0112 codes 36515 and 36516 in particular are violations of the two times rule resulting
did not have separate charges under one unexpectedly low, we disagree with from variable median costs.
of the two specified revenue codes. This those commenters who asserted that the In this instance, CPT code 92561 was
is fully consistent with our past hospital claims data for CPT codes moved from the Level II Audiometry
guidance to hospitals that it is 36515 and 36516 are flawed to the APC to the Level I Audiometry APC
appropriate to bundle the costs of all extent that would justify discarding all because the data from CY 2004 hospital
supplies (excluding implantable devices such claims and basing the payment rate claims showed that the code-specific
with active device codes) into the line for APC 0112 solely on claims for CPT median cost of $19 for CPT code 92561
item charges for the procedures with code 36522. We will not exclude all was most compatible with the median
which they were used. For those claims claims for two of the three procedures cost of APC 0364, at $27. To leave the
billed with charges in the 270 and 272 assigned to APC 112 to calculate the code in APC 0365 would create a
medical supply revenue codes, we APC’s median cost, because we believe significant overpayment, and there was
observed that the specific median cost that the APC median cost should reflect another clinically appropriate APC
available. A similar rationale applied to Commenters also noted the volatility of navigational procedures should be
CPT code 92577, whose code-specific the CPT code median as a result of the assigned to APC 0302 with the other
median cost of $108 was more coherent extremely low frequency of 9 claims, computer assisted navigational
with the median cost of APC 0366 noting that the costs of these claims procedures, or alternatively each
(Level III Audiometry) of $100 than the ranged from $140 to $66,770. procedure (CPT codes 61795, 0054T,
median cost of the Level II APC at $80. Commenters strongly urged CMS to 0055T, and 0056T) should be placed in
While we excepted APC 0364, the CY reassign CPT code 38230 from APC a new clinical APC with a payment rate
2005 APC assignment for CPT code 0111 (Blood product exchange) to APC equaling the payment rate of APC 0302.
92553, from the two times rule for CY 0123 (Bone marrow harvesting and bone Response: We agree with the
2005, we proposed to move CPT code marrow/stem cell transplant) to more commenters that these computer
92553 to APC 0365 for CY 2006 to accurately reflect the high cost of this assisted navigational procedures share a
eliminate our need to except APC 0364 procedure and to improve the clinical common technological theme in their
from the two times rule for CY 2006. homogeneity of the two APCs, stating clinical use during surgical procedures
When compared with the median costs that the APC title for APC 0123 is more and may use comparable hospital
of other procedures in APC 0365, the applicable to CPT code 38230 than the resources. We, therefore, will place CPT
median cost of CPT code 92553 of $43 title of APC 0111. codes 0054T, 0055T, and 0056T in APC
was reasonably consistent with the Response: Hospitals have reported a 0302 with CPT 61795 for CY 2006. We
median costs of other codes assigned to consistently low median costs for CPT will also give APC 0302 a new name,
APC 0365 and to the overall APC code 38230 for the past several years, ‘‘Computer Assisted Navigational
median cost of $71. Due to this code’s prompting us to reassign this service to Procedures,’’ because the APC contains
significant volume of single claims and a lower paying APC, from APC 0123 to only these four services and is thus most
stable median costs, we believed that it APC 0111, for CY 2005. However, closer appropriately described by that title.
was appropriate to propose its analysis of this code-specific low
f. Hyperbaric Oxygen Therapy (APC
reassignment based on both clinical and median cost leads us to suspect that a
0659)
hospital resource considerations. We are number of providers are likely billing
finalizing our APC assignments for CPT this code for services that are not When hyperbaric oxygen therapy
codes 92561, 92577, and 92553 as described by CPT code 38230, bone (HBOT) is prescribed for promoting the
proposed for CY 2006. marrow harvesting for transplantation. healing of chronic wounds, it typically
We proposed to move CPT code Considering the typical clinical is prescribed on average for 90 minutes,
92572 (staggered spondaic word test) characteristics of the service, we would which would be billed using multiple
from APC 0364 to APC 0365 for CY expect the costs of the necessary units of HBOT to achieve full body
2006 because we believed that its hospital resources to more closely hyperbaric oxygen therapy. In addition
resource requirements, as reflected in approximate the median costs of to the therapeutic time spent at full
hospital claims data, were more services assigned to APC 0123 for CY hyperbaric oxygen pressure, treatment
consistent with other services assigned 2006. Therefore, we will return CPT involves additional time for achieving
to APC 0365 than to procedures code 38230 to APC 0123 for CY 2006. full pressure (descent), providing air
assigned to APC 0364. CY 2003 hospital However, we will reevaluate the breaks to prevent neurological and other
claims data for CPT code 92572 revealed appropriateness of this APC assignment complications from occurring during the
a median cost of about $100 based on during the OPPS update for CY 2007. In course of treatment, and returning the
19 single claims. CY 2004 claims data, the meantime, we advise providers to patient to atmospheric pressure (ascent).
based on 10 single claims, yielded a exercise greater care when reporting The OPPS recognizes HCPCS code
median cost of about $167. Although the CPT code 38230 to ensure that this code C1300 (Hyperbaric oxygen under
median does not appear to be as stable is billed correctly only for services pressure, full body chamber, per 30
for this code as the others discussed nor described by the CPT code and that all minute interval) for HBOT provided in
is the volume of claims large, upon costs associated with providing the bone the hospital outpatient setting.
review of final CY 2004 hospital claims marrow harvesting procedure are We explained in the August 16, 2004
data in response to this comment and included in charges on the claims for proposed rule (69 FR 50495) that our CY
examination of the clinical the service. 2003 claims data revealed that many
characteristics of the service, we believe providers were improperly reporting
e. Computer Assisted Navigational charges for 90 to 120 minutes under
that CPT code 92572 is most
Procedures only one unit rather than three or four
appropriately assigned to APC 0366 for
CY 2006. Therefore, we will not finalize Comment: Two commenters units of HBOT. This inaccurate coding
our proposal to move CPT code 92572 expressed concern about computer resulted in an inflated median cost of
to APC 0365, but will instead reassign assisted navigation for orthopedic $177.96 for HBOT, derived using single
the service to APC 0366 for the CY 2006 procedures (CPT codes 0054T, 0055T, service claims and ‘‘pseudo’’ single
OPPS. and 0056T). Both commenters were service claims. Because of these single
concerned that CMS had not assigned claims coding anomalies, we proposed
d. Bone Marrow Harvesting (APC 0111) these procedures to an APC for OPPS to calculate a ‘‘per unit’’ median cost for
Comment: Several commenters stated payment, but instead had proposed their APC 0659, using only multiple units or
that the proposed payment of $735 for status indicators as ‘‘B’’ while another multiple occurrences of HBOT,
CPT code 38230 (Bone marrow computer assisted navigational excluding claims with only one unit of
harvesting for transplantation) does not procedure, CPT code 61795 (Stereotactic HBOT and excluding packaged costs. To
adequately cover the costs of providing computer assisted volumetric convert HBOT charges to costs, we used
this service. These commenters called (navigational) procedure, intracranial, the CCR from the respiratory therapy
our attention to the large difference in extracranial, or spinal), had previously cost center when available; otherwise,
the proposed median cost of $1,209 for been assigned status indicator ‘‘S’’ in we used the hospital’s overall CCR.
CPT code 38230 and the proposed APC 302 (Level III Radiation Therapy). Using this ‘‘per unit’’ methodology, we
median cost of $747 for APC 0111, Both commenters recommended that proposed a median cost for APC 0659 of
where CPT code 38230 resides. orthopedic computer assisted $82.91 for CY 2005.
In the November 15, 2004 final rule a separate line item in their respiratory C1300 in APC 0659 have a particularly
with comment period (69 FR 65758), we therapy cost center. Commenters great impact on the APC median, as
agreed with commenters that there was convinced us that hospitals did not compared to changes in the median cost
sufficient evidence that the CCR for report their HBOT costs and charges in for a procedure assigned to an APC to
HBOT was not reflected solely in the a uniform location on their cost report. which multiple services are assigned.
respiratory therapy cost center; rather, In the final rule for CY 2005, we used Response: We receive many
the CCR for HBOT was reflected in a the overall CCR for each hospital rather submissions of external data from
variety of cost centers. Therefore, we than the respiratory therapy CCR to commenters supporting their requests
calculated a ‘‘per unit’’ median cost of calculate the median cost for HBOT for higher median cost estimates for
$93.26 for HBOT, using only multiple (APC 0659). While we could encourage specific procedures. In many cases,
units or multiple occurrences of HBOT hospitals to report their costs and submitted data have not met the
and each hospital’s overall CCR. charges for HBOT separately, at this minimum standards required for setting
Our examination of the CY 2004 time extra effort by hospitals would not payment rates. We have previously
single procedure claims filed for HCPCS allow us to improve the accuracy of our provided preferred characteristics of
code C1300 revealed similar coding HBOT median cost calculation because external data to be submitted in
anomalies to those encountered in the we lose line-item specificity when the comments regarding devices (68 FR
CY 2003 single procedure claims data. data is entered into HCRIS. 47987). While we have not specifically
Therefore, for CY 2006 rate-setting, we Comment: One commenter provided criteria for non-device external
recalculated a ‘‘per unit’’ median cost commissioned a study to analyze our
data, the subset of our published
for HCPCS code C1300 using only characteristics that could be applicable
rate-setting methodology and conducted
multiple units or multiple occurrences to a service such as HBOT include the
an independent survey of hospitals that
of HBOT and each hospital’s overall public availability of the data, its
provide HBOT services. Surveys
CCR, which is the same methodology representativeness of a diverse group of
conducted in CYs 2004 and 2005 asked
we used for setting the CY 2005 hospitals both by location and type, and
all hospitals providing HBOT services to
payment rate for HBOT. Excluding its identification of its data sources. As
identify the standard cost center
claims with only one unit of HBOT, we part of the CY 2005 study, hospitals
associated with the line on their cost
used a total of 41,152 claims to calculate gave their consent for their
report where the hospital reports costs
the proposed median for APC 0659 for identification and cost report
and charges for HBOT: 206 hospitals, or
CY 2006. Applying the methodology information to be made public, an
described above, we proposed a median 44 percent of all hospitals providing essential characteristic of data
cost for APC 0659 of $93.37 for CY HBOT services, responded to one of the submitted as part of a public comment.
2006. surveys. The commenter believes that The submitted HBOT CY 2005 survey
We received several public comments the survey results are generalizable to data represent a varied group of 120
concerning our proposed APC payment all hospitals providing HBOT services hospitals, both by location and type of
for HBOT. because the demographics of those hospital, as well as 31 percent of the
Comment: Several commenters hospitals not responding to the surveys population of total hospitals providing
approved of our decision to rely on each are comparable to those responding to HBOT services according to CY 2004
hospital’s overall CCR rather than the the surveys. For each of the responding hospital claims. Inclusion of HBOT
respiratory therapy CCR in our hospitals, the survey results provided survey data from the CY 2004 survey
calculation of HBOT median costs. the standard cost center on each increases the response rate to 44
However, the commenters noted that hospital cost report. The study percent. The survey results provide us
most hospitals providing HBOT services calculated an HBOT CCR for each with the specific standard cost center in
report the costs and charges associated hospital based on the costs and charges which costs and charges for HBOT are
with providing this service on a separate in the associated standard cost center, located for the responding hospitals,
line of their cost report. These not just the costs and charges for HBOT. allowing us to relate the HBOT charge
commenters further encouraged us to On the basis of these results, the study data to cost-to-charge information
use the CCR specific to HBOT for then generalized an HBOT CCR to the provided in hospital cost reports for
hospitals that report HBOT separately. 56 percent of hospitals not responding these hospitals. We are appreciative of
They also asked CMS to encourage to the surveys. Specifically, the study this study in that it provides us with
hospitals not reporting costs and simulated HBOT CCRs for each of the some useful information as we examine
charges for HBOT separately, to do so in non-responding hospitals by applying a our payment for HBOT services.
the future. methodology that generalized to the These survey results based on this
Response: Unfortunately, the non-responding hospitals HBOT- modest response may, therefore, be
Healthcare Cost Report Information specific findings from similar hospitals. representative of the 464 hospitals that
System (HCRIS), the electronic database The study results led the commenter to submitted HBOT claims to the OPPS in
of the Hospital Cost Report (CMS–2552– conclude that the proposed median cost CY 2004. However, only a small
96) that we use to estimate costs from of $93.37 was too low, and that a more minority of OPPS hospitals actually
charges, rolls up costs and charges on accurate estimate of median cost per provides HBOT services, and there is
each hospital’s cost report into a unit is $118.94. On the basis of this such significant regional variation in the
standard list of cost centers. Because analysis the commenter requested that frequency of billing of hospital
HBOT is not included on the standard CMS use the median cost of $118.94 to outpatient HBOT services that it is
list of cost centers, CMS does not have set the payment rate for APC 0659. The unlikely to be fully explained by the
readily available information about the commenter noted that APC 0659, where different health characteristics of
specific costs and charges that each the HCPCS code for HBOT (C1300) is regional populations. We understand
institution garners in providing HBOT assigned, is unusual as it is one of only that HBOT may also be provided in
services. Until last year, we had a few APCs that contain only one freestanding centers, and the business
hypothesized that most hospitals HCPCS code. They concluded that as no decisions around its location may
providing HBOT services reported the averaging of the costs of services occurs, depend upon the local healthcare
costs and charges for those services as any changes in the median cost for infrastructure. Therefore, while the
responding hospitals may be similar to may be more likely to yield accurate 0659 based on a median cost of $90.09
the non-responding hospitals with relative values than a mixed data set for CY 2006.
respect to hospital category and consisting of both values calculated Comment: One commenter pointed
geographic location, we are not from hospital claims data and values out that they had difficulty replicating
confident that these characteristics determined by enhanced methods. CMS’s median cost estimate, in part
alone signify that the minority of Lastly, our capacity to review, because the public dataset that we make
responding hospitals is truly reflective evaluate, and adapt special approaches available included cost data calculated
of the relatively small number of OPPS to increase payment levels for with the respiratory therapy CCR, that
providers billing for HBOT. In addition, individual services in the OPPS is the calculation of the ‘‘overall CCR’’ was
we are not certain that comparability of necessarily limited. Based on all of our not sufficiently defined in regulations to
hospitals with respect to their category concerns previously discussed, it is be replicated, and that using the cost
and geographic location is related to consequently important that we obtain centers marked with a ‘‘Y’’ on the
individual hospital decisions about some idea of the extent of other possible ‘‘Revenue Code to Cost Center
where to include HBOT costs and requests for use of special methods and Crosswalk Description’’ did not yield an
charges on their Medicare cost reports. non-claims based data to increase overall CCR comparable to the one that
Therefore, we are not convinced that it payment levels for particular services or we used.
would be appropriate to generalize these groups of services before setting such a Response: We acknowledge the
HBOT cost center findings to non- precedent for one specific OPPS service, commenter’s concern regarding the
responding hospitals to calculate an where there appear to be no pressing accessibility and quality of data
adjusted payment rate for HBOT. access concerns based on our OPPS available to replicate CMS’s median cost
payment rates to date. Our hospital calculations. While we believe that we
In addition to our concern about have fulfilled our public obligation to
claims data reveal steadily increasing
generalizability based on the provide access to data to support public
frequencies of HBOT claims, from
methodology discussed above, we have comments, users of the data can
101,843 services in CY 2002, to 188,604
several additional reservations about sometimes identify improvements. We
services in CY 2003, and once again to
employing the approach recommended agree that the overall CCR calculation
242,558 services in CY 2004. This more
by the commenter without the benefit of should be more transparent. We have
than doubling of HBOT services in
additional comment from other parties. provided additional information about
hospital outpatient departments over a
First, employing this approach may 2-year time period indicates that this calculation both in the final rule
establish an important precedent, which Medicare beneficiaries are unlikely to be under our discussion of APC median
may well be cited by other commenters experiencing difficulty in accessing calculations and on our Web site. We
concerned with the median costs of medically necessary HBOT services in also agree that we should have placed
other services. The OPPS is a the context of the OPPS payment rates the hospital specific overall CCR to
prospective payment system that relies for HBOT. estimate costs for HBOT on our public
upon the coherent grouping of services Before we engage in further use file. We will remedy this for the CY
that share clinical as well as resource rulemaking, we therefore specifically 2007 rulemaking process.
utilization characteristics and the invite input on other situations where
packaging of many ancillary services to g. Ophthalmology Examinations (APC
special approaches may be appropriate
determine payments. We are concerned and where high quality external data 0601)
that differentially employing methods might be made available. We are Comment: One commenter,
that depend on additional external interested in the possible merits of these representing eye physicians and
collection of information from hospitals other approaches and in potential surgeons, agreed with our decision to
may have unintended and potentially criteria that we might use to assess exempt the APC 0235 (Level I Posterior
negative consequences in a payment when a special methodology should be Segment Eye Procedures) from the 2
system based on averages and relative employed. We believe these comments times rule for CY 2006. The commenter
values. It stands to reason that, as in the can help us to develop options for also agreed with our proposal to move
case of HBOT, commenters will only consideration for the CY 2007 OPPS several other ophthalmology procedures
submit special surveys and proposals to update. In the meantime, we intend to into higher paying APC groups (CPT
refine rate-setting when they have at continue our efforts to improve the codes 65265, 65285, 66220, 67025,
least a strong reason to believe that such precision of the OPPS relative weights 67027, 67036, 67038, 67039, and
customized methods will increase the by increasing our use of multiple 67121). See 70 FR 42704, July 25, 2005
rates for the specific services in which procedure claims and refining our cost for a table including the proposed
they are interested. In a budget-neutral estimation process. changes.
payment system based on relative While we solicit additional public However, this commenter disagreed
weights, this poses the risk that using comment on this subject matter, for CY with the proposal to move CPT codes
this specific external information for 2006 rate-setting we are finalizing our 92004 (eye exam, new patient) and
select services will actually distort the proposal to recalculate a ‘‘per unit’’ 92014 (eye exam, established patient)
process of establishing the relative median cost for HCPCS code C1300 from APC 0602 (High Level Clinic
weights in favor of some services but to using only multiple units or multiple Visits) to APC 0601 (Mid Level Clinic
the disadvantage of other services where occurrences of HBOT and each Visits). The commenter urged CMS to
such information is not available or not hospital’s overall CCR, which is the reconsider this decision and keep these
as potentially influential based on the same methodology we used for setting codes in APC 0602.
APC assignments of those services. In a the CY 2005 payment rate for HBOT. Response: At its February 2005
relative system such as the OPPS, it may Excluding claims with only one unit of meeting, the APC Panel recommended
be more important to employ a HBOT, we used a total of 47,101 claims that CMS restructure APCs 0601 and
consistent set of data than to adopt to calculate the final median cost for 0602 to eliminate violations of the two
specially ‘‘enhanced’’ data and methods APC 0659 for CY 2006. Applying the times rule. At the time of the proposed
for some services, but not for all services methodology described above, we are rule for CY 2006, the available median
generally. Indeed, a consistent data set setting the final payment rate for APC cost data for these two codes showed
that the hospital resources for both for these codes submitted by all other j. Wound Care
codes were more homogenous with providers in all other settings is outside As stated in the July 25, 2005
other services assigned to the mid level the scope of this final rule. proposed rule (70 FR 42692), based
clinic visit APC 0601, as compared to Comment: One commenter objected to upon a recommendation from the APC
services assigned to the high level clinic payment of CPT code 86586 under the Panel we referred CPT code 97602 (non-
visit APC 0602. Keeping these codes in OPPS and asked that we place it on the selective wound care) for MPFS
APC 0602 for CY 2006 would have clinical laboratory fee schedule for CY evaluation of its bundled status in
resulted in significant overpayments for 2006 because currently, the only source relation to services provided under the
both codes based on historical hospital of payment is under the OPPS and OPPS. In the proposed rule for CY 2006,
claims data. therefore independent laboratories we assigned CPT code 97602 a status
We now have additional claims data, cannot be paid for it. indicator of ‘‘A,’’ meaning that while it
reflecting more complete median costs
Response: We agree with this was not payable under the OPPS, it was
for both codes from CY 2004 claims.
comment and we will pay for this code payable under a fee schedule other than
Upon review of CPT code 92004, its
median cost of $82 based on almost under the clinical lab fee schedule in the OPPS, specifically the MPFS. We
21,000 single claims is more consistent CY 2006. This code will therefore not be explained that, under the MPFS, the
with the median costs of other services paid under the OPPS in 2006. nonselective wound care services
assigned to APC 0602 ($88), and Comment: One commenter objected to described by CPT code 97602 are
assigning this code to APC 0602 for CY payment being made under the OPPS ‘‘bundled’’ into the selective wound
2006 would not cause a two times rule for CPT codes 80500–80502 and 88187– care debridement codes (CPT codes
violation. We, therefore we will not 88189, which are for physician 97597 and 97598). Furthermore, under
finalize our CY 2006 proposal to move interpretation and report services. The the MPFS, a separate payment is never
CPT code 92004 to APC 0601, but commenter asked that we change their made for ‘‘bundled’’ services and,
instead we will reassign CPT code status indicators to ‘‘M’’ so that the because of this designation, the provider
92004 back to APC 0602 for CY 2006. codes would not be billable to a fiscal does not receive separate payment for
However, the median cost of CPT code intermediary nor payable under the furnishing non-selective wound care
92014 ($67) based on nearly 100,000 OPPS. The commenter believed that services described by CPT code 97602.
single claims remains more consistent these services should only be paid to We received several public comments
with the median cost of APC 0601 ($60). physicians on claims submitted by concerning our proposed treatment of
Based on OPPS hospital claims data, carriers. CPT code 97602 under the OPPS.
hospitals are consistently reporting Comment: Several commenters
Response: These services currently objected to our proposal to maintain a
higher costs for comprehensive eye have status indicator ‘‘X’’ and are
exams for new patients in comparison status indicator of ‘‘A’’ for CPT code
separately paid under OPPS. We believe 97602, which does not allow for
with comprehensive eye exams for that payment to hospitals is appropriate
established patients. These differences separate payment under the OPPS.
because of the resources hospitals These commenters contended that CMS’
in costs likely result from the additional furnish for the physician to be able to
hospital resources required to provide recognition of this code only under the
perform these services in a hospital (that MPFS as a bundled service is equivalent
eye exams to new patients, in keeping is, space, computer, office supplies,
with current clinical practice. To return to CMS asking hospitals to furnish but
medical records system). not charge for this service. They
CPT code 92014 to APC 0602 for CY
2006 would significantly overpay i. Photodynamic Therapy of the Skin asserted that our decision not to pay for
comprehensive eye examinations for (APC 0013) this service under the OPPS is based on
established patients. We therefore a misclassification of this code as an
Comment: One commenter supported ‘‘always therapy’’ service. They further
finalize our CY 2006 proposal to assign
the proposed move of CPT code 96567 explained that registered nurses, as
CPT code 92014 to APC 0601.
(Photodynamic Therapy of the Skin) opposed to physical therapists,
h. Pathology Services from APC 0013, with a proposed routinely perform non-selective wound
Comment: One commenter supported payment rate of $66, to APC 0016 with care services in the hospital outpatient
the proposed status indicator of B for a proposed payment rate of $153. The setting. These commenters urged CMS
HCPCS codes D0472–D0999 because the commenter also expressed appreciation to acknowledge non-selective wound
commenter indicated that providers that the drug used with this procedure care as meeting the definition of covered
should bill the appropriate CPT code in (HCPCS code J7308) is paid separately outpatient therapeutic services under
place of these codes. The commenter and not bundled into the payment for the OPPS. Two commenters requested
urged CMS to require its contractors to the procedure. The commenter asked that we assign the newly proposed
deny claims for HCPCS codes D0472– that CMS continue to monitor the status indicator ‘‘Q’’ to CPT code 97602
D0999. median costs reported by hospitals so so that separate payment can be made
Response: We agree that these HCPCS that Medicare beneficiaries may under the OPPS when this is the only
codes duplicate existing CPT codes and continue to have access to this payable service provided under the
therefore have designated them as not procedure and the drug associated with OPPS. These two commenters also
payable or recognized under OPPS. As the procedure. suggested that we pay this service at the
a practical matter, this change in status Response: We appreciate the same payment rate as services assigned
indicator has little or no impact on thoughtful comments submitted by this to APC 0600 (Low Level Clinic Visits).
providers because of this entire code pharmaceutical manufacturer. We will Another commenter strongly
series, in all of CY 2004, only 3 units of finalize the placement of CPT code recommended that CMS also review our
HCPCS code D0999 were billed by 96567 in APC 0016 as proposed. As status indicator assignment of ‘‘A’’ to
hospitals under OPPS. This CY 2006 always, we will continue to monitor CPT codes 97605 (Negative pressure
final rule with comment period applies claims data submitted by hospitals to wound therapy; total wound(s) surface
to payments under the OPPS and a ensure appropriate payment for all area less than or equal to 50 sq. cm.) and
comment that we should deny claims procedures. 97606 (Negative pressure wound
therapy; total wound(s) surface area status indicator of ‘‘A’’ under the OPPS Level Clinic Visits); however, we
greater than 50 sq. cm.), in addition to indicating they were to be paid off the concluded that these services do not
CPT code 97602 as mentioned by other MPFS, were that hospitals may have share similar enough characteristics in
commenters and discussed above. The been unable to bill and be paid for these terms of clinical homogeneity and
commenter urged that we pay separately services when they were provided as resource requirements to other services
for these services under the OPPS, non-therapy in the hospital outpatient assigned to APC 0600. In particular,
emphasizing that these codes represent setting. When some of these OPPS specialized supplies are likely necessary
comprehensive wound care services were packaged under the for the procedures, unlike many of the
management and are typically not MPFS, hospitals received no separate supplies used in services assigned to
performed with any other service. payment, and when other services were APC 0600. Likewise, we also considered
Furthermore, the commenter objected to paid off the MPFS, the services were one commenter’s recommendation to
our designation of CPT codes 97602, required to meet the criteria for therapy assign CPT codes 97597, 97598, 97602,
97605, and 97606 as ‘‘always therapy’’ services. However, this requirement for 97605, and 97606 to New Technology
services, contending that these services payment to hospitals only as therapy APC 1502 with a payment rate of $75.
are often performed by registered nurses services was inconsistent with However, because we do not consider
and should be classified as ‘‘sometimes Medicare’s designation of CPT codes wound care services to be appropriately
therapy’’ services and assigned a status 97597 and 97598 as ‘‘sometimes
described by a new technology
indicator of ‘‘S’’ which pays separately therapy’’ services, that could be
designation under the OPPS, nor do we
under the OPPS. Finally, this appropriately provided either as therapy
expect the resource intensity of these
commenter recommended that we services or as non-therapy services.
Therefore, for CY 2006, we are services to approach $75, we are not
assign CPT codes 97602, 97605, and assigning these services to New
97606 to New Technology APC 1502 reclassifying CPT codes 97602, 97605,
and 97606 as ‘‘sometimes therapy’’ Technology APC 1502. Instead, we
(Level II $50–$100) with a payment rate sought to place these codes in clinical
of $75 for CY 2006 until we can collect services that may be appropriately
provided either as therapy or non- APCs with like services sharing similar
hospital claims data to aid us in
therapy services, as well as maintaining resource requirements. Therefore, for
assigning these services to a clinical
our designation of CPT codes 97597 and CY 2006, we are assigning CPT code
APC based on hospital median costs.
97598 as ‘‘sometimes therapy’’ services. 97602 to APC 0340 (Minor Ancillary
Response: We thank the commenters In order to pay hospitals accurately Procedures) because we consider the
for their views on the classification and when delivering these ‘‘sometimes resource requirements of this service to
payment status of wound care services therapy’’ services independent of a be similar to the hospital resources
under the OPPS. Pursuant to a therapy plan of care, we are establishing necessary for many of the other minor
congressional mandate (Balanced payment rates for CPT codes 97597, hospital procedures assigned to this
Budget Act of 1997, Pub. L. 105–33) to 97598, 97602, 97605, and 97606 under APC. While it may be that our CY 2004
pay for all therapy services under one the OPPS when performed as non- hospital claims data may not reflect all
prospective payment system, as therapy services in the hospital claims for services that could have been
provided under section 1834(k)(5) of the outpatient setting. To further clarify, described by CPT code 97602 because
Act, we created a therapy code list to hospitals will receive separate payment some hospitals may have been billing
identify and track outpatient therapy under the OPPS when they bill for for an evaluation and management
services paid under the MPFS. We wound care services described by CPT
provide this list of therapy codes along service if nonselective wound care was
codes 97597, 97598, 97602, 97605, and the only procedure provided on a day,
with their respective designation in the 97606 that are furnished to hospital
Medicare Claims Processing Manual we note that based on almost 75,000
outpatients by non-therapists single claims the median cost of $42 for
Pub. 100–04, section 20. We define an independent of a therapy plan of care.
‘‘always therapy’’ service as a service CPT code 97602 is very consistent with
In contrast, when such services are the CY 2006 median cost of $36 for APC
that must be performed by a qualified performed by a qualified therapist under
therapist under a certified therapy plan 0340. In addition, we are assigning CPT
an approved therapy plan of care, codes 97597 and 97605 to APC 0012
of care, and a ‘‘sometimes therapy’’ providers should attach an appropriate
service as a service that may be (Level I Debridement and Destruction),
therapy modifier (that is, GP for
performed by a non-therapist outside of and CPT codes 97598 and 97606 to APC
physical therapy, GO for occupational
a certified therapy plan of care. As 0013 (Level II Debridement and
therapy, and GN for speech-language
recommended by the commenters, we pathology) and/or report their charges Destruction) because we consider these
have carefully reviewed our designation under a therapy revenue code (that is, services to closely resemble both the
of CPT codes 97602, 97605, and 97606 420, 430, or 440) to receive payment clinical characteristics and resource
as ‘‘always therapy’’ codes and our under the MPFS. The OCE logic will requirements of the other debridement
assignment of payment status indicator either assign these services to the services assigned to these APCs. We
‘‘A’’ to these codes under the OPPS. In appropriate APC for payment under the have listed these five codes in
light of the comments, we have also OPPS if the services are non-therapy, or Addendum B with status indicator ‘‘X’’
reexamined our classification of CPT will direct contractors to the MPFS for CPT code 97602 and status indicator
codes 97597 (selective wound care; total established payment rates if the services ‘‘T’’ for CPT codes 97597, 97598, 97605,
wound(s) surface area less than or equal are identified on hospital claims with a and 97606, along with their individual
to 20 sq. cm.) and 97598 (selective therapy modifier or therapy revenue APC assignments to indicate their
wound care; total wound(s) surface area code as therapy. payment rates in common hospital
greater than 20 sq. cm.) as ‘‘sometimes Under the OPPS, we considered outpatient circumstances where the
therapy’’ codes with respect to payment several options for determining the APC services are provided as non-therapy. If
under the OPPS. The past implications placement of CPT codes 97597, 97598, a claim indicates, as described above,
of designating CPT codes 97602, 97605, 97602, 97605, and 97606. As two that the services are provided as
and 97606 as ‘‘always therapy’’ services, commenters suggested, we considered therapy, the claim for such services will
in addition to assigning these codes a placing these codes in APC 0600 (Low be paid under the MPFS.
When hospitals provide wound care Finally, we also adjusted the median for Retrograde Cholangio-Pancreatography),
services, they should bill the most any APC (whether device-dependent or APC 0154 (Hernia/Hydrocele
appropriate CPT codes to describe those not) that declined more than 15 percent. Procedures), APC 0187 (Miscellaneous
services. Hospitals should not bill for an In addition, in the CY 2003 OPPS we Placement/Repositioning), APC 0315
evaluation and management service deleted the device codes (‘‘C’’ codes) (Level II Implantation of
along with the wound care service from the HCPCS file in the belief that Neurostimulator), APC 0415 (Level II
unless a significant, separately hospitals would include the charges for Endoscopy Lower Airway), APC 0416
identifiable evaluation and management the devices on their claims, (Level I Intravascular and Intracardiac
service, correctly identified with notwithstanding the absence of specific Ultrasound and Flow Reserve), and APC
modifier ¥25 on the claim, was also codes for devices used. 0676 (Level II Thrombolysis and
provided to the patient during the same In the CY 2004 OPPS, we used only Thrombectomy).
encounter. Lastly, under the OPPS we claims containing device codes to set Response: We implemented the
consider payment for nonselective the medians for device-dependent APCs device edits for device-dependent APCs
wound care to always be included in and again used external data in a 50–50 in two phases for CY 2005. Those
payment for selective wound care or blend with claims data to adjust identified in Table 19 of the November
negative pressure wound therapy if both medians for a few device-dependent 15, 2004 final rule with comment period
services are provided at the same codes when it appeared that the (69 FR 65763) were implemented
anatomic site in one encounter. adjustments were important to ensure effective for services furnished April 1,
Therefore, hospitals should not bill for access to care. However, hospital device 2005, and later. The remaining edits for
both services when nonselective wound code reporting was optional. device-dependent APCs were
care is provided with selective wound In the CY 2005 OPPS, which was implemented effective for services
care or negative pressure wound therapy based on CY 2003 claims data, there furnished October 1, 2005, and later. We
at the same anatomic site in a single were no device codes on the claims and, implemented the edits in two phases so
encounter. Hospitals would therefore, we could not use device- that we could ensure that any systems
appropriately use the ¥59 modifier to coded claims in median calculations as issues that might arise with
indicate nonselective and selective a proxy for completeness of the coding implementation of the first set of edits
wound care or negative pressure wound and charges on the claims. For the CY would be resolved before we
therapy services provided in a single 2005 OPPS, we adjusted device- implemented the remainder of the edits.
encounter at different anatomic sites. dependent APC medians for those We limited the edits we implemented to
device-dependent APCs for which the those for services included in the list of
IV. Payment Changes for Devices CY 2005 OPPS payment median was device-dependent APCs that we posted
A. Device-Dependent APCs less than 95 percent of the CY 2004 on the CMS Web site for public review
OPPS payment median. In these cases, to minimize the possibility of
Device-dependent APCs are the CY 2005 OPPS payment median was unintended claims processing problems.
populated by HCPCS codes that usually, adjusted to 95 percent of the CY 2004 At this time, we have not expanded the
but not always, require that a device be OPPS payment median. We also scope of device-dependent APCs or the
implanted or used to perform the reinstated the device codes and made scope of the edits because of concerns
procedure. For the CY 2002 OPPS, we the use of the device codes mandatory raised by hospitals regarding the
used external data, in part, to establish where an appropriate code exists to administrative burden that edits impose
the device-dependent APC medians describe a device utilized in a procedure on hospitals. We will evaluate the
used for weight setting. At that time, and also implemented HCPCS code impact of the edits on hospitals and on
many devices were eligible for pass- edits to facilitate complete reporting of our claims data before we consider
through payment. For the CY 2002 the charges for the devices used in the expanding the scope of the edits to other
OPPS, we estimated that the total procedures assigned to the device- services such as those suggested by the
amount of pass-through payments dependent APCs. commenter.
would far exceed the limit imposed by Comment: One commenter
statute. To reduce the amount of a pro 1. Public Comments and Our Responses recommended that device codes C1750
rata adjustment to all pass-through on the November 15, 2004 OPPS Final (Cath, hemodialysis, long-term) and
items, we packaged 75 percent of the Rule With Comment Period C1752 (Cath, hemodialysis, short-term)
cost of the devices, using external data We solicited public comments be allowed when billing for services
furnished by commenters on the August concerning the methodology set forth in using CPT codes 36557 (Insert tunneled
24, 2001 proposed rule and information our CY 2005 OPPS final rule with cv cath), 36558 (Insert tunneled cv
furnished on applications for pass- comment period (November 15, 2004, cath), and 36581 (Replace tunneled cv
through payment, into the median costs 69 FR 65681). A summary of the cath). The commenter further
for the device-dependent APCs comments we received and our recommended that CMS allow the use of
associated with these pass-through responses follow: device code C1898 (Lead, pmkr, other
devices. The remaining 25 percent of Comment: One commenter asked that than trans) when billing for services
the cost was considered to be pass- CMS implement device edits other than using CPT codes 33211 (Insertion of
through payment. those included in Table 19 of the heart electrode), 33216 (Insert lead pace-
In the CY 2003 OPPS, we determined November 15, 2004 final rule with defib, one), and 33217 (Insert lead pace-
APC medians for device-dependent comment period in April 2005. The defib, dual).
APCs using a three-pronged approach. commenter asked that CMS add the Response: We agree with the
First, we used only claims with device following APCs to the list of device- commenter’s recommendations and
codes on the claim to set the medians dependent APCs and implement device made the changes when the edits were
for these APCs. Second, we used editing for them using the specific implemented in the two phases for CY
external data, in part, to set the medians device codes provided by the 2005 discussed above in response to the
for selected device-dependent APCs by commenter: APC 0088 (Thrombectomy), preceding comment.
blending that external data with claims APC 0141 (Level I Upper GI Comment: One commenter
data to establish the APC medians. Procedures), APC 0151 (Endoscopic recommended that device codes for
brachytherapy needles, catheters, and As we stated previously, in CY 2004, an across-the-board adjustment to the
sources be required when providers bill CMS reissued HCPCS codes for devices median costs for these device-
for the following CPT codes for and asked hospitals to voluntarily code dependent APCs based on comparisons
brachytherapy application: 77761, devices utilized to provide services. As to the prior year’s payment medians. We
77762, 77763, 77776, 77777, 77778, part of our development of the medians believe that mandatory reporting of
77781, 77782, 77783, and 77784. for this final rule with comment period, device codes for services furnished in
Numerous other commenters strongly we examined CY 2004 claims that CY 2005, combined with the editing of
opposed device editing for contained device codes that met our claims for the presence of device codes,
brachytherapy procedures due to the device edits, as posted on the OPPS where such codes are appropriate,
burden that it would impose on them. Web site at http://www.cms.hhs.gov/ would result in claims data that more
Response: We did not require these providers/hopps/default.asp. We found fully reflect the relative costs of these
edits for CY 2005. The needles and that, in many cases, the number of services and that across-the-board
catheters that are placed for the claims that passed the device edits was adjustments to median costs for these
application of brachytherapy sources are quite small. To use these claims to set APCs would no longer be appropriate.
not placed when the procedures cited medians for the CY 2006 OPPS would
are performed but are generally placed mean that the medians for some of these a. APC Panel Recommendations
in procedures that are coded separately. APCs would be set based on very small
numbers of claims, reflecting the fact In the CY 2005 proposed rule, we
In the case of application of seeds for proposed to treat APCs 0107 and 0108
prostate brachytherapy (CPT code that, in CY 2004 when device coding
was optional under the OPPS, relatively in the same manner as we proposed to
77778), the needles or catheters are treat other device-dependent APCs. We
placed when CPT code 55859 (Percut/ few hospitals chose to code for devices.
Therefore, we did not propose to use note that at its August 2005 meeting, the
needle insert, pros) is performed and APC Panel recommended that CMS set
not as part of CPT code 77778. only claims that passed the device edits
to set the median costs for device- the payment rates for cardioverter
Moreover, for CY 2005, sources of defibrillator APCs (APCs 0107 and
brachytherapy are billed and paid dependent APCs for the CY 2006 OPPS.
When we considered whether to base 0108) at the CY 2005 payment rates plus
separately on the basis of charges the full market basket increase for CY
the weights for these APCs on the
reduced to cost and, therefore, are 2006. We did not accept this
unadjusted median costs, we found that,
irrelevant to the calculation of a median recommendation because to do so
for 10 of the 38 APCs for which the APC
cost for the application of the would greatly contradict our stated
composition is stable, basing the
brachytherapy sources because, unlike policy of applying a single standardized
payment weight on the unadjusted
other devices, the cost of brachytherapy methodology wherever possible to
median cost would result in a reduction
sources is not packaged into the establish APC payment amounts that are
of more than 15 percent in the median
payment for the service in which the cost for the CY 2006 OPPS compared to appropriately relative to one another.
sources are required. the CY 2005 OPPS. The APC Panel also recommended
2. CY 2006 Proposal, APC Panel In the CY 2006 proposed rule, we that CMS add APC 0416 (Level I
Recommendations, and Responses to stated that we fully expect to use the Intravascular and Intracardiac
Public Comments Received unadjusted median costs for device- Ultrasound and Flow Reserve) and, in
dependent APCs as the basis of their particular, CPT code 37250 (Iv us first
In the CY 2006 OPPS proposed rule, payment weights for the CY 2007 OPPS
we proposed to base the OPPS device- vessel add-on) to the list of device-
because device coding is required for dependent APCs and require device
dependent APC medians on CY 2004 CY 2005 and device editing is being
claims, the most current data available. editing for CPT code 37250.
implemented in CY 2005, so that all CY
In CY 2004, the use of device codes was 2005 claims should reflect the costs of We did not accept this
optional. Thus, for the CY 2006 OPPS devices used to provide services. recommendation. Many services that
proposed rule, we proposed to calculate Nevertheless, we recognized that a require devices are not included in the
median costs for these APCs using all payment reduction of more than 15 set of APCs to which we have given
single bills without regard to whether percent from the CY 2005 OPPS to the special attention as they came off pass-
there was a device code reported on the CY 2006 OPPS may be problematic for through status. We package the costs of
claim. We calculated median costs for hospitals that provide the services relatively high cost devices into the
this set of APCs using the standard contained in these APCs. Therefore, for median costs for the device-dependent
median calculation methodology. This the CY 2006 OPPS, we proposed to APCs, and the absence of charges for
methodology uses single procedure adjust the median costs for the device- these devices on claims is the reason for
claims to set the median costs for the dependent APCs listed in Table 15 of special treatment of the APCs in the
APC. We then compared these the CY 2006 proposed rule (70 FR past. The absence of charges also gives
unadjusted median costs to the adjusted 42714) for which comparisons with rise to our application of device editing
median costs that we used to set the prior years are valid to the higher of the to the services in the device-dependent
payment rates for the CY 2005 OPPS. CY 2006 unadjusted APC median or 85 APCs so that our hospital claims data
We found that 21 APCs experienced percent of the adjusted median on are more complete for these specific
increases in median cost compared to which payment was based for the CY services. At this time, we see no
the CY 2005 OPPS adjusted median 2005 OPPS. We stated that we viewed compelling reason to expand this list of
costs, 1 APC median was unchanged, 16 this as a transitional step from the device-dependent APCs. This is
APCs experienced decreases in median adjusted medians of past years to the particularly true given that we expect
costs, and 8 APCs were proposed to be use of unadjusted medians based solely that, for CY 2007, these APCs will not
reconfigured in such a way that no valid on hospital claims data with device receive special attention as a class.
comparison was possible. Table 15 codes in future years. However, we note that we will make
published in the CY 2005 OPPS As stated in the proposed rule (70 FR case-by-case decisions regarding the
proposed rule showed the comparison 42714), we expect that CY 2006 will be adjustment of median costs where we
of these median costs (70 FR 42714). the last year in which we would make believe that it is appropriate.
b. Public Comments Received and Our over other device-dependent APCs in by commenters, because doing so would
Responses past years. These commenters requested contradict our stated policy of using
We received numerous public that the same adjustment policy apply claims data developed from a single
comments concerning our proposal. to all device-dependent APCs. Some source, and applying a single
Following is a summary of those commenters asked CMS to use only standardized methodology wherever
comments and our responses: claims that contained appropriate possible to establish payment amounts
device codes in the calculations of the that are appropriately relative to one
(1) Adjustment of Median Costs median costs because the presence of another. The Medicare claims database
Comment: Some commenters the device code and a charge for the we use contains all claims for all
supported the proposed median cost device are more likely to produce the services paid under the OPPS for all
adjustment for device-dependent APCs best possible estimate of relative cost for Medicare patients (other than those in
and supported the use of claims data to the service. All commenters who Medicare managed care programs). As
set the relative weights for the CY 2006 addressed this general issue of device- such, we believe that it is the best and
OPPS. However, many commenters dependent APCs supported an most reliable source for standardized
stated that the proposed payments are adjustment of some type to median costs utilization and cost data in the Nation
inadequate to compensate hospitals for for these high cost APCs. with regard to Medicare outpatient
Response: After considering all of the hospital care. Because the OPPS is a
the full costs of the devices and
comments received, we have set the relative weight system, we believe it is
procedures for many APCs, including,
median costs for device-dependent important that, to the maximum extent
but not limited to, implantation of
APCs for CY 2006 at the highest of: The possible, the relative weights be
cochlear implants, neurostimulators,
median cost of all single bills; the calculated using standardized processes
urologic prosthetics, and cardioverter
median cost calculated using only and a standardized base of claims data.
defibrillators.
claims that contain pertinent device
Commenters presented a variety of (2) Effects of Inconsistent Markup of
codes and for which the device cost is
requests for revised median costs or Charges
greater than $1; or 90 percent of the
revised payment rates. Many Comment: Some commenters objected
payment median that was used to set
commenters asked that CMS accept and the CY 2005 payment rates. We set 90 to the use of claims data because they
use external data in place of claims data percent of the CY 2005 payment median believed the payments that result are
and requested that CMS accept and use as a floor in consideration of comments less than the cost of the procedures and
confidential and proprietary that stated that a 15-percent reduction the devices due to the high markup of
information that cannot be made public. from the CY 2005 payment median was low cost items and services and the low
Other commenters objected to the use of too large of a transitional step. We also markup of high cost items and services.
external data to set median costs that are incorporated, as part of our They indicated that the use of CCRs
the basis of the rates and to the use of methodology, the recommendation to applied to hospital charges results in
any proprietary or confidential base payment on medians that were median costs that are inadequate for
information that cannot be shared with calculated using only claims that passed high cost devices because the markup
the public. Some commenters asked the device edits. We believe that this on high cost devices is insufficient to
CMS to substitute specific amounts they policy provides a reasonable transition result in the correct costs for the devices
identified for the device portion of the to full use of claims data in CY 2007, after application of CCRs calculated
median cost, for the full median cost, or while better moderating the amount of from all services in the applicable
for the payment amount for the APCs of decline from the CY 2005 OPPS departments. Commenters offered a
interest to them. Commenters urged payment rates. Table 16 of this final rule variety of recommendations for dealing
CMS to restrict the claims used to with comment period contains the CY with this phenomenon that they
calculate the median costs for device- 2005 payment median, the CY 2006 identified as ‘‘charge compression.’’
dependent APCs to those with specified unadjusted single bill median, the They suggested that CMS establish a
diagnoses, or to those with specified amount represented by 90 percent of the sample of hospitals from which data
HCPCS device codes, or with specified CY 2005 payment median, the CY 2006 would be collected for use in place of
revenue code charges only if the charges median calculated using only claims claims data or to validate the data
associated with those codes exceeded containing appropriate devices, and the derived from claims. They also
amounts they recommended. Some CY 2006 adjusted median on which suggested that CMS establish a new cost
commenters asked that CMS set the CY payment is based. As we discussed, in center solely for high cost devices and
2006 median cost at the CY 2005 the CY 2006 proposed rule, we did not calculate an appropriate CCR for this
adjusted median with an inflation adjust the medians for APC 0122 (Level new specialized cost center. Some of the
adjustment for the full market basket II Tube Changes and Repositioning), commenters recommended that CMS
increase for CY 2006. Other commenters APC 0427 (Level III Tube Changes and conduct a study of the data of volunteer
asked CMS to adjust the medians to no Repositioning) APC 0166 (Level I hospitals to determine an appropriate
less than 95 percent of the CY 2005 Urethral Procedures), APC 0168 (Level CCR for high cost devices that would be
OPPS adjusted medians for all APCs, as II Urethral Procedures), APC 0621 applied to all hospitals. They noted that
well as for device-dependent APCs. (Level I Vascular Access Procedures), CMS could adjust claims-based medians
These commenters stated that a APC 0622 (Level II Vascular Access by substituting proprietary confidential
transitional step to 85 percent was too Procedures), and APC 0623 (Level III cost data for the device portion of the
great to prevent disruption to care. Vascular Access Procedures) because of median costs. They suggested that CMS
Some commenters asked CMS to substantial migration of HCPCS codes could also calculate a charge
disregard requests to set the payment within these APCs. decompression factor that would
rates at 100 percent of the CY 2005 We did not inflate the CY 2005 estimate the markup function from
OPPS payment rates plus inflation for median cost or payment rate by the charges on claims and device
neurostimulator and cardioverter market basket, or substitute specific acquisition cost data and incorporate
defibrillator APCs, which they stated amounts derived from external studies these data into setting two CCRs: one for
have been given preferential treatment or other external sources, as requested high cost devices and one for low cost
devices, which would be used in place a function of the cost of the device, and the stand-alone insertion procedure.
of actual hospital CCRs. Lastly, the that the device cost remains unchanged Therefore, we believe that payment at
commenters also suggested that CMS whether the procedure in which it is 50 percent of the amount for APC 0418
could create a broad stakeholder panel required is performed with other to which we proposed to assign CPT
to address this issue. surgical procedures or not. Commenters code 33225 is appropriate and, as
Other commenters stated that the use specifically objected to the movement of proposed, we have moved CPT code
of the hospital’s average CCR results in CPT code 33225 (L ventric pacing lead 33225 to APC 0418 with a status
computed costs and relative weights add-on) from New Technology APC indicator of ‘‘T.’’
that are more or less than specific actual 1525 in CY 2005 where it has a status When a spinal infusion pump is
costs, but that this averaging is indicator of ‘‘S’’ to APC 0418 ( Insertion implanted along with an intrathecal or
appropriate and desirable in a PPS and of Left Ventricular Pacing Elect) for CY epidural catheter, CPT codes billed
should continue. They stated that the 2006, in which it was proposed to have likely include those assigned to APCs
alternative is a micromanaged payment status indicator ‘‘T,’’ because the 0227 and 0223, respectively. The higher
system that resembles the system that payment for the procedure, when paying APC 0227 for implantation of the
Congress discarded in favor of a performed in addition to another infusion pump would receive full
bundled PPS. The commenters urged procedure, would be reduced by 50 payment, while the catheter insertion
CMS to remain committed to the percent although most of the cost of the APC 0223 would receive 50 percent of
principles of a PPS and the use of procedure is in the device, the cost of the APC payment because both APCs
averaging, rather than seeking to pay the which remains fixed. Commenters also are assigned ‘‘T’’ status indicators. We
actual cost for one element of costs at specifically objected to the assignment believe this reduction is appropriate, as
the expense of all other items and of status indicator ‘‘T’’ to APCs 0223 there are some efficiencies when both
services, which they stated would occur and 0227 because it results in a services are performed in a single
as a result of the application of budget reduction in payment when services to session. In addition, we note that the
neutrality adjustments required by law. place a catheter and implant an infusion CPT code for the catheter implantation
They reiterated that many factors go into pump are provided in the same session. includes the possibility of repositioning
the decision of what services to furnish Response: We decide on a service-by- in its descriptor, so it is possible that
in a hospital, and that the payment for service basis whether the assignment of this procedure may not require a new
a specific service is only one of the a status indicator ‘‘S’’ or ‘‘T’’ is device every time it is performed.
applicable factors. appropriate. In the case of most device- Therefore, we believe that the
Response: We agree that the use of the dependent APCs, the service in question procedures assigned to APCs 0223 and
hospital’s average CCR results in is never reduced because it is always the 0227 are appropriately assigned ‘‘T’’
computed costs and relative weights procedure with the highest payment rate status indicators.
that may be more or less than specific (for example, cochlear implants and
actual costs and that this averaging is (4) Impact of Proposed Rates on Access
insertion of a cardioverter defibrillator
appropriate and desirable in a PPS and to Care
(ICD)), and the assignment of a status
should continue. One of the principal indicator ‘‘T’’ is necessary so that the Comment: Some commenters stated
purposes of determining median costs lower cost services are reduced in that under the proposed payments,
for weight setting in a budget neutral payment to reflect the efficiencies that Medicare beneficiaries may not get the
payment system is to determine the occur when they are done at the same device-related services they need
appropriate relativity in resource use time as the highest paid procedure. because Medicare payments would be
among services, so that the fixed In the case of CPT code 33225 for inadequate to compensate hospitals for
amount of money can be fairly and insertion of a left ventricular pacing their costs, and that hospitals would not
equitably distributed among hospitals electrode at time of insertion of an ICD, furnish the services to Medicare
based on case-mix. We note that, in we believe that payment at 50 percent beneficiaries for the rates that Medicare
general, the median costs derived from of the payment rate for APC 0418 is proposed to pay in CY 2006. They stated
this process may not represent the appropriate for this add-on procedure that hospitals will either cease
actual acquisition costs of the services based on the information furnished to providing certain services, or they will
being furnished, nor will they ever us by manufacturers, hospitals, and decide not to furnish them due to low
represent acquisition costs. They are physicians who are familiar with the Medicare payment rates.
estimated relative costs that are service. This procedure is always done Response: We share the commenters’
converted to relative weights, scaled for as an adjunct to insertion of a concern that beneficiaries have access to
budget neutrality, and then multiplied cardioverter defibrillator and a all of the care they need, regardless of
by a conversion factor to result in significant portion of the cost of the the type of service. As other
payments that, as we have previously procedure is in the extension of commenters have stated, hospitals
discussed, were designed in such a operating room time and not in the cost decide upon the range of services to
manner that they are not expected to of the device, drugs, or supplies needed offer based on a variety of factors, of
pay the full costs of the services. to furnish the service. While CPT code which Medicare outpatient hospital
33225 is an add-on code, we discuss our payment is only one. We believe that
(3) Effects of Multiple Procedure ongoing exploration of possible the best way to ensure access to care for
Reduction solutions to the data challenges in Medicare beneficiaries is to establish the
Comment: Some commenters stated developing appropriate payment rates OPPS using as many claims as possible
that all device-dependent APCs should for add-on codes in the data section from all hospitals so that the relative
be assigned a status indicator of ‘‘S’’ (section II.A.) of this final rule with weights on which the payments are
(significant service, separately payable) comment period. Also assigned to APC based result in the most fair and
because none of the procedures assigned 0418 is the stand-alone procedure for equitable distribution possible of
to these APCs should ever be reduced insertion of the left ventricular lead, and Medicare’s funding for outpatient
when performed with another we believe the add-on lead insertion is hospital services.
procedure. Commenters stated that appropriately reduced by 50 percent in We note that our regulations at 42
much of the cost of these procedures is comparison with the payment rate for CFR 489.53(a)(2) state that a hospital
risks termination of its Medicare (6) Instructions on Reporting Device to a recall not be used for claims setting
provider agreement if it treats Medicare Charges as there is no charge for the device on
beneficiaries differently from other Comment: Some commenters asked the claim, and the use of the claim
similar patients in the hospital. that CMS educate providers on how to could skew the median cost. These
report charges for devices and commenters also asked that CMS
(5) Addition of Other APCs as Device- provide explicit guidance on how to
Dependent APCs technologies that do not have HCPCS
report devices for which the provider
codes, and that CMS issue explicit
incurred no cost due to replacement by
Comment: Some commenters asked instructions regarding consistent use of
the manufacturer under a recall of the
that CMS expand the list of APCs for revenue codes for reporting charges for
device.
which medians will be adjusted to devices and technologies to ensure that Response: The recalls of a significant
include all APCs that require the use of such charges are fully reported on number of cardioverter defibrillators
a device. Specifically, they requested claims. and pacemakers to which the
that we apply any median adjustment Response: CMS’ instructions commenters referred occurred very late
for device-dependent APCs also to APC regarding the need to report device in CY 2004 and in CY 2005. Therefore,
0112 (Apheresis, Photopheresis, and codes and charges are included in the we believe that they have no effect on
Plasmapheresis), APC 0312 Internet Only Manual, Claims the CY 2004 claims used to set the rates
(Radioelement Applications), APC 0313 Processing Manual 100–4, Chapter 4 for the CY 2006 OPPS. We are aware of
(Brachytherapy), and APC 0651 (CMS Web site: http:// the potential impact on data used for
(Complex Interstitial Radiation Source www.cms.hhs.gov/manuals/). Section ratesetting for the CY 2007 OPPS and
Application). They asked that CMS set 61.1 of that manual provides are already considering a strategy for
the median for all such APCs that use instructions on the requirement to ensuring that the CY 2005 claims data
a device at the CY 2005 OPPS adjusted report the device code and directs we will use for the CY 2007 OPPS will
providers to the CMS Web site for the be appropriately reflective of the costs
median after inflating by the full market
most current list of HCPCS codes for of the devices. We note that one way of
basket increase for CY 2006.
devices and for the most recent set of doing this is to not use claims that
Commenters asked that CMS add APC
procedure code to device edits. In contain device charges of $1.01 or less
0416 Level I Intravascular and addition, section 20.5.1 specifies
Intracardiac Ultrasound and Flow in the calculation of the median costs
revenue centers that should be used for these APCs. In the July 2005 OPPS
Reserve) and, in particular, CPT code when devices are reported. As always,
37250 (Iv us first vessel add-on) to the instruction, Change Request 3915, dated
when devices do not have appropriate June 30, 2005, we issued interim
list of device-dependent APCs and HCPCS codes for reporting, hospitals instructions regarding how hospitals
require device editing for CPT code should be sure to include all charges should report device codes and charges
37250. They stated that this service associated with their use on claims for when the device was furnished without
requires a device, that its APC should be services with which the devices were cost by the manufacturer under a recall.
treated like all other device-dependent used. Specifically, we advised hospitals to
APCs, and that claims for the service report the HCPCS code for the device
should be returned if they are submitted (7) Application of Wage Index to
Device-Dependent APCs Containing and a token charge of $1.01 or less on
without the HCPCS code for the device the line with the device code.
so that the full cost of the device will Devices
Accordingly, we will use the device
be included on every claim. Comment: Some commenters objected code and charge combination to find
Response: As previously stated in to the application of the wage index to these claims in the CY 2005 data.
response to the APC Panel’s an APC into which devices were For the future, beginning January 1,
recommendation on a similar issue, packaged. They indicated that applying 2006, hospitals should report modifier
many services that require devices are the wage index will continue to further ‘‘FB’’ on the claim with the device code
undervalue new technology services. (where there is one to report) or with the
not included in the set of APCs to which
They asked that CMS revise its policy procedure code (where there is no
we have given special attention as they
and apply the wage index only to the appropriate device code) to indicate that
came off pass-through status. We
service portion of the procedure for a device used in the procedure was
package the costs of relatively high cost
APCs for which the device cost is more furnished without cost to the provider
devices into the median costs for the
than 80 percent of the total APC and, therefore, is not being charged to
device-dependent APCs, and the payment. Medicare or the beneficiary. The device
absence of charges for these devices on Response: Whether the application of edits will recognize the modifier and
claims is the reason for special the wage index to 60 percent of the APC will not return the claim to the provider
treatment of the APCs in the past. The payment will raise or reduce the as incomplete because the device code
absence of charges also leads to our payment for the service depends on the is not on the claim. CMS will issue
application of device editing to the wage index value of the area in which instructions regarding use of the
services in the device-dependent APCs the hospital is located. However, while modifier in the January 2006 OPPS
so that our hospital claims data are more we do not believe that the application change request issuance.
complete for these specific services. At of the wage index underpays new
this time, we see no compelling reason technology items or services, we (9) Separate Payment for High Cost
to expand this list of device-dependent acknowledge the commenter’s request, Devices
APCs. This is particularly true given and we will consider it as we develop Comment: Some commenters asked
that we expect that, for CY 2007, these our policies for future updates of the that we pay separately for high cost
APCs will not receive special attention OPPS. devices and recommended that CMS
as a class. However, we note that we define ‘‘high cost’’ devices as those with
will make case-by-case decisions (8) Recalls of High Cost Devices a cost greater than 50 percent of the APC
regarding the application of edits where Comment: Some commenters are payment rate. They indicated that even
appropriate. concerned that claims for items subject with device editing, they do not believe
that hospitals will be diligent about pass-through status, and which are not median cost calculated using only
reporting all of their services or setting brachytherapy sources, into the claims that contain pertinent device
charges that reflect the costs of the payments for the procedures that utilize codes and for which the device cost is
devices. They believed that separate them. However, we recognize that there greater than $1; or 90 percent of the
payments for high cost devices is the may be valid reasons to consider payment median that was used to set
only way to achieve valid cost data for whether it would be appropriate to pay the CY 2005 payment rates. Table 16
devices and related services. separately for some high cost devices, below shows the adjusted median costs
Response: In general, we believe that and we will consider whether there are for the listed device-dependent APCs for
packaging the costs of items needed to circumstances in which this may be which comparisons with prior years are
furnish services into the payments for appropriate in the future. valid to the highest of the CY 2006
the services and the assignment of After carefully reviewing all unadjusted APC median, 90 percent of
multiple services to a single APC create comments received concerning our the adjusted median on which payment
incentives for efficiency and for the proposed median cost adjustment for was based for the CY 2005 OPPS, or the
selection of the least costly device that device-dependent APCs for CY 2006, we median calculated using only claims
meets the patient’s needs. Therefore, for have set the medians for device- that meet the device code edits
the CY 2006 OPPS, we will continue to dependent APCs at the highest of: the implemented in CY 2005.
package payment for all devices without median cost of all single bills; the BILLING CODE 4120–01–P
ER10NO05.017</GPH>
ER10NO05.018</GPH>
BILLING CODE 4120–01–C prostate brachytherapy, which are now the median cost of APC 0028 (Level I
B. Pass-Through Payments for Devices separately paid in accordance with Breast Surgery), where the
section 621(b)(2) of Pub. L. 108–173, are accompanying procedure CPT codes
1. Expiration of Transitional Pass- an exception to this established policy. 19125 and 19160 mentioned in the
Through Payments for Certain Devices For CY 2005, we continued to apply this comment reside, is over $1,100, we
Section 1833(t)(6)(B)(iii) of the Act policy, the same as we did in CYs 2003 anticipate that the packaging of this
requires that, under the OPPS, a and 2004, to categories of devices that device will not limit appropriate access.
category of devices be eligible for expired on December 31, 2004. We note that as usage of this device
transitional pass-through payments for grows, the device costs may become
2. Proposed and Final Policy for CY
at least 2, but not more than 3 years. more prominent contributors to the
2006
This period begins with the first date on median costs of procedures utilizing the
which a transitional pass-through For CY 2006, we proposed to device, as long as hospitals report the
payment is made for any medical device implement the final decision we made device code and its associated charges
that is described by the category. In our in the November 15, 2004 final rule on their claims.
November 15, 2004 final rule with with comment period that finalizes the
comment period (69 FR 65773), we expiration date for pass-through status Comment: One commenter expressed
specified three device categories for device categories C1814, C1818, and concern regarding the appropriate
currently in effect that would cease to C1819. Therefore, as of January 1, 2006, packaging of expiring device categories
be eligible for pass-through payment we will discontinue pass-through from pass-through payment for
effective January 1, 2006. payment for C1814, C1818, and C1819. ophthalmologic devices after December
The device category codes became In accordance with our established 31, 2005. The commenter recommended
effective April 1, 2001, under the policy, we proposed to package the that device category code C1814 be
provisions of the BIPA. Prior to pass- costs of the devices assigned to these packaged with HCPCS codes 67036
through device categories, we paid for three categories into the costs of the (Removal of inner eye fluid), 67040
pass-through devices under the OPPS procedures with which the devices were (Laser treatment of retina), 67108
on a brand-specific basis. All of the billed in CY 2004, the year of hospital (Repair detached retina), and 67112
initial 97 category codes that were claims data used for the CY 2006 OPPS (Rerepair detached retina), all of which
established as of April 1, 2001, have update. the commenter claimed are paid under
expired; 95 categories expired after CY We received two public comments APC 0672. The commenter
2002 and 2 categories expired after CY concerning the expiration of pass- recommended that device category code
2003. All of the categories listed in through payment for these three device C1818 be packaged with HCPCS code
Table 17, along with their expected categories. 65770 (Revise cornea with implant),
expiration dates, were created since we Comment: One commenter which is proposed to be paid through
published the criteria and process for recommended that CMS extend the APC 0244 (Cornea Transplant).
creating additional device categories for pass-through payment for device
Response: Our policy is to package
pass-through payment on November 2, category C1819 until December 31,
the expired device categories’ costs with
2001 (66 FR 55850 through 55857). We 2006, rather than ending pass-through
payment on December 31, 2005. The the costs relating to the procedure codes
based the expiration dates for the with which they were billed in our
category codes listed in Table 17 on the commenter expressed concern that our
median cost data for the procedure claims data. We will apply this policy
date on which a category was first to device category codes C1814 and
eligible for pass-through payment. codes utilizing a tissue localization
excision device do not include the costs C1818 as well. To the extent that the
There are three categories for devices
attributed to device category C1819, and HCPCS codes reported in our claims
that would have been eligible for pass-
through payments for at least 2 years as that the volume of C1819 claims is not data for the services associated with
of December 31, 2005. In the November sufficient to affect the median costs for device codes C1814 and C1818 are the
15, 2004 final rule with comment CPT codes 19125 (Excision, breast same as those HCPCS service codes
period, we finalized the December 31, lesion) and 19160 (Removal of breast noted in the comment, the median cost
2005 expiration dates for these three tissue). data for those HCPCS codes will include
categories—C1814 (Retinal tamponade Response: We finalized the pass- the costs associated with codes C1814
device, silicone oil), C1818 (Integrated through payment for device category and C1818.
keratoprosthesis), and C1819 (Tissue code C1819 in the CY 2005 final rule As indicated in the November 15,
localization excision device). Each with comment period and responded to 2004 final rule with comment period,
category includes devices for which a similar comment in that same rule (69 device categories C1814, C1818 and
pass-through payment was first made FR 65773). In this CY 2006 final rule C1819 will expire from pass-through
under the OPPS in CY 2003 or CY 2004. with comment period, we are merely payment on December 31, 2005. We
In the November 1, 2002 final rule, we implementing that decision effective for remind the public that these C-codes are
established a policy for payment of services furnished on or after January 1, still active for the billing and reporting
devices included in pass-through 2006. Moreover, we believe that the of devices and their charges along with
categories that are due to expire (67 FR device costs represented by device the HCPCS codes for the procedures
66763). For CY 2003, we packaged the category code C1819 are found in our with which they are used. When billing
costs of the devices no longer eligible median cost data, as we have CY 2004 for procedures utilizing devices that
for pass-through payments into the costs hospital claims billed with C1819 that have active device codes, hospitals are
of the procedures with which the have been used to establish CY 2006 required to report the codes for the
devices were billed in CY 2001. payment rates. As the device median devices on their claims for the
Brachytherapy sources for other than cost was only approximately $67 and procedures.
TABLE 17.—LIST OF CURRENT PASS-THROUGH DEVICE CATEGORIES BY EXPIRATION DATE

Date(s)
HCPCS codes Category long descriptor Expiration date
populated
C1814 ........................ Retinal tamponade device, silicone oil ............................................................................ 4/1/03 12/31/05
C1818 ........................ Integrated keratoprosthesis ............................................................................................. 7/1/03 12/31/05
C1819 ........................ Tissue localization excision device .................................................................................. 1/1/04 12/31/05
C. Other Policy Issues Relating to Pass- be deducted from the pass-through continued to receive pass-through
Through Device Categories payment, the ‘‘offset’’ amount. We payment in CY 2005.
created an offset list comprised of any For the CY 2006 OPPS update, CY
1. Provisions for Reducing Transitional 2004 hospital claims are available for
APC for which the device cost was at
Pass-Through Payments to Offset Costs analysis. Hospitals billed device C-
least 1 percent of the APC’s cost.
Packaged Into APC Groups The offset list that we have published codes in CY 2004 on a voluntary basis.
a. Background each year is a list of offset amounts We have reviewed our CY 2004 data,
In the November 30, 2001 final rule, associated with those APCs with examining hospital claims for services
we explained the methodology we used identified offset amounts developed that included device C-codes and
to estimate the portion of each APC using the methodology described above. utilizing the methodology for
payment rate that could reasonably be As a rule, we do not know in advance calculating device offsets noted above.
attributed to the cost of the associated which procedures residing in certain The numbers of claims for services in
devices that are eligible for pass-through APCs may be billed with new device many of the APCs for which we
payments (66 FR 59904). Beginning categories. Therefore, an offset amount calculated device percentages using CY
with the implementation of the CY 2002 is applied only when a new device 2004 data were quite small. Many of
OPPS quarterly update (April 1, 2002), category is billed with a HCPCS these APCs already had relatively few
we deducted from the pass-through procedure code that is assigned to an single claims available for median
payments for the identified devices an APC appearing on the offset list. The list calculations compared with the total bill
amount that reflected the portion of the of potential offsets for CY 2005 is frequencies because of our inability to
APC payment amount that we currently published on the CMS Web use many multiple bills in establishing
determined was associated with the cost site: http://www.cms.hhs.gov, as median costs for all APCs, and
of the device, as required by section ‘‘Device-Related Portions of Ambulatory subsetting the single claims to only
1833(t)(6)(D)(ii) of the Act. In the Payment Classification Costs for 2005.’’ those including C-codes often reduced
November 1, 2002 interim final rule For CY 2004, we modified our policy those single bills by 80 percent or more.
with comment period, we published the for applying offsets to device pass- Our claims demonstrate that relatively
applicable offset amounts for CY 2003 through payments. Specifically, we few hospitals specifically coded for
(67 FR 66801). indicated that we would apply an offset devices utilized in CY 2004. Thus, we
For the CY 2002 and CY 2003 OPPS to a new device category only when we are not confident that CY 2004 claims
updates, to estimate the portion of each could determine that an APC contains reporting C-codes represent the typical
APC payment rate that could reasonably costs associated with the device. We costs of all hospitals providing the
be attributed to the cost of an associated continued our existing methodology for services. Therefore, we did not propose
device eligible for pass-through determining the offset amount, to use CY 2004 claims with device
payment, we used claims data from the described earlier. We were able to use coding to propose CY 2006 device offset
period used for recalibration of the APC this methodology to establish the device amounts. In addition, we did not
rates. That is, for CY 2002 OPPS offset amounts for CY 2004 because propose to use the CY 2005
updating, we used CY 2000 claims data providers reported device codes (C- methodology, for which we utilized the
and for CY 2003 OPPS updating, we codes) on the CY 2002 claims used for device percentages as developed for CY
used CY 2001 claims data. For CY 2002, the CY 2004 OPPS update. For the CY 2004. Two years have passed since we
we used median cost claims data based 2005 update to the OPPS, our data developed the device offsets for CY
on specific revenue centers used for consisted of CY 2003 claims that did not 2004, and the device offsets originally
device related costs because C-code cost contain device codes and, therefore, for calculated from CY 2002 hospitals’
data were not available until CY 2003. CY 2005 we utilized the device claims data may not appropriately
For CY 2003, we calculated a median percentages as developed for CY 2004. reflect the contributions of device costs
cost for every APC without packaging In the CY 2004 OPPS update, we to procedural costs in the current
the costs of associated C-codes for reviewed the device categories eligible outpatient hospital environment. In
device categories that were billed with for continuing pass-through payment in addition, a number of the APCs on the
the APC. We then calculated a median CY 2004 to determine whether the costs CY 2004 and CY 2005 device offset
cost for every APC with the costs of the associated with the device categories are percentage lists are either no longer in
associated device category C-codes that packaged into the existing APCs. Based existence or have been so significantly
were billed with the APC packaged into on our review of the data for the device reconfigured that the past device offsets
the median. Comparing the median APC categories existing in CY 2004, we likely do not apply.
cost without device packaging to the determined that there were no close or
median APC cost including device identifiable costs associated with the b. Proposed and Final Policy for CY
packaging enabled us to determine the devices relating to the respective APCs 2006
percentage of the median APC cost that that are normally billed with them. For CY 2006, we proposed to continue
is attributable to the associated pass- Therefore, for those device categories, to review each new device category on
through devices. By applying those we set the offset to $0 for CY 2004. We a case-by-case basis as we have done in
percentages to the APC payment rates, continued this policy of setting offsets CY 2004 and CY 2005, to determine
we determined the applicable amount to to $0 for the device categories that whether device costs associated with
the new category are packaged into the previous methodology for calculating as well as through a surgically created
existing APC structure. If we do not the device percentages and offset incision. Several of the commenters
determine for any new device category amounts for the CY 2007 OPPS update, recommended that CMS allow the
the device costs associated with the new which will be based on CY 2005 creation of a new pass-through category
category are packaged into existing hospital claims data where device C- for items implanted or inserted through
APCs, we proposed to continue our code reporting is required. a natural orifice, as long as the other
current policy of setting the offset for We did not receive any public existing criteria are met.
the new category to $0 for CY 2006. comments in response to our proposals. In responding to the commenters, we
There are currently no established Accordingly, we are finalizing our stated in the November 15, 2004 final
categories that would continue for pass- proposed policy for CY 2006 for rule with comment period (69 FR
through payment in CY 2006. However, calculating device percentages and 65774) that we were also interested in
we may establish new categories in any applying offsets. hearing the views of other parties and
quarter. If we create a new device receiving additional information on
category and determine that our data 2. Criteria for Establishing New Pass- these issues. While we appreciate and
contain a sufficient number of claims Through Device Categories welcome additional comments on these
with identifiable costs associated with a. Surgical Insertion and Implantation issues from the medical device makers,
the devices in any APC, we would Criterion we were also interested in hearing the
adjust the APC payment if the offset is One of our criteria, as set forth in views of Medicare beneficiaries, of the
greater than $0. If we determine that a § 419.66(b)(3) of the regulations, for hospitals that are paid under the OPPS,
device offset greater than $0 is establishing a new category of devices and of physicians and other
appropriate for any new category that for pass-through payment is that the practitioners who attend to patients in
we create, we proposed to announce the item be surgically inserted or implanted. the hospital outpatient setting. For that
offset amounts in the program The criterion that a device be surgically reason, we solicited additional
transmittal that announces the new inserted or implanted is one of our comments on this topic within the 60-
category. day comment period for the November
original criteria adopted when we
For CY 2006, we proposed to use 15, 2004 final rule with comment period
implemented the BBRA requirement
available partial year or full year CY (69 FR 65774 through 65775). In framing
2005 hospital claims data to calculate that we establish pass-through payment
for devices. This criterion helps us their comments, we asked that
device percentages and potential offsets commenters consider the following
for CY 2006 applications for new device define whether an item is a device, as
distinguished from other items, such as questions specific to devices introduced
categories. Effective January 1, 2005, we into the body through natural orifices:
require hospitals to report device C- materials and supplies. We further
1. Whether orifices include those that
codes and their costs when hospitals clarified our definition of the surgical
are either naturally or surgically created,
bill for services which utilize devices insertion and implantation criterion in
as in the case of ostomies. If you believe
described by the existing C-codes. In the November 13, 2000 final rule (65 FR
this includes only natural orifices, why
addition, during CY 2005 we are 67805). In that rule, we stated that we
do you distinguish between natural and
implementing device edits for many consider a device to be surgically
surgically created orifices?
services that require devices and for inserted or implanted if it is introduced 2. How would you define ‘‘new,’’ with
which appropriate device C-codes exist. into the human body through a respect to time and to predecessor
Therefore, we expect that the number of surgically created incision. We also technology? What additional criteria or
claims, including device codes and their stated that we do not consider an item characteristics do you believe
respective costs, will be much more used to cut or otherwise create a distinguish ‘‘new’’ devices that are
robust and representative for CY 2005 surgical opening to be a device that is surgically introduced through an
than for CY 2004. We also note that surgically inserted or implanted. existing orifice from older technology
offsets would not be used for any In our November 15, 2004 final rule that also is inserted through an orifice?
existing categories at this time. If a new with comment period, we responded to 3. What characteristics do you
device category is created for payment, comments received on our CY 2005 consider to distinguish a device that
for CY 2006 we proposed to examine the OPPS proposed rule, which requested might be eligible for a pass-through
available CY 2005 claims data, that we revisit our surgical insertion and category even if inserted through an
including device costs, to determine implantation criterion for establishing a existing orifice from materials and
whether device costs associated with new device category. The commenters supplies such as sutures, clips or
the new category are already packaged specifically requested that CMS customized surgical kits that are used
into the existing APC structure, as eliminate the current requirement that incident to a service or procedure?
indicated earlier. If we conclude that items that are included in new pass- 4. Are there differences with respect
some related device costs are packaged through device categories must be to instruments that are seen as supplies
into existing APCs, we proposed to surgically inserted or implanted through or equipment for open procedures when
utilize the methodology described a surgically created incision. The those same instruments are passed
earlier and first used for the CY 2003 commenters expressed concern that the through an orifice using a scope?
OPPS to determine an appropriate current requirement may prevent access
device offset percentage for those APCs to innovative and less invasive (1) Public Comments Received on the
with which the new category would be technologies, particularly in the areas of November 15, 2004 Final Rule With
reported. gynecologic, urologic, colorectal, and Comment Period and Our Responses
We proposed not to publish a list of gastrointestinal procedures. These Below is a summary of the public
APCs with device percentages as a commenters asked that CMS change the comments we received on the four
transitional policy for CY 2006 because surgical insertion or implantation stated surgical insertion and
of the previously discussed limitations criterion to allow pass-through payment implantation device criterion questions
of the CY 2004 OPPS data with respect for potential new device categories that and our responses to them.
to device costs associated with include items introduced into the Comment: Most commenters generally
procedures. We expect to reexamine our human body through a natural orifice, framed their responses to the four
questions listed above. Commenters an FDA investigational device sometimes difficult to determine what a
were generally in favor of modifying our exemption (IDE) clearance. The supply is.
surgical insertion and implantation commenter further stated that these Regarding our question about whether
criterion so that devices that are placed devices should be granted ‘‘new’’ status there are differences with respect to
into patients without the need for a at the time of FDA release as an IDE. instruments that are seen as supplies or
surgical incision would not be ineligible The commenter stated that if FDA equipment for open procedures when
for pass-through payment, claiming that required a premarket approval (PMA) those same instruments are passed
devices that are inserted through a for the device, a determination of through an orifice using a scope,
natural orifice offer important benefits newness should be made on a case-by- commenters believed that the
to Medicare beneficiaries, such as case basis. definitions of supplies and eligible
avoidance of more costly and more devices are independent of the use of a
invasive surgery. One commenter stated Regarding the question of what scope during a procedure, and stated
that procedures that could be performed characteristics distinguish a device that there were no distinguishing features of
with minimal morbidity and on an might be eligible for a pass-through supplies or equipment. One commenter
outpatient basis are the trend for surgery category even if inserted through an reiterated that the current clinical and
and should be encouraged. Another existing orifice from materials and cost criteria are sufficient to distinguish
commenter believed that our criterion of supplies that are used incident to a eligible devices (that is, those with ‘‘a
surgical insertion or implantation service or procedure, some commenters specific therapeutic use’’) from
through a surgically created incision generally believed that the current materials and supplies. Commenters
was ineffective as a clear and clinical and cost criteria are sufficient to believed that the use of a scope should
comprehensive description of surgical distinguish devices that might be not be a factor in the distinction
procedures, including endoscopic and eligible from materials and supplies. between devices and supplies.
laparoscopic procedures. Other commenters stated that the device One commenter urged us to consider
Regarding the first specific question must be an integral part of the the points that the surgical incision
we posed, whether devices introduced procedure or that it should include the requirement is not mandated by statute
into the body through natural orifices characteristic of having a diagnostic or and that CMS’ criterion to limit devices
includes orifices that are either therapeutic purpose, without which the to only those that are surgically inserted
naturally or surgically created, procedure could not be performed. or implanted may have been based upon
commenters generally stated CMS Thus, according to these commenters, concern that less restrictive criteria
should include devices as potentially the device must function for a specific would cause spending on pass-though
eligible for pass-through categories procedure, while supplies may be used items to exceed the pool of money set
whether they are introduced through for many procedures. One commenter to fund the pass-though payments. The
orifices that are either naturally or pointed out that many devices are now commenter indicated that this concern
surgically created, as in the case of implanted through the use of naturally would no longer be valid, given the
ostomies, if the devices meet other cost occurring orifices or without significant relatively few items currently paid on a
and clinical criteria, in order to incisions. This commenter indicated pass-through basis.
encourage the development of new Response: As we stated in the
that the requirement of a ‘‘traditional
technologies. November 15, 2004 final rule, we share
incision’’ no longer serves the purpose
Regarding the second question the view that it is important to ensure
of distinguishing between devices that
restated above, which asked how the access for Medicare beneficiaries to new
are and are not implanted, or between
public would define ‘‘new’’ with respect technologies that offer substantial
devices and supplies and instruments. clinical improvement in the treatment of
to time and to predecessor technology,
The commenter stated that retaining the their medical conditions. We also
some commenters stated that they
requirement of a traditional incision recognize that since the beginning of the
believed the current clinical and cost
could create incentives to use more OPPS, there have been beneficial
criteria are sufficient and that no
additional criteria or characteristics are invasive technology, if that is the advances in technologies and services
needed. Several commenters indicated technology that is eligible for pass- for many conditions, which have both
that the timeframe for what CMS through payments and less invasive markedly altered the courses of medical
considers ‘‘new’’ could be clarified so technology is not. The commenter care and ultimately improved the health
that if the device in question was not suggested excluding tools and outcomes of many beneficiaries.
FDA approved or not used for the disposable supplies by excluding any We carefully considered the
services in the OPD during the year of item that is used primarily for the comments and proposed to maintain our
the hospital claims that provided the purpose of cutting or delivering an current criterion that a device must be
basis for the most recent OPPS update, implantable device. However, the surgically inserted or implanted, but
it should be considered ‘‘new.’’ Some commenter recommended not reducing also proposed to modify the way we
commenters elaborated by example. payment when delivery systems are currently interpret this criterion under
They stated that if CMS changes the packaged with the device. The § 419.66(b)(3) of the regulations. We
surgical insertion or implantation commenter further recommended that proposed to consider eligible those
requirement to include devices inserted the term ‘‘incision’’ be clearly defined to items that are surgically inserted or
through natural orifices in CY 2005, include all procedures involving the implanted either through a natural
devices approved by the FDA and in use cutting, breaking, or puncturing of orifice or a surgically created orifice
in the OPD in CY 2003 or previously tissue or skin, regardless of how small (such as through an ostomy), as well as
would not be eligible, while devices that cut is, provided that the device is those that are inserted or implanted
approved by FDA in CY 2004 or later attached to or inserted into the body via through a surgically created incision.
and used in the OPD settings would be this cut, puncture, or break. Another We noted that we would maintain all of
eligible for pass-through consideration. commenter stated that there are items our other criteria in § 419.66 of the
Another commenter stated that the included in a surgical kit that have regulations, as elaborated in our various
definition of ‘‘new’’ device should significant cost and are single use, for rules, such as the November 1, 2002
include those devices that require only example, guidewires, implying that it is final rule (67 FR 66781 through 66787).
Specifically, we noted that we would eligible for a pass-through device previously existing category merits
maintain the clarification made at the category. review. Beginning with CY 2006, 3 years
time we clarified the surgically inserted Response: We appreciate the support will have elapsed since the vast majority
or implanted criterion in our August 3, for our proposal to modify our of the 97 initial device categories we
2000 interim final rule with comment interpretation of the surgical insertion established on April 1, 2001, will have
period, namely, that we do not consider or implantation criterion for pass- expired: 95 categories expired after
an item used to cut or otherwise create through payment eligibility for devices. December 31, 2002, and 2 categories
a surgical opening to be a device that is Our current criterion is that a device expired after December 31, 2003.
surgically implanted or inserted (65 FR must be surgically inserted or Several additional years will have
67805). implanted, while our interpretation of passed since those categories were first
With this proposed revision of our this criterion up to this point has been populated in CY 2000 or CY 2001. Thus,
definition of devices that are surgically to consider eligible only those devices while some of the initial device category
inserted or implanted, we reminded the that are inserted or implanted through a descriptors sufficed at the time they
public that device category eligibility for surgically created incision, as clarified were first created, further clarification
transitional pass-through payment in our August 3, 2000 interim final rule. as to the types of devices that they are
continues to depend on meeting our As stated above, other clarifications in meant to describe is indicated.
substantial clinical improvement that interim final rule remain. We do Therefore, we proposed to create an
criterion, where we compare the clinical not believe that it is either essential or additional category for devices that meet
outcomes of treatment options using the advisable to revise the regulations. all of the criteria required to establish a
device to currently available treatments, Therefore, we are not changing the new category for pass-through payment
including treatments using devices in current language of § 419.66(b)(3), as in instances where we believe that an
existing or previously existing pass- some commenters have suggested. existing or previously existing category
through device categories. We expect However, we are adopting as final our descriptor does not appropriately
that requested new pass-through device interpretation that surgical insertion or describe the new type of device. This
categories that successfully demonstrate implantation criteria include devices may entail the need to clarify or refine
substantial clinical improvement for that are surgically inserted or implanted the short or long descriptors of the
Medicare beneficiaries would describe via a natural or surgically created previous category. We will evaluate
new devices, where the additional orifice, as well as those devices that are each situation on a case-by-case basis.
inserted or implanted via a surgically We proposed that any such clarification
device costs would not be reflected in
created incision. We will maintain all of will be made prospectively from the
the hospital claims data providing the
the other criteria in § 419.66 of the date the new category would be made
costs of treatments available during the
regulations, as elaborated in our various effective.
time period used for the most recent
rules, such as the November 1, 2002 We also proposed to revise
OPPS update.
final rule (67 FR 66781 through 66787) § 419.66(c)(1) of the regulations,
(2) Public Comments Received on the and our August 3, 2000 interim final accordingly, to reflect, as one of the
CY 2006 OPPS Proposed Rule and Our rule with comment period, namely, that criteria for establishing a device
Responses we do not consider an item used to cut category, our determination that a
or otherwise create a surgical opening to device is not appropriately described by
We received many comments be a device that is surgically implanted any of the existing categories or by any
concerning our proposals to modify the or inserted (65 FR 67805). category previously in effect. In order to
surgical insertion or implantation determine if a ‘‘new’’ device is
criterion for new pass-through device b. Existing Device Category Criterion
appropriately described by an existing
categories. One of our criteria, as set forth in or previously existing category of
Comment: Commenters supported our § 419.66(c)(1) of the regulations, to devices, we proposed to apply two tests
proposal to modify the way we establish a new device category for pass- based upon our evaluation of
currently interpret our criterion that a through payment is that the devices that information provided to us in the device
device must be surgically inserted or would populate the category not be category application. First, we will
implanted under § 419.66(b)(3) of the described by any existing or previously expect an applicant for a new device
regulations, but suggested that CMS existing category. Commenters to our category to show that its device is not
consider eligible those items that are various proposed rules, as well as similar to devices (including related
surgically inserted or implanted either applicants for new device categories, predicate devices) whose costs are
through a natural orifice or a surgically have expressed concern that some of our reflected in the OPPS claims data in the
created orifice (such as through an existing and previously existing device most recent OPPS update. Second, we
ostomy), as well as items that are category descriptors are overly broad, will require an applicant for a new
surgically inserted or implanted through and that the category descriptors as they device category to demonstrate that
a surgically created incision. A few are currently written may preclude utilization of its device provides a
commenters suggested that CMS modify some new technologies from qualifying substantial clinical improvement for
the regulatory language to codify this for establishment of a new device Medicare beneficiaries compared with
change, by explicitly stating in category for pass-through payment. currently available treatments,
§ 419.66(b)(3) that the device is These parties have recommended that including procedures utilizing devices
implanted or inserted through a natural CMS consider modifying the descriptors in existing or previously existing device
or surgically created orifice or through for existing device categories, especially categories. We will consider a new
a surgically created incision. These when a device would otherwise meet all device that meets both of these tests not
commenters made this request in the the other criteria for establishing a new to be appropriately described by one of
context of stating that the proposed device category to qualify for pass- the existing or previously existing pass-
interpretation resolves the current need through payment. through device categories.
to make a traditional surgical incision to We agree that implementation of the We received a large number of public
insert or implant a device through an requirement that a new device category comments concerning our proposal to
orifice for that device to be considered not be described by an existing or create an additional category for devices
that meet all of the criteria required to substantial clinical improvement neurostimulator (implantable). This
establish a new category for pass- criterion. same type of rechargeable device was
through payment in instances where we Comment: A few commenters considered for the IPPS new technology
believe that an existing or previously recommended that CMS consider add-on payment, and passed all that
existing category descriptor does not pending pass-through applications in payment system’s criteria, including
appropriately describe the new type of light of this modification to the existing demonstrating substantial clinical
device. category criterion, and that CMS make improvement. Therefore, with the
Comment: Commenters generally modifications to existing or previously adoption of our proposal to clarify an
supported our proposal to create an existing categories effective January 1, existing or previously existing device
additional category for devices that meet 2006, where all device category criteria category if an existing or previously
all of the criteria required to establish a are met. existing device category does not
new category for pass-through payment Response: It is our intention to appropriately describe a new device and
in instances where we believe that an evaluate pending pass-through device the device would otherwise be eligible
existing or previously existing category category applications against any for a new pass-through device category,
descriptor does not appropriately changes to criteria as a result of this we will consider the rechargeable
describe the new type of device, and final rule with comment period. If any neurostimulator applications for pass-
which may entail the need to clarify or pending applications are then eligible through payment beginning January
refine the short or long descriptors of for establishment of a new device 2006, in which case we would also
the previous category. The commenters category for pass-through payment, we consider the need to clarify or refine the
believed that CMS has sufficient will endeavor to add those for payment description of category C1767. Any
documentation on devices in expired effective January 1, 2006. Any payment coding and payment information will be
categories to differentiate those devices instructions would be announced in the announced in the program transmittal
from new devices, as well as the program transmittal implementing our implementing the OPPS for CY 2006.
authority to clarify the definitions of CY 2006 OPPS update. We also note that we have included an
previously existing categories. The Comment: In commenting on our estimate for a rechargeable
commenters gave examples of devices proposal to modify the existing device neurostimulator category in our pass-
that they believe are not appropriately category criterion for pass-through through spending estimate in section
described by existing categories and payment for devices, a number of VI.B of this rule, should there be
whose descriptors are overly broad. commenters noted that rechargeable creation of a new device category for
Commenters also supported the implantable pulse generator (IPG) pass-through payment for such devices.
application of the two tests that we neurostimulators should be provided We are finalizing this proposal
proposed to apply in order to determine with pass-through payment status, and without change. We will create an
if the devices in device category that a new category is needed additional category for devices that meet
applications are described by an specifically for rechargeable all of the criteria required to establish a
existing or previously existing category. neurostimulators. The commenters new category for pass-through payment
One commenter expressed that it would claimed that rechargeable in instances where we believe that an
be useful for CMS to provide additional neurostimulators have allowed a existing or previously existing category
details on how we intend to evaluate significant advance to the field of descriptor does not appropriately
whether a new technology is similar to neuromodulation for the treatment of describe the new type of device. This
existing technologies. Another chronic intractable pain. The may entail the need to clarify or refine
commenter expressed concern that we commenters stated there is a high degree the short or long descriptors of the
have not developed standards of proof of patient compliance with rechargeable previous category. We will evaluate
of substantial clinical improvement, neurostimulators, and these devices will each situation on a case-by-case basis
which is one of the proposed tests, and reduce the cost of spinal cord and apply the two tests described above.
encouraged CMS to develop further stimulation over time by reducing the Any such clarification to a category
explanation of the substantial clinical number of surgical battery descriptor will be made prospectively
improvement test. replacements. A large number of from the date the new category would
Response: We appreciate the commenters stated that the new class of be made effective. We are also finalizing
commenters’ support for our proposed rechargeable IPG neurostimulators our proposed revision of our regulations
modification to our policy that a device meets our proposed new tests to at § 419.66(c)(1) to reflect this change.
may not be described by an existing or determine if a device is described by an
previously existing device category. existing or previously existing category. V. Payment Changes for Drugs,
Regarding the recommendations made The commenters requested that CMS Biologicals, and Radiopharmaceuticals
for clarifying whether a nominated new clarify the previously existing category A. Transitional Pass-Through Payment
device is similar to an existing to state that it described for Additional Costs of Drugs and
technology, as new device applications nonrechargeable neurostimulators. The Biologicals
consist of unique technologies, commenters recommended that CMS
evaluation of what constitutes a similar apply any revised criterion to pending 1. Background
technology or substantial clinical applications. Section 1833(t)(6) of the Act provides
improvement is done on an individual Response: We note that two pass- for temporary additional payments or
application basis. We refer the through applications now under ‘‘transitional pass-through payments’’
commenters to our discussion of the consideration are for devices currently for certain drugs and biological agents.
substantial clinical improvement described by a previously existing pass- As originally enacted by the BBRA, this
criterion that is found in our November through category. These applications are provision required the Secretary to
1, 2002 final rule (67 FR 66782–66783), for implantable rechargeable make additional payments to hospitals
which provides a list of criteria and neurostimulators. Neurostimulators are for current orphan drugs, as designated
examples of clinical outcomes that are covered by a previously existing OPPS under section 526 of the Federal Food,
used to determine if a request for a new device category for pass-through Drug, and Cosmetic Act (Pub. L. 107–
category of devices meets our payment, C1767, Generator, 186); current drugs and biological agents
and brachytherapy used for the the Office of Management and Budget codes for payment purposes and
treatment of cancer; and current (OMB) for approval, as required under requested clarification in the final rule.
radiopharmaceutical drugs and the Paperwork Reduction Act (PRA). Response: In order to reduce
biological products. For those drugs and Notification of new drugs and redundancy and simplify coding for
biological agents referred to as biologicals application processes is drugs, biologicals, and
‘‘current,’’ the transitional pass-through generally posted on the OPPS Web site radiopharmaceuticals under the OPPS,
payment began on the first date the at: http://www.cms.hhs.gov/providers/ we are deleting the temporary C-codes
hospital OPPS was implemented (before hopps. for items that also have permanent
enactment of BIPA (Pub. L. 106–554), on HCPCS codes and are paying for those
2. Expiration in CY 2005 of Pass-
December 21, 2000). items under the permanent HCPCS
Through Status for Drugs and
Transitional pass-through payments codes if it is appropriate to do so.
Biologicals
are also required for certain ‘‘new’’ Among the items whose pass-through
drugs, devices, and biological agents Section 1833(t)(6)(C)(i) of the Act status will expire on December 31, 2005,
that were not being paid for as a specifies that the duration of are HCPCS codes C9123, C9203, C9205,
hospital OPD service as of December 31, transitional pass-through payments for C9211, and C9212, which will be
1996, and whose cost is ‘‘not drugs and biologicals must be no less deleted effective December 31, 2005. For
insignificant’’ in relation to the OPPS than 2 years and no longer than 3 years. services furnished on or after January 1,
payment for the procedures or services The drugs whose pass-through status 2006, hospitals should use HCPCS code
associated with the new drug, device, or will expire on December 31, 2005, meet J7344 to bill for Transcyte, HCPCS code
biological. Under the statute, that criterion. In the CY 2006 OPPS Q9955 to bill for Perflexane lipid micro,
transitional pass-through payments can proposed rule, in Table 19 (70 FR HCPCS code J9263 to bill for
be made for at least 2 years but not more 42722) we listed the 10 drugs and Oxaliplatin, and HCPCS code J0215 to
than 3 years. In Addenda A and B to biologicals for which we proposed that bill for Alefacept. Later in the preamble,
this final rule with comment period, pass-through status would expire on we list all of the C-codes in Table 25
pass-through drugs and biological December 31, 2005. that will be deleted on December 31,
agents are identified by status indicator We received one public comment 2005 and replaced with other existing or
‘‘G.’’ concerning the proposed expiration of new HCPCS codes in CY 2006.
The process to apply for transitional pass-through status for those drugs and For this final rule with comment
pass-through payment for eligible drugs biologicals on December 31, 2005. period, in Table 18 below, we are
and biological agents can be found on Comment: One commenter noted that specifying the drugs and biologicals for
our CMS Web site: www.cms.hhs.gov. If the proposed rule did not make clear which pass-through status will expire
we revise the application instructions in whether drugs coming off pass-through on December 31, 2005. This listing is
any way, we will post the revisions on status will be reassigned to J-codes or the same as that published in the
our Web site and submit the changes to will continue to be listed under their C- proposed rule.
TABLE 18.—LIST OF DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH STATUS EXPIRES DECEMBER 31, 2005
HCPCS APC Short descriptor
C9123 ...................................................................................................................................................... 9123 Transcyte, per 247 sq cm.

C9203 ...................................................................................................................................................... 9203 Perflexane lipid micro.
C9205 ...................................................................................................................................................... 9205 Oxaliplatin.
C9211 ...................................................................................................................................................... 9211 Inj, alefacept, IV.
C9212 ...................................................................................................................................................... 9212 Inj, alefacept, IM.
J0180 ....................................................................................................................................................... 9208 Agalsidase beta injection.
J1931 ....................................................................................................................................................... 9209 Laronidase injection.
J2469 ....................................................................................................................................................... 9210 Palonosetron HCl.
J3486 ....................................................................................................................................................... 9204 Ziprasidone mesylate.
J9041 ....................................................................................................................................................... 9207 Bortezomib injection.
3. Drugs and Biologicals With Pass- eligible drugs (assuming that no pro rata that would be covered under this
Through Status in CY 2006 reduction in pass-through payment is program at that time. Section 1847A of
In the CY 2005 OPPS proposed rule necessary) as the amount determined the Act, as added by section 303(c) of
(70 FR 42722 and 42723), we proposed under section 1842(o) of the Act. We Pub. L. 108–173, establishes the use of
to continue pass-through status in CY note that this section of the Act also the average sales price (ASP)
2006 for 14 drugs and biologicals. These states that if a drug or biological is methodology as the basis for payment of
items, which were listed in Table 20 of covered under a competitive acquisition drugs and biologicals described in
the CY 2006 OPPS proposed rule (70 FR contract under section 1847B of the Act, section 1842(o)(1)(C) of the Act and
42723), were given pass-through status the payment rate is equal to the average furnished on or after January 1, 2005.
as of April 1, 2005. The APCs and price for the drug or biological for all This payment methodology is set forth
HCPCS codes for drugs and biologicals competitive acquisition areas and the in § 419.64 of the regulations. Similar to
that we proposed to continue with pass- year established as calculated and the payment policy established for pass-
through status in CY 2006 are assigned adjusted by the Secretary. The through drugs and biologicals in CY
status indicator ‘‘G’’ in Addenda A and competitive acquisition program had 2005, we proposed to pay under the
B of this final rule with comment not been implemented at the time of OPPS for drugs and biologicals with
period. issuance of the CY 2006 proposed rule. pass-through status in CY 2006
Section 1833(t)(6)(D)(i) of the Act sets Therefore, we did not have payment consistent with the provisions of section
the payment rate for pass-through rates for certain drugs and biologicals 1842(o) of the Act, as amended by
section 621 of Pub. L. 108–173, at a rate these pass-through drugs and biologicals therapies within the hospital outpatient
that is equivalent to the payment these are necessary. setting. One commenter suggested that
drugs and biologicals would receive in In Table 20 of the proposed rule, we CMS consider making the pass-through
the physician office setting. listed the drugs and biologicals for payment methodology consistent with
Section 1833(t)(6)(D)(i) of the Act also which we proposed that pass-through the methodology applied to new drugs
sets the amount of additional payment status continue in CY 2006. We assigned in the physician office setting (that is,
for pass-through eligible drugs and pass-through status to these drugs and wholesale acquisition cost or the
biologicals (the pass-through payment biologicals as of April 1, 2005. Since applicable payment methodology in
amount). The pass-through payment publication of the CY 2006 OPPS effect on November 1, 2003) to
amount is the difference between the proposed rule, we have approved three distinguish and provide sufficient
amount authorized under section additional drugs and biologicals for payment for the class of pass-through
1842(o) of the Act, and the portion of pass-through payment beginning on or drugs in future years.
the otherwise applicable fee schedule after July 1, 2005. These products are Response: Section 1833(t)(6)(D)(i) of
amount (that is, the APC payment rate) Abraxane, which has been assigned the Act sets the additional payment
that the Secretary determines is HCPCS code C9127 (Injection, Paclitaxel amount for pass-through eligible drugs
associated with the drug or biological. Protein Bound Particles, per 1 mg); or biologicals as the difference between
In the CY 2006 OPPS proposed rule, Macugen, which has been assigned the amount determined under section
(70 FR 42722 and 42731) we proposed HCPCS code C9128 (Injection, 1842(o) of the Act and the APC payment
to continue to make separate payment in Pegaptanib Sodium, per 0.3 mg); and rate determined by the Secretary
CY 2006 for new drugs and biologicals Clolar, which has been assigned HCPCS associated with the drug or biological.
with a HCPCS code consistent with the code C9129 (Injection, Clofarabine, per As we explained earlier, section 1847A
provisions of section 1842(o) of the Act, 1 mg). (See Change Request 3915, of the Act, as added by section 303(c)
as amended by section 621 of Pub. L. Transmittal 599 issued on June 30, of Pub. L. 108–173, establishes the use
108 173, at a rate that is equivalent to 2005.) In addition, two more products of the ASP methodology as the basis for
the payment they would receive in a have been approved for pass-through payment of drugs and biologicals
physician office setting, whether or not status beginning on or after October 1, described in section 1842(o)(1)(C) of the
we have received a pass-through 2005. They are Retisert, which has been Act and furnished on or after January 1,
application for the item. Accordingly, in assigned HCPCS code C9225 (Injection, 2005. Our proposal to pay for drugs and
CY 2006 the pass-through payment fluocinolone acetonide intravitreal biologicals with pass-through status in
amount would equal zero for those new implant, per 0.59 mg) and Prialt, which CY 2006 using the ASP methodology at
drugs and biologicals that we determine has been assigned HCPCS code C9226 a rate that is equivalent to the payment
have pass-through status. That is, when (Injection, ziconotide for intrathecal these drugs and biologicals would
we subtract the amount to be paid for infusion, per 5 mcg). (See Change receive in the physician office setting is
pass-through drugs and biologicals Request 4035, Transmittal 691 issued on consistent with the provisions of section
under section 1842(o) of the Act, as September 30, 2005). For CY 2006, the 1842(o) of the Act, as amended by
amended by section 621 of Pub. L. 108– C-codes C9127, C9128, C9129, and section 621 of Pub. L. 108–173.
173, from the portion of the otherwise C9226 have been deleted and replaced Specifically, in CY 2006, we will be
applicable fee schedule amount or the with permanent HCPCS codes J9264, paying for drugs and biologicals with
APC payment rate associated with the J2503, J9027, and J2278, respectively. pass-through status under the OPPS
drug or biological that would be the These new eligible pass-through items based on the ASP methodology and
amount paid for drugs and biologicals are listed in Table 19 below. We also using ASP data specific to the drug or
under section 1842(o) of the Act as have included in Addenda A and B to biological itself. We note that there may
amended by section 621 of Pub. L. 108– this final rule with comment period the be certain drugs and biologicals with
173, the resulting difference is equal to CY 2006 APC payment rates for all pass- pass-through status that are payable
zero. through drugs and biologicals. under different HCPCS codes in the
We proposed to use payment rates We received several public comments physician offices and outpatient
based on the ASP data from the fourth on the proposed listing and payment departments, and for such cases,
quarter of 2004 for budget neutrality rates for drugs and biologicals with payment for the drug or biological under
estimates, impact analyses, and to pass-through status continuing in CY the OPPS will be based on the ASP data
complete Addenda A and B of the 2006. for the item described by the code that
proposed rule because these were the Comment: A few commenters is used under the OPPS. We agree that
most recent numbers available to us indicated that our proposal to apply the pass-through payments are designed to
during the development of the proposed same payment methodology to pass- recognize differences between the
rule. These payment rates were also the through drugs and to drugs that are payment rates under the OPPS and the
basis for drug payments in the physician classified as a ‘‘specified covered payment rates for certain drugs and
office setting effective April 1, 2005. To outpatient drug’’ may not appropriately biologicals in the physician office
be consistent with the ASP-based recognize and pay hospitals for the setting. Statutory changes in the
payments that would be made when additional costs that are often associated payment methodology for pass-through
these drugs and biologicals are with new technologies that are given drugs and biologicals mean that such
furnished in physician offices, we stated pass-through status. One commenter cost differentials no longer exist.
in our proposed rule (70 FR 42722 and indicated that the proposal negated the We have used payment rates based on
42723) that we planned to make any intent of the pass-through payment, the ASP data from the second quarter of
appropriate adjustments to the amounts which was meant to compensate CY 2005 for budget neutrality estimates,
shown in Addenda A and B of the hospitals for costs not covered by impact analyses, and to complete
proposed rule when we publish our existing APC payments. Commenters Addenda A and B of this final rule with
final rule and also on a quarterly basis urged CMS to consider maintaining a comment period because these were the
on our Web site during CY 2006 if later differential in payment systems between most recent numbers available to us
quarter ASP submissions indicate that innovative and older drugs in order to during the development of this rule.
adjustments to the payment rates for ensure adequate access to newer These payment rates are also the basis
for drug payments in the physician Table 19 below lists the drugs and available for use. The commenter
office setting effective October 1, 2005. biologicals that will have pass-through expressed concern about the CMS
However, the payment rates for pass- status in CY 2006. Addenda A and B of HCPCS Workgroup’s preliminary
through drugs and biologicals that will this final rule with comment period list recommendation to deny a unique code
be effective in the OPPS on January 1, the final CY 2006 rates for these pass- for Orthovisc and to include Orthovisc
2006 will be based on ASP data from the through drugs and biologicals, which with other viscosupplements described
third quarter of CY 2005, which will are based on ASP data reported by by HCPCS code J7317. The commenter
also be the basis for drug payments in manufacturers from the second quarter stated its belief that a new code is
physician offices as of January 1, 2006. of CY 2005. These items are assigned to necessary and appropriate for Orthovisc
To be consistent with the ASP-based status indicator ‘‘G.’’ under the established HCPCS process,
payments that will be made when these Comment: A commenter and such a decision would recognize
pass-through drugs and biologicals are recommended that CMS finalize the the unique characteristics of Orthovisc,
furnished in physician offices, we plan proposal to continue payment for distinguish it from other
to make any appropriate adjustments in HCPCS codes C9221 and C9222 as pass- viscosupplements, allow for appropriate
CY 2006 to the payment rates for these through biologics in CY 2006 and payment, and facilitate patient access.
items if later quarter ASP submissions requested that CMS confirm that the The commenter indicated that it
indicate that adjustments to the proposed payment rate of $1,234.36 for resubmitted its J-code application under
payment rates are necessary. HCPCS code C9221 reflected ASP+6 the new HCPCS process on December
As noted earlier, section percent. 24, 2004 and requested that CMS
1833(t)(6)(D)(i) of the Act also states that Response: We agree with the recognize Orthovisc as a unique product
if a drug or biological is covered under commenters that HCPCS codes C9221 and grant it a unique HCPCS code.
a competitive acquisition contract under and C9222 should be paid as pass- Response: Effective January 1, 2006,
section 1847B of the Act, the payment through items in CY 2006; therefore, the National HCPCS Panel has created
rate is equal to the average price for the these items are listed in Table 19 along HCPCS code J7318 (Hyaluron/derive
drug or biological for all competitive with other drugs and biologicals that intra-art inj) to describe all of the
acquisition areas and year established as will also have pass-through status under sodium hyaluronate products, including
the OPPS in CY 2006 and are also Orthovisc. Decisions regarding the
calculated and adjusted by the
assigned to status indicator ‘‘G’’ in creation of permanent HCPCS codes are
Secretary. The competitive acquisition
Addendum B of this final rule with coordinated by the National HCPCS
program still has not been implemented
comment period. Panel. Comments related to the HCPCS
with issuance of this final rule with Comment: A commenter indicated
comment period. We expect code creation process and decisions
that the HCPCS code C9127 (paclitaxel made by the National HCPCS Panel are
implementation by July 1, 2006. For this protein-bound particles for injectable
final rule with comment period, we do outside the scope of this rule. However,
suspension, per 1 mg) was granted pass- we note that in CY 2006 because HCPCS
not have payment rates for certain drugs through status effective July 1, 2005; code C9220 will continue to have pass-
and biologicals that would be covered however, the CY 2006 proposed rule through status under the OPPS both
under this program at that time. listed this code with a status indicator HCPCS code C9220 and HCPCS code
However, when the competitive ‘‘K’’ rather than status indicator ‘‘G.’’ J7318 will be payable under the OPPS,
acquisition program is implemented in The commenter requested that this code and their payment rates will be
CY 2006, the OPPS payment rates for be assigned to status indicator ‘‘G’’ in established using the ASP data for all of
pass-through drugs and biologicals that the final rule indicating its pass-through the products described by these codes.
will also be covered under the program status. Therefore, we encourage providers to
will be based on the competitive Response: In the proposed rule, we continue billing for Orthovisc, which
acquisition program methodology in CY listed only the drugs and biologicals has pass-through status, using HCPCS
2006. that received pass-through status as of code C9920 in order to receive
We refer readers to section V.B.3.a. of April 1, 2005. As indicated earlier, there appropriate payment for furnishing this
this preamble for a discussion of are additional drugs and biologicals that drug in the hospital outpatient setting.
payment policies for specified covered have been approved for pass-through Comment: A few commenters
outpatient drugs. status since the publication of the requested the CMS clarify in the final
Comment: The manufacturer of proposed rule, and HCPCS code C9127 rule how payment for infusion drugs
natalizumab (HCPCS code Q4079) is one of the drugs that received pass- administered through an item of DME,
supported continued pass-through through status effective July 1, 2005. We such as drugs administered through an
status for this product, but was note that HCPCS code C9127 has been implantable or external infusion pump,
concerned that continuation of the 1-mg deleted effective December 31, 2005 and will be paid under the OPPS in CY
unit descriptor will create confusion replaced with HCPCS code J9264 in CY 2006. One commenter was especially
among providers and inject the potential 2006. Consequently, in this final rule we concerned about the payment rate for
of erroneously denied or underpaid have assigned HCPCS code J9264 to HCPCS code C9226 (Brand name:
claims. The commenter indicated that a status indicator ‘‘G’’ in Addendum B in Prialt), which is administered through
300 mg dose of the product is always this final rule with comment period. an intrathecal pump. The commenters
uniformly infused and urged CMS to Comment: Another commenter noted CMS’ statement that CY 2006
amend the coding descriptor to reflect indicated that it was pleased with CMS’ payment for drugs and biologicals under
its clinical use. proposal to continue pass-through status the OPPS will follow that of the
Response: We recognize the in CY 2006 for the drug Orthovisc, physician office setting; however, CMS
commenter’s concern. However, the which is reported under HCPCS code did not specifically state that this
National HCPCS Panel coordinates C9220; however, it was also concerned particular group of drugs, which are not
decisions regarding the descriptors of that once the period of eligibility for paid under the ASP methodology, will
permanent HCPCS codes. Therefore, we pass-through payments expired, there continue to be paid at 95 percent of
will not respond to this comment as it will not be a code corresponding to AWP in CY 2006. Commenters
is outside the scope of this rule. HCPCS code C9220 that will be requested that CMS clarify that infusion
drugs administered through an item of 5 mcg) effective October 1, 2005. We provision that requires payment for
DME and furnished in the hospital note that Prialt is not considered a DME infusion drugs at 95 percent of
outpatient setting, like Prialt, will be single-indication orphan drug under AWP is therefore not applicable to Prialt
paid at 95 percent of AWP pursuant to OPPS. As the commenters noted, or any other DME infusion drugs
section 1842(o)(1)(D) of the Act. One section 1842(o)(1)(D) of the Act states furnished in the hospital outpatient
commenter also requested that CMS that drugs infused through DME are setting. Therefore, in CY 2006 we will
clarify that Prialt is not an orphan drug. paid at 95 percent of AWP until such continue to pay for Prialt and other non-
Response: HCPCS code C9226 was time as they are incorporated into the pass-through DME infusion drugs using
approved for pass-through status DME competitive bidding program. the ASP methodology instead of paying
effective October 1, 2005. As a pass- However, section 1842(o)(1) of the Act at 95 percent of AWP. We note that
through drug under the OPPS, payment (which governs section 1842(o)(1)(D)) HCPCS code C9226 has been deleted
for Prialt was established using the ASP specifically states that this payment effective December 31, 2005 and
methodology. (See Change Request methodology only applies when a ‘‘drug replaced with J2278 in CY 2006.
4035, Transmittal 691 issued on or biological is not paid on a cost or Consequently, in this final rule, we have
September 30, 2005). As with other new prospective payment basis.’’ Payment assigned HCPCS code J2278 to status
drugs without ASP data, payment for for drugs under the OPPS is established indicator ‘‘G’’ in Addendum B in this
Prialt was set at WAC+6% ($32.24 per on the basis of prospective rates. The final rule with comment period.
TABLE 19.—LIST OF DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2006

HCPCS Code APC Short descriptor
C9220 ...................................................................................................................................................... 9220 Sodium hyaluronate.

C9221 ...................................................................................................................................................... 9221 Graftjacket Reg Matrix.
C9222 ...................................................................................................................................................... 9222 Graftjacket SftTis.
C9225 ...................................................................................................................................................... 9225 Fluocinolone acetonide.
J0128 ....................................................................................................................................................... 9216 Abarelix injection.
J0878 ....................................................................................................................................................... 9124 Daptomycin injection.
J2278 ....................................................................................................................................................... 1694 Ziconotide injection.
J2357 ....................................................................................................................................................... 9300 Omalizumab injection.
J2503 ....................................................................................................................................................... 1697 Pegaptanib sodium injection.
J2783 ....................................................................................................................................................... 0738 Rasburicase.
J2794 ....................................................................................................................................................... 9125 Risperidone, long acting.
J7518 ....................................................................................................................................................... 9219 Mycophenolic acid.
J8501 ....................................................................................................................................................... 0868 Oral aprepitant.
J9027 ....................................................................................................................................................... 1710 Clofarabine injection.
J9035 ....................................................................................................................................................... 9214 Bevacizumab injection.
J9055 ....................................................................................................................................................... 9215 Cetuximab injection.
J9264 ....................................................................................................................................................... 1712 Paclitaxel injection.
J9305 ....................................................................................................................................................... 9213 Pemetrexed injection.
Q4079 ...................................................................................................................................................... 9126 Injection, Natalizumab, 1 mg.
B. Payment for Drugs, Biologicals, and Transmittal A–01–133, issued on Section 1833(t)(16)(B) of the Act, as
Radiopharmaceuticals Without Pass- November 20, 2001, explains in greater added by section 621(a)(1) of Pub. L.
Through Status detail the rules regarding separate 108–173, requires that the threshold for
payment for packaged services.) establishing separate APCs for drugs
1. Background and biologicals be set at $50 per
Packaging costs into a single aggregate
Under the CY 2005 OPPS, we administration for CYs 2005 and 2006.
payment for a service, procedure, or
currently pay for drugs, biologicals For CY 2005, we finalized our policy to
episode of care is a fundamental
including blood and blood products, continue paying separately for drugs,
principle that distinguishes a biologicals, and radiopharmaceuticals
and radiopharmaceuticals that do not prospective payment system from a fee
have pass-through status in one of two whose median cost per day exceeds $50
schedule. In general, packaging the costs and packaging the costs of drugs,
ways: packaged payment and separate of items and services into the payment
payment (individual APCs). We biologicals, and radiopharmaceuticals
for the primary procedure or service whose median cost per day is less than
explained in the April 7, 2000 final rule
with which they are associated $50 into the procedures with which
(65 FR 18450) that we generally package
encourages hospital efficiencies and they are billed. For CY 2005, we also
the cost of drugs and
radiopharmaceuticals into the APC also enables hospitals to manage their adopted an exception policy to our
payment rate for the procedure or resources with maximum flexibility. packaging rule for one particular class of
treatment with which the products are Notwithstanding our commitment to drugs, the oral and injectable 5HT3
usually furnished. Hospitals do not package as many costs as possible, we forms of anti-emetic treatments (69 FR
receive separate payment from Medicare are aware that packaging payments for 65779 through 65780).
for packaged items and supplies, and certain drugs, biologicals, and
2. Criteria for Packaging Payment for
hospitals may not bill beneficiaries radiopharmaceuticals, especially those
Drugs, Biologicals, and
separately for any packaged items and that are particularly expensive or rarely Radiopharmaceuticals
supplies whose costs are recognized and used, might result in insufficient
paid within the national OPPS payment payments to hospitals, which could In accordance with section
rate for the associated procedure or adversely affect beneficiary access to 1833(t)(16)(B) of the Act, for CY 2006,
service. (Program Memorandum medically necessary services. the threshold for establishing separate
APCs for drugs and biologicals is products were excluded from these Step 5. We trimmed the unit records
required to be set at $50 per calculations and our treatment of these with cost per unit greater or less than 3
administration. Therefore, in the CY items is discussed separately in sections standard deviations from the geometric
2006 proposed rule we proposed to V.F., V.E., and X.B., respectively, of this mean.
continue our existing policy of paying preamble. Step 6. We aggregated the remaining
separately for drugs, biologicals, and In order to calculate the per day cost unit records to determine the mean cost
radiopharmaceuticals whose per day for drugs, biologicals, and per unit of the drug or
cost exceeds $50 and packaging the cost radiopharmaceuticals to determine their radiopharmaceutical.
of drugs, biologicals, and packaging status in CY 2006, we Step 7. Using only the records that
radiopharmaceuticals whose per day proposed several changes in the remained after records with unit counts
cost is less than $50 into the procedures methodology that was described in per day greater or less than 3 standard
with which they are billed. We also detail in the CY 2004 OPPS proposed deviations from the geometric mean
proposed to continue our policy of rule (68 FR 47996 through 47997) and were trimmed (step 3), we determined
exempting seven oral and injectable finalized in the CY 2004 final rule with the total number of units billed for each
5HT3 anti-emetic products from our comment period (68 FR 63444 through item and the total number of unique
packaging rule (Table 21 of the CY 2006 63447). For CY 2006, to calculate the per-day records for each item. We
OPPS proposed rule, 70 FR 42723), per day cost of the drugs, biologicals, divided the count of the total number of
thereby making separate payment for all and radiopharmaceuticals, our proposed units by the total number of unique per-
of the 5HT3 anti-emetic products. As methodology was the following: day records for each item to calculate an
stated in our CY 2005 final rule with Step 1. After application of the CCRs, average number of units per day.
comment period (69 FR 65779 through we aggregated all line-items for a single Step 8. Instead of using median cost
65780), chemotherapy is very difficult date of service on a single claim for each as done in previous years, we used the
for many patients to tolerate, as the side product. This resulted in creation of a payment rate for each drug and
effects are often debilitating. In order for single line-item with the total number of biological effective April 1, 2005 for the
units and the total cost of a drug or physician office setting, which was
beneficiaries to achieve the maximum
radiopharmaceutical given to a patient calculated using the ASP methodology,
therapeutic benefit from chemotherapy
in a single day. and multiplied the payment rate by the
and other therapies with side effects of
Step 2. We then created a separate average number of units per day for
nausea and vomiting, anti-emetic use is
record for each drug or each drug or biological to arrive at its
often an integral part of the treatment
radiopharmaceutical by date of service, per day cost. For items that did not have
regimen. We want to continue to ensure
regardless of the number of lines on an ASP-based payment rate, we used
that our payment rules do not impede
which the drug or radiopharmaceutical their mean unit cost derived from the
a beneficiary’s access to the particular
was billed on each claim. For example, CY 2004 hospital claims data to
anti-emetic that is most effective for him
‘‘drug X’’ is billed on a claim with two determine their per day cost. Our
or her as determined by the beneficiary
different dates of service, and for each reasoning for using these cost data is
and his or her physician. date of service, the drug is billed on two discussed in section V.B.3.a. of this
line-items with a cost of $10 and 5 units preamble.
TABLE 20.—ANTI-EMETICS TO EXEMPT for each line-item. In this case, the Step 9. We packaged the items with
FROM $50 PACKAGING REQUIREMENT computer program would create two per day cost based on the ASP
records for this drug, and each record methodology or mean cost less than $50
HCPCS Code Short description and made items with per day cost
would have a total cost of $20 and 10
J1260 ........... Dolasetron mesylate. units of the product. greater than $50 separately payable.
J1626 ........... Granisetron HCl injection. Step 3. We trimmed records with unit In the past, many commenters had
J2405 ........... Ondansetron HCl injection. counts per day greater or less than 3 alleged that hospitals do not accurately
J2469 ........... Palonosetron HCl. standard deviations from the geometric bill the number of units for drugs and
Q0166 .......... Granisetron HCl 1 mg oral. mean. (This is a new step in the radiopharmaceuticals consistent with
Q0179 .......... Ondansetron HCl 8 mg oral. methodology that we proposed for CY expected appropriate clinical use. We
Q0180 .......... Dolasetron mesylate oral. 2006.) have consistently decided not to
Step 4. For each remaining record for determine whether a hospital claim
For the CY 2006 proposed payment a drug or radiopharmaceutical, we reports a clinically appropriate unit
rates, we calculated the per day cost of calculated the cost per unit of the drug. dose of a drug for rate-setting purposes.
all drugs, biologicals, and If the HCPCS descriptor for ‘‘drug X’’ is Variations among patients with respect
radiopharmaceuticals that had a HCPCS ’’per 1 mg’’ and one record was created to appropriate doses, the variety of
code in CY 2004 and were paid (via for a total of 10 mg (as indicated by the indications with different dosing
packaged or separate payment) under total number of units for the drug on the regimens for some agents, and the
the OPPS using claims data from claim for each unique date of service), possibility of off-label uses make it
January 1, 2004 to December 31, 2004. the computer program divided the total difficult to know when units are
In CY 2004, multisource drugs and cost for the record by 10 to give a per incorrectly reported. However, we
radiopharmaceuticals had two HCPCS unit cost. We then weighted this unit believed that trimming the units would
codes that distinguished the innovator cost by the total number of units in the improve the accuracy of estimates by
multisource (brand) drug or record. We did this by generating a removing those records with the most
radiopharmaceutical from the number of line-items equivalent to the extreme units, without requiring us to
noninnovator multisource (generic) drug number of units in that particular claim. speculate about clinically appropriate
or radiopharmaceutical. We aggregated Thus, a claim with 100 units of ‘‘drug dosing. Therefore, we believed that
claims for both the brand and generic X’’ and a total cost of $200 would be trimming the records with unit counts
HCPCS codes in our packaging analysis given 100 line-items, each with a cost of greater or less than 3 standard
of these multisource products. Items $2, while a claim of 50 units with a cost deviations from the geometric mean
such as single indication orphan drugs, of $50 would be given 50 line items, would eliminate claims from our
certain vaccines, and blood and blood each with a cost of $1. analysis that might not appropriately
represent the actual number of units of distorts the resource homogeneity of the payment rate, we used their mean unit
a drug or radiopharmaceutical furnished nuclear medicine APCs and cost, which we also recalculated using
by a hospital to a patient during a recommended that CMS make separate all of the CY 2004 hospital claims data
specific clinical encounter. Because it payments for all radiopharmaceuticals. used for this final rule with comment
reduced extreme variation, trimming on Response: We appreciate the period to determine their per day cost.
greater or less than 3 standard commenters’ support of our proposals
We note that there are two drugs for
deviations from the geometric mean for CY 2006 to establish a packaging
which we proposed to pay separately in
made this trim more conservative and threshold for drugs, biologicals, and
our proposed rule that now have per
removed fewer records. This change in radiopharmaceuticals at $50 per day
day costs less than $50 based on the
methodology gave us even greater and to pay separately for the seven
5HT3 anti-emetic products. Section updated cost and claims data. In these
confidence in the cost estimates we use
1833(t)(16)(B) of the Act requires that cases, we are applying our equitable
for our packaging decisions.
We specifically requested comments the threshold for establishing separate adjustment authority to the packaging
on the changes that we proposed in our APCs for drugs and biologicals be set at threshold according to the policy that
methodology for packaging drugs and $50 per administration for CY 2006. we finalized in the CY 2005 final rule
radiopharmaceuticals. In response, we Therefore, we cannot change the for drugs and biologicals with similar
received numerous public comments on threshold amount for circumstances (69 FR 65780). Therefore,
the proposed methodology. radiopharmaceuticals, to which the for CY 2006, we are applying the
Comment: Many commenters policy also applies, as one of the following policy to these drugs and
supported CMS’ continued use of the commenters has suggested. biologicals:
$50 per day cost threshold to determine In determining the packaging status of • Drugs and biologicals that were
whether a drug, biological, or drugs, biologicals, and paid separately in CY 2005, were
radiopharmaceutical will be packaged radiopharmaceuticals for CY 2006, we proposed for separate payment in CY
or paid separately. One commenter calculated the per day costs of these 2006, and have per day costs less than
indicated that this system allows items using the general methodology $50 based on updated ASPs and
hospital outpatient departments to have described above. However, as it is our hospital claims data used for this CY
an efficient option for packaging and for policy to use updated data for the final 2006 final rule with comment period
collecting payments for less costly rule, to determine the final per day costs will continue to receive separate
drugs. Numerous commenters also of these items we used the payment rate payment in CY 2006.
supported CMS’ proposal to exempt the for each drug and biological effective
5HT3 anti-emetic products from the October 1, 2005 for the physician office • Those drugs and biologicals that
current $50 packaging threshold and setting, which was calculated using the were packaged in CY 2005, were
pay for all of them separately, noting ASP methodology, along with updated proposed for separate payment in CY
that the policy will help to ensure that hospital claims data from CY 2004. The 2006, and have per day costs less than
Medicare beneficiaries have access to payment rate was multiplied by the $50 based on updated ASPs and
the particular anti-emetic that is most average number of units per day for hospital claims data used for this CY
effective for them as determined by the each drug or biological, which were 2006 final rule with comment period
beneficiary and his or her physician. recalculated using all of the CY 2004 will remain packaged in CY 2006.
One commenter, to the contrary, hospital claims data used for this final Table 21 lists the two drugs and
indicated that the current threshold for rule with comment period, to arrive at biologicals to which this policy will
separate payment of each product’s per day cost. For items apply, along with their CYs 2005 and
radiopharmaceuticals is too high and that did not have an ASP-based 2006 payment status indicators.
TABLE 21.—DRUGS AND BIOLOGICALS WITH PER DAY COSTS LESS THAN $50 USING FINAL RULE DATA, BUT WERE
PROPOSED FOR SEPARATE PAYMENT
CY 2005 sta- CY 2006 sta-
HCPCS Description tus indicator tus indicator
J0580 ................................................ Penicillin g benzathine inj ......................................................................... N N

J3350 ................................................ Urea injection ........................................................................................... K K
We also note that there were several TABLE 22.—DRUGS AND BIOLOGICALS Comment: One commenter supported
drugs, biologicals, and WITH PER DAY COSTS ABOVE $50 the addition of ‘‘step 3’’ to the
radiopharmaceuticals that we proposed FOR WHICH SEPARATE PAYMENT calculation of the per day cost
to package in the proposed rule and that WILL BE MADE IN CY 2006 methodology used to determine the
now have per day costs greater than $50 packaging status of drugs, biologicals,
using updated ASPs and all of the HCPCS 1 Description and radiopharmaceuticals and stated
hospital claims data from CY 2004 used that the addition of the new step will
for this final rule with comment period. 90665 ...... Lyme disease vaccine, im. improve the accuracy of the per day cost
In accordance with our established 90717 ...... Yellow fever vaccine, sc. calculation by enabling CMS to trim out
policy for such cases, for CY 2006 we A9504 ..... Technetium tc 99m apcitide. very high units of service associated
will pay for these drugs, biologicals, and
J0350 ...... Injection anistreplase 30 u. with very low costs that may
J0470 ...... Dimecaprol injection. inappropriately lower the overall
radiopharmaceuticals separately. Table J2700 ...... Oxacillin sodium injection. median cost.
22 lists the drugs and biologicals that J2910 ...... Aurothioglucose injection.
were proposed as packaged items, but Response: We appreciate the
J3470 ...... Hyaluronidase injection.
will be paid separately in CY 2006. J7197 ...... Antithrombin iii injection.
commenter’s support of the change in
our methodology to determine the per
day costs of drugs, biologicals, and even greater confidence in the cost package oral drugs in CY 2007. Other
radiopharmaceuticals and are finalizing estimates we use for our packaging commenters echoed this general
this change for CY 2006, along with the decisions. Also, section 621(a)(2) of Pub. suggestion, but further suggested that
other proposed changes for determining L. 108–173 requires that the threshold the oral anti-emetic drugs be paid
per day costs of these items. for establishing separate APCs for drugs separately along with the infused and
Comment: We received comments on and biologicals be set at $50 per injectable drugs. One commenter stated
the packaging status of one drug and administration for CY 2006. Therefore, that CMS should continue to pay
several radiopharmaceuticals where the we cannot change the packaging separately for all drugs and biologicals
commenters indicated that the items threshold amount from $50, which that were separately paid in the past,
were incorrectly packaged and should would be required of us if we were to including all therapies that had received
be paid separately in CY 2006. Specific pay for these items separately. For these
items mentioned in the comments were pass-through status. Another commenter
reasons, we believe that it is appropriate
HCPCS codes J1245, A9513, C1079, for us to package these items in CY 2006 suggested that, to the extent CMS may
C9013, and Q3012. One commenter under OPPS. We expect that the modest elect to raise the packaging threshold in
asserted that confusing HCPCS per day costs of these packaged items CY 2007 and beyond, the threshold be
descriptors contributed to the will allow hospitals to make the most linked to an appropriate price indexing
submission of inaccurate claims data to clinically appropriate choices of mechanism. In establishing the
CMS. This commenter also noted that products in their care of patients, as appropriate price indexing measure, the
the inconsistent market availability of hospitals will also bill a variety of commenter urged CMS to give
some of these products resulted in small separately payable services for the care substantial consideration to the impact
numbers of claims and variable cost provided. resulting from capturing more high-cost
data, which CMS used to determine the Comment: One commenter indicated drugs in packaged payment groups,
per day costs of these items. The that it is operationally impossible to including the effect such a policy may
commenters indicated that there are establish a separate process for charging have on beneficiary access to needed
other products that are used for the anti-emetic drugs when they are used treatments, with particular focus on
same indication as some of these only in conjunction with chemotherapy avoiding unintended disadvantages for
products, and also that there are clinical since the majority of their surgical newer innovator products. Other
situations where physician would prefer outpatients receive these drugs. The commenters suggested that CMS
to utilize one particular product over commenter inquired as to whether CMS determine appropriate payment levels
another. Therefore, commenters did not could develop an edit to only pay for
that will be sufficient to ensure patient
want payment rules to affect access to the anti-emetic drug when it is
access in its consideration of the use of
particular products that may be most connected to a cancer diagnosis.
clinically effective for patients. Response: We note that separate alternative thresholds for packaging
Response: We understand the payments for these 5HT3 injectable and drugs in CY 2007, and that CMS utilize
commenters’ concerns about the oral anti-emetic drugs will be made as ASP data from CY 2005 to determine the
packaging of these items. Based on the long as these drugs are covered by appropriate parameters for a packaging
methodology we used to calculate per Medicare, regardless of the clinical threshold in CY 2007. On the other
day costs of these items, as described indications for the drugs’ use. The hand, MedPAC indicated that it has
earlier in the preamble, we determined policy described above for the 5HT3 long been concerned about the
that the per-day costs of these products anti-emetic drugs applies only to the incentives created by the unpackaging
were below $50. Therefore, these items packaging status of these items, not to of drugs that exists in the OPPS. For
were packaged. When we recalculated their coverage status. Hospitals should example, MedPAC stated that, under the
the per day costs of these items using continue billing for these injectable and OPPS, providers have an incentive to
updated CY 2004 claims data and ASP- oral anti-emetic drugs in accordance use a higher-cost drug that is paid
based payment rates based on data from with existing coverage rules. separately in place of a lower-cost drug
the second quarter of CY 2005 for the Section 1833(t)(16)(B) of the Act that that is packaged. If hospitals act on this
final rule, we observed that the per day requires the threshold for establishing incentive, it could raise beneficiaries’
costs of these items remained below separate APCs for drugs and biologicals overall cost sharing, Part B premiums,
$50. For radiopharmaceuticals, we to be set at $50 per administration will
and program spending. MedPAC added
recalculate their mean per day costs expire at the end of CY 2006. Therefore,
that setting payment rates for small
using updated CY 2004 claims data. we will be evaluating other packaging
As described earlier, we applied an thresholds for these products for the CY packages is likely to be less accurate
additional unit trimming step in the 2007 OPPS update. We specifically than setting rates for larger packages. It
methodology to determine per day costs requested comments on the use of pointed out that, with greater packaging,
of items in CY 2006. We stated our alternative thresholds for packaging variations in charging practices are more
belief that trimming the units would drugs and radiopharmaceuticals in CY likely to balance out, leading to
improve the accuracy of the per day cost 2007. payment rates that, on average, are more
estimates by removing those records We received a number of public reflective of costs.
with the most extreme units, without comments in response to this request. Response: We appreciate receiving
requiring us to speculate about Comment: Commenters made various these suggestions for establishing an
clinically appropriate dosing. Therefore, suggestions for establishing the appropriate packaging threshold for CY
we believe that the new trimming step packaging threshold for CY 2007. 2007 and will take the
eliminates claims from our analysis that Several commenters encouraged CMS to recommendations into consideration as
might not appropriately represent the set the packaging threshold no higher
we work on our packaging proposal for
actual number of units of a drug or than $50 in CY 2007 and beyond. Other
the CY 2007 OPPS.
radiopharmaceutical furnished by a commenters suggested that CMS
hospital to a patient during a specific provide separate payment for all infused
clinical encounter. We indicated that and injectable drugs, regardless of their
this change in methodology gave us per day costs, and only continue to
3. Payment for Drugs, Biologicals, and additional classification changes hospital outpatient drug acquisition cost
Radiopharmaceuticals Without Pass- through Transmittal 132 (Change survey mandated for the GAO. This
Through Status That Are Not Packaged Request 3154, released March 30, 2004) provision directs the GAO to collect
a. Payment for Specified Covered and Transmittal 194 (Change Request data on hospital acquisition costs of
Outpatient Drugs 3322, released June 4, 2004). specified covered outpatient drugs and
Section 1833(t)(14)(A) of the Act, as to provide information based on these
(1) Background added by section 621(a)(1) of Pub. L. data that can be taken into consideration
Section 1833(t)(14) of the Act, as 108–173, also provides that payment for for setting CY 2006 payment rates for
added by section 621(a)(1) of Pub. L. these specified covered outpatient drugs these products under the OPPS.
108–173, requires special classification for CYs 2004 and 2005 is to be based on Accordingly, the GAO conducted a
of certain separately paid its ‘‘reference average wholesale price survey of 1,400 acute care, Medicare-
radiopharmaceuticals, drugs, and (AWP).’’ Section 1833(t)(14)(A)(ii) of the certified hospitals and requested
biologicals and mandates specific Act, as added by section 621(a) of Pub. hospitals to provide purchase prices for
payments for these items. Under section L. 108–173 requires that in CY 2005— specified covered outpatient drugs
1833(t)(14)(B)(i) of the Act, a ‘‘specified • A sole source drug must be paid no purchased between July 1, 2003 and
covered outpatient drug’’ is a covered less than 83 percent and no more than June 30, 2004. The survey yielded a
outpatient drug, as defined in section 95 percent of the reference AWP. response rate of 83 percent; 1,157
1927(k)(2) of the Act, for which a • An innovator multiple source drug hospitals provided usable information.
separate APC exists and that either is a must be paid no more than 68 percent To ensure that its methodology for data
radiopharmaceutical agent or is a drug of the reference AWP. collection and analysis was sound, the
• A noninnovator multiple source GAO consulted an advisory panel of
or biological for which payment was
drug must be paid no more than 46 experts in pharmaceutical economics,
made on a pass-through basis on or
percent of the reference AWP. pharmacy, medicine, survey sampling
before December 31, 2002. Section 1833(t)(14)(G) of the Act
Under section 1833(t)(14)(B)(ii) of the and Medicare payment.
defines ‘‘reference AWP’’ as the AWP The GAO reported the average and
Act, certain drugs and biologicals are determined under section 1842(o) the median purchase prices for 55 specified
designated as exceptions and are not Act as of May 1, 2003. We interpreted covered outpatient drug categories for
included in the definition of ‘‘specified this to mean the AWP set under the the period July 1, 2003 to June 30, 2004.
covered outpatient drugs.’’ These CMS single drug pricer (SDP) based on These items represented 86 percent of
exceptions are— prices published in the Red Book on Medicare spending for specified covered
• A drug or biological for which May 1, 2003. outpatient drugs during the first 9
payment is first made on or after For CY 2005, we finalized our policy months of CY 2004. The initial GAO
January 1, 2003, under the transitional to determine the payment rates for data did not include any
pass-through payment provision in specified covered outpatient drugs radiopharmaceuticals. The report noted
section 1833(t)(6) of the Act. under the provisions of Pub. L. 108–173 that the purchase price information
• A drug or biological for which a by comparing the payment amounts accounted for volume and other
temporary HCPCS code has not been calculated under the median cost discounts provided at the time of
assigned. methodology as done for procedural purchase, but excluded subsequent
• During CYs 2004 and 2005, an APCs to the AWP percentages specified rebates from manufacturers and
orphan drug (as designated by the in section 1833(t)(14)(A)(ii) of the Act. payments from group purchasing
Secretary). organizations. The GAO survey data
Section 1833(t)(14)(F) of the Act (2) Changes for CY 2006 Related to Pub.
were available in time for consideration
defines the categories of drugs based on L. 108–173
in the CY 2006 OPPS proposed rule.
section 1861(t)(1) and sections Section 1833(t)(14)(A)(iii) of the Act, At the time of issuance of the CY 2006
1927(k)(7)(A)(ii), (k)(7)(A)(iii), and as added by section 621(a)(1) of Pub. L. OPPS proposed rule, another available
(k)(7)(A)(iv) of the Act. The categories of 108 173, requires that payment for source of drug pricing information was
drugs are ‘‘sole source drugs (includes a specified covered outpatient drugs in the ASP data from the fourth quarter of
biological product or a single source CY 2006 be equal to the average CY 2004, which were used to set
drug),’’ ‘‘innovator multiple source acquisition cost for the drug for that payment rates for drugs and biologicals
drugs,’’ and ‘‘noninnovator multiple year as determined by the Secretary in the physician office setting effective
source drugs.’’ The definitions of these subject to any adjustment for overhead April 1, 2005. We had ASP-based prices
specified categories for drugs, costs and taking into account the for approximately 475 drugs and
biologicals, and radiopharmaceuticals hospital acquisition cost survey data biologicals (including contrast agents)
were discussed in the January 6, 2004 collected by the Government payable under the OPPS. However, we
OPPS interim final rule with comment Accountability Office (GAO) in CYs did not then have (and we still do not
period (69 FR 822), along with our use 2004 and 2005. If hospital acquisition have) any ASP data on
of the Medicaid average manufacturer cost data are not available, the law radiopharmaceuticals. Payments for
price database to determine the requires that payment be equal to most of the drugs and biologicals paid
appropriate classification of these payment rates established under the in the physician office setting were
products. Because of the many methodology described in section based on ASP+6 percent. Payments for
comments received on the January 6, 1842(o), section 1847A, or section items with no reported ASP were based
2004 interim final rule with comment 1847B of the Act as calculated and on wholesale acquisition cost (WAC).
period, the classification of many of the adjusted by the Secretary as necessary. Lastly, the third source of cost data
drugs, biologicals, and that we had at the time of issuance of
radiopharmaceuticals changed from that (3) Data Sources Available for Setting the proposed rule for drugs, biologicals,
initially published. We announced these CY 2006 Payment Rates and radiopharmaceuticals was the mean
changes to the public on February 27, Section 1833(t)(14)(D) of the Act, as and median costs derived from the CY
2004, through Transmittal 112, Change added by section 621(a)(1) of Pub. L. 2004 hospital claims data. In our data
Request 3144. We also implemented 108–173, outlines the provisions of the analysis for the proposed rule, we
compared the payment rates for drugs using the GAO acquisition cost survey claims data, the GAO mean purchase
and biologicals using data from all three and the hospital claims data, instead of prices, and the ASP-based payment
sources described above. As section using median costs. amounts (ASP+6 percent in most cases),
1833(t)(14)(A)(iii) of the Act clearly For the proposed rule, we estimated and calculated the equivalent average
specifies that payment for specified aggregate expenditures for all drugs and ASP-based payment rate under each of
covered outpatient drugs in CY 2006 be biologicals (excluding the three payment methodologies. The
equal to the ‘‘average’’ acquisition cost radiopharmaceuticals) that would be results which we presented in the
for the drug, we limited our analysis to separately payable in CY 2006 and for proposed rule are shown in Table 23
the mean costs of drugs determined the 55 drugs and biologicals reported by below.
the GAO using mean costs from the
TABLE 23.—COMPARISON OF RELATIVE PRICING FOR OPPS DRUGS AND BIOLOGICALS UNDER VARIOUS PAYMENT
METHODOLOGIES
ASP equiva-
ASP equivalent
lent
Type of pricing data Time period of pricing data (all sepa-
(55 GAO rately billable
drugs only) drugs)
GAO mean purchase price ............................................. 12 months ending June 2004 ......................................... ASP+3% ...... N/A
ASP+6% .......................................................................... 4th quarter of 2004 ......................................................... ASP+6% ...... ASP+6%
Mean cost from claims data ............................................ 1st 9 months of 2004 ...................................................... ASP+8% ...... ASP+8%
Prior to any adjustments for the acquiring the item (66 FR 59896 and 67 reasons. First, there were differences in
differing time periods of the pricing FR 66769). However, findings from a the time periods for the two sources of
data, the results indicated that using the MedPAC survey of hospital charging data. The GAO data were from the 12
GAO mean purchase prices as the basis practices indicated that hospitals set months ending June 2004, and the ASP
for paying the 55 drugs and biologicals charges for drugs, biologicals, and data were from the fourth quarter of CY
would be equivalent to paying for those radiopharmaceuticals high enough to 2004. It could be argued that prices
drugs and biologicals, on average, at reflect their handling costs as well as increased in the intervening time
ASP+3 percent. In addition, using mean their acquisition costs. Therefore, the period. However, we determined that
unit cost from hospital claims data to set mean costs calculated using charges there was no source of reliable
the payment rates for the drugs and from hospital claims data converted to information on specific price changes
biologicals that would be separately costs are representative of hospital for this time period for the drugs
payable in CY 2006 would be equivalent acquisition costs for these products, as studied by the GAO. In the future, we
to basing their payment rates, on well as their pharmacy overhead costs. will have better information on price
average, at ASP+8 percent. For CY 2006, the statute specifies that trends for Medicare Part B drugs as
In determining the payment rates for payments for specified covered more quarters of pricing information are
drugs and biologicals in CY 2006, we outpatient drugs are required to be equal reported under the ASP system.
did not propose to use the GAO mean to the ‘‘average’’ acquisition cost for the We also noted that the comparison
purchase prices for the 55 drugs and drug. Payments based on mean costs between the GAO data and the ASP data
biologicals because the GAO data reflect would represent the products’ was problematic as the ASP data
hospital acquisition costs from a less acquisition costs plus overhead costs, included rebates and other price
recent period of time. The survey was instead of acquisition costs only. concessions and the GAO data did not.
conducted from July 1, 2003 to June 30, Therefore, at the time of issuance of the Inclusion of these rebates and price
2004; thus, the purchase prices are proposed rule, we determined that it
concessions in the GAO data would
generally reflective of the time that is decrease the GAO prices relative to the
would be appropriate for us to use a
the midpoint of this period, which is ASP prices, suggesting that ASP+6
source of cost information other than
January 1, 2004. The hospital purchase percent may be an overestimate of
the CY 2004 hospital claims data to set
price data also do not fully account for hospitals’ average acquisition costs.
the payment rates for most drugs and
rebates from manufacturers or payments Unfortunately, we did not have a source
biologicals in CY 2006.
from group purchasing organizations of information on the magnitude of the
made to hospitals. We also noted that it Based on these considerations, we rebates and price concessions for the
would be difficult to update the GAO proposed to pay ASP+6 percent as the specific drugs in the GAO data at that
mean purchase prices during CY 2006 acquisition payment for separately time.
and in future years. payable drugs and biologicals in CY Therefore, we determined in the
We also did not propose, in general, 2006. Given the data as described above, proposed rule that it was difficult to
to use mean costs from CY 2004 hospital we determined at the time of issuance adjust the GAO prices for inflation,
claims data to set payment rates for of the proposed rule that this was our rebates, and price concessions to make
drugs and biologicals in CY 2006. In best estimate of average acquisition the comparison with ASP more precise.
previous OPPS rules, we stated that costs for CY 2006. We noted in the We indicated that we would continue to
pharmacy overhead costs are captured proposed rule (70 FR 42726) that the examine new data to improve our future
in the pharmacy revenue cost centers comparison between the GAO purchase estimates of acquisition costs. In future
and reflected in the median costs of price data and the ASP data indicated years, our proposed pricing would be
drug administration APCs, and the that the GAO data, on average, were modified as appropriate to reflect the
payment rate we established for a drug, equivalent to ASP+3 percent. However, most recent data and analyses available.
biological, or radiopharmaceutical APC as noted earlier, we determined that this We also noted that, in addition to the
was intended to pay only for the cost of comparison was problematic for two importance of making accurate
estimates of acquisition costs for drug adequacy of the payment rates to reflect hospital acquisition costs.
pricing, there were important account for hospital acquisition costs of Furthermore, MedPAC indicated that
implications for prices of other services the drugs and biologicals. reporting may not be consistent across
due to the required budget neutrality of During the August 2005 meeting of manufacturers, and CMS may need to
the OPPS. For example, drugs and the APC Panel, the Panel recommended verify the accuracy of ASP data through
biological prices set at ASP+3 percent that CMS evaluate all the separately confidential audits. Although MedPAC
instead of ASP+6 percent would have payable drug to be paid at ASP+6 stated that it supports CMS’ proposed
made available approximately an percent under the OPPS and pay use of ASPs, it remained concerned
additional $60 million for other items particular attention to those whose about the proposal to pay for most
and services under the OPPS. payments would drop or rise specified covered outpatient drugs at a
In the proposed rule, we also noted precipitously. We appreciate the Panel’s rate of ASP+8 percent, specifically
that ASP data are unavailable for some support of our payment proposal and ASP+6 percent for the drug and an
drugs and biologicals. For the few drugs discuss the final CY 2006 policies for additional 2 percent for handling costs.
and biologicals, other than drugs and biologicals below. MedPAC noted that CMS’ analysis of
radiopharmaceuticals as discussed later, We received many public comments hospitals’ mean purchase prices for
where ASP data were unavailable, we in response to our proposal to pay for drugs studied in the GAO survey
proposed to use the mean costs from the drugs and biologicals under the OPPS indicated that the hospitals’ mean
CY 2004 hospital claims data to using the ASP methodology. purchase prices were equivalent to
determine their packaging status for Comment: Many commenters, ASP+3 percent. Given that average ASP
rate-setting. Until we received ASP data including national organizations values have declined in recent quarters
for these items, we proposed that representing leading pharmaceutical and that the GAO’s data did not fully
payment would be based on their mean and biotechnology companies, hospital reflect rebates, MedPAC stated that the
cost. associations, and hospitals, supported proposed payment rates for drugs alone
Our proposal used payment rates CMS’ proposal to pay for most may be too high.
based on ASP data from the fourth separately payable drugs and biologicals Several commenters, however,
quarter of CY 2004 because these were at ASP+6 percent. These commenters remained concerned that this proposal
the most recent numbers available to us stated that paying for drugs and will result in significant reductions in
during the development of the proposed biologicals at this rate appeared to be payments below acquisition costs for
rule. To be consistent with the ASP- both a reasonable and the best available certain types of drugs and biologicals,
based payments that would be made estimate of average hospital acquisition such as IVIG and drugs and biologicals
when these drugs and biologicals are cost. One commenter stated that ASPs used to treat rare disorders, and was
furnished in physician offices, we stated reported by manufacturers are as close inadequate to protect beneficiary access
in our proposed rule (70 FR 42726) that to real-time costs as any data source to these therapies. One commenter
we planned to make any appropriate CMS uses for rate-setting. Some of the indicated that payments increased to
adjustments to the amounts shown in commenters indicated that this policy ASP+8 percent also resulted in
Addenda A and B to the proposed rule offered hospitals the assurance that the compensation below acquisition costs
for these items based on more recent payment rates will reflect market for certain products. Many of these
ASP data from the second quarter of CY conditions as those rates will be commenters urged CMS to monitor
2005, which is the basis for setting updated on a quarterly basis. Other patient access problems and take
payment rates for drugs and biologicals supporters of this proposal noted that prompt steps to adjust payment rates
in the physician office setting effective the policy had the additional benefit of where necessary to address such
October 1, 2005, prior to our publication providing consistent payment rates problems. Several commenters
of the CY 2006 OPPS final rule, and also under the OPPS and under Part B in the requested that CMS implement the APC
on a quarterly basis on our Web site physician office setting, thus helping to Panel’s recommendation to monitor for
during CY 2006. We noted that we avoid financial incentives for selection ‘‘precipitous’’ drops in payment rates
would determine the packaging status of of sites of service. One commenter during the transition to ASP-based
each drug or biological only once during indicated that the proposed policy also payments and apply a dampening
the year during the update process. offered simplicity to the OPPS, both for policy to the payment rates for certain
However, for the separately payable CMS and providers, by treating almost drugs and biologicals. Several
drugs and biologicals, we would update all separately paid drugs uniformly and dampening options were suggested,
their ASP-based payment rates on a noted that paying for pass-through drugs such as limiting payment decreases to
quarterly basis. the same way as other separately 15 percent from CY 2005, paying at the
We also noted that we intend for the payable drugs without pass-through higher of ASP+8 percent or 90 percent
quarterly updates of the ASP-based status created appropriate incentives to of drugs’ CY 2005 payment rates, and
payment rates for separately payable provide the most effective therapies, freezing payment at the CY 2005 levels.
drugs and biologicals to function as regardless of their costs and payment One commenter recommended that no
future surveys of hospital acquisition amounts. change be made to the payment rates for
cost data, as section 1833(t)(14)(D)(ii) of A comment from MedPAC drugs and biologicals from CY 2005 to
the Act instructs us to conduct periodic acknowledged the problems presented CY 2006. Another commenter urged
subsequent surveys to determine by the GAO purchase price information CMS to gather data on the adequacy of
hospital acquisition cost for each and recognized the use of ASP data as ASP payment over the next year and
specified covered outpatient drug. a viable alternative. However, MedPAC report to Congress if the agency finds
We specifically requested comments indicated that a limitation of ASP data that ASP is not an appropriate payment
on our proposal to pay for drugs and is that CMS derives ASPs from formula.
biologicals (including contrast agents) manufacturers’ sales to all distribution A comment from a large cancer care
under the OPPS using the ASP-based channels, including wholesalers, group provider raised several issues
methodology that is also used to set the purchasing organizations, hospitals, and concerning the use of ASPs. The
payment rates for drugs and biologicals other providers such as physicians. commenter noted that the prices and
furnished in physician offices and the Therefore, the ASPs do not specifically discounts included in the calculation of
ASP often are not passed along to pay for separately payable drugs and compared the payment rates for drugs
providers. The commenter added that biologicals at ASP+6 percent. For this and biologicals using data from all three
small hospitals without purchasing final rule with comment period, we sources described above. As described
power are likely to purchase drugs again evaluated the three data sources in the proposed rule, we limited our
above ASP rates. In addition, the that we have available to us for setting analysis to the mean costs of drugs and
commenter noted that because the CY 2006 payment rates for drugs biologicals determined using the GAO
manufacturers typically raise prices two and biologicals. As described in the acquisition cost survey and the hospital
to three times per year, the two-quarter proposed rule, these data sources are the claims data, instead of using median
lag in the calculation of ASP may cause GAO reported average and median costs. We estimated aggregate
hospitals to suffer losses each time they purchase prices for 55 specified covered
expenditures for all drugs and
administer drugs. Another commenter outpatient drug categories for the period
biologicals (excluding
questioned whether ASP could be July 1, 2003 to June 30, 2004; ASP data;
calculated regionally instead of and mean and median costs derived radiopharmaceuticals) that would be
nationally. One commenter noted that from hospital claims data used for this separately payable in CY 2006 and for
CMS did not make clear in the proposed final rule with comment period. For this the 55 drugs and biologicals reported by
rule what data will be used to establish final rule with comment period, we are the GAO using mean costs from the
payment rates for separately payable able to use updated ASP data from the claims data, the GAO mean purchase
drugs and biologicals as of January 1, second quarter of CY 2005, which are prices, and the ASP-based payment
2006. The commenter indicated that used to set payment rates for drugs and amounts (ASP+6 percent in most cases),
ASP data for the third quarter of CY biologicals in the physician office and then calculated the equivalent
2005 will be available on October 30, setting effective October 1, 2005. We are average ASP-based payment rate under
2005 and requested that these data be also able to use updated claims data, each of the three payment
used to set payment rates for the first reflecting all of the hospital claims data methodologies. The results based on
quarter of CY 2006. from CY 2004 and updated CCRs. updated ASP and claims data are
Response: We appreciate the In our data analysis for this final rule presented in Table 24 below.
commenters’ support of our proposal to with comment period, we again
TABLE 24.—COMPARISON OF RELATIVE PRICING FOR OPPS DRUGS AND BIOLOGICALS UNDER VARIOUS PAYMENT
METHODOLOGIES
ASP equiva-
ASP equivalent
lent
Type of pricing data Time period of pricing data (all sepa-
(55 GAO rately billable
drugs only) drugs)
GAO mean purchase price ............................................. 12 months ending June 2004 ......................................... ASP+4% ...... N/A
ASP+6% .......................................................................... 2nd quarter of 2005 ........................................................ ASP+6% ...... ASP+6%
Mean cost from claims data ............................................ 12 months of 2004 .......................................................... ASP+6% ...... ASP+6%
Prior to any adjustments for the based methodology. However, our intent well as their related pharmacy overhead
differing time periods of the pricing is to pay for drugs and biologicals based costs. Our calculations indicated that
data, the results indicated that using the on their hospital acquisition costs, and using mean unit costs to set the
GAO mean purchase prices as the basis we believe that market-based ASP data, payment rates for all separately payable
for paying the 55 drugs and biologicals which are reported by the drugs and biologicals would be
would be equivalent to paying for those manufacturers, better represent these equivalent to basing their payment rates
drugs and biologicals, on average, at costs than dampened payment rates. We on the ASP+6 percent, on average. This
ASP+4 percent. In addition, using mean also note that commenters did not result also seems to confirm MedPAC’s
unit cost from hospital claims to set the present actual evidence demonstrating comment that paying for the acquisition
payment rates for the drugs and that access problems currently exist for cost of drugs alone at ASP+6 percent
biologicals that would be separately some of these products. They presented may be too high. Because pharmacy
payable in CY 2006 would be equivalent anecdotal reports and results based on overhead costs are already built into the
to basing their payment rates, on surveys that we can not validate. charges for drugs, biologicals, and
average, at ASP+6 percent. We note that Therefore, we believe that it is still radiopharmaceuticals, our current data
these levels are slightly different from appropriate for us to base payment for therefore indicate that payment for
the estimates we determined for the these items on the ASP data. drugs and biologicals and pharmacy
proposed rule, where the GAO data As noted earlier and in the proposed overhead at a combined ASP+6 percent
were equivalent to ASP+3 percent and rule, findings from a MedPAC survey of rate would serve as the best proxy for
mean costs derived from the CY 2004 hospital charging practices indicated the combined acquisition and overhead
claims data were equivalent to ASP+8 that hospitals set charges for drugs, costs of each of these products.
percent, on average. (See Table 22 of the biologicals, and radiopharmaceuticals Therefore, in this final rule with
CY 2006 OPPS proposed rule, 70 FR high enough to reflect their pharmacy comment period for CY 2006, we are
42725). handling costs as well as their adopting a policy of paying for the
We understand the concerns raised by acquisition costs. Therefore, the mean acquisition and overhead costs of
commenters about the reductions in costs calculated using charges from separately paid drugs and biologicals at
payment rates for certain drugs and hospital claims data converted to costs a combined rate of ASP+6 percent. In
biologicals with the transition from an are representative of hospital other words, payment at ASP+6 percent
AWP-based methodology to an ASP- acquisition costs for these products, as will serve as a proxy to make
appropriate payment for both the drug names appear first (and can be C9201, and C9200 respectively under
acquisition cost and overhead cost of sorted alphabetically), rather than using the OPPS in CY 2005. Commenters
each of these products. We discuss in ‘‘injection’’ as the first word. The indicated that the proposed CY 2006
additional detail our responses commenter also sought clarification on payment rates for the acquisition and
regarding payments for pharmacy the dosage sizes of several HCPCS codes overhead costs of all three of these
overhead costs later in the preamble. and identified HCPCS codes for drugs products were incorrectly based on the
As noted in the proposed rule, ASP that the commenters believed are CY 2004 claims data, instead of ASP+8
data are unavailable for some drugs and obsolete. percent as proposed for other separately
biologicals. For these few drugs and Response: We note that the HCPCS payable drugs and biologicals, and they
biologicals, we used the mean costs code descriptions in Addendum B of were very concerned that decreased
from the CY 2004 hospital claims data our final rule with comment period are payments will significantly underpay
to determine their packaging status for based on the short descriptors assigned hospitals and jeopardize patient access
rate-setting. Until we receive ASP data to the HCPCS codes by the National to these therapies. One of the
for these items, payment will be based HCPCS Panel. The National HCPCS commenters stated that CMS based
on their mean cost calculated from CY Panel also determines the units payment for Apligraf on mean costs
2004 hospital claims data. The payment associated with the HCPCS codes. We derived from the CY 2004 claims data
rates for separately payable drugs and suggest that the commenter pursue its because there had been no ASP payment
biologicals shown in Addenda A and B concerns related to the HCPCS codes rate specific to HCPCS code C1305 and
to this final rule with comment period through the process set up by the noted that the ASP rate for Apligraf is
represent payments for their acquisition National HCPCS Panel. reported by CMS in the physician office
costs in addition to their overhead costs. Comment: One commenter indicated setting under HCPCS code J7340. Other
For this final rule with comment that there are currently five sodium commenters raised similar concerns for
period, we are using payment rates hyaluronate products approved for use Dermagraft whose ASP rate is reported
based on ASP data from the second in the United Stated that differ in terms in the physician office setting under
quarter of CY 2005 because these are the of molecular weights, proposed HCPCS code J7342, instead of HCPCS
most recent numbers available for the biological effects, active ingredient code C9201. With respect to Orcel, one
development of this final rule. To be doses per treatment, number of commenter stated that this product was
consistent with the ASP-based treatments per course, and labeling for not commercially available during CY
payments that would be made when repeated treatment courses. Because of 2004 and, as a result, neither ASP data
these drugs and biologicals are the existing coding mechanism for these nor hospital outpatient claims data
furnished in physician offices, as products, the commenter noted that the should have existed for the product. The
proposed, we plan to make any proposed payment rates associated with commenter recommended that, in the
appropriate adjustments to the amounts the HCPCS codes may create financial absence of either claims or ASP data,
shown in Addenda A and B to this final incentives for hospitals to stock and use CMS should follow its payment policy
rule with comment period for these certain products instead of choosing for drugs and biologicals that do not
items on a quarterly basis as more recent products based on clinical judgment have ASP data and establish the
ASP data become available and post the and appropriate treatment for patients. payment rate for Orcel using WAC. If
payment rate changes on our Web site The commenter expressed the belief that WAC was not available, then CMS
during each quarter of CY 2006. the dosing differences among these should set payment for Orcel at 95
Effective January 1, 2006, we will base agents warrant the creation of specific percent of the May 1, 2003 AWP.
payment rates for separately payable codes for each single source product Response: We recognize the
drugs and biologicals on ASP data from and has submitted recommendations to commenters’ concerns about the
the third quarter of CY 2005, which will CMS for specific coding and proposed reduction in payment rates for
also be the basis for setting payment nomenclature for adoption in CY 2006. these wound care products in CY 2006.
rates for drugs and biologicals in the Response: We recognize the The commenters were correct in stating
physician office setting effective January commenter’s concerns about payment that we based the payment rates for
1, 2006. We discussed in the proposed for these sodium hyaluronate products these items on their mean costs derived
rule that we would determine the under the OPPS. As noted earlier, the from the CY 2004 claims data in the
packaging status of each drug or National HCPCS Panel has created proposed rule because we believed that
biological only once during the year HCPCS code J7318 (Hyaluron/derive we did not have any ASP data for these
during the update process; however, for intra-art inj) to describe all of the C-codes. We appreciate the commenters
the separately payable drugs and sodium hyaluronate products effective indicating to us that HCPCS codes
biologicals, we would update their ASP- January 1, 2006. The payment rate for C1305 and C9201 are billed using
based payment rates on a quarterly HCPCS code J7318 in CY 2006 will be HCPCS codes J7340 and J7342,
basis. Specifically, for CY 2006, the established using the ASP data for all of respectively, in the physician office, and
packaging status of each drug or the products described by this code. the ASP data submitted for these
biological has been established using HCPCS code J7318 will be used in the products were associated with their
the ASP data from the second quarter of OPPS during CY 2006 to report the permanent J-codes.
CY 2005 and the appropriate packaging administration of all products described For this final rule with comment
status indicator can be found for these by that code that do no have another period, we reviewed the NDCs for
items in Addendum B of this final rule OPPS-specific code available due to which ASP data from the second quarter
with comment period. During CY 2006, their pass-through status. of CY 2005 were reported under HCPCS
we will only update quarterly the Comment: We received many codes J7340 and J7342, and verified that
payment rates for the separately payable comments on the significant proposed these NDCs included Apligraf and
drugs and biologicals whose payments reduction in payment rates from CY Dermagraft products, respectively.
are based on the ASP methodology. 2005 to CY 2006 for several wound care Therefore, for CY 2006, we will be
Comment: One commenter requested products. The products of concern are deleting the HCPCS code C1305 for
that CMS standardize the HCPCS code Apligraf, Dermagraft, and Orcel, which Apligraf and HCPCS code C9201 for
descriptions in Addendum B, so that the are reported by HCPCS codes C1305, Dermagraft and paying for these
products using the ASPs calculated for consistency between the OPPS and where it is appropriate to do so, we are
HCPCS codes J7340 and J7342, physician offices, and result in deleting these C-codes and replacing
respectively. As one of the commenters appropriate payment rates for these them with new CY 2006 HCPCS codes
noted, ASP data are not available three wound care products in CY 2006. or existing HCPCS codes that
currently for HCPCS code C9200, which In addition to reviewing whether appropriately describe products
describes Orcel. Based on our review of permanent HCPCS codes duplicate the currently coded in the OPPS by the C-
the descriptor for HCPCS code J7340, three temporary C-codes describing codes. As discussed later in the
we determined that this code wound care products in the CY 2005 preamble, we are also deleting the C-
appropriately describes Orcel; therefore, OPPS, we also reviewed whether there
codes that were created to represent the
we will be deleting HCPCS code C9200 are permanent HCPCS codes that
innovator multiple source (brand) drugs
and paying for this product using currently exist or will be created in CY
2006 that describe the other C-codes for and instructing hospitals to use the
HCPCS code J7340. Even though the
calculation of the ASP-based payment drugs, biologicals, and HCPCS codes for noninnovator multiple
rate for HCPCS code J7340 does not radiopharmaceuticals that are payable source (generic) drugs to bill for both
currently account for the ASP of Orcel, under the OPPS in CY 2005 to the brand and generic forms of a drug
we believe that it is still appropriate for determine if we could streamline coding in CY 2006. Table 25 lists the C-codes
us to pay for Orcel using HCPCS code for other items as well. Based on our that we are deleting effective December
J7340 since this code appropriately review, we found that there are several 31, 2005 and the permanent HCPCS
describes this product. Also, once Orcel C-codes for drugs, biologicals, and codes that will be replacing them in CY
becomes available in the market and we radiopharmaceuticals that are payable 2006. For services furnished on or after
receive ASP data for this product, the under OPPS in CY 2005 that will be January 1, 2006, hospitals should use
ASP-based payment rate for HCPCS replaced with new permanent HCPCS replacements codes to bill for the
code J7340 will properly reflect the codes in CY 2006. We also found that products whose C-codes will be deleted
market price for Orcel. We believe that there are some C-codes that are also on December 31, 2005.
this coding policy will lessen confusion described by other permanent HCPCS
BILLING CODE 4210–01–P
for providers, enhance coding codes that existed in CY 2005. In cases
ER10NO05.019</GPH>
ER10NO05.020</GPH>
BILLING CODE 4210–01–C payment for these items is consistent which will be effective January 1, 2006,
Comment: One commenter noted that with all other separately payable drugs to facilitate uniform billing for all
CMS should confirm that payment for under OPPS. A few commenters echocardiography contrast agents across
echocardiography contrast agents will indicated that CMS should implement all sites of service.
be based on ASP+6 percent plus an the new HCPCS codes for
appropriate amount to reflect handling Response: In CY 2005,
echocardiography contrast agents, echocardiography contrast agents are
ER10NO05.021</GPH>
(no less than two percent) so that
described by three C-codes, which are when calculating the ASPs for the IVIG manufacturers and have been assured by
HCPCS code C9112 (Perflutren lipid HCPCS codes and equalize the lag time these manufacturers that their ASPs
micro, 2ml), HCPCS code C9202 between the ASP reporting by have been developed in accordance
(Octafluoropropane), and HCPCS code manufacturers and CMS’ posting of the with applicable guidance and that the
C9203 (Perflexane lipid micro). In the ASP-based payment rates for the OPPS resulting price reflects the current IVIG
proposed rule, we proposed to deleted and Part B physician office payment market. At the same time, the IVIG
these C-codes and pay for the products rates. One commenter urged CMS to manufacturers’ association, the Plasma
using Q-codes in CY 2006. As noted in revert to the original J-codes for IVIG Protein Therapeutics Association,
the previous response to comments, (J1563 and J1564) and maintain the CY reports that the overall supply of IVIG
these three C-codes will be deleted as of 2005 payment rates. Other commenters is adequate and has improved in the
December 31, 2005 and replaced with suggested that, at minimum, CMS past several months. However, based on
HCPCS codes Q9957, Q9956, and should continue payment for IVIG at the the comments received and our ongoing
Q9955, respectively. Hospitals should CY 2005 payment rates of 83 percent of work with manufacturers, patient
use the new Q-codes in CY 2006 when AWP for 2 years, during which time groups, and other stakeholders, we
billing for these echocardiography CMS, consulting with Congress, continue to be concerned about CY 2005
contrast agents. We also note we will be manufacturers, distributors, providers, reports of patients experiencing
paying for the acquisition and overhead and patient groups, should conduct a difficulties in accessing timely IVIG
costs of these separately payable study to determine the best payment treatments and reports of providers
echocardiography contrast agents at a methodology for IVIG with the goal of experiencing difficulties in obtaining
combined rate of ASP+6 percent in CY ensuring access to IVIG and continuity adequate amounts of IVIG products on
2006. of care in all practice settings. a consistent basis to meet their patients’
Response: As discussed earlier, we needs in the current marketplace. Most
Comment: We received many
believe that ASP data are reflective of brands of IVIG have been put on
comments that expressed concerns
present hospital acquisition costs for allocation by manufacturers, and some
about the proposed reductions in OPPS
separately payable drugs and biologicals manufacturers have reported allocating
payment rates for intravenous
under the OPPS. We believe this to be products to a smaller number of
immunoglobulin (IVIG) products.
true for IVIG as well. We therefore distributors and reducing the size of
Commenters requested that CMS make
cannot agree that it is appropriate to inventories. In addition, there have been
special consideration in its payment for make adjustments to the payment rates reports of diversion of products to the
IVIG due to the current access problems for IVIG based on past prices, as we secondary market and secondary
facing patients that rely on this have more current ASP data available distributors raising prices markedly.
lifesaving therapy. Commenters that reflect current market pricing for all The Secretary’s Advisory Committee on
indicated that payment at ASP+6 of the brands of IVIG. Blood Safety and Availability has
percent has not been adequate to permit With respect to establishing brand- recommended immediate steps be taken
the continued purchase and specific HCPCS codes for the different to ensure access to IVIG so that patients’
administration of IVIG in physician IVIG products, we note that the needs are being met. However, the
offices, infusion suites, and home care procedures for HCPCS coding complexity of the IVIG marketplace
settings, resulting in a shift of care to specifically reject brand-specific coding, makes it unclear what particular
hospitals. Consequently, hospitals have and we do not see a compelling reason systematic approaches would be most
been overburdened by the increase in to override that standard. For further effective in addressing the many
demand for IVIG, which has not been discussion of HCPCS coding, see http: individual circumstances that have been
easily accessible. The commenters //www.cms.hhs.gov/medicare/hcpcs/ shared with us while not exacerbating
indicated that CMS’ goal in setting codpayproc.asp. Finally, we note that in what appears to be a temporary
payment rates for IVIG should be to CY 2006 the OPPS and physician offices disruption in the marketplace.
ensure that patients have access to all will both be paid based on the most IVIG is a complicated biological
brands of IVIG in all sites of care. recently available quarter’s ASP data, product that is purified from human
Commenters requested that CMS use with implementation of payment rate plasma obtained from human plasma
any and all authority and flexibility to changes in both systems on the same donors. Its purification is a complex
address the existing payment problems date. As noted earlier, effective January process that occurs along a very long
that will arise if the proposed OPPS 1, 2006 we will base payment rates for timeline, and only a small number of
payment rates for IVIG are implemented all separately payable drugs and manufacturers provide commercially
and recommended several actions. In biologicals under the OPPS on ASP data available products. Historically,
order of priority, commenters’ from the third quarter of CY 2005, numerous factors, including decreased
recommendations were to: (1) Provide a which will also be the basis for setting manufacturing capacity, increased
proxy add-on payment rate for IVIG payment rates for drugs and biologicals usage, more sophisticated processing
when determining the CY 2006 payment in the physician office setting effective steps, and low demand for byproducts
levels; (2) in the absence of a proxy add- January 1, 2006. After considering these from IVIG fractionation have affected
on, apply the 15-percent dampening factors, we are finalizing our proposal to the supply of IVIG. For CY 2006, there
provision proposed for device- pay for IVIG under the OPPS at ASP+6 are two HCPCS codes that describe all
dependent APCs to determine the CY percent for CY 2006, the same payment IVIG products, based on their
2006 payment rates for IVIG; (3) rate as in the physician office setting. lyophilized versus liquid preparation.
establish unique HCPCS codes for each We will, however, continue to work The recent patterns of utilization of
brand of IVIG and set their payment with the IVIG community, IVIG also are unusual in comparison
rates on the ASP data specific to each manufacturers, Congress, and other with most other drugs and biologicals.
product; (4) classify IVIG as a biologic entities to seek better understanding of Different IVIG products are FDA-
response modifier and pay its the supply and market issues approved in a number of therapeutic
administration through a high influencing the current IVIG areas for various specific conditions,
complexity intravenous infusion APC; environment. We have discussed the which include: Anti-infective therapy
and (5) exclude prompt pay discounts accuracy of the ASP data with the (bone marrow transplant); immune
globulin replacement therapy (primary around efforts to ensure that IVIG is according to product availability and
immune deficiencies and chronic responsibly utilized for evidence-based patients’ needs, and implement
lymphocytic leukemia); anti- clinical indications so that optimal physicians’ determinations regarding
inflammatory therapy (Kawasaki benefit is obtained. whether the available formulations are
disease); and immunomodulation Based on the potential access appropriate for patients and whether
therapy (idiopathic thrombocytopenic concerns, the growing demand for IVIG, specific dosing adjustments are
purpura). IVIG therapy, which has been and the unique features of IVIG detailed required. Product-specific factors must
available for about 25 years, was above, as well as our move to an ASP be evaluated in light of patients’ clinical
initially reserved for the treatment of payment methodology for IVIG in the indications for the IVIG infusions, their
these FDA-approved indications. More OPPS for CY 2006, as we seek to gain underlying medical conditions, and
recently, IVIG has been increasingly improved understanding of the their past reactions to various IVIG
used off-label so that off-label uses now contemporary, volatile IVIG marketplace products, and hospital staff must locate
significantly exceed on-label uses. Many we will employ a two-pronged approach appropriate doses of IVIG products in
of these off-label uses are for during CY 2006 to help ensure the light of these considerations. If the
autoimmune, neurological, or systemic availability of IVIG to physicians and appropriate IVIG product formulations
inflammatory conditions. Some off-label hospital outpatient departments who were more widely and reliably
uses of IVIG are supported by a robust care for Medicare beneficiaries and will available, we do not believe that routine
evidence base, while for other medical be paid ASP+6 percent for the IVIG IVIG infusions would require these
conditions the evidence has not products. extensive preadministration-related
demonstrated that IVIG infusions are of First, in addition to ongoing services prior to each infusion.
significant therapeutic benefit. In monitoring and outreach activities To continue to ensure appropriate
addition, despite the growing uses of within the Department of Health and patient access to IVIG in CY 2006 during
IVIG there are definite risks associated Human Services, the Office of the this short-term period of market
with IVIG treatment, including both Inspector General (OIG) is studying the instability for IVIG, beginning for dates
early inflammatory reactions and more availability and pricing of IVIG as part of service on or after January 1, 2006
rare but serious renal and of its monitoring of market prices
through December 31, 2006, we will
thromboembolic complications, as well pursuant to section 1847A(d)(2)(A). We
temporarily allow a separate payment to
as the inherent risk associated with expect the OIG’s work to provide a
hospitals to reflect the additional
receipt of any biological product even significant contribution to the analysis
resources that are associated with
with the ongoing improvements in the of the current situation with respect to
locating and acquiring adequate IVIG
safety of these types of products. the specific activities of manufacturers
products and preparing for an
and distributors that may be
Medicare currently has one national outpatient hospital infusion of IVIG in
contributing to possible access problems
coverage determination in place since the current environment. We expect that
for IVIG as we move to the ASP
CY 2002 regarding IVIG infusions to making separate payment for these
payment methodology in both physician
treat autoimmune blistering diseases, office and hospital outpatient settings. additional necessary services will help
and there are numerous local coverage We hope to understand those particular insure that hospitals are able continue
policies that describe Medicare coverage market behaviors that may have led to to provide IVIG infusions to their
for specific off-label indications. In the such public alarm about the availability patients who depend upon them. We
context of these national and local of IVIG and the adequacy of our will also provide an additional payment
coverage policies, IVIG use in hospital payment rate of ASP+6 percent, to physician offices for these special
outpatient departments has climbed concerns that have been particularly services, to ensure that patients
steeply over the most recent years for strong and persistent for IVIG in continue to have access to IVIG
which data are available, from about comparison with other drugs paid under infusions in the most medically
40,000 infusion days in CY 2002, to the same ASP methodology. appropriate settings, without
60,000 days in CY 2003, and again to Second, we will provide additional undesirable shifts in sites of service for
over 70,000 days in CY 2004. The payment in CY 2006. Presently the IVIG their care.
infusion of IVIG in physician offices marketplace is a dynamic one, where a Because the extra hospital resources
increased from about 2.3 million grams significant portion of IVIG products currently associated with the
in CY 2003 to 4.0 million grams in CY previously available in CY 2005 are preadministration-related services for
2004. In the face of growing demand for being discontinued and other products intravenous infusion of
IVIG in the absence of significant are expected to enter the market over immunoglobulin are not accounted for
changes in the prevalence of medical the next year. In light of this temporary in the CY 2004 hospital claims data
conditions for which there is high market instability, we understand that used to establish payments rates for the
quality evidence regarding the manufacturers have continued CY 2006 drug administration HCPCS
effectiveness of IVIG therapy, we are allocation procedures aimed at codes that will be billed for IVIG
concerned that all patients with medical stabilizing the supply of IVIG. Even so, infusions, we are creating a temporary
need for IVIG continue to have access to we understand that providers may face G-code to describe these additional
this expensive and valuable therapy. purchasing whichever brand of IVIG is preadministration services related to the
Over the upcoming year, we will be available, even if it is not a brand the intravenous infusion of
using our historical claims databases to patient is known to tolerate. Many immunoglobulin. We have established
study the epidemiology of IVIG patients treated with IVIG receive the following G-code for hospital
treatment of Medicare beneficiaries in regular infusions on a predictable outpatient billing for CY 2006:
outpatient settings. We expect that the schedule. To meet this need, hospital • G0332; Preadministration-related
health system as a whole should staff must conduct significant services for intravenous infusion of
encourage an accountable and preadministration services prior to IVIG immunoglobulin, per infusion
scientifically grounded use of IVIG, and infusions to monitor and manage their encounter (This service is to be billed in
we welcome discussions with industry, inventory, locate available IVIG conjunction with administration of
providers, and other interested entities products, reschedule infusions immunoglobulin.)
Hospitals may bill this service once and other interested entities; and this regarding the creation of permanent
per day in association with a patient temporary separate payment for hospital HCPCS codes; therefore, comments
encounter for administration of IVIG, in and physician office resources required related to the HCPCS code creation
addition to billing for the appropriate for the intensive preadministration process are outside the scope of this
drug administration service(s) and for services related to IVIG infusion, the rule.
appropriate units of the HCPCS code IVIG marketplace will stabilize over the Comment: One commenter was
that describes the IVIG product infused. upcoming year. Substantial concerned that where the ASP
In addition, hospitals may also bill for preadministration-related services for information does not exist, CMS will
any significant and separately IVIG infusions should no longer be use the CY 2004 hospital claims data,
identifiable evaluation and management required of physician offices and and with drug cost increases averaging
(E/M) service they perform at a level 2 hospital outpatient departments that 5 to 10 percent over the past two years,
through 5 in association with the provide IVIG infusions to patients who the payments would not be enough to
infusion encounter, appending modifier need them. Therefore, this additional cover the costs of providing these drugs.
–25 to the E/M service. We have payment for G0332 is effective for CY Response: We understand the
established the payment level for this 2006 only. Thus, we will be closely commenter’s concern. However, as we
service in outpatient hospital monitoring this issue once again in the stated in the proposed rule, until ASP
departments by crosswalking it to the context of our rulemaking for CY 2007. data are available for certain drugs and
payment level established for the Comment: One commenter requested biologicals, their payment rates will be
physician office for CY 2006. We believe that CMS provide separate payment for based on their mean costs derived from
that the hospital resources required for all magnetic resonance imaging contrast the CY 2004 claims data. We note that
HCPCS code G0332 should be very agents, including imaging agents with respect to items for which we
similar to the practice expense for this covered by HCPCS code Q9953. currently do not have ASP data, once
service in the physician office, and, Response: In CY 2006, the HCPCS their ASP data become available in later
because no physician work is included codes that will be used to describe quarter submissions, their payment rates
in the physician office payment for the magnetic resonance imaging contrast under the OPPS will be adjusted so that
new service, the HCPCS code G0332 agents are HCPCS codes Q9952 (Inj Gad- the rates are based on the ASP
payment rates in physician office and base MR contrast, ml), Q9953 (Inj Fe- methodology and set to ASP+6 percent.
hospital outpatient settings should be based MR contrast, ml) and Q9954 (Oral Therefore, we encourage the
generally comparable. HCPCS code MR contrast, 100 ml). In the proposed manufacturers of these drugs and
G0332 is a new service with no claims rule, we proposed to pay separately for biologicals to report their ASPs to CMS.
HCPCS code Q9952 and HCPCS code We received several public comments
history under the OPPS and we cannot
Q9954; however, we proposed to on the November 15, 2004 final rule
identify an appropriate clinical APC for
package HCPCS code Q9953 because we with comment period concerning issues
its assignment based on considerations
were not able to estimate its per related to payment for drugs and
of clinical and resource homogeneity. biologicals in CY 2005. For those issues
administration cost. For CY 2006, we
Therefore, we are assigning HCPCS code that have not already been addressed in
will be paying separately for HCPCS
G0332 to New Technology APC 1502 other sections of this preamble, below is
code Q9952 and HCPCS code Q9954, as
(status indicator ‘‘S’’) with a payment a summary of those comments and our
proposed. Additionally, we will provide
rate of $75 for CY 2006, based on a responses.
separate payment for HCPCS code
direct crosswalk to the New Technology Comment: One commenter stated that
Q9953 since we have now determined
APC that corresponds with the CMS incorrectly calculated a payment
its per day cost to be higher than $50 in
physician office CY 2006 payment of this final rule with comment period. rate of $6.60 per cm2 for the product
approximately $69. Comment: One commenter indicated Integra described by HCPCS code C9206
We believe that this temporary that WinRho SDF Liquid is a new (Collagen-Glycosaminoglycan Bilayer
separate payment provided through intravenous gamma globulin product Matrix, per cm2) and that the payment
HCPCS code G0332 in CY 2006 for the that recently received marketing rate was inappropriate in the OPPS
physician office and hospital outpatient clearance from the FDA, and that this setting. The commenter noted that
resources associated with additional product was created to replace the first Integra is provided in four sizes that are
IVIG preadministration-related services generation therapy, WinRho SDF. The appropriate for different clinical needs
due to the present significant commenter noted that WinRho SDF and settings, and the payment rate set
fluctuations in the IVIG marketplace Liquid does not require reconstitution, by CMS represented a single payment
will ensure that Medicare beneficiaries whereas WinRho SDF is a lyophilized rate based on the cost of the largest
depending on IVIG experience no product that requires reconstitution and package size used in the inpatient
adverse health consequences from the is described by HCPCS code J2792. setting. The commenter recommended
market instability for IVIG products. In According to the commenter, if WinRho that either three additional and separate
the meantime, we will continue to SDF Liquid is also assigned to HCPCS payment HCPCS codes be established
evaluate the market factors affecting the code J2792, then the OPPS payment in for the different sizes, with payment
pricing and availability of IVIG products CY 2006 is likely to be below the rates established according to their
in the context of our ASP+6 percent acquisition cost of this new product. different WACs, or that the payment rate
payment methodology and our separate Therefore, the commenter requested that for Integra be based on the costs of the
payment for HCPCS code G0332 in CY CMS establish separate codes to smallest packaging sizes, which are the
2006. We expect that in CY 2006 with distinguish between the liquid and ones used in the hospital outpatient
continued collection of updated ASP lyophilized forms of Rho D Immune department. In addition, the commenter
data for IVIG; improved understanding Globulin. recommended that the unit descriptor
of the IVIG marketplace; more focused Response: We recognize the for HCPCS code C9206 be changed to 25
attention on the medical necessity of the commenter’s concern about payment for cm2 so that it is consistent with the
utilization of IVIG; ongoing this new intravenous gamma globulin descriptors of the CPT codes used with
collaboration between CMS, the IVIG product under the OPPS. The National this product and also so that it is
community, manufacturers, providers, HCPCS Panel coordinates decisions convenient and easy to apply for
hospital personnel inputting codes on the change to HCPCS code J3396 will support CMS’ proposal not to apply an
claim forms. not impact providers’ ability to equitable adjustment to the payment
Response: Effective January 1, 2005, accurately bill for their use of this rate for darbepoetin alfa in CY 2006. For
HCPCS code C9206 (Collagen- medication. example, the commenter noted that new
Glycosaminoglycan Bilayer Matrix, per Response: Decisions regarding the clinical data demonstrate that
cm2) was created to describe Integra. To creation of permanent HCPCS codes are darbepoetin alfa and epoetin alfa
accommodate the different package coordinated by the National HCPCS achieve comparable clinical outcomes at
sizes that currently exist or may enter Panel. Comments related to the HCPCS comparably priced doses. By applying
the market in the future, our policy is code creation process and decisions the proposed payment rates for doses of
to create a HCPCS code descriptor based made by the National HCPCS Panel are the two drugs based on current clinical
on the lowest possible dosage or size of outside the scope of this rule. guidelines and validated randomized
the product; therefore, we assigned a In CY 2005, we applied an equitable controlled trials, the commenter
unit of cm2 to HCPCS code C9206. The adjustment to determine the payment concluded that overall Medicare and
payment rate of $6.60 per cm2 for this rate for darbepoetin alfa (HCPCS code beneficiary spending would decrease for
biological was calculated using the Q0137) pursuant to section 1833(t)(2)(E) similar clinical outcomes with the use
standard methodology used to of the Act. However, for CY 2006, we of darbepoetin alfa rather than epoetin
determine the payment rates for drugs proposed to establish the payment rate alfa. In addition, the commenter
and biologicals in the physician office for this biological using the ASP highlighted that applying an equitable
setting, where for drugs and biologicals methodology. The ASP data represent adjustment to the payment rate for
without an ASP, our methodology market prices for this biological; darbepoetin alfa in CY 2006 would, in
prescribes the use of the lesser of the therefore, we believe it is appropriate to fact, increase Medicare and beneficiary
median WAC for all sources of the use the ASP methodology to establish spending on darbepoetin alfa. This
generic forms of the product or the payment rates for darbepoetin alfa commenter also recommended that if
brand name product with the lowest because this method will permit market CMS plans to utilize its equitable
WAC. Therefore, because Integra is a forces to determine the appropriate adjustment authority again, then the
brand name product with four different payment for this biological. We conversion ratio should be increased to
package sizes and prices, we set the specifically requested comments on the 400:1 to reflect the results of a new
payment rate for HCPCS code C9206 at proposed payment policy for this clinical study that proves the clinical
$6.60, which was the lowest WAC per biological. comparability of darbepoetin alfa and
cm2. This payment rate was in effect We received several public comments epoetin alfa at such a dosing ratio.
during the first quarter of CY 2005. We on our proposal. One commenter on this topic also
note that the payment rates for C9206 Comment: A number of commenters provided detailed results of clinical
for the second quarter of CY 2005 and expressed concern about our proposal to studies that the commenter believes
following quarters were based on 106 establish payment for both epoetin alfa provide a strong rationale for continuing
percent of its ASP, based on the ASP (marketed under the trade name of the equitable payment adjustment for
methodology for drugs furnished in the Procrit ) and darbepoetin alfa darbepoetin alfa and demonstrate that
physician office setting on or after (marketed under the trade name of the appropriate conversion ratio for
January 1, 2005. We note that for CY Aranesp) using the ASP methodology. making this adjustment is less than or
2006, HCPCS code C9206 has been Several commenters urged CMS to equal to 260:1. The commenter stated
deleted and replaced with the implement this proposal so that a that Medicare and beneficiary spending
permanent HCPCS code J7343. market-oriented, ASP-based payment for these two drugs under the proposed
Comment: One commenter requested system can function as the Pub.L. 108– payment policy for CY 2006 will be
that CMS revise the first quarter CY 173 intended without any arbitrary higher in order to achieve comparable
2005 ASP rate for HCPCS code J0180 government interference. In addition, therapeutic effects unless CMS
(Injection, agalsidase beta, 1 mg) from one of the commenters indicated that maintains the equitable adjustment
$121.12 to $121.14 because it believes this policy would promote appropriate policy and re-establishes a conversion
that CMS made an error in the patient and physician choice in making ratio that is less than or equal to 260:1.
weighting of the different ASP figures health care decisions. One of the Response: We appreciate the many
provided to CMS for the two National commenters supported the proposal to thoughtful and detailed comments on
Drug Codes for this product. establish a payment rate for darbepoetin our proposed CY 2006 payment rates for
Response: The methodology used to alfa using the ASP methodology and to darbepoetin alfa and epoetin alfa. Based
establish the ASP-based payment rates discontinue application of an equitable on our ASP market price data from the
for drugs and biologicals is discussed in adjustment to its payment rate. This second quarter of CY 2005 for these two
the CY 2006 Medicare Physician Fee commenter also stated that CMS drugs, we observed that the payment
Schedule final rule. Therefore, we will accurately noted in the CY 2006 rates for epoetin alfa and darbepoetin
not respond to this comment since it is proposed rule that ‘‘the ASP data alfa would decrease by similar levels in
outside the scope of this rule. represent market prices for this CY 2006 from their current CY 2005
Comment: One commenter expressed biological,’’ and that using the ASP payment rates. Payment for epoetin alfa
concern about the creation of the new methodology to establish the CY 2006 would decrease by 17 percent and
HCPCS code J3396 (Injection, OPPS payment rate for darbepoetin alfa payment for darbepoetin alfa would
verteporfin, 0.1 mg) in CY 2005 for ‘‘will permit market forces to determine decrease by 18 percent. In CY 2006, if
verteporfin and the deletion of HCPCS the appropriate payment for this we continued the CY 2005 equitable
code J3395 (Injection, verteporfin, 15 biological.’’ Therefore, the commenter adjustment policy of determining the
mg). The commenter stated that the new reasoned that an equitable adjustment is payment rate for darbepoetin alfa using
code will create confusion among not needed in CY 2006 since payments a conversion ratio of 330 Units of
providers and urged CMS to reinstate for all separately payable drugs and epoetin alfa to 1 microgram of
HCPCS code J3395 for use with biologicals will be based on market darbepoetin alfa (330:1), then the
verteporfin injections and/or to clarify prices. The commenter also provided payment rate for darbepoetin alfa would
and implement measures to ensure that clinical and economic data to further decrease by 17 percent, the same rate of
change as that for epoetin alfa. conversion ratio is also well within the hospital mean per day costs for the three
Following the payment methodology range of the conversion ratios that may A-codes exceeded the packaging
described earlier for separately payable be supported by the available clinical threshold and our payment policy for
drugs and biologicals where payment data. We therefore do not believe that new codes without predecessors applied
for their acquisition and overhead costs there is sufficient clinical evidence to to one of the new codes, we proposed
would be equal to ASP+6 percent in CY indicate that we should specifically to pay for the HCPCS codes Q9945
2006, the payment rate for epoetin alfa employ our equitable adjustment through Q9951 separately in CY 2006 at
would be $9.22 per 1000 Units and the authority to adjust the payment rate for payment rates calculated using the ASP
payment rate for darbepoetin alfa would darbepoetin alfa in CY 2006. By methodology. We noted that because the
be $3.01 per microgram. However, if we finalizing this payment policy new Q-codes describing LOCM were
applied the CY 2005 conversion ratio of specifically for the CY 2006 OPPS, more descriptively discriminating and
330:1, the payment rate for darbepoetin based on our latest payment rate had different units than the previous A-
alfa would be $3.04 per microgram. analysis and independent review of the codes for LOCM, as well as widely
In determining our payment policy for recent clinical literature, it is not our varying ASPs, we expected that the
darbepoetin alfa in CY 2006, we intention to preclude the use of a packaging status of these Q-codes might
reviewed the results of the many recent conversion ratio to establish the OPPS change in future years when we have
clinical studies that were provided in payment rates for epoetin alfa and specific OPPS claims data for these new
the comments. We independently darbepoetin alfa in the future. Rather, as codes. We specifically invited
assessed the methodological rigor of the long as the market price for darbepoetin comments on our proposed policy to
study designs and the generalizability of alfa is consistent with a payment rate pay separately for LOCM described by
the results of the various studies. This derived using a clinically appropriate HCPCS codes Q9945 through Q9951 in
assessment included the conversion ratio, invoking our equitable CY 2006.
adjustment authority would not lead to We received several public comments
appropriateness and comparability of
a different result. However, we retain in response to our request.
the sizes and characteristics of the Comment: Several commenters
subject groups, the duration of the trials, our authority to apply an equitable
adjustment in the future to determine supported CMS’ proposal to pay
the administered doses of the separately for LOCM using HCPCS
investigational agents, the drop out rates the payment rate for darbepoetin alfa
pursuant to section 1833(t)(2)(E) of the codes Q9945 through Q9951, indicating
in the treatment arms, and the that this policy will help to protect
consideration of other possible causes of Act. We will once again assess the need
to exercise this authority when we next beneficiary access to the most
study bias. With the limitations of the appropriate therapies. The commenters
studies supporting either an increase or update the payment rates under the
believed that this change would
a decrease in the conversion factor, the OPPS based on the latest available
promote consistency across sites of
quality and quantity of the currently clinical evidence on the appropriate
services. A comment from a
available published evidence do not conversion ratio and based on the actual
manufacturer of contrast agents
provide sufficient, clear evidence to pricing experience at that time.
expressed concern about the use of the
support a change in the appropriate Effective April 1, 2005, several new Q-codes for LOCM and the
conversion factor at this time. HCPCS codes were created to describe corresponding ASP payment
Methodological shortcomings included various concentrations of low osmolar methodology to determine their
insufficient sample sizes, excessive contrast material (LOCM). These new payment rates. The commenter noted
dropout rates, inadequate study codes are HCPCS codes Q9945 through that the proposed payment rates for the
duration, and failure to adequately Q9951. However, in Transmittal 514 contrast media codes increase as the
account for confounding effects. Some (April 2005 Update of the OPPS), we iodine or active material concentration
studies have yet to be published as full, instructed hospitals to continue decreases and believed that the coding
peer-reviewed journal articles; abstracts reporting LOCM in CY 2005 using the tiers adopted by CMS do not
do not provide sufficient detail for our existing HCPCS codes A4644, A4645, appropriately categorize the various
review. Overall, the results of these and A4646 and made Q9945 through media products. The commenter was
clinical studies were not consistent or Q9951 not payable under the OPPS. For also concerned that such a payment
conclusive in defining a single, different CY 2006, we proposed to activate the scheme might be a perverse incentive
conversion ratio for dosing between new Q-codes for hospitals and for hospitals to use a lower
these two products, particularly with discontinue the use of HCPCS codes concentration LOCM in diagnostic
respect to the timing of specific doses of A4644 through A4646 for billing LOCM imaging procedures in order to qualify
the two drugs required to achieve products. We have CY 2004 hospital for higher payment rates or motivate
several different meaningful clinical claims data for HCPCS codes A4644 clinically unnecessary and potentially
outcomes. The results of contemporary through A4646, which show that the dangerous switches in contrast media
clinical studies demonstrated that a mean costs per day for these products selections. The commenter
wide range of conversion ratios could be are greater than $50. Because we did not recommended that CMS review whether
considered, and these ratios varied by a have CY 2004 hospital claims data for an alternative payment mechanism
factor of two or more depending on the HCPCS codes Q9945 through Q9951, we would be more appropriate for LOCM
specific study design, the measured crosswalked the cost data for the HCPCS and proposed a revised version of the Q-
clinical outcomes, and the treated A-codes to the new Q-codes. There is no code classifications for LOCM.
patient populations. As we have noted predecessor code that crosswalks to Response: We appreciate the
above, the payment rate for darbepoetin HCPCS code Q9951 for LOCM with a commenters’ support of our proposal to
alfa at ASP+6 percent ($3.01 per concentration of 400 or greater mg/ml of implement new HCPCS codes for LOCM
microgram) is slightly lower than but iodine. Therefore, we proposed that our in CY 2006 and pay for them separately.
consistent with the payment rate for general payment policy of paying In the final rule, the payment rates for
darbepoetin alfa using the 330:1 separately for new codes while hospital these codes are based on their market
conversion ratio ($3.04 per microgram) data are being collected would apply to prices from the second quarter of CY
that we established in CY 2005. This HCPCS code Q9951. As our historical 2005, and we believe that the ASP-based
rates appropriately reflect the adversely affect beneficiary access to the effect of cost compression using a
acquisition and pharmacy overhead services utilizing radiopharmaceuticals. CCR method, stating that the proposed
costs of these products under each of As we did not have ASPs for methodology will result in
the HCPCS codes. Decisions regarding radiopharmaceuticals that best represent underpayment for more expensive
the creation of permanent HCPCS codes market prices, we proposed as a radiopharmaceuticals. The commenters
are coordinated by the National HCPCS temporary 1-year policy for CY 2006 to noted that because hospitals do not tend
Panel. We suggest that commenters who pay for radiopharmaceuticals that were to maintain a constant CCR, as
have concerns about the new Q-codes separately payable in CY 2006 based on radiopharmaceutical costs increase, the
for LOCM should pursue appropriate the hospital’s charge for each differences between actual costs and the
changes through the process set up by radiopharmaceutical agent adjusted to CMS derived costs increase
the National HCPCS Panel to establish cost. As we noted in the proposed rule, exponentially. One commenter
HCPCS codes. MedPAC has indicated that hospitals suggested that CMS address this issue
currently include the charge for by establishing a national and unique
(4) CY 2006 Proposed and Final pharmacy overhead costs in their charge
Payment Policy for CCR for radiopharmaceuticals during
for the radiopharmaceutical. Therefore, CY 2006, which could more accurately
Radiopharmaceutical Agents we also noted in the proposed rule that account for radiopharmaceutical
We do not have ASP data for paying for these items on the basis of handling and overhead costs, while a
radiopharmaceuticals. Therefore, for CY charges converted to cost would be the few other commenters recommended
2006, we proposed to calculate per day best available proxy for the average that CMS facilitate hospital reporting of
costs of radiopharmaceuticals using acquisition cost of the
mean unit costs from the CY 2004 accurate charges for
radiopharmaceutical along with its
hospital claims data to determine the radiopharmaceuticals by clarifying
handling cost until we received ASP
items’ packaging status similar to the exactly which cost-to-charge ratio
and overhead information on these
drugs and biologicals with no ASP data. would apply to each hospital to
agents. We noted that we expected
In a separate report, the GAO provided calculate the hospital outpatient
hospitals’ different purchasing and
CMS with hospital purchase price payment for radiopharmaceuticals in CY
preparation and handling practices for
information for nine 2006. Another commenter suggested
radiopharmaceuticals to be reflected in
radiopharmaceuticals. As part of the that CMS provide a template that
their charges, which would be
GAO survey described earlier, the GAO hospitals may use to prepare their
converted to costs using hospital-
surveyed 1,400 acute-care, Medicare- specific CCRs. To better identify the claims for radiopharmaceuticals,
certified hospitals and requested separately payable including handling and other costs, and
hospitals to provide purchase prices for radiopharmaceuticals to which this provide instructions to fiscal
radiopharmaceuticals from July 1, 2003 policy would apply, we proposed to intermediaries regarding the
to June 30, 2004. The assign them to status indicator ‘‘H.’’ We implementation of this policy. One of
radiopharmaceutical part of the survey specifically requested public comment the commenters suggested that CMS
yielded a response rate of 61 percent, on the proposed payment policy for recognize the general reasonable
where 808 hospitals provided usable separately payable concern regarding using the hospital-
information. The GAO reported the radiopharmaceuticals in CY 2006. specific overall cost-to-charge
average and median purchase prices for We received many comments on this methodology for highly expensive
nine radiopharmaceuticals for the proposal. radiopharmaceuticals, and identified 19
period July 1, 2003, to June 30, 2004. Comment: Numerous commenters radiopharmaceuticals with hospital
These items represented 9 percent of the expressed concern about our proposal to acquisition costs per patient study
Medicare spending for specified covered pay for separately payable greater than $500, for which it
outpatient drugs during the first 9 radiopharmaceuticals at hospitals’ recommended that CMS use external
months of CY 2004. The report noted charges converted to cost in CY 2006. data to verify and pay based on invoice
that the purchase price information Most of the commenters generally acquisition costs plus handling fees, or
accounted for volume and other supported the proposed payment freeze the CY 2005 payment rates for
discounts provided at the time of methodology for radiopharmaceuticals these radiopharmaceuticals, or both.
purchase, but excluded subsequent in CY 2006. However, several of the Other commenters suggested limiting
rebates from manufacturers and commenters noted their belief that this decreases in payment rates for
payments from group purchasing methodology may trigger drastic separately payable
organizations. decreases in the payment rates for radiopharmaceuticals from CY 2005 to
When we examined differences certain items based on their review of CY 2006, including (1) establishing a
between the CY 2005 payment rates for hospital charge data for these agents. payment floor during CY 2006, based on
these nine radiopharmaceutical and Some of the commenters urged CMS to an appropriate percentage of the CY
their GAO mean purchase prices, we consider refining the methodology for 2005 payment rate for specific
found that the GAO purchase prices CY 2006 and offered several options. radiopharmaceuticals; (2) ensuring that
were substantially lower for several of Several commenters recommended that the resultant payment rate for each
these agents. We also found similar CMS utilize hospital-specific overall product in CY 2006 does not fall below
patterns when we compared the CY CCRs, rather than departmental CCRs, the level identified in the GAO data or,
2005 payment rates for indicating that overall CCRs were more if GAO data were unavailable, that the
radiopharmaceuticals with their CY reflective of hospitals’ overall charges payment not be less than 95 percent of
2004 median and mean costs from and that department-specific CCRs the CY 2005 payment rate for the
hospital claims data. In the proposed would fail to convert charges for product; and (3) ensuring that payments
rule, we indicated that our intent was to radiopharmaceuticals to ‘‘average’’ for these products do not fall below 95
maintain consistency, whenever acquisition costs, resulting in percent of their CY 2005 rates. One
possible, between the payment rates for significantly lower payments than the commenter, to the contrary, indicated
these agents from CY 2005 to CY 2006, CY 2005 levels. Some of the that while the concerns of other
because such rapid reductions could commenters expressed concern about commenters advocating a payment floor
under the proposed methodology for CY for items properly so that charges Y–90 ibritumomab tiuxetan,
2006 are understandable, CMS should converted to costs can appropriately therapeutic, per treatment dose, up to 40
not implement a floor in addition to account fully for their acquisition and millicuries) for services furnished on or
implementing a CCR approach for overhead costs. The specific payment after January 1, 2006.
payment. This commenter noted that rates for separately payable Comment: One commenter
there were variations in the cost data radiopharmaceuticals are not being recommended that HCPCS code G3001
reported by hospitals in their charge determined on a prospective basis in CY (Administration and supply of
reports, and it was important that 2006 because hospitals will receive a tositumomab, 450 mg), currently
hospitals, as well as manufacturers, be newly calculated payment for each applicable to both doses of the non-
encouraged to report accurately to CMS claim submitted for a separately payable radioactive component of therapy and
and that setting an artificial payment radiopharmaceutical, based on the its administration, be amended to apply
floor reduces hospitals’ incentives to do specific radiopharmaceutical charge on only to the non-radioactive component
so. The commenter further stated that that claim and the applicable overall of the regimen. The commenter also
because the proposed policy already hospital CCR. Therefore, if necessary we recommended that hospitals should be
would provide hospitals with an believe that hospitals can appropriately allowed to use CPT code 90784 for the
opportunity to report charges accurately adjust their charges for administration of the non-radioactive
for each claim, there was no need for radiopharmaceuticals so that the component of BEXXAR and HCPCS
CMS to provide any additional calculated costs properly reflect their code G3001 to reflect the supply of
safeguards to ensure sufficient payment actual costs. Specifically, it is tositumomab, thus allowing hospitals to
and that hospitals would already have appropriate for hospitals to set charges identify the non-radioactive product
the ability to receive appropriate for these agents in CY 2006 based on all accurately in their claims with a
payment by reporting appropriate costs associated with the acquisition, familiar product code and receive
charges for these agents in their claims. preparation, and handling of these appropriate payment for the infusion of
Lastly, several of the commenters products so that their payments under the product. Consequently, the
indicated that CMS incorrectly stated the OPPS can accurately reflect all of commenter strongly urged CMS to retain
that overhead costs for the actual costs associated with HCPCS code G3001 as a product-only
radiopharmaceuticals are included in providing these products to hospital code, so that these facilities can
the hospital charges for the outpatients. We believe that payment for continue to provide treatment to
radiopharmaceuticals. One commenter these items using charges converted to Medicare beneficiaries.
stated that some hospital costs costs will be the best available proxy for Response: As we had stated in the
associated with radiopharmaceutical the average acquisition costs of the November 7, 2003 final rule with
purchase and use are captured in radiopharmaceuticals along with their comment period for CY 2004 (68 FR
hospital charges. However, the handling costs and that no additional 63443), unlabeled tositumomab is not
preparation, distribution, dampening based on historical payment approved as either a drug or a
administration, and safe disposal of rates is necessary to pay appropriately radiopharmaceutical, but it is a supply
radiopharmaceuticals, along with labor for radiopharmaceuticals. Therefore, for that is required as part of the Bexxar
costs and necessary patient and hospital CY 2006, we are finalizing the proposed treatment regimen. We do not make
staff protection costs, are not uniformly policy to pay for radiopharmaceuticals separate payment for supplies used in
and accurately reflected in hospital that are separately payable based on the services provided under the OPPS.
charges. These commenters urged CMS hospital’s charge for each Payments for necessary supplies are
to provide hospital outpatient radiopharmaceutical adjusted to cost. packaged into payments for the
departments with clear guidance on the We note that we will not be indicating separately payable services provided by
array of costs associated with exactly which cost-to-charge ratio will the hospital. Administration of
radiopharmaceutical acquisition and apply to each hospital, as the fiscal unlabeled tositumomab is a complete
handling that should be appropriately intermediaries determine those values. service that qualifies for separate
included in their charges for We also note that we have never payment under its own APC. This
radiopharmaceuticals, so that payments provided such information in previous complete service is currently described
and data in CY 2006 accurately reflect years for pass-through devices and by HCPCS code G3001. Therefore, we
hospital acquisition and pharmacy brachytherapy sources which are also do not agree with the commenter’s
overhead costs for each paid under the same methodology. As recommendation that we assign a
radiopharmaceutical. One commenter indicated in the proposed rule, we are separate code to the supply of unlabeled
also noted that an additional payment assigning all radiopharmaceuticals that tositumomab. Rather, we will continue
for overhead and handling of will be separately payable in CY 2006, to make separate payment for the
radiopharmaceuticals should be made to which this policy will apply, status administration of tositumomab, and
because these costs are not captured in indicator ‘‘H’’ in Addendum B of this payment for the supply of unlabeled
charges for the radiopharmaceuticals. final rule with comment period. tositumomab is packaged into the
Response: We appreciate the Comment: A commenter indicated administration payment.
commenters’ support of our proposed that the OPPS Final Rule should reflect Comment: One commenter suggested
payment policy for separately payable the use of HCPCS code A9523, rather that CMS establish HCPCS descriptors
radiopharmaceuticals in CY 2006. As than HCPCS code C1083, to describe the based on ‘‘per dose’’ units for
recommended by several commenters, imaging agent in the Zevalin therapeutic radiopharmaceuticals, indicating that
in this final rule with comment period, regimen in the event that the HCPCS such a policy would help facilitate a
we are using hospital-specific overall Committee modifies the HCPCS smoother transition as CMS moves to
CCRs to derive the costs of these items descriptor of HCPCS code A9523 to establish payments for
from the hospitals’ reported charges. We reflect a per dose unit. radiopharmaceuticals based on average
acknowledge the commenters’ concerns Response: We note that HCPCS codes acquisition costs and pharmacy
about the use of the CCRs resulting in C1083 and A9523 will be deleted on handling APCs.
cost compression. We believe that December 31, 2005 and replaced with Response: For CY 2006, the National
hospitals have the ability to set charges the new HCPCS code A9543 (Yttrium HCPCS Panel has changed the
descriptors of many of the radiopharmaceuticals because we do not costs associated with this practice could
radiopharmaceutical product to indicate pay for any of the radiopharmaceuticals be difficult to capture through ASP
per dose units. The new CY 2006 using the ASP methodology. However, reporting. We invited very specific
HCPCS codes and their descriptors can for CY 2006, we proposed to begin comments on these and all other
be found on the HCPCS Web site at collecting ASP data on all relevant issues surrounding
http://www.cms.hhs.gov/medicare/ radiopharmaceuticals for purposes of implementation of ASP reporting for
hcpcs/. The payment status indicators ASP-based payment of radiopharmaceuticals.
associated with these codes can be radiopharmaceuticals beginning in CY We received numerous public
found in Addendum B of this final rule 2007. comments on our proposal to begin
with comment period. As we had stated in the November 7, collecting ASP data on all
Comment: One commenter suggested 2003 final rule with comment period for radiopharmaceuticals for purposes of
that CMS require hospitals to report CY 2004 (68 FR 42728), in the CY 2006 ASP-based payment of
HCPCS codes and charges for all proposed rule we recognized that there radiopharmaceuticals beginning in CY
radiopharmaceuticals to facilitate are significant complex issues 2007.
accurate data collection and help ensure surrounding the reporting of ASPs for Comment: Many commenters
that the costs and charges of radiopharmaceuticals. Most provided detailed discussions of the
radiopharmaceuticals (as well as the radiopharmaceuticals must be policy, including practical and legal
associated handling costs) are compounded from a ‘‘cold kit’’ challenges related to our proposal to
considered in establishing payment containing necessary nonradioactive require ASP reporting for
rates under the OPPS. Another materials for the final product to which radiopharmaceuticals in CY 2006. Some
commenter commended CMS for a radioisotope is added. There are of these commenters indicated that
clarification and education provided to critical timing issues, given the short radiopharmaceuticals are formulated,
hospitals regarding the importance of half-lives of many radioisotopes used distributed, compounded, and
coding and reporting charges for for diagnostic or therapeutic purposes. administered in unique distribution
radiopharmaceuticals and encouraged Significant variations in practices exist channels that preclude the
CMS to continue to remind hospitals to with respect to what entity purchases determination of ASP relevant to a
report charges regardless of N, K, or H the constituents and who then radiopharmaceutical HCPCS code by the
status indicators assigned to the compounds the radiopharmaceutical to manufacturer. Most
radiopharmaceuticals, as these charges develop a final product for radiopharmaceuticals are typically
have a key role in setting future APC administration to a patient. For formed from two or more components.
rates and assignment of appropriate example, manufacturers may sell the Thus, one manufacturer does not know
status indicators. components of a radiopharmaceutical to if a hospital combining individual
Response: We will continue to independent radiopharmacies. These components to generate the end
strongly encourage hospitals to report radiopharmacies may then sell unit or product, a patient dose, uses exclusively
charges for all drugs, biologicals, and multi-doses to many hospitals. the manufacturer’s raw materials, or
radiopharmaceuticals using the correct However, some hospitals also may instead combines raw materials from
HCPCS codes for the items used, purchase the components of the more than one manufacturer. In this
including the items that have packaged radiopharmaceutical and prepare the case, the manufacturer has no way to
status in CY 2006. We agree with the radiopharmaceutical themselves. In calculate the ASP of the end product
commenters, that a robust set of claims some cases, hospitals may generate the patient dose, as the manufacturer only
for each packaged or separately payable radioisotope on-site, rather than knows the sales prices of its own
item paid under the OPPS aids in purchasing it. The costs associated with components. Consequently,
obtaining the most accurate data for acquiring the radiopharmaceutical in radiopharmaceutical manufacturers
future packaging decisions and rate- these instances may vary significantly. could not in good faith sign CMS
setting. In the CY 2005 final rule, we In addition, there may only be required ASP-reporting certifications as
noted that, with just a very few manufacturer pricing for the they generally have no knowledge or
exceptions, hospitals appeared to be components. However, the price set by access to end product unit prices. In
reporting charges for drugs, biologicals the manufacturer for one component of addition, the components may be
and radiopharmaceuticals using the a radiopharmaceutical may not directly combined to generate a vial of
existing HCPCS codes, even when such translate into the acquisition cost of the radiopharmaceutical from which
items had packaged status (69 FR ‘‘complete’’ radiopharmaceutical, which multiple patient doses can be drawn.
65811). Therefore, we do not believe it may result from the combination of Pricing for a patient unit dose would
is necessary to institute a coding several components. In general, for thus vary, depending on how many
requirement for drugs, biologicals, and drugs other than radiopharmaceuticals, patient doses are drawn from a vial.
radiopharmaceuticals in CY 2006 as we the products sold by manufacturers with Commenters also noted that a
are currently doing for device category National Drug Codes (NDCs) correspond significant proportion of
codes required to be reported when directly with the HCPCS codes for the radiopharmaceuticals are sold as
used in procedures. products administered to patients so components to independent
Section 303(h) of Pub. L. 108–173 ASPs may be directly calculated for the freestanding radiopharmacies or nuclear
exempted radiopharmaceuticals from HCPCS codes. In the case of pharmacies. These radiopharmacies
ASP pricing in the physician office radiopharmaceuticals, this 1 to 1 prepare patient unit doses, which are
setting where the fewer numbers relationship may not hold, potentially then purchased by hospitals. The
(relative to the hospital outpatient making the calculation of ASPs for manufacturer of the component may not
setting) of radiopharmaceuticals are radiopharmaceuticals more complex. know what the radiopharmacies’ prices
priced locally by Medicare contractors. In addition, some hospitals may are for a final unit dose product, and
However, the statute does not exempt generate their own radioisotopes, which may be precluded from accessing such
radiopharmaceutical manufacturers they then use for radiopharmaceutical information. Some of the commenters
from ASP reporting. We currently do compounding, and they may sell these indicated that if ASP reporting were
not require reporting for complete products to other sites. The imposed, it might require reporting from
commercial radiopharmacies, entities comment on the proposal before it is radiopharmaceutical payment

that are currently not subject to ASP finalized. alternatives to ASP reporting suggested
reporting. Most commenters urged CMS to by commenters as we develop our
Many commenters also questioned recognize the operational and statutory policies for the CY 2007 OPPS. We will
whether CMS has the legal authority to impediments to ASP reporting for continue to seek input and guidance
impose ASP reporting on radiopharmaceuticals and the inherent from hospitals, radiopharmaceutical
radiopharmaceutical manufacturers and difficulties in establishing the OPPS manufacturers, and other interested
the authority to implement payment for payments for these products based upon organizations as we contemplate
radiopharmaceuticals based on ASP. any ASP methodology. Rather than alternative payment methodologies for
They noted that Pub. L. 108–173 attempting to determine ASP for radiopharmaceuticals.
exempted radiopharmaceuticals from radiopharmaceuticals based on some Comment: Several commenters
the ASP-based payment methodology in manipulation of a hypothetical requested that for CY 2007 and future
physician offices. One of the radiopharmaceutical ASP, many years CMS carefully review and analyze
commenters stated that when Congress commenters urged CMS to consider radiopharmaceutical costs acquired in
exempted radiopharmaceuticals from continuation of the CCR methodology to CY 2006 and consider continuing the
the Pub. L. 108–173 provision pay for separately payable use of the CCR methodology for
modifying Part B payments for drugs radiopharmaceuticals using the overall payment, along with other possible
and biologicals furnished in the hospital-specific CCRs with some options. Some commenters suggested
physician office setting, it did so refinements in CY 2007, as this policy that CMS consider the impact to the
because of the unique nature and may generate combined hospital average payment system and the burden to
complexities associated with acquisition and overhead costs, hospitals to significantly change
radiopharmaceuticals rather than the consistent with statutory requirements. payment methods for
unique nature of the physician office One commenter suggested that CMS radiopharmaceuticals from year to year.
setting. Therefore, it was unlikely that consider all issues surrounding Other commenters encouraged CMS to
Congress intended for CMS to collect radiopharmaceutical acquisition, work in close consultation in the future
ASP data for radiopharmaceuticals that dispensing, and dosage before adopting with hospitals and manufacturers to
would be precluded from use in a Part any alternative payment mechanisms. help ensure that the costs of
B radiopharmaceutical payment Other commenters urged CMS to radiopharmaceuticals are properly
methodology. continue working with hospitals and captured in the OPPS rates beyond CY
Most of the commenters agreed that manufacturers to ensure that both short-
2006. One commenter stated that data
the variability and complexities term and long-term payment
from the GAO survey of hospital
associated with radiopharmaceuticals methodologies for radiopharmaceuticals
and their preparation make uniform acquisition costs could be one basis for
would sufficiently pay providers for
application of the ASP processes to acquiring information on which
medically necessary diagnostic tests and
products virtually impossible for CMS. national payment rates could be
therapies and generate valid and reliable
One commenter believed that it may be established. Another commenter
data to support future payment rates.
appropriate to pay hospitals for Response: We appreciate all of the recommended that CMS explore the
therapeutic radioimmunotherapies comments that we received on our possibility of treating radiotherapies
based on the same calculation for ASP proposal to begin ASP reporting for such as Bexxar and Zevalin differently
as used for physician-administered radiopharmaceuticals in CY 2006. We from traditional radiopharmaceuticals
pharmaceuticals. However, this recognize that there are many complex in order to preserve patient access to
commenter did not provide an opinion issues surrounding our ability to collect them.
on the applicability of the ASP accurate ASP data for these agents in CY Response: We appreciate receiving
methodology for diagnostic 2006. At this time, we agree with the these suggestions for establishing an
radiopharmaceuticals. Another commenters about the difficulties in appropriate payment methodology for
commenter suggested that ASP data translating ASP information gathered radiopharmaceuticals beyond CY 2006
could be adapted to the unique features from manufacturers regarding and will take all of the
of radiopharmaceuticals if CMS radiopharmaceutical raw materials into recommendations into consideration
considered collecting ASP data from individual patient doses of specific when we start developing our payment
independent radiopharmacies in radiopharmaceuticals, as described by proposal for radiopharmaceuticals for
addition to manufacturers. The particular HCPCS codes. As this the CY 2007 OPPS. Other payment
commenter noted that if CMS were to transitional step would be essential to options for radiopharmaceuticals that
use some form of ASPs for outpatient any future OPPS radiopharmaceutical we will also consider include basing
hospital radiopharmaceutical payments, payment methodology based on ASP payments on mean costs derived from
it must—(1) qualify manufacturer data, we are hesitant at this time to hospital claims data or creating charge-
reporting; (2) use a weighted average establish required ASP reporting for based payment rates for these items.
that includes manufacturer and radiopharmaceuticals, with its Another option would be to develop a
radiopharmacy ASP data; (3) work with accompanying administrative hospital payment methodology using
stakeholders to determine the complexities. Therefore, in this final the invoice data submitted to carriers
appropriate crosswalk between NDCs rule with comment period, we are not when radiopharmaceuticals are
and HCPCS codes; (4) conduct surveys adopting our proposal to require administered in physician offices. It is
of the relationships between end-user reporting of ASP data by not our intention to maintain the CY
acquisition costs at the HCPCS level radiopharmaceutical manufacturers in 2006 methodology of paying for
from independent radiopharmacies and CY 2006. Instead, we will continue to radiopharmaceuticals on the basis of
hospital radiopharmacies and the further explore the issues surrounding charges converted to costs permanently.
manufacturer-reported ASPs; and (5) ASP reporting and crosswalking ASPs to Rather, we will actively seek other
develop a specific proposal for reporting patient doses of radiopharmaceuticals. sources of information on
radiopharmaceutical ASPs In addition, we will take into radiopharmaceutical costs that might
appropriately and allow stakeholders to consideration other provide a basis for payment. We
welcome suggestions about such sources financial incentive to use a SCOD does not always increase any incentive
of data and alternative methodologies. instead of a packaged drug would be that otherwise may exist for a hospital
We discuss in section V.B.3.a.(5) of increased by the proposed method of to use a SCOD instead of a packaged
this preamble our CY 2006 proposed budget neutrality adjustment, creating drug.
payment policies for overhead costs of higher payments for hospitals that are
drugs, biologicals, and (5) MedPAC Report on APC Payment
relatively high users of SCODs and Rate Adjustment for Specified Covered
radiopharmaceuticals. In section V.D. of reducing payments for low users.
this preamble, we discuss the Outpatient Drugs
Another commenter supported the use
methodology that we proposed to use to of these rates for budget neutrality Section 1833(t)(14)(E) of the Act, as
determine the CY 2006 payment rates estimates and impact analysis. added by section 621(a)(1) of Pub. L.
for new drugs, biologicals, and 108–173, required MedPAC to submit a
Response: We understand MedPAC’s
radiopharmaceuticals. report to the Secretary, not later than
concern about our proposal to not scale
While payments for drugs, biologicals July 1, 2005, on adjusting the APC rates
the payment rates for separately payable
and radiopharmaceuticals are taken into for specified covered outpatient drugs to
drugs and biologicals. The statute
account when calculating budget take into account overhead and related
contains a general requirement (section
neutrality, we note that we proposed to expenses, such as pharmacy services
1833(t)(9)(B)) that changes to the APC
pay for the acquisition costs of drugs, and handling costs. This provision also
relative weights, APC groups, and other
biologicals, and radiopharmaceuticals required that the MedPAC report
adjustments ‘‘for a year may not cause include the following: a description and
without scaling these payment amounts.
the estimated amount of expenditures analysis of the data available for
We proposed not to scale these
under this part for the year to increase adjusting such overhead expenses;
payments because we believed that
or decrease.’’ We therefore apply a recommendation as to whether a
Congress, in section 621 of Pub.L. 103–
178, intended for payments for these budget neutrality adjustment, or scalar, payment adjustment should be made;
drugs to be based on average acquisition to the APC relative weights to satisfy and the methodology for adjusting
costs. Scaling these payments would this requirement. Section payment, if an adjustment is
mean that they are no longer based 1833(t)(14)(A)(iii)(I) requires that, recommended. Section 1833(t)(14)(E)(ii)
solely on acquisition costs. Therefore, at beginning in CY 2006, we pay for a of the Act, as added by section 621(a)(1)
the time of the proposed rule we separately payable drug on the basis of of Pub. L. 108–173, authorized the
believed that it was most consistent ‘‘the average acquisition cost of the Secretary to adjust the APC weights for
with the statute not to scale these drug.’’ We believe that the best specified covered outpatient drugs to
payment rates. In section V.B.3.a.(5) of interpretation of the specific reflect the MedPAC recommendation.
this preamble, we also discuss that we requirement that we pay for such drugs The statute mandates MedPAC to
proposed to add 2 percent of the ASP on the basis of average acquisition cost, report on whether drug APC payments
to the payment rates for drugs and is that these payments themselves under the OPPS should be adjusted to
biologicals with rates based on the ASP should not be adjusted as part of account for pharmacy overhead and
methodology to provide payment to meeting the statutory budget neutrality nuclear medicine handling costs
hospitals for pharmacy overhead costs requirement. If we were to apply the associated with providing specified
associated with furnishing these budget neutrality scalar to these covered outpatient drugs. In creating its
products. We proposed to scale these payments, we would no longer be framework for analysis, MedPAC
additional payment amounts for paying the average acquisition cost, but interviewed stakeholders, analyzed cost
pharmacy overhead costs. In the CY rather an adjusted average acquisition report data, conducted four individual
2006 proposed rule, we specifically cost, for separately payable drugs. For hospital case studies, and received
invited public comments on whether it CY 2006, as described earlier, we will be technical advice on grouping items with
was appropriate to exempt payment paying for the acquisition and overhead similar handling costs from a team of
rates for drugs, biologicals, and costs of drugs and biologicals at ASP+6 experts in hospital pharmacy, hospital
radiopharmaceuticals from scaling and percent, without scaling for budget finance, cost accounting, and nuclear
scale the additional payment amount for neutrality. We believe that these medicine.
pharmacy overhead costs. amounts are the best proxies we have As we discussed in the CY 2006 OPPS
We note that further discussion of the for the aggregate average acquisition and proposed rule (70 FR 42728), MedPAC
budget neutrality implications of the pharmacy overhead costs of drugs and concluded that the handling costs for
various drug payment proposals that we biologicals. We continue to believe that drugs, biologicals, and
considered is included in section XIX.C. not scaling these payments is most radiopharmaceuticals delivered in the
of this preamble. consistent with the statutory hospital outpatient department are not
We received a few public comments requirement of paying for the insignificant, as medications typically
on these scaling issues associated with acquisition costs of drugs on the basis administered in outpatient departments
drugs, biologicals, and of average costs. Because we are no generally require greater pharmacy
radiopharmaceuticals. longer identifying a separate payment preparation time than do those provided
Comment: MedPAC expressed amount for overhead costs, we will not to inpatients. MedPAC found that little
concern that CMS proposed to apply scale any part of the ASP+6 percent information is currently available about
budget neutrality adjustments to all payment for drugs in order to maintain the magnitude of these costs. According
APCs, while exempting payment for the consistency with the statutory to the MedPAC analysis, hospitals
acquisition costs of specified covered requirement to pay on the basis of historically set charges for drugs,
outpatient drugs from these average acquisition costs. It is also biologicals, and radiopharmaceuticals at
adjustments. MedPAC’s concern was worth noting that the budget neutrality levels that reflected their respective
that this policy, by reducing the adjustment is not always negative. For handling costs, and payments covered
payment rates for clinical APCs but not CY 2006, for example, the budget both drug acquisition and handling.
drugs, may exacerbate any existing neutrality adjustment is 1.012508103. Moreover, hospitals vary considerably
incentives for hospitals to use separately Therefore applying the adjustment to in their likelihood of providing specific
payable products. For example, the clinical APCs but not to drug payments services which utilize drugs, biologicals,
or radiopharmaceuticals with different categorizations, with the categories 2 proposed to establish three distinct
handling costs. and 3 reported as the most frequent HCPCS C-codes and three
As we also reported in the CY 2006 combination. For example, MedPAC corresponding APCs for drug handling
OPPS proposed rule, MedPAC placed HCPCS codes J1260 (Injection, categories to differentiate overhead costs
developed seven drug categories for dolasetron mesylate, 10 mg) and J2020 for drugs and biologicals, by combining
pharmacy and nuclear medicine (Injection, linezolid, 200 mg) in several of the categories identified in the
handling costs, according to the level of consensus categories 2 and 3, MedPAC report. We proposed to
resources used to prepare the products acknowledging that the appropriate collapse the MedPAC categories 2, 3,
(Table 23 of the proposed rule, 70 FR categorization could vary depending on and 4 into a single category described by
42729) Characteristics associated with the clinical preparation and use of the HCPCS code CXXXX, and MedPAC
the level of handling resources required drug. We noted in the proposed rule (70 categories 5 and 6 into another category
included radioactivity, toxicity, mode of FR 42729) that we have no information described by HCPCS code CYYYY,
administration, and the need for special regarding hospitals’ frequencies of use while maintaining MedPAC category 1
handling. Groupings ranged from of various forms of drugs provided in as described by HCPCS code CWWWW.
dispensing an oral medication on the the outpatient department under the (Our rationale for not proposing to
low end of relative cost to providing OPPS, as the case studies only included create an overhead payment category for
radiopharmaceuticals on the high end. four facilities and the technical advisory radiopharmaceuticals is discussed
MedPAC collected cost data from four committee was similarly small. Thus, in below.) We proposed merging categories
hospitals that were then used to develop many cases it is impossible to assign a in this way generally because we
relative median costs for all categories drug exclusively and appropriately to a believed that doing so would resolve the
but radiopharmaceuticals (Category 7+). certain overhead category that would categorization dilemmas resulting from
The case study facilities were not able apply to all hospital outpatient uses of the most common scenarios where
to provide sufficient cost information the drug because of the different drugs might fall into more than one
regarding the handling of outpatient handling resources required to prepare grouping and minimized the
radiopharmaceuticals to develop a cost different forms of the drugs. administrative burden on hospitals to
relative for Category 7+. The MedPAC There are over 100 separately payable determine which category applied to the
study classified about 230 different drugs, biologicals, and handling of a drug in a specific clinical
drugs, biologicals, and radiopharmaceuticals that are separately situation. In addition, these broader
radiopharmaceuticals into the seven payable under the OPPS but for which handling cost groupings would
categories based on input from their MedPAC provided no consensus minimize any undesirable payment
expert panel and each case study categorizations in its 7 drug groups. In policy incentives to utilize particular
facility. preparation for the CY 2006 proposed forms of drugs or specific preparation
In its report, MedPAC recommended rule, we independently examined these methods. We proposed only to collapse
the following: products and considered the handling those categories whose MedPAC relative
• Establish separate, budget neutral cost categories that could be
payments to cover the costs hospitals weights differed by less than a factor of
appropriately assigned to each product two, consistent with the principle
incur for handling separately payable as described by an individual HCPCS
drugs, biologicals, and outlined in section 1833(t)(2) of the Act
code. As discussed above, many of the that provides that items and services
radiopharmaceuticals; and drugs had several forms, which would
• Define a set of handling fee APCs within an APC group cannot be
place them in different handling cost
that group drugs, biologicals, and considered comparable with respect to
groupings depending on the specific
radiopharmaceuticals based on the use of resources if the median cost
form of the drug prepared by the
attributes of the products that affect of the highest cost item or service
hospital pharmacy for a patient’s
handling costs; instruct hospitals to within an APC group is more than 2
treatment. In addition, as we stated in
submit charges for these APCs; and base times greater than the median cost of the
the proposed rule, we believe that
payment rates for the handling fee APCs lowest cost item or service within that
hospitals may have difficulty
on submitted charges reduced to costs. same group.
discriminating among the seven
MedPAC found some differences in categories for some drugs, because the As discussed in previous final rules
the categorizations of drug and applicability of a given category and in the CY 2006 OPPS proposed rule,
radiopharmaceutical products by description to a specific clinical we believed that pharmacy overhead
different experts and across the case situation could be ambiguous. Indeed, costs are captured in the pharmacy
study sites. In the majority of cases in the MedPAC study, initially only revenue cost centers and reflected in the
where groupings disagreed, hospitals about 80 percent of the case study median cost of drug administration
used different forms of the products, pharmacists agreed with the expert APCs, and the payment rate we
which were coded with the same panel category assignments. However, established for a drug, biological, or
HCPCS code. For example, a drug may concurrence increased that percentage radiopharmaceutical APC was intended
be purchased as a prepackaged liquid or to almost 90 percent after discussion to pay only for the cost of acquiring the
as a powder requiring reconstitution. and review. Nevertheless, there item (66 FR 59896, 67 FR 66769, and 70
Such a drug would vary in the handling remained a number of drugs for which FR 42729 through 42730). As a MedPAC
resources required for its preparation differences in categorization by the case survey of hospital charging practices
and would fall into a different drug study facilities and the expert panel indicated that hospitals’ charges for
category depending on its form. In persisted. drugs, biologicals, and
addition, the handling cost groupings In light of our concerns over our radiopharmaceuticals reflect their
may vary depending on the intended ability to appropriately assign drugs to handling costs as well as their
method of drug delivery, such as via the seven MedPAC drug categories so acquisition costs, we believed pharmacy
intravenous push or intravenous that the categories accurately described overhead costs would be incorporated
infusion. For a number of commonly the drugs’ attributes in all of the OPPS into the OPPS payment rates for drugs,
used drugs, MedPAC provided two hospitals and the MedPAC biologicals, and radiopharmaceuticals if
categories in their final consensus recommendations, for CY 2006 we the rates were based on hospital claims
data. However, in light of our proposal separately payable drugs and providing drugs and biologicals. The
to establish three distinct C-codes for biologicals. As we did not have separate Panel recommended that CMS: (1)
drug handling categories, we also hospital charge data on pharmacy Reconsider carefully the proposal to pay
proposed to instruct hospitals to charge overhead, we proposed for CY 2006 to 2 percent of ASP for hospital pharmacy
the appropriate pharmacy overhead C- pay for drug and biological overhead overhead costs to ensure that it is in line
code for overhead costs associated with costs based on 2 percent of the ASP. As with hospital costs and that CMS take
each administration of each separately described earlier, we estimated into account external data gathered
payable drug and biological based on aggregate expenditure for all separately during the comment period; (2) pay for
the code description that best reflected payable OPPS drugs and biologicals the pharmacy overhead costs of both
the service the hospital provided to (excluding radiopharmaceuticals) using packaged and separately paid drugs,
prepare the product for administration mean costs from the claims data and employing a mechanism that adds only
to a patient. We would collect hospital then determined the equivalent average minimal additional administrative
charges for these C-codes for 2 years, ASP-based rates. Our calculations at the burden for hospitals; and (3) delay the
and consider basing payment for the time of the proposed rule indicated that implementation of the proposed codes
corresponding drug handling APCs on using mean unit costs to set the for drug handling cost categories until
the charges reduced to costs in CY 2008, payment rates for all separately payable January 2007 so that further data and
similar to the payment methodology for drugs and biologicals would be alternative solutions for making
other procedural APCs. Median hospital equivalent to basing their payment rates payments to hospitals for pharmacy
costs for the drug handling APCs should on ASP+8 percent. As noted previously, overhead costs can be collected,
reflect the CY 2006 practice patterns because pharmacy overhead costs are analyzed by CMS, and presented to the
across all OPPS hospitals of handling already built into the charges for drugs, Panel at its winter 2006 meeting. The
drugs whose preparation was described biologicals, and radiopharmaceuticals as final CY 2006 policies on pharmacy
by each of the C-codes, reflecting the indicated by the MedPAC study overhead costs are discussed below.
differential utilization of various forms described above, we believed on the We received many public comments
of drugs and alternative methods of basis of the data available at the time of concerning our proposals.
preparation and delivery through our development of the proposed rule Comment: Commenters were pleased
hospitals’ billing and charges for the C- that payments for drugs and biologicals that CMS recognized that additional
codes. Table 24 of the proposed rule (70 and overhead at a combined ASP+8 payments should be provided to
FR 42730) listed the drug handling percent would serve as a proxy for hospitals to cover handling costs
categories, C-codes, and APCs we representing both the acquisition and associated with administering drugs and
proposed for CY 2006. overhead cost of each of these products. biologicals in the hospital outpatient
We proposed these three categories setting. However, many commenters
Moreover, as we proposed to pay for all
because we believed that they were were concerned that the proposed
separately payable drugs and biologicals
sufficiently distinct and reflective of the payment of 2 percent of the ASP for
using the ASP methodology, where
resources necessary for drug handling to these costs was not adequate to ensure
payment rates for most of these items
permit appropriate hospital billing and that hospitals would be able to continue
were set at ASP+6 percent, we believed
to capture the varying overhead costs of to provide these services. Commenters
that an additional 2 percent of the ASP
the drugs and biologicals separately indicated that these handling costs
would provide adequate additional
payable under the OPPS. We did not could be substantial and cited
payment for the overhead costs of these
propose to adopt the median cost comments in the MedPAC study on
products and be consistent with
relatives reported for MedPAC’s six pharmacy handling costs attributing 26
historical hospital costs for drug to 28 percent of pharmacy department
categories (excluding
acquisition and handling. Even though costs to overhead costs. Several
radiopharmaceuticals). This was
we did not propose to scale the payment commenters noted that MedPAC stated
because it was very difficult to
rates for drugs and biologicals based on in its report that pharmacy overhead
accurately crosswalk the cost relatives
the ASP methodology, we proposed to costs are inconsistently reported in
for the six categories to the three
scale the additional payment amount of hospital charge data. Therefore, these
categories we proposed. In addition, we
2 percent of the ASP for pharmacy commenters concluded that our analysis
were not confident that the cost
overhead costs. Therefore, for CY 2006, of the HCPCS drug charge data derived
relatives that were based on cost data
from four hospitals appropriately we proposed to pay an additional 2 from CY 2004 provider claims is not
reflected the median relative resource percent of the ASP scaled for budget likely to reflect pharmacy handling
costs of all hospitals that would bill neutrality for overhead costs associated charges accurately and consistently.
these drug handling services under the with separately payable drugs and One commenter stated that an
OPPS. Instead, we believed it was most biologicals, along with paying ASP+6 additional payment of 2 percent of ASP
appropriate to collect hospital charges percent for the acquisition costs of the for drug handling is not adequate for
for the drug handling services based on drugs and biologicals. We specifically certain drugs that have very high
attributes of the products that affected requested public comments on this handling costs due to special equipment
the hospital resources required for their proposed policy for paying for or procedures related to the drug’s
handling, and to consider making future pharmacy overhead costs in CY 2006 toxicity, or special compounding or
payments under the OPPS using the and on the proposed policy regarding preparation requirements. Several other
proposed C-codes based on the medians hospital billing of drug handling charges commenters stated that hospitals are
of charges converted to costs for the associated with each administration of facing increased pharmacy handling
drug handling APC associated with each each separately payable drug or costs and overhead expenses as a result
administration of a separately payable biological using the proposed C-codes. of at least one, and possibly two, new
drug or biological. During the August 2005 meeting of government requirements that reflect
For CY 2006, pursuant to section the APC Panel, the Panel made three new criteria for compounding sterile
1833(t)(14)(E)(ii) of the Act, we recommendations regarding our products and new procedures to ensure
proposed an adjustment to cover the proposals for determining and paying staff and patient safety. According to the
costs hospitals incur for handling for overhead costs associated with commenters, these additional costs were
not reflected in the CY 2004 hospital that should be dedicated to paying commenter indicated that this method
claims data, and therefore were not pharmacy handling costs and determine should also be more accurate than the
accounted for in CMS’ estimate of 2 how much of the total should be current proposal of 2 percent of ASP for
percent of ASP for the pharmacy allocated to groups of drugs that are handling costs that applies equally to all
overhead costs of drugs and biologicals. similar with respect to their handling three categories. The commenter
Commenters provided various costs. MedPAC noted that 2 percent of expressed concern that the proposed 2
recommendations for CMS to consider ASP, as suggested by our analysis of the percent of ASP for handling costs is
in determining appropriate payment data on hospitals’ acquisition and significantly lower than the percentage
levels for drug handling costs in CY overhead costs, would be a viable basis indicated by both MedPAC and CMS
2006. One commenter encouraged CMS for creating such a pool. Under the studies. Because the drug handling cost
to use industry data to set an equitable MedPAC methodology, hospitals would must be paid in a budget neutral
payment rate for these pharmacy receive the same payment for the manner, the commenter questioned the
overhead costs instead of the percentage handling cost of each specified covered adoption of an administratively
of ASP proposed. Another commenter outpatient drug within the same burdensome process which attempted to
recommended that CMS increase the category of handling costs, regardless of redistribute OPPS payments for only 2
payment for pharmacy overhead costs to the acquisition costs of the specific percent of drug payments. The
more closely approximate the findings drugs assigned to the category. commenter recommended that CMS
reported by MedPAC. Several One commenter urged CMS to withdraw its proposed billing
commenters recommended implement a pharmacy service and requirement for handling charges and
implementing a dampening policy in handling add-on of at least 8 percent of simply adopt the 2 percent of ASP
CY 2006, so that drug payments are no ASP, in addition to the acquisition cost payment method proposed for CY 2006
lower than 95 percent of the CY 2005 payment of ASP+6 percent. The and future years if CMS believes that its
payment levels. Another dampening commenter used the hospital outpatient data indicate that drug handling costs
policy suggested was that CMS pay for claims data to examine the percentage are only 2 percent of drug payments.
separately payable drugs and biologicals add-on to ASP that would be necessary The commenter added that submitting
at the higher of ASP+8 percent or 90 to maintain aggregate payments in CY handling charges for the proposed C-
percent of the CY 2005 payment rate. 2006 at 95 or 100 percent of the CY 2005 codes would be burdensome for such a
One commenter recommended that level. The commenter found that, to relatively small payment refinement
CMS consider freezing payments in CY maintain payments at 95 or 100 percent benefit. Several other commenters
2006 for those drugs whose payments of the CY 2005 levels for chemotherapy believed that, while an imperfect
would decline significantly from the CY or supportive care drugs, except measure, increasing payment for drug
2005 rates, particularly those drugs that radiopharmaceuticals, add-on amounts handling costs by 2 percent of ASP
may have especially complex and costly of 7.6 percent of ASP or 13.3 percent of would be appropriate as a temporary
handling requirements. Some of these ASP, respectively, would be necessary. measure.
commenters indicated that a dampening The commenter stated that payment at Some commenters also indicated that
policy would allow CMS to provide this level would be an appropriate CMS should work with hospital and
hospitals with a transition mechanism interim measure to limit the potential pharmacy stakeholders to develop an
as it moved toward an ASP-based decreases in drug payments until data approach to establish differential add-on
payment methodology, and at the same are collected to implement a better long- payments for drug handling costs to
time provide adequate payment for term solution. Many other commenters account for a wide variety of drug
these items until CMS collected supported this proposal to pay 8 percent handling categories. Lastly, one
sufficient pharmacy overhead charge of ASP for overhead costs in addition to commenter noted that if CMS
data to establish accurate cost-based paying ASP+6 percent for acquisition implements this policy, it should
payment rates for drug handling costs (for a total payment of ASP plus continue to analyze and refine payment
expenses. 14 percent for drug acquisition and for pharmacy overhead costs in the
MedPAC expressed concern about the overhead costs). future to ensure that 2 percent of the
methodology to pay hospitals 2 percent Another commenter recommended ASP adjustment provides adequate
of ASP for each separately payable drug that CMS adopt a process similar to payment for these services.
administered because of the what it proposed to support the 2 Response: We understand the
proportional nature of this proposal. percent payment for CY 2006 and commenters’ concerns about basing the
MedPAC suggested that CMS consider suggested a variation to the proposed additional payment amount for
another alternative because the methodology. The commenter indicated overhead costs of drugs and biologicals
proposed method ties payment for that CMS could compute a reasonable on 2 percent of an item’s ASP. We agree
handling costs directly to the estimate of handling costs by use of with MedPAC and other commenters on
acquisition cost of a drug. MedPAC current claims data by first computing the proposed rule that hospital charges
noted that payment for the handling the mean cost of each drug and then for drugs and biologicals are generally
cost of a particular drug could differ deducting the ASP+6 percent amount. reflective of both their acquisition and
sharply from the handling cost hospitals The commenter added that, after overhead costs. MedPAC did indicate in
actually incur; for example, a drug with statistical outliers are excluded, CMS its comments that 2 percent would be a
a high acquisition cost does not would have a reasonable estimate of the viable basis for creating the drug
necessarily also have high handling handling costs either by drug HCPCS overhead pool. Therefore, we are not
costs. MedPAC also expressed concern code or by three categories without convinced by those commenters who
that this method of paying for pharmacy hospitals incurring the additional contended that drug overhead costs are
overhead could result in higher drug burden of billing a new handling charge. much higher than 2 percent of ASP (for
acquisition costs for hospitals because it The commenter stated that CMS could example, 25 to 30 percent of total drug
gives manufacturers an incentive to then add the estimated handling costs to costs). As described earlier, using
increase prices. MedPAC proposed an the drug ASP+6 percent payment to updated CY 2004 claims data and ASP
alternative methodology under which create a single payment for both the information from the second quarter of
CMS would estimate the total dollars acquisition and handling costs. The CY 2005, we determined that using
mean unit costs to set the payment rates physician office setting is based on factors across all types of service
for the drugs and biologicals that would ASP+6 percent plus an additional settings and believe that it is
be separately payable in CY 2006 would furnishing fee to cover the costs of appropriate to adopt a methodology for
be equivalent to basing their payment providing the product to Medicare paying for clotting factors under the
rates, on average, at ASP+6 percent. beneficiaries. According to the OPPS that is consistent with the
Consequently, we believe that it is commenters, this fee was set at $0.14 methodology applied in the physician
appropriate for us to base payment for per unit of clotting factor for CY 2005 office setting and the inpatient hospital
average acquisition and overhead costs and is required to be updated annually. setting. Therefore, in CY 2006, we will
for separately payable drugs and The commenters also noted that an add- be paying for clotting factors at ASP+6
biologicals on ASP+6 percent for CY on payment is made to hospitals for percent in the OPPS and providing
2006 because both acquisition and clotting factors provided to patients in payment for the furnishing fee that will
overhead costs are reflected in the the hospital inpatient setting. They also be a part of the payment for clotting
charges submitted by hospitals for these indicated that for hospital inpatient factors furnished in physician offices
items. We have no reason to believe services the current additional payment under Medicare Part B. This furnishing
that, in the aggregate, a payment rate of for a clotting factor equals 95 percent of fee will be updated each calendar year
ASP+6 percent would be insufficient to its AWP; however, for CY 2006, CMS based on the consumer price index, and
provide combined appropriate payment proposed to set the payment rate and we will update the amount
for both the hospital acquisition and the furnishing fee for clotting factors appropriately each year under the
overhead costs related to providing used in the hospital inpatient setting at OPPS. In CY 2005, the furnishing fee is
drugs and biologicals to hospital the same rate as for clotting factors $0.14 per unit, and for CY 2006, it will
outpatients. provided in physician offices under Part be updated to $0.146 per unit. Effective
In the light of this decision to proceed B. The commenters argued that the January 1, 2006, we will make payment
with an integrated payment of ASP+6 hospital outpatient handling costs for clotting factors at ASP+6 percent
percent for the acquisition and overhead should not be treated differently than in using ASP data from the third quarter of
costs of drugs, we also are not adopting the physician office because the costs of 2005 along with paying for the
MedPAC’s recommendation to create inventory, specialized refrigeration, furnishing fee using the updated
and appropriately distribute a drug assay management, and formulation of amount for CY 2006. The final CY 2006
overhead payment pool in this final rule clotting factors are similar for all regulations establishing the ASP
with comment period. We understand providers of these drugs and do not very methodology and the furnishing fee for
MedPAC’s concern that a flat percentage between the hospital inpatient and blood clotting factors under Medicare
add-on payment for overhead costs outpatient setting. The commenters Part B can be found in the CY 2006
might underpay these costs for some were concerned that the proposed 2 Medicare Physician Fee Schedule final
drugs and overpay for others. However, percent of ASP did not fully cover the rule. We believe that this methodology
on the basis of our claims data, we additional costs of furnishing clotting will allow us to provide adequate
believe that the payment rate that we are factors to Medicare beneficiaries in the payment for both the acquisition and
adopting will provide adequate payment hospital outpatient setting and urged overhead costs of clotting factors under
for both acquisition and overhead costs CMS to apply the Part B furnishing fee the OPPS in CY 2006.
in the aggregate. We also note the to the hospital outpatient setting as Comment: One commenter requested
difficulties in determining the relative well. One of the commenters
that CMS clarify how it will pay
values of the separate drug handling hospitals for the costs incurred with
additionally requested that CMS not
cost categories in order to allocate handling intrathecal drugs, noting that
include clotting factors in the collection
spending from MedPAC’s overhead drug MedPAC did not discuss the handling
of overhead cost data using the
pool. However, we will continue to costs of intrathecal drugs in its report on
proposed C-codes, as CMS has already
study and consider this alternative as pharmacy overhead costs. The
established a mechanism for calculating
we develop our future policies on commenter noted that intrathecal drugs
and updating the costs associated with
payment for drug costs in general and involve significant handling costs;
providing these drugs under the
overhead costs in particular. As we therefore, CMS should ensure that
Medicare Physician Fee Schedule and
evaluate other options for paying for intrathecal drugs are paid a sum
Inpatient Prospective Payment System,
drug handling costs in the future, we sufficient to cover their handling costs.
will also consider different and it sought clarification in the Response: In CY 2006, payment for
methodologies that could be used to preamble and regulatory text of the final intrathecal drugs will be determined
develop clinically meaningful and rule on all payment provisions related using the same ASP methodology as
distinct payment levels for the diverse to clotting factors. will be used for other separately payable
pharmacy overhead resources associated Response: Section 303 of Pub. L. 108– drugs and biologicals, where payment
with administration of drugs and 173 established section 1847A of the for acquisition and overhead costs will
biologicals. We welcome comments and Act which requires that almost all be set at ASP+6 percent.
information about sources of data that Medicare Part B drugs not paid on a cost Comment: We received many
could be useful in further developing a or prospective basis be paid at 106 comments on our proposal to
methodology for payment of drug percent of average sales price (ASP) and implement C-codes for drug handling
overhead costs for the CY 2007 provided for payment of a furnishing fee categories in CY 2006. Many of the
proposed rule. for blood clotting factors, effective commenters opposed the proposal,
Comment: Two commenters were January 1, 2005. In CY 2006, payment while other commenters supported it.
concerned that the proposed additional for clotting factors furnished in both the A national association of hospitals
payment of 2 percent of ASP did not physician office setting and inpatient expressed strong opposition to the
fully cover hospital costs of procuring, hospital setting will be made at ASP+6 proposal to require hospitals to report
storing, and furnishing clotting factors percent plus an additional amount for their drug handling charges using C-
to patients with hemophilia. The the furnishing fee. We agree with the codes in order for CMS to pay pharmacy
commenters noted that the CY 2005 commenters’ statements about the use of overhead costs and recommended that
payment for a clotting factor in the similar resources to furnish clotting CMS find an alternative method to
identify drug handling costs. The level, such as drug handling costs for to report a single revenue code with the
commenter raised several concerns individual drugs. The commenter also pharmacy handling C-codes, or would
regarding this proposal. For example, expressed concern that CMS’ proposal the revenue codes need to match the
the commenter indicated that by to pay the drug handling costs only for actual drug revenue code. The
proposing to require hospitals to bill a separately payable drugs would create commenters urged CMS to review the
handling charge when the industry an additional burden for hospitals as coding and billing requirements
practice has been to bill a combined they must identify and modify only necessary to implement such a
charge to reflect both the drug those drug charge items that qualify for mechanism correctly.
acquisition cost and handling cost is separate payment under the OPPS. One commenter strongly opposed the
contrary to a basic, long standing tenet Charges for packaged drugs must proposal requiring hospitals to establish
of the Medicare Act in 42 U.S.C. 1395 continue to include the overhead costs separate pharmacy overhead charges for
that CMS interpreted as prohibiting any as part of the drug’s line item charge or separately payable drugs and biologicals
interference with hospital charge the appropriate revenue code charge. and use the three proposed C-codes for
structures. Also, the commenter noted Because Medicare beneficiaries charging these overhead costs in CY
that Medicare providers must have a frequently require more than one drug 2006. This commenter indicated that it
consistent charge structure in order to in an outpatient encounter, it may be would be extremely burdensome and
prepare the Medicare cost report and to impossible to identity any correlation difficult for hospitals to implement the
apportion costs within the Medicare between the drug HCPCS code reported proposal. The commenter also indicated
cost report. The proposal to require and the drug handling category HCPCS that there are many complex issues and
code reported. Additionally, there administratively burdensome aspects to
hospitals to begin billing the drug
would be no incentives for hospitals to adopting this proposal for charging for
handling charge as a separate line-item
perform the charge master maintenance drug handling using these new C-codes.
charge will present billing and payment
and educate pharmacy staff as neither The commenter pointed out that even
concerns for all other payers because
the presence nor accuracy of the drug assuming that hospitals could provide
drug handling charges would also have
handling HCPCS codes will impact the differential charges, other concerns
to be billed also to private payers and
proposed CY 2006 payment of drug remain. For example, the commenter
the Medicaid program, or the provider
handling costs. Another concern raised indicated that hospitals would have to
would have to be able to generate
was that CMS would be able to evaluate the normal mark-up formula
consistent charges for proper Medicare for all pharmacy items and deduct the
determine appropriate payment rates for
apportionment costs. However, since handling costs for only the separately
these C-codes in future years using the
most other payers do not recognize C- payable drugs under Medicare, while
claims data only if hospitals can
codes and may refuse to accept and/or the drug handling charges for packaged
reasonably estimate their drug handling
pay for such handling charges, it would drugs would remain incorporated
costs and if hospitals mark up their drug
raise concern for a provider as to within overall charges for those drugs.
handling costs in line with their overall
whether it must pursue collection in The commenter stated that because the
pharmacy mark-up. The last concern
order to have a consistent charge cited by the commenter was that there C-codes would only be recognized by
structure for payment and may be an issue if hospitals report the and acceptable to Medicare, but not to
apportionment. The commenter noted new drug handling costs separately other payers, hospitals would have to
that drug handling costs are not without restructuring their existing drug modify their billing systems to separate
presently billed separately by the vast charges to remove the drug handling out the drug handling charge from the
majority of hospitals, and most of these costs already included in the drug drug charge for Medicare claims, but bill
hospitals do not have sophisticated cost charges. them as a single line-item for other
accounting systems that would permit Other commenters echoed these payers. The commenter believed that
the determination of handling costs for concerns. One commenter indicated that there would also be confusion about
each billable drug. Reporting pharmacy even though collecting charge data for how the drug handling C-codes would
overhead charges with C-codes would handling costs may be useful for CMS, apply when a hospital pharmacy mixes
result in a tremendous burden to the reporting requirement would multiple doses of a drug for a patient,
hospitals, requiring the modification of overwhelm coding and nursing staffs and in particular the question of
their pharmacy charge masters to reduce already challenged with the complex whether the hospital would report a
each current drug charge to reflect only task of ensuring that the correct dosage single C-code for handling costs or
the drug acquisition cost and to remove of the drug is billed. Another multiple C-codes in this situation. The
the drug handling costs currently commenter strongly opposed the use of commenter also expressed concern that
included in each drug line item’s C-codes to bill for drug handling costs some hospitals may not be able to
charge. Hospitals that do not have because it would present an operational accommodate the proposed C-codes
sophisticated cost accounting systems nightmare because every drug required because drug pricing is generated
would have difficulty in determining ‘‘handling.’’ The commenter, therefore, through a pharmacy charging system
the applicable amount attributable to requested that CMS not implement this often located outside the hospital’s
the handling costs. The commenter proposal until further assessments of the normal charging system. For these
indicated that even if this system implications associated with reasons, the commenter indicated that it
administratively burdensome process of such a change are completed. is unclear how CMS would expect
billing for handling charges is adopted, Several commenters raised other providers to report drug charges in the
CMS would still be unable to determine coding, billing, and charging issues inpatient setting versus the outpatient
the drug handling costs at the related to this proposal. For example, setting because many hospitals use the
individual drug level because an commenters questioned whether CMS same charge master for inpatient and
average pharmacy department CCR would expect multiple line-items to be outpatient services.
would be applied to billed charges to reported per date of service if multiple One of the commenters noted that
determine drug handling costs, and drugs from the same drug handling when hospital clinic nurses and
these CCRs were never intended to family are provided. They also asked pharmacies bill for drugs, they do not
determine cost at the specific procedure whether CMS would require providers view the patient-specific data to
determine if the patient has Medicare apply, thus ensuring the most accurate commenters recommended that CMS
coverage and whether the drug is payment level possible while meeting consult with hospital organizations on
separately payable to make decisions the objective of the proposal to this issue, and after reviewing their
about whether to report additional streamline the overhead payment feedback, consider delaying C-code
services. The commenter pointed out system. implementation until January 1, 2007
that dispensing fees vary significantly in A few commenters did not believe the while continuing to refine the codes and
each hospital due to variances in three drug handling categories proposed develop instructions for their use. The
overhead and handling fees incurred. were sufficient to cover the wide range APC Panel also recommended that CMS
The commenter believed that the of drug handling costs for all of the delay implementation of this proposal
proposal requires more research and separately payable drugs used by in order to collect more data and study
consideration in order to reduce the hospital outpatient departments and alternatives.
administrative burden that would be stated that the categories proposed by If this policy is implemented for CY
required of hospital staff and adequately MedPAC would allow greater 2006, some commenters suggested that
capture all pharmacy overhead and differentiation of drug handling costs. CMS provide a grace period of no less
handling costs incurred. This One commenter explained that more than 90 days after the implementation of
commenter supported establishing refined categories can and should be the CY 2006 OPPS to allow hospitals
payment for pharmacy overhead costs developed and urged CMS to reevaluate time to make necessary system changes
based on the additional 2 percent of the use of the MedPAC categories and and to educate pharmacy staff, finance
ASP added to each APC drug payment, to release a listing of the drugs assigned staff, and coders on the required use of
as this method simplifies the payment to each drug handling category for the drug handling C-codes. Other
mechanism. hospital review. These commenters commenters noted that a grace period of
Many commenters stated that CMS indicated that limiting the number of no less than 6 months would be
should not implement the proposed categories for which hospitals report required after the implementation of the
drug handling C-codes in CY 2006 and their drug handling costs would not CY 2006 OPPS. One commenter insisted
should instead study alternate provide accurate cost data and were that CMS collect hospital charge data for
mechanisms for obtaining drug handling concerned that CMS’ descriptions of overhead costs for 2 years to determine
cost data, including using the cost these categories did not provide if the proposed 2 percent of the ASP
report to compute an average pharmacy sufficient clarity for hospitals to add-on rate is adequate and consider
handling percentage that may be used in appropriately classify all of their drugs. new payment rates for these pharmacy
the future along with the ASP+6 percent One commenter noted that intrathecal overhead services in CY 2008.
model for drug acquisition costs. Other drugs should be assigned to category Response: We have carefully
commenters recommended that CMS three or a new overhead cost category considered all the comments and the
work with stakeholder groups to collect for intrathecal drugs should be created. concerns raised by the commenters. In
additional data and develop simpler, MedPAC was pleased that CMS’ light of the extensive operational issues
alternative solutions for ensuring that proposed methodology to pay for related to coding, billing, and charging
hospitals are appropriately paid for their overhead and handling costs beginning for C-codes for drug handling categories
pharmacy overhead and drug handling in CY 2008 reflected its identified by commenters, we believe
costs. Some commenters stated that recommendations and noted that the there is good reason at this time not to
such approaches should incorporate the methodology would be similar to that proceed with our proposal for CY 2006.
payment for drug handling directly into used to set payment rates for procedural Therefore, we are not finalizing our
the payment rate for the drug itself, APCs. However, MedPAC encouraged proposal to collect data on pharmacy
rather than requiring separate coding CMS to explore whether it would be overhead costs in CY 2006. Rather, we
systems. One commenter suggested that reasonable to expand the number of will continue to solicit input from the
CMS obtain more accurate information handling cost APCs beyond the industry, APC Panel, and hospitals to
by surveying hospital pharmacy proposed three categories after the explore alternative methodologies for
departments and studying data on the charge data necessary to set rates for the capturing meaningful and complete
departmental costs of hospital three handling cost APCs are collected. pharmacy overhead costs, for potential
pharmacies. Another commenter stated Several commenters supported the use in providing appropriate payments
that CMS should collect data and make creation of a mechanism for hospitals to to hospitals for such services in future
payments in a manner similar to the begin capturing and reporting pharmacy updates of the OPPS. We note that for
way in which data are collected and costs. However, they indicated that it CY 2006 we are requiring specific
payments provided through the Quality will take hospitals considerable time coding for certain devices, as we require
Measurement Demonstration Project and effort to develop this approach as the billing of all separately payable
that was implemented in physicians’ most hospitals do not currently report drugs and request that hospitals report
offices in CY 2005. pharmacy costs directly or capture these packaged drugs. We believe that
Several commenters supported our costs fully. One commenter hospitals can easily ascertain the
proposal to implement the C-codes for recommended that CMS tie reporting of acquisition costs of devices and decide
drug handling categories. They the new C-codes for handling fees to on an appropriate markup that includes
supported the development of the three actual payment amounts for the services device handling, and these device costs
proposed distinct C-codes for drug so that hospitals would have an (except for devices with pass-through
handling categories and the collection of incentive to quickly develop a status) are then appropriately packaged
hospital claims data over the next 2 mechanism to report these codes. Other into payments for the separately payable
years for use in establishing payment commenters supported the general C- procedures that utilize the devices.
rates based on actual costs in CY 2008 code methodology, but were concerned Similarly, we believe that hospitals are
and beyond. One of the commenters that there was insufficient time to aware of the acquisition costs of drugs
supported basing payment for these new properly instruct and educate hospitals and provide an appropriate markup that
categories in CY 2008 on a weighted on how and when to use these codes. includes pharmacy overhead. These
average of the overhead costs for all Therefore, to ensure that the new C- billed drugs are then either separately
drugs to which the categories will codes can be used effectively, these paid at ASP+6% for CY 2006 or their
payment is packaged into payments for including those on pass-through and requirements. However, as MedPAC
the separately payable procedures new to the market. also found that handling costs for drugs,
where the drugs are administered. One commenter strongly opposed the biologicals, and radiopharmaceuticals
However, as discussed above, hospitals expansion of the drug handling C-code were built into hospitals’ charges for the
do not keep track of their pharmacy reporting proposal to packaged drugs, products themselves, we stated in the
overhead costs nor their device citing that this policy would proposed rule that we believed that the
handling costs separately. Rather, these exponentially increase the coding and charges from hospital claims converted
broad overhead and handling costs are administrative burden on hospitals due to costs were representative of hospital
typically built into the charges for the to the large number of drugs that would acquisition costs for these agents, as
drugs or devices themselves, In many require special charging practices for well as their overhead costs. These costs
ways, the device charge reported on a Medicare purposes. For example, the would appropriately reflect each
claim is like the drug charge, in that commenter noted that hospitals hospital’s potentially diverse patterns of
both currently reflect the acquisition generally do not provide detailed billing acquisition or production of
for drugs that are not separately paid. radiopharmaceuticals for use in the
cost of the device or drug and the
The commenter believed that because outpatient hospital setting and their
handling cost of the device or drug
all drugs do not have their own unique related handling costs that vary across
(special handling, storage, etc.). Just as
HCPCS codes, creating new codes for all radiopharmaceutical products and the
we do not require hospitals at this time drugs would be a significant burden. circumstances of their production and
to further differentiate their device The commenter added that, given the use. Therefore, we did not propose to
charges into acquisition and handling large volume of drugs used in hospital create separate handling categories for
components, based on our review of outpatient departments, expanding drug radiopharmaceuticals for CY 2006.
comments to the CY 2006 proposed rule handling coding requirements to all of We received many public comments
we are also not going to require these drugs, regardless of their on this radiopharmaceutical proposal.
hospitals for CY 2006 to separate the packaging status, would dramatically Comment: Several commenters stated
traditionally highly linked drug increase hospital administrative costs that CMS should not assume that the
acquisition and pharmacy overhead associated with this proposal. Other hospitals have incorporated handling
charges. commenters expressed similar views. costs in their hospital charges for
Comment: Several commenters urged Response: We agree with the radiopharmaceuticals. They indicated
CMS to recognize that low-cost drugs commenters who stated that extending that there has been some ambiguity
and biologicals may have substantial specific payment for handling costs to about what costs should be included in
handling costs depending on the type packaged drugs would impose an radiopharmaceutical charges, as
and volume of the drugs administered, excessive burden on hospitals. As the opposed to procedure charges, and this
and therefore, recommended that CMS commenters noted, this policy would matter is complicated by the difference
apply additional payments to packaged exponentially increase the coding and in payment policies for physician
drugs and biologicals, as well as to administrative burden that our proposed offices as compared to the hospital
separately payable therapies. The APC use of C-codes would have imposed. In outpatient setting. They also stated that
Panel also recommended that CMS pay addition, as we have stated previously, differing payment policies and lack of
for the overhead costs of both packaged overhead costs are built into the charges clear billing instructions in the different
and separately paid drugs. One of the for drugs, and these charges are already settings contribute to uncertainty about
accounted for in setting the weights for where radiopharmaceutical costs are
commenters suggested that the use of
the procedural APCs into which some reported by hospitals. Commenters
the proposed C-codes for drug handling
drugs are packaged. Accordingly, we suggested that CMS specifically declare
categories also be extended to include
believe that additional payment for where the costs for radiopharmaceutical
packaged drugs. One commenter
overhead costs of packaged drugs would handling should reside for all delivery
recommended that CMS make an add-
be duplicative and have not made a settings and give clear direction to
on payment of at least $14.80 per dose separate provision for additional providers. One commenter stated that,
of packaged drug administered, and that payment. due to the variety of
CMS consider establishing a new G- As discussed earlier, we proposed to radiopharmaceuticals that can be used
code for pharmacy handling services pay for separately payable with the same procedure, it is most
associated with packaged drugs for this radiopharmaceuticals based on their accurate to incorporate
purpose. The commenter based its charges on the claims submitted by radiopharmaceutical handling costs in
recommendation on an analysis of the hospitals converted to costs. MedPAC the charge for the radiopharmaceutical
amount of required pharmacist and found that the handling resource costs rather than in the charge for the nuclear
pharmacy technician time, plus indirect associated with radiopharmaceuticals medicine procedure.
overhead costs, associated with were especially difficult to study and Response: We understand the
preparing each dose of a packaged drug. estimate because of the varying resource commenters’ concerns. We would
Another commenter indicated that CMS requirements for handling emphasize that, in light of the policy
may believe that overhead costs for radiopharmaceuticals in a variety of that we are adopting in this final rule
packaged drugs are reflected in the hospital outpatient settings for different with comment period of paying for
payments for drug administration APCs; clinical uses. These various methods of radiopharmaceuticals based on
however, the commenter did not believe preparation of radiopharmaceuticals, hospitals’ charges converted to costs, it
that the drug administration APC and the individual is appropriate for hospitals to include
payment rates are sufficient to pay radiopharmaceuticals themselves, differ all the costs associated with acquiring
providers for administration services, or significantly in the costs of their and handling radiopharmaceuticals in
the acquisition and handling costs handling, with substantial variation in their charges for the
associated with packaged drugs. In such factors as site of preparation, radiopharmaceuticals.
addition, one commenter indicated that personnel time, shielding, However, because we proposed to
CMS should ensure that the add-on transportation, equipment, waste collect ASP information for
payment is applied equally to all drugs, disposal, and regulatory compliance radiopharmaceuticals in CY 2006, we
requested specific comments on best construct categories of handling including the costs of handling in their
appropriate categories for potentially cost APCs for radiopharmaceuticals, charges for radiopharmaceuticals.
capturing radiopharmaceutical handling which are generally likely to require Another commenter recommended that
costs. We stated in the proposed rule greater resources for their preparation CMS incorporate these added handling
that we believed that these handling than drugs and biologicals. One costs directly into the final payment
costs may vary depending on many commenter recommended that all rates for radiopharmaceuticals by
factors. We also indicated that the radiopharmaceuticals be paid individual HCPCS codes.
handling cost categories should exclude separately. The commenter believed that
Response: As discussed earlier, we
any resources associated with specific because of the potential for hospitals to
will not be implementing the C-code
diagnostic procedures or administration bill one of the radiopharmaceutical
codes for patient services that utilize the handling category codes, this policy handling categories for drugs and
radiopharmaceuticals. However, the would facilitate appropriate data biologicals in CY 2006 due to the
handling cost categories should include gathering, recognition, and payment of complex operational and policy issues
all aspects of radiopharmaceutical handling costs for all surrounding this proposal. We will
handling and preparation, including radiopharmaceuticals. continue to study the possibility of
transportation, storage, compounding, One commenter was pleased that creating handling cost categories for
required shielding, inventory CMS did not intend to create C-codes radiopharmaceuticals, as well as drugs,
management, revision of dosages based for radiopharmaceutical handling costs in order to develop viable options for
on patient conditions, documentation, for CY 2006. Other commenters stated making accurate payments for drug and
disposal, and regulatory compliance. that, if CMS implements its proposal to radiopharmaceutical handling costs for
The MedPAC study contractor suggested create handling cost categories for drugs consideration in future updates of the
a variety of discriminating factors that and biologicals in CY 2006, it should OPPS. In the meantime, as discussed
may be related to the magnitude of also create handling cost categories for earlier, payment for both acquisition
radiopharmaceutical handling costs, radiopharmaceuticals in CY 2006. These and handling costs of
including the complexity of the commenters added, however, if CMS radiopharmaceuticals in CY 2006 will
calculations and manipulations delays implementation of these drug be made based on hospital charges for
involved with compounding, the handling categories, it would be these items converted to costs using
intended use of the product for appropriate to delay the adoption of each hospital’s overall CCR. This
diagnostic or therapeutic purposes, the handling cost category codes for methodology will allow us to pay
item’s status as a radioimmunoconjugate radiopharmaceuticals. simultaneously for radiopharmaceutical
or nonradioimmunoconjugate, short- Several commenters noted that if CMS acquisition and handling costs, without
lived agents produced in-house, and implemented specific coding for creating additional administrative
preparation of the radiopharmaceutical handling and overhead costs of burden for hospitals.
in-house versus production in a radiopharmaceuticals in CY 2006, it
commercial radiopharmacy. We sought would have to initiate well in advance Comment: One commenter noted that
comments on the construction of of January 2006 an educational effort to CMS should include the costs
radiopharmaceutical handling cost communicate to providers the need to associated with specially trained
categories that would meaningfully use the new codes and to adjust personnel to handle and compound
reflect differences in the levels of radiopharmaceutical charges during CY radiopharmaceuticals, waste, and
necessary hospital resources and that 2006 to accurately reflect any changes in spoilage in its list of elements to
could easily be understood and applied HCPCS code descriptors, along with consider including as part of
by hospitals characterizing their identification of the relevant hospital radiopharmaceutical handling costs.
preparation of radiopharmaceuticals. CCR appropriate for calculating The commenter also suggested that CMS
We received numerous public radiopharmaceutical payments. Another make clear whether the
comments concerning commenter suggested that CMS advise radiopharmaceutical ‘‘transportation’’
radiopharmaceutical handling cost hospitals to make timely updates in costs should reside with the acquisition
categories. charges to ensure that they fully, costs or with the handling costs. At
Comment: We received comments accurately, and uniformly report all present, many radiopharmaceutical
describing various proposals for creating relevant costs for radiopharmaceuticals. invoice acquisition costs could include
radiopharmaceutical handling cost A few commenters were concerned the ‘‘transportation’’ costs, therefore, the
categories. One commenter about the usefulness of creating commenter cautioned CMS regarding
recommended the creation of five additional C-codes for hospitals to the potential for double counting.
handling categories for report radiopharmaceutical handling
radiopharmaceuticals and assigning costs in CY 2006 for use in CY 2007 Response: Since in CY 2006 payment
them G-codes, instead of C-codes as without providing any payment to for both acquisition and handling costs
proposed, for drug handling categories. hospitals for this additional work, citing of radiopharmaceuticals will be made
The commenter recommended this that the process will place an undue based on hospital charges for these
approach because G-codes are available administrative burden on hospitals. items converted to costs, we encourage
to all insurers and would assist They recommended that CMS work hospitals to include in their charges the
hospitals in more accurate, consistent, with medical specialty societies and costs associated with specially trained
and efficient billing for industry to develop appropriate personnel to handle and compound
radiopharmaceuticals. Another handling cost categories for radiopharmaceuticals, waste, spoilage,
commenter suggested seven potential radiopharmaceuticals and establish a and transportation costs as noted by the
radiopharmaceutical handling specific payment rate for each category commenter. Whether hospitals associate
categories for our consideration. Still to help deflect the additional costs to these costs with radiopharmaceutical
another commenter proposed four hospitals for this added burden and to acquisition or handling is not
categories for capturing the costs of ensure adequate data collection. In significant, as both types of costs should
radiopharmaceuticals. MedPAC also addition, the commenters asked for be fully reflected in the hospitals’
encouraged CMS to further study how to concurrent direction to hospitals about charges for radiopharmaceuticals.
b. Final CY 2006 Payment for Nonpass- In the proposed rule, we stated that under the OPPS in CY 2006 but whose
Through Drugs, Biologicals, and there were several drugs, biologicals, codes do not crosswalk to other HCPCS
Radiopharmaceuticals With HCPCS and radiopharmaceuticals that were codes previously recognized under the
Codes, But Without OPPS Hospital payable during CY 2004 or where OPPS.
Claims Data HCPCS codes for products were created In CY 2006, payment for these new
Pub. L. 108–173 does not address the effective January 1, 2005, for which we drugs, biologicals, and
OPPS payment in CY 2005 and after for did not have any CY 2004 hospital radiopharmaceuticals will be based on
new drugs, biologicals, and claims data. In order to determine the ASP+6 percent. In accordance with the
radiopharmaceuticals that have assigned packaging status of these items for CY ASP methodology used in the physician
HCPCS codes, but that do not have a 2006, in the proposed rule we office setting, in the absence of ASP
reference AWP or approval for payment calculated an estimate of the per day data, we will use wholesale acquisition
as pass-through drugs or biologicals. cost of each of these items by cost (WAC) for the product to establish
Because there is no statutory provision multiplying the payment rate for each the initial payment rate. We note,
that dictated payment for such drugs product, as determined using the ASP however, that if WAC is also
and biologicals in CY 2005, and because methodology, by an estimated average unavailable, then we will calculate
we had no hospital claims data to use number of units of each product that payment at 95 percent of the most
in establishing a payment rate for them, would be furnished to a patient during recent AWP that we have available at
we investigated several payment options one administration. We proposed to the time of the development of this final
for CY 2005 and discussed them in package items for which we estimated rule and for the quarterly updates. We
detail in the CY 2005 OPPS final rule the per administration cost to be less note that with respect to items for which
with comment period (69 FR 65797 than $50 and pay separately for items we currently do not have ASP data,
through 65799). with an estimated per administration once their ASP data become available in
In the CY 2006 OPPS proposed rule, cost greater than $50. We indicated that later quarter submissions, their payment
we proposed to use the same payment for the separately payable rates under the OPPS will be adjusted
methodology that we used in CY 2005. items would be based on rates so that the rates are based on the ASP
That is, we proposed to pay for these determined using the ASP methodology methodology and set to ASP+6 percent.
new drugs and biologicals with HCPCS established in the physician office For this final rule with comment
codes but which do not have pass- setting. There were two codes HCPCS period, we are basing the payment rates
through status at a rate that is equivalent codes 90393 (Vaccina ig, im) and Q9953 for these items on ASP data from the
to the payment they would receive in (Inj Fe-based MR contrast, ml), for second quarter of CY 2005, which are
the physician office setting, which which we were not able to determine effective in the physician office setting
would be established in accordance payment rates based on the ASP on October 1, 2005, because these are
with the ASP methodology described in methodology. Because we were unable the most recent values available for the
the CY 2006 Medicare Physician Fee to estimate the per administration cost development of this rule. To be
Schedule final rule. As discussed in the of these items, we proposed to package consistent with the ASP-based
CY 2005 final rule with comment period them in CY 2006. We specifically payments that would be made when
(69 FR 65797), new drugs, biologicals, requested public comments on our these drugs and biologicals are
and radiopharmaceuticals may be proposed policy for determining the per furnished in physician offices as
expensive, and we were concerned that administration cost of these drugs, proposed, we plan to make any
packaging these new items might biologicals, and radiopharmaceuticals appropriate adjustments to the amounts
jeopardize beneficiary access to them. In that were payable under the OPPS, but shown in Addenda A and B to this final
addition, we did not want to delay did not have any CY 2004 claims data. rule with comment period for these
separate payment for these items solely We received several public comments items on a quarterly basis as more recent
because a pass-through application was in response to our request. ASP data become available. Changes in
not submitted. We noted in the Comment: One commenter supported the payment rates will be posted on our
proposed rule that this payment the proposal to price drugs that have a Web site during each quarter of CY
methodology is the same as the HCPCS code but do not have pass- 2006. Accordingly, effective January 1,
methodology that would be used to through status at the same rate they 2006, we will base payment rates for all
calculate the OPPS payment amount would be paid in the physician office separately payable drugs and biologicals
that pass-through drugs and biologicals setting based on the ASP methodology. on ASP data from the third quarter of
would be paid in CY 2006 in accordance Response: We appreciate the CY 2005, which will also be the basis
with section 1842(o) of the Act, as commenter’s support. We are finalizing for setting payment rates for drugs and
amended by section 303(b) of Pub. L. our proposed policy to pay for new biologicals in the physician office
108–173, and section 1847A of the Act. drugs, biologicals, and setting effective January 1, 2006.
Thus, we proposed to continue to treat radiopharmaceuticals with HCPCS For CY 2006, we will apply this
new drugs, biologicals, and codes but which do not have pass- policy to several drugs, biologicals, and
radiopharmaceuticals with established through status at a rate that is equivalent radiopharmaceuticals that are new
HCPCS codes the same, irrespective of to the payment they would receive in effective January 1, 2006 and do not
whether pass-through status has been the physician office setting, which will have pass-through status or hospital
determined. We also proposed to assign be established in accordance with the claims data. These items are listed in
status indicator ‘‘K’’ to HCPCS codes for ASP methodology. We are also paying Table 26 below and will be separately
new drugs and biologicals for which we separately for drugs, biologicals, and payable under OPPS in CY 2006, and
have not received a pass-through radiopharmaceuticals whose HCPCS thus, we have assigned them to status
application. codes will be payable for the first time indicator ‘‘K’’.
TABLE 26.—CY 2006 PAYMENT METHODOLOGY FOR NEW DRUGS, BIOLOGICALS, AND RADIOPHARMACEUTICALS WITHOUT
PASS-THROUGH STATUS AND CY 2004 CLAIMS DATA
CY 2006
HCPCS code Description APC SI
90714 ..................... Td vaccine no prsrv >/= 7 im ...................................................................................................... 1634 K

A9567 ..................... Technetium TC–99m aerosol ..................................................................................................... 1679 H
A9535 ..................... Injection, methylene blue ............................................................................................................ 1640 K
J0132 ..................... Acetylcysteine injection ............................................................................................................... 1680 K
J0278 ..................... Amikacin sulfate injection ........................................................................................................... 1681 K
J2425 ..................... Palifermin injection ...................................................................................................................... 1696 K
J2805 ..................... Sincalide injection ....................................................................................................................... 1699 K
J2850 ..................... Inj secretin synthetic human ....................................................................................................... 1700 K
J3471 ..................... Ovine, up to 999 USP units ........................................................................................................ 1702 K
J3472 ..................... Ovine, 1000 USP units ............................................................................................................... 1703 K
J7341 ..................... Non-human, metabolic tissue ..................................................................................................... 1707 K
J8540 ..................... Oral dexamethasone ................................................................................................................... 1708 K
J9225 ..................... Histrelin implant .......................................................................................................................... 1711 K
Q9958 .................... HOCM <=149 mg/ml iodine, 1ml ................................................................................................ 1714 K
Q9960 .................... HOCM 200–249mg/ml iodine, 1ml ............................................................................................. 1715 K
Q9964 .................... HOCM >= 400 mg/ml iodine, 1ml ............................................................................................... 1737 K
Comment: One commenter agreed in would be $100.39 for HCPCS code In this final rule with comment
principle with CMS’ proposed Q9953, which far exceeds the CY 2006 period, we are finalizing the proposed
methodology for determining the OPPS $50 packaging threshold. policy for determining the per
packaging status for drugs for which Therefore, the commenter requested that administration cost of drugs, biologicals,
CMS did not have CY 2004 claims data. CMS use the ASP data as reported to and radiopharmaceuticals that are
However, the commenter expressed establish a CY 2006 OPPS payment payable under the OPPS, but which do
concern about the proposal to package amount for HCPCS code Q9953. not have any CY 2004 claims data to
HCPCS code Q9953 (Inj Fe-based MR determine their packaging status in CY
Response: Consistent with the
contrast, ml). The commenter noted that 2006. Table 27 below lists all of the
commenter’s statement, we received
ASP data are available for Q9953, and drugs and biologicals to which this
the data demonstrated that the average ASP data from the second quarter of CY policy will apply in CY 2006.
per administration cost of Q9953 2005 for HCPCS code Q9953 after the We note that in the proposed rule, we
exceeded the $50 packaging threshold. proposed rule was issued. For this final indicated that we are packaging HCPCS
Thus, the commenter believed that rule with comment period, we are using code 90393 (Vaccina ig, im) as we were
HCPCS code Q9953 should be paid updated ASP data under the unable to determine a payment rate for
separately in CY 2006. The commenter methodology we proposed to determine this item based on the ASP
indicated that the most current ASP the packaging status for items that did methodology; thus, we were also unable
data submission, which was submitted not have any CY 2004 hospital claims to estimate the per administration cost
to CMS on July 29, 2005, showed an data, and our calculation of the per day of this item, For this final rule with
ASP for Feridex I.V., the product cost of HCPCS code Q9953 indicated comment period, we were still not able
described by HCPCS code Q9953, of that it is higher than $50 per day. to determine an ASP-based payment for
$28.68 per ml. The commenter pointed Therefore, we will make separate this item to estimate its per
out that using an average dosing of 3.5 payment for HCPCS code Q9953 in CY administration cost. Therefore, we will
ml per the Feridex I.V. package insert, 2006 and set payment at the rate continue to package this code in this
the average cost per administration determined using the ASP methodology. final rule with comment period.
TABLE 27.—DRUGS, BIOLOGICALS, AND RADIOPHARMACEUTICALS WITHOUT CY 2004 CLAIMS DATA

Est. average
ASP-based number of units CY 2006
HCPCS code Description payment rate per administra- SI
tion
90581 ..................... Anthrax vaccine, sc ....................................................................................... $126.46 1 K

C1093* ................... TC99M fanolesomab ..................................................................................... 1,197.00 1 H
C9206* ................... Integra, per cm2 ............................................................................................ 10.69 19 K
C9224 .................... Injection, galsulfase ....................................................................................... 1,522.15 14 K
J0135 ..................... Adalimumab injection .................................................................................... 293.98 2 K
J0190 ..................... Inj biperiden lactate/5 mg .............................................................................. 3.14 1 N
J0200 ..................... Alatrofloxacin mesylate ................................................................................. 16.03 2.5 N
J0288 ..................... Ampho b cholesteryl sulfate .......................................................................... 12.00 35 K
J0395 ..................... Arbutamine HCl injection ............................................................................... 160.00 1 K
J1180 ..................... Dyphylline injection ........................................................................................ 8.05 8.4 K
J1457 ..................... Gallium nitrate injection ................................................................................. 1.25 340 K
J3315 ..................... Triptorelin pamoate ....................................................................................... 372.86 1 K
TABLE 27.—DRUGS, BIOLOGICALS, AND RADIOPHARMACEUTICALS WITHOUT CY 2004 CLAIMS DATA—Continued

Est. average
ASP-based number of units CY 2006
HCPCS code Description payment rate per administra- SI
tion
J3530 ..................... Nasal vaccine inhalation ............................................................................... 15.00 1 N

J7350 ..................... Injectable human tissue ................................................................................ 5.35 33 K
J7674 ..................... Methacholine chloride, neb ........................................................................... 0.40 8.875 N
J9357 ..................... Valrubicin, 200 mg ........................................................................................ 369.60 4 K
Q2012* ................... Pegademase bovine, 25 iu ........................................................................... 166.07 56 K
Q2018* ................... Urofollitropin, 75 iu ........................................................................................ 48.45 2 K
* For CY 2006, C1093, C9206, Q2012, and Q2018 are deleted and replaced with A9566, J7343, J2504, and J3355 respectively.
Comment: One commenter requested and have not been published before as based on their classification and to be
that CMS clarify the coding and these codes are not currently separately paid accordingly. We continued this
payment policies for high osmolar paid in the physician office setting. In coding practice in CY 2005 with
contrast medium (HOCM) that will be response to one of the commenter’s payment made in accordance with
applicable during CY 2006. The concerns about appropriate billing for section 1833(t)(14)(A)(ii) of the Act.
commenter supported the proposal that HOCM, the hospitals may wish to post 2. CY 2006 Payment Policy
would allow hospitals to bill and be their charges for HOCM on the claim
paid for these agents using the recently with the revenue code that crosswalks In the CY 2006 OPPS proposed rule,
assigned HCPCS codes Q9958—Q9964 to the cost center on the hospital we proposed to base the payment rates
and revenue code 636. In addition, the Medicare cost report where the costs for for drugs and biologicals and their
commenter requested that HOCM agents HOCM are reported. We note that we pharmacy overhead costs on the ASP
be paid using the ASP methodology in will be closely examining hospital methodology that is used to set payment
CY 2006. The commenter noted that claims data for HOCM codes, as for all rates for these items in the physician
section 3631 of CMS’ Intermediary drugs, biologicals, and office setting. Under this methodology,
Manual currently states that ‘‘if billing radiopharmaceuticals, to assess whether a single payment rate for the drug is
separately, hospitals use revenue code packaging or separate payment is calculated by considering the prices for
255 for contrast material other than appropriate for future OPPS updates. both the innovator multiple source
LOCM. To prevent confusion and the (brand) and noninnovator multiple
C. Coding and Billing Changes for source (generic) forms of the drug.
inappropriate denial of claims, the
Specified Covered Outpatient Drugs Therefore, under the OPPS, we noted in
commenter further requested that CMS
specify that hospitals should disregard 1. Background the proposed rule that we believed that
the program manual instruction and use there was no longer a need to
As discussed in the January 6, 2004 differentiate between the brand and
revenue code 636 and the Q-codes when interim final rule with comment period
billing for HOCM. generic forms of a drug. Thus, we
(69 FR 826), we instructed hospitals to proposed to discontinue use of the C-
Response: The HCPCS codes Q9958— bill for sole source drugs using the codes that were created to represent the
Q9964 for HOCM were created effective existing HCPCS codes, which were innovator multiple source drugs. In CY
July 1, 2005. We believe that these codes priced in accordance with the 2006, hospitals would use the HCPCS
should be paid separately according to provisions of section 1833(t)(14)(A)(i) of codes for noninnovator multiple source
the ASP methodology in CY 2006, the Act, as added by Pub. L. 108–173. (generic) drugs to bill for both the brand
similar to our policy of paying However, at that time, the existing and generic forms of a drug as they did
separately for new items in CY 2006 HCPCS codes did not allow us to prior to implementation of section
because these codes had no predecessor differentiate payment amounts for 1833(t)(14)(A) in Pub. L. 108–173. We
codes in the OPPS and the codes innovator multiple source and specifically requested comments on this
themselves will first be recognized noninnovator multiple source forms of proposed policy.
under the OPPS in CY 2006. In this final the drug. Therefore, effective April 1, We received a few public comments
rule with comment period, we were able 2004, we implemented new HCPCS concerning this proposal.
to determine ASP-based payment rates codes via Program Transmittal 112 Comment: Several commenters
for all of the HOCM codes, except (Change Request 3144, February 27, supported the proposal to eliminate the
HCPCS code Q9959. We were unable to 2004) and Program Transmittal 132 use of the brand name drug C-codes in
identify a product that crosswalked to (Change Request 3154, March 30, 2004) CY 2006 as there was no longer a need
this code; therefore, we could not that providers were instructed to use to to distinguish between innovator (brand
calculate an appropriate payment for bill for innovator multiple source drugs name) and noninnovator (generic)
this code. Therefore, we are packaging in order to receive appropriate payment multiple source drugs. The commenters
HCPCS code Q9959 in this final rule in accordance with section indicated that this policy will reduce
with comment period. We note that if 1833(t)(14)(A)(i)(II) of the Act. We also the administrative burden of
ASP data become available in later instructed providers to continue to use maintaining and reporting separate
quarter submissions for this code, then the existing HCPCS codes to bill for HCPCS codes for both generic and brand
we will pay for this code separately noninnovator multiple source drugs to name drugs. However, some
based on an appropriate payment rate. receive payment in accordance with commenters pointed out that the
The ASP-based payment rates for the section 1833(t)(14)(A)(i)(III) of the Act. availability of these drugs varies in the
separately payable HOCM codes that are These coding policies allowed hospitals marketplace, and they asked CMS to
listed in Addenda A and B of this final to appropriately code for drugs, clarify how it determines a single ASP
rule with comment period are estimates biologicals, and radiopharmaceuticals payment for both brand and generic
drugs to ensure that the calculated APC in order for a drug or biological to be appropriate payment amount with the
payment accurately reflects the assigned pass-through status, a next OPPS quarterly update.
combined cost of both brand and temporary C-code assigned for billing For CY 2006, we proposed to continue
generic forms of the drug. One purposes, and an APC payment amount the same methodology for paying for
commenter also requested that CMS determined. Pass-through applications new drugs, biologicals, and
clarify whether the ASP is based on the are reviewed on a flow basis, and radiopharmaceuticals without HCPCS
volume of brand versus generic drugs payment for drugs and biologicals codes. We received a few public
purchased by providers during a given approved for pass-through status is comments in response to our proposal.
quarter. implemented throughout the year as Comment: Several commenters
Response: Section 1847A(b)(3) of the part of the quarterly updates of the supported CMS’ proposal to pay for new
Act specifies that the payment amount OPPS. drugs prior to the assignment of a
for multiple source drugs is the volume- HCPCS code at an amount equal to 95
2. CY 2006 Payment Policy percent of the drug’s AWP and
weighted average of the ASPs reported
by the manufacturers of the NDCs Section 1833(t)(15) of the Act, as reiterated that the AWP should
assigned to the billing HCPCS code. The added by section 621(a)(1) of Pub. L. correspond to the payment rate
computation is weighted by the number 108–173, provides for payment for new established by the fiscal intermediaries
of units sold during the reporting drugs and biologicals until HCPCS using the Red Book or an equivalent
period. As availability of products codes are assigned under the OPPS. recognized compendium. One
changes in the marketplace, changes in Under this provision, we are required to commenter noted that this policy allows
purchasing patterns will be reported in make payment for an outpatient drug or providers to receive payment for newer
the ASP data. For further discussion of biological that is furnished as part of drugs in a timely fashion.
the methodology used to determine the covered outpatient hospital services but Response: We appreciate the
ASP-based payment amounts, see the for which a HCPCS code has not yet commenters’ support for the
related ‘‘Frequently Asked Question’’ at been assigned in an amount equal to 95 continuation of our policy to pay for
http://questions.cms.hhs.gov. This issue percent of AWP. This provision applies new drugs, biologicals, and
is also addressed in the CY 2006 only to payments made under the OPPS radiopharmaceuticals without HCPCS
Medicare Physician Fee Schedule final on or after January 1, 2004. codes at 95 percent of AWP. For CY
As noted in the proposed rule (70 FR 2006, we are finalizing our proposed
rule.
For CY 2006, we are finalizing our 42733), we initially adopted the methodology, without modification.
proposal to discontinue use of the C- methodology for determining payment
E. Payment for Vaccines
codes that were created to represent the under section 1833(t)(15) of the Act on
an interim basis on May 28, 2004, via Outpatient hospital departments
innovator multiple source drugs, and administer large numbers of
Transmittal 188, Change Request 3287,
note that hospitals are to use the HCPCS immunizations for influenza (flu) and
and finalized the methodology for CY
codes for noninnovator multiple source pneumococcal pneumonia (PPV),
2005 in our CY 2005 OPPS final rule
(generic) drugs to bill for both the brand typically by participating in
with comment period. In that final rule
and generic forms of a drug. immunization programs. In recent years,
with comment period, we also
D. Payment for New Drugs, Biologicals, expanded the methodology to include the availability and cost of some
and Radiopharmaceuticals Before payment for new radiopharmaceuticals vaccines (particularly the flu vaccine)
HCPCS Codes Are Assigned to which a HCPCS code is not assigned have fluctuated considerably. As
(69 FR 65804 through 65807). We discussed in the November 1, 2002 final
1. Background instructed hospitals to bill for a drug or rule (67 FR 66718), we were advised by
Historically, hospitals have used a biological that is newly approved by the providers that the OPPS payment was
HCPCS code for an unlisted or FDA by reporting the NDC for the insufficient to cover the costs of the flu
unclassified drug, biological, or product along with new HCPCS code vaccine and that access of Medicare
radiopharmaceutical or used an C9399 (Unclassified drug or biological). beneficiaries to flu vaccines might be
appropriate revenue code to bill for When HCPCS code C9399 appears on a limited. They cited the timing of
drugs, biologicals, and claim, the OCE suspends the claim for updates to the OPPS rates as a major
radiopharmaceuticals furnished in the manual pricing by the fiscal concern. They indicated that our update
outpatient department that do not have intermediary. The fiscal intermediary methodology, which uses 2-year-old
an assigned HCPCS code. The codes for prices the claim at 95 percent of its claims data to recalibrate payment rates,
not otherwise classified drugs, AWP using the Red Book or an would never be able to take into account
biologicals, and radiopharmaceuticals equivalent recognized compendium, yearly fluctuations in the costs of the flu
are assigned packaged status under the and processes the claim for payment. vaccine. We agreed with this concern
OPPS. That is, separate payment is not This approach enables hospitals to bill and decided to pay hospitals for
made for the code, but charges for the and receive payment for a new drug, influenza and pneumococcal
code would be eligible for an outlier biological, or radiopharmaceutical pneumonia vaccines based on a
payment and, in future OPPS updates, concurrent with its approval by the reasonable cost methodology. As a
the charges for the code are packaged FDA. The hospital does not have to wait result of this change, hospitals, home
with the separately payable service with for the next OPPS quarterly release or health agencies (HHAs), and hospices,
which the code is reported for the same for approval of a product-specific which were paid for these vaccines
date of service. HCPCS code to receive payment for a under the OPPS in CY 2002, have been
Drugs and biologicals that are newly newly approved drug, biological, or receiving payment at reasonable cost for
approved by the FDA and for which a radiopharmaceutical. In addition, the these vaccines since CY 2003.
HCPCS code has not yet been assigned hospital does not have to resubmit Influenza, pneumococcal, and
by the National HCPCS Alpha-Numeric claims for adjustment. Hospitals hepatitis B vaccines and their
Workgroup could qualify for pass- discontinue billing HCPCS code C9399 administration are specifically covered
through payment under the OPPS. An and the NDC upon implementation of a by Medicare under section 1861(s)(10)
application must be submitted to CMS HCPCS code, status indicator, and of the Act. For CY 2006, we proposed
to continue to pay influenza and for CY 2006 in this final rule with FDA for treatment of only one or more
pneumococcal vaccines at reasonable comment period. We did not receive orphan condition(s).
cost. However, hepatitis B vaccines have any comments on our proposals to also • The current United States
been paid under clinical APCs that also pay for Hepatitis B vaccines at Pharmacopoeia Drug Information
included other vaccines. For CY 2006, reasonable cost and pay for each (USPDI) shows that the drug has neither
we proposed to pay for all hepatitis B separately payable vaccine under its an approved use nor an off-label use for
vaccines at reasonable cost, consistent own APC. For CY 2006, we are also other than the orphan condition(s).
with the payment methodology for finalizing these two proposals. Eleven single indication orphan drugs
influenza and pneumococcal vaccines. Comment: Several commenters noted were identified as having met these
Influenza and pneumococcal vaccines that CMS assigned CPT code 90660 criteria and payments for these drugs
are exempt from coinsurance and (Intranasal influenza vaccine) status were made outside of the OPPS on a
deductible payments under sections indicator ‘‘E,’’ indicating that Medicare reasonable cost basis.
1833(a)(3) and 1833(b) of the Act and does not cover the item, does not In the November 7, 2003 final rule
have been assigned status indicator ‘‘L’’. recognize it, or does not provide with comment period (68 FR 63452), we
However, hepatitis B vaccines have no separate payment for it. The discontinued payment for orphan drugs
similar coinsurance or deductible commenters urged CMS to implement on a reasonable cost basis and made
exemption. Therefore, we proposed to the APC Panel’s recommendation to pay separate payments for each single
assign these items status indicator ‘‘F’’. for CPT code 90660 on a reasonable cost indication orphan drug under its own
Previously under the OPPS, basis and exempt this code from APC. Payments for the orphan drugs
separately payable vaccines other than were made at 88 percent of the AWP
coinsurance and deductible, similar to
influenza and pneumococcal were listed for these drugs in the April 1,
all other influenza vaccines.
grouped into clinical APCs 0355 (Level 2003 single drug pricer, unless we were
Response: We agree with the
I Immunizations) and 0356 (Level II presented with verifiable information
commenters that our proposal to pay
Immunizations) for payment purposes. that showed that our payment rate did
influenza vaccines at reasonable cost not reflect the price that was widely
Payment rates for these APCs were should also apply to CPT code 90660.
based on the APCs’ median costs, available to the hospital market. For CY
Therefore, CPT code 90660 will be paid 2004, Ceredase (alglucerase) and
calculated from the costs of all of the at reasonable cost and assigned to status
vaccines grouped within the APCs. For Cerezyme (imiglucerase) were paid at 94
indicator ‘‘L’’ in CY 2006, similar to all percent of the AWP because external
CY 2006, we proposed to pay for each other influenza vaccines.
separately payable vaccine under its data submitted by commenters on the
own APC, consistent with our policy for F. Changes in Payment for Single August 12, 2003 proposed rule caused
separately payable drugs other than Indication Orphan Drugs us to believe that payment at 88 percent
vaccines, instead of aggregating them of the AWP would be insufficient to
Section 1833 (t)(1)(B)(i) of the Act ensure beneficiaries’ access to these
into clinical APCs with other vaccines. gives the Secretary the authority to
We believed this policy would allow us drugs.
designate the hospital outpatient In the December 31, 2003 correction
to more appropriately establish a
services to be covered. The Secretary of the November 7, 2003 final rule with
payment rate for each separately
has specified coverage for certain drugs comment period (68 FR 75442), we
payable vaccine based on the ASP
as orphan drugs (section added HCPCS code J9017 (Arsenic
methodology. Proposed and final policy
1833(t)(14)(B)(ii)(III) of the Act, as trioxide, 1 mg) to our list of single
changes to coding and payments for the
added by section 621(a)(1) of Pub. L. indication orphan drugs. In the
administration of these vaccines are
108–173). Section 1833 (t)(14)(C) of the November 15, 2004 final rule with
discussed in section VIII.C. of this
Act, as added by section 621(a)(1) of comment period (69 FR 65807), we
preamble.
During the August 2005 meeting of Pub. L. 108–173, gives the Secretary the retained the same criteria for identifying
the APC Panel, the Panel recommended authority in CYs 2004 and 2005 to single indication orphan drugs and
that CMS change the status indicator for specify the amount of payment for an added two HCPCS codes to our list,
CPT code 90660, intranasal influenza orphan drug that has been designated as HCPCS code C9218 (Injection,
vaccine, to ‘‘L,’’ and that the code be such by the Secretary. Azactidine, per 1 mg) and HCPCS code
reimbursed on a reasonable-cost basis. In the CY 2006 OPPS proposed rule J9010 (Alemtuzumab, 10 mg) (69 FR
As discussed below, we accepted this (70 FR 42733), we indicated that we 65808). As of CY 2005, the following are
recommendation. recognized that orphan drugs that are the 14 orphan drugs that we have
We specifically requested comments used solely for an orphan condition or identified as meeting our criteria:
on our proposed vaccine policies for CY conditions are generally expensive and, HCPCS code C9218 (Injection,
2006. We received several public by definition, are rarely used. We Azactidine, per 1 mg); HCPCS code
comments concerning our proposal. believed that if the costs of these drugs J0205 (Injection, Alglucerase, per 10
Comment: All commenters supported were packaged into the payment for an units); HCPCS code J0256 (Injection,
CMS’ proposal to continue to pay for associated procedure or visit, the Alpha 1-proteinase inhibitor, 10 mg);
influenza and pneumococcal payment for the procedure might be HCPCS code J9300 (Gemtuzumab
pneumonia vaccines based on insufficient to compensate a hospital for ozogamicin, 5mg); HCPCS code J1785
reasonable cost. One commenter the typically high costs of this special (Injection, Imiglucerase, per unit);
believed that payment based on type of drug. Therefore, we proposed to HCPCS code J2355 (Injection,
reasonable cost helps to ensure that continue paying for them separately. Oprelvekin, 5 mg); HCPCS code J3240
hospitals are adequately paid for In the November 1, 2002 final rule (67 (Injection, Thyrotropin alpha, 0.9 mg);
providing these vaccines. FR 66772), we identified 11 single HCPCS code J7513 (Daclizumab,
Response: We appreciate the indication orphan drugs that are used parenteral, 25 mg); HCPCS code J9010
commenters’ continued support of our solely for orphan conditions by (Alemtuzumab, 10 mg); HCPCS code
policy. We are finalizing our proposal to applying the following criteria: J9015 (Aldesleukin, per single use vial);
pay for influenza and pneumococcal • The drug is designated as an orphan HCPCS code J9017 (Arsenic trioxide, 1
pneumonia vaccines at reasonable cost drug by the FDA and approved by the mg); HCPCS code J9160 (Denileukin
diftitox, 300 mcg); HCPCS code J9216 the number of hospitals providing data greater stability and accuracy in their
(Interferon, gamma 1-b, 3 million units); was so small compared to the total reporting of sales prices. As the ASPs
and HCPCS code Q2019 (Injection, number of hospitals expected to utilize reflect the average sales prices to all
Basiliximab, 20 mg). the drug. Furthermore, we recognized purchasers, the ASP data also include
In the November 15, 2004 final rule that the GAO data on hospital drug drug sales to hospitals. Past commenters
with comment period (69 FR 65808), we acquisition costs did not reflect the have indicated to us that some orphan
stated that had we not classified these current acquisition costs experienced by drugs are administered principally in
drugs as single indication orphan drugs hospitals but instead, relied on past cost hospitals, and to the extent that this is
for payment under the OPPS, they data from late CY 2003 through early CY true their ASPs should predominantly
would have met the definition of single 2004. On the other hand, we stated that be based upon the sales of drugs used
source specified covered outpatient the ASP data were more current and by hospitals. For three of the orphan
drugs and received lower payments, thus were likely more reflective of drugs for which the GAO provided
which could have impeded beneficiary hospital acquisition costs for alpha 1- average purchase prices from a large
access to these unique drugs dedicated proteinase inhibitor at the time of percentage of hospitals expected to
to the treatment of rare diseases. issuance of the CY 2006 proposed rule. acquire the drugs, the GAO data were
Instead, for CY 2005, under our In contrast to the GAO data for alpha very consistent with the ASP+6 percent.
authority at section 1833(t)(14)(C) of the 1-proteinase inhibitor, the GAO data for For the fourth drug, the GAO mean was
Act, we set payment for all 14 single imiglucerase (HCPCS code J1785) significantly lower than the ASP+6
indication orphan drugs at the higher of reflected hospital purchase prices from percent and the confidence interval
88 percent of the AWP or the ASP+6 about 69 percent of the hospitals around that mean was quite tight,
percent. For CY 2005, we also updated expected to utilize the drug. For this although only a small proportion of
on a quarterly basis the payment rates drug, the mean hospital purchase price hospitals expected to acquire the drug
through comparison of the most current was about 93 percent of the CY 2005 reported their purchase prices. Thus, in
ASP and AWP information available to payment rate for imiglucerase updated the proposed rule, we stated that we
us. Given that CY 2005 was the first year in April 2005, which was based on believed that proposing to pay for
of mandatory ASP reporting by ASP+6 percent rate. Thus, the ASP- orphan drugs based on an ASP
manufacturers, we did not want based payment rate also appeared to be methodology was appropriate for the CY
potential significant fluctuations in the appropriately reflective of hospital 2006 OPPS and should assure patients’
ASPs to affect payments to hospitals acquisition costs for imiglucerase, and continued access to these orphan drugs
furnishing these drugs, which in turn to be consistent with the GAO mean in the hospital outpatient department.
might cause access problems for purchase price. Therefore, for CY 2006, we proposed to
beneficiaries. Therefore, in the For denileukin difitox (HCPCS code pay for single indication orphan drugs
November 15, 2004 final rule, we did J9160) and alemtuzumab (HCPCS code
at the ASP+6 percent.
not implement the proposed 95 percent J9010), the GAO data for these drugs
AWP cap on payments for single reflected hospital purchase prices from We believed that paying for orphan
indication orphan drugs, which was about 77 percent and 66 percent of the drugs using the ASP methodology was
described in the August 16, 2004 hospitals expected to acquire these consistent with our proposed general
proposed rule (69 FR 50518), as we drugs, respectively. The mean hospital drug payment policy for other
intended to monitor the impact of our purchase price for denileukin difitox separately payable drugs and biologicals
payment policy and consider the need was about 94 percent of the payment in the CY 2006 and reflected our general
for a cap in future OPPS updates if rate based on the ASP+6 percent rate view that ASP-based payment rates
appropriate (69 FR 65809). and about 79 percent of the CY 2005 serve as the best proxy for the average
As indicated in the proposed rule (70 payment rate. As for alemtuzumab, the acquisition cost for these items as
FR 42734), as a part of the GAO study mean hospital purchase price was about described in this section V. of the
on hospital acquisition costs of 95 percent of the payment rate based on preamble. In addition, we proposed to
specified covered outpatient drugs, the the ASP+6 percent rate and about 89 pay an additional 2 percent of the ASP
GAO provided the average hospital percent of the CY 2005 payment rate. scaled for budget neutrality to cover the
purchase prices for four orphan drugs: For both of these drugs, the ASP-based handling costs of these drugs, also
HCPCS code J0256 (Injection, Alpha 1- payment rates also appeared to be consistent with our proposed general
proteinase inhibitor, 10 mg), HCPCS appropriately reflective of their hospital pharmacy overhead payment policy for
code J1785 (Injection, Imiglucerase, per acquisition costs, based on confirmation handling costs associated with
unit), HCPCS code J9160 (Denileukin by the GAO average purchase price data separately payable drugs and
difitox, 300 mcg), and HCPCS code from over two-thirds of the hospitals biologicals. We believed that the ASP+6
J9010 (Alemtuzumab, 10 mg). expected to acquire the drugs. percent for orphan drugs would provide
For alpha 1-proteinase inhibitor During the quarterly updates to appropriate payment for hospital
(HCPCS code J0256), the hospitals in the payment rates for single indication acquisition costs for these drugs that are
study sample represented only about 14 orphan drugs for CY 2005, we observed administered by a relatively small
percent of the estimated total number of significant improvement in the accuracy number of providers, so that patients
hospitals purchasing the drug. The and consistency of manufacturers’ would continue to have access to
mean hospital purchase price was about reporting of the ASPs for these orphan orphan drugs in the hospital outpatient
73 percent of the payment rate based on drugs. Overall, we found that the ASPs setting. Hospitals would also receive
ASP+6 percent rate and about 63 as compared to the AWPs were less additional payments for costs associated
percent of the CY 2005 payment rate likely to experience dramatic with their storage, handling, and
updated in April 2005. We noted in the fluctuations in prices from quarter to preparation of orphan drugs. We
proposed rule (70 FR 42734) that we quarter. We indicated in the proposed proposed to update the payment rates
believed the GAO acquisition data for rule that we expected that as the ASP on a quarterly basis to reflect the most
alpha 1-proteinase inhibitor were likely system continues to mature, current ASPs available to us, and we
not representative of hospital manufacturers will further refine their also noted that appropriate adjustments
acquisition costs for the drug because quarterly reporting, leading to even to the payment amounts shown in
Addendum A and B of this final rule these drugs have a relatively low products. We note that this policy will
with comment period would be made if volume of patient use, lack any other no longer differentiate how we pay for
the ASP submissions in a later quarter nonorphan indication, and are typically orphan drugs based on the use of the
indicated that adjustments to the very costly. We will consider the drugs because all orphan drugs, both
payment rates were necessary. (70 FR recommendation to establish an single-indication and multi-indication,
42735) These changes to the Addenda evaluation process to determine future will be paid under the same
would be announced in our program changes to the OPPS orphan drug list methodology.
instructions released on a quarterly and the payment rates for these drugs. For this CY 2006 OPPS final rule with
basis and posted on our Web site at Based on our analysis of the ASP rates comment period, we are using payment
http://www.cms.hhs.gov. using data from the fourth quarter of CY rates for single-indication orphan drugs
We specifically requested comments 2004 and the GAO reported mean based on ASP data from the second
on our proposed payment policy for purchase prices for four orphan drugs, quarter of CY 2005, which are effective
single indication orphan drugs in CY we stated in the proposed rule (70 FR in the physician office setting on
2006. We received several public 42735) that we believed proposing to October 1, 2005, because these are the
comments regarding our proposal. pay for orphan drugs using the ASP most recent numbers available for the
Comment: One commenter indicated methodology at a payment rate of development of this rule. To be
that, under the proposed payment ASP+6 percent is appropriate for the CY consistent with the ASP-based
policy for orphan drugs, it did not 2006 OPPS and should ensure patients’ payments that would be made when
anticipate access problems generally for continued access to these orphan drugs these drugs and biologicals are
orphan drugs that will be used in the in the hospital outpatient department. furnished in physician offices, as
hospital outpatient setting in CY 2006. Using updated ASP data reported from proposed, we plan to make any
However, the commenter also stated the second quarter of CY 2005, we appropriate adjustments to the amounts
that orphan drugs should be given found that our current analysis is shown in Addenda A and B to this final
special consideration as a class and consistent with the results we found for rule with comment period for these
recommended that CMS adopt the the proposed rule. As indicated in the items on a quarterly basis as more recent
definition of ‘‘orphan drugs’’ used in the proposed rule, we believe that paying ASP data become available. Changes in
Food, Drug, and Cosmetics Act for for orphan drugs using the ASP the APC payment rates for these items
purposes of identifying drugs and methodology is consistent with our CY will be posted on our Web site during
biologicals that are treatments for rare 2006 final drug payment policy for other each quarter of CY 2006. Therefore,
diseases. The commenter further separately payable drugs and biologicals effective January 1, 2006, we will base
recommended that CMS establish an and reflects our general view that ASP- payment rates for single-indication
evaluation process to determine which based payment rates serve as the best orphan drugs on ASP data from the
orphan products may need special proxy for the average acquisition costs third quarter of CY 2005, which will
status or assistance to assure access. For for these items as described earlier in also be the basis for setting payment
example, the commenter suggested that this preamble. rates for drugs and biologicals in the
CMS accept orphan products designated Earlier in the preamble, we indicated physician office setting effective January
by the FDA as a valid class for initial that in CY 2006, we are basing payment 1, 2006.
consideration; develop prospective for the average acquisition and overhead Comment: One commenter indicated
criteria to determine which orphan costs for other separately payable drugs that payment at ASP+6 percent is
drugs should not be part of this class; and biologicals on ASP+6 percent inadequate for HCPCS code J9160
work with stakeholders to identify any because, in part, both the acquisition (Denileukin diftitox, 300 mcg) because
access problems that may occur or are and pharmacy overhead costs are the methodology has resulted in access
likely to occur in the near future; and reflected in the charges submitted by issues for patients in the physician
provide patients and pharmaceutical hospitals for these items. In this final office setting, which influenced the shift
companies an opportunity to present rule with comment period, we made of patients from physician offices to
data and receive a written explanation this determination using updated ASP hospital outpatient sites. As CMS
with examples before making a final data, hospital claims data, and CCRs. proposed to use the same methodology
decision that an orphan drug access We believe that the same observation is to establish payment rates in the
problem exists. true for single indication orphan drugs, hospital outpatient setting, the
Response: As we stated in the CY as we do not have any reason to believe commenter is concerned that the
2005 final rule with comment period (69 that hospitals would include their consequence will be that patients will
FR 65808), using the statutory authority acquisition and overhead costs in the be left with no access to this biological.
in section 1833(t)(1)(B)(i) of the Act, charges for other separately payable The commenter noted that the GAO data
which gives the Secretary broad drugs and biologicals, but would not that supported the belief that the
authority to designate covered OPD follow the same charging practice when median purchase price for hospitals was
services under the OPPS, we have billing for single-indication orphan almost exactly the same as the WAC
established criteria which distinguish drugs. Therefore, we believe that in CY price for this item for CY 2003.
single indication orphan drugs from 2006, a combined payment rate of Therefore, the commenter
other drugs designated as orphan drugs ASP+6 percent will be sufficient and recommended that CMS consider a
by the FDA under the Orphan Drug Act. appropriate for both the acquisition and temporary payment rate for one year
Our determination to provide special overhead costs related to providing that is closer to the actual hospital
payment for these drugs in previous single-indication drugs to hospital acquisition cost such as WAC or
years neither affected nor deviated from outpatients. Accordingly, in this final implement some other special
FDA’s classification of any drugs as rule with comment period, we are methodology to ensure appropriate
orphan drugs. The special treatment adopting the policy of paying for orphan payment for this product in CY 2006.
given to this subset of FDA-designated drugs separately at ASP+6 percent, The commenter also indicated that an
orphan drugs was intended to ensure which represents a combined payment additional payment amount of 2 percent
that beneficiaries had continued access for the acquisition and overhead costs of the ASP for handling costs associated
to these life-saving therapies given that associated with furnishing these with this biological is inadequate and
requested a higher handling rate for a rule, we believe the GAO acquisition and subsequent years, we specify the
special class of products, like data for alpha 1-proteinase inhibitor are applicable percentage up to 2.0 percent.
denileukin diftitox, that require special likely not representative of hospital If we estimate before the beginning of
handling. acquisition costs for the drug because the calendar year that the total amount
Response: As we stated in the the number of hospitals providing data of pass-through payments in that year
proposed rule, the GAO data for is so small compared to the total would exceed the applicable percentage,
denileukin difitox reflected hospital number of hospitals expected to use the section 1833(t)(6)(E)(iii) of the Act
purchase prices from about 77 percent drug. Moreover, the GAO data relied on requires a uniform reduction in the
of the hospitals expected to acquire past hospital cost information from late amount of each of the transitional pass-
these drugs. The mean hospital CY 2003 through early CY 2004. As through payments made in that year to
purchase price from the GAO study for previously stated, the ASP data are more ensure that the limit is not exceeded.
denileukin difitox was about 91 percent current, and thus are likely more We make an estimate of pass-through
of the ASP+6 percent payment rate reflective of present hospital acquisition spending to determine not only whether
based on data from the second quarter costs for alpha 1-proteinase inhibitor. payments exceed the applicable
of CY 2005 and about 79 percent of the We continue to believe this to be true, percentage, but also to determine the
CY 2005 payment rate. We continue to and therefore, based on rationale cited appropriate reduction to the conversion
believe in this final rule with comment above, in CY 2006, we will pay for all factor for the projected level of pass-
period that the ASP-based payment rate single-indication orphan drugs, through spending in the following year.
for this drug appears to be appropriately including alpha 1-proteinase inhibitor, As stated in the proposed rule,
reflective of its hospital acquisition at a rate of ASP+6 percent for both the making an estimate of pass-through
costs, based on confirmation by the acquisition and overhead costs spending for devices in CY 2006 entails
GAO average purchase price data from associated with these items. We find no estimating spending for two groups of
over three-fourths of the hospitals reason to establish a payment floor for items (70 FR 42735). The first group
expected to acquire the drug. Moreover, alpha 1-proteinase inhibitor that is consists of those items for which we
as stated previously, we believe that like related to the CY 2005 payment rates, have claims data for procedures that we
for other single-indication orphan drugs when we have more current ASP data believe used devices that were eligible
and other separately payable drugs and available that reflect current market for pass-through status in CY 2004 and
biologicals, a combined payment of prices. CY 2005 and that would continue to be
ASP+6 percent in CY 2006 for this drug With respect to establishing brand- eligible for pass-through payment in CY
is adequate to cover both its acquisition specific HCPCS codes for the different 2006. The second group consists of
and pharmacy overhead costs. products described by HCPCS code those items for which we have no direct
We received two public comments on J0256, we suggest that the commenter claims data, that is, items that became,
the proposed payment rate for HCPCS pursue these changes through the or would become, eligible in CY 2005
code J0256. process set up by the National HCPCS and would retain pass-through status in
Comment: One commenter indicated CY 2006, as well as items that would be
Panel to establish HCPCS codes. Lastly,
that HCPCS code J0256 described three newly eligible for pass-through payment
we note that in CY 2006 there will not
alpha 1-augmentation therapies beginning in CY 2006.
be a lag in the implementation of the
currently available and urged CMS to
ASP-based payment rates for the OPPS B. Estimate of Pass-Through Spending
recognize the critical importance of the
and the physician fee schedule. As for CY 2006
access issues surrounding these
noted earlier, effective January 1, 2006, As we proposed, in this final rule
therapies. Therefore, the commenter
we will base payment rates for single- with comment period, we are setting the
recommended that in CY 2006 CMS set
indication orphan drugs on ASP data applicable percentage cap at 2.0 percent
the payment rate for HCPCS code J0256
at the higher of the CY 2005 fourth from the third quarter of CY 2005, of the total OPPS projected payments for
quarter payment rate or the proposed which will also be the basis for setting CY 2006. As we discuss in section IV.C.
ASP+8 percent rate. The commenter payment rates for drugs and biologicals of this preamble, the three remaining
added that setting a floor should in the physician office setting effective device categories receiving pass-through
provide access to all three therapies, January 1, 2006. We note that HCPCS payment in CY 2005 will expire on
which is critical because there is not a codes C9128 and Q201 have been December 31, 2005. Therefore, we
sufficient supply of any of the alpha 1- deleted effective December 31, 2005 and estimate pass-through spending
proteinase inhibitors to supply all replaced with HCPCS codes J9025 and attributable to the first group of items
patients for whom the therapy has been J0480, respectively, in CY 2006. described above to equal zero.
prescribed. Another commenter VI. Estimate of Transitional Pass- To estimate CY 2006 pass-through
recommended that CMS establish Through Spending in CY 2006 for spending for device categories in the
brand-specific codes and payment rates Drugs, Biologicals, and Devices second group, that is, items for which
for the different products described by we have no direct claims data, as we
HCPCS code J0256; synchronize A. Total Allowed Pass-Through proposed, in this final rule with
operationally the lag time between the Spending comment period, we used the following
manufacturers’ ASP reporting and CMS’ Section 1833(t)(6)(E) of the Act limits approach: For additional device
posting of the updated ASP payment the total projected amount of categories that are approved for pass-
rates on its Web site so that such transitional pass-through payments for through status after July 1, 2005, but
changes are implemented at the same drugs, biologicals, before January 1, 2006, we used price
time for drugs paid under the OPPS and radiopharmaceuticals, and categories of information from manufacturers and
those paid under the physician fee devices for a given year to an volume estimates based on claims for
schedule; and consider a proxy add-on ‘‘applicable percentage’’ of projected procedures that would most likely use
payment to cover the overhead costs total Medicare and beneficiary the devices in question because we did
associated with these drugs. payments under the hospital OPPS. For not have any CY 2004 claims data upon
Response: As discussed earlier in this a year before CY 2004, the applicable which to base a spending estimate. We
preamble and noted in the proposed percentage was 2.5 percent; for CY 2005 projected these data forward to CY 2006
using inflation and utilization factors specified covered drug, and the pool that exceeds the estimated amount
based on total growth in OPPS services payment amount for the for pass-through payments in CY 2006.
as projected by CMS’ Office of the radiopharmaceutical under section The commenter indicated that this will
Actuary (OACT) to estimate CY 2006 1842(o) of the Act. However, we have no ensure beneficiary access to basic
pass-through spending for this group of new radiopharmaceuticals that were services.
device categories. For device categories added for pass-through payment in CY Response: We appreciate the
that become eligible for pass-through 2005, and we have no information commenter’s support.
status in CY 2006, we used the same identifying new radiopharmaceuticals to Accordingly, we are finalizing our
methodology. We anticipated that any which a HCPCS code might be assigned proposed methodology for estimating
new categories for January 1, 2006, on or after January 1, 2006, for which CY 2006 OPPS pass-through spending
would be announced after the pass-through status would be sought. for drugs, biologicals, and categories of
publication of the proposed rule, but We also have no data regarding payment devices with the modification as
before publication of this final rule with for new radiopharmaceuticals with discussed above. Our adoption of this
comment period. Therefore, as indicated pass-through status under the proposal as modified will return 1.83
in the proposed rule (70 FR 42735), the methodology that we specified in the
percent of the pass-through pool to
estimate of pass-through spending in CY 2005 final rule with comment
adjust the conversion factor.
this final rule with comment period period. However, we do not believe that
incorporates any pass-through spending pass-through spending for new VII. Brachytherapy Source Payment
for device categories made effective radiopharmaceuticals in CY 2006 will Changes
January 1, 2006, and during subsequent be significant enough to materially
A. Background
quarters of CY 2006. affect our estimate of total pass-through
We did not announce pass-through spending in CY 2006. Therefore, we are Section 1833(t)(16)(C) and section
status for any new device categories not including radiopharmaceuticals in 1833(t)(2)(H) of the Act, as added by
after July 1, 2005. There is one new our estimate of pass-through spending sections 621(b)(1) and (b)(2) of Pub. L.
device category that we may add for for CY 2006. 108–173, respectively, establish separate
pass-through payment as of January 1, In accordance with the methodology payment for devices of brachytherapy
2006. To estimate CY 2006 pass-through described above and the methodology consisting of a seed or seeds (or
spending for items for which we have for estimating pass-through spending radioactive source) based on a hospital’s
no direct claims data, we are adhering discussed in our proposed rule for CY charges for the service, adjusted to cost.
to the methodology, as specified above, 2006, we estimate that total pass- Charges for the brachytherapy devices
for estimating pass-through spending for through spending for device categories may not be used in determining any
the second group of items, with a that first become eligible for pass- outlier payments under the OPPS. In
refinement to the growth factor. That is, through status during CY 2006 will addition, consistent with our practice
we are projecting forward to CY 2006 equal approximately $45.5 million, under the OPPS to exclude items paid
the OPPS volume of the procedure which represents 0.17 percent of total at cost from budget neutrality
utilizing devices that could fall into the OPPS projected payments for CY 2006. consideration, these items must be
potential new device category at a This figure includes estimates for the excluded from budget neutrality as well.
higher rate of increase than the total rate current device categories continuing The period of payment under this
of growth in OPPS services as projected into CY 2006, which equal zero, in provision is for brachytherapy sources
by the OACT. The rate of growth of this addition to projections for categories furnished from January 1, 2004, through
relatively new procedure in the OPPS that first become eligible during CY December 31, 2006.
claims data from recent years is several 2006.
This estimate of total pass-through Section 621(b)(3) of Pub. L. 108–173
times the overall growth rate of all OPPS
spending for CY 2006 is significantly requires the Government Accountability
services.
With respect to CY 2006 pass-through lower than many previous years’ Office (GAO) to conduct a study to
spending for drugs and biologicals, as estimates (except for the CY 2005 determine appropriate payment
we noted in the proposed rule (70 FR estimate, which was approximately amounts for devices of brachytherapy,
42735) and as explained in section $23.4 million) both because of the and to submit a report on its study to
V.A.3. of this final rule with comment method we used, as discussed in section the Congress and the Secretary,
period, the pass-through payment V.A.3. of this preamble, for determining including recommendations. As
amount for new drugs and biologicals the amount of pass-through payment for indicated in the CY 2006 proposed rule,
that we determine have pass-through drugs and biologicals with pass-through we are awaiting the report and any
status will equal zero. Therefore, our status, and the fact that there are no CY recommendations on the payment of
estimate of pass-through spending for 2005 pass-through device categories that devices of brachytherapy, which would
drugs and biologicals with pass-through are being carried over to CY 2006. pertain to brachytherapy payments after
status in CY 2006 equals zero. Because we estimate pass-through December 31, 2006.
In the CY 2005 final rule with spending in CY 2006 will not amount to In the OPPS interim final rule with
comment period (69 FR 65810), we 2.0 percent of total projected OPPS CY comment period published on January
indicated that we are accepting pass- 2006 spending, we will return 1.83 6, 2004 (69 FR 827), we implemented
through applications for new percent of the pass-through pool to sections 621(b)(1) and (b)(2)(C) of Pub.
radiopharmaceuticals that are assigned a adjust the conversion factor, as we L. 108–173. In that rule, we stated that
HCPCS code on or after January 1, 2005. discuss in section II.C. of this preamble. we will pay for the brachytherapy
The pass-through amount for new We received one public comment on sources listed in Table 4 of the interim
radiopharmaceuticals approved for our estimated pass-through spending for final rule with comment period (69 FR
pass-through status in CY 2005 is the CY 2006. 828) on a cost basis, as required by the
difference between the OPPS payment Comment: One commenter statute. Since January 1, 2004, we have
for the radiopharmaceutical, that is, the commended us for returning, via an used status indicator ‘‘H’’ to denote
payment amount determined for the adjustment to the conversion factor, the nonpass-through brachytherapy sources
radiopharmaceutical as a sole source portion of the pass-through spending paid on a cost basis, a policy that we
finalized in the CY 2005 final rule with the HCPCS codes, long descriptors, APC evaluate the one request that we had
comment period (69 FR 65838). assignments, and status indicators that received for establishment of a new
As we indicated in the January 6, we used for brachytherapy sources paid brachytherapy source code prior to
2004 interim final rule with comment under the OPPS in CY 2005 (69 FR publishing this final rule with comment
period, we began payment for the 65840 and 65841). period (70 FR 42736). Our decision
brachytherapy source in HCPCS code Further, for CY 2005, we added the regarding that coding request is
C1717 (High Dose Rate Iridium 192) following code of linear source discussed below.
based on the hospital’s charge adjusted Palladium-103 to be paid at cost: C2636 At the end of May 2005, we received
to cost beginning January 1, 2004. Prior Brachytherapy linear source, Palladium- a recommendation for the creation of a
to enactment of Pub. L. 108–173, these 103, per 1 mm. We had indicated in our new code and descriptor that would be
sources were paid as packaged services August 16, 2004 proposed rule that we used to pay separately for Ytterbium-
in APC 0313. As a result of the were aware of a new linear source 169, a new high activity brachytherapy
requirement under Pub. L. 108–173 to Palladium-103, which came to our source for use in High Dose Rate (HDR)
pay for HCPCS code C1717 separately, attention in CY 2003 through an brachytherapy, in accordance with
we adjusted the payment rate for APC application for a new device category sections 1833(t)(16)(C) and 1833(t)(2)(H)
0313, Brachytherapy, to reflect the for pass-through payment. We stated of the Act, as added by sections
unpackaging of the brachytherapy that, while we decided not to create a 621(b)(1) and (b)(2), respectively, of
source. We finalized this payment new category for pass-through payment, Pub. L. 108–173. We evaluated this new
methodology in our November 15, 2004 we believed that the new linear source source and agree with the
final rule with comment period (69 FR fell under the provisions of Pub. L. 108– recommendation to establish a new
65839). 173. Therefore, we made final our code and descriptor for Ytterbium-169,
Section 1833(t)(2)(H) of the Act, as proposal to add HCPCS code C2636 as effective October 1, 2005. The new
added by section 621(b)(2)(C) of Pub. L. a new brachytherapy source to be paid coding information was first announced
108–173, mandated the creation of at cost in CY 2005. in Program Transmittal 662, dated
separate groups of covered OPD services August 26, 2005, for OPPS
B. Changes Related to Pub. L. 108–173
that classify brachytherapy devices implementation effective October 1,
separately from other services or groups As stated in the CY 2006 OPPS 2005. The new code and long descriptor
of services. The additional groups must proposed rule (70 FR 42736), we are as follow:
be created in a manner that reflects the consistently invite the public to submit
• C2637 Brachytherapy source,
number, isotope, and radioactive recommendations for new codes to
Ytterbium-169, per source
intensity of the devices of describe brachytherapy sources in a
manner reflecting the number, This code and descriptor are also
brachytherapy furnished, including
radioisotope, and radioactivity intensity listed in Table 29 below.
separate groups for Palladium-103 and
Iodine-125 devices. In accordance with of the sources. We request that We received one public comment
this provision and based on commenters provide a detailed rationale concerning payment for brachytherapy
recommendations of the APC Panel in to support recommended new codes and sources.
the February 2004 meeting, we to send recommendations to us. We Comment: One commenter requested
established the following two new endeavor to add new brachytherapy CMS to identify a form of radiation
brachytherapy source codes for CY 2005 source codes and descriptors to our therapy as utilizing a source of
(69 FR 65839): systems for payment on a quarterly brachytherapy and provide a separate
• C2634 Brachytherapy source, basis. Such recommendations should be payment for the source.
High Activity Iodine-125, greater than directed to the Division of Outpatient Response: We will evaluate this
1.01 mCi (NIST), per source Care, Mail Stop C4–05–17, Centers for request and, if warranted, establish a
• C2635 Brachytherapy source, Medicare & Medicaid Services, 7500 code, descriptor, and separate payment
High Activity Palladium-103, greater Security Boulevard, Baltimore, MD for a source of brachytherapy.
than 2.2 mCi (NIST), per source 21244. Evaluation of potential brachytherapy
In addition to adopting the APC Prior to the publication of the CY sources is often complex and requires a
Panel’s recommendation to establish 2006 OPPS proposed rule, we had then significant evaluation period. Because
new HCPCS codes that would recently received only one such request this request was received as one of our
distinguish high activity Iodine-125 for coding and payment of a new comments to the proposed rule for CY
from high activity Palladium-103 on a brachytherapy source since we added 2006, we will continue to evaluate it
per source basis, we adopted this policy separate APC payment beginning in CY and provide a code and descriptor, if
for other brachytherapy code 2005 for the three brachytherapy appropriate, through one of our
descriptors, as well. Therefore, sources discussed above. Therefore, we quarterly OPPS updates.
beginning January 1, 2005, we included did not propose any coding changes to
C. Final Policy for CY 2006
‘‘per source’’ in the HCPCS code the sources of brachytherapy for CY
descriptors for all those brachytherapy 2006 but listed in Table 26 of the CY Table 28 provides a complete listing
source descriptors for which units of 2006 proposed rule (70 FR 42737) the of the HCPCS codes, long descriptors,
payment were not already delineated. separately payable brachytherapy APC assignments, and status indicators
Table 40 published in the November 15, sources that we proposed to continue that we will use for brachytherapy
2004 final rule with comment period (69 for CY 2006. In addition, in that same sources paid separately on a cost basis
FR 65840) included a complete listing of proposed rule, we stated that we would under the OPPS in CY 2006.
TABLE 28.— SEPARATELY PAYABLE BRACHYTHERAPY SOURCES FOR CY 2006

New
HCPCS Long descriptor APC APC title status
indicator
C1716 ..................... Brachytherapy source, Gold 198, per source .... 1716 Brachytx source, Gold 198 ................................ H
C1717 ..................... Brachytherapy source, High Dose Rate Iridium 1717 Brachytx source, HDR Ir-192 ............................. H
192, per source.
C1718 ..................... Brachytherapy source, Iodine 125, per source .. 1718 Brachytx source, Iodine 125 .............................. H
C1719 ..................... Brachytherapy source, Non-High Dose Rate 1719 Brachytx source, Non-HDR Ir-192 ..................... H
Iridium 192, per source.
C1720 ..................... Brachytherapy source, Palladium 103, per 1720 Brachytx source, Palladium 103 ........................ H
source.
C2616 ..................... Brachytherapy source, Yttrium-90, per source .. 2616 Brachytx source, Yttrium-90 ............................... H
C2632 ..................... Brachytherapy solution, Iodine125, per mCi ...... 2632 Brachytx sol, I-125, per mCi .............................. H
C2633 ..................... Brachytherapy source, Cesium-131, per source 2633 Brachytx source, Cesium-131 ............................ H
C2634 ..................... Brachytherapy source, High Activity, Iodine- 2634 Brachytx source, HA, I-125 ................................ H
125, greater than 1.01 mCi (NIST), per
source.
C2635 ..................... Brachytherapy source, High Activity, Palladium- 2635 Brachytx source, HA, P-103 .............................. H
103, greater than 2.2 mCi (NIST), per source.
C2636 ..................... Brachytherapy linear source, Palladium-103, 2636 Brachytx linear source, P-103 ............................ H
per 1MM.
C2637 ..................... Brachytherapy source, Ytterbium-169, per 2637 Brachytx, Ytterbium-169 ..................................... H
source.
VIII. Coding and Payment for Drug In response to comments we received each visit, unless a modifier was used
Administration concerning the available opportunities to identify drug administration services
to gather additional drug administration provided more than once in a separate
A. Background
data (and subsequently facilitate encounter on the same day.
From the start of the OPPS until the development of more accurate payment In 2004, the CPT Editorial Panel
end of CY 2004, three HCPCS codes rates for drug administration services in approved several new drug
were used to bill drug administration future years) and to reduce hospital administration codes and revised
services provided in the hospital administrative burden, we proposed for several existing codes for use beginning
outpatient department: the CY 2005 OPPS to change our coding in CY 2006. Those physicians paid
• Q0081 (Infusion therapy, using and payment methodologies related to under the Medicare Physician Fee
other than chemotherapeutic drugs, per drug administration services. Schedule were given HCPCS G-codes
visit) After examining comments and corresponding to these expected CY
• Q0083 (Chemotherapy suggestions, including 2006 CPT codes to bill for drug
administration by other than infusion recommendations of the APC Panel, we administration services provided in CY
technique only, per visit) adopted a crosswalk for the CY 2005 2005 in the physician office setting.
OPPS that identified all active CY 2005
• Q0084 (Chemotherapy B. CY 2006 Drug Administration Policy
CPT drug administration codes and the
administration by infusion technique Changes
corresponding OPPS Q-codes, which
only, per visit). hospitals had previously used to report For CY 2006 OPPS billing purposes,
A fourth OPPS drug administration their charges for drug administration we proposed to continue our policy of
HCPCS code, Q0085 (Administration of services. Hospitals were instructed to using CPT codes to bill for drug
chemotherapy by both infusion and begin billing CPT codes for drug administration services provided in the
another route, per visit) was active from administration services in the hospital hospital outpatient department,
the beginning of the OPPS through the outpatient department effective January understanding that the CY 2005 CPT
end of CY 2003. 1, 2005. codes were likely going to change
Each of these four HCPCS codes Payment rates for CY 2005 drug significantly for CY 2006. We
mapped to an APC (that is, Q0081 administration services were set using anticipated that the CY 2005 CPT codes
mapped to APC 0120, Q0083 mapped to CY 2003 claims data. These data would no longer be active in CY 2006.
APC 0116, Q0084 mapped to APC 0117, reflected per-visit costs associated with Therefore, we proposed a CY 2006
and Q0085 mapped to APC 0118), and the four Q-codes listed above. To allow crosswalk that mapped CY 2005 CPT
the APC payment rates for these codes for the time necessary to collect data at codes to the CPT drug administration
were made on a per-visit basis. The per- the more specific CPT code level and to codes approved by the CPT Editorial
visit payment included payment for all continue accurate payments based on Panel in CY 2004. Our closest proxy to
hospital resources (except separately available claims data, we used the Q- the expected CY 2006 CPT codes was
payable drugs) associated with the drug code crosswalk to map CPT drug the set of HCPCS G-codes used in the
administration procedures. For CY administration codes to existing drug physician office setting for CY 2005 and
2004, we discontinued using HCPCS administration APCs. While hospitals we used these G-codes in an extensive
code Q0085 to identify drug were instructed to bill all relevant CPT crosswalk (Table 27 in the proposed
administration services and moved to a codes that describe the services rule) that provided an overview of our
combination of HCPCS codes Q0083 provided, the OCE collapsed payments proposed billing and payment policies
and Q0084 that allowed more accurate for drug administration services for CY 2006.
calculations when determining OPPS attributed to the same APC and paid a The OPPS drug administration
payment rates. single APC amount for those services for payment rates that we proposed for CY
2006 were dependent on CY 2004 data ‘‘sequential,’’ or ‘‘concurrent’’ either did with implementation of the new CY
containing per-visit charges for HCPCS not apply or would be very difficult to 2006 CPT codes and their descriptors, in
codes Q0081, Q0083, and Q0084. While correctly apply in the hospital setting the OPPS we originally moved to the
HCPCS code Q0085 was used to inform due to the patient’s likelihood of use of CPT codes for the billing of drug
payment rates for drug administration receiving numerous drug administration administration services at the request of
APCs for CY 2005, there are no data services from multiple hospital hospitals so they could use one standard
from this code to develop payment rates departments during the course of a code set for billing all payers. We would
for drug administration APCs for CY patient’s hospital outpatient encounter. expect that hospitals would nonetheless
2006 because this code was not used in The commenters recommended that need to implement some administrative
CY 2004. We proposed to map the new CMS instruct hospitals to disregard changes for other payers who will be
CY 2006 CPT codes to existing drug these terms, particularly the word making payments for hospital outpatient
administration APC groups (APC 0116, ‘‘initial’’ and the related CPT instruction drug administration services based on
APC 0117, and APC 0120) as we did in to bill only one initial service when the CY 2006 CPT codes. While we do
CY 2005. Again, we indicated in our multiple intravenous injections and not doubt the administrative burden on
proposal that hospitals would be infusion are provided, when billing for hospitals associated with billing
expected to bill all relevant CPT codes outpatient services as these codes do not changes, we cannot and do not
for services provided, despite the per- sufficiently describe the way hospital understand how our instructing
encounter payment hospitals would services are often provided. The hospitals to ignore certain concepts in
receive for services billed within the commenters pointed out that because the code descriptors for the new CY
same APC group without the use of a hospital outpatient charging for drug 2006 CPT codes would substantially
proper modifier to signify services that administration services currently occurs reduce the administrative changes
were provided in a separate visit on the at the departmental level on a flow basis necessary for hospitals to bill the codes
same day. as services are provided, if hospitals appropriately to other payers, in
The APC Panel approved the were required to use the CPT codes in addition to Medicare.
crosswalk presented in Table 27 of the full accordance with the CPT Comment: Several commenters
CY 2006 OPPS proposed rule at both the instructions, extensive, disruptive, and pointed out that if the proposed
February 2005 and August 2005 burdensome involvement of medical crosswalk were implemented as
meetings, and further recommended records staff and coders would be displayed in Table 27 of the proposed
that CMS evaluate hospital claims data required to bill for these very common rule and no exceptions to CPT billing
to ensure appropriate payments for hospital outpatient services. guidance were provided, our CY 2005
subsequent hours of infusion. Response: While we understand the payment policy of providing separate
We received a number of public commenters’ concerns regarding the APC payments for chemotherapy
comments on several aspects of our granularity of the CY 2006 CPT codes, services and nonchemotherapy
proposed drug administration policy for we do not agree that the concepts infusions during the same episode of
CY 2006. embedded in CPT codes described with care would no longer apply. The
Comment: Numerous commenters the terms ‘‘initial,’’ ‘‘sequential,’’ or commenters believed that if our
generally supported our proposed ‘‘concurrent,’’ and the accompanying proposal is to package all subsequent
policy to use CPT codes to report drug expectations of differential resources hours of infusion therapy
administration services in the hospital required to perform those services, are (chemotherapy and nonchemotherapy),
outpatient setting in CY 2006. They inapplicable in the hospital setting. hospitals following CPT billing
stated that consistent coding across sites Similar to a physician office setting, we guidelines would have coded only one
of service reduces hospital burden by believe it is reasonable to expect that initial code, and therefore only received
simplifying the coding process. The different hospital resources would be one APC payment. The commenters
majority of these commenters offered used for the first (initial) drug expressed concern about this situation
support in the context of the overall administration service provided to a and stated that they did not believe it
principle of utilizing CPT codes when patient in a hospital outpatient setting was CMS’ intent to reduce payment in
applicable in the hospital outpatient on a single day. For example, the first this scenario.
setting to bill for services under the intravenous infusion provided to a Response: The commenters are correct
OPPS. hospital outpatient would generally in that it was not our intent to change
Response: We agree with the require either the start of an intravenous the drug administration payment
commenters that consistent coding line or the accessing of an indwelling policies in place in CY 2005. We
across sites of service is preferable when catheter or port. All subsequent appreciate the analysis submitted by the
codes are applicable across settings. Our intravenous infusions in the hospital on commenters who provided us with
transition to CPT codes in CY 2005 was the same day would likely not involve detailed recommendations to remedy
in response to numerous comments those additional resources associated this situation.
requesting that the OPPS recognize CPT with the initial infusion. We understand Under CY 2006 CPT guidelines,
drug administration codes to reduce the that the concepts associated with drug hospitals would be required to bill one,
overall hospital administrative burden administration coding using CY 2006 and only one, initial service code for
of billing one set of codes for Medicare CPT codes are substantially different intravenous drug administration
and another set of codes for non- from the principles of drug services (unless a modifier is used to
Medicare payers. administration coding used by the OPPS indicate an additional episode of care
Comment: Commenters expressed in the past. However, this conceptual on the same date of service). As many
concern over the complexity and difference alone does not lead us to commenters noted, hospital billing
specificity of the CPT codes and the conclude that the full adoption of the personnel recently transitioned from a
billing guidelines provided by the AMA CY 2006 CPT codes and their per-visit concept under the CY 2004 Q-
for the new CY 2006 CPT codes for drug descriptors in the hospital setting is codes to a per-treatment concept under
administration. Specifically, the inappropriate. CY 2005 CPT codes, and an additional
commenters stated that CPT code While we acknowledge that hospital transition in CY 2006 to even more
descriptions that contain ‘‘initial,’’ charging practices might need to change complex concepts does not allow
sufficient time to properly train and for correction. We grew concerned that APC payment to the services billed, and
educate hospital personnel regarding hospitals would have an overwhelming would subsequently result in a return of
correct coding for drug administration. burden not only implementing these such claims to providers. We are still
As we considered the above new CPT codes in hospital software but reviewing the future use of such logic
comments, we developed preliminary also providing the necessary training to for drug administration services under
OCE logic that would have potentially a variety of staff who provide and bill the OPPS.
permitted some of the CY 2006 CPT these high-volume drug administration Comment: Commenters provided a
codes for sequential and additional services. It is our understanding that a variety of other solutions that could
infusion services to be assigned status system change this complex may have permit continuation of CY 2005 OPPS
indicator ‘‘Q,’’ consistent with a variable unintended consequences if drug administration payment policies
payment status. That is, under some implemented for January 1, 2006. One of while using CY 2006 CPT codes. The
circumstances where the sequential our main concerns is that without commenters’ suggestions included
infusion was the same type of infusion sufficient time to train and educate staff, reverting back to the three Q-codes
(that is, chemotherapy or hospitals may experience a great (used prior to CY 2005), creating HCPCS
nonchemotherapy) as the initial number of returned claims and, codes to mimic the CY 2005 CPT codes,
infusion, payment for the sequential therefore, experience a delay in or creating a hybrid of CY 2005 and CY
infusion would be packaged into payment for these high-volume services. 2006 drug administration codes.
payment for the initial drug We believe that the level of Response: We appreciate the many
administration service. In contrast, for understanding required to properly bill ideas discussed in the comments we
situations where the sequential infusion for services under the CY 2006 CPT received on the proposed rule, and we
was of a different type than the initial codes will require substantial hospital considered the above mentioned options
infusion, separate OPPS payment for the efforts to minimize unintentional coding in addition to many others before
sequential infusion would be made. errors that could lead to returned making our decision. However, we
Thus, in order to determine the payment claims. believe we have discussed the inherent
status of some drug administration CPT We have developed the advanced advantages of using CPT codes, and in
codes (packaged or separately payable), OCE logic that identifies separately order to continue in our efforts to use
hospitals would have to be meticulous payable instances of multiple drug CPT codes whenever possible, we will
in correctly coding their claims. administration services provided in the be adopting 20 of the 33 CY 2006 drug
Therefore, only expected code pairs that same episode of care but with only one administration CPT codes for billing
had been built into OCE logic were initial CPT code. Claims not passing this and payment purposes under the OPPS
present on claims. Otherwise, claims extensive logic would not provide for CY 2006 (Table 29).
would have to be returned to hospitals sufficient information in order to assign BILLING CODE 4120–01–P
BILLING CODE 4120–01–C

infusions and intravenous pushes, as administration codes that we will not be
In addition, we will not recognize those codes will be deleted for the CY using in the OPPS for CY 2006 are codes
under the OPPS 13 of the 33 CY 2006 2006 OPPS. We are adopting these 6 that require determinations of initial,
CPT codes, but instead will instruct newly created C-codes in an effort to sequential, and concurrent infusions or
hospitals to use 6 new HCPCS C-codes minimize the administrative burden intravenous pushes. The C-codes will
for billing and payment purposes under hospitals have indicated they will face permit straightforward billing of types
OPPS for CY 2006 (Table 31). The C- if the OPPS were to adopt all 33 of the of infusions and intravenous pushes, for
codes generally parallel the less CY 2006 drug administration CPT the first hour and then each additional
complex CY 2005 CPT codes for codes. The CY 2006 CPT drug hour of infusion or for each intravenous
ER10no05.022</GPH>
push, an approach to coding that billing should be clear, as hospitals have future. In addition, because we will
commenters indicated was consistent 1 year of experience already with the have more specific drug administration
with current patterns of delivery and use of very similar codes during CY median cost data for use in the CY 2007
billing of drug administration services 2005. OPPS and beyond with the first
in the hospital outpatient setting. The We believe that providing hospitals availability of CY 2005 cost data for the
OCE logic to determine the appropriate with additional time to train staff on the CPT codes for drug administration
CY 2006 APC payments to make for a correct billing of the CY 2006 drug services, we anticipate that ensuring
single drug administration encounter in administration CPT codes, combined more accurate payment with respect to
one day or multiple separate encounters with the opportunity for hospital staff to these remaining CPT drug
in the same day will operate as it did use these codes for non-Medicare payers
administration codes may be more
for CY 2005. As the C-codes are similar during CY 2006, should allow a less
feasible for future OPPS updates.
to the CY 2005 CPT codes, we expect burdensome transition to the remaining
that their implementation for CY 2006 CPT drug administration codes in the
TABLE 30.—CY 2006 OPPS DRUG ADMINISTRATION C-CODES

Code Description Add-On SI APC
C8950 .................... Intravenous infusion for therapy/diagnosis; up to 1 hour ........................................... ................ S 0120
C8951 .................... Intravenous infusion for therapy/diagnosis; each additional hour (List separately in Y N
addition to C8950).
C8952 .................... Therapeutic, prophylactic or diagnostic injection; intravenous push .......................... ................ X 0359
C8953 .................... Chemotherapy administration, intravenous; push technique ...................................... ................ S 0116
C8954 .................... Chemotherapy administration, intravenous; infusion technique, up to one hour ....... ................ S 0117
C8955 .................... Chemotherapy administration, intravenous; infusion technique, each additional Y N
hour (List separately in addition to C8954).
Comment: Commenters requested that the final rule. Information for hospitals infusion requiring a pump and pump
CMS provide various billing and coding that discusses billing and coding maintenance and refilling codes so
instructions relating to the CY 2006 CPT specifics will be distributed separately hospitals can bill for these services
drug administration codes, and that via CMS transmittal following the when provided to patients who require
CMS include more specific definitions publication of this final rule with extended infusions of non-
of CPT drug administration terminology comment period. In addition, we expect chemotherapy medications, including
in the final rule. that all drug administration codes used drugs for pain. They argued that the CY
Response: We appreciate the in the CY 2006 OPPS, including the new 2006 CPT codes for drug administration
commenters’ request for clarity on C-codes, will conform to CPT guidance do not include appropriate codes to bill
aspects of the proposed CY 2006 drug regarding under what clinical
for these services, which require
administration CPT codes. As we have circumstances they may be
done in the past, we will release specific and significant hospital
appropriately billed, including
instructions separately from this final instructions related to appropriate resources.
rule with comment period that include coding for the administration of certain Response: We agree that codes for
drug administration billing and coding complex biologics. these services were needed, and we
guidance for hospitals for CY 2006. In Comment: Commenters requested that have created HCPCS codes C8956
addition, as is our longstanding a section within the AMA CPT Manual (Refilling and maintenance of portable
practice, we defer questions about CPT be created to identify and provide or implantable pump or reservoir for
code definitions to the AMA CPT hospital-specific definitions for CPT drug delivery for therapy/diagnosis,
Editorial Panel members who are the codes that are used by the OPPS. systemic (eg. intravenous, intra-arterial))
creators and maintainers of CPT codes. Response: The OPPS does not issue or and C8957 (Intravenous infusion for
Comment: Several commenters maintain CPT codes. Comments therapy/diagnosis; initiation of
requested that CMS provide explicit regarding the AMA CPT Manual or CPT prolonged infusion (more than 8 hours),
billing and coding instructions codes should be directed to the AMA.
Comment: Commenters requested that requiring use of portable or implantable
regarding the administration of specific
CMS create non-chemotherapy HCPCS pump) for this purpose (Table 31).
drugs and agents.
Response: As stated above, we do not codes similar to the CPT codes for
provide billing guidance to hospitals in initiation of a prolonged chemotherapy
TABLE 31.—NONCHEMOTHERAPY PROLONGED INFUSION CODES THAT REQUIRE A PUMP

Code Description Add-On SI APC
C8956 .................... Refilling and maintenance of portable or implantable pump or reservoir for drug de- ................ T 0125
livery for therapy/diagnosis, systemic (eg. intravenous, intra-arterial).
C8957 .................... Intravenous infusion for therapy/diagnosis; initiation of prolonged infusion (more ................ S 0120
than 8 hours), requiring use of portable or implantable pump.
Comment: One commenter requested pharmacy revenue code (636), to suited for administration of that type of
that the OPPS use the information identify which payment would be best drug.
present on the claim, specifically the
Response: We support minimizing the codes mapped to APCs 0116, 0117 and supervision of preparation and
administrative burden that hospitals 0120. For CY 2006, while the codes for provision of antigens for allergen
incur when billing for drug initial hour of infusion and subsequent immunotherapy; five single stinging
administration services in the outpatient hour(s) of infusion were available for insect venoms) was mapped to APC
department. However, we do not believe hospitals to report in CY 2005, 0352 (Level I Injections) based on a
that this suggestion would yield more appropriate CY 2005 claims data are not median cost of $11.43 from 9 single
accurate claims data or reduce the available to use for ratesetting purposes claims, while HCPCS code 95146
administrative burden on hospitals to for the CY 2006 OPPS. As the most (Professional services for the
code for drug administration services. recent and complete year of data supervision of preparation and
Hospitals are responsible for identifying available from CY 2004 reflects per-visit provision of antigens for allergen
which drug administration services are payment rates for drug administration immunotherapy; two single stinging
provided and establishing appropriate services, we must continue to use both venoms) was mapped to APC 0359
charges for those services, and our crosswalk methodology and the (Level III Injections) based on a median
implementing a system such as that OCE claims logic during CY 2006 which cost of $70.64 from 43 single claims.
conceived by the commenter that allows us to collect more specific drug These unexpected median cost results
removes the determination from administration cost data while may have arisen from miscoding or from
hospitals would be unproductive. continuing to make appropriate drug the inherently high volatility in costs
Comment: Commenters noted that CY administration payments. Because of the that may occur due to small numbers of
2006 drug administration APC payment descriptors of the previous drug claims. While we are unable to retain
rates are derived from CY 2004 claims administration Q-codes upon which CY these codes in APC 0371 as
data and expressed concern that these 2006 drug administration payment rates recommended by the commenter due to
data are outdated and inaccurate. are based, each payment for a drug the restructuring of the injection codes
Response: While we acknowledge the administration APC in CY 2006 is into three levels of injection APCs, we
concern presented by commenters, we necessarily a payment that reflects an have decided to place CPT codes 95144
do not believe that our reliance on the ‘‘average’’ infusion service in CY 2004, through 95165 in APC 0353 (Level II
most recent claims data available constituting one or more hours. We Injections) because we believe that the
provides inaccurate payments for drug appreciate hospitals’ continued services provided by these HCPCS codes
administration services provided in diligence in accurately billing for the are similar to other HCPCS codes within
hospital outpatient departments. It has additional hours of infusion for this APC and the CY 2006 median cost
been the OPPS policy to set payments chemotherapy and nonchemotherapy for APC 0353 most closely matches the
for drug administration services, as well treatments that will once again be CY 2005 median cost these codes
as almost all other OPPS services, based packaged for CY 2006, as we gather experienced in APC 0371.
on the most recent claims year data additional hospital claims data to
available, and we are continuing that support our move to more specific C. 2006 Vaccine Administration Policy
methodology in CY 2006. payments for individual drug Changes
Comment: Several commenters administration services in the future. Hospitals currently use three HCPCS
requested that CMS implement a Comment: One commenter noted that G-codes to indicate the administration
chemotherapy demonstration program in Addendum B, Payment Status by of the following vaccines that have
similar to the Quality of Care HCPCS Code and Related Information specific statutory coverage:
Demonstration program that was Calendar Year 2006, HCPCS code G0258 • G0008—Administration of
instituted in the physician office setting (IV infusion during obs stay) was Influenza Virus Vaccine.
throughout CY 2005. incorrectly listed as payable with a • G0009—Administration of
Response: While we recognize the status indicator of ‘‘X.’’ Pneumococcal Vaccine.
desire of the commenters to ensure Response: We agree that HCPCS code • G0010—Administration of Hepatitis
beneficiary access to drug G0258 was incorrectly listed in B Vaccine.
administration services by providing Addendum B of the proposed rule as HCPCS codes G0008 and G0009 are
additional payments to hospitals for having status indicator ‘‘X’’ rather than exempt from beneficiary coinsurance
drug administration-related services, we ‘‘B.’’ However, HCPCS code G0258 is and deductible applications and, as
believe that the drug administration deleted for CY 2006; therefore, it will such, payment has been made outside of
payment methodology we are finalizing have no payment status in the CY 2006 the OPPS since CY 2003 based on
in this final rule with comment period OPPS. reasonable cost. We have made payment
provides accurate payments for hospital Comment: One commenter requested for HCPCS code G0010 through a
drug administration services. Further, that CMS not reassign CPT codes 95144 clinical APC (that is, APC 0355) that
we do not believe that there is a through 95165 (Antigen therapy included vaccines along with this
beneficiary access issue directly services) to the injection APCs as listed vaccine administration code. Additional
attributable to the OPPS payment in Addendum B of the proposed rule. vaccine administration codes have been
policies for drug administration Instead, the commenter suggested packaged or not paid under the OPPS.
services. keeping these services within APC 0371 As stated in the CY 2006 OPPS
Comment: Many commenters because of their similarity in resource proposed rule, we believe that HCPCS
requested that the OPPS provide use and for reasons of clinical codes G0008, G0009 and G0010 are
payment for additional hours of coherence. clinically similar and comparable in
infusion, instead of packaging Response: We agree with the resource use to one another and to the
subsequent hours of infusion into the commenter that the median cost data administration of other immunizations
payment for the initial hour of infusion available for these codes do not and other therapeutic, prophylactic, or
therapy. correspond to the expected levels of diagnostic injections. To that end, we
Response: As discussed in the service based on the CPT code concluded that the appropriate APC
proposed rule, CY 2006 OPPS payment descriptors. For example, in the assignment for these vaccine
rates rely upon CY 2004 claims data that proposed rule, HCPCS code 95149 administration services was newly
only has information on the three Q- (Professional services for the reconfigured APC 0353 (Injection, Level
II). However, because of their statutory copayment and deductible would not be not be used to report these services
exemption regarding beneficiary applied to services in APC 0350. which are exempt from copayment.
deductible and coinsurance, for Our vaccine administration proposed Comment: Similar to the APC Panel
operational reasons we were unable to policy also included proposed changes recommendation discussed above,
include HCPCS codes G0008 and G0009 to the status indicators for vaccine commenters requested that CMS
in an APC with codes that did not share administration codes 90473 and 90474 provide payment for the administration
this exemption. from ‘‘E’’ (Not paid under OPPS) to ‘‘S’’ of intranasal influenza vaccine similar
Instead of including these codes (Paid under OPPS) and proposed to to payments for other methods of
within the same APC, we proposed to make payments for these services when administration of the influenza vaccine.
map HCPCS codes G0008 and G0009 to they were covered through proposed
Response: As stated above, vaccine
APC 0350 (Administration of flu and APC 1491 (New Technology—Level IA
PPV vaccines). As dictated by statute, ($0–$10)). administration codes other than G0008
HCPCS codes G0008 and G0009 would Finally, we proposed to change the for administration of influenza virus
continue to be exempt from beneficiary status indicators for the four remaining vaccine are not exempted in the OCE
coinsurance and deductible. vaccine administration codes involving from charging beneficiary deductible
We also proposed to change the status physician counseling (90465, 90466, and coinsurance and they should not be
indicator for HCPCS code G0010 from 90467 and 90468) from ‘‘N’’ (Packaged) used to report these services which are
‘‘K’’ (Separate APC Payment) to ‘‘B’’ to ‘‘B’’ (Not paid under OPPS; Alternate exempt from copayment.
(Not paid under OPPS; Alternate code code may be available). We proposed Comment: Numerous commenters
may be available), and to change the that hospitals providing immunization supported our proposal to pay
status indicators for vaccine services with physician counseling separately for vaccine administration
administration codes 90471 and 90472 would use the vaccine administration services.
from ‘‘N’’ (Packaged) to ‘‘X’’ (Separate codes 90471, 90472, 90473, and 90474 Response: We appreciate the
APC Payment), in agreement with the to report such services, as we did not commenters’ support of our proposed
recommendation of the APC Panel to believe the provision of physician policy and are adopting it as final in this
unpackage these services. Hospitals counseling would significantly affect rule.
would code for hepatitis B vaccine the hospital resources required for Comment: Several commenters noted
administration using codes 90471 or administration of immunizations. a typographical error in the CY 2006
90472 (as appropriate), and payment During its August 2005 meeting, the OPPS proposed rule preamble that
would be mapped to reconfigured APC APC Panel made a recommendation to incorrectly listed two codes to be used
0353 (Injection, Level II) that would CMS to pay for the administration of flu
for the administration of hepatitis B
include other injection services that vaccines similarly under the OPPS
vaccine as codes 96471 and 96472
were clinically similar and comparable regardless of their method of
instead of codes 90741 and 90742.
in resource use. administration. We agree that hospitals
In order to pay appropriately for should always use the most specific Response: We appreciate the
services that we believed were clinically HCPCS codes available, whose commenters’ note, and we have
similar and comparable in resource use descriptors are consistent with the corrected the error in this final rule with
and, barring technical restrictions, method of administration and type of comment period.
would otherwise be assigned to the vaccine, to bill for all vaccine After consideration of the public
same APC, we proposed to calculate a administration services but, in comments received, in this final rule
combined median cost for all services particular, to bill for vaccine services with comment period, we are finalizing
assigned to APC 0350 and APC 0353 that are congressionally exempt from our proposed CY 2006 methodology to
that would then serve as the median deductible and coinsurance. However, pay separately for vaccine
cost for both APCs. This combined we note that vaccine administration administration services as discussed
median would be calculated using codes other than G0008 for above. Table 32 below specifies the CY
charges converted to costs from claims administration of influenza virus 2006 vaccine administration codes, their
for services in both APCs and would vaccine and G0009 for administration of APC median costs, the status indicator
have the effect of making the OPPS pneumococcal vaccine are not exempted assigned to each code, and the APC
payment rates for APC 0350 and APC in the OCE from charging beneficiary payment amount.
0353 identical, although beneficiary deductible and coinsurance and should BILLING CODE 4120–01–P
BILLING CODE 4120–01–C considering through the CMS OPPS We received a number of public
IX. Hospital Coding for Evaluation and Web site as soon as we have completed comments on our proposal.
Management (E/M) Services them. We also stated that we will notify Comment: Several commenters
the public through our listserve when expressed disappointment that CMS has
In the CY 2006 proposed rule (70 FR
these proposed guidelines become not yet proposed national E/M
42740), we again stated our concerns
available, and instructed interested guidelines for facilities. While the
and directions for developing a set of
parties to subscribe to this listserve by majority of commenters were pleased
national facility coding guidelines for
emergency department and clinic visits. going to the following CMS Web site: that CMS is continuing to develop and
We noted that we intend to make http://www.cms.hhs.gov/medlearn/ test draft codes and guidelines, they
available for public comment the listserv.asp and following the directions were concerned that the ongoing lack of
to the OPPS listserve.
ER10NO05.023</GPH>
proposed coding guidelines that we are uniformity places hospitals at risk for
multiple interpretations of the level of As stated in the CY 2006 OPPS them into payments for the procedures
service that should be coded, and proposed rule, we intend to make with which they were administered.
hampers CMS’ ability to gather available for public comment the Hospital payments for the costs of blood
consistent, meaningful data on services proposed coding guidelines that we are and blood products, as well as the costs
provided in the emergency department considering through the CMS OPPS of collecting, processing, and storing
and hospital clinics. One commenter Web site once we are satisfied with the blood and blood products, are made
emphasized that the implementation of results of the testing and have made through the OPPS payments for specific
a uniform set of national guidelines for appropriate modifications in light of blood product APCs. On April 12, 2001,
E/M services is especially important these testing results. Furthermore, we CMS issued the original billing
because CMS uses the mid-level clinic will provide ample opportunity for the guidance for blood products to hospitals
visit (APC 0601) to scale the relative public to comment on such a major (Program Transmittal A–01–50). In
payment weights for all other services proposal. We will continue to be response to requests for clarification of
paid under the OPPS. A few considerate of the time necessary to these instructions, CMS issued
commenters recommended that CMS educate clinicians and coders on the use Transmittal 496 on March 4, 2005. The
implement the E/M guidelines drafted of the new codes and guidelines and for comprehensive billing guidelines in the
by the independent panel of experts hospitals to modify their systems. We Transmittal also addressed specific
from the AHA and the AHIMA. Two still anticipate providing a minimum concerns and issues related to billing for
other commenters provided their own notice of between 6 and 12 months prior blood-related services, which the public
model guidelines for CMS to consider. to implementation of the new had brought to our attention.
Several commenters reminded CMS evaluation and management codes and In CY 2000, payments for blood and
that adoption of a new set of guidelines guidelines. blood products were established based
for E/M services will involve an Comment: One commenter expressed on external data provided by
enormous undertaking by large medical a number of concerns that the commenters due to limited Medicare
centers and that CMS had committed to commenter believed were related to claims data. From CY 2000 to CY 2002,
providing a minimum of between 6 and proposals on the manner in which the payment rates for blood and blood
12 months’ notice prior to Medicare program uses CPT code products were updated for inflation. For
implementation to allow providers definitions that have been adopted by CY 2003, as described in the November
adequate time to make necessary the AMA as a basis to classify patients 1, 2002 final rule with comment period
systems changes and educate their staff. who receive emergency department (67 FR 66773), we applied a special
The commenters also urged CMS to services for payment purposes under the dampening methodology to blood and
ensure adequate opportunity for the Medicare OPPS. blood products that had significant
public to review and comment on the Response: In the CY 2006 OPPS reductions in payment rates from CY
proposed guidelines before they are proposed rule, we did not propose to 2002 to CY 2003, when median costs
finalized. make any changes related to the manner were first calculated from hospital
Response: Over the past year, we have in which we use CPT code definitions claims. Using the dampening
engaged a contractor to assist us with as a basis to classify patients. We are not methodology, we limited the decrease in
testing the validity and reliability of a making any changes to our use of the payment rates for blood and blood
slightly modified draft of the guidelines CPT code definitions in this final rule products to approximately 15 percent.
recommended by the independent with comment period. However, we For CY 2004, as recommended by the
Hospital Evaluation and Management remind the public that regulations APC Panel, we froze payment rates for
Coding Panel of the AHA and AHIMA. implementing the HIPAA (42 CFR Parts blood and blood products at CY 2003
We have contracted a study of these 160 and 162) require that the HCPCS be levels as we studied concerns raised by
guidelines using a sample of hospital used to report health care services, commenters and presenters at the
outpatient claims to analyze the including outpatient services paid August 2003 and February 2004 APC
potential financial impact of the under the OPPS. The OPPS regulations Panel meetings.
proposed guidelines on classes of at 42 CFR 419.2(a) establish HCPCS
For CY 2005, we established new
hospitals and on the OPPS, as well as APCs that allowed each blood product
codes as the means for identifying
the potential burden that adoption of to be assigned to its own separate APC,
services paid under the OPPS. The
such guidelines might impose on as several of the previous blood product
HIPAA regulations require that these
hospitals. Although we have made APCs contained multiple blood
codes be used in the manner described
much progress in our efforts to develop products with no clinical homogeneity
by the maintainer’s guidelines. In
a set of national facility guidelines for or whose product-specific median costs
accordance with our policy that was
emergency department and clinic visits, may not have been similar. Some of the
established in the April 7, 2000 final
we believe additional testing is blood product HCPCS codes were
rule with comment period that
necessary and essential to providing reassigned to the new APCs (Table 34 of
implemented the OPPS, hospitals use
hospitals with the least burdensome the November 15, 2004 final rule with
standard for achieving uniformity and to internal guidelines only to distinguish comment period (69 FR 65819)).
yielding more accurate, meaningful among varying levels of resource We also noted in the November 15,
information related to hospital resources intensity when determining an 2004 final rule with comment period
upon which to set the OPPS payments appropriate CPT code to bill for that public comments on previous OPPS
for emergency department and clinic outpatient E/M services. rules had stated that the CCRs that were
services. We are committed to the goal X. Payment for Blood and Blood used to adjust charges to costs for blood
of paying appropriately under the OPPS Products products in past years were too low.
for the costs of hospital E/M services Past commenters indicated that this
across the levels of care. Therefore, we A. Background approach resulted in an
will continue to develop and test the Since the implementation of the OPPS underestimation of the true hospital
draft codes and guidelines. However, we in August 2000, separate payments have costs for blood and blood products. In
have not yet set a date for their been made for blood and blood products response to these comments and APC
implementation. through APCs rather than packaging Panel recommendations from its
February 2004 and September 2004 applied to some products. We continue the same simulation methodology
meetings, we conducted a thorough to believe that using blood-specific described in the November 15, 2004
analysis of the OPPS CY 2003 claims CCRs applied to hospital claims data final rule with comment period (69 FR
(used to calculate the CY 2005 APC will result in reasonably accurate 65816). For blood and blood products
payment rates) to compare CCRs payments that more fully reflect whose CY 2006 medians would have
between those hospitals reporting a hospitals’ true costs of providing blood otherwise experienced a decrease of
blood-specific cost center and those and blood products than our general more than 10 percent in comparison
hospitals defaulting to the overall methodology of defaulting to the overall with their CY 2005 payment rates, we
hospital CCR in the conversion of their hospital CCR when more specific CCRs proposed to adjust the simulated
blood product charges to costs. As a are unavailable. medians by limiting their decrease to 10
result of this analysis, we observed a For blood and blood products whose percent.
significant difference in CCRs utilized CY 2006 simulated medians At the August 2005 APC Panel
for conversion of blood product charges experienced a decrease of more than 10 meeting, the Panel recommended that
to costs for those hospitals with and percent in comparison to their CY 2005 CMS use its CY 2005 payment rates as
without blood-specific cost centers. The payment medians, we proposed to limit the floor for its CY 2006 payment rates
median hospital blood-specific CCRs the decrease in medians to 10 percent. for all blood and blood products.
were almost two times the median Therefore, overall we proposed to base Specifically, the Panel recommended
overall hospital CCR. As discussed in median costs for blood and blood that CMS should pay the greater of: (1)
the November 15, 2004 final rule with products in CY 2006 on the greater of: The simulated median costs calculated
comment period, we applied a (1) Simulated medians calculated using from the CY 2004 hospitals claims data;
methodology for hospitals not reporting CY 2004 claims data; or (2) 90 percent or (2) the CY 2005 APC payment
a blood-specific cost center, which of the APC payment median for CY 2005 medians for these products. For reasons
simulated a blood-specific CCR for each for such products. We recognize that discussed in detail below, we are not
hospital that we then used to convert possible errors in hospital billing or adopting the Panel’s recommendation
charges to costs for blood products. coding for blood products in CY 2004 for setting the CY 2006 payment rates
Thus, we developed simulated medians may have contributed to these decreases for blood and blood products. Instead,
for all blood and blood products based in medians. In particular, hospitals may for CY 2006, we are setting the final
on CY 2003 hospital claims data (69 FR have been uncertain about which of median costs for blood and blood
65816). their many different costs for providing products at the greater of: (1) The
For CY 2005, we also identified a blood and blood products should be simulated median costs calculated from
subset of blood products that had less captured in their charges for the the CY 2004 hospital claims data; or (2)
than 1,000 units billed in CY 2003. For products, based on variations in the 95 percent of the CY 2005 adjusted
these low-volume blood products, we specific circumstances of the services median costs for these products.
based the CY 2005 payment rate on a they provided. In addition, the six We received numerous public
50/50 blend of CY 2004 product-specific products affected by the proposed CY comments concerning our proposed
OPPS median costs and the CY 2005 2006 adjustment policy all were payment for blood and blood products.
simulated medians based on the relatively low volume with fewer than Comment: Numerous commenters
application of blood-specific CCRs to all 7,000 units billed in CY 2004. Three of applauded our March 2005 issuance of
claims. We were concerned that, given these products were affected by the low- comprehensive billing guidelines
the low frequency in which these volume payment adjustment for CY (Program Transmittal 496) for blood and
products were billed, a few occurrences 2005 because there were less than 1,000 blood products, stating that the
of coding or billing errors may have led units billed, and their CY 2005 payment guidelines clarified many areas of
to significant variability in the median medians would have decreased without confusion for providers and should
calculation. The claims data may not the adjustment. In the interim, as result in improved hospital coding of
have captured the complete costs of hospitals become more familiar with the blood and blood products. Other
these products to hospitals as fully as comprehensive billing guidelines for commenters recommended that CMS
possible. This low-volume adjustment blood and blood products that are release guidance on blood and blood
methodology also allowed us to further described in Program Transmittal 496 products on an annual basis.
study the issues raised by commenters (Change Request 3681 dated March 4, Response: We appreciate the
and by presenters at the September 2004 2005), we acknowledge the need to comment and expect that the billing
APC Panel meeting, without putting protect beneficiaries’ access to a safe guidance that we issued in March 2005
beneficiary access to these low-volume blood supply and proposed to do so by will result in improved hospital coding
blood products at risk. limiting significant decreases in of blood and blood products. We will
payment rates for blood and blood continue to support educational efforts
B. Proposed and Final Policy Changes by interested organizations to clarify
products from CY 2005 to CY 2006. We
for CY 2006 areas of confusion and improve
expect that our billing guidance will
For CY 2006, we proposed to continue assist hospitals in more fully including accuracy of billing for hospitals related
to make separate payments for blood all appropriate costs for providing blood to the billing of blood and blood
and blood products under the OPPS and blood products in their charges for products. In addition, we will continue
through individual APCs for each those products, so that our data for CY to issue guidance on billing for blood
product. We also proposed to establish 2005, which will be used to set median and blood products to provide
payment rates for these blood and blood costs for blood and blood products in clarification or additional explanation
products by using the same simulation the CY 2007 OPPS update, should more as needed, based on additional
methodology described in the November accurately capture the hospital costs questions and issues that are brought to
15, 2004 final rule with comment period associated with each different blood our attention.
(69 FR 65816), which utilized hospital- product. Comment: Numerous commenters
specific actual or simulated CCRs for Therefore, for CY 2006, we proposed expressed concern that the proposed
blood cost centers to convert hospital to establish payment rates for blood and payment rates for several blood
charges to costs, with an adjustment blood products under the OPPS using products had decreased from their CY
2005 payment rates. Commenters stated outpatients. We agree with commenters acknowledge the need to balance these
that such payment declines would that beneficiary access to the safest and payment fluctuations with protecting
likely jeopardize beneficiary access to most immediately available blood beneficiary access to such services by
these products. Most notably, according supply is critical to saving lives. In moderating abrupt payment declines
to several organizations providing blood addition, we understand that, in most that occur over a 1-year period. We were
and blood products to hospitals, the cases, the hospital costs related to concerned that our proposed allowance
proposed CY 2006 payment rate for providing blood and blood products of a 10 percent decrease in median costs
leukocyte-reduced red blood cells stem mainly from the costs of from the CY 2005 adjusted final medial
(HCPCS code P9016), the most processing and storing the blood. We costs might affect beneficiary access to
commonly billed blood product in the also acknowledge that new blood testing these services. Therefore, for CY 2006,
hospital outpatient setting, is due to technological advances and for blood and blood products whose CY
significantly below hospitals’ actual challenges associated with donor 2006 simulated median costs would
acquisition costs. Commenters urged recruitment and retention may have otherwise experienced a decrease
CMS to set the CY 2006 payment rates contribute to rising costs of blood and of more than 5 percent in comparison
for blood and blood products at the blood products. However, there may be with their CY 2005 adjusted final
greater of: (1) The simulated medians other environmental forces, including median costs, we are adjusting the
calculated using the CY 2004 claims improved efficiencies through new simulated medians by limiting their
data; or (2) the CY 2005 APC payment technologies and changes in the clinical decrease to 5 percent. We applied this
medians for these products. circumstances surrounding outpatient
adjustment to 11 blood and blood
Response: We are displaying in Table hospital transfusions, that may reduce
product APCs for CY 2006. Table 33 of
33 of this final rule with comment the costs of providing blood products.
this final rule with comment period
period the list of blood product HCPCS While the above-mentioned issues must
contains the adjusted payment medians
codes with their final CY 2006 adjusted all be carefully considered, we also
for CY 2006. Those CY 2006 final
median costs. Overall, median costs remind commenters that the payment
median costs that we adjusted by
from CY 2005 and CY 2006 were rates for services paid under the OPPS
moderating their decrease to 5 percent
relatively stable, with significant will naturally experience fluctuations
are indicated by an asterisk in the table.
increases and adjusted decreases for from year to year. Such variation is
some specific blood products. In inherent in any budget-neutral In summary, for the CY 2006 OPPS, the
addition, we expect that as hospitals prospective payment system such as the final median costs for blood and blood
improve their billing and coding OPPS, where payment rates are products are set at the greater of: (1) the
practices, medians based on historical developed based on historical hospital simulated median costs calculated from
hospital claims data should continue to claims data. However, when such the CY 2004 claims data; or (2) 95
become more consistent and reflective fluctuations become large enough to percent of the CY 2005 adjusted median
of all hospital costs associated with potentially jeopardize access to services costs for these products.
providing blood products to hospital paid under the OPPS, we may BILLING CODE 4120–01–P
BILLING CODE 4120–01–C services to be included in the room and we encourage hospitals to consult their
Comment: While one commenter board rate. The commenter urged CMS fiscal intermediaries with any concerns
thanked CMS for providing hospitals to instruct hospitals to establish a related to the billing of blood
with detailed billing guidance for blood charge structure for blood transfusion transfusion and administration services
and blood products when furnished and administration services that applies to inpatients.
under the hospital outpatient setting, uniformly to both inpatients and Comment: One commenter supported
the commenter requested additional outpatients. our proposal to set CY 2006 OPPS
clarification on whether hospitals Response: We appreciate the payments for blood and blood products
should charge inpatients, as they do comment’s recommendation. However, based on hospital claims data rather
outpatients, for blood administration we do not consider the OPPS final rule, than blood industry data. This
services. The commenter explained that which addresses hospital outpatient commenter recommended that if CMS
some hospitals do not charge inpatients payment policies, to be an appropriate does consider using external data in
separately for blood administration forum for addressing detailed billing some fashion for setting the payment
ER10NO05.024</GPH>
services; rather they consider such guidance for inpatient services. Rather, rates for blood and blood products, that
CMS proceed very cautiously in payment under the OPPS for CPT code payable observation services. We
considering whether to utilize blood 85060 by changing its status indicator continued to receive incomplete and
industry data. The commenter stated from ‘‘X’’ to ‘‘B.’’ unreliable data as a result of
that it is crucial that the external data We did not receive any public inconsistent hospital reporting, with
be valid, reliable, publicly available, comments on this proposal. some hospitals reporting observation
reflective of geographic variations in Accordingly, we are finalizing our services per day, and others reporting
costs, and subject to audit. proposal to discontinue payment under each hour of observation as one unit.
Response: Although we are not using the OPPS effective for services The CY 2006 proposed changes were an
external data for setting the CY 2006 furnished on or after January 1, 2006, for effort to ensure more consistent hospital
payment rates for blood and blood CPT code 85060 by changing its status billing for both separately payable and
products, we thank the commenter for indicator from ‘‘X’’ to ‘‘B.’’ packaged observation services in order
the recommended and considered to guide our future analyses of
caution toward using such external data XI. Payment for Observation Services observation care and to shift the
in this case. A. Background administrative burden for determining
After carefully considering all separately payable observation services
comments received on our proposed CY Observation care is a well-defined set
from hospitals to the OCE. We do not
2006 OPPS methodology for of specific, clinically appropriate
expect to see an increase in the number
establishing APC payment for blood and services, which include ongoing short-
of separately payable observations
blood products, we are adopting as final term treatment, assessment, and
services as a result of these changes.
our proposal with modification. To reassessment, before a decision can be First, we proposed to discontinue
ensure beneficiaries’ access to a safe made regarding whether patients will HCPCS codes G0244 (Observation care
blood supply, we are adopting a require further treatment as hospital by facility to patient), G0263 (Direct
payment adjustment policy that will inpatients or if they are able to be admission with CHF, CP, asthma), and
limit significant decreases in APC discharged from the hospital. G0264 (Assessment other than CHF, CP,
payment rates for blood and blood Observation status is commonly asthma) and to create two new HCPCS
products from CY 2005 to CY 2006 by assigned to patients with unexpectedly codes to be used by hospitals to report
not more than 5 percent rather than 10 prolonged recovery after surgery and to all observation services, whether
percent as proposed. Therefore, for the patients who present to the emergency separately payable or packaged, and
CY 2006 OPPS, the final median costs department and who then require a direct admission for observation care,
for blood and blood products are set at significant period of treatment or whether separately payable or packaged:
the greater of: (1) The simulated median monitoring before a decision is made • G0378—Hospital observation
costs calculated from the CY 2004 concerning their next placement. For a services, per hour (cited in the proposed
claims data; or (2) 95 percent of the CY detailed discussion of the clinical and rule as ‘‘GXXXX’’).
2005 adjusted median costs for these payment history of observation services • G0379—Direct admission of patient
products, as reflected in Table 34 above. under the OPPS, we refer readers to the for hospital observation care (cited in
For CY 2006, we also proposed to November 1, 2002 final rule with the proposed rule as ‘‘GYYYY’’).
change the status indicator for CPT code comment period (67 FR 66794). Second, we proposed to shift
85060 (Blood smear, peripheral, For a detailed discussion of our determination of whether or not
interpretation by physician with written proposed changes to payments for observation services are separately
report) from ‘‘X’’ (separately paid under observation services for CY 2006, we payable under APC 0339 (Observation)
the OPPS) to ‘‘B’’ (not paid under the refer readers to the CY 2006 OPPS from the hospital billing department to
OPPS). When a hospital provides a proposed rule at 70 FR 42742 through the OPPS claims processing logic. That
physician interpretation of an abnormal 42745. A summary of the proposed is, hospitals would bill HCPCS code
peripheral blood smear interpretation changes is included below, followed by G0378 when observation services are
for a hospital outpatient, the charge for our responses to the public comments, provided to any patient admitted to
the facility resources associated with the and our final policies for CY 2006. ‘‘observation status,’’ regardless of the
interpretation should be bundled into patient’s condition. In addition to the
B. Proposed and Final CY 2006 Coding
the charge reported for the ordered HCPCS code G0378, hospitals would
Changes for Observation Services and
hematology lab service, such as CPT bill HCPCS code G0379 when
Direct Admission to Observation
code 85007 (Blood count; blood smear, observation services are the result of a
microscopic examination with manual In response to comments received direct admission to ‘‘observation status’’
differential WBC count) or CPT code regarding the continuing administrative without an associated emergency room
85008 (Blood count; blood smear, burden on hospitals when attempting to visit, hospital outpatient clinic visit, or
microscopic examination without differentiate between packaged and critical care service on the day of or day
manual differential WBC count), that are separately payable observation services before the observation services.
paid under the Clinical Laboratory Fee for purposes of billing correctly, and We proposed to assign both of these
Schedule (CLFS). A physician recommendations made by the APC proposed new HCPCS codes a new
interpretation of an abnormal peripheral Panel and participants at the February status indicator ‘‘Q’’ (packaged service
blood smear is considered a routine part 2005 APC Panel meeting, in the CY subject to separate payment based on
of the ordered hematology lab service, 2006 OPPS proposed rule, we proposed criteria) that would trigger the OCE logic
such as CPT codes 85007 and 85008 two changes in observation coding and during the processing of the claim to
paid under the CLFS, so hospitals will implementation of the OPPS payment determine if the observation service or
receive duplicate payment for the policies for observation services in CY direct admission service is packaged
facility resources associated with a 2006. As we stated in the CY 2006 with the other separately payable
physician’s blood smear interpretation if proposed rule (70 FR 42743), these hospital services provided, or if a
we were to continue to pay separately administrative changes were prompted separate APC payment for observation
for CPT code 85060 under the OPPS for by the fact that CY 2004 hospital data services or direct admission to
hospital outpatients. Therefore, for CY do not reflect the CY 2005 policy observation is appropriate in accordance
2006, we proposed to discontinue changes implemented for separately with the criteria discussed in section
XI.C. or XI.D. of this preamble. In XI.B. of the CY 2006 proposed rule on Response: While we appreciate this
addition, we proposed to change the page 70 FR 42743 where we stated that suggestion and we agree that the OCE
status indicator for CPT codes 99217 hospitals would bill HCPCS code G0378 logic could recognize these revenue
through 99220 and 99234 through 99236 when observation services are provided codes, we will implement HCPCS code
from ‘‘N’’ (packaged) to ‘‘B’’ (code not to any patient admitted to ‘‘observation G0379 as proposed. The OCE logic has
recognized by the OPPS). We noted we status,’’ regardless of the patient’s status no method of identifying if the direct
would expect hospitals to use HCPCS as inpatient or outpatient. admission to observation care service
code G0378 to accurately report all Response: We mistakenly included was actually provided. For example, the
observation services provided to the word ‘‘inpatient’’ in this statement. observation care billed with HCPCS
beneficiaries, whether the observation The statement should instead read, code G0378 may have been an error in
would be packaged or separately ‘‘Hospitals would bill HCPCS code coding by a hospital, or the hospital
payable, to assist us in developing G0378 when observation services are may have failed to bill for an emergency
consistent and complete hospital claims provided to any patient admitted to room or clinic visit on the same day on
data regarding the utilization and costs ‘observation status’ regardless of the the same claim as the observation
of observation services. The units of patient’s condition.’’ services. Because we plan to pay
service reported with HCPCS code Comment: One commenter notified separately for HCPCS code G0379 in
G0378 would equal the number of hours CMS of an omission on page 70 FR some circumstances and the OPPS pays
the patient is in observation status. 42745, under section XI.C.3.a of the CY for services that were provided and
Comment: Several commenters 2006 proposed rule. The commenter billed with HCPCS codes on claims, the
expressed support for the proposed pointed out that we had omitted direct HCPCS code G0379 is necessary for
changes and CMS’ and the APC Panel’s admission from the bulleted list of billing and possible separate payment.
efforts to streamline the billing process additional hospital services. In addition, if hospitals did not
for observation services in hospitals. Response: We appreciate the appropriately bill HCPCS code G0379
Nine commenters stated that they commenter bringing this error to our with its associated charges in cases of
appreciated our proposal to shift the attention. The omission was direct admission to observation, we
burden of determining if observation is inadvertent. In this final rule with would have no direct way of calculating
separately payable from the hospitals to comment period, we have made the the median cost of the direct admission
the OCE logic. appropriate change to make the policy to observation to facilitate analysis of its
While most of these commenters median cost in comparison with the
consistent with the CY 2005 OPPS
approved the proposal to use the new OPPS payment rate for that service. If
payment policy. The corrected policy
HCPCS code G0378 to bill for hospital the observation care itself was not
reads as follows for the billing of
observation services, two commenters separately payable, and there were no
hospital observation services:
believed that HCPCS code G0378 is other separately payable services on the
‘‘Additional Hospital Services:
unnecessary. They recommended that claim, there would be no billed direct
providers should use CPT evaluation a. The hospital must provide on the
same day or the day before and report admission service with which to
and management codes for observation package the observation care and other
care, specifically CPT codes 99218, on the same claim:
packaged costs on the claim. Thus, in
99219, and 99220. The commenters also • An emergency department visit
the absence of a code on a claim
suggested that CMS should require (APC 0610 or 0612); or
reporting a direct admission to
hospitals to provide the hour • A clinic visit (APC 0600, 0601, or
observation services billed as HCPCS
information in the unit field and 0602); or
code G0379, Medicare will not use the
develop edits for these codes to edit for • Critical care (APC 0620); or OCE logic to infer that the patient was
the qualifying conditions. A third • Direct admission to observation previously seen by a physician outside
commenter requested clarification on using HCPCS code G0379.’’ of the hospital who ordered the direct
why G-codes are needed at all. Comment: Many commenters admission of the patient for observation
Response: We disagree with the expressed overall approval for our services.
commenters that HCPCS code G0378 is proposed policy changes concerning the In summary, while a few commenters
unnecessary and disagree that the new G-codes for observation services questioned the necessity of creating new
requirement of reporting the code per and, specifically, approval of the new G-codes for reporting observation
hour could be handled in the unit field HCPCS code G0379 to report direct services and direct admission to
for CPT observation codes. The CPT admission to observation when a observation, we agree with the many
observation codes are per day codes by Medicare beneficiary is directly commenters who encouraged us to
CPT definition. We believe that to admitted into a hospital outpatient implement the new codes and to use the
instruct hospitals to bill multiple units department for observation care after OCE logic to determine when
of a per day code to report the hours of being seen by a physician in the observation services are separately
observation care provided would create community. payable for the CY 2006 OPPS. Like
confusion and many variances in claims However, seven commenters believed those commenters, we believe that this
reporting resulting in poor hospital that HCPCS code G0379 would be change will both reduce the
claims data. Generally, we follow CPT unnecessary if CMS would alter the administrative burden on hospitals and
instructions for coding, and in this case OCE logic to look for revenue codes 45X will improve CMS claims data which
we believe that it would be most (Emergency Department) and 516 will allow us to continue to evaluate our
prudent to establish a per hour G-code (urgent care) on claims for observation payment policies for observation
for observation services to facilitate ease services coded with HCPCS code G0378. services under the OPPS.
of coding observation services and to They reasoned that if one of these
ensure that we will be able to obtain revenue codes is not on the claim, the C. Proposed and Final Criteria for
useful and consistent data from future OCE logic should determine that the Separate Payment for Direct Admission
claims. observation services billed were as a to Observation
Comment: Five commenters sought result of a direct admission to Through claims processing logic, we
clarification of the language in section observation care. proposed to continue paying for direct
admission to observation at a rate equal payable in such a scenario, payment for In summary, we are implementing as
to that of a Low Level Clinic Visit (APC the direct admission to observation and final our proposed CY 2006 payment
0600) when a Medicare beneficiary seen the accompanying observation services policies for observation services under
by a physician in the community and would be packaged with payments for the OPPS. We are also implementing the
then is directly admitted into a hospital the other separately payable services on policy related to the new HCPCS code
outpatient department for observation the claim, including the day’s earlier G0379 as proposed in order to continue
care that does not qualify for separate hospital visit if all of these services were paying for direct admission to
payment under APC 0339. In order to billed on the claim. observation at a rate equal to that of a
receive separate payment for a direct As discussed in the data section Low Level Clinic Visit when a Medicare
admission into observation (APC 0600), (section II.A.) of this final rule with beneficiary is directly admitted into a
the claim must show: comment period and in Change Request hospital outpatient department for
1. Both HCPCS codes G0378 (Hourly 4047, issued on October 14, 2005, some observation care that does not qualify
Observation) and G0379 (Direct Admit nonrepetitive OPPS services provided for separate payment under APC 0339.
to Observation) with the same date of on the same day by a hospital may be
service. billed on different claims, provided that D. Proposed and Final Criteria for
2. That no services with a status all charges associated with each Separately Payable Observation Services
indicator ‘‘T’’ or ‘‘V’’ or Critical care procedure or service being reported are (APC 0339)
(APC 0620) were provided on the same billed on the same claim with the For CY 2006, we proposed to continue
day of service as HCPCS code G0379. HCPCS code which describes that applying the existing CY 2005 criteria
3. The observation care does not service. We reiterate that it is vitally (69 FR 65830), which determine if
qualify for separate payment under APC important that all of the charges that hospitals may receive separate payment
0339. pertain to a nonrepetitive, separately for medically necessary observation care
Comment: One commenter disagreed paid procedure or service be reported on provided to a patient with congestive
with our proposal that no service with the same claim with that procedure or heart failure, chest pain, or asthma. In
a status indicator of ‘‘V’’ (clinic or service. Only thus can we develop addition, we proposed to continue our
emergency department visit) can be on complete and accurate median costs for policy of packaging payment for all
the claim when provided on the same ratesetting purposes. We also emphasize other observation services into the
day of service as HCPCS code G0379. that this relaxation of same day billing payments for the separately payable
The commenter stated that because requirements for some nonrepetitive services with which the observation
OPPS services performed on the same services does not apply to nonrepetitive service is reported. As explained
date of service must be reported on the services provided on the same day as previously in section XI.B. of this
same claim, the hospital would not either direct admission to observation preamble, the only changes we
receive any payment for observation care or observation services because the proposed are related to the code
services for patients who receive a OCE claim-by-claim logic cannot hospitals will use to report observation
service in a provider-based clinic in the function properly unless all services services, and the point at which a
morning and later in the day are directly related to the episode of observation payment determination is made. Rather
admitted to observation by their primary care, including hospital clinic visits, than requiring the hospital to determine
care practitioner for an unrelated emergency department visits, critical prior to claims submission whether
reason. The commenter recommended care services, and ‘‘T’’ status patient condition and the services
that CMS eliminate the requirement that procedures, are reported on the same furnished meet the criteria for payment
a hospital must combine separate claim. Further instruction on billing of APC 0339, that determination would
outpatient encounters on a single claim. repetitive and nonrepetitive hospital shift to the claims processing modules
Response: We appreciate the services can be found in Change Request installed by the fiscal intermediaries to
commenter’s suggestion, but at this time 4047 cited above. process all OPPS bills, thereby reducing
we are not removing the requirement Specifically with respect to the billing the administrative burden on hospitals.
that services with status indicator ‘‘V’’ of HCPCS code G0379 for direct Criteria for separate observation
cannot be billed on the same claim with admission to observation care, we service payments include
the same date of service as HCPCS code expect that hospitals will only bill this documentation of specific ICD–9–CM
G0379 for direct admission to service if a patient is admitted directly diagnostic codes; the length of time a
observation care for separate payment to observation care after being seen by patient is in observation status; hospital
for HCPCS code G0379 to be made. We a physician in the community. Although services provided before, during, and
believe that the circumstances under our OCE logic is performed on a claim- after the patient receives observation
which a patient would have a hospital by-claim basis, hospitals should not bill care; and ongoing physician evaluation
visit (clinic or emergency room), sees a HCPCS code G0379 for direct admission of the patient’s status.
physician outside the hospital for an to observation care on the same day as As we stated in Program Transmittal
unrelated reason later in the same day, hospital clinic visits, emergency room A–02–129 released in January 2003, we
and then be directed on that same day visits, critical care services, and ‘‘T’’ will continue to update any changes in
to the same hospital where he or she status procedures that are related to the the list of ICD–9–CM codes required for
had the first hospital visit for direct subsequent admission to observation payment of HCPCS code G0378
admission to observation for observation care. Instead, hospitals should bill all of resulting from the October 1 annual
services that would be packaged (that is, the services associated with the update of ICD–9–CM in the October
not for chest pain, congestive heart observation care, including hospital quarterly update of the OPPS. The ICD–
failure, or asthma) but for which we clinic visits, emergency room visits, 9–CM codes for CY 2006 through
would make separate payment for the critical care services, and ‘‘T’’ status October 2006 are listed in Table 35. As
direct admission to observation would procedures, on the same claim so that we proposed, below are the criteria that
be very rare. The OCE editing cannot the OCE logic may appropriately we will continue using in CY 2006 to
deal with the complexity of this unusual determine the separately payable or determine if hospitals may receive
sequence of events. Thus, if the packaged payment status of HCPCS separate OPPS payment for medically
observation services were not separately codes G0378 and G0379. necessary observation care provided to
a patient with congestive heart failure, appropriate ICD–9–CM code (as shown ICD–9–CM diagnosis code(s) is reported
chest pain, or asthma. in Table 30 below) to reflect the in the secondary diagnosis field but is
condition. not reported in either the Patient Reason
1. Diagnosis Requirements c. The qualifying ICD–9–CM diagnosis for Visit field (FL 76) or in the principal
a. The beneficiary must have one of code must be reported in Form Locator diagnosis field (FL 67), separate
three medical conditions: congestive (FL) 76, Patient Reason for Visit, or FL payment for APC 0339 will not be
heart failure, chest pain, or asthma. 67, principal diagnosis, or both, in order allowed.
b. The hospital bill must report as the for the hospital to receive separate
reason for visit or principal diagnosis an payment for APC 0339. If a qualifying BILLING CODE 4120–01–P
ER10NO05.025</GPH>
BILLING CODE 4120–01–C appreciate the APC Panel’s concern for preceding observation care. The APC
2. Observation Time clear coding and billing guidance. We Panel believed that sometimes
will provide detailed guidance observation services could be provided
a. Observation time must be regarding billing for observation on the same day as ‘‘T’’ status
documented in the medical record. services in an upcoming Internet-only procedures, but be unassociated with
b. A beneficiary’s time in observation manual update and ‘‘Medlearn Matters’’ those procedures, as the observation
(and hospital billing) begins with the article. For further clarification, this care could be related to treatment of
beneficiary’s admission to an guidance will also include a restatement chest pain, asthma, or congestive heart
observation bed. of when observation hours begin and failure for which we might otherwise
c. A beneficiary’s time in observation end, and a discussion of appropriate make separate payment.
(and hospital billing) ends when all billing of the G-codes for observation Although we appreciate the
clinical or medical interventions have services in relationship to other services discussion of the APC Panel and this
been completed, including followup also billed by hospitals. As we have recommendation, we believe that in
care furnished by hospital staff and stated before in reference to the most cases, where observation care is
physicians that may take place after a appropriate duration of observation billed on a claim on the same date as a
physician has ordered the patient be services, we believe that in the ‘‘T’’ status procedure, the observation
released or admitted as an inpatient. overwhelming majority of cases, services are most likely related to post-
d. The number of units reported with decisions can be and are routinely made procedural observation for which we do
HCPCS code G0378 must equal or in less than 48 hours, and generally in not make separate payment. As we take
exceed 8 hours. less than 24 hours, regarding whether to on the administrative responsibility for
3. Additional Hospital Services release a beneficiary from the hospital determining which observation services
following resolution of the reason for we will pay separately for, we have
a. The hospital must provide on the the outpatient visit or whether to admit limited ability to determine the
same day or the day before and report the beneficiary as an inpatient (69 FR temporal order of ‘‘T’’ status procedures
on the same claim: 65830, November 15, 2004). in relationship to the observation
• An emergency department visit In response to the APC Panel’s services. In addition, considering that
(APC 0610, 0611, or 0612) or recommendation for clarification there are over 13,000 ‘‘T’’ status codes
• A clinic visit (APC 0600, 0601, or concerning if and when a hospital may paid under the OPPS, it would be an
0602); or issue an ABN, all hospital observation extremely large administrative burden
• Critical care (APC 0620); or services, regardless of the duration of for us to individually evaluate each ‘‘T’’
• Direct admission to observation the observation care, that are medically status code to determine if there may be
services using HCPCS code G0379 (APC reasonable and necessary are covered by an exception to the rule in some clinical
0600). Medicare, and hospitals receive OPPS circumstances, where observation care
b. No procedure with a ‘‘T’’ status payments for such observation services. would precede or be unassociated with
indicator can be reported on the same We make separate payment for the ‘‘T’’ status procedure. We will
day or day before observation care is observation care only for the three discuss this issue again with the APC
provided. conditions previously defined that also Panel in future APC Panel meetings and
4. Physician Evaluation meet our specific criteria, and payments will examine the utilization patterns
for all other reasonable and necessary and costs of procedure-related
a. The beneficiary must be in the care observation services are packaged into observation services in our claims data
of a physician during the period of the payments for other separately based on the new G-code reporting of
observation, as documented in the payable services provided to the patient observation care.
medical record by admission, discharge, on the same day. An ABN should not be We note, as described earlier in the
and other appropriate progress notes issued in the context of reasonable and context of billing HCPCS code G0379 for
that are timed, written, and signed by necessary observation services, whether direct admission to observation, that
the physician. packaged or not. through Change Request 4047 issued on
b. The medical record must include The APC Panel also recommended October 14, 2005, we have recently
documentation that the physician that CMS reevaluate expanding the list relaxed our previous requirement to bill
explicitly assessed patient risk to of diagnoses eligible for separate all OPPS services provided on the same
determine that the beneficiary would payment for observation. day on the same claim. In the case of
benefit from observation care. We appreciate this recommendation observation care, because of the OCE
The APC Panel met in August 2005 by the APC Panel. While we believe that claim-by-claim logic, in order for us to
and made several recommendations for it is premature to expand the conditions make proper determinations regarding
clarification of the observation policy, for which we would separately pay for packaging or separate payment for
including that CMS offer further observation services, we believe that the observation services consistent with our
guidance regarding the definition of coding changes we are finalizing for CY payment policy to make separate
end-time of observation services, billing 2006 will result in more consistent and observation payment only for the three
the new HCPCS G-codes in relation to accurate hospital claims. The data specified medical conditions, all
the currently required evaluation and gathered from these claims will allow services associated with the observation
management visit codes, the typical further analysis of the appropriateness care, including hospital clinic visits,
length of observation time, and if the of expanding the number of separately emergency room visits, critical care
hospital has the ability to issue an payable conditions. services, and ‘‘T’’ status procedures that
Advance Beneficiary Notice (ABN) and In addition, the APC Panel may have resulted in the need for
under what circumstances. recommended that CMS establish a observation care, must be reported on
We appreciate the consideration of mechanism to reimburse separately for the same claim.
the issues by the APC Panel and will observation services when specific Comment: Several commenters
continue to evaluate its HCPCS codes with status indicator ‘‘T’’ requested clarification of the billing
recommendations as we gather claims are also on the claim with observation process, such as how to bill observation
data based on the new G-codes. We also services on the day of or the day services when the patient is seen over
the midnight hour. Three commenters coronary artery disease as valid related to post-procedural observation
requested that CMS issue further billing conditions for separate payment of for which we do not make separate
guidance in the form of prompt issuance observation. payment. We refer the readers to the
of program transmittals and manual Response: We appreciate the previous response for further
changes, as well as a possible training comments that we received from these explanation.
package for hospitals to use when commenters regarding possible Comment: One commenter
training physicians so that physicians additions to the list of diagnoses eligible recommended that CMS reconsider
can receive the same instructions from for separate payment for observation requiring hospitals to report one of the
all facilities to which they admit services. Although we are not ICD–9–CM diagnosis codes designated
patients. implementing in the CY 2006 OPPS the for payment of APC 0339 as the
Response: We appreciate these recommendations made by commenters admitting or primary diagnosis on the
suggestions and, as stated earlier, we and the APC Panel to expand separate hospital claim. The commenter was
will provide detailed guidance payment for observation to include concerned that if we restrict the position
regarding billing for observation conditions in addition to congestive of the diagnosis code to the admitting or
services in an upcoming Internet-only heart failure, asthma, and chest pain, we principal field, many claims that
manual update and ‘‘Medlearn Matters’’ will continue to analyze our data based otherwise meet the criteria for separate
article. on the new G-codes and will study the payment of observation services will not
Comment: Several commenters feasibility and impact of such changes be payable because coding rules and the
recommended that CMS reevaluate in eligible diagnoses as we consider frequency by which Medicare
expanding the list of diagnoses eligible future updates of the OPPS. We believe beneficiaries with asthma, congestive
for separate payment for observation. that the use of the new G-code for heart failure, or chest pains have other
One commenter requested that CMS reporting hourly observation services presenting signs, symptoms, and
consider adding the following should yield much more robust and clinical conditions will result in
diagnoses: 466.0—Acute bronchitis; reliable claims data upon which to base inappropriate placement of the requisite
466.11 (Acute bronchitis due to RSV); such further analyses. diagnosis code. The commenter
466.19 (Acute bronchitis due to oth Comment: One commenter recommended that CMS accept the
infects organism); 491.21 (Chr recommended that CMS establish a required diagnosis in any diagnosis
obstructive bronchitis, w acute mechanism to reimburse separately for field.
exacerbation); 491.22 (Chr obstructive observation services when specific Response: As we stated in the CY
bronchitis, w acute bronchitis); and 496 HCPCS codes with status indicator ‘‘T’’ 2005 OPPS final rule with comment
(Chr obstructive pulmonary disease). are also on the claim with observation period, we do not agree that this
The commenter stated that the current services on the day of or the day requirement will result in many claims
asthma diagnoses that receive separate preceding observation care. The for APC 0339 not being paid. Rather, we
payment include some patients with commenter stated that the intensity and believe that requiring hospitals to report
chronic obstructive pulmonary disease types of service for these types of the signs, symptoms, and conditions
(COPD), but not all patients with COPD, procedures can be similar and that that are the reason for the patient’s visit
and that physicians are frequently procedural complications or physician will enhance coding accuracy and
nonspecific when stating a diagnosis, planned overnight observation can ensure that Medicare is paying
which then leads to a wide variety of apply to status ‘‘T’’ procedures such as appropriately for APC 0339 by limiting
assignments of asthma and COPD codes. breast procedures and interventional separate payment to those observation
In addition, the commenter reasoned radiology procedures. The commenter services furnished to monitor asthma,
that the care of a patient with asthma, also expressed concern that patients chest pain, and congestive heart failure.
bronchitis, or COPD is very similar as initially in observation for chest pain If we were to accept the required ICD–
far as the diagnostic tests performed, may proceed to cardiac catheterization 9–CM diagnosis code as a secondary
medications ordered, and clinical care evaluations, and the current rule would diagnosis, we would remain concerned
provided. seem to limit separate payment for that we may be making separate
Response: Our separately payable observation services in this situation, payment for observation for conditions
observation policy includes only even though the observation was for other than asthma, congestive heart
diagnoses directly related to asthma. chest pain and it preceded the cardiac failure, or chest pain because these
While we acknowledge that some of catheterization. The commenter conditions are reported in the secondary
these conditions may have similar requested that CMS either allow both diagnosis field even though they are not
symptoms or a similar clinical course to ‘‘S’’ and ‘‘T’’ status services to be on the the clinical reason that the patient is
asthma, we do not consider these claim or discontinue this edit. receiving observation services.
diagnoses codes to represent asthma. In Response: Our changes in coding and In summary, after careful
addition, there may be significant OCE logic for CY 2006 do not affect the consideration of the comments we
differences in responses to treatment for criteria for separately payable received related to the criteria required
patients with these other diagnoses. observation services. We do not intend for separate payment of observation
Therefore, we are not adding the to make separate payment for services (APC 0339), we have decided to
suggested diagnoses at this time. observation services following surgical continue using the criteria as proposed
Comment: One commenter requested or interventional procedures, and, in for CY 2006. We will analyze the data
that CMS and the APC Panel study the general, these services may be most that will be gathered through the
possible expansion of the conditions for readily identified by their ‘‘T’’ status reporting of the new HCPCS codes
which separate payment would be under the OPPS. As we stated G0378 and G0379 to further study the
provided to include the diagnoses of previously in response to a similar implications of expanding the list of
febrile neutropenia, chemotherapy recommendation by the APC Panel, we conditions eligible for separate payment
hypersensitivity reaction, and believe that in most cases, where for observation services. In addition, we
hypovolemia, electrolyte imbalance. observation care is billed on a claim on will be issuing additional guidance for
Another commenter requested that CMS the same date as a ‘‘T’’ status procedure, reporting and billing observation
consider adding the diagnosis codes for the observation services are most likely services in the form of a change request
updating the Internet-only manual and • We have determined that the we found that the utilization data
a ‘‘Medlearn Matters’’ article. procedure is being performed in suggesting that this procedure is an
multiple hospitals on an outpatient office-based procedure were errant.
XII. Procedures That Will Be Paid Only
basis; or Additional sources of utilization data
as Inpatient Procedures • We have determined that the suggested that this procedure is
A. Background procedure can be appropriately and predominately performed on an
safely performed in an ambulatory inpatient basis. Concomitant with not
Section 1833(t)(B)(i) of the Act gives surgical center (ASC) and is on the list meeting our criteria of being performed
the Secretary broad authority to of approved ASC procedures or on an outpatient basis in multiple
determine the services to be covered proposed by us for addition to the ASC hospitals and not appearing on the ASC
and paid for under the OPPS. Before list. list of approved procedures, we were
implementation of the OPPS in August We believe that these additional not compelled to support the removal of
2000, Medicare paid reasonable costs for criteria help us to identify procedures this procedure from the inpatient list.
services provided in the outpatient that are appropriate for removal from For this reason, we proposed to retain
department. The claims submitted were the inpatient list. CPT code 33420 on the inpatient list for
subject to medical review by the fiscal In the November 7, 2003 final rule CY 2006.
intermediaries to determine the with comment period (68 FR 63465), no CPT codes 65273 and 59856 were
appropriateness of providing certain significant changes were made to the similarly reevaluated because of our
services in the outpatient setting. We inpatient list. In the November 15, 2004 concern with the HCPCS long
did not specify in regulations those final rule with comment period (69 FR descriptors for these two codes. The
services that were appropriate to 65834), we removed 22 procedures from long descriptors for these codes are as
provide only in the inpatient setting and the inpatient list, effective for services follows: CPT code 65273 (Repair of
that, therefore, should be payable only furnished on or after January 1, 2005. laceration; conjunctiva, by mobilization
when provided in that setting. and rearrangement, with
B. Proposed and Final Changes to the
In the April 7, 2000 final rule with Inpatient List hospitalization) and CPT code 59856
comment period, we identified (Induced abortion, by one or more
procedures that are typically provided For CY 2006 OPPS, we used the same vaginal suppositories (eg, prostaglandin)
only in an inpatient setting and, methodology as described in the with or without cervical dilation (eg,
therefore, would not be paid by November 15, 2004 final rule with laminaria), including hospital
Medicare under the OPPS (65 FR comment period (69 FR 65837) to admission and visits, delivery of fetus
18455). These procedures comprise identify a subset of procedures currently and secundines; with dilation and
what is referred to as the ‘‘inpatient on the inpatient list that were being curettage and/or evacuation). The long
list.’’ The inpatient list specifies those widely performed on an outpatient descriptors indicate that hospital
services that are only paid when basis. These procedures were then admission or hospitalization is included
provided in an inpatient setting because clinically reviewed for possible removal in the codes for these two procedures,
of the nature of the procedure, the need from the inpatient list. We solicited which leads us to believe that these two
for at least 24 hours of postoperative input from the APC Panel on the procedures do not meet the established
recovery time or monitoring before the appropriateness of the removal of 26 criteria for removal from the inpatient
patient can be safely discharged, or the procedures from the inpatient list at the list. The same code descriptor for CPT
underlying physical condition of the February 2005 APC Panel meeting. The code 65273, but without hospitalization,
patient. As we discussed in the April 7, APC Panel recommended that these 26 is assigned to CPT code 65272, which is
2000 final rule with comment period (65 procedures be removed from the list and already separately payable under the
FR 18455) and the November 30, 2001 further recommended that CMS OPPS. Therefore, we proposed to retain
final rule (66 FR 59856), we use the consider CPT code 37183 (Remove CPT codes 65273 and 59856 on the
following criteria when reviewing hepatic shunt (TIPS)) for removal. We inpatient list for CY 2006.
procedures to determine whether or not agreed with the APC Panel’s In addition, we proposed to remove
they should be moved from the recommendation that CPT code 37183 CPT code 62160 (Neuroendoscopy) from
inpatient list and assigned to an APC be removed from the inpatient list for the inpatient list. Questions about this
group for payment under the OPPS: CY 2006 and we proposed to remove it service have been raised to us by the
from the inpatient list. In addition, the hospital community because CPT code
• Most outpatient departments are
APC Panel recommended that CMS 62160 is an add-on CPT code (that is, a
equipped to provide the services to the
review site of service data on code that is commonly performed as an
Medicare population.
laminectomy services, which currently ‘‘additional or supplemental’’ procedure
• The simplest procedure described have status indicator C and are on the to the primary procedure). Two of the
by the code may be performed in most inpatient list, to determine whether the separately coded services that CPT
outpatient departments. procedures are being performed in the indicates are to be used with the add-
• The procedure is related to codes hospital outpatient setting with enough on code are currently payable under the
that we have already removed from the frequency to be assigned to APCs for OPPS. Further clinical evaluation of this
inpatient list. payment under the OPPS. add-on procedure and its use in various
In the November 1, 2002 final rule However, subsequent to the APC sites of service leads us to believe it is
with comment period (67 FR 66792), we Panel’s February 2005 meeting, we appropriate for removal from the
removed 43 procedures from the conducted further clinical evaluations inpatient list.
inpatient list for payment under OPPS. of three procedures (CPT codes 33420, Therefore, for CY 2006, we proposed
We also added the following criteria for 65273, and 59856) included among the to remove 25 procedures from the
use in reviewing procedures to 26 procedures that the APC Panel inpatient list and to assign 23 of these
determine whether they should be recommended for removal from the procedures to clinically appropriate
removed from the inpatient list and inpatient list. Upon further clinical APCs. We did not propose to assign two
assigned to an APC group for payment evaluation of CPT code 33420 of these procedures to APC groups, that
under the OPPS: (Valvotomy, mitral valve; closed heart), is, CPT codes 00634 (Anesthesia for
procedures in lumbar region; department may serve to alleviate some codes released in the fall for
chemonucleoysis) and 01190 hospital losses and provide information implementation in January, because of
(Anesthesia for obturator neurectomy; to CMS regarding procedures that may the timing of the release of these codes
intrapelvic) because they are anesthesia be good candidates for removal from the we are unable to provide discussions of
procedures for which no separate list. those assignments in any proposed rule.
payment is made under the OPPS. Finally, the commenters once again Instead, consistent with current
Payment for these two procedures will stated that they strongly supported the practice, we will continue to designate
be packaged into the procedures with February, 2004 APC Panel’s these codes with comment indicator
which they are billed. We proposed that recommendation that CMS eliminate the ‘‘NI’’ in the final rule to indicate that we
the changes to the inpatient list would inpatient list. are assigning them an interim payment
be effective for services furnished on or Response: We are not eliminating the status which is subject to public
after January 1, 2006. inpatient list at this time. We continue comment following publication of the
We received numerous public to believe that there are services that final rule that implements the annual
comments on our proposed assignment cannot be safely and effectively OPPS update. We believe that these
of procedures to the inpatient list for the delivered to Medicare beneficiaries in processes provide ample opportunity for
CY 2006 OPPS. the hospital outpatient setting. We are the public to comment regarding the
Comment: No commenter objected to concerned that elimination of the
assignments of new CPT codes to the
the removal of the 25 procedures from inpatient list could result in unsafe or
inpatient list prior to our finalizing such
the inpatient list. However, commenters uncomfortable care for Medicare
assignments.
requested that CMS eliminate the beneficiaries. Among the potential
inpatient list. Among the reasons cited results of eliminating the list are long Comment: One commenter requested
in the comments is that physicians are observation stays after some procedures that CMS clarify that just because
not bound by the list for payment for and imposition of OPPS copayments, services are not on the inpatient list that
their professional services but are the which could differ significantly from a does not mean they can only be
decisionmakers regarding where a beneficiary’s inpatient cost-sharing provided in the outpatient setting.
procedure is performed. The responsibilities. Response: Many services payable
commenters stated that physicians often We believe that it is important for under the OPPS may also be payable by
are unaware of the payment restrictions hospitals to educate physicians on Medicare when they are provided in
placed on the hospital by the inpatient Medicare services provided under the other outpatient settings, including
list or, because their payment is OPPS to avoid inadvertently providing ASCs and physician offices, and in
unaffected by the list’s constraints, may services in a hospital outpatient setting inpatient settings, depending on the
not be concerned with the hospital’s that are more appropriately performed clinical circumstances and health care
payment. They pointed out that these in an inpatient setting. However, we
delivery practices surrounding the care
factors make implementation and will follow up on the commenters’
of specific Medicare beneficiaries. As
administration of the inpatient list very recommendations regarding what CMS
we have stated previously, the OPPS
difficult for hospitals. may be able to do to supplement
inpatient list is a list of procedures that
The commenters requested that if hospitals’ physician education efforts.
Comment: Several commenters are only paid by Medicare when they
CMS does retain the list, that CMS make
a strong effort to educate physicians requested that CMS issue billing are provided in an inpatient setting, and
about the hospital issues related to the instructions for instances where the absence of procedures from the
inpatient list by, at a minimum, posting hospitals have charges for an inpatient inpatient list should not be interpreted
the inpatient list and an explanation of procedure performed in the outpatient as identifying those procedures as
it on CMS’ physician Web sites and on department in addition to other services appropriately performed only in the
carrier Web sites. on the bill. Commenters were concerned outpatient setting.
Commenters also stated that teaching that some fiscal intermediaries allow Comment: Several commenters
hospitals, where many of the procedures payment for the services other than the requested that CMS remove additional
that are on the inpatient list are inpatient procedure, while other fiscal procedures from the inpatient list. In
performed on an outpatient basis for the intermediaries do not. They also addition, the APC Panel recommended
first time, are affected by the policy requested that CMS include in the that CMS review site of service data on
more than are nonteaching hospitals, proposed rule explanations for any new certain laminectomy services, which
because there is usually a significant Category III CPT codes that CMS assigns currently have status indicator C and are
time gap between when the services are to the inpatient list. on the inpatient list, to determine
performed safely in teaching hospital Response: Billing instructions are whether the procedures are being
outpatient departments and ‘‘most’’ outside of the scope of the final rule, but performed in the hospital outpatient
hospital outpatient departments. They we will look into the billing issues as setting with enough frequency to be
asserted that criteria should be revised suggested by the commenters. With assigned to APCs for payment under the
to allow a procedure to be removed from regard to new Category III CPT codes OPPS. None of the commenters
the list when it can be performed safely released by the AMA on January 1 for provided us with specific evidence to
in a hospital outpatient department implementation on July 1 of a given support statements that the procedures
rather than based on the number of year, we refer the readers to section were being performed on an outpatient
outpatient departments in which it may III.E. of this final rule for a description basis in a safe and effective manner, nor
be safely performed. of our process for recognizing these did they suggest appropriate APC
The commenters also urged CMS to codes and receiving public comments assignments for the procedures.
establish an appeal process in the event on their status under the OPPS. We will
that the list is not eliminated. They respond to those comments in the final The commenters requested that the
believe that a process that would allow rule, here for CY 2007. With regard to CPT codes for procedures shown in
for case-by-case review of the new Category III CPT codes released by Table 35 below be removed from the
documentation for inpatient procedures the AMA on July 1 for implementation inpatient list.
that were performed in the outpatient in January and new Category I CPT BILLING CODE 4210–01–P
BILLING CODE 4210–01–C Laminotomy (hemilaminectomy), with performed in addition to the base
Response: We carefully evaluated decompression of nerve root(s), procedures, the resulting complete
each of the 17 procedures the including parital facetectomy, surgical sessions involve more extensive
commenters requested for deletion from foraminotomy and/or excision of surgery, longer intraoperative times,
the inpatient list. With the exception of herniated intervertebral disk, longer recovery periods, and a higher
one of the procedures, we found that 16 reexploration, single interspace; cervical frequency of performance in the
of the procedures are performed on and 63042, Laminotomy inpatient setting, than do the base
Medicare beneficiaries more than 90 (hemilaminectomy), with procedures alone that are not included
percent of the time in the inpatient decompression of nerve root(s), on the inpatient list.
setting and are associated with more including parital facetectomy, We will take this opportunity to
than 23 hour recovery times. Some of foraminotomy and/or excision of remind the public that the
the procedures are associated with an herniated intervertebral disk, determinations for inclusion on the
expectation of 4 to 5 day hospital stays. reexploration, single interspace; inpatient list are made for the Medicare
Two of the codes (63043 and 63044) are lumbar). We are retaining codes 63043 population. Thus, although some
for ‘‘add-ons’’ to procedures that are not and 63044 on the inpatient list because procedures may be routinely performed
ER10NO05.026</GPH>
included on the inpatient list (63040, when these ‘‘add-on’’ services are on an outpatient basis for younger
patients, their safe performance in the a patient-by-patient basis whether or not evidence that this procedure is being
outpatient hospital setting may be much a particular procedure would be most performed safely in some outpatient
rarer for older individuals who are appropriately performed in the inpatient settings with increasing frequency. We
likely to have a number of comorbidities setting. We believe that these 16 are deleting the procedure from the
and slower recovery times. For procedures should remain on the inpatient list and assigning it to APC
procedures that are not included on the inpatient list for the CY 2006 OPPS. 0208 (Laminotomies and
inpatient list, we rely on the The one procedure that we believe is Laminectomies) for CY 2006.
practitioners’ judgment to determine on appropriate for deletion from the
inpatient list is code 63075. We found BILLING CODE 4210–01–P
ER10NO05.027</GPH>
BILLING CODE 4210–01–C As discussed in the November 15, 2004 established. Hospitals should be using
C. Ancillary Outpatient Services When final rule with comment period (69 FR this modifier only under circumstances
Patient Expires (-CA Modifier) 65841), the payment median was set in described in section VI of Transmittal
accordance with the same methodology A–02–129, which provided specific
In the November 1, 2002 final rule
we followed to set payment rates for the billing guidance for the use of modifier
with comment period (67 FR 66798), we
other procedural APCs in CY 2005, -CA. In addition to expected use of the
discussed the creation of a new HCPCS
based on the relative payment weight -CA modifier for exploratory
modifier -CA to address situations
calculated for APC 0375. A review of laparotomies and insertions of intra-
where a procedure on the OPPS
the 18 hospital claims utilized for aortic balloon assist devices, other
inpatient list must be performed to
ratesetting revealed a reasonable mix of unanticipated examples of ‘‘C’’ status
resuscitate or stabilize a patient (whose
outpatient services that a hospital could procedures reported with the -CA
status is that of an outpatient) with an
be expected to furnish during an modifier by hospitals in CY 2004
emergent, life-threatening condition,
encounter with a patient with an include knee arthroplasty,
and the patient dies before being
emergency condition requiring thyroidectomy, repair of nonunion or
admitted as an inpatient. In Transmittal
immediate medical intervention, as well malunion of the femur, and
A–02–129, issued on January 3, 2003,
as a wide range of costs. thromboendarterectomy of the carotid,
we instructed hospitals on the use of For CY 2006, we did not propose any vertebral, or subclavian arteries.
this modifier when submitting a claim changes to our payment policy for Moreover, few of the claims also include
on bill type 13x for a procedure that is services billed on the same date as a ‘‘C’’ a clinic or emergency room visit on the
on the inpatient list and assigned the status procedure appended with same date of service as the procedure
payment status indicator (SI) ‘‘C.’’ modifier -CA. We proposed to continue appended with modifier -CA, as might
Conditions to be met for hospital to make one payment under APC 0375 be expected for some patients
payment for a claim reporting a service for the services that meet the specific presenting to a hospital with serious
billed with modifier -CA include a conditions discussed in previous rules medical conditions which require
patient with an emergent, life- for using modifier -CA, based on urgent interventions with inpatient
threatening condition on whom a calculation of the relative payment procedures. We are concerned that some
procedure on the inpatient list is weight for APC 0375, using charge data procedures reported by hospitals with
performed on an emergency basis to from CY 2004 claims for line items with the -CA modifier in CY 2004 may not
resuscitate or stabilize the patient. For a HCPCS code and status indicator ‘‘V,’’ have been provided to patients with
CY 2003, a single payment for otherwise ‘‘S,’’ ‘‘T,’’ ‘‘X,’’ ‘‘N,’’ ‘‘K,’’ ‘‘G,’’ and ‘‘H,’’ emergent, life-threatening conditions,
payable outpatient services billed on a in addition to charges for revenue codes where the inpatient procedure was
claim with a procedure appended with without a HCPCS code. performed on an emergency basis to
this new -CA modifier was made under In accordance with this methodology, resuscitate or stabilize the patient.
APC 0977 (New Technology Level VIII, for the CY 2006 proposed rule, we Instead, those procedures may have
$1,000–$1,250), due to the lack of calculated a median cost of $2,528.61 been provided to hospital outpatients as
available claims data to establish a for APC 0375 for the aggregated scheduled inpatient procedures that
payment rate based on historical otherwise payable outpatient hospital were not emergency interventions for
hospital costs. services based on 300 CY 2004 hospital patients in critical or unstable condition
As discussed in the November 7, 2003 claims reporting modifier -CA with an and such circumstances would have
final rule with comment period, we inpatient procedure. These 300 claims been inconsistent with our billing and
created APC 0375 to pay for services were billed by 218 different hospital payment rules regarding correct use of
furnished on the same date as a providers, each submitting between 1 the -CA modifier to receive payment for
procedure with SI ‘‘C’’ and billed with and 10 claims with modifier -CA APC 0375. In light of these claims
the modifier -CA (68 FR 63467) because appended to a ‘‘C’’ status procedure. findings and our current analysis, we
we were concerned that payment under This median cost for APC 0375 is will continue to closely monitor
a New Technology APC would not relatively consistent with the median hospital use of modifier -CA, following
result in an appropriate payment. calculated for the CY 2005 OPPS changes in the claims volume, noting
Payment under a New Technology APC update, and, as expected, the hospital inpatient procedures to which the -CA
is a fixed amount that does not have a claims once again show a wide range of modifier is appended, examining other
relative payment weight and, therefore, costs. Nevertheless, we are concerned services billed on the same date as the
is not subject to recalibration based on with the very large increase in the inpatient procedure, and analyzing
hospital costs. In the absence of hospital volume of hospital claims billed with specific hospital patterns of billing for
claims data to determine costs, the the -CA modifier from CY 2003 to CY services with modifier -CA appended, to
clinical APC 0375 payment rate for CY 2004, growing from 18 to 300 claims assess whether a proposal to change our
2004 was set at of $1,150, which was the over that 1-year time period. We policies regarding payment for APC
payment amount for the newly acknowledge that modifier -CA was first 0375 would be warranted in the future
structured New Technology APC that introduced in CY 2003, and in CY 2003 or whether hospitals require further
replaced APC 0977. and CY 2004 hospitals may have been education regarding correct use of the
For CY 2005, payment for otherwise experiencing a learning curve with modifier -CA.
payable outpatient services furnished on respect to its appropriate use on claims We received several public comments
the same date of service that a for services payable under the OPPS. concerning our proposed payment for
procedure with SI ‘‘C’’ was performed However, our clinical review for the APC 0375.
on an emergent basis on an outpatient proposed rule of the 300 claims Comment: A few commenters
who died before inpatient admission reporting modifier -CA lends some indicated that the -CA modifier policy
and where modifier -CA was appended support to our early concerns regarding supports an important function for
to the inpatient procedure continued to the increased CY 2004 modifier volume hospitals and should be retained.
be made under APC 0375 (Ancillary and hospitals’ possible incorrect use of Commenters suggested that the
Outpatient Services When Patient the modifier for services that do not increased use of the modifier noted by
Expires) at a payment rate of $3,217.47. meet the payment conditions we CMS may be due to hospitals only
recently becoming aware of the orthotics, and supplies (DMEPOS) fee • ‘‘X’’ to indicate ancillary services
relatively new modifier. schedule or the Medicare Physician Fee that are paid under the OPPS.
In response to CMS’ question about Schedule. Some, but not all, of these • ‘‘Y’’ to indicate nonimplantable
why few of the claims with a -CA other payment systems are identified in durable medical equipment that must be
modifier included a clinic or emergency Addendum D1. billed directly to the durable medical
department visit on the same date of • ‘‘B’’ to indicate the services that are equipment regional carrier rather than
service, the commenters speculated that billable to fiscal intermediaries but are to the fiscal intermediary.
perhaps the beneficiary came in for a not payable under the OPPS when We proposed the payment status
scheduled procedure but due to submitted on an outpatient hospital Part indicators identified above, of which
complications, the physician finds it B bill type, but that may be payable by indicators ‘‘M’’ and ‘‘Q’’ are new for CY
necessary to provide a service that they fiscal intermediaries to other provider 2006, for each HCPCS code and each
had not otherwise intended to perform types when submitted on an appropriate APC listed in Addenda A and B and we
in an outpatient setting and the patient bill type. requested comments on the
then died prior to inpatient admission. • ‘‘C’’ to indicate inpatient services appropriateness of the indicators that
Response: Despite the comments we that are not payable under the OPPS. we proposed to assign.
received, we remain concerned that, • ‘‘D’’ to indicate a code that is We received numerous comments
while our billing and payment rules discontinued, effective January 1, 2006. regarding the appropriateness of the
indicate that the inpatient procedure on • ‘‘E’’ to indicate items or services status indicator assignment for specific
the claim should be performed on an that are not covered by Medicare or HCPCS codes which we discuss in other
emergency basis to stabilize the patient codes that are not recognized by related sections of this final rule with
if the modifier -CA is to be reported, on Medicare. comment period. In addition, we
• ‘‘F’’ to indicate acquisition of received several general comments
many of our claims, the -CA modifier
corneal tissue which is paid on a regarding the payment status indicators
was appended to inpatient list
reasonable cost basis, certain CRNA and their proposed uses, which are
procedures that would likely not have
services, and hepatitis B vaccines that discussed below.
been emergency resuscitative
are paid on a reasonable cost basis. Comment: Several commenters
procedures. We remind hospitals to • ‘‘G’’ to indicate drugs and recommended that CMS revise the
review our billing and payment rules for biologicals that are paid under the OPPS definition of status indicator ‘‘H’’ which
using the -CA modifier described in transitional pass-through rules. had been initially used only for pass-
section VI. Of Transmittal A–02–129. • ‘‘H’’ to indicate pass-through through device categories paid on a cost
Hospitals should limit their use of the devices, brachytherapy sources, and basis that were not subject to
-CA modifier to only those claims where separately payable coinsurance. The commenters argued
all of the conditions outlined are met. radiopharmaceuticals that are paid on a that the proposed expansion of ‘‘H’’ to
After careful consideration of the cost basis. include brachytherapy sources that are
public comments received, we have • ‘‘K’’ to indicate drugs and paid on a cost basis and
decided that we will make no change to biologicals (including blood and blood radiopharmaceuticals that we proposed
our -CA modifier policy at this time. We products) that are paid in separate APCs to pay on a cost basis for CY 2006 is
will continue to monitor the use of the under the OPPS, but that are not paid inconsistent in classification because
modifier and will continue to encourage under the OPPS transitional pass- coinsurance applies to these items.
educational efforts by interested parties through rules. One commenter made
regarding appropriate use of the -CA • ‘‘L’’ to indicate flu and recommendations regarding other status
modifier on OPPS claims. pneumococcal immunizations that are indicators. For indicator ‘‘A,’’ the
XIII. Indicator Assignments paid at reasonable cost but to which no commenter requested that CMS identify
coinsurance or copayment apply. what fee schedule each HCPCS code is
A. Status Indicator Assignments • ‘‘M’’ to indicate services that are paid under. For indicator ‘‘B,’’ the
The payment status indicators (SIs) only billable to carriers and not to fiscal commenter recommended that if the
that we assign to HCPCS codes and intermediaries and that are not payable HCPCS code was paid to physicians, the
APCs under the OPPS play an important under the OPPS. same code should be paid to hospitals.
• ‘‘N’’ to indicate services that are
role in determining payment for services The commenter also requested that CMS
paid under the OPPS, but for which
under the OPPS because they indicate revise the definition of status indicator
payment is packaged into another
whether a service represented by a ‘‘E’’ to separately identify services that
service or APC group.
HCPCS code is payable under the OPPS • ‘‘P’’ to indicate services that are were not covered by Medicare according
or another payment system and also paid under the OPPS, but only in partial to statute from those not covered for
whether particular OPPS policies apply hospitalization programs. other reasons. Lastly, the commenter
to the code. In the CY 2006 OPPS • ‘‘Q’’ to indicate packaged services asked whether hospitals could
proposed rule, we provided for CY 2006 subject to separate payment under OPPS automatically follow the language in the
our proposed status indicator payment criteria. ‘‘C’’ status indicator descriptor, which
assignments for APCs in Addendum A, • ‘‘S’’ to indicate significant states, ‘‘Not paid under the OPPS.
for the HCPCS codes in Addendum B, procedures that are not discounted Admit patient. Bill as inpatient.’’
and the definitions of the status when multiple and that are subject to Response: We have established
indicators in Addendum D1. separate APC payment under the OPPS. specific status indicators in the OPPS
Specifically, for CY 2006, we • ‘‘T’’ to indicate significant services for the principal purpose of making
proposed to use the following status that are paid under the OPPS and to appropriate payment for services under
indicators in the specified manner: which the multiple procedure payment the OPPS because we must signal the
• ‘‘A’’ to indicate services that are discount under the OPPS applies. claims processing system through the
billable to fiscal intermediaries but are • ‘‘V’’ to indicate medical visits OCE software as to HCPCS codes that
paid under some payment method other (including emergency department or are paid under the OPPS and those
than OPPS, such as under the durable clinic visits) that are paid under the codes to which particular OPPS
medical equipment, prosthetics, OPPS. payment policies apply.
With respect to those HCPCS codes separate cost-based pass-through inpatient setting because of the nature of
proposed for CY 2006 with the status payments that are not subject to the procedures, their associated
indicator ‘‘H,’’ all of those codes have coinsurance in the OPPS payment status recovery times, or the physical
individual APC assignments that are description of status indicator ‘‘H’’ in conditions of the patients. Therefore,
unique. Because the APCs for these Addendum D. We are finalizing for CY these services are not paid by Medicare
items each contain only one HCPCS 2006 our proposed expansion of the under the OPPS. While the OPPS
code, we have chosen to associate the definition of status indicator ‘‘H’’ to payment status explanation suggests
application of coinsurance or the lack include radiopharmaceutical agents. what a hospital might do regarding
thereof within each of these APCs in our With respect to the comments
admission and billing for such services,
claims processing system. Therefore, in concerning status indicators ‘‘A’’ and
hospitals must follow all of their own
CY 2005, the APCs for pass-through ‘‘E,’’ the OPPS has no administrative
need to make the distinctions suggested and Medicare’s policies and procedures
device categories do not have associated
coinsurance, whereas the APCs for by the commenter. Regarding HCPCS regarding inpatient hospital admissions
brachytherapy sources are subject to a codes assigned status indicator ‘‘B,’’ in and inpatient billing.
20-percent coinsurance. Similarly, for some cases such services may be paid to We are finalizing the definitions of
separately payable physicians and not to hospitals because status indicators ‘‘H’’ and ‘‘K’’ as noted
radiopharmaceuticals in CY 2006, their the services are professional services in Table 37 below. Consequently, all
APCs will be subject to a 20-percent only, not requiring hospital resources. pass-through device categories active in
coinsurance. Therefore, we have no In other cases, there may be alternate CY 2006 are assigned status indicator
operational need to establish a new HCPCS codes that are recognized for the ‘‘H’’ and are not subject to coinsurance,
status indicator to separately identify services under the OPPS. Therefore, we while brachytherapy sources and
the coinsurance status of HCPCS codes do not believe that status indicator ‘‘B’’ radiopharmaceuticals assigned status
paid on a cost basis under the OPPS. needs to be modified. indicator ‘‘H’’ will be subject to
However, we will indicate that pass- Lastly, status indicator ‘‘C’’ identifies coinsurance.
through device categories receive services that are only paid in an
TABLE 37.—CY 2006 DEFINITIONS OF STATUS INDICATORS ‘‘H’’ AND ‘‘K’’

Status indicator Item/code/service OPPS payment status
H .............................. (1) Pass-Through Device Categories .................................... (1) Separate cost-based pass-through payment; Not sub-
ject to coinsurance.
(2) Brachytherapy Sources .................................................... (2) Separate cost-based nonpass-through payment.
(3) Radiopharmaceutical Agents ........................................... (3) Separate cost-based nonpass-through payment.
K .............................. Non-Pass-Through Drugs and Biologicals ............................ Paid under OPPS; Separate APC payment.
We are also finalizing our policy November 15, 2004 final rule with groups. We noted in the proposed rule
regarding status indicator ‘‘Q.’’ HCPCS comment period (69 FR 65827 and that the payment status indicators for
codes with status indicator ‘‘Q’’ are 65828) to identify in this CY 2006 final each APC and HCPCS code in Addenda
either separately payable or packaged, rule the assignment status of a specific A and B are subject to comment (70 FR
depending on the specific HCPCS code to an APC and the 42748), and included the APC
circumstances of their billing. timeframe when comments on the assignment of all individual HCPCS
Addendum B displays the APC HCPCS APC assignment will be codes.
assignments of those codes with ‘‘Q’’ accepted. The two comment indicators Specific changes based on APC Panel
status when they are separately payable. are listed below and in Addendum D2.
recommendations are noted in the
OCE claims processing logic will be • ’’NF’’—New code, final APC related topic sections of this final rule
applied to codes assigned status assignment; Comments were accepted
with comment period under section I.D.
indicator ‘‘Q’’ in order to determine if on a proposed APC assignment in the
We discuss other changes throughout
the service will be packaged or Proposed Rule; APC assignment is no
the final rule to address particular
separately payable. In the event that a longer open to comment.
interests or concerns of the public.
code is separately payable, the HCPCS • ’’NI’’—New code, interim APC
code will receive an APC payment that Addendum B of this final rule with
assignment; Comments will be accepted
corresponds to the APC listed in comment period provides the status
on the interim APC assignment for the
Addendum B, and would be subject to new code. indicator and, where applicable, the
any discounting policies applied to that APC assignment for those HCPCS codes
Comment: Several commenters
APC (identified by the APC status expressed concern regarding changes in that are payable under the OPPS, as well
indicator). For CY 2006, hospital the proposed APC assignments for as those HCPCS codes that are being
observation G-codes are assigned ‘‘Q’’ several codes (for example, CPT codes discontinued in CY 2006. To facilitate
status; specific discussion of the 63655 and 78700) that were not review of these changes, we are
payment policy applying to these specifically addressed in the proposed establishing new comment indicator
services can be found in section IX. of rule. The commenters believed that the ‘‘CH’’ in this final rule with comment
this final rule with comment period. proposed new APC assignments for period to designate HCPCS codes in
these codes were made in error. Addendum B whose status indicator or
B. Comment Indicators for the CY 2006 APC assignment, or both, for the
OPPS Final Rule Response: In general, changes in
proposed APC assignments that were upcoming year will change from what
In the CY 2006 proposed rule, we not discussed in detail in the proposed they are in the current year:
proposed to continue to use the two rule were made to improve clinical and • ‘‘CH’’—Active HCPCS codes in
comment indicators finalized in the resource homogeneity of the APC current year and next calendar year;
status indicator and/or APC assignment Secretary should improve Medicare procedure is paid at 50 percent of its
have changed. coding edits that detect unbundled respective APC payment rate. In the
For example, in Addendum B of this diagnostic imaging services and reduce proposed rule, we indicated that we
final rule with comment period, the the technical component payment for believed that a similar policy for
APC assignment and/or status indicator multiple imaging services when they are payment of diagnostic imaging services
assignment for HCPCS codes flagged performed on contiguous areas of the would be more appropriate than our
with comment indicator ‘‘CH’’ will be body (Recommendation 3–B). MedPAC current policy because it would lead to
different for services furnished on or pointed out that Medicare’s payment more appropriate payment for multiple
after January 1, 2006, than they were for rates are based on each service being imaging procedures of contiguous body
services furnished on December 31, provided independently and that the areas that are performed during the
2005. A HCPCS code showing comment rates do not account for efficiencies that same session.
indicator ‘‘CH’’ in Addendum B is not may be gained when multiple studies
open to comment as they are so In our efforts to determine whether or
using the same imaging modality are not such a policy would improve the
indicated only for the ease of the public performed in the same session. Further,
to review the changes made from FY accuracy of OPPS payments, in the CY
MedPAC stated that those efficiencies 2006 OPPS proposed rule, we identified
2005 to CY 2006. Rather, in Addendum are especially likely when contiguous
B of this final rule with comment 11 ‘‘families’’ of imaging procedures by
body areas are the focus of the imaging
period, only HCPCS codes flagged with imaging modality (ultrasound,
because the patient and equipment have
comment indicator ‘‘NI’’ are subject to computerized tomography (CT) and
already been prepared for the second
public comment. computerized tomography angiography
and subsequent procedures, potentially
(CTA), magnetic resonance imaging
XIV. Nonrecurring Policy Changes yielding resource savings in areas such
(MRI) and magnetic resonance
as clerical time, technical preparation,
A. Payments for Multiple Diagnostic angiography (MRA)) and contiguous
and supplies, elements of hospital costs
Imaging Procedures body area (for example, CT and CTA of
for imaging procedures that are reflected
Chest/Thorax/Abdomen/Pelvis), as
Currently, under the OPPS, hospitals in APC payment rates under the OPPS.
Under the OPPS, we have a displayed in Table 38. Using those
billing for diagnostic imaging
procedures receive full APC payments longstanding policy of reducing families of procedures, we examined
for each service on a claim, regardless payment for multiple surgical OPPS bills for CY 2004 and found that
of how many procedures are performed procedures performed on the same there were numerous claims reporting
using a single imaging modality and patient in the same operative session more than one imaging procedure
whether or not contiguous areas of the (§ 419.44(a) of the regulations). In such within the same family provided to a
body are studied in the same session. In cases, full payment is made for the beneficiary by a hospital on the same
its March 2005 Report to Congress, procedure with the highest APC day.
MedPAC recommended that the payment rate, and each subsequent BILLING CODE 4210–01–P
ER10NO05.028</GPH>
ER10NO05.029</GPH>
BILLING CODE 4210–01–C For example, the imaging procedures (Computed tomography, pelvis; without
described by CPT codes 72192 contrast material) and 74150 (Computed
ER10NO05.030</GPH>
tomography, abdomen; without contrast many of the supplies are not furnished diagnostic imaging procedures at this
material) are for studies of two adjacent twice. Specifically, we consider that the time based on logic that efficiencies
body regions. Appropriate diagnostic following clinical labor activities related to multiple imaging procedures
evaluation of many constellations of included in the ‘‘technical component’’ were already captured in the OPPS
patients’ signs and symptoms and (TC) of the MPFS are not duplicated for claims data. The Panel made its
potentially affected organ systems may subsequent procedures: Greeting, recommendation that CMS should
involve assessment of pathology in both positioning and escorting the patient; postpone implementation of the policy
the abdomen and pelvis, body areas that providing education and obtaining for a year so that we may gather more
are anatomically and functionally consent; retrieving prior exams; setting data on the implications of those
closely related. Therefore, both studies up the IV; and preparing and cleaning changes. The Panel also recommended
are frequently performed in the same the room. In addition, we consider that that CMS work with the American
session to provide the necessary clinical supplies, with the exception of film, are College of Radiology and other
information to diagnose and treat a not duplicated for subsequent stakeholders in that process.
patient. Although each procedure, by procedures. Equipment time and Comment: Many commenters on the
itself, entails the use of hospital indirect costs are allocated based on proposed rule requested that we
resources, including certain staff, clinical labor time in the physician postpone implementation of the
equipment, and supplies, some of those payment methodology and therefore, we proposed discounting policy until we
resource costs are not incurred twice believe, these inputs should be reduced perform further analyses and are able to
when the procedures are performed in accordingly. find more substantial, supporting
the same session and, thus we believed, We performed analyses and found hospital-based data. The commenters
should not be paid as if they were. that excluding those practice expense stated that our use of the MPFS data was
Beginning with the beneficiary’s arrival inputs, along with the corresponding an inappropriate basis for estimating
in the outpatient department, costs are portion of equipment time and indirect costs and cost efficiencies in the
incurred only once for registering the costs, supported a 50-percent reduction hospital outpatient department and that
patient, taking the patient to the in the payment for the TC portion of a 50-percent reduction for second and
procedure room, positioning the patient subsequent procedures. The items and subsequent services provided in the
on the table for the CT scan, among services that make up hospitals’ facility same imaging session was unwarranted.
others. We proposed a reduction costs are generally very similar to those Commenters stated that the hospital cost
because we believed that reducing the that are counted in the TC portion of the data used by CMS to set payment rates
payment for the second and subsequent MPFS for diagnostic imaging already reflect savings due to the
procedures within the identified procedures. We believed that the efficiencies of performing multiple
families might result in more accurate analytic justification for a 50-percent procedures during the same session, and
payments with respect to the hospital reduction of the TC for the second and that the proposed policy to discount
resources utilized for multiple imaging subsequent imaging procedures using second and subsequent procedures is
procedures performed in the same the MPFS input data also provided a actually tantamount to discounting
session. basis for a similar relative reduction to those procedures twice.
OPPS bills do not contain detailed payments for multiple imaging In addition, other commenters
information on the hospitals’ costs that procedures performed in the hospital suggested that a lower percentage
are incurred in furnishing imaging outpatient department. Therefore, we reduction may be more accurate. Some
procedures. Much of the cost is proposed to make a 50-percent commenters also provided specific
packaged and included in the overall reduction in the OPPS payments for recommendations for modifications to
charges for the procedures. Even if some second and subsequent imaging the procedures included in the families
bundled costs are reported with charges procedures performed in the same eligible for discounting. One commenter
on separate lines either with HCPCS session, similar to our policy of indicated that CMS had failed to
codes or with revenue codes, when reducing payments for some second and consider differences in patient
there are multiple procedures on the subsequent surgical procedures. preparation requirements for some
claims, it is impossible for us to We proposed to apply the multiple imaging procedures that would
accurately attribute bundled costs to imaging procedure reduction only to necessitate significant additional time
each procedure. However, at the time of individual services described by codes between the two tests, even though they
issuance of the proposed rule, our within one family, not across families. are being performed during the same
analysis of CY 2004 hospital claims Reductions would apply when more session. The commenters asserted that
convinced us that some discounting of than one procedure within the family is any discounting payment policy would
multiple imaging procedures is performed in the same session. For systematically disadvantage hospitals
warranted. In order to determine the example, no reduction would apply to relative to other settings for imaging
level of adjustment that would be an MRI of the brain (CPT code 70552) services and that the negative effect on
appropriate for the second and in code Family 5, when performed in rural hospitals, who commonly lease
subsequent procedures performed the same session as an MRI of the spinal expensive capital equipment such as
within a family in the same session, we canal and contents (CPT code 72142) in MRI machines, would result in
used the MPFS methodology and data. code Family 6. We proposed to make discontinuation of essential diagnostic
Under the resource-based practice full payment for the procedure with the radiology services in many areas.
expense methodology used for Medicare highest APC payment rate, and payment Finally, the commenters identified
payments to physicians, specific at 50 percent of the applicable APC implementation issues that we had not
practice expense inputs of clinical labor, payment rate for every additional addressed in the proposed rule, such as
supplies and equipment are used to procedure in the same family, when defining what we meant as ‘‘the same
calculate ‘‘relative value units’’ on performed in the same session. session.’’
which physician payments are based. At its August 2005 meeting, the APC Response: After careful consideration
When multiple images are acquired in a Panel heard testimony that provided of the public comments received, the
single session, most of the clinical labor evidence against proceeding with the results of additional analyses of CY
activities are not performed twice and proposal to discount for multiple 2004 OPPS claims data, and the APC
Panel recommendation, we have disprove the commenters’ contentions B. Interrupted Procedure Payment
decided not to finalize our proposal to that there are efficiencies already Policies (Modifiers –52, –73, and –74)
discount for multiple diagnostic reflected in their hospital costs, and
1. Modifier –52
imaging procedures at this time. In therefore, their CCRs and the median
calculating median costs for outpatient costs for the procedures. Further, the Since implementation of the OPPS in
imaging procedures in the radiology results of our initial analyses do support 2000, we have required hospitals to
families we proposed for discounting, the recommendation that we should report modifiers –52, –73, and –74 to
for most hospitals’ claims, we used a defer implementation of the proposed indicate procedures that were
hospital-specific diagnostic radiology multiple imaging procedure reduction terminated before their completion.
CCR for the conversion of charges to policy to perform additional analyses. Modifier –52 indicates partial reduction
costs. Some hospitals reported costs and Depending upon the results of our or discontinuation of services that do
charges in nonstandard cost centers for analyses, in a future rule we may not require anesthesia, while modifiers
ultrasound, CT, or MRI services, and, in propose revisions to the structure of our –73 and –74 are used for procedures
general, those modality-specific CCRs rates in order to ensure that these rates requiring anesthesia, where the patient
were lower than their CCRs for properly reflect the relative costs of was taken to the treatment room and the
diagnostic radiology. Those lower CCRs initial and subsequent imaging procedure was discontinued before
were not inconsistent with hospitals’ procedures. anesthesia administration or after
experiences of particular efficiencies in Comment: MedPAC expressed anesthesia administration/procedure
providing multiple ultrasound, CT, or support of our multiple imaging initiation, respectively. The elective
MRI services in a single setting, without discounting proposal and suggested that cancellation of procedures is not
reductions in charges for those multiple it would be preferable for CMS to be reported. Hospitals are paid 50 percent
procedure sessions. of the APC payment for services with
able to make the proposed reductions
For the majority of hospitals for modifier –73 appended and 100 percent
without the requirement for budget
which we used diagnostic radiology for procedures with modifier –52 or –74
neutrality so that budget savings and
CCRs to convert charges to costs for reported, in accordance with § 419.44(b)
lower cost sharing for beneficiaries
ultrasound, CT, and MRI procedures, we of the regulations. In January 2005, we
would result. MedPAC realized that
were concerned about whether these clarified, in Program Transmittal 442,
CMS is statutorily required to maintain
CCRs were too general and broad to the definition of anesthesia for purposes
budget neutrality in all changes made to
reflect the efficiencies of providing of billing for services furnished in the
the OPPS and, therefore, suggested that
multiple imaging procedures on hospital outpatient department in the
the Secretary offer a legislative proposal
contiguous body parts. We found that context of reporting modifiers –73 and
to Congress to allow us to capture –74. The APC Panel considered the
the imaging procedures we identified as potential savings.
eligible for the proposed payment current OPPS payment policies for
Response: We appreciate MedPAC’s interrupted procedures at its February
reductions accounted for approximately
support for our proposed policy. We are 2005 meeting and made a number of
half of the total OPPS charges attributed
by the OPPS to hospitals’ diagnostic also appreciative of the preliminary recommendations that are addressed in
radiology cost centers. This result work that MedPAC has provided in this the following discussion.
suggests that costs and charges related area. We have carefully considered its Current OPPS policy requires
to ultrasound, CT, and MRI services in suggestions, as well as those of other providers to use modifier –52 to
the 11 proposed families are significant commenters, in determining whether to indicate that a service that did not
contributors from the OPPS to hospitals’ finalize our proposed multiple require anesthesia was partially reduced
diagnostic radiology cost centers; we diagnostic imaging policy and will or discontinued at the physician’s
also recognize that costs and charges are consider their suggestions regarding discretion. The physician may
incurred in diagnostic radiology cost budget neutrality issues in our ongoing discontinue or cancel a procedure that
centers for inpatients and patients not work on this issue. is not completed in its entirety due to
insured by Medicare. We have no way Given the evidence presented by the a number of circumstances, such as
of knowing how patterns of costs and commenters, the recommendation of the adverse patient reaction or medical
charges for those patients contribute to APC Panel, and our further analysis of judgment that completion of the full
hospitals’ diagnostic radiology CCRs, this issue, we are convinced that study is unnecessary. The modifier is
but we have no specific reason to additional analyses are in order. reported most often to identify
believe that their patterns of services Therefore, during the coming year, we interrupted or reduced radiological and
would be very different than those for will perform analyses of relevant data to imaging procedures, and our current
Medicare beneficiaries in the hospital determine what, if any, changes in our policy is to make full payment for
outpatient setting. Thus, it may be median cost calculations for imaging procedures with a –52 modifier.
correct that our median costs for services or discounting policies, or both, We have reconsidered our payment
imaging services in the 11 families could be appropriate to enable us to policy for interrupted or reduced
proposed for the reduction policy reflect make more accurate payments for services not requiring anesthesia and
a reduced median based, in part, on diagnostic imaging services. To the reported with a –52 modifier. At its
hospitals’ provision of multiple scans in extent feasible, as recommended by the February 2005 meeting, the APC Panel
one session. APC Panel, we will look to the recommended continuing current OPPS
Although our analyses provided no stakeholders in this policy for payment policy at 100 percent of the
definite answer regarding whether, and additional information and input APC payment for reduced services
by how much, the OPPS median costs concerning further development. As we reported with modifier –52, although
for single imaging services in the 11 have stated, in a future rule we may the APC Panel members acknowledged
proposed families are reduced due to propose revisions to the structure of our their limited familiarity with the
existing hospital efficiencies related to rates in order to ensure that these rates specific outpatient hospital services and
multiple services as compared with the properly reflect the relative costs of their clinical circumstances that would
hypothetical median costs for actual initial and subsequent imaging warrant the reporting of modifier –52.
single services, our analyses do not procedures. We examined our data to determine the
appropriateness of our current policy cases, the provider must address the associated with emergency
regarding payment for services that are beneficiary’s clinical needs and because interventions and use of additional
reduced, and although some hospital of the costs incurred as a result of those resources, the data did not indicate that
resources are used to provide even an interventions, no fewer resources are this was likely to have been the primary
incomplete service, such as a radiology used during the attempt to complete the reason for the procedures to which the
service, we are skeptical that it is procedure than there would have been –52 modifier was appended in CY 2004.
accurate to pay the full rate for a if it had been completed without The highest frequency use of the –52
discontinued or reduced radiological complications. modifier was among diagnostic imaging
service. Compared to surgical In fact, many commenters asserted procedures that are typically not
procedures that require anesthesia, a that failed attempts to complete associated with adverse reactions (the
number of general and procedure- procedures often result in much higher top three procedures are imaging
specific supplies, and reserved resource use than completed, services without contrast), and we
procedure rooms that must be cleaned uncomplicated procedures because the believe that there are some cost savings
and prepared prior to performance of procedure’s discontinuation may come that result from not performing the
each specific procedure, the costs to the after many supplies and much time entire procedure (for example, less film,
hospital outpatient department for the were expended. Further, they stated that less computer time, and less room time).
rooms and supplies typically associated a reduction in the OPPS payment is As the claims for many of these
with procedures not requiring unfair because there are many times that procedures included little packaging
anesthesia are much more limited. For no other procedures can be performed and we found the line item charges for
example, the scheduling maintained for during the period that was scheduled the services were not reduced when the
radiological services not requiring for the incomplete procedure. –52 modifier was reported, we could
anesthesia generally exhibits greater Commenters also stated that CMS generally not detect significant
flexibility than that for surgical does not fully understand hospital differences in costs for the same
procedures, and the procedure rooms operations and urged CMS to learn more procedure, with and without the –52
are used for many unscheduled services before we implement such a payment modifier reported. However, because the
that are fit in, when possible, between reduction policy. They stated that there line item charges for the services were
those that are scheduled. Consequently, was no indication in the proposed rule typically similar for completed and
we believe that the loss of revenue that that CMS conducted any analysis to interrupted procedures, we do not
may result from a surgical procedure support the proposed reduction. They believe that our claims analysis had the
being discontinued prior to its initiation believed that CMS must perform cost potential to reflect any true hospital cost
in the procedure room is usually more analyses regarding the procedures to savings when procedures were
substantial than that lost as the result of which the modifier is applied in order discontinued. In general, we did not
a discontinued service not requiring to evaluate the types of other services observe increased costs for claims for
anesthesia, such as a radiology delivered when procedures are services reported with the –52 modifier.
procedure. Nonetheless, under our interrupted and the resources expended Further, some of the services that had
current policy, Medicare makes the full in their delivery. the –52 modifier appended do not
APC payment for discontinued or Further, the commenters believed require significant supplies or
reduced radiological procedures and there is still confusion among providers procedure rooms, but, rather, are
only 50 percent of the APC payment for regarding how to use the –52 modifier, provided in examination rooms or other
surgical procedures that are and suggested that CMS review the data nonspecific areas of the outpatient
discontinued prior to initiation of the to evaluate the potential financial department. Therefore, only minimal
procedure or the administration of impact of the proposed policy because costs would be incurred by the hospital
anesthesia. it may be applied disproportionately to for an incomplete procedure.
Therefore, we proposed to pay 50 those providers who use the modifier Our data also indicated that the –52
percent of the APC payment amount for appropriately. modifier was often used
a discontinued procedure that does not Response: We have conducted inappropriately. For example,
require anesthesia where modifier –52 is analyses of our hospital claims data to diagnostic colonoscopies ordinarily
reported. We believed that this examine the usage of the –52 modifier require anesthesia and, therefore, when
proposed payment would appropriately in CY 2004. Those analyses are the basis discontinued, are to be reported using
recognize the hospital’s costs involved for our determination that a reduction in the –73 or –74 modifiers, rather than
with the delivery of a typical reduced the OPPS payments for interrupted modifier –52. However, what we found
service, similar to our payment policies procedures reported with a –52 modifier in the hospital claims data was that
for interrupted procedures that require is warranted. We discovered 120,000 diagnostic colonoscopy was the fifth
anesthesia. procedures in the CY 2004 hospital most frequently reported procedure
We received many comments on our claims data with a –52 modifier with the –52 modifier. We expect that
proposal to reduce by 50 percent the appended. That level of use seemed the frequency of –52 modifier use with
OPPS payment for claims for high, and more in-depth analysis procedures in which anesthesia was
discontinued procedures reported with revealed that, although most of the administered will have decreased for CY
modifier –52. usage was for imaging procedures, some 2005 as a result of our clarification
Comment: All of the commenters of the services reported with the –52 regarding the use of modifiers –52, –73
requested that CMS continue to make modifier were unexpected and and –74 published in Transmittal 442
full payment for those procedures. One inappropriate (that is, office visit and issued in January 2005.
argument presented by commenters was diagnostic colonoscopy). We have examined our data and given
that the modifier cannot be used for The results of our data analysis careful consideration to the public
elective cancellations, and that appear, to some degree, to conflict with comments and the APC Panel’s
discontinuations are often associated much of the anecdotal information discussion and recommendations
with some unanticipated incident presented by the commenters. Although regarding OPPS payment policies for
related to the beneficiary’s clinical the commenters asserted that many interrupted procedures. Given the
condition. They asserted that, in those times, discontinuation of procedures is nature of the procedures that were likely
reported appropriately with the –52 information regarding other separately those cases are reported using modifier
modifier in CY 2004, we continue to payable services under the OPPS. –74, and we make the full APC payment
believe that there are considerable Moreover, even if we believed that it for the planned service.
savings associated with their incomplete was appropriate, it is not feasible for us The payment policy for interrupted
performance. We think that in the to selectively exempt individual procedures reported with modifier –74
hospital outpatient setting, there are procedures from the requirements of our was originally adopted because we
generally many opportunities to utilize OPPS payment policy for the –52 believed that the facility costs incurred
the rooms and equipment that would modifier, nor should providers for discontinued procedures that were
otherwise be left unused as a result of knowingly misuse a CPT code in initiated to some degree were as
discontinued procedures. We also contradiction to CPT instructions. significant to the hospital provider as
believe that, although there may be While we do not establish HCPCS for a completed procedure, including
occasional instances in which a codes for new technology procedures resources for patient preparation,
discontinued procedure appropriately that are described by existing HCPCS operating room use, and recovery room
reported with the –52 modifier codes or combinations of HCPCS codes, care. However, we had come to question
consumes more resources than one that we acknowledge that the commenter is that underlying assumption, especially
is completed without interruption, those concerned about the current CPT coding as many surgical procedures have come
are unusual events and the vast majority structure and its applicability to capsule to require specialized and costly devices
of discontinued cases are significantly endoscopy of the esophagus, along with and equipment, and our APC payments
less costly than completed procedures. the implications of the CY 2006 OPPS include the costs for those devices and
Therefore, we are finalizing our payment policy for services reported equipment. At the time of the CY 2006
proposed policy to apply a 50 percent with the –52 modifier. As the AMA, proposed rule, we expressed our belief
reduction to the APC payments for through the CPT Editorial Panel, that there may be costs that are not
interrupted procedures reported with develops new CPT codes, provides incurred in the event of a procedure’s
the –52 modifier in CY 2006. coding instructions, and makes editorial discontinuation, if a hospital is
Comment: One commenter requested changes to existing CPT codes, we managing its use of devices, supplies,
that CMS give special consideration to encourage the commenter to bring its and equipment efficiently and
capsule endoscopy of the esophagus if concerns about appropriate CPT coding conservatively. For example, the
CMS makes final its proposal to reduce for capsule endoscopy of the esophagus patient’s recovery time may be less than
payment for procedures with the –52 to the attention of the CPT Editorial the recovery time would have been for
modifier. The commenter indicated that Panel. the planned procedure, because less
the procedure is correctly coded using extensive surgery was performed or
2. Modifiers –73 and –74
CPT 91110 (Gastrointestinal tract costly devices planned for the
imaging, intraluminal (e.g., capsule When a procedure requiring procedure may not be used.
endoscopy), esophagus through ileum, anesthesia is discontinued after the The APC Panel recommended that we
with physician interpretation and beneficiary was prepared for the continue to pay 100 percent of the
report), with –52 appended to indicate procedure and taken to the room where procedural APC payment when modifier
that the ileum was not visualized, even it was to be performed but before the –74 is appended to the surgical service
in cases where visualization of the administration of anesthesia, hospitals because, in its opinion, procedures may
ileum was not intended. The commenter currently report modifier –73 and frequently be terminated prior to
stated that, although the professional receive 50 percent of the APC payment completion because the patient is
component costs are reduced if the for the planned service. The APC Panel experiencing adverse effects from the
ileum is not included in the test, the recommended that we make full APC surgical service or the anesthesia. The
technical costs of the procedure are the payment for services with modifier –73 APC Panel speculated that, in fact,
same whether or not the ileum is reported, because significant hospital significant additional resources could be
visualized. resources were expended to prepare the expended in such a situation to stabilize
The commenter suggested several patient and the treatment room or and treat the patient if a procedure were
options for accommodating the capsule operating room for the procedure. discontinued because of patient
endoscopy of the esophagus procedure Although the circumstances that require complications. However, we believed
in case CMS goes forward with the use of modifier –73 occur infrequently, that many of such additional services,
proposed –52 modifier policy. These we continue to believe that hospitals including critical care, drugs, blood and
included exempting hospitals from realize significant savings when blood products, and x-rays that may be
reporting the modifier with CPT 91110, procedures are discontinued prior to necessary to manage and treat such
establishing an administrative exception initiation but after the beneficiary is patients, are separately payable under
so that intermediaries would not reduce taken to the procedure room. We believe the OPPS and thus the hospital’s costs
payment under the OPPS for the savings are recognized for treatment/ need not be paid through the APC
procedure, and establishing a different operating room time, single use devices, payment for the planned procedure.
code for the procedure that would drugs, equipment, supplies, and Because the OPPS is paying for the time
obviate the need for the –52 modifier. recovery room time. Thus, we believe in the operating room, recovery room,
Response: We are finalizing our our policy of paying 50 percent of the outpatient department staff, and
proposal to reduce payments for procedure’s APC payment when supplies related to the typical
procedures to which the –52 modifier is modifier –73 is reported remains procedure, it seemed that those costs
appended. We do not believe that appropriate. might be lower in those infrequent cases
exempting the capsule endoscopy Further, in the CY 2006 proposed when the procedure is initiated but not
procedure from the reduction policy is rule, we explored the possibility of completed. We acknowledged that the
practical or warranted, given our applying a payment reduction for costs on claims reporting a service with
consideration of specific information interrupted procedures in which modifier –74 might be particularly
available to use concerning the capsule anesthesia was to be used (and may diverse, depending upon the point in
endoscopy of the esophagus procedure have been administered) and the the procedure when the service was
and hospital cost and clinical procedure was initiated. Currently, interrupted. Thus, in the proposed rule,
we specifically invited comment on the an evolving medical condition, the OPPS making inappropriate
clinical circumstances in which requiring significant hospital resources. payments for hospital resources utilized
modifier –74 is used in the hospital They added that sterile supplies may for such discontinued procedures, we
outpatient department, and the degree have been opened and other resources, remain concerned that making the full
to which hospitals may experience cost including staff time and allocated APC payment could also be
savings in such situations where procedure room time, used. The inappropriate if a discontinued
procedures are not completed. We were commenters recommended that CMS procedure with the –74 modifier
specifically interested in comments make 100 percent of the APC payment appended was a high cost service
regarding the disposition of devices and when a –73 modifier is reported with a requiring an expensive device that was
specialized equipment that are not used procedure. In addition, several not actually utilized. In the future, we
because a procedure is discontinued commenters requested that CMS modify may further examine our hospital claims
after its initiation. In particular, we were the definition of when the –73 modifier data to analyze cost information for
interested in obtaining information is to be used. They indicated a procedures reported with and without
about when during the procedure the preference that the modifier be used the –74 modifier.
decision to discontinue is typically earlier, when a procedure is cancelled
made. while a patient is still in a holding room We will provide billing guidance for
We received numerous public or preoperative suite where the patient CY 2006 regarding modifiers –52, –73,
comments on the use of modifiers–73 has been prepared for surgery, rather and –74 to offer hospitals additional
and –74 and the associated costs of than being applicable only after the instructions regarding the appropriate
procedures billed with one of those patient has been taken into the use of the three modifiers in the OPPS.
modifiers. treatment room. Our goal is to assure that hospitals
Comment: A number of commenters Response: We made no proposals to understand and report these modifiers
encouraged CMS to continue to make change our payment policies for correctly so that they receive
full OPPS payments for interrupted procedures reported with modifiers –73 appropriate payments for the services
services requiring anesthesia that were and –74 for CY 2006. We appreciate the they provide.
coded with the –74 modifier to indicate detailed comments we received on
that the procedures were interrupted hospitals’ experiences with their use. XV. OPPS Policy and Payment
after their initiation or after the We continue to believe that payment at Recommendations
administration of anesthesia. In 50 percent of the APC rate is A. MedPAC Recommendations
response to the proposed rule in which appropriate for procedures reported
we discussed our concerns about the with modifier –73, as we believe, in 1. Report to the Congress: Medicare
appropriateness of our current policy of particular, that there are significant Payment Policy (March 2005)
making full payment for those savings associated with decreased
discontinued procedures, the procedure or operating room times and The Medicare Payment Advisory
commenters provided extensive detail markedly reduced recovery times. We Commission (MedPAC) submits reports
about the variable clinical do not believe it is appropriate to make to Congress in March and June that
circumstances where the –74 modifier is procedural APC payments for services summarize payment policy
correctly reported and provided cancelled prior to a patient’s entering recommendations. The March 2005
examples of the hospital resources the treatment or operating room. While MedPAC report included the following
required in such circumstances. They specific hospital resources used in two recommendations relating
believed that the resources were individual circumstances to prepare specifically to the hospital OPPS:
definitely not reduced because, in most patients for surgery differ, in general, a. Recommendation 1: The Congress
cases, all supplies would have been costs incurred in preoperative should increase payment rates for the
opened, the patient would continue to preparation are similar across surgical outpatient prospective payment system
require recovery time, and the operative procedures (for example, establishment by the projected increase in the hospital
session might actually be longer than of intravenous access, pre-operative market basket index less 0.4 percent for
usual because of patient complications medication) and are unlikely to be calendar year 2006. A discussion
or multiple unsuccessful attempts to closely related to the APC payments for regarding hospital update payments,
complete a complicated procedure. the planned procedures. We expect that and the effect of the market basket
In addition, numerous commenters hospitals will continue to be cautious in update in relation to other factors
recommended that CMS make full APC expending resources preoperatively for influencing OPPS payment rates, is
payments for services reported with a procedures that may be cancelled prior included in section II.C. (‘‘Conversion
–73 modifier because of significant to the patient entering the treatment Factor Update for CY 2006’’) of this
hospital resources required to prepare room. Therefore, we will continue our preamble.
patients for those procedures. The current policy of a 50-percent reduction
commenters pointed out that the current in the APC payment for services b. Recommendation 2: The Congress
OPPS payment policy indicates that reported with the –73 modifier for the should extend hold-harmless payments
CMS makes 50 percent of the APC CY 2006 OPPS. under the outpatient prospective
payment when a –73 modifier is We also will maintain our current payment system for rural sole
appended to a procedure that requires policy of paying 100 percent of the APC community hospitals and other rural
anesthesia and was interrupted after the payment for procedures reported with hospitals with 100 or fewer beds
patient was taken into the treatment the –74 modifier for CY 2006. We agree through calendar year 2006. A
room but prior to the administration of with the commenters that, in general, discussion of the expiration of the hold-
anesthesia. The commenters provided the clinical circumstances where the harmless provision is included in
multiple examples of the types of costs –74 modifier is reported may be section II.F. of this preamble. See also
incurred by hospitals in such particularly diverse and unpredictable. section II.G. (‘‘Adjustment for Rural
circumstances, noting that the While we understand that any Hospitals’’) of this preamble for a
procedure might have been interrupted reductions in APC payments under such discussion of section 411 of Pub. L.
because a patient required treatment for circumstances could pose some risk of 108–173.
2. Report to the Congress: Issues in a volume of outpatients (100 or more or in collaboration with a physician.
modernized Medicare Program— during a 2-week period) that were MedPAC reported that NPs have
Payment for Pharmacy Handling Costs treated by nonphysician practitioners. independent practice authority in 21
in Hospital Outpatient Departments We stated that it would be sufficient for States, and CNSs have independent
(June 2005) a physician to review and sign a 25- practice authority in 20 States. PAs, by
A discussion of the MedPAC percent sample of medical records for law, must work under the supervision of
recommendations relating to pharmacy patients cared for by a nonphysician a physician. Based on the American
overhead payments in the hospital practitioner unless State practice and Medical Association’s guidelines for
outpatient department can be found in laws require higher standards for PAs, the definition of supervision varies
section V. of the preamble of this final physician oversight for nonphysician by State. Generally, the physician
practitioners. assistant is a representative of the
rule with comment period.
However, the current regulation does physician, treating the patient in the
B. APC Panel Recommendations not distinguish between inpatient and style and manner developed and
Recommendations made by the APC outpatient physician oversight. directed by the supervising physician.
Panel are discussed in sections of this Although the CAH CoPs at MedPAC further reported that several
preamble that correspond to topics § 485.631(b)(iv) provide that a doctor of studies have shown comparable patient
addressed by the APC Panel. Minutes of medicine or osteopathy periodically outcomes for the services provided by
the APC Panel’s February 2005 and reviews and signs the records of patients physician and nonphysician
cared for by NPs, CNSs, or PAs, section practitioners. MedPAC reported that
August 2005 meeting are available
1820(c)(2)(B)(iv)(III) of the Act states research conducted by Mundinger et al.2
online at http://www.cms.hhs.gov/faca/
that CAH inpatient care provided by a in 2000, Brown and Grimes 3 in 1993,
apc/default.asp.
PA or NP is subject to the oversight of Ryan in 1993,4 and the Office of
C. GAO Hospital Outpatient Drug a physician. The review of outpatient Technology Assessment 5 in 1986 has
Acquisition Cost Survey records is not addressed in the statute. shown that nonphysician practitioners
A discussion of the June 30, 2005 Presently, for patients cared for by can perform about 80 percent of the
GAO report entitled ‘‘Medicare: Drug nonphysician practitioners, the services provided by primary care
Purchase Prices for CMS Consideration interpretative guidelines set forth in physicians with comparable quality. A
in Hospital Outpatient Rate-Setting’’ Appendix W of the State Operations randomized trial of physicians and NPs
and section 621(a)(1) of the MMA is Manual (CMS Publication 7) set providing care in ambulatory care
included in section V. of the preamble parameters for inpatient and outpatient settings who had the same authority,
of this final rule with comment period. physician reviews. To maintain responsibilities, productivity, and
consistency from the EACH/RPCH administrative requirements were
XVI. Physician Oversight of program to the CAH program, we shown to have comparable patient
Nonphysician Practitioners in Critical indicated in the Interpretative outcomes (see pages 5 and 11 of the
Access Hospitals Guidelines that CAHs with a high June 2002 MedPAC report).
volume of outpatients need to have a Nonphysician practitioners are trained
A. Background
physician review and sign a random with the expectation that they will
Section 1820 of the Act, as amended sample of 25 percent of outpatient
by section 4201 of the Balanced Budget exercise a certain degree of autonomy
medical records. Therefore, the
Act of 1997, Pub. L. 105–33, provides when providing patient care. About 90
interpretative guidelines allow a
for the establishment of Medicare Rural percent of NPs and 50 percent of PAs
physician to review and sign a 25-
Hospital Flexibility Programs provide primary care.
percent sample of outpatient records for
(MRHFPs), under which individual We believe sufficient control and
patients under the care of a
States may designate certain facilities as oversight of these nonphysician
nonphysician practitioner.
critical access hospitals (CAHs). Nonphysician practitioners recently practitioners is generated by State laws
Facilities that are so designated and brought to our attention their concerns which allow independent practice
meet the CAH conditions of regarding their ability to practice under authority. However, we remain
participations (COPs) under 42 CFR part their State laws governing scope of concerned that, in those States without
485, subpart F, will be certified as CAHs practice. Particularly, the nonphysician independent practice laws, we have a
by CMS. The MRHFP replaced the practitioners believe the current responsibility to continue to ensure the
Essential Access Community Hospital regulations and guidelines impede their
2 Mundinger, M.O., Kane, R.I., Lenez, E.R., et al.,
(EACH)/ Rural Primary Care Hospital ability to practice in CAHs. Certified
Primary Care Outcomes in Patients Treated by
(RPCH) program. nurse midwives, NPs, and CNSs Nurse Practitioners or Physicians, A Randomized
disagree with the need for a physician Trial, The Journal of the American Medical
B. Proposed Policy Change in the to review records of patients that have Association, January 5, 2000, Vol. 283, No. 1, pages
Proposed Rule been in their care when State law 59–68.
3 Brown, S.A. and Grimes, D.E., Nurse
Under the former EACH/RPCH permits them to practice independently.
Practitioners and Certified Nurse Midwives: A Meta
program, physician oversight was MedPAC, in its June 2002 Report to Analysis of Studies on Nurses in Primary Care
required for services provided by Congress, stated that certified nurse Roles, American Nurses Association, Washington,
nonphysician practitioners such as midwives, NPs, CNSs, and PAs are DC, March 1993.
physician assistants (PAs), nurse health care practitioners who furnish 4 Ryan, S.A., Nurse Practitioners: Educational
many of the same health care services Issues, Practice Styles, and Service Barriers. In
practitioners (NPs), and clinical nurse Clawson, D.K., Osterweis, M., eds: The Role of
specialists (CNSs) in a CAH. Under the traditionally provided by physicians, Physician Assistants and Nurse Practitioners in
MRHFP, the statute likewise requires such as diagnosing illnesses, performing Primary Health Care Association of Academic
physician oversight for nonphysician physical examinations, ordering and Health Centers, Washington, DC, 1993.
5 Office of Technology Assessment, U.S.
practitioners. interpreting laboratory tests, and
Congress: Nurse Practitioners, Physician Assistants,
We note that under the EACH/RPCH providing preventive health services. In and Certified Nurse Midwives: A Policy Analysis,
program, we allowed for situations many States, advance practice nurses Health Technology Case Study 37, Washington, DC,
when the RPCH had an unusually high are permitted to practice independently U.S. Government Printing Office, 1986.
safety and quality of services provided requirement for inpatients treated by a are removing the word ‘‘independently’’
to Medicare beneficiaries. nonphysician practitioner in a CAH. As from the final regulation at
Therefore, in the CY 2006 OPPS we stated in the proposed rule, section § 485.63(b)(1)(v) and (vi) and further
proposed rule (70 FR 42753), we 1820(c)(2)(B)(iv)(III) of the Act provides revising the regulation to state that,
proposed to revise the regulation at that CAH inpatient care provided by a where State law requires record reviews
§ 485.631(b)(1)(iv) and to add new PA, NP, or CNS is subject to the or co-signatures, or both, by a
paragraphs (b)(1)(v) and (b)(1)(vi) to oversight of a physician. Therefore, we collaborating physician, physicians
§ 485.631 to defer to State law regarding will still require physicians to must periodically, but not less than
the review of records for outpatients periodically review and sign medical every 2 weeks, review and sign a sample
cared for by nonphysician practitioners. records of all inpatients cared for by a of outpatient records of patients who
We proposed that if State law allows nonphysician practitioner. were cared for by nonphysician
these practitioners to practice Comment: Two commenters stated practitioners in accordance with the
independently, we would not require that, given the growing clinical policies of the CAH and current
physicians to review and sign medical independence of NPs, they have standards of practice. In addition, where
records of outpatients cared for by these concern with CMS adding additional State law does not require record
nonphysician practitioners in CAHs. Federal requirements for patient record reviews or co-signatures, or both, by a
However, for those States that do not reviews that go beyond existing State collaborating physician, physician are
allow independent practice of licensure laws. Some commenters stated not required to review and sign
nonphysician practitioners, we that most States do not use the term outpatient records of patients who were
proposed to continue to maintain the ‘‘independent practice,’’ but instead cared for by nonphysician practitioners.
requirement that periodic review is define independent practice as the
performed by the physician on practitioner functioning autonomously. D. Final Policy
outpatient records under the care of a Another commenter stated that some After carefully considering the public
nonphysician practitioner in a CAH. We States do not address independent comments received, we are adopting the
believe a review at least every 2 weeks practice and, instead, describe their proposed policy changes as final with
provides a sufficient time period oversight agreement as a ‘‘collaborative’’ the following modifications: We are
without unduly imposing an agreement between the physician and revising the regulation at
administrative burden on the physician the nonphysician practitioner. § 485.63(b)(1)(v) and (vi) by removing
or the CAH. In addition, we proposed to Response: We share the commenters’ references to independent practice. We
allow the CAH to determine the sample concern with imposing requirements are further providing that physicians
size of the reviewed records in that do not increase the safety and must review and sign a sample of
accordance with current standards of health outcomes of patients. We outpatient records periodically, but not
practice to allow the CAH flexibility in proposed the new policy to eliminate less than every 2 weeks, only if State
adapting the review to its particular the requirement for a physician to law requires such record reviews or co-
circumstances. Specifically, we review and sign all medical records of signatures, or both, by a collaborating
proposed that the physician periodically outpatients (or a random sample of 25 physician.
(that is, at least once every 2 weeks) percent for CAHs with a high volume of
XVII. Files Available to the Public Via
reviews and signs a sample of the outpatients) cared for by a nonphysician
the Internet
outpatient records of nonphysician practitioner to provide CAHs with the
practitioners according to the facility flexibility to comply with State laws for Addenda A and B to this final rule
policy and current standards of practice. outpatient oversight. We believe that with comment period provide various
We proposed to still require periodic sufficient control and oversight of data pertaining to CY 2006 payment for
review and oversight of all inpatient nonphysician practitioners are services under the OPPS. In previous
records by physicians. generated by State laws. years, we have listed in Addendum B
We also believe that the proposed hundreds of HCPCS codes describing
C. Public Comments Received on the policy on physician oversight of services that are not paid under the
Proposed Rule and Our Responses outpatient care provided by hospital OPPS. To conserve resources
We received 11 public comments nonphysician practitioners allows for and to make Addendum B more relevant
concerning our proposed revision of collaborative arrangements. to the OPPS, in this final rule with
§ 485.631(b)(1)(iv) and the addition of Nonphysician practitioners who are comment period that updates the OPPS
§§ 485.631(b)(1)(v) and (b)(1)(vi). required by State law to have a for CY 2006, we are including in
Comment: The majority of collaborative agreement with a Addendum B only the HCPCS codes for
commenters supported our proposal to physician would be expected to follow services that are paid under the OPPS,
defer to State law regarding the need for any State law, current standards of as well as HCPCS codes that will be
physicians to review and sign the practice, and the CAH’s policies discontinued in CY 2006. The HCPCS
medical records for outpatients cared for concerning physicians collaborating codes published in Addendum B to this
by nonphysician practitioners in CAHs. with nonphysician practitioners who final rule with comment period, as well
The commenters also stated that CMS provide care for outpatients. We further as HCPCS codes for items or services
should extend the application of this understand that, in many instances, the furnished in a hospital outpatient
policy to physician review of inpatient terms ‘‘autonomous’’ and setting that are paid under a fee
records for patients cared for by ‘‘independent’’ are synonymous. schedule or payment methodology other
nonphysician practitioners. Although PAs are not considered than the OPPS, and HCPCS codes for
Response: We appreciate the independent practitioners because they items or services not recognized or
commenters’ support of our proposed always work under physician covered by Medicare, are available to
policy change to defer to State law for supervision, PAs perform their duties the public on the CMS Web site at:
physician oversight of outpatients cared with a high degree of autonomy in http://www.cms.hhs.gov/providers/
for by nonphysician practitioners in providing patient care and making hopps.
CAHs. However, we believe the statute medical decisions. Based on these For the convenience of the public, we
is very specific as to the oversight comments, and to provide clarity, we are also including on this same CMS
Web site, in a format that can be readily specialists, certified nurse midwives, or to be approximately $1.4 billion.
downloaded and manipulated, a table physician assistants when State law Therefore, this final rule with comment
that displays the HCPCS data in allows these nonphysician practitioners period is an economically significant
Addendum B sorted by APC to practice independently. rule under Executive Order 12866, and
assignment, which is identified on the Based on public comments received a major rule under 5 U.S.C. 804(2).
Web site as Addendum C. In addition, on the proposed policy changes in
2. Regulatory Flexibility Act (RFA)
we are including on the CMS Web site, § 485.631(b)(1), in this final rule with
in a format that can be easily comment period, we have revised the The RFA requires agencies to
downloaded and manipulated, proposed section to remove the term determine whether a rule would have a
Addendum A. ‘‘independently’’ and to specify that significant economic impact on a
We note that in the CY 2006 OPPS where State law requires record review substantial number of small entities. For
proposed rule, we included, as Addenda or co-signatures, or both, by a purposes of the RFA, small entities
H, I, J, K, L, M, N, and O, reprints of collaborating physician, physicians include small businesses, nonprofit
wage index related tables from the IPPS must review and sign a sample of organizations, and government agencies.
that would be used for the OPPS for CY outpatient records of patients who were Most hospitals and most other providers
2006. In this final rule with comment cared for by nonphysician practitioners and suppliers are small entities, either
period, we are not reprinting these in accordance with the policies of the by nonprofit status or by having
tables as they were issued in the final CAH and current standards of practice. revenues of $6 million to $29 million in
FY 2006 IPPS rule, and corrected. We refer the readers to section XVI.C. of any 1 year (65 FR 69432).
Rather, we are providing a link on the this preamble for a fuller discussion of For purposes of the RFA, we have
CMS Web site at: http:// these final changes. determined that approximately 37
www.cms.hhs.gov/providers/hopps to The information collection percent of hospitals would be
all of the FY 2006 IPPS wage index requirements associated with these considered small entities according to
related tables, except for the table provisions are subject to the PRA. the Small Business Administration
containing the out-migration wage However, the collection requirement is (SBA) size standards. We do not have
adjustment data referenced in section data available to calculate the
currently approved under OMB control
II.D. of this preamble. The out-migration percentages of entities in the
number 0938–0328 with an expiration
table is presented as Addendum L in pharmaceutical preparation
date of January 31, 2008.
this final rule with comment period. For manufacturing, biological products, or
additional assistance, contact Rebecca XIX. Regulatory Impact Analysis medical instrument industries that
Kane, (410) 786–0378. would be considered to be small entities
A. OPPS: General
according to the SBA size standards. For
XVIII. Collection of Information We have examined the impacts of this the pharmaceutical preparation
Requirements final rule with comment period as manufacturing industry (NAICS
In the CY 2006 OPPS proposed rule, required by Executive Order 12866 325412), the size standard is 750 or
we solicited public comments on the (September 1993, Regulatory Planning fewer employees and $67.6 billion in
following information collection and Review), the Regulatory Flexibility annual sales (1997 business census). For
requirement and the associated burden Act (RFA) (September 19, 1980, Pub. L. biological products (except diagnostic)
that is subject to the Paperwork 96–354), section 1102(b) of the Social (NAICS 325414), with $5.7 billion in
Reduction Act of 1995 (PRA): Security Act, the Unfunded Mandates annual sales, and medical instruments
Reform Act of 1995 (Pub. L. 104–4), and (NAICS 339112), with $18.5 billion in
Section 485.631(b)(1)(iv), (b)(1)(v), and
Executive Order 13132. annual sales, the standard is 50 or fewer
(b)(1)(vi)—Condition of Participation:
1. Executive Order 12866 employees (see the standards Web site
Staffing and Staff Responsibilities
at http://www.sba.gov/regulations/
In the proposed rule, we proposed to Executive Order 12866 (as amended siccodes/). Individuals and States are
revise § 485.631(b)(1)(iv) and add new by Executive Order 13258, which not included in the definition of a small
§§ 485.631(b)(v) and (vi) of the merely reassigns responsibility of entity.
regulations to require, as a condition of duties) directs agencies to assess all
participation for a CAH, that a doctor of costs and benefits of available regulatory 3. Small Rural Hospitals
medicine or osteopathy (1) periodically alternatives and, if regulation is In addition, section 1102(b) of the Act
review and sign the records of all necessary, to select regulatory requires us to prepare a regulatory
inpatients cared for by nurse approaches that maximize net benefits impact analysis if a rule may have a
practitioners, clinical nurse specialists, (including potential economic, significant impact on the operations of
certified nurse midwives, or physician environmental, public health and safety a substantial number of small rural
assistants; and (2) periodically, but not effects, distributive impacts, and hospitals. This analysis must conform to
less than every 2 weeks, review and sign equity). A regulatory impact analysis the provisions of section 604 of the
a sample of outpatient records of (RIA) must be prepared for major rules RFA. With the exception of hospitals
patients cared for by nurse practitioners, with economically significant effects located in certain New England
clinical nurse specialists, certified nurse ($100 million or more in any 1 year). counties, for purposes of section 1102(b)
midwives, or physician assistants We estimate that the effects of the of the Act, we previously defined a
according to the policy and standard provisions that will be implemented by small rural hospital as a hospital with
practice of the CAH when State law this final rule with comment period will fewer than 100 beds that is located
does not allow these nonphysician result in expenditures exceeding $100 outside of a Metropolitan Statistical
practitioners to practice independently. million in any 1 year. We estimate the Area (MSA) (or New England County
In addition, we proposed to provide that total increase (from changes in this final Metropolitan Area (NECMA)). However,
a doctor of medicine or osteopathy is rule with comment period as well as under the new labor market definitions
not required to review and sign enrollment, utilization, and case-mix that we adopted in the November 15,
outpatient records of patients cared for changes) in expenditures under the 2004 final rule with comment period,
by nurse practitioners, clinical nurse OPPS for CY 2006 compared to CY 2005 for CY 2005 (consistent with the FY
2005 IPPS final rule), we no longer in order to support a teaching used to determine the APC payment
employ NECMAs to define urban areas adjustment to the OPPS. One rates. We are also required under
in New England. Therefore, we now commenter suggested that such a study section 1833(t)(9)(A) of the Act to revise,
define a small rural hospital as a was necessary in light of the lower not less often than annually, the wage
hospital with fewer than 100 beds that average payment increase estimated for index and other adjustments. In
is located outside of an MSA. Section major teaching hospitals in the addition, we must review the clinical
601(g) of the Social Security proposed rule, 0.6 percent. The integrity of payment groups and weights
Amendments of 1983 (Pub. L. 98–21) commenter hypothesized that teaching at least annually. Accordingly, in this
designated hospitals in certain New hospitals are more dependent on pass- final rule with comment period, we are
England counties as belonging to the through, outlier, and device-dependent updating the conversion factor and the
adjacent NECMA. Thus, for purposes of APC payments, for which payments are wage index adjustment for hospital
the OPPS, we classify these hospitals as less stable than for other hospitals, and outpatient services furnished beginning
urban hospitals. We believe that the that this is one reason for an adjustment. January 1, 2006, as we discuss in
changes in this final rule with comment Finally, the commenter cited the sections II.C. and II.D., respectively, of
period will affect both a substantial statement in the April 7, 2000 final rule, this preamble. We also are revising the
number of rural hospitals as well as where CMS indicated that it would relative APC payment weights using
other classes of hospitals and that the study cost and payment differentials claims data from January 1, 2004,
effects on some may be significant. among hospitals, including teaching through December 31, 2004 and updated
Therefore, we conclude that this final facilities, once there was reliable claims cost report information. In response to
rule with comment period will have a data under the OPPS. a provision in Pub. L. 108–173 that we
significant impact on a substantial Response: We do not believe that a analyze the cost of outpatient services in
number of small entities. study of the unit costs of teaching rural hospitals relative to urban
hospitals relative to other classes of hospitals, we are increasing payments to
4. Unfunded Mandates hospitals is necessary at this time. As rural SCHs. Section II.G. of this
Section 202 of the Unfunded we stated in our April 7, 2000 final rule, preamble provides greater detail on this
Mandates Reform Act of 1995 (Pub. L. we believe it is important to monitor rural adjustment. Finally, we are
104–4) also requires that agencies assess ongoing trends for specific classes of removing three device categories from
anticipated costs and benefits before hospitals. However, we also believe that pass-through payment status. In
issuing any rule that may result in a such studies are especially warranted particular, section IV.C.1. of this
single expenditure in any 1 year by when hospitals experience a negative preamble discusses the expiration of
State, local, or tribal governments, in the increase in payments. In this specific pass-through status for devices.
aggregate, or by the private sector, of instance, major teaching hospitals are Under this final rule with comment
$120 million. This final rule with projected to experience an overall period, the update change to the
comment period does not mandate any increase in payments of 1.0 percent. conversion factor as provided by statute
requirements for State, local, or tribal This increase is lower than the market will increase total OPPS payments by
governments. This final rule with basket update to the conversion factor 3.7 percent in CY 2006. The inclusion
comment period also does not impose because it reflects extra payments for in CY 2006 of payment for specific
unfunded mandates on the private drugs authorized by Pub. L. 108–173 for covered outpatient drugs within budget
sector of more than $120 million 2 years that expire in CY 2006. For the neutrality, and the expiration of
dollars. past 2 years, teaching hospitals have additional drug payment outside budget
been receiving more payment for drugs neutrality, result in a net increase of 2.2
5. Federalism
than budget neutrality would allow. The percent. The changes to the APC
Executive Order 13132 establishes increase in total payments for teaching weights, changes to the wage indices,
certain requirements that an agency hospitals is less this year because the and the introduction of a payment
must meet when it publishes any rule provision allowing extra drug payments adjustment for rural SCHs will not
(proposed or final rule) that imposes expires. Without considering these increase OPPS payments because these
substantial direct costs on State and expiring payments for drugs, major changes to the OPPS are budget neutral.
local governments, preempts State law, teaching hospitals are projected to However, these updates do change the
or otherwise has Federalism receive a 3.5 percent increase in total distribution of payments within the
implications. payments and minor teaching hospitals budget neutral system as shown in
We have examined this final rule with are projected to experience an increase Table 39 and described in more detail
comment period in accordance with of 4.1 percent. In light of such large in this section.
Executive Order 13132, Federalism, and increases, we do not believe that a study
have determined that it will not have an of unit costs for teaching hospitals is C. Alternatives Considered
impact on the rights, roles, and necessary. In addition, we are not Alternatives to the changes we are
responsibilities of State, local or tribal convinced that a reliance on pass- making and the reasons that we have
governments. As reflected in Table 39, through, outlier, or device-dependent chosen the options that we have are
the impact analysis shows that APCs is a reason to propose an discussed throughout this final rule
payments to governmental hospitals adjustment. We believe that the source with comment period. Some of the
(including State, local, and tribal of payments is less important than total major issues discussed in this final rule
governmental hospitals) will increase by payments for each hospital. with comment period and the options
1.9 percent under this final rule with considered are discussed below.
comment period. B. Impact of Changes in This Final Rule
Comment: Several commenters noted With Comment Period 1. Option Considered for Payment
that OPPS is the only major Medicare We are adopting as final several Policy for Separately Payable Drugs and
payment system that does not include a proposed changes to the OPPS that are Biologicals
teaching adjustment and urged CMS to required by the statute. We are required As discussed in detail in section V.B.3
compare the unit costs of teaching under section 1833(t)(3)(C)(ii) of the Act of this preamble, section
hospitals with other types of hospitals to update annually the conversion factor 1833(t)(14)(A)(iii) of the Act requires
that payment for specified covered percent (again before payment for alone at the proposed rate of ASP+6
outpatient drugs in CY 2006, as adjusted pharmacy overhead) based on the percent. A commenter from MedPAC
for pharmacy overhead costs, be equal average relationship between the mean noted that, given that ASP values have
to the average acquisition cost for the costs from hospital claims data and declined in recent quarters and that the
drug for that year as determined by the ASP. GAO’s data did not fully reflect rebates,
Secretary and taking into account the In the proposed rule, we did not set the proposed drug payment rates of
hospital acquisition cost survey data payment rates for separately payable ASP+6 percent could be too high. In
collected by the GAO in CY 2004 and drugs and biologicals at ASP+3 percent addition, our more recent claims data
CY 2005. If hospital acquisition cost because the GAO data reflect hospital indicate that this rate would represent
data are not available, the law requires acquisition costs from a less recent excessive payment for acquisition costs
that payment be equal to payment rates period of time, as the midpoint of the of drugs alone. Instead, the hospital
established under the methodology time period when the survey was claims data suggest that ASP+6 percent
described in section 1842(o), section conducted is January 1, 2004, and it will is an appropriate rate for the acquisition
1847A, or section 1847B of the Act, as be difficult to update the GAO mean and pharmacy overhead costs of drugs
calculated and adjusted by the Secretary purchase prices during CY 2006 and in because pharmacy overhead costs are
as necessary. future years. Because the changes in already built into hospital charges for
The payment policy that we are drug payments are required to be budget drugs. Therefore, we are adopting that
adopting for CY 2006 is to pay for the neutral by law, we note that paying for policy in this final rule with comment
acquisition and pharmacy overhead separately payable drugs and biologicals period.
costs of all separately payable drugs and at ASP+3 percent relative to ASP+6 Payment for drugs and biologicals
biologicals at the payment rates effective percent would have made available under this methodology adds
in the physician office setting as approximately an additional $60 million approximately $500 million to the
determined using the manufacturer’s for other items and services paid under amount of drug costs that was included
average sales price (ASP) methodology. the OPPS. in our budget neutrality calculation for
(The payment rate in the physician In the proposed rule, we also did not the CY 2005 OPPS. The effect of the
office setting is ASP+6 percent.) These use ASP+8 percent to set payment rates addition of this amount is offset by
payment rates listed in this final rule for drugs and biologicals in CY 2006. reductions in weights for other services
with comment period are based on ASP The statute specifies that CY 2006 that are largely a function of updated,
data from the second quarter of 2005, payments for specified covered reduced CCRs.
which were used to set payment rates outpatient drugs are required to be equal
to the ‘‘average’’ acquisition cost for the 2. Payment Adjustment for Rural SCHs
for drugs and biologicals in the
physician office setting effective drug. Payment at ASP+8 percent for In section II.G. of this preamble, we
October 1, 2005, as these are the most drugs or biologicals, which represented are finalizing a 7.1 percent payment
recent numbers available to us during the average relationship between the adjustment increase for rural SCHs.
the development of this final rule with mean cost from hospital claims data and Section 1833(t)(13)(A) of the Act
comment period. For the few drugs and ASP at the time of the proposed rule, instructs the Secretary to conduct a
biologicals, other than would reflect the product’s acquisition study to determine if rural hospital
radiopharmaceuticals as discussed cost plus pharmacy overhead cost, outpatient costs exceed urban hospital
earlier, where ASP data are unavailable, instead of acquisition cost only. outpatient costs. In addition, under
we used the mean costs from the CY Therefore, we believed at that time that section 1833(t)(13)(B) of the Act, the
2004 hospital claims data to determine it would not be appropriate for us to use Secretary is given authorization to
their packaging status and for ASP+8 percent to set the payment rates provide an appropriate adjustment to
ratesetting. We believe that the ASP- for drugs and biologicals in CY 2006. rural hospitals, by January 1, 2006, if
based payment rates serve as the best In this final rule with comment rural hospital costs are determined to be
proxy for the average acquisition and period, we have updated data on drug greater than urban hospital costs.
pharmacy overhead costs for the drug or costs, and we have reviewed the For this final rule with comment
biological because the rates calculated available alternatives in the light of period, we conducted the same analyses
using the ASP methodology are based those data. Based on our updated data, that we conducted for the proposed rule
on the manufacturers’ sales prices from the average relationship between the with updated data, and in addition, we
the second quarter of CY 2005 and take mean costs from hospital claims data examined the relative costliness of
into consideration information on sales and ASP is now ASP+6 percent, rather several classes of hospitals identified in
prices to hospitals. Furthermore, than ASP+8 percent as in the proposed public comments. We used regression
payments for drugs and biologicals rule. Therefore, in this final rule with analysis to analyze the differences in the
using the ASP methodology will allow comment period, we are adopting the outpatient cost per unit between rural
for consistency of drug pricing between policy of paying both for the acquisition and urban hospitals in order to compare
the physician offices and hospital and pharmacy overhead costs of costs after accounting for other factors
outpatient departments. separately payable drugs at a combined that influence unit cost, including local
In the CY 2006 proposed rule, we rate of ASP+6 percent. As in the labor supply, and complexity and
proposed paying for acquisition costs of proposed rule, we considered several volume of services.
drugs alone at the rate of ASP+6 alternatives. We again considered As in the proposed rule, our initial
percent, with an additional 2 percent of paying for separately payable drugs and regression analysis found that all rural
ASP for the pharmacy overhead costs of biologicals at ASP+3 percent, reflecting hospitals give some indication of having
drugs. At that time, we also considered the GAO survey data on drug costs. higher cost per unit, after controlling for
paying for separately payable drugs and However, payment at this level would labor input prices, service-mix
biologicals (before payment for reflect only the acquisition costs of complexity, volume, facility size, and
pharmacy overhead) at ASP+3 percent, drugs and, therefore, would not be type of hospital. In order to assess
based on the average relationship sufficient to pay for acquisition and whether the small difference in costs
between the GAO mean purchase prices overhead costs. We also considered was uniform across rural hospitals or
and ASP. We also considered ASP+8 paying for the acquisition costs of drugs whether all of the variation was
attributable to a specific class of rural occurrence could pose a financial risk CY 2006 resulting from the combined
hospitals, we included more specific for hospitals, but limits these payments impact of APC recalibration, wage
categories of rural hospitals in our to the most complex and costly services. effects, the rural SCH adjustment, and
explanatory regression analysis. We At 1.0 percent, the OPPS outlier policy the market basket update to the
divided rural hospitals into categories becomes catastrophic insurance against conversion factor; and, finally,
indicated by their eligibility for the an occurrence of a very costly service. estimated payments considering all
expiring hold harmless provision: rural At the same time, reducing the payments for CY 2006 relative to all
SCHs, small rural hospitals with 100 or percentage of total payments dedicated payments for CY 2005, including the
fewer beds, and all other rural hospitals. to outlier payments increases the expiration of extra payment for
Further analysis revealed that only rural conversion factor, redistributing 1.0 specified covered outpatient drugs
SCHs are more costly than urban percent of total payments to almost all outside budget neutrality and the
hospitals holding all other variables services. change in the percentage of total
constant. We also examined the relative Alternatives to this policy are either payments dedicated to outlier
costliness of other types of hospitals to remain at 2.0 percent or to increase payments. Because the expiring
suggested by public comments, the percentage of payments dedicated to payments for drugs were not budget
including urban SCHs and MDHs. We outliers to the statutory limit of 3.0 neutral, most classes of hospitals will
observed no significant difference in the percent. Increasing the percentage of experience a positive update for CY
unit costs of small rural hospitals with payments dedicated to outliers could 2006 that is lower than the market
100 or fewer beds, all other rural target more payment to outliers, but is basket update. In essence, the presence
hospitals, MDHs, urban SCHs, and all at odds with OPPS payment by service of extra payment in previous years
other urban hospitals. Therefore, we are rather than case. It is not possible to makes the increase for CY 2006 look
adopting a 7.1 percent payment increase eliminate outlier payments entirely artificially low. We also estimate that a
for rural SCHs on all services except without a statutory change. few classes of hospitals may receive less
drugs, biologicals, and those paid under D. Limitations of Our Analysis payment in CY 2006. Because updates
pass-through for CY 2006. to the conversion factor, including the
The distributional impacts presented
3. Change in the Percentage of Total update of the market basket, the removal
here are the projected effects of the final
OPPS Payments Dedicated to Outlier of additional money for pass-through
policy changes, as well as the statutory
Payments payments, and a change in the
changes that will be effective for CY
percentage of total payments dedicated
In section II.H. of this preamble, we 2006, on various hospital groups. We
to outlier payments are applied
are changing the percentage of total estimate the effects of individual policy
uniformly, observed redistributions of
OPPS payments dedicated to outlier changes by estimating payments per
service while holding all other payment payments in the impact table largely
payments to 1.0 percent in CY 2006
policies constant. We use the best data depends on the mix of services
from the current policy of 2.0 percent.
available but do not attempt to predict furnished by a hospital (for example,
We also will continue using a fixed-
behavioral responses to our policy how the APCs for the hospital’s most
dollar threshold in addition to the
changes. In addition, we do not make frequently furnished services would
threshold based on a multiple of the
adjustments for future changes in change), the impact of the wage index
APC amount, which we have applied
variables such as service volume, changes on the hospital, and the impact
since the beginning of the OPPS. In
response to findings reported by the service-mix, or number of encounters. of the payment adjustment for rural
MedPAC in its March 2004 Report to SCHs. However, total payments made
E. Estimated Impacts of This Final Rule under this system and the extent to
Congress that the OPPS outlier policy
With Comment Period on Hospitals which this final rule with comment
based on a multiple threshold only
targeted outlier payments to simple and The estimated increase in the total period redistributes money during
low cost procedures. In the same report, payments made under OPPS is limited implementation would also depend on
MedPAC recommended eliminating the by the increase to the conversion factor changes in volume, practice patterns,
entire outlier policy from the OPPS set under the methodology in the and the mix of services billed between
because the OPPS pays by service rather statute. The distributional impacts CY 2005 and CY 2006, which CMS
than by case and, therefore, hospitals presented do not include assumptions cannot forecast. Overall, the final OPPS
are already paid for every increased about changes in volume and service- rates for CY 2006 will have a positive
service associated with a costly case. In mix. The enactment of Pub. L. 108–173 effect for all hospitals paid under the
addition, cost variability is lower for on December 8, 2003, provided for the OPPS. Adopted changes will result in a
expensive, complex procedures than payment of additional dollars in CY 2.2 percent increase in Medicare
less expensive and simpler procedures. 2004 and CY 2005 to providers of OPPS payments to all hospitals, exclusive of
We implemented the fixed-dollar services outside of the budget neutrality transitional pass-through payments.
threshold in the CY 2005 OPPS that requirement for specified covered Removing cancer and children’s
targets outlier payments to complex and outpatient drugs. These provisions hospitals because their payments are
expensive procedures that ultimately expire in CY 2006. Pub. L. 108–173 also held harmless to the pre-BBA ratio
could impact beneficiary access to provided for additional payment outside between payment and cost, suggests that
services. Our decision to reduce the of the budget neutrality requirement for adopted changes will result in a 2.3
percentage of total payments dedicated wage indices for specific hospitals percent increase in Medicare payments
to outlier payments continues to refine reclassified under section 508 through to all other hospitals.
our outlier policy to improve its CY 2007. Table 39 shows the estimated To illustrate the impact of the CY
appropriateness for the OPPS. A redistribution of hospital payments 2006 changes adopted in this final rule
reduction in the percentage of total among providers as a result of a new with comment period, our analysis
payment set aside for outlier payments APC structure, wage indices, and begins with a baseline simulation model
with the fixed-dollar threshold adjustment for rural SCHs, which are that uses the final CY 2005 weights, the
continues to target outlier payments to budget neutral; the estimated FY 2005 final post-reclassification IPPS
those services where one costly distribution of increased payments in wage indices, as subsequently corrected
and without additional increases and the market basket update by using Column 1: Total Number of Hospitals
resulting from section 508 the weights and wage indices for each Column 1 in Table 39 shows the total
reclassifications, and the final CY 2005 year to model CY 2006 requirements, number of hospital providers (4,222) for
conversion factor. Columns 2, 3, and 4 and using a CY 2005 conversion factor which we were able to use CY 2004
in Table 39 reflect the independent that included the market basket update hospital outpatient claims to model CY
effects of the APC reclassification and and budget neutrality adjustments for 2005 and CY 2006 payments by classes
recalibration changes, updated wage differences in wages and the adjustment of hospitals. We excluded all hospitals
indices, and the new adjustment for for rural SCHs. for which we could not accurately
rural SCHs, respectively. These effects Finally, Column 6 depicts the full estimate CY 2005 or CY 2006 payment
are budget neutral, which is apparent in impact of the CY 2006 policy on each and entities that are not paid under the
the overall zero impact in payment for hospital group by including the effect of OPPS. The latter entities include CAHs,
all hospitals in the top row. Column 2 all the changes for CY 2006 and all-inclusive hospitals, and hospitals
shows the independent effect of changes comparing them to all payments in CY located in Guam, the U.S. Virgin
resulting from the reclassification of 2005, including those required by Pub. Islands, and the State of Maryland. This
services codes among APC groups and L. 108–173. Column 6 shows the process is discussed in greater detail in
the recalibration of APC weights based section II.A. of this preamble. At this
combined budget neutral effects of
on a complete year of CY 2004 hospital time, we are unable to calculate a
Columns 2 through 5, plus the impact
OPPS claims data and more recent cost disproportionate share (DSH) variable
of changing the percentage of total
report data. This column also shows the for hospitals not participating in the
payments dedicated to outlier payments
impact of incorporating drug payment at IPPS. Hospitals for which we do not
to 1.0 percent, the impact of changing
106 percent of ASP and, for have a DSH variable are grouped
the percentage of total payments
radiopharmaceuticals, payment at cost, separately and generally include
dedicated to transitional pass-through
within budget neutrality. We modeled psychiatric hospitals, rehabilitation
payments to 0.17 percent, the impact of
the independent effect of APC hospitals, and long-term care hospitals.
expiring payments for drugs added on
recalibration by varying only the Finally, section 1833(t)(7)(D) of the Act
top of OPPS payments in CY 2005 as a
weights, the final CY 2005 weights permanently holds harmless cancer
versus the final CY 2006 weights, in our result of Pub. L. 108–173, and the
continued presence of payment for wage hospitals and children’s hospitals to the
baseline model, and calculating the proportion of their pre-BBA payment
percent difference in payments. Column index increases for hospitals reclassified
under section 508 of Pub. L. 108–173. relative to their costs. Because this final
3 shows the impact of updating the rule with comment period will not
wage index used to calculate payment We modeled the independent effect of impact these hospitals negatively, we
by applying the final FY 2006 IPPS all changes in Column 6 using the final removed them from our impact
wage index, as subsequently corrected. weights for CY 2005 with additional analyses. We show the total number
The OPPS wage index used in Column money for drugs authorized by Pub. L. (4,162) of OPPS hospitals, excluding the
3 does not include changes to the wage 108–173 and the final weights for CY hold-harmless cancer hospitals and
index for hospitals reclassified under 2006. The wage indices in each year children’s hospitals, on the second line
section 508 of Pub. L. 108–173. We include wage index increases for of the table.
modeled the independent effect of hospitals eligible for reclassification
updating the wage index by varying under section 508 of Pub. L. 108–173. Column 2: APC Recalibration
only the wage index, using the final CY We used the final conversion factor for The combined effect of APC
2006 scaled weights, and a CY 2005 CY 2005 of $56.983 and the final CY reclassification and recalibration,
conversion factor that included a budget 2006 conversion factor of $59.511. including the payment for drugs and
neutrality adjustment for changes in Column 6 also contains simulated biologicals at 106 percent of ASP for
wage effects between CY 2005 and CY outlier payments for each year. We used acquisition and pharmacy overhead
2006. Column 4 shows the budget the charge inflation factor used in the costs, resulted in larger changes in
neutral impact of adding a 7.1 percent final FY 2006 IPPS rule of 7.21 percent Column 2 than are typically observed
adjustment to payment for services to increase individual costs on the CY for APC recalibration. Overall, these
other than drugs, biologicals, and those 2004 claims to reflect CY 2005 dollars, changes have no impact on all urban
receiving pass-through payments to and we used the most recent overall hospitals, which show no projected
rural SCHs. We modeled the CCR for each hospital as calculated for change in payments, although some
independent effect of the payment the APC median setting process. Using classes of urban hospitals experience
adjustment for rural SCHs by varying the CY 2004 claims and a 7.21 percent decreases in payments. However,
only the presence of the rural charge inflation factor, we currently changes to the APC structure for CY
adjustment, using CY 2006 scaled estimate that actual outlier payments for 2006 tend to favor, slightly, urban
weights, the FY 2006 wage indices, and CY 2005, using a multiple threshold of hospitals that are not located in large
a CY 2005 conversion factor with budget 1.75 and a fixed-dollar threshold of urban areas. We estimate that large
neutrality adjustments for the new wage $1,175 will be 1.15 percent of total urban hospitals will experience a
index and the adjustment for rural payments, which is .85 percent lower decline of 0.7 percent, while ‘‘other’’
SCHs. than the 2.0 percent that we projected urban hospitals experience an increase
Column 5 demonstrates the combined in setting outlier policies for CY 2005. of 0.9 percent. Urban hospitals with
‘‘budget neutral’’ impact of APC Outlier payments of only 1.15 percent between 0 and 99 beds and between 100
recalibration, the wage index update, appear in the CY 2005 comparison in and 199 beds experience decreases,
and the new adjustment for rural SCHs Column 6. We used the same set of while the largest urban hospitals, those
on various classes of hospitals, as well claims and a charge inflation factor of with beds greater than 500 experience
as the impact of updating the 14.94 percent to model the CY 2006 increases of 0.7 percent. With regard to
conversion factor with the market basket outliers at 1.0 percent of total payments volume, all urban hospitals except those
update. We modeled the independent using a multiple threshold of 1.75 and with the highest volume, experience
effect of budget neutrality adjustments a fixed-dollar threshold of $1,250. decreases in payments. The lowest
volume hospitals experience the largest hospitals, rehabilitation hospitals, and Looking across other categories of
decrease of 5.4 percent. Urban hospitals long-term care hospitals will experience hospitals, we estimate that updating the
providing the highest volume of services decreases in payments of 4.5 percent, wage index will lead major teaching
demonstrate a projected increase of 0.2 and for the urban subset, 5.9 percent. hospitals to lose 0.2 percent and
percent as a result of APC recalibration. Classifying hospitals by type of hospitals without graduate medical
Estimated decreases in payment for ownership suggests that proprietary and education programs are estimated to
urban hospitals are also concentrated in government hospitals will lose 1.1 and gain 0.1 percent. Hospitals serving
some regions, specifically, New 0.1 percent, respectively, while between 0.0 and 0.10 percent of low-
England, Pacific, South Atlantic, and voluntary hospitals will gain 0.2 income patients lose up to 0.1 percent,
Mountain, with the first two percent. whereas hospitals serving other
experiencing the largest decreases of 1.0 percentages of low-income patients
Column 3: New Wage Indices
each. On the other hand, a few regions experience no change. Government,
experience moderate increases. Urban Changes introduced by the final FY voluntary, and proprietary hospitals as
hospitals in the East South Central and 2006 IPPS wage indices will have a classes will experience no change in
West North Central regions experience modest impact in CY 2006, increasing payment due to wage changes.
increases of 1.6 and 2.3 percent, payments to rural hospitals slightly and
having no effect overall on urban Column 4: New Adjustment for Rural
respectively.
Overall, rural hospitals show a hospitals. We estimate that rural SCHs SCHs
modest 0.2 percent decrease as a result will experience an increase in payments As discussed in section II.G. of this
of changes to the APC structure, and of 0.1 percent, while all other rural preamble, we have increased payments
this 0.2 percent decrease appears to be hospitals experience an increase of 0.2 for all services except drugs and
concentrated in rural hospitals that are percent. With respect to volume, rural biologicals to rural SCHs by 7.1 percent.
not rural SCHs, which experience a 0.6 hospitals with the least volume and This resulted in an adjustment to the
percent increase. Notwithstanding a rural hospitals with moderate volume conversion factor of 0.996. Targeting
modest overall decline in payments, experience decreases of 0.1 and 0.2 payments to these rural hospitals
there is substantial variation among percent, respectively. For both facility uniformly reduces payments to all other
classes of rural hospitals. Specifically, size and volume, no category of rural hospitals by 0.4 percent. The uniform
rural hospitals with less than 100 beds hospitals experiences an increase reduction for all urban and other rural
and between 150 and 199 beds greater than 0.3 percent. Examining hospitals is evident in Column 4. The
experience decreases, with hospitals hospitals by region reveals slightly periodic appearance of a ¥ 0.3 among
having less than 50 beds experiencing greater variability. We estimate that urban classes of hospitals is due to the
the largest decrease of 1.6 percent. Rural rural hospitals in several regions will difference between the definition of
hospitals with greater than 200 beds experience decreases in payment up to rural used for this impact table and the
experience the largest increase of 1.6 0.3 percent due to wage changes, broader definition of rural employed for
percent. With regard to volume, all rural including the Middle Atlantic, South the adjustment for rural SCHs. SCHs
hospitals, except those with the highest Atlantic, West North Central, and West located in urban areas that are
volume, experience decreases in South Central regions. However, rural reclassified as rural for wage index
payments. The lowest volume hospitals hospitals in the remaining regions purposes are eligible for the adjustment.
experience the largest decrease of 5.7 experience increases. We estimate that The observed increase of 5.6 percent for
percent. Rural hospitals providing the the New England region will see the rural SCHs is lower than 7.1 percent
highest volume of services demonstrate largest increase of 2.2 percent. because drugs and biologicals do not
a projected increase of 0.8 percent as a Overall, urban hospitals experience receive the payment adjustment. The
result of APC recalibration. Decreases no change in payments as a result of the remaining classes of rural hospitals
for rural hospitals occur in every region new wage indices. With respect to show variable increases that reflect the
except West North Central and the facility size, we estimate that urban distribution of rural SCHs. The largest
Middle Atlantic. The largest decreases hospitals with between 300 and 499 increases are observed among rural
are observed in the Pacific (¥1.8 beds will experience a decrease in hospitals with small numbers of beds,
percent), New England (¥1.4 percent), payments of 0.2 percent. Urban with moderate volume, and regions in
and West South Central (¥1.4 percent) hospitals with less than 99 beds the western half of the country.
regions. On the other hand, rural experience the largest increase of 0.2
percent. When categorized by volume, Column 5: All Budget Neutrality
hospitals in the Middle Atlantic and Changes and Market Basket Update
West North Central regions experience urban hospitals with the largest volumes
increases of 1.8 and 3.5 percent, experience no change in payment as a The addition of the market basket
respectively. result of changes to the wage index, and update alleviates any negative impacts
Among other classes of hospitals, the urban hospitals with the lowest volume on payments for CY 2006 created by the
largest observed impacts resulting from experience a 0.4 percent increase in budget neutrality adjustments made in
APC recalibration include declines of payment. We estimate that urban Columns 2, 3, and 4, with the exception
0.6 percent for nonteaching hospitals hospitals in all but the Pacific, New of hospitals with the lowest volume of
and increases of 0.4 percent for major England and the Middle Atlantic services and hospitals not paid under
teaching hospitals. Hospitals treating regions will experience modest IPPS, including psychiatric hospitals,
the most low-income patients (high DSH decreases due to wage changes of no rehabilitation hospitals, and long-term
percentage) and the least low-income more than 0.5 percent (except for urban care hospitals. In many instances, the
patients demonstrate declines of 0.2 hospitals in Puerto Rico, with a decrease redistribution of payments created by
percent. Urban hospitals that are of 1 percent). Urban hospitals in the APC recalibration offset those
treating DSH patients and are also Pacific and New England regions will introduced by updating the wage
teaching hospitals experience increases experience an increase of 1.2, and 0.2 indices. However, in a few instances,
of 0.5 percent. We project that hospitals percent, respectively. Urban hospitals in negative APC recalibration changes
for which a DSH percentage is not the Middle Atlantic region will compound a reduction in payment from
available, including psychiatric experience no change in payments. updating the wage index. In addition,
all urban and rural hospitals that are not decreases in payment due to APC In general, urban hospitals appear to
SCHs experience a decrease in payment recalibration or the update for the wage experience the largest negative impacts
of 0.4 percent as a result of the payment indices. from the combined effects of losing
adjustment for rural SCHs. The changes across columns for other additional payments for drugs, the
We estimate that the cumulative classes of hospitals are fairly moderate decreases in payment from the payment
impact of the budget neutrality and most show updates relatively close adjustment for rural SCHs, and,
adjustments and the addition of the to the market basket update with the frequently, negative changes in
market basket update will result in an exception of hospitals not paid under payments due to APC recalibration. We
increase in payments for urban hospitals the IPPS. These hospitals show negative estimate that hospitals in large urban
of 3.3 percent, which is less than the payment updates as a result of negative areas will gain 1.2 percent in CY 2006
market basket update of 3.7 percent. payment changes for APC recalibration and hospitals in other urban areas will
Large urban hospitals will experience an and the adjustment for rural SCHs. gain 2.8 percent. We estimate that low-
increase of 2.5 percent and other urban Proprietary hospitals also show an volume urban hospitals will experience
hospitals will experience an increase of increase much less than the market a decrease in total payments of 1.0
4.2 percent. Most other classes of urban basket as a result of negative payments percent between CY 2005 and CY 2006.
hospitals experience updates lower than under APC recalibration. This negative update includes the
the market basket update. Urban cumulative effect of negative payments
hospitals with the lowest volume Column 6: All Changes for CY 2006 from APC recalibration, a negative
experience a negative market basket Column 6 compares all changes for impact of the payment adjustment for
update, which is largely a function of rural SCHs, a loss of payments outside
CY 2006 to final payment for CY 2005
the 5.4 percent decrease in payments budget neutrality for drugs and a loss of
and includes any additional dollars
attributable to changes to the APC some outlier payments. All other classes
resulting from provisions in Pub. L.
structure. Urban hospitals with of urban hospitals show increases
108–173 in both years, changes in
moderate volume will also lose the bulk between 0.4 and 3.8 percent. We note
outlier payment percentages and
of the market basket update as a result that urban hospitals in the East South
thresholds, and the difference in pass-
of a 2.9 percent decrease resulting from Central and West North Central regions
through estimates. Overall, we estimate
the APC recalibration and the addition are estimated to receive slightly more
that hospitals will gain 2.2 percent
of the payment adjustment for rural than the market basket in spite of
under this final rule with comment
SCHs. The same compounding effect expiring drug payments, the largest
holds true for urban hospitals in the period in CY 2006 relative to total
spending in CY 2005, which included increases for urban hospitals.
New England and South Atlantic
regions and Puerto Rico, which Pub. L. 108–173 dollars for drugs and Overall, rural hospitals experience
experience the lowest overall increases wage indices. When we excluded cancer larger increases than those observed for
of 2.5, 2.3, and 1.4 percent, respectively. and children’s hospitals, which are held urban hospitals because the payment
Urban hospitals in the East South harmless, the gain is 2.3 percent. While adjustment for rural SCHs tends to
Central and West North Central regions hospitals receive the 3.7 percent buffer the loss of payments for drugs
experience increases in payment for CY increase due to the market basket from Pub. L. 108–173. However, this
2006 above the market basket update. update appearing in Column 5 and the adjustment is only for rural SCHs.
We estimate that the cumulative additional 0.85 percent in outlier Overall, we estimate that rural hospitals
impact of budget neutrality adjustments payments that we estimate as not being will experience an increase in payments
and the market basket update will result paid in CY 2005, we estimate that of 3.9 percent. However, we also
in an overall increase for rural hospitals hospitals also experience an overall 2.25 estimate that rural SCHs will experience
of 5.7 percent, with rural SCHs percent loss due to the expiration of an increase of 7.6 percent, and that the
experiencing an update of 10.2 percent additional payment for drugs in CY other rural hospitals will only
and other rural hospitals experiencing 2005, as well as a 0.07 percent reduction experience an increase of 1.5 percent.
an update of 2.9 percent. In general, due to the change in estimated pass- With the exception of low-volume rural
rural hospitals with more than 50 beds through payments for CY 2006. That is, hospitals, no category of rural hospitals
and the highest volume rural hospitals without the net additional 0.78 (0.85– experiences a decrease in payments
experience increases of more than 5.3 0.07) percent increase in outlier between CY 2005 and CY 2006, and a
percent, which generally results from payments due to lower than expected few groups of rural hospitals show
the combined impact of increases in payment for outliers in CY 2005, increases comparable to, or better than,
payment from APC recalibration, wage hospitals will receive a positive increase the market basket. For example, rural
changes, and the new adjustment for in payments of 1.5 percent. Paying the hospitals with more than 100 beds
rural SCHs. We estimate that low- net additional 0.78 percent in CY 2006 experience increases of at least 4.1
volume rural hospitals will experience a increases overall gains to 2.2 (rounded percent. Rural hospitals with moderate
decrease in payments of 1.1 percent, 2.23) percent, which is lower than the to high volume experience increases of
which results from the combined impact market basket update. The change in the no less than 2.8 percent. Across the
of decreased payments attributable to outlier thresholds has a small regions, all rural hospitals except those
APC recalibration and wage index redistributive impact by class of in the New England and East North
update that are larger than the estimated hospital and the vast majority of Central regions experience increases in
1.2 percent increase from the redistributive impacts observed between payments greater than 3.2 percent. Rural
adjustment for rural SCHs. Rural Columns 5 and 6 can be attributed to the hospitals in the West North Central
hospitals also demonstrate large loss of additional payment for drugs region experience an increase of 6.1
increases by region. We estimate that all outside budget neutrality required by percent. We project that low-volume
regions except East South Central will Pub. L. 108–173. The redistributive rural hospitals, like low-volume urban
experience increases larger than the impact of the change in the outlier target hospitals, will experience a decrease in
market basket update. For these regions, from 2 to 1 percent is discussed in payments of 2.2 percent (due to
in aggregate, the payment adjustment for greater detail under section XIX.F. of decreases in payments for mid-level and
rural SCHs compensates for observed this preamble. high-level emergency visits).
Among other classes of hospitals, we between CY 2005 and CY 2006 of 1.5 will experience an increase of 1.0
estimate that hospitals not paid under percent. Factoring in expiring payments percent.
the IPPS (DSH Not Available) will for drugs through Pub. L. 108–173, we BILLING CODE 4210–01–P
experience decreases in payments estimate that major teaching hospitals
ER10NO05.031</GPH>
ER10NO05.032</GPH>
BILLING CODE 4210–01–C CY 2006 total payment under a 2.0 hospitals from reducing the amount of
F. Estimated Impact of the Change in percent policy. Using updated claims total payments set aside for outlier
Outlier Policy data, a new charge inflation factor, new payments from 2.0 percent to 1.0
APC payment rates, and CCRs, we percent. As expected, modest reductions
As stated in section II.H. of this estimate that the fixed-dollar threshold in total payments are observed for
preamble, we are changing the associated with a 2.0 percent outlier hospitals that probably receive a larger
percentage of payments that we have set policy would have been $550. We used percentage of their total payments as
aside for outlier payments from 2.0 this fixed-dollar threshold to model the outlier payments, including major
percent to 1.0 percent. In order to 2.0 percent outlier policy. All other teaching hospitals and large urban
accommodate this reduction in outlier components of the payment system are hospitals. We estimate that major
payments, we increased the fixed-dollar held constant, including the multiple teaching hospitals will experience a
threshold to $1,250. This threshold threshold of 1.75 times the APC decrease of 0.7 percent in total
changed from the $1,575 in the payment rate. This impact differs from payments and that large urban hospitals
proposed rule because we used updated any impact attributable to outlier will experience a decrease of 0.1 percent
claims, final rule APC payment rates, an payments in Table 40 because the in total payments. These same hospitals
updated charge inflation factor of 14.94 comparison here is within estimates of are also responsible for the 0.4 percent
percent, and each hospital’s overall CCR CY 2006 and not across CY 2005 and CY decrease in total payments for urban
that we calculate as part of our APC 2006. We expect that this policy change hospitals with more than 500 beds, the
median estimation process. would slightly redistribute payments 0.1 percent decrease for teaching
Table 40 shows the impact of away from hospitals receiving a lot of hospitals with a disproportionate share
reducing the amount of total aggregate outlier payments to hospitals generally of low-income patients, and the 0.5
OPPS payments set aside for outlier not receiving outlier payments. We also percent decrease for hospitals serving a
payments to 1.0 percent of CY 2006 would expect the losses to be large percentage of low-income patients.
payments. Column 2 compares concentrated in a few classes of Also evident are slight increases in total
estimated CY 2006 total payments with hospitals and the benefits to be diffused payments for most other hospitals
a 1.0 percent outlier policy and an across all other classes of hospitals. arising from the increase in the
additional 1.0 percent of total payments Table 40 depicts small changes in conversion factor. For example, rural
ER10NO05.033</GPH>
in the conversion factor with estimated total payments across all classes of hospitals gain 0.2 percent overall. The
decreases in total payments for low- concentrated loss of outlier payments complexity services that fail to meet the
volume rural and low-volume urban for moderate cost and moderate higher fixed-dollar threshold.
hospitals appear to be attributable to a BILLING CODE 4210–01–P
ER10NO05.034</GPH>
BILLING CODE 4210–01–C below, we have prepared an accounting Medicare payments under the OPPS as
G. Accounting Statement statement showing the classification of a result of the changes presented in this
the expenditures associated with the final rule with comment period based
As required by OMB Circular A–4 provisions of this final rule with on the data for 4,222 hospitals. All
(available at http://www.whitehousegov/ comment period. This table provides expenditures are classified as transfers
omb/circulars/a004/a–4.pdf, in Table 41 our best estimate of the increase in to Medicare providers (that is, OPPS).
TABLE 41.—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FROM CY 2005 TO CY 2006

Category Transfers
Annualized Monetized Transfers .............................................................. $660 Billion.

From Whom to Whom .............................................................................. Federal Government to OPPS Medicare Providers.
Category ................................................................................................... Reduction in Costs.
Annualized Monetized Reduction ............................................................. $436 Million.
From Whom to Whom .............................................................................. Reduction in Payments from Beneficiaries to Federal Government.
Total ................................................................................................... $1.1 Billion.
H. Estimated Impacts of This Final Rule which OPPS payments will rise and will comment period, the minimum
With Comment Period on Beneficiaries decrease for services for which OPPS unadjusted copayment for APC 601 is
payments will fall. For example, for a $12.05 because the OPPS payment for
For services for which the beneficiary mid-level office visit (APC 0601), the the service will increase under this final
pays a copayment of 20 percent of the
minimum unadjusted copayment in CY rule with comment period, and there is
payment rate, the beneficiary share of
2005 was $11.22. In this final rule with no national unadjusted copayment. In
ER10NO05.035</GPH>
payment will increase for services for
another example, for a Level IV Needle reference to the legal authority under noted in Addendum B with the status
Biopsy (APC 0037), in the CY 2005 which the rule is proposed, and the indicator ‘‘NI.’’ However, we are
OPPS, the national unadjusted terms and substances of the proposed providing a 60-day public comment
copayment in CY 2005 was $234.20, and rule or a description of the subjects and period on these codes.
the minimum unadjusted copayment issues involved. This procedure can be
List of Subjects
was $106.47. In this final rule with waived, however, if an agency finds
comment period, the national good cause that a notice-and-comment 42 CFR Part 419
unadjusted copayment for APC 0037 is procedure is impracticable, Hospitals, Medicare, Reporting and
$228.76 because the national unadjusted unnecessary, or contrary to the public recordkeeping requirements.
copayment is limited to 40 percent of interest and incorporates a statement of
the APC payment rate for CY 2006, as the finding and its reasons in the rule 42 CFR Part 485
discussed in section II. of the preamble issued. Grant program-health, Health
to this final rule with comment period. As established in regulations, HCPCS facilities, Medicaid, Medicare,
The minimum unadjusted copayment codes are used to identify services for Reporting and recordkeeping
for APC 0037 is $114.38. However, in all which predetermined amounts are paid requirements.
cases, the statute limits beneficiary under the OPPS (42 CFR 419.2(a)). The
■ For the reasons stated in the preamble
liability for copayment for a service to HCPCS is a national coding system
comprised of Level I (CPT) codes and of this final rule with comment period,
the inpatient hospital deductible for the
Level II (HCPCS National Codes) that the Centers for Medicare & Medicaid
applicable year. For 2006, the inpatient
are intended to provide uniformity to Services is amending 42 CFR Chapter IV
deductible is $952.
In order to better understand the coding procedures, services, and as set forth below:
impact of changes in copayment on supplies across all types of medial PART 419—PROSPECTIVE PAYMENT
beneficiaries we modeled the percent providers and suppliers. Level I (CPT) SYSTEM FOR HOSPITAL OUTPATIENT
change in total copayment liability codes are copyrighted by the AMA and DEPARTMENT SERVICES
using CY 2004 claims. We estimate that consist of several categories, including
total beneficiary liability for copayments Category I codes which are five-digit ■ A. Part 419 is amended as follows:
will decline as an overall percentage of numeric codes, and Category II codes ■ 1. The authority citation for Part 419
total payments from 33 percent in CY which are temporary codes to track continues to read as follows:
2005 to 29 percent in CY 2006. This emerging technology, services, and Authority: Secs. 1102, 1833(t), and 1871 of
represents a decline in beneficiary procedures, as we discuss elsewhere in the Social Security Act (42 U.S.C. 1302,
liability of more than $400 million from this preamble. 1395l(t), and 1395hh).
the CY 2005 OPPS to the CY 2006 AMA issues an annual update of the
CPT code set each fall, with January 1 ■ 2. Section 419.43 is amended by
OPPS. adding a new paragraph (g) to read as
as the effective date for implementing
Conclusion the updated CPT codes. The HCPCS, follows:
The changes in this final rule with including both Level I and Level II § 419.43 Adjustments to national program
comment period will affect all classes of codes, is similarly updated annually on payment and beneficiary copayment
hospitals. Some hospitals experience a calendar year basis. Annual coding amounts.
significant gains and others less changes are not available to the public * * * * *
significant gains, but almost all until the fall immediately preceding the (g) Payment adjustment for certain
hospitals will experience positive annual January update of the OPPS. rural hospitals. (1) General rule. CMS
updates in OPPS payments in CY 2006. Because of the timing of the release of provides for additional payment for
Table 39 demonstrates the estimated these codes, it is impracticable for us to covered hospital outpatient services not
distributional impact of the OPPS provide prior notice and solicit excluded under paragraph (g)(4) of this
budget neutrality requirements and an comment on these codes in advance of section, furnished on or after January 1,
additional 2.2 percent increase in the publication of the annual final rule 2006, if the hospital—
payments for CY 2006, after considering that implements the OPPS update. Yet (i) Is a sole community hospital under
the expiring provision for additional it is imperative that these codes be § 412.92 of this chapter; and
drug payment under Pub. L. 108–173 accounted for and recognized timely (ii) Is located in a rural area as defined
and a change in the percentage of total under the OPPS for payment because in § 412.64(b) of this chapter or is
payments dedicated to outliers and services represented by these codes will treated as being located in a rural area
transitional pass-through payments, be provided to Medicare beneficiaries under § 412.103 of this chapter.
exclusive of transitional pass-through by outpatient hospital departments once (2) Amount of adjustment. The
payments, across various classes of issued by the applicable group. amount of the additional payment under
hospitals. The accompanying Moreover, as we explain above, paragraph (g)(1) of this section is
discussion, in combination with the rest regulations implementing HIPAA (42 determined by CMS and is based on the
of this final rule with comment period CFR parts 160 and 162) require that the difference between costs incurred by
constitutes a regulatory impact analysis. HCPCS be used to report health care hospitals that meet the criteria in
In accordance with the provisions of services, including outpatient services paragraphs (g)(1)(i) and (g)(1)(ii) of this
Executive Order 12866, this final rule paid under the OPPS. Therefore, we section and costs incurred by hospitals
with comment period was reviewed by believe it would be contrary to the located in urban areas.
the Office of Management and Budget. public interest to delay recognition of (3) Budget neutrality. CMS establishes
these codes as payment could not then the payment adjustment under
XX. Waiver of Proposed Rulemaking be made for those services provided paragraph (g)(2) of this section in a
We ordinarily publish a notice of under these codes and public access to budget neutral manner, excluding
proposed rulemaking in the Federal these services would be impeded. services and groups specified in
Register and invite public comment on Therefore, for good cause, we waive paragraph (g)(4) of this section.
the proposed rule. The notice of notice and comment rulemaking (4) Excluded services and groups.
proposed rulemaking includes a procedures with respect to these codes Drugs and biologicals that are paid
under a separate APC and devices of PART 485—CONDITIONS OF nurse specialists, certified nurse
brachytheraphy consisting of a seed or PARTICIPATION: SPECIALIZED midwives, or physician assistants
seeds (including a radioactive source) PROVIDERS according to the policies of the CAH and
are excluded from qualification for the according to current standards of
payment adjustment in paragraph (g)(2) ■ B. Part 485 is amended as follows: practice where State law requires record
■ 1. The authority citation for Part 485 reviews or co-signatures, or both, by a
of this section.
continues to read as follows: collaborating physician.
(5) Copayment. The payment
Authority: Secs. 1102 and 1871 of the (vi) Is not required to review and sign
adjustment in paragraph (g)(2) of this Social Security Act (42 U.S.C. 1302 and
section is applied before calculating 1395hh).
outpatient records of patients cared for
copayment amounts. by nurse practitioners, clinical nurse
■ 2. Section 485.631 is amended by— specialists, certified nurse midwives, or
(6) Outliers. The payment adjustment ■ a. Republishing paragraph (b)(1) physician assistants where State law
in paragraph (g)(2) of this section is introductory text. does not require record reviews or co-
applied before calculating outlier ■ b. Revising paragraph (b)(1)(iv).
signatures, or both, by a collaborating
payments. ■ c. Adding new paragraphs (b)(1)(v)
physician.
and (b)(1)(vi).
■ 3. Section 419.66 is amended by The revision and additions read as * * * * *
revising paragraph (c)(1) to read as follows: (Catalog of Federal Domestic Assistance
follows: Program No. 93.773, Medicare—Hospital
§ 485.631 Condition of participation: Insurance; and Program No. 93.774,
§ 419.66 Transitional pass-through Staffing and staff responsibilities.
Medicare—Supplementary Medical
payments: Medical devices. * * * * * Insurance Program)
* * * * * (b) Standard: Responsibilities of the Dated: October 26, 2005.
doctor of medicine or osteopathy. (1)
(c) Criteria for establishing device Mark B. McClellan,
The doctor of medicine or osteopathy—
categories. * * * Administrator, Centers for Medicare &
* * * * * Medicaid Services.
(1) CMS determines that a device to (iv) Periodically reviews and signs the
be included in the category is not records of all inpatients cared for by Dated: November 1, 2005.
appropriately described by any of the nurse practitioners, clinical nurse Michael O. Leavitt,
existing categories or by any category specialists, certified nurse midwives, or Secretary.
previously in effect, and was not being physician assistants.
paid for as an outpatient service as of (v) Periodically, but not less than Editorial Note: The following Addenda
every 2 weeks, reviews and signs a will not be published in the Code of Federal
December 31, 1996. Regulations.
sample of outpatient records of patients
* * * * *
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Rule: Medicare: Hospital Outpatient Prospective Payment System and 2006 CY Payment Rates

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Rule: Medicare: Hospital Outpatient Prospective Payment System and 2006 CY Payment Rates

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Thursday,

November 10, 2005

42 CFR Parts 419 and 485

99211 ................ Office/outpatient visit, est ......................................................................................................... $11.98 6.15

the same services under the prior

Unit Outpatient Cost ........................................................................................................ $157.57 ($64.94) $188.76 ($93.53)

TABLE 7.—NEW HCPCS CODES IMPLEMENTED IN APRIL 2005

C9127 .................... Injection, paclitaxel protein-bound particles, per 1 mg.

TABLE 9.—NEW TECHNOLOGY APCS FOR CY 2006

1491 ........ New Technology—Level IA ($0–$10) ......................................................................................................... S $5

TABLE 10.—CY 2006 APC ASSIGNMENTS FOR MEG SERVICES

95965 ..... $644.71 $5,250 $2,947.35 $2,750/1523

78725, Kidney function study ................................................................... 78003, Thyroid, stimulation, suppression.

95056, Photosensitivity tests .................................................................... 95004, Percutaneous allergy skin tests.

TABLE 17.—LIST OF CURRENT PASS-THROUGH DEVICE CATEGORIES BY EXPIRATION DATE

C9123 ...................................................................................................................................................... 9123 Transcyte, per 247 sq cm.

TABLE 19.—LIST OF DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2006

C9220 ...................................................................................................................................................... 9220 Sodium hyaluronate.

J0580 ................................................ Penicillin g benzathine inj ......................................................................... N N

(no less than two percent) so that

commercial radiopharmacies, entities comment on the proposal before it is radiopharmaceutical payment

90714 ..................... Td vaccine no prsrv >/= 7 im ...................................................................................................... 1634 K

TABLE 27.—DRUGS, BIOLOGICALS, AND RADIOPHARMACEUTICALS WITHOUT CY 2004 CLAIMS DATA

90581 ..................... Anthrax vaccine, sc ....................................................................................... $126.46 1 K

TABLE 27.—DRUGS, BIOLOGICALS, AND RADIOPHARMACEUTICALS WITHOUT CY 2004 CLAIMS DATA—Continued

J3530 ..................... Nasal vaccine inhalation ............................................................................... 15.00 1 N

TABLE 28.— SEPARATELY PAYABLE BRACHYTHERAPY SOURCES FOR CY 2006

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TABLE 30.—CY 2006 OPPS DRUG ADMINISTRATION C-CODES

TABLE 31.—NONCHEMOTHERAPY PROLONGED INFUSION CODES THAT REQUIRE A PUMP

TABLE 37.—CY 2006 DEFINITIONS OF STATUS INDICATORS ‘‘H’’ AND ‘‘K’’

TABLE 41.—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FROM CY 2005 TO CY 2006

Annualized Monetized Transfers .............................................................. $660 Billion.

payment will increase for services for

[FR Doc. 05–22136 Filed 11–2–05; 4:13 pm]

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