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Wednesday,

August 23, 2006

Part II

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

42 CFR Parts 410, 414, et al. Medicare:


Hospital Outpatient Prospective Payment
System and CY 2007 Payment Rates;
Proposed Rule
sroberts on PROD1PC70 with PROPOSALS

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49506 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules

DEPARTMENT OF HEALTH AND In addition, this proposed rule would on the link ‘‘Submit electronic
HUMAN SERVICES support implementation of a comments on CMS regulations with an
restructuring of the contracting entities open comment period.’’ (Attachments
Centers for Medicare & Medicaid responsibilities and functions that should be in Microsoft Word,
Services support the adjudication of Medicare WordPerfect, or Excel; however, we
fee-for-service (FFS) claims. This prefer Microsoft Word.)
42 CFR Parts 410, 414, 416, 419, 421, restructuring is directed by section 2. By regular mail. You may mail
485, and 488 1874A of the Act, as added by section written comments (one original and two
[CMS–1506–P; CMS–4125–P] 911 of the MMA. The prior separate copies) to the following address ONLY:
Medicare intermediary and Medicare Centers for Medicare & Medicaid
RIN 0938–AO15 carrier contracting authorities under Services, Department of Health and
Title XVIII of the Act have been Human Services, Attention: CMS–1506–
Medicare Program; Hospital Outpatient replaced with the Medicare P, or CMS–4125–P, P.O. Box 8011,
Prospective Payment System and CY Administrative Contractor (MAC) Baltimore, MD 21244–1850.
2007 Payment Rates; CY 2007 Update authority. Please allow sufficient time for mailed
to the Ambulatory Surgical Center This proposed rule would also comments to be received before the
Covered Procedures List; Ambulatory continue to implement the requirements close of the comment period.
Surgical Center Payment System and of the DRA that require that we expand 3. By express or overnight mail. You
CY 2008 Payment Rates; Medicare the ‘‘starter set’’ of 10 quality measures may send written comments (one
Administrative Contractors; and that we used in FY 2005 and FY 2006 original and two copies) to the following
Reporting Hospital Quality Data for FY for the hospital Inpatient Prospective address ONLY: Centers for Medicare &
2008 Inpatient Prospective Payment Payment System (IPPS) Reporting Medicaid Services, Department of
System Annual Payment Update Hospital Quality Data for the Annual Health and Human Services, Attention:
Program—HCAHPS Survey, SCIP, Payment Update (RHQDAPU) program. CMS–1506–P, or CMS–4125–P, Mail
and Mortality We began to adopt expanded measures Stop C4–26–05, 7500 Security
AGENCY: Centers for Medicare & effective for payments beginning in FY Boulevard, Baltimore, MD 21244–1850.
Medicaid Services (CMS), HHS. 2007. We are proposing to add 4. By hand or courier. If you prefer,
additional quality measures to the you may deliver (by hand or courier)
ACTION: Proposed rule.
expanded set of measures for FY 2008 your written comments (one original
SUMMARY: This proposed rule would payment purposes. These measures and two copies) before the close of the
revise the Medicare hospital outpatient include the HCAHPS survey, as well as comment period to one of the following
prospective payment system to Surgical Care Improvement Project addresses: Room 445–G, Hubert H.
implement applicable statutory (SCIP, formerly Surgical Infection Humphrey Building, 200 Independence
requirements and changes arising from Prevention (SIP)), and Mortality quality Avenue, SW., Washington, DC 20201; or
our continuing experience with this measures. 7500 Security Boulevard, Baltimore, MD
system, and to implement certain DATES: To be assured consideration, 21244–1850.
related provisions of the Medicare comments on all sections of the If you intend to deliver your
Prescription Drug, Improvement, and preamble of this proposed rule, except comments to the Baltimore address,
Modernization Act (MMA) of 2003, and section XVIII. and section XXIII., must please call telephone number (410) 786–
the Deficit Reduction Act (DRA) of be received at one of the addresses 7195 in advance to schedule your
2005. The proposed rule describes provided in the ADDRESSES section, no arrival with one of our staff members.
proposed changes to the amounts and later than 5 p.m. October 10, 2006. (Because access to the interior of the
factors used to determine the payment To be assured consideration, Hubert H. Humphrey Building is not
rates for Medicare hospital outpatient comments on section XVIII. of this readily available to persons without
services paid under the prospective preamble relating to the proposed Federal Government identification,
payment system. These changes would revised ASC payment system and the commenters are encouraged to leave
be applicable to services furnished on or related regulation changes for their comments in the CMS drop slots
after January 1, 2007. implementation January 1, 2008, must located in the main lobby of the
In addition, this proposed rule would be received at one of the addresses building. A stamp-in clock is available
revise the current list of procedures that provided in the ADDRESSES section, no for persons wishing to retain proof of
are approved when furnished in a later than 5 p.m. on November 6, 2006. filing by stamping in and retaining an
Medicare-approved ambulatory surgical ADDRESSES: In commenting on all extra copy of the comments being filed.)
center (ASC), which would be provisions except those found in section Comments mailed to the addresses
applicable to services furnished on or XXIII. of the preamble, please refer to indicated as appropriate for hand or
after January 1, 2007. Further, this file code CMS–1506–P. In commenting courier delivery may be delayed and
proposed rule would revise the ASC on the provisions found in section received after the comment period.
facility payment system to implement XXIII. of the preamble for the FY 2008 Submission of Comments on
provisions of the MMA and other IPPS RHQDAPU program, please refer to Paperwork Requirements. You may
applicable statutory requirements, and file code CMS–4125–P. Because of staff submit comments on this document’s
update the ASC payment rates. Changes and resource limitations, we cannot paperwork requirements by mailing
to the ASC facility payment system and accept comments by facsimile (FAX) your comments to the addresses
the payment rates would be applicable transmission. provided at the end of the ‘‘Collection
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to services furnished on or after January You may submit comments in one of of Information Requirements’’ section in
1, 2008. four ways (no duplicates, please): this document.
This proposed rule would revise the 1. Electronically. You may submit For information on viewing public
emergency medical screening electronic comments on specific issues comments, see the beginning of the
requirements for critical access in this regulation to http:// SUPPLEMENTARY INFORMATION section.
hospitals (CAHs). www.cms.hhs.gov/eRulemaking. Click FOR FURTHER INFORMATION CONTACT:

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Alberta Dwivedi, (410) 786–0378, Office. Free public access is available on FY Federal fiscal year
Hospital outpatient prospective a Wide Area Information Server (WAIS) GAO Government Accountability Office
payment issues. through the Internet and via HCPCS Healthcare Common Procedure
Coding System
Dana Burley, (410) 786–0378, asynchronous dial-in. Internet users can
HCRIS Hospital Cost Report Information
Ambulatory surgery center issues. access the database by using the World System
Suzanne Asplen, (410) 786–4558, Partial Wide Web; the Superintendent of HHA Home health agency
hospitalization and community Documents’ home page address is HIPAA Health Insurance Portability and
mental health centers issues. http://www.gpoaccess.gov/index.html, Accountability Act of 1996, Pub. L. 104–
Mary Collins, (410) 786–3189, Critical by using local WAIS client software, or 191
access hospital emergency medical by telnet to swais.access.gpo.gov, then ICD–9–CM International Classification of
planning issues. login as guest (no password required). Diseases, Ninth Edition, Clinical
Sandra M. Clarke, (410) 786–6975, Modification
Dial-in users should use
IDE Investigational device exemption
Medicare Administrative Contractors communications software and modem IPPS [Hospital] Inpatient prospective
issues. to call (202) 512–1661; type swais, then payment system
Mark Zobel, (410) 786–6905, Medicare login as guest (no password required). IVIG Intravenous immune globulin
Administrative Contractors issues. MAC Medicare Administrative Contractors
Alphabetical List of Acronyms
Liz Goldstein, (410) 786–6665, FY 2008 MedPAC Medicare Payment Advisory
Appearing in the Proposed Rule
IPPS RHQDAPU HCAHPS issues. Commission
Bill Lehrman, (410) 786–1037, FY 2008 ACEP American College of Emergency MDH Medicare-dependent, small rural
IPPS RHQDAPU HCAHPS issues. Physicians hospital
AHA American Hospital Association MMA Medicare Prescription Drug,
Sheila Blackstock, (410) 786–3506, FY
AHIMA American Health Information Improvement, and Modernization Act of
2008 IPPS RHQDAPU SCIP and 2003, Pub. L. 108–173
Management Association
mortality issues. AMA American Medical Association MPFS Medicare Physician Fee Schedule
SUPPLEMENTARY INFORMATION: APC Ambulatory payment classification MSA Metropolitan Statistical Area
comments from the public on all issues AMP Average manufacturer price NCCI National Correct Coding Initiative
set forth in this proposed rule to assist ASC Ambulatory Surgical Center NCD National Coverage Determination
us in fully considering issues and ASP Average sales price NTIOL New technology intraocular lens
AWP Average wholesale price OCE Outpatient Code Editor
developing policies. You can assist us OMB Office of Management and Budget
BBA Balanced Budget Act of 1997, Pub. L.
by referencing the file code CMS–1506- OPD [Hospital] Outpatient department
105–33
P or file code CMS–4125-P for FY 2008 BBRA Medicare, Medicaid, and SCHIP OPPS [Hospital] Outpatient prospective
RHQDAPU program issues, and the [State Children’s Health Insurance payment system
specific ‘‘issue identifier’’ that precedes Program] Balanced Budget Refinement Act PA Physician assistant
the section on which you choose to of 1999, Pub. L. 106–113 PHP Partial hospitalization program
comment. BCA Blue Cross Association PM Program memorandum
BCBSA Blue Cross and Blue Shield PPI Producer Price Index
Inspection of Public Comments: All PPS Prospective payment system
Association
comments received before the close of BIPA Medicare, Medicaid, and SCHIP PPV Pneumococcal pneumonia (virus)
the comment period are available for Benefits Improvement and Protection Act PRA Paperwork Reduction Act
viewing by the public, including any of 2000, Pub. L. 106–554 QIO Quality Improvement Organization
personally identifiable or confidential CAH Critical access hospital RFA Regulatory Flexibility Act
business information that is included in CBSA Core-Based Statistical Area RHQDAPU Reporting hospital quality data
a comment. We post all comments CCR Cost-to-charge ratio for annual payment update
CMHC Community mental health center RHHI Regional home health intermediary
received before the close of the SBA Small Business Administration
comment period on the following Web CMS Centers for Medicare & Medicaid
Services SCH Sole community hospital
site as soon as possible after they have SDP Single Drug Pricer
CNS Clinical nurse specialist
been received: http://www.cms.hhs.gov/ CORF Comprehensive outpatient SI Status indicator
eRulemaking. Click on the link rehabilitation facility TEFRA Tax Equity and Fiscal
‘‘Electronic Comments on CMS CPT [Physicians’] Current Procedural Responsibility Act of 1982, Pub. L. 97–248
Regulations’’ on that Web site to view Terminology, Fourth Edition, 2006, TOPS Transitional outpatient payments
public comments. copyrighted by the American Medical USPDI United States Pharmacopoeia Drug
Association Information
Comments received timely will also
be available for public inspection as CRNA Certified registered nurse anesthetist In this document, we address three
they are received, generally beginning CY Calendar year payment systems under the Medicare
DMEPOS Durable medical equipment, program: the hospital outpatient
approximately 3 weeks after publication
prosthetics, orthotics, and supplies prospective payment system (OPPS), the
of a document, at the headquarters of DMERC Durable medical equipment
the Centers for Medicare & Medicaid regional carrier
hospital inpatient prospective payment
Services, 7500 Security Boulevard, DRA Deficit Reduction Act of 2005, Pub. L. system (IPPS), and the ambulatory
Baltimore, MD 21244, on Monday 109–171 surgical center (ASC) payment system.
through Friday of each week from 8:30 DSH Disproportionate share hospital The provisions relating to the OPPS are
a.m. to 4 p.m. To schedule an EACH Essential Access Community included in sections I. through XIII.,
appointment to view public comments, Hospital XV., XVI., XX., XXIV., XXVI., and
phone 1–800–743–3951. E/M Evaluation and management XXVII. of the preamble and in Addenda
EPO Erythropoietin A, B, C (available on the Internet only;
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Electronic Access ESRD End-stage renal disease see section XXIV. of the preamble of this
FACA Federal Advisory Committee Act,
This Federal Register document is Pub. L. 92–463
proposed rule), D1, D2, and E of this
also available from the Federal Register FAR Federal Acquisition Regulations proposed rule. The provisions related to
online database through GPO Access, a FDA Food and Drug Administration IPPS are included in sections XXIII.,
service of the U.S. Government Printing FFS Fee-for-service XXV. through XXVII. of the preamble.
FSS Federal Supply Schedule The provisions related to ASCs are

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included in sections XVII,. XVIII., and 15. OPPS Policy and Payment B. Proposed Changes—Variations Within
XXIV. through XXVII. of the preamble Recommendations APCs
and in Addenda AA, BB, and CC of the 16. Proposed Policies Affecting 1. Background
Ambulatory Surgical Centers (ASCs) for 2. Application of the 2 Times Rule
proposed rule.
CY 2007 3. Exceptions to the 2 Times Rule
In addition, in this document, we
17. Proposed Revised Ambulatory Surgical C. New Technology APCs
address our proposed implementation of Center (ASC) Payment System for 1. Introduction
the Medicare contracting reform Implementation January 1, 2008 2. Proposed Movement of Procedures from
provisions of the MMA that replace the 18. Medicare Provider Contractor Reform New Technology APCs to Clinical APCs
prior Medicare intermediary and carrier Mandate a. Nonmyocardial Positron Emission
authorities formerly found in sections 19. Reporting Quality Data for Improved Tomography (PET) Scans
1816 and 1842 of the Act with Medicare Quality and Costs under the OPPS b. PET/Computed Tomography (CT) Scans
administrative contractor (MAC) 20. Promoting Effective Use of Health c. Stereotactic Radiosurgery (SRS)
Information Technology Treatment Delivery Services
authority under a new section 1874A of
21. Health Care Information Transparency d. Magnetoencephalography (MEG)
the Act. The provisions relating to Initiative
MACs are included in sections XIX., Services
22. Reporting Hospital Quality Data for e. Other Services in New Technology APCs
XXVI., and XXVII.E. of this preamble. Annual Payment Update under the IPPS D. Proposed APC-Specific Policies
To assist readers in referencing sections 23. Impact Analysis 1. Skin Replacement Surgery and Skin
contained in this document, we are II. Proposed Updates Affecting OPPS Substitutes (APCs 0024, 0025 and 0027)
providing the following table of Payments for CY 2007 2. Treatment of Fracture/Dislocation (APC
contents: A. Proposed Recalibration of APC Relative
0046)
Weights for CY 2007
Table of Contents 3. Electrophysiologic Recording/Mapping
1. Database Construction
(APC 0087)
I. Background for the OPPS a. Database Source and Methodology
4. Insertion of Mesh or Other Prosthesis
A. Legislative and Regulatory Authority for b. Proposed Use of Single and Multiple
(APC 0154)
the Hospital Outpatient Prospective Procedure Claims
5. Percutaneous Renal Cryoablation (APC
Payment System c. Proposed Revision to the Overall Cost-
0163)
B. Excluded OPPS Services and Hospitals to-Charge Ratio (CCR) Calculation
6. Keratoprosthesis (APC 0244)
C. Prior Rulemaking 2. Proposed Calculation of Median Costs
7. Medication Therapy Management
D. APC Advisory Panel for CY 2007
1. Authority of the APC Panel 3. Proposed Calculation of Scaled OPPS Services
2. Establishment of the APC Panel Payment Weights 8. Complex Interstitial Radiation Source
3. APC Panel Meetings and Organizational 4. Proposed Changes to Packaged Services Application (APC 0651)
Structure B. Proposed Payment for Partial 9. Single Allergy Tests (APC 0381)
E. Provisions of the Medicare Prescription Hospitalization 10. Hyperbaric Oxygen Therapy (APC
Drug, Improvement, and Modernization 1. Background 0659)
Act of 2003 2. Proposed PHP APC Update for CY 2007 11. Myocardial Positron Emission
1. Reduction in Threshold for Separate 3. Proposed Separate Threshold for Outlier Tomography (PET) Scans (APCs 0306,
APCs for Drugs Payments to CMHCs 0307)
2. Special Payment for Brachytherapy C. Proposed Conversion Factor Update for 12. Radiology Procedures (APCs 0333,
F. Provisions of the Deficit Reduction Act CY 2007 0662, and Other Imaging APCs)
of 2005 D. Proposed Wage Index Changes for CY IV. Proposed OPPS Payment Changes for
1. 3-Year Transition of Hold Harmless 2007 Devices
Payments E. Proposed Statewide Average Default A. Proposed Treatment of Device-
2. Medicare Coverage of Ultrasound CCRs Dependent APCs
Screening for Abdominal Aortic F. OPPS Payments to Certain Rural 1. Background
Aneurysms Hospitals 2. Proposed CY 2007 Payment Policy
G. Summary of the Major Contents of This 1. Hold Harmless Transitional Payment 3. Devices Billed in the Absence of an
Proposed Rule Changes Made by Pub. L. 109–171 (DRA) Appropriate Procedure Code
1. Proposed Updates Affecting Payment for 2. Proposed Adjustment for Rural SCHs 4. Proposed Payment Policy When Devices
CY 2007 are Replaced Without Cost or Where
Implemented in CY 2006 Related to Pub.
2. Proposed Ambulatory Payment Credit for a Replaced Device is
L. 108–173 (MMA)
Classification (APC) Group Policies Furnished to the Hospital
G. Proposed CY 2007 Hospital Outpatient
3. Proposed Payment Changes for Devices B. Proposed Pass-Through Payments for
Outlier Payments
4. Proposed Payment Changes for Drugs, Devices
Biologicals, and Radiopharmaceuticals H. Calculation of the Proposed OPPS
National Unadjusted Medicare Payment 1. Expiration of Transitional Pass-Through
5. Estimate of Transitional Pass-Through Payments for Certain Devices
Spending in CY 2007 for Drugs, I. Proposed Beneficiary Copayments for CY
2007 a. Background
Biologicals, and Radiopharmaceuticals
1. Background b. Proposed Policy for CY 2007
6. Proposed Brachytherapy Payment
2. Proposed Copayment for CY 2007 2. Provisions for Reducing Transitional
Changes
7. Proposed Coding and Payment for Drug 3. Calculation of a Proposed Adjusted Pass-Through Payments to Offset Costs
and Vaccine Administration Copayment Amount for an APC Group Packaged Into APC Groups
8. Proposed Hospital Coding for Evaluation for CY 2007 a. Background
and Management (E/M) Services III. Proposed OPPS Ambulatory Payment b. Proposed Policy for CY 2007
9. Proposed Payment for Blood and Blood Classification (APC) Group Policies V. Proposed OPPS Payment Changes for
Products A. Proposed Treatment of New HCPCS and Drugs, Biologicals, and
10. Proposed Payment for Observation CPT Codes Radiopharmaceuticals
Services 1. Proposed Treatment of New HCPCS A. Proposed Transitional Pass-Through
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11. Procedures That Will Be Paid Only as Codes Included in the Second and Third Payment for Additional Costs of Drugs
Inpatient Services Quarterly OPPS Updates for CY 2006 and Biologicals
12. Proposed Nonrecurring Policy Changes 2. Proposed Treatment of New CY 2007 1. Background
13. Emergency Medical Screening in Category I and III CPT Codes and Level 2. Expiration in CY 2006 of Pass-Through
Critical Access Hospitals (CAHs) II HCPCS Codes Status for Drugs and Biologicals
14. Proposed OPPS Payment Status and 3. Proposed Treatment of New Mid-Year 3. Drugs and Biologicals With Proposed
Comment Indicator CPT Codes Pass-Through Status in CY 2007

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B. Proposed Payment for Drugs, XI. Proposed OPPS Payment for Observation 6. Other Comments on the May 4, 2005
Biologicals, and Radiopharmaceuticals Services Interim Final Rule
Without Pass-Through Status XII. Proposed Procedures That Will Be Paid C. Proposed Regulatory Changes for CY
1. Background Only as Inpatient Procedures 2007
2. Proposed Criteria for Packaging Payment A. Background D. Implementation of Section 5103 of Pub.
for Drugs, Biologicals, and B. Proposed Changes to the Inpatient Only L. 109–171 (DRA)
Radiopharmaceuticals List E. Proposal to Modify the Current ASC
3. Proposed Payment for Drugs, C. Proposed CY 2007 Payment for Process for Adjusting Payment for New
Biologicals, and Radiopharmaceuticals Ancillary Outpatient Services When Technology Intraocular Lenses (NTIOLs)
Without Pass-Through Status That Are Patient Expires (-CA Modifier) 1. Background
Not Packaged 1. Background a. Current ASC Payment for Insertion of
a. Proposed Payment for Specified Covered 2. Proposed Policy for CY 2007 IOLs
Outpatient Drugs XIII. Proposed OPPS Nonrecurring Policy b. Classes of NTIOLs Approved for
b. Proposed CY 2007 Payment for Nonpass- Changes Payment Adjustment
Through Drugs, Biologicals, A. Removal of Comprehensive Outpatient 2. Proposed Changes
Radiopharmaceuticals With HCPCS Rehabilitation Facility (CORF) Services a. Process for Recognizing IOLs as
Codes, But Without OPPS Hospital from the List of Services Paid under the Belonging to an Active IOL Class
Claims Data OPPS b. Public Notice and Comment Regarding
VI. Proposed Estimate of OPPS Transitional B. Addition of Ultrasound Screening for Adjustments of NTIOL Payment
Pass-Through Spending in CY 2007 for Abdominal Aortic Aneurysms (AAAs) Amounts
Drugs, Biologicals, (Section 5112 of Pub. L. 109–171 (DRA)) c. Factors CMS Considers in Determining
Radiopharmaceuticals, and Devices 1. Background Whether a Payment Adjustment for
A. Total Allowed Pass-Through Spending 2. Proposed Assignment of New HCPCS Insertion of a New Class of IOL is
B. Proposed Estimate of Pass-Through Code for Payment of Ultrasound Appropriate
Spending for CY 2007 Screening for Abdominal Aortic d. Proposal to Revise Content of a Request
VII. Proposed Brachytherapy Source Payment Aneurysm (AAA) (Section 5112) to Review
Changes 3. Handling of Comments Received in e. Notice of CMS Determination
A. Background Response to This Proposal f. Proposed Payment Adjustment
B. Proposed Payments for Brachytherapy XIV. Emergency Medical Screening in XVIII. Proposed Revised ASC Payment
Sources in CY 2007 Critical Access Hospitals (CAHs) System for Implementation January 1,
VIII. Proposed Changes to OPPS Drug A. Background 2008
Administration Coding and Payment for B. Proposed Policy Change A. Background
CY 2007 XV. Proposed OPPS Payment Status and 1. Provisions of Pub. L. 108–173
A. Background Comment Indicators 2. Other Factors Considered
B. Proposed CY 2007 Drug Administration A. Proposed CY 2007 Status Indicator B. Procedures Proposed for Medicare
Coding Changes Definitions Payment in ASCs Effective for Services
C. Proposed CY 2007 Drug Administration 1. Proposed Payment Status Indicators to Furnished on or After January 1, 2008
Payment Changes Designate Services That Are Paid Under 1. Proposed Payable Procedures
IX. Proposed Hospital Coding and Payment the OPPS a. Proposed Definition of Surgical
for Visits 2. Proposed Payment Status Indicators to Procedure
A. Background Designate Services That Are Paid Under b. Procedures Proposed for Exclusion from
1. Guidelines Based on the Number or a Payment System Other Than the OPPS Payment Under the Revised ASC System
Type of Staff Interventions 3. Proposed Payment Status Indicators to 2. Proposed Treatment of Unlisted
2. Guidelines Based on the Time Staff Designate Services That Are Not Procedure Codes and Procedures That
Spent With the Patient Recognized Under the OPPS But That Are Not Paid Separately Under the OPPS
3. Guidelines Based on a Point System May Be Recognized by Other 3. Proposed Treatment of Office-Based
Where a Certain Number of Points Are Institutional Providers Procedures
Assigned to Each Staff Intervention 4. Proposed Payment Status Indicators to 4. Listing of Surgical Procedures Proposed
Based on the Time, Intensity, and Staff Designate Services That Are Not Payable for Exclusion from Payment of an ASC
Type Required for the Intervention by Medicare Facility Fee Under the Revised Payment
4. Guidelines Based on Patient Complexity B. Proposed CY 2007 Comment Indicator System
B. CY 2007 Proposed Coding Definitions C. Proposed Ratesetting Method
1. Clinic Visits XVI. OPPS Policy and Payment 1. Overview of Current ASC Payment
2. Emergency Department Visits Recommendations System
3. Critical Care Services A. MedPAC Recommendations 2. Proposal to Base ASC Relative Payment
C. CY 2007 Proposed Payment Policy B. APC Panel Recommendations Weights on APC Groups and Relative
D. CY 2007 Proposed Treatment of C. GAO Recommendations Payment Weights Established Under the
Guidelines XVII. Proposed Policies Affecting OPPS
1. Background Ambulatory Surgical Centers (ASCs) for 3. Proposed Packaging Policy
2. Outstanding Concerns With the AHA/ CY 2007 4. Payment for Corneal Tissue Under the
AHIMA Guidelines A. ASC Background Revised ASC Payment System
a. Three Versus Five Levels of Codes 1. Legislative History 5. Proposed Payment for Office-Based
b. Lack of Clarity for Some Interventions 2. Current Payment Method Procedures
c. Treatment of Separately Payable Services 3. Published Changes to the ASC List 6. Payment Policy for Multiple Procedure
d. Some Interventions Appear Overvalued B. Proposed ASC List Update Effective for Discounting
e. Concerns of Specialty Clinics Services Furnished on or After January 1, 7. Proposed Geographic Adjustment
f. American with Disabilities Act 2007 8. Proposed Adjustment for Inflation
g. Differentiation Between New and 1. Criteria for Additions to or Deletions 9. Proposed Beneficiary Coinsurance
Established Patients, and Between from the ASC List 10. Proposed to Phase in Implementation
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Standard Visits and Consultations 2. Response to Comments to the May 4, of Payment Rates Calculated Under the
h. Distinction Between Type A and Type 2005 Interim Final Rule for the ASC CY 2008 Revised ASC Payment System
B Emergency Departments Update 11. Proposed Calculation of ASC
X. Proposed Payment for Blood and Blood 3. Procedures Proposed for Additions to Conversion Factor and Payment Rates for
Products the ASC List CY 2008
A. Background 4. Suggested Additions Not Accepted a. Overview
B. Proposed Policy Changes for CY 2007 5. Rationale for Payment Assignment b. Budget Neutrality Requirement

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c. Proposed Calculation of the ASC 5. HCAHPS Registration Requirements Relative Weights, Payment Rates, and
Payment Rates for CY 2008 6. HCAHPS Additional Steps Copayment Amounts— CY 2007
d. Proposed Calculation of the ASC 7. HCAHPS Survey Completion Addendum AA—Proposed List of Medicare
Payment Rates for CY 2009 and Future Requirements Approved ASC Procedures for CY 2007
Years 8. HCAHPS Public Reporting With Additions and Payment Rates;
e. Alternative Option for Calculating the 9. Reporting HCAHPS Results for Multi- Including Rates That Result From
Budget Neutrality Adjustment Campus Hospitals Implementation of Section 5103 of the
Considered E. SCIP & Mortality Measure Requirements DRA
12. Proposed Annual Updates for the FY 2008 RHQDAPU Program Addendum B—OPPS Proposed Payment
D. Information in Addenda Related to the F. Conclusion Status by HCPCS Code and Related
Revised CY 2008 ASC Payment System XXIV. Files Available to the Public Via the Information Calendar Year 2007
E. Technical Changes to 42 CFR Parts 414 Internet Addendum BB—Proposed List of Medicare
and 416 XXV. Collection of Information Requirements Approved ASC Procedures for CY 2008
XIX. Medicare Contracting Reform Mandate XXVI. Response to Comments With Additions and Payment Rates
A. Background XXVII. Regulatory Impact Analysis Addendum CC—Proposed List of Procedures
B. CMS’s Vision for Medicare Fee-for- A. Overall Impact for CY 2008 Subject to Payment
Service and MACs 1. Executive Order 12866 Limitation at the Medicare Physician Fee
C. Provider Nomination and the Former 2. Regulatory Flexibility Act (RFA) Schedule (MPFS) Nonfacility Amount
Medicare Acquisition Authorities 3. Small Rural Hospitals Addendum D1—Proposed Payment Status
D. Summary of Changes Made to Sections 4. Unfunded Mandates Indicators
1816 of the Act 5. Federalism Addendum D2—Proposed Comment
E. Provisions of the Proposed Regulations B. Effects of Proposed OPPS Changes in Indicators
1. Definitions This Proposed Rule Addendum E—Proposed CPT Codes That Are
2. Assignments of Providers and Suppliers 1. Alternatives Considered Paid Only as Inpatient Procedures
to MACs a. Alternatives Considered for CPT Coding I. Background for the OPPS
3. Other Proposed Technical and and Payment Policy for Evaluation and
Conforming Changes Management Codes A. Legislative and Regulatory Authority
a. Definition of ‘‘Intermediary’’ b. Options Considered for Brachytherapy for the Hospital Outpatient Prospective
b. Intermediary Functions Source Payments Payment System
c. Options Available to Providers and CMS c. Options Considered for Payment of
d. Nomination for Intermediary Radiopharmaceuticals When the Medicare statute was
e. Notification of Actions on Nominations, 2. Limitation of Our Analysis originally enacted, Medicare payment
Changes to Another Intermediary or to 3. Estimated Impact of This Proposed Rule for hospital outpatient services was
Director Payment, and Requirements for on Hospitals based on hospital-specific costs. In an
Approval of an Agreement 4. Estimated Effect of This Proposed Rule effort to ensure that Medicare and its
f. Considerations Relating to the Effective on Beneficiaries beneficiaries pay appropriately for
and Efficient Administration of the 5. Accounting Statement
6. Conclusion services and to encourage more efficient
Medicare Program
C. Effects of Proposed Changes to the ASC delivery of care, the Congress mandated
g. Assignment and Reassignment of
Providers by CMS Payment System for CY 2007 replacement of the reasonable cost-
h. Designation of National or Regional 1. Alternatives Considered based payment methodology with a
Intermediaries and Designation of 2. Limitations on Our Analysis prospective payment system (PPS). The
Regional and Alternative Designated 3. Estimated Effects of This Proposed Rule Balanced Budget Act (BBA) of 1997
Regional Intermediaries for Home Health on ASCs (Pub. L. 105–33), added section 1833(t)
Agencies and Hospices 4. Estimated Effects of This Proposed Rule to the Social Security Act (the Act)
i. Awarding of Experimental Contracts on Beneficiaries
5. Conclusion
authorizing implementation of a PPS for
XX. Reporting Quality Data for Improved hospital outpatient services (OPPS).
Quality and Costs under the OPPS 6. Accounting Statement
D. Effects of the Proposed Revisions to the The Medicare, Medicaid, and SCHIP
XXI. Promoting Effective Use of Health Care
Technology ASC Payment System for CY 2008 Balanced Budget Refinement Act
XXII. Health Care Information Transparency 1. Alternatives Considered (BBRA) of 1999 (Pub. L. 106–113), made
Initiative 2. Limitations on Our Analysis major changes in the hospital OPPS.
XXIII. Additional Quality Measures and 3. Estimated Effects of This Proposed Rule The Medicare, Medicaid, and SCHIP
Procedures for Hospital Reporting of on ASCs Benefits Improvement and Protection
Quality Data for the FY 2008 IPPS 4. Estimated Effects of This Proposed Rule Act (BIPA) of 2000 (Pub. L. 106–554),
Annual Payment Update on Beneficiaries
5. Conclusion made further changes in the OPPS.
A. Background Section 1833(t) of the Act was also
B. Proposed Additional Quality Measures E. Effects of the Medicare Contractor
Reform Mandate amended by the Medicare Prescription
for FY 2008
1. Introduction F. Effects of Proposed Additional Quality Drug, Improvement, and Modernization
2. HCAHPS Survey and the Hospital
Measures and Procedures for Hospital Act (MMA) of 2003 (Pub. L. 108–173).
Quality Initiative Reporting of Quality Data for IPPS FY The Deficit Reduction Act (DRA) of
3. Surgical Care Improvement Project 2008 2005 (Pub. L. 109–171), enacted on
(SCIP) Quality Measures 1. Alternatives Considered February 8, 2006, made additional
2. Estimated Effects of This Proposed Rule
4. Mortality Outcome Measures
a. Effects on Hospitals
changes in the OPPS. A discussion of
C. General Procedures and Participation the provisions contained in Pub. L. 109–
Requirements for the FY 2008 IPPS b. Effects on Other Providers
c. Effects on the Medicare and Medicaid 171 that are specific to the calendar year
RHQDAPU Program (CY) 2007 OPPS is included in section
D. HCAHPS Procedures and Participation Program
G. Executive Order 12866 II.F. of this preamble.
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Requirements for the FY 2008 IPPS


RHQDAPU Program
The OPPS was first implemented for
Regulation Text
1. Introduction services furnished on or after August 1,
2. HCAHPS Hospital Pledge and Addenda 2000. Implementing regulations for the
Beginning Date for Data Collection Addendum A—OPPS Proposed List of OPPS are located at 42 CFR Part 419.
3. HCAHPS Dry Run Ambulatory Payment Classification Under the OPPS, we pay for hospital
4. HCAHPS Data Collection Requirements (APCs) With Status Indicators (SI), outpatient services on a rate-per-service

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Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules 49511

basis that varies according to the technology services that are not eligible Puerto Rico; and Indian Health Service
ambulatory payment classification for transitional pass-through payments hospitals.
(APC) group to which the service is and for which we lack sufficient data to
C. Prior Rulemaking
assigned. We use Healthcare Common appropriately assign them to a clinical
Procedure Coding System (HCPCS) APC group, we have established special On April 7, 2000, we published in the
codes (which include certain Current APC groups based on costs, which we Federal Register a final rule with
Procedural Terminology (CPT) codes) refer to as new technology APCs. These comment period (65 FR 18434) to
and descriptors to identify and group new technology APCs are designated by implement a prospective payment
the services within each APC group. cost bands which allow us to provide system for hospital outpatient services.
The OPPS includes payment for most appropriate and consistent payment for The hospital OPPS was first
hospital outpatient services, except designated new procedures that are not implemented for services furnished on
those identified in section I.B. of this yet reflected in our claims data. Similar or after August 1, 2000. Section
preamble. Section 1833(t)(1)(B)(ii) of the to pass-through payments, an 1833(t)(9) of the Act requires the
Act provides for Medicare payment assignment to a new technology APC is Secretary to review certain components
under the OPPS for hospital outpatient temporary; that is, we retain a service of the OPPS not less often than annually
services designated by the Secretary within a new technology APC until we and to revise the groups, relative
(which includes partial hospitalization acquire sufficient data to assign it to a payment weights, and other adjustments
services furnished by community clinically appropriate APC group. to take into account changes in medical
mental health centers (CMHCs)) and practice, changes in technology, and the
hospital outpatient services that are B. Excluded OPPS Services and addition of new services, new cost data,
furnished to inpatients who have Hospitals and other relevant information and
exhausted their Part A benefits or who Section 1833(t)(1)(B)(i) of the Act factors.
are otherwise not in a covered Part A authorizes the Secretary to designate the Since initially implementing the
stay. Section 611 of Pub. L. 108–173 hospital outpatient services that are OPPS, we have published final rules in
added provisions for Medicare coverage paid under the OPPS. While most the Federal Register annually to
of an initial preventive physical hospital outpatient services are payable implement statutory requirements and
examination, subject to the applicable under the OPPS, section changes arising from our experience
deductible and coinsurance, as an 1833(t)(1)(B)(iv) of the Act excludes with this system. We last published
outpatient department service, payable payment for ambulance, physical and such a document on November 10, 2005
under the OPPS. occupational therapy, and speech- (70 FR 68516). In that final rule with
The OPPS rate is an unadjusted language pathology services, for which comment period, we revised the OPPS
national payment amount that includes payment is made under a fee schedule. to update the payment weights and
the Medicare payment and the Section 614 of Pub. L. 108–173 conversion factor for services payable
beneficiary copayment. This rate is amended section 1833(t)(1)(B)(iv) of the under the CY 2006 OPPS on the basis
divided into a labor-related amount and of claims data from January 1, 2004,
Act to exclude OPPS payment for
a nonlabor-related amount. The labor- through December 31, 2004, and to
screening and diagnostic mammography
related amount is adjusted for area wage implement certain provisions of Pub. L.
services. The Secretary exercised the
differences using the inpatient hospital 108–173. In addition, we responded to
authority granted under the statute to
wage index value for the locality in public comments received on the
exclude from the OPPS those services
which the hospital or CMHC is located. provisions of November 15, 2004 final
All services and items within an APC that are paid under fee schedules or
other payment systems. Such excluded rule with comment period pertaining to
group are comparable clinically and the APC assignment of HCPCS codes
with respect to resource use (section services include, for example, the
professional services of physicians and identified in Addendum B of that rule
1833(t)(2)(B) of the Act). In accordance with the new interim (NI) comment
with section 1833(t)(2) of the Act, nonphysician practitioners paid under
the Medicare Physician Fee Schedule indicators; and public comments
subject to certain exceptions, services received on the July 25, 2005 OPPS
and items within an APC group cannot (MPFS); laboratory services paid under
the clinical diagnostic laboratory fee proposed rule for CY 2006 (70 FR
be considered comparable with respect 42674).
to the use of resources if the highest schedule; services for beneficiaries with
end-stage renal disease (ESRD) that are We published a correction of the
median (or mean cost, if elected by the November 10, 2005 final rule with
Secretary) for an item or service in the paid under the ESRD composite rate;
and, services and procedures that comment period on December 23, 2005
APC group is more than 2 times greater
require an inpatient stay that are paid (70 FR 76176). This correction
than the lowest median cost for an item
under the hospital inpatient prospective document corrected a number of
or service within the same APC group
payment system (IPPS). We set forth the technical errors that appeared in the
(referred to as the ‘‘2 times rule’’). In
services that are excluded from payment November 10, 2005 final rule with
implementing this provision, we use the
under the OPPS in § 419.22 of the comment period.
median cost of the item or service
assigned to an APC group. regulations. D. APC Advisory Panel
Special payments under the OPPS Under § 419.20(b) of the regulations,
may be made for new technology items we specify the types of hospitals and 1. Authority of the APC Panel
and services in one of two ways. Section entities that are excluded from payment Section 1833(t)(9)(A) of the Act, as
1833(t)(6) of the Act provides for under the OPPS. These excluded amended by section 201(h) of the BBRA,
temporary additional payments which entities include Maryland hospitals, but requires that we consult with an outside
sroberts on PROD1PC70 with PROPOSALS

we refer to as ‘‘transitional pass-through only for services that are paid under a panel of experts to review the clinical
payments’’ for at least 2 but not more cost containment waiver in accordance integrity of the payment groups and
than 3 years for certain drugs, biological with section 1814(b)(3) of the Act; their weights under the OPPS. The Act
agents, brachytherapy devices used for critical access hospitals (CAHs); further specifies that the panel will act
the treatment of cancer, and categories hospitals located outside of the 50 in an advisory capacity. The Advisory
of other medical devices. For new States, the District of Columbia, and Panel on Ambulatory Payment

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49512 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules

Classification (APC) Groups (the APC to facilitate its required APC review we have included a discussion of the
Panel), discussed under section I.D.2. of process. The three current proposed methodology that we would
this preamble, fulfills these subcommittees are the Data use for the drug administration
requirements. The APC Panel is not Subcommittee, the Observation threshold for CY 2007 in section V. of
restricted to using data compiled by Subcommittee, and the Packaging this preamble.
CMS and may use data collected or Subcommittee. The Data Subcommittee
2. Special Payment for Brachytherapy
developed by organizations outside the is responsible for studying the data
Department in conducting its review. issues confronting the APC Panel and Section 621(b)(1) of Pub. L. 108–173
for recommending options for resolving amended section 1833(t)(16) of the Act
2. Establishment of the APC Panel to require that payment for
them. The Observation Subcommittee
On November 21, 2000, the Secretary reviews and makes recommendations to brachytherapy devices consisting of a
signed the initial charter establishing the APC Panel on all issues pertaining seed or seeds (or radioactive source)
the APC Panel. This expert panel, which to observation services paid under the furnished on or after January 1, 2004,
may be composed of up to 15 OPPS, such as coding and operational and before January 1, 2007, be paid
representatives of providers subject to issues. The Packaging Subcommittee based on the hospital’s charge for each
the OPPS (currently employed full-time, studies and makes recommendations on device furnished, adjusted to cost.
not as consultants, in their respective issues pertaining to services that are not Because this statutory provision will no
areas of expertise), reviews and advises separately payable under the OPPS, but longer be in effect for CY 2007, we
CMS about the clinical integrity of the are bundled or packaged APC payments. discuss our proposed methodology for
APC groups and their weights. For Each of these subcommittees was payment for brachytherapy devices for
purposes of this Panel, consultants or established by a majority vote of the CY 2007 in section VII.B. of this
independent contractors are not APC Panel during a scheduled APC preamble.
considered to be full-time employees. Panel meeting. All subcommittee
The APC Panel is technical in nature F. Provisions of the Deficit Reduction
recommendations are discussed and
and is governed by the provisions of the Act of 2005
voted upon by the full APC Panel.
Federal Advisory Committee Act Discussions of the recommendations The Deficit Reduction Act (DRA) of
(FACA). Since its initial chartering, the resulting from the APC Panel’s March 2005, Pub. L. 109–171, enacted on
Secretary has twice renewed the APC 2006 meeting are included in the February 8, 2006, included three
Panel’s charter: on November 1, 2002, sections of this preamble that are provisions affecting the OPPS, as
and on November 1, 2004. The current specific to each recommendation. For discussed below.
charter indicates, among other discussions of earlier APC Panel 1. 3-Year Transition of Hold Harmless
requirements, that the APC Panel meetings and recommendations, we
Payments
continues to be technical in nature; is reference previous hospital OPPS final
governed by the provisions of the rules or the Web site mentioned earlier Section 5105 of Pub. L. 109–171
FACA; may convene up to three in this section. provides a 3-year transition of hold
meetings per year; has a Designated harmless OPPS payments for hospitals
E. Provisions of the Medicare located in a rural area with not more
Federal Officer (DFO); and is chaired by
Prescription Drug, Improvement, and than 100 beds that are not defined as
a Federal official who also serves as a
Modernization Act of 2003 sole community hospitals (SCHs). This
CMS medical officer.
The current APC Panel membership The Medicare Prescription Drug, provision provides an increased
and other information pertaining to the Improvement, and Modernization Act payment for such hospitals for covered
Panel, including its charter, Federal (MMA) of 2003, Pub. L. 108–173, made OPD services furnished on or after
Register notices, meeting dates, agenda changes to the Act relating to the January 1, 2006, and before January 1,
topics, and meeting reports can be Medicare OPPS. In the January 6, 2004 2009, if the OPPS payment they receive
viewed on the CMS Web site at http:// interim final rule with comment period is less than the pre-BBA payment
new.cms.hhs.gov/FACA/05_Advisory and the November 15, 2004 final rule amount that they would have received
PanelonAmbulatoryPayment with comment period, we implemented for the same covered OPD services. This
ClassificationGroups.asp. provisions of Pub. L. 108–173 relating to provision specifies that, in such cases,
the OPPS that were effective for services the amount of payment to the specified
3. APC Panel Meetings and provided in CY 2004 and CY 2005, hospitals shall be increased by the
Organizational Structure respectively. In the November 10, 2005 applicable percentage of such
The APC Panel first met on February final rule with comment period, we difference. Section 5105 specifies the
27, February 28, and March 1, 2001. implemented provisions of Pub. L. 108– applicable percentage as 95 percent for
Since that initial meeting, the APC 173 relating to the OPPS that went into CY 2006, 90 percent for CY 2007, and
Panel has held nine subsequent effect for services provided in CY 2006 85 percent for CY 2008.
meetings, with the last meeting taking (70 FR 68521). We note below those
place on March 1 and 2, 2006. (The APC 2. Medicare Coverage of Ultrasound
provisions of Pub. L. 108–173 that will
Panel did not meet on March 3, 2006, Screening for Abdominal Aortic
expire at the end of CY 2006.
as announced in the meeting notice Aneurysms
published on December 23, 2005 (70 FR 1. Reduction in Threshold for Separate Section 5112 of Pub. L. 109–171
76313).) Prior to each meeting, we APCs for Drugs amended section 1861 of the Act to
publish a notice in the Federal Register Section 621(a)(2) of Pub. L. 108–173 include coverage of ultrasound
to announce the meeting and, when amended section 1833(t)(16) of the Act screening for abdominal aortic
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necessary, to solicit and announce to set a $50 per administration threshold aneurysms for certain individuals on or
nominations for APC Panel for the establishment of separate APCs after January 1, 2007. The provision will
membership. for drugs and biologicals furnished from apply to individuals (a) Who receive a
The APC Panel has established an January 1, 2005, through December 31, referral for such an ultrasound screening
operational structure that, in part, 2006. Because this statutory provision as a result of an initial preventive
includes the use of three subcommittees will no longer be in effect for CY 2007, physical examination; (b) who have not

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Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules 49513

been previously furnished with an • Proposed changes relating to the 7. Proposed Coding and Payment for
ultrasound screening under Medicare; expiring hold harmless payment Drug and Vaccine Administration
and (c) who have a family history of provision. In section VIII. of this preamble, we
abdominal aortic aneurysm or manifest • Proposed changes to payment for discuss our proposed coding and
risk factors included in a beneficiary rural sole community hospitals for CY payment changes for drug and vaccine
category recommended for screening (as 2007. administration services.
determined by the United States • Proposed changes in the way we
Preventive Services Task Force). calculate hospital outpatient outlier 8. Proposed Hospital Coding for
Ultrasound screening for abdominal payments for CY 2007. Evaluation and Management (E/M)
aortic aneurysm will be included in the • Calculation of the proposed Services
initial preventive physical examination. national unadjusted Medicare OPPS In section IX. of this preamble, we
Section 5112 also added ultrasound payment. discuss our proposal for developing the
screening for abdominal aortic • The proposed beneficiary coding guidelines for evaluation and
aneurysm to the list of services for copayment for OPPS services for CY management services.
which the beneficiary deductible does 2007.
not apply. These amendments apply to 9. Proposed Payment for Blood and
services furnished on or after January 1, 2. Proposed Ambulatory Payment Blood Products
2007. Classification (APC) Group Policies In section X. of this preamble, we
In section III. of this preamble, we discuss our proposed payment changes
G. Summary of the Major Content of
discuss the proposed additions of new for blood and blood products.
This Proposed Rule
procedure codes to the APCs; our 10. Proposed Payment for Observation
In this proposed rule, we are setting proposal to establish a number of new
forth proposed changes to the Medicare Services
APCs; and our proposal to make
hospital OPPS for CY 2007. These changes to the assignment of HCPCS In section XI. of this preamble, we
changes would be effective for services codes under a number of existing APCs discuss our proposed criteria and
furnished on or after January 1, 2007. based on our analyses of Medicare coding changes for separately payable
We are setting forth proposed changes to claims data and recommendations of the observation services.
the Medicare ASC program for CY 2007 APC Panel. We also discuss the 11. Procedures That Will Be Paid Only
and CY 2008. We are setting forth application of the 2 times rule and as Inpatient Services
proposed changes to the way we process proposed exceptions to it; proposed
FFS claims under Medicare Part A and In section XII. of this preamble, we
changes for specific APCs; the proposed
Part B. Some of these changes were discuss the procedures that we propose
refinement of the New Technology cost
effective on October 1, 2005 and all of to remove from the inpatient list and
bands; and the proposed movement of
the changes are to be fully implemented assign to APCs.
procedures from the New Technology
by October 1, 2011. Finally, we are APCs. 12. Proposed Nonrecurring Policy
setting forth a notice seeking comments Changes
on the RHQDAPU program under the 3. Proposed Payment Changes for
Medicare hospital IPPS for FY 2008. Devices In section XIII. of this preamble, we
These changes would be effective for discuss proposed changes to certain
In section IV. of this preamble, we comprehensive outpatient rehabilitation
payments beginning with FY 2008. The discuss proposed changes to the device-
following is a summary of the major facility (CORF) services paid under the
dependent APCs, and to the pass- OPPS. In this section, we also discuss
changes that we are proposing to make: through payment for categories of proposed payment for ultrasound
1. Proposed Updates Affecting Payments devices. screening for abdominal aortic
for CY 2007 4. Proposed Payment Changes for Drugs, aneurysms (AAAs).
In section II. of this preamble, we set Biologicals, and Radiopharmaceuticals 13. Emergency Medical Screening in
forth— In section V. of this preamble, we Critical Access Hospitals (CAHs)
• The methodology used to discuss proposed changes for drugs, In section XIV. of this preamble, we
recalibrate the proposed APC relative biologicals, and radiopharmaceuticals. discuss proposed changes to a
payment weights and the proposed
5. Estimate of Transitional Pass-Through regulation governing emergency medical
recalibration of the relative payment
Spending in CY 2007 for Drugs, screening in critical access hospitals
weights for CY 2007.
Biologicals, and Devices (CAHs).
• The proposed payment for partial
hospitalization, including the proposed In section VI. of this preamble, we 14. Proposed OPPS Payment Status and
separate threshold for outlier payments discuss the proposed methodology for Comment Indicator
for CMHCs. estimating total pass-through spending In section XV. of this preamble, we
• The proposed update to the and whether there should be a pro rata discuss proposed changes to the list of
conversion factor used to determine reduction for transitional pass-through status indicators assigned to APCs and
payment rates under the OPPS for CY drugs, biologicals, present our proposed comment
2007. radiopharmaceuticals, and categories of indicators for the CY 2007 OPPS final
• The proposed retention of our devices for CY 2007. rule.
current policy to apply the IPPS wage
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indices to wage adjust the APC median 6. Proposed Brachytherapy Payment 15. OPPS Policy and Payment
costs in determining the OPPS payment Changes Recommendations
rate and the copayment standardized In section VII. of this preamble, we In section XVI. of this preamble, we
amount for CY 2007. discuss our proposal concerning coding address recommendations made by
• The proposed update of statewide and payment for the sources of MedPAC and the APC Panel regarding
average default cost-to-charge ratios. brachytherapy. the OPPS for CY 2007.

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16. Proposed Policies Affecting 23. Impact Analysis proposed OPPS APC relative weights for
Ambulatory Surgical Centers (ASCs) for In section XXVII. of this preamble, we CY 2007 OPPS. From the 50.7 million
CY 2007 set forth an analysis of the impact that whole claims, we created 91.4 million
the proposed changes will have on single records, of which 62.8 million
In section XVII. of this preamble we were ‘‘pseudo’’ single claims (created
discuss proposed payment changes affected entities and beneficiaries.
from multiple procedure claims using
affecting ASCs in CY 2007, the proposed II. Proposed Updates Affecting OPPS the process we discuss in this section).
list of updated ASC procedures, and Payments for CY 2007 The proposed APC relative weights
proposed modification of the ASC and payments for CY 2007 in Addenda
payment adjustment process for new A. Proposed Recalibration of APC
Relative Weights for CY 2007 A and B to this proposed rule were
technology intraocular lenses (NTIOLs). calculated using claims from this period
(If you choose to comment on the that had been processed before January
17. Proposed Revised Ambulatory issues in this section, please include the
Surgical Center (ASC) Payment System 1, 2006. We selected claims for services
caption ‘‘APC Relative Weights’’ at the paid under the OPPS and matched these
for Implementation January 1, 2008 beginning of your comment.) claims to the most recent cost report
In section XVIII. of this preamble, we 1. Database Construction filed by the individual hospitals
discuss our proposal to implement a represented in our claims data. We are
new ASC payment system for services a. Database Source and Methodology proposing that the APC relative weights
furnished on or after January 1, 2008, Section 1833(t)(9)(A) of the Act for CY 2007 continue to be based on the
and the regulatory changes related to the requires that the Secretary review and median hospital costs for services in the
proposed new system. revise the relative payment weights for APC groups. For the CY 2007 OPPS
APCs at least annually. In the April 7, final rule, we are proposing to base APC
18. Medicare Provider Contractor
2000 OPPS final rule with comment median costs on claims for services
Reform Mandate period (65 FR 18482), we explained in furnished in CY 2005 and processed
In section XIX. of this preamble, we detail how we calculated the relative before June 30, 2006.
discuss proposed changes to the payment weights that were
b. Proposed Use of Single and Multiple
regulations under 42 CFR Part 421, implemented on August 1, 2000, for
Procedure Claims
Subpart B to conform them to the each APC group. Except for some
statutory changes required by section reweighting due to a small number of For CY 2007, we are proposing to
911 of Public Law 108–173 related to APC changes, these relative payment continue to use single procedure claims
Medicare contracting reform. weights continued to be in effect for CY to set the medians on which the APC
2001. This policy is discussed in the relative payment weights would be
19. Reporting Quality Data for Improved November 13, 2000 interim final rule based. We have received many requests
Quality and Costs Under the OPPS (65 FR 67824 through 67827). asking that we ensure that the data from
We are proposing to use the same claims that contain charges for multiple
In section XX. of this preamble, we
basic methodology that we described in procedures are included in the data
discuss the expenditure growth in
the April 7, 2000 final rule with from which we calculate the relative
outpatient hospital services, invite
comment period to recalibrate the APC payment weights. Requesters believe
comment on value-based purchasing
relative payment weights for services that relying solely on single procedure
specifically related to hospital
furnished on or after January 1, 2007, claims to recalibrate APC relative
outpatient departments, and discuss a
and before January 1, 2008. That is, we payment weights fails to take into
value-based purchasing program account data for many frequently
would recalibrate the relative payment
proposal for the CY 2007 OPPS. performed procedures, particularly
weights for each APC based on claims
20. Promoting Effective Use of Health and cost report data for outpatient those commonly performed in
Information Technology services. We are proposing to use the combination with other procedures.
most recent available data to construct They believe that, by depending upon
In section XXI. of this preamble, we the database for calculating APC group single procedure claims, we base
invite comments on promoting weights. For the purpose of recalibrating relative payment weights on the least
hospitals’ effective use of health APC relative payment weights in this costly services, thereby introducing
information technology. proposed rule for CY 2007, we used downward bias to the medians on
21. Health Care Information approximately 131.9 million final action which the weights are based.
Transparency Initiative claims for hospital OPD services We agree that, optimally, it is
furnished on or after January 1, 2005, desirable to use the data from as many
In section XXII. of this preamble, we and before January 1, 2006. Of the 131.9 claims as possible to recalibrate the APC
discuss HHS’ major health information million final action claims for services relative payment weights, including
transparency initiative which we are provided in hospital outpatient settings, those with multiple procedures. We
launching in 2006. 102.9 million claims were of the type of generally use single procedure claims to
22. Reporting Hospital Quality Data for bill potentially appropriate for use in set the median costs for APCs because
Annual Payment Update Under the IPPS setting rates for OPPS services (but did we are, so far, unable to ensure that
not necessarily contain services payable packaged costs can be appropriately
In section XXIII. of this preamble, we under the OPPS). Of the 102.9 million allocated across multiple procedures
invite comment on our proposal for the claims, approximately 48.5 million were performed on the same date of service.
FY 2008 IPPS annual payment update to not for services paid under the OPPS or However, by bypassing specified codes
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add the HCAHPS survey, measures were excluded as not appropriate for that we believe do not have significant
from the Surgical Care Improvement use (for example, erroneous cost-to- packaged costs, we are able to use more
Project (SCIP), and Mortality measures charge ratios or no HCPCS codes data from multiple procedure claims. In
to the quality of care measures to be reported on the claim). We were able to many cases, this enables us to create
used in FY 2007 for purposes of the use 50.7 million whole claims of the multiple ‘‘pseudo’’ single claims from
IPPS annual payment update. remaining 54.4 million claims to set the claims that, as submitted, contained

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multiple separately paid procedures on combined with the single procedure We are proposing to bypass the 454
the same claim. For the CY 2007 OPPS, claims to set the median costs for the codes identified in Table 1 to create new
we are proposing to use the date of bypass codes. single claims and to use the line-item
service on the claims and a list of codes For CY 2006, we continued using the costs associated with the bypass codes
to be bypassed to create ‘‘pseudo’’ single codes on the CY 2005 OPPS bypass list on these claims, together with the single
claims from multiple procedure claims, and expanded it to include 404 bypass procedure claims, in the creation of the
as we did in recalibrating the CY 2006 codes, including 3 bladder median costs for the APCS into which
APC relative payment weights. We refer catheterization codes (CPT codes 51701, they are assigned. Of the codes on this
to these newly created single procedure 51702, and 51703), which did not meet list, 404 codes were used for bypass in
claims as ‘‘pseudo’’ single claims the empirical criteria discussed below CY 2006. We are proposing to continue
because they were submitted by for the selection of bypass codes. We the use of the codes on the CY 2006
providers as multiple procedure claims. added these three codes to the CY 2006 OPPS bypass list and to expand it by
For CY 2003, we created ‘‘pseudo’’ bypass list because a decision to change adding codes that, using data presented
single claims by bypassing HCPCS their payment status from packaged to to the APC Panel at its March 2006
codes 93005 (Electrocardiogram, separately paid would have resulted in meeting, meet the same empirical
tracing), 71010 (Chest x-ray), and 71020 a reduction of the number of single bills criteria as those used in CY 2006 to
(Chest x-ray) on a submitted claim. on which we could base median costs create the bypass list, or which our
However, we did not use claims data for for other major separately paid clinicians believe would contain
the bypassed codes in the creation of the procedures that were billed on the same minimal packaging if the services were
median costs for the APCs to which claim with these three procedure codes. correctly coded (for example,
these three codes were assigned because That is, single bills which contained ultrasound guidance). Our examination
the level of packaging that would have other procedures would have become of the data against the criteria for
remained on the claim after we selected multiple procedure claims when these inclusion on the bypass list, as
the bypass code was not apparent and, bladder catheterization codes were discussed below for the addition of new
therefore, it was difficult to determine if converted to separately paid status. We codes, shows that the empirically
the medians for these codes would be believed and continue to believe that selected codes used for bypass for the
correct. bypassing these three codes does not CY 2006 OPPS generally continue to
For CY 2004, we created ‘‘pseudo’’ meet the criteria or come very close to
adversely affect the medians for other
single claims by bypassing these three meeting the criteria, and we have
procedures because we believe that
codes and also by bypassing an received no comments against bypassing
when these services are performed on
additional 269 HCPCS codes in APCs. them.
the same day as another separately paid
We selected these codes based on a To facilitate comment, Table 1
service, any packaging that appears on
clinical review of the services and indicates the list of codes we are
the claim would be appropriately
because it was presumed that these proposing to bypass for creation of
associated with the other procedure and
codes had only very limited packaging ‘‘pseudo’’ singles for CY 2007 OPPS.
and could appropriately be bypassed for not with these codes.
Bypass codes shown in Table 1 with an
the purpose of creating ‘‘pseudo’’ single Consequently, for CY 2006, we asterisk indicate the HCPCS codes we
claims. The APCs to which these codes identified 404 bypass codes for use in are proposing to add to the CY 2006
were assigned were varied and included creating ‘‘pseudo’’ single claims and OPPS listed codes for bypass in CY
mammography, cardiac rehabilitation, used some part of 90 percent of the total 2007. The criteria we are proposing to
and Level I plain film x-rays. To derive claims that were eligible for use in use to determine the additional codes to
more ‘‘pseudo’’ single claims, we also OPPS ratesetting and modeling in add to the CY 2006 OPPS bypass list in
split the claims where there were dates developing the final rule with comment order to create the bypass list for CY
of service for revenue code charges on period. This process enabled us to use, 2007 OPPS are discussed below.
that claim that could be matched to a for CY 2006 OPPS, 88 million single The following empirical criteria were
single procedure code on the claim on bills for ratesetting: 55 million ‘‘pseudo’’ developed by reviewing the frequency
the same date. singles and 34 million ‘‘natural’’ single and magnitude of packaging in the
For the CY 2004 OPPS, as in CY 2003, bills (bills that were submitted single claims for payable codes other
we did not include the claims data for containing only one separately payable than drugs and biologicals. We assumed
the bypassed codes in the creation of the major HCPCS code). (These numbers do that the representation of packaging on
APCs to which the 269 codes were not sum to 88 million because more the single claims for any given code is
assigned because, again, we had not than 800,000 single bills were removed comparable to packaging for that code in
established that such an approach was when we trimmed at the HCPCS level at the multiple claims:
appropriate and would aid in accurately +/¥3 standard deviations from the • There were 100 or more single
estimating the median costs for those geometric mean.) claims for the code. This number of
APCs. For CY 2004, from approximately For CY 2007, we are proposing to single claims ensured that observed
16.3 million otherwise unusable claims, continue using date-of-service matching outcomes were sufficiently
we used approximately 9.5 million as a tool for creation of ‘‘pseudo’’ single representative of packaging that might
multiple procedure claims to create claims and to continue the use of a occur in the multiple claims.
approximately 27 million ‘‘pseudo’’ bypass list to create ‘‘pseudo’’ single • Five percent or fewer of the single
single claims. For CY 2005, we claims. The process we are proposing claims for the code had packaged costs
identified 383 bypass codes and from for CY 2007 OPPS results in our being on that single claim for the code. This
approximately 24 million otherwise able to use some part of 94.8 percent of criterion results in limiting the amount
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unusable claims, we used the total claims that are eligible for use of packaging being redistributed to the
approximately 18 million multiple in the OPPS ratesetting and modeling in payable procedure remaining on the
procedure claims to create developing this proposed rule. This claim after the bypass code is removed
approximately 52 million ‘‘pseudo’’ process enabled us to use, for CY 2007, and ensures that the costs associated
single claims. For CY 2005, we used the 62.8 million ‘‘pseudo’’ singles and 29.6 with the bypass code represent the cost
claims data for the bypass codes million ‘‘natural’’ single bills. of the bypassed service.

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• The median cost of packaging packaging and codes for specified drug list is contained in the discussion of
observed in the single claim was equal administration for which hospitals have drug administration in section VIII.C. of
to or less than $50. This limits the requested separate payment but for this preamble.
amount of error in redistributed costs. which it is not possible to acquire We specifically invite public
• The code is not a code for an median costs unless we add these codes comment on the ‘‘pseudo’’ single
unlisted service. to the bypass list. A more complete
In addition, we are proposing to add process, including the bypass list and
discussion of the effects of adding these the criteria.
to the bypass list codes that our
drug administration codes to the bypass
clinicians believe contain minimal BILLING CODE 4120–01–P
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c. Proposed Revision to the Overall these cost centers are largely paid for We also have underestimated spending
Cost-to-Charge Ratio (CCR) Calculation under other payment systems. The for services paid at charges reduced to
We calculate both an overall CCR and specific list of ancillary cost centers, cost in our budget neutrality estimates.
cost center-specific cost-to-charge ratios both standard and nonstandard, In examining the two different
(CCRs) for each hospital. For CY 2007 included in our overall CCR calculation calculations, we decided that elements
is available on our Web site in the of each methodology had merit. Clearly,
OPPS, we are proposing to change the
revenue center-to-cost center crosswalk as noted above, allied health costs
methodology for calculating the overall
workbook: http://www.cms.hhs.gov/ should not be included in an overall
CCR. The overall CCR is used in many
HospitalOutpatientPPS. CCR calculation. However, weighting by
components of the OPPS. We use the
The overall CCR calculation provided Medicare Part B charges from Worksheet
overall CCR to estimate costs from
in Program Transmittal A–03–04, on the D, Parts V and VI, makes the overall
charges on a claim when we do not have
other hand, takes the CCRs from CCR calculation more specific to OPPS.
an accurate cost center CCR. This does
Worksheet C, Part I, Column 9, for each Therefore, we are proposing to adopt a
not happen very often. For the vast
specified ancillary cost center; single overall CCR calculation that
majority of services, we are able to use
multiplies them by the Medicare Part B incorporates weighting by Medicare Part
a cost center CCR to estimate costs from outpatient specific charges in each B charges but excludes allied health
charges. However, we also use the corresponding ancillary cost center from costs for modeling and payment.
overall CCR to identify the outlier Worksheet D, Parts V and VI (Columns Specifically, the proposed calculation
threshold, to model payments for 2, 3, 4, and 5 and subscripts thereof); removes allied health costs from cost
services that are paid at charges reduced and then divides the sum of these costs center CCR calculations for specified
to cost, and, during implementation, to by the sum of charges for the specified ancillary cost centers, as discussed
determine outlier payments and ancillary cost centers from Worksheet D, above, multiplies them by the Medicare
payments for other services. Parts V and VI (Columns 2, 3, 4, and 5 Part B charges on Worksheet D, Parts V
We have discovered that the and subscripts thereof). Compared with and VI, and sums these estimated
calculation of the overall CCR that the our ‘‘traditional’’ overall CCR Medicare costs. This sum is then
fiscal intermediaries are using to calculation that has been used for divided by the sum of the same
determine outlier payment and payment modeling OPPS and to calculate the Medicare Part B charges for the same
for services paid at charges reduced to median costs, this fiscal intermediary specified set of ancillary cost centers.
cost differs from the overall CCR that we calculation of overall CCR fails to Using the same cost report data, we
use to model the OPPS. In Program remove allied health costs and adds estimated a median overall CCR for the
Transmittal A–03–04 on ‘‘Calculating weighting by Medicare Part B charges. proposed calculation of 0.3081 (mean
Provider-Specific Outpatient Cost-to- In comparing these two calculations, 0.3389) with a standard deviation of
Charge Ratios (CCRs) and Instructions we discovered that, on average, the 0.1583. The similarity to the median
on Cost Report Treatment of Hospital overall CCR calculation being used by and standard deviation of the
Outpatient Services Paid on a the fiscal intermediary resulted in ‘‘traditional’’ overall CCR calculation
Reasonable Cost Basis’’ (January 17, higher overall CCRs than under our noted above (median 0.3040 and
2003), we revised the overall CCR ‘‘traditional’’ calculation. Using the standard deviation of 0.1318) masks
calculation that the fiscal intermediaries most recent cost report data available for some sizeable changes in overall CCR
use in determining outlier and other every provider with valid claims for CY calculations for specific hospitals due
cost payments. Until this point, each 2004 as of November 2005, we largely to the inclusion of Medicare Part
fiscal intermediary had used an overall estimated the median overall CCR using B weighting.
CCR provided by CMS, or calculated an the traditional calculation to be 0.3040 In order to isolate the overall impact
updated CCR at the provider’s request (mean 0.3223) and the median overall of adopting this methodology on APC
using the same calculation. The CCR using the fiscal intermediary medians, we used the first 9 months of
calculation in Program Transmittal A– calculation to be 0.3309 (mean 0.3742). CY 2005 claims data to estimate APC
03–04, that is, the fiscal intermediary There also was much greater variability median costs varying only the two
calculation, diverged from the in the fiscal intermediary calculation of methods of determining overall CCR.
‘‘traditional’’ overall CCR that we used the overall CCR. The standard deviation We expected the impact to be limited
for modeling. It should be noted that the under the ‘‘traditional’’ calculation was because the majority of costs are
fiscal intermediary overall CCR 0.1318, while the standard deviation estimated using a cost center-specific
calculation noted in Program using the fiscal intermediary’s CCR and not the overall. As predicted,
Transmittal A–03–04 was created with calculation was 0.2143. In part, the we observed minor changes in APC
feedback and input from the fiscal higher median estimate for the fiscal median costs from the adoption of the
intermediaries. intermediary calculation is attributable proposed overall CCR calculation. We
CMS’ ‘‘traditional’’ calculation to the inclusion of allied health costs for largely observed differences of no more
consists of summing the total costs from the over 700 hospitals with allied health than 5 percent in either direction. The
Worksheet B, Part I (Column 27), after programs. It is inappropriate to include median overall percent change in APC
removing the costs for nursing and these costs in the overall CCR cost estimates was -0.3 percent. We
paramedical education (Columns 21 and calculation, because CMS already typically observe comparable changes in
24), for those ancillary cost centers that reimburses hospitals for the costs of APC medians when we update our cost
we believe contain most OPPS services, these programs through cost report report data. The impact of the proposed
summing the total charges from settlement. The higher median estimate CCR calculation on the outlier threshold
Worksheet C, Part I (Columns 6 and 7) and greater variability also is a function is discussed further in section II. G. of
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for the same set of ancillary cost centers, of the weighting by Medicare Part B this preamble. Using updated cost
and dividing the former by the later. We charges. Because the fiscal intermediary report data for the calculations in this
exclude selected ancillary cost centers overall CCR calculation is higher, on proposed rule, we estimate a median
from our overall CCR calculation, such average, CMS has underestimated the overall CCR across all hospitals of
as 5700 Renal Dialysis, because we outlier payment thresholds and, 0.2999 using the proposed overall CCR
believe that the costs and charges in therefore, overpaid outlier payments. calculation.

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We believe that a single overall CCR CY 2007, we pulled all claims for the ratio of submitted to settled cost
calculation should be used for all outpatient services furnished in CY using the overall CCR, and we then
components of the OPPS for both 2005 from the national claims history adjusted the most recent available
modeling and payment. Therefore, we file. This is not the population of claims submitted but not settled cost report
are proposing to use the modified paid under the OPPS, but all outpatient using that ratio. We are proposing to use
overall CCR calculation as discussed claims (including, for example, CAH the most recently submitted cost reports
above when the hospital-specific overall claims, and hospital claims for clinical to calculate the CCRs to be used to
CCR is used for any of the following laboratory services for persons who are calculate median costs for the OPPS CY
calculations—in the CMS calculation of neither inpatients nor outpatients of the 2007 final rule. We calculated both an
median costs for OPPS ratesetting, in hospital). overall CCR and cost center-specific
the CMS calculation of the outlier We then excluded claims with CCRs for each hospital. We used the
threshold, in the fiscal intermediary condition codes 04, 20, 21, and 77. proposed overall CCR calculation
calculation of outlier payments, in the These are claims that providers discussed in II.A.1.c. of this preamble
CMS calculation of statewide CCRs, in submitted to Medicare knowing that no for all purposes.
the fiscal intermediary calculation of payment will be made. For example, We then flagged CAH claims, which
pass-through payments for devices, and providers submit claims with a are not paid under the OPPS, and claims
for any other fiscal intermediary condition code 21 to elicit an official from hospitals with invalid CCRs. The
payment calculation in which the denial notice from Medicare and latter included claims from hospitals
current hospital-specific overall CCR document that a service is not covered. without a CCR; those from hospitals
may be used now or in the future. If this We then excluded claims for services paid an all-inclusive rate; those from
proposal is finalized, we would issue a furnished in Maryland, Guam, and the hospitals with obviously erroneous
Medicare program instruction to fiscal U.S. Virgin Islands because hospitals in CCRs (greater than 90 or less than
intermediaries that would instruct them those geographic areas are not paid .0001); and those from hospitals with
to recalculate and use the hospital- under the OPPS. CCRs that were identified as outliers (3
specific overall CCR as we are proposing We divided the remaining claims into standard deviations from the geometric
for these purposes. the three groups shown below. Groups mean after removing error CCRs). In
2 and 3 comprise the 103 million claims addition, we trimmed the CCRs at the
2. Proposed Calculation of Median Costs that contain hospital bill types paid cost center level by removing the CCRs
for CY 2007 under the OPPS. for each cost center as outliers if they
In this section of the preamble, we 1. Claims that were not bill types 12X, exceeded +/-3 standard deviations from
discuss the use of claims to calculate the 13X, 14X (hospital bill types), or 76X the geometric mean. This is the same
proposed OPPS payment rates for CY (CMHC bill types). Other bill types are methodology that we used in
2007. The hospital outpatient not paid under the OPPS and, therefore, developing the final CY 2006 CCRs. For
prospective payment page on the CMS these claims were not used to set OPPS CY 2007, we are proposing to trim at the
Web site on which this proposed rule is payment. departmental CCR level to eliminate
posted provides an accounting of claims 2. Claims that were bill types 12X, aberrant CCRs that, if found in high
used in the development of the 13X, or 14X (hospital bill types). These volume hospitals, could skew the
proposed rates: http:// claims are hospital outpatient claims. medians. We used a four-tiered
www.cms.hhs.gov/ 3. Claims that were bill type 76X hierarchy of cost center CCRs to match
HospitalOutpatientPPS. The accounting (CMHC). (These claims are later a cost center to every possible revenue
of claims used in the development of combined with any claims in item 2 code appearing in the outpatient claims,
this proposed rule is included on the above with a condition code 41 to set with the top tier being the most
Web site under supplemental materials the per diem partial hospitalization rate common cost center and the last tier
for the CY 2007 proposed rule. That determined through a separate process.) being the default CCR. If a hospital’s
accounting provides additional detail For the CCR calculation process, we cost center CCR was deleted by
regarding the number of claims derived used the same general approach as we trimming, we set the CCR for that cost
at each stage of the process. In addition, used in developing the final APC rates center to ‘‘missing,’’ so that another cost
below we discuss the files of claims that for CY 2006 (70 FR 68537), with a center CCR in the revenue center
comprise the data sets that are available change to the development of the hierarchy could apply. If no other
for purchase under a CMS data user overall CCR as discussed above. That is, departmental CCR could apply to the
contract. Our CMS Web site, http:// we first limited the population of cost revenue code on the claim, we used the
www.cms.hhs.gov/ reports to only those for hospitals that hospital’s overall CCR for the revenue
HospitalOutpatientPPS, includes filed outpatient claims in CY 2005 code in question. For example, a visit
information about purchasing the before determining whether the CCRs reported under the clinic revenue code,
following two OPPS data files: ‘‘OPPS for such hospitals were valid. but the hospital did not have a clinic
Limited Data Set’’ and ‘‘OPPS We then calculated the CCRs at a cost cost center, we mapped the hospital-
Identifiable Data Set.’’ center level and overall for each specific overall CCR to the clinic
We are proposing to use the following hospital for which we had claims data. revenue code. The hierarchy of CCRs is
methodology to establish the relative We did this using hospital-specific data available for inspection and comment at
weights to be used in calculating the from the Healthcare Cost Report the CMS Web site: http://
proposed OPPS payment rates for CY Information System (HCRIS). We used www.cms.hhs.gov/
2007 shown in Addenda A and B to this the most recent available cost report HospitalOutpatientPPS.
proposed rule. This methodology is as data, in most cases, cost reports for CY We then converted the charges to
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follows: 2004. For this proposed rule, we used costs on each claim by applying the CCR
We used outpatient claims for the full the most recent cost report available, that we believed was best suited to the
CY 2005, processed before January 1, whether submitted or settled. If the most revenue code indicated on the line with
2006, to set the relative weights for this recent available cost report was the charge. Table 2 below contains a list
proposed rule for CY 2007. To begin the submitted but not settled, we looked at of the allowed revenue codes. Revenue
calculation of the relative weights for the last settled cost report to determine codes not included in Table 2 are those

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not allowed under the OPPS because (that is, status indicator N) and not claims records. The single procedure
their services cannot be paid under the separately payable. claim record that contained the bypass
OPPS (for example, inpatient room and 4. Multiple Minor Claims: Claims with code did not retain packaged services.
board charges) and, thus charges with multiple HCPCS codes that are The single procedure claim record that
those revenue codes were not packaged packaged (that is, status indicator N) contained the other separately payable
for creation of the OPPS median costs. and not separately payable. procedure (but no bypass code) retained
One exception is the calculation of 5. Non-OPPS Claims: Claims that the packaged revenue code charges and
median blood costs, as discussed in contain no services payable under the the packaged HCPCS charges.
section X. of this preamble. OPPS (that is, all status indicators other We also removed lines that contained
Thus, we applied CCRs as described than S, T, V, X, or N). These claims are multiple units of codes on the bypass
above to claims with bill types 12X, excluded from the files used for the list and treated them as ‘‘pseudo’’ single
13X, or 14X, excluding all claims from OPPS. Non-OPPS claims have codes claims by dividing the cost for the
CAHs and hospitals in Maryland, Guam, paid under other fee schedules, for multiple units by the number of units
and the U.S. Virgin Islands, and claims example, durable medical equipment or on the line. Where one unit of a single
from all hospitals for which CCRs were clinical laboratory, and do not contain separately paid procedure code
flagged as invalid. either a code for a separately paid remained on the claim after removal of
We identified claims with condition service or a code for a packaged service. the multiple units of the bypass code,
code 41 as partial hospitalization In previous years, we made a we created a ‘‘pseudo’’ single claim
services of hospitals and moved them to determination of whether each HCPCS from that residual claim record, which
another file. These claims were code was a major code, or a minor code, retained the costs of packaged revenue
combined with the 76X claims or a code other than a major or minor codes and packaged HCPCS codes. This
identified previously to calculate the code. We used those code specific enables us to use claims that would
partial hospitalization per diem rate. determinations to sort claims into these otherwise be multiple procedure claims
We then excluded claims without a five identified groups. For CY 2007 and could not be used. We excluded
HCPCS code. We also moved claims for OPPS, we are proposing to use status those claims that we were not able to
observation services to another file. We indicators, as described above, to sort convert to singles even after applying all
moved to another file claims that the claims into these groups. We believe of the techniques for creation of
contained nothing but flu and that using status indicators is an ‘‘pseudo’’ singles.
pneumococcal pneumonia (‘‘PPV’’) appropriate way to sort the claims into We then packaged the costs of
vaccine. Influenza and PPV vaccines are these groups and also to make our packaged HCPCS codes (codes with
paid at reasonable cost and, therefore, process more transparent to the public. status indicator ‘‘N’’ listed in
these claims are not used to set OPPS We further believe that this proposed Addendum B to this proposed rule) and
rates. We note that the two above method of sorting claims will enhance packaged revenue codes into the cost of
mentioned separate files containing the public’s ability to derive useful the single major procedure remaining on
partial hospitalization claims and the information and become a more the claim. The list of packaged revenue
observation services claims are included informed commenter on this proposed codes is shown below in Table 2.
in the files that are available for rule. After removing claims for hospitals
purchase as discussed above. We note that the claims listed in with error CCRs, claims without HCPCS
We next copied line-item costs for numbers 1, 2, 3, and 4 above are codes, claims for immunizations not
drugs, blood, and devices (the lines stay included in the data files that can be covered under the OPPS, and claims for
on the claim, but are copied off onto purchased as described above. services not paid under the OPPS, 97.5
another file) to a separate file. No claims We set aside the single minor, million claims were left. Of these 97.5
were deleted when we copied these multiple minor claims and the non- million claims, we were able to use
lines onto another file. These line-items OPPS claims (numbers 3, 4, and 5 some portion of 50.7 million whole
are used to calculate a per unit mean above) because we did not use these claims (93.2 percent of the 54.4 million
and median and a per administration claims in calculating median cost. We potentially usable claims) to create the
mean and median for drugs, then examined the multiple major 91.4 million single and ‘‘pseudo’’ single
radiopharmaceutical agents, blood and claims for date of service to determine claims for use in the CY 2007 median
blood products, and devices, including if we could break them into single payment ratesetting. Approximately 43
but not limited to brachytherapy procedure claims using the dates of million claims were for services not
sources, as well as other information service on all lines on the claim. If we paid under the OPPS.
used to set payment rates, including a could create claims with single major We also excluded (1) Claims that had
unit to day ratio for drugs. procedures by using date of service, we zero costs after summing all costs on the
We then divided the remaining claims created a single procedure claim record claim and (2) claims containing
into the following five groups: for each separately paid procedure on a payment flag 3. Effective for services
1. Single Major Claims: Claims with a different date of service (that is, a furnished on or after July 1, 2004, the
single separately payable procedure ‘‘pseudo’’ single). Outpatient Code Editor (OCE) assigns
(that is, status indicator S, T, V, or X), We then used the ‘‘bypass codes’’ payment flag number 3 to claims on
all of which would be used in median listed in Table 1 of this preamble and which hospitals submitted token
setting. discussed in section II.A.1.b. to remove charges for a service with status
2. Multiple Major Claims: Claims with separately payable procedures that we indicator ‘‘S’’ or ‘‘T’’ (a major separately
more than one separately payable determined contain limited costs or no paid service under OPPS) for which the
procedure (that is, status indicator S, T, packaged costs, or were otherwise fiscal intermediary is required to
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V, or X), or multiple units for one suitable for inclusion on the bypass list, allocate the sum of charges for services
payable procedure. As discussed below, from a multiple procedure bill. When with a status indicator equaling ‘‘S’’ or
some of these can be used in median one of the two separately payable ‘‘T’’ based on the weight for the APC to
setting. procedures on a multiple procedure which each code is assigned. We do not
3. Single Minor Claims: Claims with a claim was on the bypass code list, we believe that these charges, which were
single HCPCS code that is packaged split the claim into two single procedure token charges as submitted by the

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hospital, are valid reflections of hospital codes). We then deleted 299,022 single considered comparable with respect to
resources. Therefore, we are proposing bills reported with modifier 50 that the use of resources if the highest
to delete these claims. We also deleted were assigned to APCs that contained median (or mean cost, if elected by the
claims for which the charges equal the HCPCS codes that are considered to be Secretary) for an item or service in the
revenue center payment (that is, the conditional or independent bilateral group is more than 2 times greater than
Medicare payment) on the assumption procedures under the OPPS and that are the lowest median cost for an item or
that where the charge equals the subject to special payment provisions service within the same group (‘‘the 2
payment, to apply a CCR to the charge implemented through the OCE. Modifier times rule’’). Finally, we reviewed the
would not yield a valid estimate of 50 signifies that the procedure was medians and reassigned HCPCS codes to
relative provider cost. performed bilaterally. Although these different APCs as deemed appropriate.
For the remaining claims, we then are apparently single claims for a Section III.B. of this preamble includes
standardized 60 percent of the costs of separately payable service and although a discussion of the HCPCS code
the claim (which we have previously there is only one unit of the code assignment changes that resulted from
determined to be the labor-related reported on the claim, the presence of examination of the medians and for
portion) for geographic differences in modifier 50 signifies that two services other reasons. The APC medians were
labor input costs. We made this were furnished. Therefore, costs recalculated after we reassigned the
adjustment by determining the wage reported on these claims are for two affected HCPCS codes. Both the HCPCS
index that applied to the hospital that procedures and not for a single medians and the APC medians were
furnished the service and dividing the procedure. Hence, we deleted these weighted to account for the inclusion of
cost for the separately paid HCPCS code multiple procedure records, which we multiple units of the bypass codes in the
furnished by the hospital by that wage would have treated as single procedure creation of pseudo single bills.
index. As has been our policy since the claims in prior OPPS updates. We are
A detailed discussion of the proposed
inception of the OPPS, we are proposing seeking comments on the relative
medians for blood and blood products is
to use the pre-reclassified wage indices benefits of deleting these claims versus
included in section X. of this preamble.
for standardization because we believe dividing the costs for the two
A discussion of the proposed medians
that they better reflect the true costs of procedures by two to create two
for APCs that require one or more
items and services in the area in which ‘‘pseudo’’ single claims.
We used the remaining claims to devices when the service is performed
the hospital is located than the post-
calculate median costs for each is included in section IV.A. of this
reclassification wage indices, and would
separately payable HCPCS code and preamble. A discussion of the proposed
result in the most accurate adjusted
each APC. The comparison of HCPCS median for observation services is
median costs.
We also excluded claims that were and APC medians determines the included in section XI. of this preamble
outside 3 standard deviations from the applicability of the ‘‘2 times’’ rule. As and a discussion of the proposed
geometric mean of units for each HCPCS stated previously, section 1833(t)(2) of median for partial hospitalization is
code on the bypass list (because, as the Act provides that, subject to certain included below in section II.B. of this
discussed above, we used claims that exceptions, the items and services preamble.
contain multiple units of the bypass within an APC group cannot be BILLING CODE 4120–01–P
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sroberts on PROD1PC70 with PROPOSALS

BILLING CODE 4120–01–C


EP23AU06.011</GPH>

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3. Proposed Calculation of Scaled OPPS relative payment weights. Based on this stated in our January 6, 2004 interim
Payment Weights comparison, we adjusted the relative final rule, charges for the brachytherapy
Using the median APC costs weights for purposes of budget sources were not used in determining
discussed previously, we calculated the neutrality. The unscaled relative outlier payments, and payments for
proposed relative payment weights for payment weights were adjusted by these items were excluded from budget
each APC for CY 2007 shown in 1.354626473 for budget neutrality. We neutrality calculations for the CY 2006
Addenda A and B of this proposed rule. recognize the scaler, or weight scaling OPPS. We excluded these payments
In prior years, we scaled all the relative factor, for budget neutrality that we are from budget neutrality calculations, in
payment weights to APC 0601 (Mid proposing for CY 2007 is higher than part, because of the challenge posed by
Level Clinic Visit) because it is one of any previous OPPS weight scaler as a estimating hospital-specific cost
the most frequently performed services result of our proposal to use APC 0606 payment. For CY 2007, we are
in the hospital outpatient setting. We as the base for calculation of relative proposing a specific payment rate for
weights. Our proposed use of the brachytherapy sources, which will be
assigned APC 0601 a relative payment
median cost for APC 0606 of $83.67 subject to scaling for budget neutrality.
weight of 1.00 and divided the median
causes the unscaled weights to be lower (We provide a discussion of
cost for each APC by the median cost for
than they would have been if we had brachytherapy payment issues,
APC 0601 to derive the relative payment
chosen APC 0605 (Level 2 Clinic Visits; including their continued exclusion
weight for each APC.
For CY 2007 OPPS, we are proposing median $62.12) as the scaling base. The from outlier payments, under section
to scale all of the relative payment CY 2007 median cost of APC 0606 is VII. of this preamble.) Therefore, the
significantly higher than the CY 2006 costs of brachytherapy sources are
weights to APC 0606 (Level III Clinic
median cost of APC 0601 for mid-level accounted for in the scaler of
Visits) because we are proposing to
clinic visits, which was used in CY 2006 1.354626473.
delete APC 0601 as part of the
and earlier years to calculate unscaled
reconfiguration of the visit APCs. We 4. Proposed Changes to Packaged
weights. Historically, the median cost
chose APC 0606 as the scaling base Services
for APC 0601 has been similar to the CY
because under our proposal to (If you choose to comment on the
2007 proposed median cost for APC
reconfigure the APCs where clinic visits issues in this section, please include the
0605. In order to appropriately scale the
are assigned for CY 2007, APC 0606 is caption ‘‘Packaged Services’’ at the
total weight estimated for OPPS in CY
the middle level clinic visit APC (that beginning of your comment.)
2007 to be similar to the total weight in
is, Level III of five levels). We have OPPS for CY 2006, we calculated a Payments for packaged services under
historically used the median cost of the scaler of 1.354626473, which is higher the OPPS are bundled into the payments
middle level clinic visit APC (that is using APC 0606 as the base than it providers receive for separately payable
APC 0601 through CY 2006) to calculate would be if we used APC 0605 as the services provided on the same day.
unscaled weights because mid-level base. In addition to adjusting for Packaged services are identified by the
clinic visits are among the most increases and decreases in weight due status indicator ‘‘N.’’ Hospitals include
frequently performed services in the the recalibration of APC medians, the charges for packaged services on their
hospital outpatient setting. Therefore, to scaler also accounts for any change in claims, and the costs associated with
maintain consistency in using as a the base. these packaged services are then
median the most frequently used The proposed relative payment bundled into the costs for separately
services, we are proposing to continue weights listed in Addenda A and B of payable procedures on those same
to use the median cost of the middle this proposed rule incorporate the claims in establishing payment rates for
clinic level, proposed ASC 0606, to recalibration adjustments discussed in the separately payable services. This is
calculate unscaled weights. Following sections II.A.1. and 2. of this preamble. consistent with the principles of a
our standard methodology, but using the Section 1833(t)(14)(H) of the Act, as prospective payment system based upon
proposed CY 2007 median for APC added by section 621(a)(1) of Pub. L. groupings of services and in contrast to
0606, we assigned APC 0606 a relative 108–173, states that ‘‘Additional a fee schedule that provides individual
payment weight of 1.00 and divided the expenditures resulting from this payment for each service billed.
median cost of each APC by the median paragraph shall not be taken into Hospitals may use CPT codes to report
cost for APC 0606 to derive the unscaled account in establishing the conversion any packaged services that were
relative payment weight for each APC. factor, weighting and other adjustment performed, consistent with CPT coding
The choice of the APC on which to base factors for 2004 and 2005 under guidelines.
the relative weights for all other APCs paragraph (9) but shall be taken into As a result of requests from the
does not affect the payments made account for subsequent years.’’ Section public, a Packaging Subcommittee to the
under the OPPS because we scale the 1833(t)(14) of the Act provides the APC Panel was established to review all
weights for budget neutrality. payment rates for certain ‘‘specified the procedural CPT codes with a status
Section 1833(t)(9)(B) of the Act covered outpatient drugs.’’ Therefore, indicator of ‘‘N.’’ Providers have often
requires that APC reclassification and the cost of those specified covered suggested that many packaged services
recalibration changes, wage index outpatient drugs (as discussed in section could be provided alone, without any
changes, and other adjustments be made V. of this preamble) is now included in other separately payable services on the
in a manner that assures that aggregate the budget neutrality calculations for CY claim, and requested that these codes
payments under the OPPS for CY 2007 2007 OPPS. not be assigned status indicator ‘‘N.’’ In
are neither greater than nor less than the Under section 1833(t)(16)(C) of the deciding whether to package a service or
aggregate payments that would have Act, as added by section 621(b)(1) of pay for a code separately, we consider
sroberts on PROD1PC70 with PROPOSALS

been made without the changes. To Pub. L. 108–173, payment for devices of a variety of factors, including whether
comply with this requirement brachytherapy consisting of a seed or the service is normally provided
concerning the APC changes, we seeds (or radioactive source) is to be separately or in conjunction with other
compared aggregate payments using the made at charges adjusted to cost for services; how likely it is for the costs of
CY 2006 relative weights to aggregate services furnished on or after January 1, the packaged code to be appropriately
payments using the CY 2007 proposed 2004, and before January 1, 2007. As we mapped to the separately payable codes

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with which it was performed; and interpretation) if there are no separately accepted that recommendation when we
whether the expected cost of the service payable OPPS services on the claim. finalized the status indicator ‘‘N’’
is relatively low. • CMS continue to separately pay for assignment to 0069T for CY 2006. This
The Packaging Subcommittee CPT code 76000 (Fluoroscopy, up to one code is indicated as an add-on code to
identified areas for change for some hour physician time). an electrocardiography service,
packaged CPT codes that it believed • CMS maintain the packaged status according to the AMA’s CY 2006 CPT
could frequently be provided to patients of CPT codes 76001 (Fluoroscopy, book. In its presentation to the APC
as the sole service on a given date and physician time more than one hour), Panel, the manufacturer requested that
that required significant hospital 76003 ((Fluoroscopic guidance for we pay separately for CPT code 0069T
resources as determined from hospital needle placement), and 76005 and assign it to APC 0099
claims data. (Fluoroscopic guidance and localization (Electrocardiograms), based on its
Based on the comments received, of needle or catheter tip). estimated cost and clinical
additional issues, and new data that we • CMS maintain the packaged status characteristics.
shared with the Packaging of CPT codes 76937 (Ultrasound At the APC Panel meeting, the
Subcommittee concerning the packaging guidance for vascular access) and 75998 manufacturer stated that the acoustic
status of codes for CY 2007, the (Fluoroscopic guidance for central heart sounds recording and analysis
Packaging Subcommittee reviewed the venous access device placement, service may be provided with or
packaging status of numerous HCPCS replacement, or removal). without a separately reportable
codes and reported its findings to the • CMS provide separate payment for electrocardiogram. Members of the APC
APC Panel at its March 2006 meeting. CPT codes 94760 (Noninvasive ear or Panel engaged in extensive discussion
The APC Panel accepted the report of pulse oximetry for oxygen saturation; of clinical scenarios as they considered
the Packaging Subcommittee, heard single determination), 94761 whether CPT code 0069T could or could
several presentations on certain (Noninvasive ear or pulse oximetry for not be appropriately reported alone or
packaged services, discussed the oxygen saturation; multiple in conjunction with several different
deliberations of the Packaging determinations), and 94762 procedure codes. We note that the
Subcommittee, and recommended (Noninvasive ear or pulse oximetry for parenthetical information following the
that— oxygen saturation by continuous AMA’s code descriptor indicates that
• CMS pay separately for HCPCS overnight monitoring) if there are no CPT code 0069T is to be reported in
code 0069T (Acoustic heart sound separately payable OPPS services on the conjunction with CPT code 93005
recording and computer analysis only). claim. (Electrocardiogram, routine ECG with at
• CMS maintain the packaged status • CMS pay separately for CPT code least 12 leads; tracing only, without
of HCPCS code 0152T (Computer aided 96523 (Irrigation of implanted venous interpretation and report). In addition,
detection with further physician review access device) if there are no separately we do not believe that, based on its
for interpretation, with or without payable OPPS services on the claim. expected clinical uses as described by
digitization of films radiographic • CMS maintain the packaged status the manufacturer, CPT code 0069T
images; chest radiograph(s)). of HCPCS code G0269 (Placement of would ever be performed as a sole
• CMS maintain the packaged status occlusive device into either a venous or service without other separately payable
of CPT code 36500 (venous arterial access site). OPPS services and payment for CPT
catheterization for selective blood organ • CMS pay separately for HCPCS code 0069T could always be packaged
sampling). code P9612 (Catheterization for into payments for those other services.
• CMS pay separately for CPT code collection of specimen, single patient) if Therefore, we believe that CPT code
36540 (Collect blood, venous access there are no separately payable OPPS 0069T is appropriately packaged
device) if there are no separately services on the claim. because it is closely linked to the
payable OPPS services on the claim. • CMS bring data to the next APC performance of an ECG, should never be
• CMS pay separately for CPT code Panel meeting that show the following: reported alone, and is estimated to
36600 (Arterial puncture; withdrawal of (a) how the costs of packaged items and require only modest hospital resources.
blood for diagnosis) if there are no services are incorporated into the Using CY 2005 claims, we had only 9
separately payable OPPS services on the median costs of APCs and (b) how the single claims for CPT code 0069T, with
claim. costs of these packaged items and a median line-item cost of $1.93,
• CMS pay separately for CPT code services influence payments for consistent with its low expected cost.
38792 (Sentinel node identification) if associated procedures. Packaging payment for CPT code 0069T
there are no separately payable OPPS • The Packaging Subcommittee is consistent with the principles of a
services on the claim. continue until the next APC Panel prospective payment system that
• CMS maintain the packaged status meeting. provides payments for groups of
of CPT codes 74328 (Endoscopic For CY 2007, we are proposing to services. To the extent that the acoustic
catheterization of the biliary ductal maintain CPT code 0069T as a packaged heart sounding recording service may be
system, radiological supervision and service and not adopt the APC Panel’s more frequently provided in the future
interpretation), 74329 (Endoscopic recommendation to pay separately for in association with ECGs or other OPPS
catheterization of the pancreatic ductal this code. The service uses signal services as its clinical indications
system, radiological supervision and processing technology to detect, evolve, we expect that its cost would
interpretation), and 74330 (Combined interpret, and document acoustical also be increasingly reflected in the
endoscopic catheterization of the biliary activities of the heart through special median costs for those other services,
and pancreatic ductal systems, sensors applied to a patient’s chest. This particularly ECG procedures.
sroberts on PROD1PC70 with PROPOSALS

radiological supervision and code was a new Category III CPT code For CY 2007, we are proposing to
interpretation). implemented in the CY 2005 OPPS and accept the APC Panel’s recommendation
• CMS pay separately for CPT code assigned a new interim status indicator to maintain the packaged status of CPT
75893 (Venous sampling through of ‘‘N’’ in the CY 2005 OPPS final rule. code 0152T. The service involves the
catheter, with or without angiography, The APC Panel recommended packaging application of computer algorithms and
radiological supervision and CPT code 0069T for CY 2006, and we classification technologies to chest x-ray

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images to acquire and display with CPT codes 36500 and 75893. We have heard concerns from the
information regarding chest x-ray However, we acknowledge that these public stating that they are unable to
regions that may contain indications of two codes may occasionally be provided submit claims to CMS that report only
cancer. This code was a new Category without any separately payable packaged codes. We note that although
III CPT code implemented in the CY procedures. In these uncommon these claims are processed by the OCE
2006 OPPS and assigned a new interim instances, the provider historically has and are ultimately rejected for payment,
status indicator of ‘‘N’’ in the CY 2006 not received any payment under the they are received by CMS, and we have
OPPS final rule with comment period. OPPS. We also understand that there is cost data for packaged services based
The code is indicated as an add-on code a cost associated with registering a upon these claims. However, we
to chest x-ray CPT codes, according to patient and providing these services. recognize that the data used in our
the AMA’s CY 2006 CPT book. In its For CY 2006, we have approximately analyses to assess the frequencies with
presentation to the APC Panel, the 160 single claims for CPT code 75893, which packaged services are provided
manufacturer requested that we pay with a median cost of $269. Based on alone and their median costs are
separately for this service and assign it the proposal described below for somewhat limited. It is possible that an
to a New Technology APC with a ‘‘special’’ packaged codes, for CY 2007, unknown number of hospitals chose not
payment rate of $15, based on its when CPT codes 36500 and 75893 are to submit claims to CMS when a
estimated cost, clinical considerations, billed on a claim with no separately packaged code(s) was provided without
and similarity to other image post- payable OPPS services, CPT code 75893 other separately payable services on
processing services that are paid would become separately payable and their claims, realizing that they would
separately. would receive payment for APC 0668. In not receive payment for those claims.
Under the OPPS we make payment for this circumstance, payment for CPT While we have been told that some
medically necessary services either code 36500 would be packaged into the hospitals may bill for a low-level visit
separately or packaged into our separate payment for CPT code 75893. if a packaged service only is provided so
payments for other services. We agree For CY 2007, we are proposing to
that they receive some payment for the
with the APC Panel that packaged accept the APC Panel’s recommendation
and pay separately for CPT codes 36540, encounter, we note that providers
payment for diagnostic chest x-ray
36600, 38792, 75893, 94762, and 96523 should bill a low-level visit code in
computer-aided detection (CAD) under
when any of these codes appear on a such circumstances only if the hospital
a prospective payment methodology for
claim with no separately payable OPPS provides a significant, separately
outpatient hospital services is
services also reported for the same date identifiable low-level visit in
appropriate because of the close
of service. We will refer to this subset association with the packaged service.
relationship of chest x-ray CAD to chest
x-ray services and its projected modest of codes as ‘‘special’’ packaged codes. Through OCE logic, the PRICER
cost. Because 0152T is a new CPT code We acknowledge that there is a cost to would automatically assign payment for
for CY 2006, we have no CY 2005 the hospital associated with registering a ‘‘special’’ packaged service reported
hospital claims data available for and treating a patient, regardless of on a claim if there are no other services
analysis. To the extent that CAD may be whether the specific service provided separately payable under the OPPS on
more frequently provided in the future requires minimal or significant hospital the claim for the same date of service.
to aid in the review of diagnostic chest resources. While we continue to believe In all other circumstances, the ‘‘special’’
x-rays as its clinical indications evolve, that these ‘‘special’’ packaged codes are packaged codes would be treated as
we expect that its cost would also be almost always provided along with a packaged services. We are proposing to
increasingly reflected in the median separately payable service, our claims assign status indicator ‘‘Q’’ to these
costs for chest x-ray procedures. analyses indicate that there are rare ‘‘special’’ packaged codes to indicate
For CY 2007, we are proposing to instances when one of these services is that they are usually packaged, except
accept the recommendation of the APC provided without another separately for special circumstances when they are
Panel and maintain the packaged status payable OPPS service on the claim for separately payable. Through OCE logic,
of CPT code 36500. We note that several the same date of service. In these the status indicator of a ‘‘special’’
providers have commented that CPT instances, providers do not currently packaged code would be changed either
code 36500 is sometimes billed only receive any payment. Therefore, we are to ‘‘N’’ or to the status indicator of the
with its corresponding radiological proposing to provide payment for the APC to which the code is assigned for
supervision and interpretation code, ‘‘special’’ packaged codes listed above separate payment, depending upon the
75893, but with no other separately when they are billed on a claim without presence or absence of other OPPS
payable OPPS services. In those cases, another separately payable OPPS service services also reported on the claim for
the provider would not receive any on the same date. When any of the the same date. Table 3 below lists the
payment. For CY 2006, we accepted the ‘‘special’’ packaged codes are billed proposed status indicators and APC
APC Panel’s recommendation to with other codes that are separately assignments for these ‘‘special’’
package both CPT codes 36500 and payable under the OPPS on the same packaged codes when they are
75893 and to examine claims data. Our date of service, the ‘‘special’’ packaged separately payable. We note that the
initial review of several clinical code would be treated as a packaged payment for these ‘‘special’’ packaged
scenarios submitted by the public code, and the cost of the packaged code codes is intended to make payment for
seemed to suggest that other separately would be bundled into the costs of the all of the hospital costs, which may
payable procedures, such as other separately payable services on the include patient registration and
venography, would likely be billed on claim. The payments that the provider establishment of a medical record, in an
sroberts on PROD1PC70 with PROPOSALS

the same claim. Our claims data receives for the separately payable outpatient hospital setting even when
indicate that there are usually separately services would include the bundled no separately payable services are
payable codes that are billed on claims payment for the packaged code(s). provided to the patient on that day.

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TABLE 3.—PROPOSED STATUS INDICATORS AND APC ASSIGNMENTS FOR ‘‘SPECIAL’’ PACKAGED CPT CODES
Proposed Proposed CY
Proposed CY
CPT code Descriptor status 2007 APC
2007 APC indicator median

36540 ............................... Collect blood, venous access device .............................................. 0624 S .................. $32.96
36600 ............................... Arterial puncture; withdrawal of blood for diagnosis ....................... 0035 T .................. 12.45
38792 ............................... Sentinel node identification ............................................................. 0389 S .................. 86.92
75893 ............................... Venous sampling through catheter, with or without angiography, 0668 S .................. 393.35
radiological supervision and interpretation.
94762 ............................... Noninvasive ear or pulse oximetry for oxygen saturation by con- 0443 X .................. 61.39
tinuous overnight monitoring.
96523 ............................... Irrigation of implanted venous access device ................................. 0624 S .................. 32.96

In the case of a claim with two or interpretation codes leads to inaccurate package these codes. In summary, we
more ‘‘special’’ packaged codes only payments for the full hospital resources believe that these services would always
reported on a single date of service, the associated with endoscopic retrograde be provided with another separately
PRICER would assign separate payment cholangiopancreatography procedures. payable procedure, so their costs would
only to the ‘‘special’’ packaged code that For CY 2007, we are proposing to be appropriately bundled with the
would receive the highest payment. The accept the APC Panel’s recommendation definitive vascular access device
other ‘‘special’’ codes would remain to continue to package CPT codes procedures. The costs for these guidance
packaged and would not receive 76001, 76003, and 76005 and to procedures are relatively low compared
separate payment. continue to pay separately for CPT code to the CY 2007 proposed payment rates
We will monitor and analyze the 76000. We received a comment which for the separately payable services they
claims frequency and claims detail for stated that it was inconsistent to pay most frequently accompany. If we were
situations in which these codes are separately for CPT code 76000 to unpackage CPT codes 76937 and
billed alone and then separately paid. (Fluoroscopy (separate procedure), up to 75998, the single bills available to
This will allow us to determine both one hour physician time) but to package develop median costs for vascular
which providers are billing these codes CPT code 76001 (Fluoroscopy, access device insertion services would
most often and under what physician time more than one hour) be significantly reduced. Therefore, we
circumstances these codes are billed. when CPT code 76001 appears to be a are proposing to continue to package
We expect that hospitals scheduling and similar code, except that it is for a both CPT codes 76937 and 75998 for CY
providing services efficiently to longer period of physician time. The 2007.
Medicare beneficiaries will continue to Packaging Subcommittee believed that For CY 2007, we are proposing to
generally provide these minor services many of the claims that listed CPT code accept the APC Panel’s recommendation
in conjunction with other medically 76001 were erroneously billed, as many to continue to package HCPCS code
necessary services. of the procedure codes that were billed G0269. This code should never be billed
For CY 2007, we are proposing to with CPT code 76001 included without another separately payable
accept the APC Panel’s recommendation fluoroscopy as an integral part of the procedure. Recent data indicate that 94
and maintain the packaged status of procedure. In other cases, the Packaging percent of the time HCPCS code G0269
CPT codes 74328, 74329, and 74330. Subcommittee noted that a procedure- was billed with either CPT code 93510
The AMA notes that these radiological specific fluoroscopy code should or 93526. In addition, the median cost
supervision and interpretation codes probably have been billed, instead of of G0269 is low compared to the costs
should be reported with procedure CPT code 76001. The Packaging of the procedures with which it is
codes 43260–43272. In fact, our data Subcommittee believed that CPT code typically associated.
indicate that these supervision and 76000 could often be provided as a sole For CY 2007, we are proposing to
interpretation codes are billed with service, with no other separately continue packaging CPT codes 94760
43260–43272 more than 90 percent of payable procedures. The Packaging (Noninvasive ear or pulse oximetry for
the time, indicating their routine use. Subcommittee recommended that CMS oxygen saturation; single determination)
We believe that some providers may be continue to pay separately for CPT code and 94761 (Noninvasive ear or pulse
concerned that although the payment 76000, consistent with the AMA’s oximetry for oxygen saturation; multiple
for the endoscopic procedure includes definition of this code, which specifies determinations) and not adopt the APC
the bundled payment for the that it is a separate procedure, and to Panel’s recommendation to provide
supervision and interpretation continue to package CPT codes 76001, separate payment for these services if
performed by the radiology department, 76003, and 76005. there are no other separately payable
the payment for the comprehensive For CY 2007, we are proposing to OPPS services on the claim for the same
service may be directed to the hospital accept the APC Panel’s recommendation date of service. Our data review
department that performed the to continue to package CPT codes 76937 revealed that these services are very
endoscopic procedure, rather than to the and 75998. In the CY 2006 OPPS final frequently provided in the OPPS, with
radiology department. While we rule with comment period (70 FR 68544 over 1 million claims in CY 2005 for the
understand this concern, the OPPS pays and 68545), we reviewed in detail the single pulse oximetry determination
sroberts on PROD1PC70 with PROPOSALS

hospital for services provided, and we data related to these two codes and service and over 400,000 claims for the
believe that hospitals are responsible for promised to share CY 2004 and early CY multiple determinations service. These
attributing payments to hospital 2005 data with the Packaging high frequencies may actually be
departments as they believe appropriate. Subcommittee. We reviewed current understated as both of these services are
We do not believe that packaging these data with the Packaging Subcommittee, packaged codes, and we have been told
radiological supervision and and it recommended that we continue to that some hospitals may not report the

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HCPCS codes for services for which scenarios involving currently packaged believe that some CMHCs manipulated
they receive no separate payments. HCPCS codes to the Packaging their charges in order to inappropriately
Single and multiple pulse oximetry Subcommittee for its ongoing review. receive outlier payments.
determinations are almost always Additional detailed suggestions for the In the CY 2003 OPPS update, the
provided in association with other Packaging Subcommittee should be difference in median per diem cost for
services that are separately payable submitted to APCPanel@cms.hhs.gov, CMHCs and hospital-based PHPs was so
under the OPPS, into which their costs with ‘‘Packaging Subcommittee’’ in the great, $685 for CMHCs and $225 for
may be appropriately packaged. subject line. hospital-based PHPs, that we applied an
Specifically, OPPS hospital claims data adjustment factor of .583 to CMHC costs
B. Proposed Payment for Partial to account for the difference between
revealed that out of the total instances
Hospitalization ‘‘as submitted’’ and ‘‘final settled’’ cost
of CPT code 94760 appearing on claims
used for setting payment rates for this (If you choose to comment on issues reports. By doing so, the CMHC median
CY 2007 OPPS proposed rule, CPT code in this section, please include the per diem cost was reduced to $384,
94760 was billed only 4 percent of the caption ‘‘Partial Hospitalization’’ at the resulting in a combined hospital-based
time in association with no other beginning of your comment.) and CMHC PHP median per diem cost
separately payable OPPS services, with 1. Background of $273. As with all APCs in the OPPS,
a median cost of $14. Using the same the median cost for each APC was
data, CPT code 94761 was billed only 7 Partial hospitalization is an intensive scaled relative to the cost of a mid-level
percent of the time in association with outpatient program of psychiatric office visit and the conversion factor
no other separately payable OPPS services provided to patients as an was applied. The resulting per diem rate
services, with a median cost of $36. alternative to inpatient psychiatric care for PHP for CY 2003 was $240.03.
These pulse oximetry services have a for beneficiaries who have an acute In the CY 2004 OPPS update, the
relatively low cost compared with the mental illness. A partial hospitalization median per diem cost for CMHCs grew
OPPS services they frequently program (PHP) may be provided by a to $1,038, while the median per diem
accompany. If we were to provide hospital to its outpatients or by a cost for hospital-based PHPs was again
separate payment for these pulse Medicare-certified community mental $225. After applying the .583
oximetry determinations when health center (CMHC). Section adjustment factor in the CY 2004
performed as stand alone procedures by 1833(t)(1)(B)(i) of the Act provides the proposed rule to the median CMHC per
hospitals, we are concerned that Secretary with the authority to designate diem cost, the median CMHC per diem
hospitals would lose their incentive to the hospital outpatient services to be cost was $605. Because the CMHC
provide these basic, low cost, and brief covered under the OPPS. The Medicare median per diem cost exceeded the
services as efficiently as possible, regulations at 42 CFR 419.21(c) that average per diem cost of inpatient
generally during the same encounters implement this provision specify that psychiatric care, we proposed a per
where they are providing other services payments under the OPPS will be made diem rate for CY 2004 based solely on
to the same patients. We believe their for partial hospitalization services hospital-based PHP data. The proposed
appropriate provision as single services furnished by CMHCs. Section PHP per diem for CY 2004, after scaling,
should be very rare. Therefore, for CY 1883(t)(2)(C) of the Act requires that we was $208.95. However, by the time we
2007 we are proposing not to include establish relative payment weights published the OPPS final rule with
these codes on the list of ‘‘special’’ based on median (or mean, at the comment period for CY 2004, we had
packaged codes, so their payment would election of the Secretary) hospital costs received updated CCRs for CMHCs.
remain packaged in all circumstances. determined by 1996 claims data and Using the updated CCRs significantly
For CY 2007, we are proposing to data from the most recent available cost lowered the CMHC median per diem
assign status indicator ‘‘A’’ to HCPCS reports. Payment to providers under the cost to $440. As a result, we determined
code P9612 and reject the APC Panel’s OPPS for PHPs represents the provider’s that the higher per diem cost for CMHCs
recommendation to pay separately overhead costs associated with the was not due to the difference between
under the OPPS for this code when it is program. Because a day of care is the ‘‘as submitted’’ and ‘‘final settled’’ cost
billed without any separately payable unit that defines the structure and reports, but was the result of excessive
OPPS services. This code is currently scheduling of partial hospitalization increases in charges which may have
payable on the clinical lab fee schedule. services, we established a per diem been done in order to receive higher
Its status indicator of ‘‘A’’ would payment methodology for the PHP APC, outlier payments. Therefore, in
provide payment for the service effective for services furnished on or calculating the PHP median per diem
whenever it is billed, regardless of the after August 1, 2000. For a detailed cost for CY 2004, we did not apply the
presence or absence of other reported discussion, we refer readers to the April .583 adjustment factor to CMHC costs to
services. In addition, for consistency we 7, 2000 OPPS final rule with comment compute the PHP APC. Using the
are proposing to assign status indicator period (65 FR 18452). updated CCRs for CMHCs, the combined
‘‘A’’ to HCPCS code P9615 as it is also Historically, the median per diem cost hospital-based and CMHC median per
payable on the clinical lab fee schedule. for CMHCs has greatly exceeded the diem cost for PHP was $303. After
In general, when a code is payable on median per diem cost for hospital-based scaling, we established the CY 2004
the clinical lab fee schedule, we defer to PHPs and has fluctuated significantly PHP APC of $286.82.
that fee schedule and do not assign from year to year while the median per For CY 2005, the PHP per diem
payment under the OPPS. diem cost for hospital-based PHPs has amount was based on 12 months of
The APC Panel Packaging remained relatively constant ($200– hospital and CMHC PHP claims data
Subcommittee remains active, and $225). We believe that CMHCs may have (for services furnished from January 1,
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additional issues and new data increased and decreased their charges in 2003, through December 31, 2003). We
concerning the packaging status of response to Medicare payment policies. used data from all hospital bills
codes will be shared for its As discussed in more detail in section reporting condition code 41, which
consideration as information becomes II.B.2. of the preamble of this proposed identifies the claim as partial
available. We continue to encourage rule and in the CY 2004 OPPS final rule hospitalization, and all bills from
submission of common clinical with comment period (68 FR 63470), we CMHCs because CMHCs are Medicare

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49538 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules

providers only for the purpose of Therefore, as stated in the CY 2006 median per diem cost that was used to
providing partial hospitalization OPPS final rule with comment period establish the CY 2006 per diem PHP
services. We used CCRs from the most (70 FR 68548 and 68549), we considered payment.
recently available hospital and CMHC the following three alternatives to our For CY 2007, we analyzed 12 months
cost reports to convert each provider’s update methodology for the PHP APC of data for hospital and CMHC PHP
line-item charges as reported on bills, to for CY 2006 to mitigate this drastic claims for services furnished between
estimate the provider’s cost for a day of reduction in payment for PHP services: January 1, 2005 and December 31, 2005.
PHP services. Per diem costs were then (1) Base the PHP APC on hospital-based We also used the most currently
computed by summing the line-item PHP data alone; (2) apply a different available CCRs to estimate costs. Using
costs on each bill and dividing by the trimming methodology to CMHC costs these CY 2005 claims data, the median
number of days on the bill. in an effort to eliminate the effect of per diem cost for CMHCs was $165 and
In a Program Memorandum issued on data for those CMHCs that appeared to the median per diem cost for hospital-
January 17, 2003 (Transmittal A–03– have excessively increased their charges based PHPs was $209. Following the
004), we directed fiscal intermediaries in order to receive outlier payments; methodology used for the CY 2005
to recalculate hospital and CMHC CCRs and (3) apply a 15 percent reduction to update, the CY 2007 combined hospital-
by April 30, 2003, using the most the combined hospital-based and CMHC based and CMHC median per diem cost
recently settled cost reports. Following median per diem cost that was used to is $172.
the initial update of CCRs, fiscal establish the CY 2005 PHP APC. (We While the combined hospital-based
intermediaries were further instructed refer readers to the CY 2006 OPPS final and CMHC median per diem cost is
to continue to update a provider’s CCR rule with comment period for a full about $10 higher using the CY 2005 data
and enter revised CCRs into the discussion of the three alternatives (70 compared to the CY 2004 data ($172
outpatient provider specific file. FR 68548).) After carefully considering compared to $161), we believe this
Therefore, for CMHCs, we used CCRs these three alternatives and all amount is still too low to cover the cost
from the outpatient provider specific comments received on them, we for PHPs. We continue to believe that
file. adopted the third alternative for CY the policy we adopted for CY 2006—a
In the CY 2005 OPPS update, the 2006. We adopted this alternative 15-percent reduction applied to the
CMHC median per diem cost was $310 because we believed and continue to current median cost—provides an
and the hospital-based PHP median per believe that a reduction in the CY 2005 appropriate decrease in median per
diem cost was $215. No adjustments median per diem cost would strike an diem costs for both the hospital and
were determined to be necessary and, appropriate balance between using the CMHC data. Therefore, for CY 2007, we
after scaling, the combined median per best available data and providing are proposing an additional 15 percent
diem cost of $289 was reduced to adequate payment for a program that reduction to the combined hospital-
$281.33. We believed that the reduction often spans 5–6 hours a day. We believe based and CMHC median per diem cost.
in the CMHC median per diem cost that 15 percent is an appropriate We will continue to monitor and work
indicated that the use of updated CCRs reduction because it recognizes with CMHCs to improve their reporting.
had accounted for the previous increase decreases in median per diem costs in If CMHC data continues to be a problem,
in CMHC charges, and represented a both the hospital data and the CMHC we would consider using data from
more accurate estimate of CMHC per data, and also reduces the risk of any hospital-based PHPs only.
diem costs for PHP. adverse impact on access to these To calculate the CY 2007 APC PHP
For the CY 2006 OPPS final rule with services that might result from a large per diem cost, we reduced $245.65 (the
comment period, we analyzed 12 single-year rate reduction. However, we CY 2005 combined hospital-based and
months of the most current claims data adopted this policy as a transitional CMHC median per diem cost of $289
available for hospital and CMHC PHP measure, and stated in the CY 2006 reduced by 15 percent) by 15 percent,
services furnished between January 1, OPPS final rule with comment period which resulted in a combined median
2004, and December 31, 2004. We also that we would continue to monitor per diem cost of $208.80.
used the most currently available CCRs CMHC costs and charges for these 3. Proposed Separate Threshold for
to estimate costs. The median per diem services and work with CMHCs to
cost for CMHCs was $154, while the Outlier Payments to CMHCs
improve their reporting so that
median per diem cost for hospital-based payments can be calculated based on In the November 7, 2003 final rule
PHPs was $201. Based on the CY 2004 better empirical data, consistent with with comment period (68 FR 63469), we
claims data, the average charge per day the approach we have used to calculate indicated that, given the difference in
for CMHCs was $760, considerably payments in other areas of the OPPS (70 PHP charges between hospitals and
greater than hospital-based per day costs FR 68548). CMHCs, we did not believe it was
but significantly lower than what it was To apply this methodology for CY appropriate to make outlier payments to
in CY 2003 ($1,184). We believed that 2006, we reduced $289 (the CY 2005 CMHCs using the outlier percentage
a combination of reduced charges and combined unscaled hospital-based and target amount and threshold established
slightly lower CCRs for CMHCs resulted CMHC median per diem cost) by 15 for hospitals. There was a significant
in a significant decline in the CMHC percent, resulting in a combined median difference in the amount of outlier
median per diem cost between CY 2003 per diem cost of $245.65 for CY 2006. payments made to hospitals and CMHCs
and CY 2004. for PHP. In addition, further analysis
Following the methodology used for 2. Proposed PHP APC Update for CY indicated that using the same OPPS
the CY 2005 OPPS update, the CY 2006 2007 outlier threshold for both hospitals and
OPPS update combined hospital-based For CY 2007, we are proposing to CMHCs did not limit outlier payments
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and CMHC median per diem cost was calculate the CY 2007 PHP per diem to high cost cases and resulted in
$161, a decrease of 44 percent compared payment rate using the same update excessive outlier payments to CMHCs.
to the CY 2005 combined median per methodology that we adopted in CY Therefore, for CYs 2004, 2005, and
diem amount. We believed that this 2006. That is, we are proposing to apply 2006, we established a separate outlier
amount was too low to cover the cost for an additional 15-percent reduction to threshold for CMHCs. For CYs 2004 and
all PHPs. the combined hospital-based and CMHC 2005, we designated a portion of the

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estimated 2.0 percent outlier target proposing to set a dollar threshold for spending. Finally, proposed payments
amount specifically for CMHCs, CMHC outliers. As noted above, we are for outliers remain at 1.0 percent of total
consistent with the percentage of proposing to set the outlier threshold for payments for CY 2007.
projected payments to CMHCs under the CMHCs for CY 2007 at 3.40 percent The proposed market basket increase
OPPS in each of those years, excluding times the APC payment amount and the update factor of 3.4 percent for CY 2007,
outlier payments. For CY 2006, we set CY 2007 outlier payment percentage the required wage index budget
the estimated outlier target at 1.0 applicable to costs in excess of the neutrality adjustment of approximately
percent and allocated a portion of that threshold at 50 percent. 0.999908021, the return of 0.04 percent
1.0 percent, 0.6 percent (or 0.006 CMS and the Office of the Inspector for the difference in the pass-through
percent of total OPPS payments), to General are continuing to monitor the set-aside, and the proposed adjustment
CMHCs for PHP services. The CY 2006 excessive outlier payments to CMHCs. for the rural payment adjustment for
CMHC outlier threshold is met when the rural SCHs, including rural EACHs, of
C. Proposed Conversion Factor Update
cost of furnishing services by a CMHC 0.999883468 result in a proposed
for CY 2007
exceeds 3.40 times the PHP APC conversion factor for CY 2007 of
payment amount. The CY 2006 OPPS (If you choose to comment on issues $61.551.
outlier payment percentage is 50 in this section, please include the
caption ‘‘Conversion Factor’’ at the D. Proposed Wage Index Changes for CY
percent of the amount of costs in excess 2007
of the threshold. beginning of your comment.)
The separate outlier threshold for Section 1833(t)(3)(C)(ii) of the Act (If you choose to comment on issues
CMHCs became effective January 1, requires us to update the conversion in this section, please include the
2004, and has resulted in more factor used to determine payment rates caption ‘‘OPPS: Wage Indices’’ at the
commensurate outlier payments. In CY under the OPPS on an annual basis. beginning of your comment.)
2004, the separate outlier threshold for Section 1833(t)(3)(C)(iv) of the Act Section 1833(t)(2)(D) of the Act
CMHCs resulted in $1.8 million in provides that, for CY 2007, the update requires the Secretary to determine a
outlier payments to CMHCs. In CY 2005, is equal to the hospital inpatient market wage adjustment factor to adjust, for
the separate outlier threshold for basket percentage increase applicable to geographic wage differences, the portion
CMHCs resulted in $0.5 million in hospital discharges under section of the OPPS payment rate and the
outlier payments to CMHCs. In contrast, 1886(b)(3)(B)(iii) of the Act. copayment standardized amount
in CY 2003, more than $30 million was The forecast of the hospital market attributable to labor and labor-related
paid to CMHCs in outlier payments. We basket increase for FY 2007 published cost. This adjustment must be made in
believe this difference in outlier in the IPPS proposed rule on April 25, a budget neutral manner. As we have
payments indicates that the separate 2006 is 3.4 percent (71 FR 24148). To set done in prior years, we are proposing to
outlier threshold for CMHCs has been the OPPS proposed conversion factor for adopt the IPPS wage indices and extend
successful in keeping outlier payments CY 2007, we increased the CY 2006 these wage indices to hospitals that
to CMHCs in line with the percentage of conversion factor of $59.511, as participate in the OPPS but not the IPPS
OPPS payments made to CMHCs. specified in the November 10, 2005 final (referred to in this section as ‘‘non-
As discussed in section II.B.2. of this rule with comment period (70 FR IPPS’’ hospitals).
preamble, the CY 2005 CMHC data 68551), by 3.4 percent. As discussed in section II.A. of this
produce median per diem costs too low In accordance with section preamble, we standardize 60 percent of
to use for the CY 2007 partial 1833(t)(9)(B) of the Act, we further estimated costs (labor-related costs) for
hospitalization payment rate. Due to the adjusted the conversion factor for CY geographic area wage variation using the
continued volatility of the CMHC charge 2006 to ensure that the revisions we are IPPS wage indices that are calculated
data, we are proposing to maintain the making to our updates for a revised prior to adjustments for reclassification
existing outlier threshold for CMHCs for wage index and expanded rural to remove the effects of differences in
CY 2007 at 3.40 times the APC payment adjustment are made on a budget area wage levels in determining the
amount and the CY 2007 outlier neutral basis. We calculated a budget OPPS payment rate and the copayment
payment percentage applicable to costs neutrality factor of 0.999908021 for standardized amount.
in excess of the threshold at 50 percent. wage index changes by comparing total As published in the original OPPS
As noted in section II.G. of this payments from our simulation model April 7, 2000 final rule with comment
preamble, for CY 2007, we are using the FY 2007 IPPS proposed wage period (65 FR 18545), OPPS has
proposing to continue our policy of index values to those payments using consistently adopted the final IPPS
setting aside 1.0 percent of the aggregate the current (FY 2006) IPPS wage index wage indices as the wage indices for
total payments under the OPPS for values. To reflect the inclusion of adjusting the OPPS standard payment
outlier payments. We are proposing that essential access community hospitals amounts for labor market differences.
a portion of that 1.0 percent, an amount (EACHs) as rural SCHs (discussed in Thus, the wage index that applies to a
equal to 0.25 percent of outlier section II.F. of this preamble), we particular hospital under the IPPS will
payments and 0.0025 percent of total calculated an additional budget also apply to that hospital under the
OPPS payments would be allocated to neutrality factor of 0.999883468 for the OPPS. As initially explained in the
CMHCs for PHP service outliers. As rural adjustment, including EACHs. For September 8, 1998 OPPS proposed rule,
discussed in section II.G. of this CY 2007, we estimate that allowed pass- we believed and continue to believe that
preamble, we again are proposing to set through spending would equal using the IPPS wage index as the source
a dollar threshold in addition to an APC approximately $43.2 million, which of an adjustment factor for OPPS is
multiplier threshold for OPPS outlier represents 0.13 percent of total OPPS reasonable and logical, given the
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payments. However, because the PHP is projected spending for CY 2007. The inseparable, subordinate status of the
the only APC for which CMHCs may proposed conversion factor also is hospital outpatient within the hospital
receive payment under the OPPS, we adjusted by the difference between the overall. In accordance with section
would not expect to redirect outlier 0.17 percent pass-through dollars set- 1886(d)(3)(E) of the Act, the IPPS wage
payments by imposing a dollar aside in CY 2006 and the 0.13 percent index is updated annually. In this
threshold. Therefore, we are not estimate for CY 2007 pass-through proposed rule, we are using the

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49540 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules

proposed FY 2007 hospital IPPS wage proposed rule published May 17, 2006, payment rates to accommodate
indices published in the Federal for proposed changes to the geographic differences in labor costs in
Register on April 25, 2006, which occupational mix adjustment and this proposed rule, we have used the
include the wage indices proposed to be related issues (71 FR 28644–28653). In wage indices identified in the FY 2007
in effect through March 31, 2007, and this proposed rule, we are not reprinting IPPS proposed rule. For the CY 2007
those proposed to be in effect on or after the proposed FY 2007 IPPS wage OPPS final rule, we plan to use the
April 1, 2007, to accommodate the indices. We also refer readers to the revised FY 2007 IPPS wage indices that
expiring reclassification provisions CMS Web site for the OPPS at http:// will be fully adjusted for differences in
under section 508 of Pub. L. 108–173, to www.cms.hhs.gov/providers/hopps. At occupational mix using the new survey
determine the wage adjustments for the this Web site, the reader will find a link data and available after October 1, 2006.
OPPS payment rate and the copayment to the proposed FY 2007 IPPS wage In all cases, we will use the final FY
standardized amount for CY 2007. indices tables. (However, as noted 2007 IPPS wage indices, which include
However, in accordance with our above, these tables may change as a the wage indices to be in effect through
established policy, we are proposing to result of the May 17, 2006 occupational March 31, 2007, and those to be in effect
use the FY 2007 final version of these mix proposed rule discussed above.) on or after April 1, 2007, with any
wage indices to determine the wage 1. The proposed continued use of the subsequent corrections, for calculating
adjustments for the OPPS payment rate Core Based Statistical Areas (CBSAs) OPPS payment in CY 2007.
and copayment standardized amount issued by the OMB as revised standards 2. The reclassifications of hospitals to
that we will publish in our final rule for for designating geographical statistical geographic areas for purposes of the
CY 2007. areas based on the 2000 Census data, to wage index. For purposes of the OPPS
On May 17, 2006 (71 FR 28644), in define labor market areas for hospitals wage index, we are proposing to adopt
response to a court order in Bellevue for purposes of the IPPS wage index. all of the IPPS reclassifications for FY
Hosp. Ctr. v. Leavitt, we published a The OMB revised standards were 2007, including reclassifications that the
second IPPS proposed rule that would published in the Federal Register on Medicare Geographic Classification
revise the methodology for calculating December 27, 2000 (65 FR 82235), and Review Board (MGCRB) approved under
the occupational mix adjustment for FY OMB announced the new CBSAs on the one-time appeal process for
2007. We proposed to replace in full the June 6, 2003, through an OMB bulletin. hospitals under section 508 of Pub. L.
descriptions of the data and In the FY 2005 IPPS final rule, CMS 108–173. We note that section 508
methodology that would be used in adopted the new OMB definitions for reclassifications will terminate March
calculating the occupational mix wage index purposes. In the FY 2007 31, 2007, and that this expiration, along
adjustment discussed in the first FY IPPS proposed rule, we again stated that with the calendar year operating period
2007 IPPS proposed rule. The second hospitals located in MSAs will be urban of OPPS, impacts the calculation of the
proposed rule also states that, because and hospitals that are located in OPPS payment and the budget
of the collection of new occupational Micropolitan Areas or outside CBSAs neutrality adjustment for the wage
mix data, we would publish the FY will be rural. To help alleviate the index. In the FY 2007 IPPS proposed
2007 occupational mix adjusted wage decreased payments for previously rule (71 FR 24085 through 24087), we
index tables and related impacts on the urban hospitals that became rural under proposed procedural rules for hospitals
CMS Web site shortly after we publish the new geographical definitions, we that wished to reclassify for the second
the FY 2007 IPPS final rule, and in allowed these hospitals to maintain for half of FY 2007 (April 1, 2007, through
advance of October 1, 2006. The weights the 3-year period from FY 2005 through September 30, 2007) under section
and factors would also be published on FY 2007, the wage index of the MSA 1886(d)(10) of the Act. These rules
the CMS Web site after the FY 2007 where they previously had been located. essentially provided procedures for
IPPS final rule, but in advance of To be consistent with the IPPS, we will some hospitals to retain section 508
October 1, 2006. (71 FR 28650). Thus, continue the policy we began in CY reclassifications for the first half of FY
for purposes of determining OPPS wage 2005 of applying the same urban-to- 2007 and also be eligible to maintain an
indices, readers are also directed to refer rural transition to non-IPPS hospitals approved reclassification under section
to the wage index tables that are paid under the OPPS. That is, we would 1886(d)(10) for the second half of FY
published after the FY 2007 IPPS final maintain the wage index of the MSA 2007. Rather than calculating one wage
rule. where the hospital was previously index that reflected all final
We note that the FY 2007 IPPS wage located for purposes of determining a reclassification adjustments, we
indices continue to reflect a number of wage index for CY 2007. Beginning in proposed two separate wage indices for
changes implemented in FY 2005 as a FY 2008, the 3-year transition will end FY 2007, one to be in effect October 1
result of the revised Office of and these hospitals will receive their through March 31, 2007, and one to be
Management and Budget (OMB) statewide rural wage index. However, in effect April 1 through September 30,
standards for defining geographic hospitals paid under the IPPS will be 2007.
statistical areas, the implementation of eligible to apply for reclassification. These procedural rules also impact a
an occupational mix adjustment as part For the occupational mix adjustment, hospital’s eligibility to receive the out-
of the wage index, and new wage we refer readers to CMS’s May 17, 2006 migration wage adjustment, discussed
adjustments provided for under Pub. L. occupational mix proposed rule in greater detail in section III.I. of the FY
108–173. The following is a brief discussed above. Under this proposed 2007 IPPS proposed rule (71 FR 24087)
summary of the proposed changes in the rule, wage indices would be adjusted and under section II.D.4. of this
FY 2005 IPPS wage indices, continued 100 percent for occupational mix. In preamble. A hospital cannot receive an
for FY 2007, and any adjustments that addition, as stated above, CMS plans out-migration wage adjustment if it is
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we are applying to the OPPS for CY that wage index tables and other reclassified under section 1886(d)(10) of
2007. We refer the reader to the FY 2007 adjustment factors would be published the Act. Hospitals declining
IPPS proposed rule (71 FR 24074 after publication of the FY 2007 IPPS reclassification status for any part of the
through 24091) for a detailed discussion final rule, but prior to October 1, 2006. year become eligible to receive the out-
of the proposed changes to the wage As noted above, for purposes of migration wage adjustment if they are
indices. Readers should refer to our estimating an adjustment for the OPPS located in an adjustment county.

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Because the OPPS operates on a harmless provision for hospitals 68553 through 68555). In this proposed
calendar year (January 1 through changing status from urban to rural rule, we are proposing to update the
December 31) and not a fiscal year, the under the new CBSA geographic default ratios for CY 2007 using the
expiring reclassification status under statistical area definitions. However, most recent cost report data.
section 508 of Pub. L. 108–173 results section 508 sets aside $900 million to We calculated the statewide default
in different wage indices for OPPS for implement the section 508 CCRs using the same overall CCRs that
the first quarter of CY 2007 (January 1, reclassifications. We considered the we use to adjust charges to costs on
2007, through March 31, 2007) and the increased Medicare payments that the claims data. Please refer to section
last three quarters of CY 2007 (April 1, section 508 reclassifications would II.A.1.c. of this preamble for a
2007, through December 31, 2007). create in both the IPPS and OPPS when discussion of our proposed revision to
3. The out-migration wage adjustment we determined the impact of the one- the overall CCR calculation. Table 4 lists
to the wage index. In FY 2007 IPPS time appeal process. Because the the proposed CY 2007 default urban and
proposed rule (71 FR 24087), we increased OPPS payments already count rural CCRs by State and compares them
discussed the out-migration adjustment against the $900 million limit, we did to last year’s default CCRs. These CCRs
under section 505 of Pub. L. 109–173 for not consider these reclassifications are the ratio of total costs to total
counties under this adjustment. when we calculated the proposed OPPS charges from each provider’s most
Hospitals paid under the IPPS located in budget neutrality adjustment. recently submitted cost report, for those
the qualifying section 505 ‘‘out- Under the procedural rules described
cost centers relevant to outpatient
migration’’ counties receive a wage under section II.D.3. of this proposed
services weighted by Medicare Part B
index increase unless they have already rule above and in section III.H.5. of the
charges. We also adjusted these ratios to
been otherwise reclassified. (See the FY 2007 IPPS proposed rule (71 FR
reflect final settled status by applying
IPPS FY 2007 proposed rule for further 24085) regarding expiring section 508
the differential between settled to
information on out-migration.) For reclassifications, different wage indices
may be in effect for the first quarter of submitted costs and charges from the
OPPS purposes, we propose to continue most recent pair of settled to submitted
our policy from CY 2006 to allow non- the calendar year and the last three
quarters of the calendar year. These cost reports.
IPPS hospitals paid under the OPPS to
rules have implications for budget For this proposed rule, 81.79 percent
qualify for out-migration adjustment if
neutrality adjustments. Any additional of the submitted cost reports
they are located in a section 505 out-
payment attributable to reclassifications represented data for CY 2004. We only
migration county. Because non-IPPS
due to section 508 between January 1 used valid CCRs to calculate these
hospitals cannot reclassify, they are
and April 1, 2007, must be excluded default ratios. That is, we removed the
eligible for the out-migration wage
from a budget neutrality adjustment, CCRs for all-inclusive hospitals, CAHs,
adjustment. Tables identifying counties
and all other adjustments to the wage and hospitals in Guam and the U.S.
eligible for the out-migration adjustment
index are subject to budget neutrality. Virgin Islands because these entities are
will be published after the FY 2007 IPPS
Rather than calculating two different not paid under the OPPS, or in the case
final rule and CMS plans to publish
conversion factors, with different budget of all-inclusive hospitals, because their
them in advance of October 1, 2006.
neutrality adjustments, we are CCRs are suspect. We further identified
These tables will reflect updated county
proposing to calculate one budget and removed any obvious error CCRs
listing to reflect changes to the
neutrality adjustment that reflects the and trimmed any outliers. We limited
occupation mix adjustment made in
combined adjustments required for the the hospitals used in the calculation of
response to Bellevue court case
first quarter and last three quarters of the default CCRs to those hospitals that
discussed above. Because we are
the calendar year, respectively. We billed for services under the OPPS
proposing to adopt the final FY 2007
followed the same approach in the FY during CY 2004.
IPPS wage index, we will adopt any
2007 IPPS proposed rule (71 FR 24087). Finally, we calculated an overall
changes in a hospital’s classification
status that would make them either E. Proposed Statewide Average Default average CCR, weighted by a measure of
eligible or ineligible for the out- CCRs volume for CY 2004, for each State
migration wage adjustment both through except Maryland. This measure of
(If you choose to comment on issues
March 31, 2007, and on or after April 1, volume is the total lines on claims and
in this section, please include the
2007. is the same one that we use in our
caption ‘‘OPPS: Cost-to-Charge Ratios’’
With the exception of reclassifications impact tables. For Maryland, we used an
at the beginning of your comment.)
resulting from the implementation of CMS uses CCRs to determine outlier overall weighted average CCR for all
the one-time appeal process under payments, payments for pass-through hospitals in the Nation as a substitute
section 508 of Pub. L. 108–173, all devices, and monthly interim for Maryland CCRs, which appear in
changes to the wage index resulting transitional corridor payments under Table 4. Very few providers in Maryland
from geographic labor market area the OPPS. Some hospitals do not have are eligible to receive payment under
reclassifications or other adjustments a valid CCR. These hospitals include, the OPPS, which limits the data
must be incorporated in a budget but are not limited to, hospitals that are available to calculate an accurate and
neutral manner. Accordingly, in new and have not yet submitted a cost representative CCR. The observed
calculating the OPPS budget neutrality report, hospitals that have a CCR that differences between last year’s default
estimates for CY 2007, in this proposed falls outside predetermined floor and statewide CCRs and the proposed CCRs
rule, we have included the wage index ceiling thresholds for a valid CCR, or are a combination of the general decline
changes that would result from MGCRB hospitals that have recently given up in the ratio between costs and charges
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reclassifications, implementation of their all-inclusive rate status. Last year, widely observed in the cost report data
section 505 of Pub. L. 108–173, and we updated the default urban and rural and the change in the proposed overall
other refinements made in the FY 2007 CCRs for CY 2006 in our final rule, CCR calculation.
IPPS proposed rule, such as the hold published on November 10, 2005 (70 FR BILLING CODE 4120–01–P

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BILLING CODE 4120–01–C F. OPPS Payments to Certain Rural furnished during the period that begins
As stated above, CMS uses default Hospitals with the provider’s first cost reporting
statewide CCRs for several groups of (If you choose to comment on issues period beginning on or after January 1,
hospitals, including, but not limited to, in this section, please include the 2004, and ends on December 31, 2005.
hospitals that are new and have not yet caption ‘‘OPPS: Rural Hospitals Hold Accordingly, the authority for making
submitted a cost report, hospitals that Harmless Transitional Payments’’ at the transitional corridor payments under
have a CCR that falls outside beginning of your comment.) section 1833(t)(7)(D)(i) of the Act, as
predetermined floor and ceiling amended by section 411 of Pub. L. 108–
thresholds for a valid CCR, and 1. Hold Harmless Transitional Payment 173, expired for rural hospitals having
hospitals that have recently given up Changes Made by Pub. L. 109–171 100 or fewer beds and SCHs located in
their all-inclusive rate status. Current (DRA) rural areas on December 31, 2005.
OPPS policy also requires hospitals that When the OPPS was implemented, Section 5105 of Pub. L. 109–171
experience a change of ownership, but every provider was eligible to receive an reinstituted the hold harmless
that do not accept assignment of the additional payment adjustment transitional outpatient payments (TOPs)
previous hospital’s provider agreement, (transitional corridor payment) if the for covered OPD services furnished on
to use the previous provider’s CCR. payments it received for covered OPD or after January 1, 2006, and before
For CY 2007, we are proposing to services under the OPPS were less than January 1, 2009, for rural hospitals
apply this treatment of using the default the payments it would have received for having 100 or fewer beds that are not
statewide CCR to include an entity that the same services under the prior SCHs. When the OPPS payment is less
has not accepted assignment of an reasonable cost-based system. Section than the payment the provider would
existing hospital’s provider agreement 1833(t)(7) of the Act provides that the have received under the previous
in accordance with 42 CFR 489.18, and transitional corridor payments are reasonable cost-based system, the
that has not yet submitted its first temporary payments for most providers, amount of payment is increased by 95
Medicare cost report. We are proposing with two exceptions, to ease their percent of the amount of the difference
that this policy be effective for hospitals transition from the prior reasonable between those two payment systems for
experiencing a change of ownership on cost-based payment system to the OPPS CY 2006, by 90 percent of the amount
or after January 1, 2007. We believe that system. Cancer hospitals and children’s of that difference for CY 2007, and by
a hospital that has not accepted hospitals receive the transitional 85 percent of the amount of that
assignment of an existing hospital’s corridor payments on a permanent
difference for CY 2008.
provider agreement is similar to a new basis. Section 1833(t)(7)(D)(i) of the Act
hospital that will establish its own costs originally provided for transitional For CY 2006, we have implemented
and charges. We believe that the corridor payments to rural hospitals section 5106 of Pub. L. 109–171 through
hospital that has chosen not to accept with 100 or fewer beds for covered OPD Transmittal 877, issued on February 24,
assignment may have different costs and services furnished before January 1, 2006. We did not specifically address
charges than the existing hospital. 2004. However, section 411 of Pub. L. whether TOPs payments apply to
Furthermore, we believe that the 108–173 amended section EACHs, which are considered to be
hospital should be provided time to 1833(t)(7)(D)(i) of the Act to extend SCHs under section
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establish its own costs and charges. these payments through December 31, 1886(d)(5)(D)(iii)(III) of the Act.
Therefore, we are proposing to use the 2005, for rural hospitals with 100 or Accordingly, under the statute, EACHs
default statewide CCR to determine fewer beds. Section 411 also extended are treated as SCHs. Therefore, we
cost-based payments until the hospital the transitional corridor payments to believe that EACHs are not eligible for
has submitted its first Medicare cost sole community hospitals (SCHs) TOPs payment under Pub. L. 109–171.
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report. located in rural areas for services We are proposing to update § 419.70(d)

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to reflect the requirements of Pub. L. For CY 2006, the outlier threshold is discovered that the calculation of the
109–171. met when the cost of furnishing a overall CCR that the fiscal
service or procedure by a hospital intermediaries are using to determine
2. Proposed Adjustment for Rural SCHs
exceeds 1.75 times the APC payment outlier payment and payment for
Implemented in CY 2006 Related to
amount and exceeds the APC payment services paid at charges reduced to cost
Pub. L. 108–173 (MMA)
rate plus a $1,250 fixed-dollar differs from the overall CCR that we
(If you choose to comment on issues threshold. We introduced a fixed-dollar traditionally use to model the outlier
in this section, please include the threshold in CY 2005 in addition to the thresholds. We discovered this during
caption ‘‘OPPS: Rural SCH Payments’’ at traditional multiple threshold in order our calculations of the outlier threshold
the beginning of your comment.) to better target outliers to those high for our CY 2006 final rule with
In the CY 2006 OPPS final rule with cost and complex procedures where a comment period, and we indicated in
comment period (70 FR 68556), we very costly service could present a our preamble discussion for that rule,
finalized a payment increase for rural hospital with significant financial loss. that we may revisit the threshold
SCHs of 7.1 percent for all services and If a provider meets both of these estimate in light of identified
procedures paid under the OPPS, conditions, the multiple threshold and differences in the overall CCR
excluding drugs, biologicals, the fixed-dollar threshold, the outlier calculation. Because, on average, the
brachytherapy seeds, and services paid payment is calculated as 50 percent of overall CCR calculation used by the
under pass-through payment policy in the amount by which the cost of fiscal intermediaries results in higher
accordance with section 1833(t)(13)(B) furnishing the service exceeds 1.75 CCRs than those estimated using our
of the Act, as added by section 411 of times the APC payment rate. For a ‘‘traditional’’ CCR sets, the outlier
Pub. L. 108–173. Section 411 gave the discussion on CMHC outliers, see threshold is too low. The OPPS impact
Secretary the authority to make an section II.B.3. of the preamble to this table in section XXVII. of this preamble
adjustment to OPPS payments for rural proposed rule. demonstrates an estimated payment
hospitals effective January 1, 2006 if As explained in our CY 2006 OPPS differential of 0.25 percent of total
justified by a study of the difference in final rule with comment period (70 FR spending for hospital outlier payments
costs by APC between hospitals in rural 68561), we set our projected target for in CY 2006 because of the differences in
and urban areas. Our analysis showed a aggregate outlier payments at 1.0 overall CCR calculations. The revised
difference in costs only for rural SCHs percent of aggregate total payments overall CCR calculation that we are
and we implemented a payment under the OPPS. Our outlier thresholds proposing for CY 2007 aligns the two
adjustment for those hospitals beginning were set so that estimated CY 2006 CCR calculations by removing allied
January 1, 2006. aggregate outlier payments would equal and nursing health costs for those
We recently became aware that we 1.0 percent of aggregate total payments hospitals with paramedical education
did not specifically address whether the under the OPPS. In our CY 2006 OPPS programs from the fiscal intermediary’s
adjustment applies to EACHs, which are final rule with comment period (70 FR CCR calculation and weighting our
considered to be SCHs pursuant to 68563), we also published total outlier ‘‘traditional’’ calculation by total
section 1886(d)(5)(D)(iii)(III) of the Act. payments as a percent of total Medicare Part B charges. We expected
Thus, under the statute, EACHs are expenditures for past years. At this time, this proposed change in the overall CCR
treated as SCHs. Currently, fewer than we do not have a complete set of CY calculation to raise the outlier
10 hospitals are classified as EACHs. As 2005 claims in order to produce this threshold.
of CY 1998, under section 4201(c) of number for CY 2005. We will report on
Pub. L. 105–33, a hospital can no longer CY 2005 outlier payments in our CY The claims that we use to model each
become newly classified as an EACH. 2007 OPPS final rule. OPPS lag by 2 years. For this proposed
Therefore, for purposes of receiving this For CY 2007, we are proposing to rule, we used CY 2005 claims to model
rural adjustment, we are clarifying that continue our policy of setting aside 1.0 the CY 2007 OPPS. In order to estimate
EACHs are treated as SCHs for purposes percent of aggregate total payments CY 2007 outlier payments for this
of receiving this adjustment, assuming under the OPPS for outlier payments. A proposed rule, we inflated the charges
these entities otherwise meet the rural portion of that 1.0, an amount equal to on the CY 2005 claims using the same
adjustment criteria. 0.25 percent of outlier payments and inflation factor of 1.1515 that we used
This adjustment is budget neutral and 0.0025 percent of total OPPS payments to estimate the IPPS fixed-dollar outlier
applied before calculating outliers and would be allocated to CMHCs for partial threshold for the IPPS FY 2007
coinsurance. We also stated that we hospitalization program service outliers. proposed rule. For 1 year, the inflation
would not reestablish the adjustment In order to ensure that estimated CY factor is 1.0757. The methodology for
amount on an annual basis, but that we 2007 aggregate outlier payments would determining this charge inflation factor
might review the adjustment in the equal 1.0 percent of estimated aggregate was discussed in the FY 2007 IPPS
future and, if appropriate, would revise total payments under the OPPS, we are proposed rule (71 FR 24150). As we
the adjustment. For CY 2007, we are proposing that the outlier threshold be stated in our CY 2005 final rule with
proposing to continue our current set so that outlier payments are triggered comment period, we believe that the use
policy of a budget neutral 7.1 percent when the cost of furnishing a service or of this charge inflation factor is
payment increase for rural SCHs for procedure by a hospital exceeds 1.75 appropriate for OPPS because, with the
specified services. times the APC payment amount and exception of the routine service cost
exceeds the APC payment rate plus a centers, hospitals use the same cost
G. Proposed CY 2007 Hospital $1,825 fixed-dollar threshold. centers to capture costs and charges
Outpatient Outlier Payments We calculated the fixed-dollar across inpatient and outpatient services
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(If you choose to comment on issues threshold for this proposed rule using (69 FR 65845, November 15, 2004). As
in this section, please include the the same methodology as we did in CY also noted in the FY 2006 IPPS final
caption ‘‘Outlier Payments’’ at the 2006 except we used the revised overall rule, we believe that a charge inflation
beginning of your comment.) CCR calculation discussed in section factor is more appropriate than an
Currently, the OPPS pays outlier II.A.1.c. of this preamble. As discussed adjustment to costs because this
payments on a service-by-service basis. in section II.A.1.c. of this preamble, we methodology closely captures how

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actual outlier payments are made and H. Calculation of the Proposed OPPS for the proposed FY 2007 IPPS payment
calculated (70 FR 47495, August 12, National Unadjusted Medicare Payment rates. We note that the original proposal
2005). We then applied the revised (If you choose to comment on issues for calculating the FY 2007 IPPS wage
overall CCR that we calculated from in this section, please include the index has been recently changed. (Refer
each hospital’s most recent cost report caption ‘‘OPPS: National Unadjusted to the May 17, 2006 FY 2007 IPPS
(CMS–2552–96) and, if the cost report Medicare Payment’’ at the beginning of proposed rule, 71 FR 28644).) Final FY
was not settled, we adjusted it by a your comment.) 2007 IPPS wage indices will be adjusted
settled-to-submitted ratio. We simulated The basic methodology for 100 percent for differences in
aggregated outlier payments using these determining prospective payment rates occupational mix. Although we have
costs for several different fixed-dollar for OPD services under the OPPS is set not incorporated those changes in this
thresholds holding the 1.75 multiple forth in existing regulations at § 419.31 proposed rule due to the availability of
constant until the total outlier payments and § 419.32. The payment rate for new survey data, as is our practice, we
equaled 1.0 percent of aggregated total services and procedures for which propose to adopt changes made to the
OPPS payments. We estimate that a payment is made under the OPPS is the FY 2007 IPPS wage index values after
threshold of $1,825 combined with the product of the conversion factor they have been finalized.
multiple threshold of 1.75 times the Step 3. Adjust the wage index of
calculated in accordance with section
APC payment rate would allocate 1.0 hospitals located in certain qualifying
II.C. of this proposed rule and the
percent of aggregated total OPPS counties that have a relatively high
relative weight determined under
payments to outlier payments. percentage of hospital employees who
section II.A. of this proposed rule.
reside in the county, but who work in
For CMHCs, in CY 2007 we project Therefore, the national unadjusted
a different county with a higher wage
the outlier threshold is met when the payment rate for APCs contained in
index, in accordance with section 505 of
cost of furnishing a service or procedure Addendum A to this proposed rule and
Pub. L. 108–173. Addendum L contains
by a CMHC exceeds 3.40 times the APC for HCPCS codes to which payment
the qualifying counties and the
payment rate. If a CMHC provider meets under the OPPS has been assigned in
proposed wage index increase
this condition, the outlier payment is Addendum B to this proposed rule
developed for the FY 2007 IPPS. This
calculated as 50 percent of the amount (Addendum B is provided as a
step is to be followed only if the
by which the cost exceeds 3.40 times convenience for readers) was calculated
hospital has chosen not to accept
the APC payment rate. We are proposing by multiplying the proposed CY 2007
reclassification under Step 2 above.
to continue the same threshold policy scaled weight for the APC by the Step 4. Multiply the applicable wage
for CY 2007 as we have established for proposed CY 2007 conversion factor. index determined under Steps 2 and 3
CY 2006. An explanation for this However, to determine the payment
by the amount determined under Step 1
proposed policy is discussed in section that will be made in a calendar year
that represents the labor-related portion
II.B.3. the preamble of this proposed under the OPPS to a specific hospital for
of the national unadjusted payment rate.
rule. an APC for a service other than a drug, Step 5. Calculate 40 percent (the
in a circumstance in which the multiple nonlabor-related portion) of the national
The following is an example of an procedure discount does not apply, we
outlier calculation for CY 2007 under unadjusted payment rate and add that
take the following steps: amount to the resulting product of Step
our proposed policy. A hospital charges Step 1. Calculate 60 percent (the
$20,000 for a procedure. The wage 4. The result is the wage index adjusted
labor-related portion) of the national payment rate for the relevant wage
adjusted, and rural adjusted, if unadjusted payment rate. Since the
applicable, APC payment for the index area.
initial implementation of the OPPS, we Step 6. If a provider is a SCH, as
procedure is $3,500. Using the have used 60 percent to represent our
provider’s CCR of 0.35, the estimated defined in § 419.92, and located in a
estimate of that portion of costs rural area, as defined in § 412.63(b), or
cost to the hospital is $7,000 (0.35 × attributable, on average, to labor. (Refer is treated as being located in a rural area
$20,000). To determine whether this to the April 7, 2000 final rule with under § 412.103 of the Act, multiply the
provider is eligible for outlier payments comment period (65 FR 18496 through wage index adjusted payment rate by
for this procedure, the provider must 18497) for a detailed discussion of how 1.071 to calculate the total payment.
determine whether the cost for the we derived this percentage.)
service exceeds both the APC outlier Step 2. Determine the wage index area I. Proposed Beneficiary Copayments for
cost threshold (1.75 × APC payment) in which the hospital is located and CY 2007
and the fixed-dollar threshold ($1,825 + identify the wage index level that (If you choose to comment on issues
APC payment). In this example, the applies to the specific hospital. The in this section, please include the
provider meets both criteria: wage index values assigned to each area caption ‘‘OPPS: Beneficiary
(1) $7,000 exceeds $6,125 (1.75 × reflect the new geographic statistical Copayments’’ at the beginning of your
$3,500) areas as a result of revised OMB comment.)
standards (urban and rural) to which
(2) $7,000 exceeds $5,325 ($3,500 + hospitals are assigned for FY 2007 1. Background
$1,825) under the IPPS, reclassifications Section 1833(t)(3)(B) of the Act
To calculate the outlier payment, through the Medicare Classification requires the Secretary to set rules for
which is 50 percent of the amount by Geographic Review Board, section determining copayment amounts to be
which the cost of furnishing the service 1866(d)(8)(B) ‘‘Lugar’’ hospitals, and paid by beneficiaries for covered OPD
exceeds 1.75 times the APC rate, section 401 of Pub. L. 108–173, and the services. Section 1833(t)(8)(C)(ii) of the
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subtract $6,125 (1.75 × $3,500) from reclassifications of hospitals under the Act specifies that the Secretary must
$7,000 (resulting in $825). The provider one-time appeals process under section reduce the national unadjusted
is eligible for 50 percent of the 508 of Pub. L. 108–173. The wage index copayment amount for a covered OPD
difference, in this case $437.50 ($825/2). values include the occupational mix service (or group of such services)
The formula is (cost ¥ (1.75 × APC adjustment described in section II.D. of furnished in a year in a manner so that
payment rate))/2. this proposed rule that was developed the effective copayment rate

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(determined on a national unadjusted 3. Calculation of a Proposed Adjusted caption ‘‘OPPS: New HCPCS and CPT
basis) for that service in the year does Copayment Amount for an APC Group Codes’’ at the beginning of your
not exceed specified percentages. For all for CY 2007 comment.)
services paid under the OPPS in CY To calculate the OPPS adjusted 1. Proposed Treatment of New HCPCS
2007, and in calendar years thereafter, copayment amount for an APC group, Codes Included in the Second and Third
the specified percentage is 40 percent of take the following steps: Quarterly OPPS Updates for CY 2006
the APC payment rate (section Step 1. Calculate the beneficiary
1833(t)(8)(C)(ii)(V) of the Act). Section payment percentage for the APC by During the second and third quarters
1833(t)(3)(B)(ii) of the Act provides that, dividing the APC’s national unadjusted of CY 2006, we created a total of four
for a covered OPD service (or group of copayment by its payment rate. For new Level II HCPCS codes that were not
such services) furnished in a year, the example, using APC 0001, $7.00 is 23 addressed in the November 10, 2005
national unadjusted coinsurance percent of $30.14. final rule with comment period that
amount cannot be less than 20 percent Step 2. Calculate the wage adjusted updated the CY 2006 OPPS. We have
payment rate for the APC, for the designated the payment status of those
of the OPD fee schedule amount.
provider in question, as indicated in codes and added them either through
2. Proposed Copayment for CY 2007 section II.H. of this preamble. Calculate the April update (Transmittal 896, dated
the rural adjustment for eligible March 24, 2006) or the July update of
For CY 2007, we are proposing to providers as indicated in section II.H. of the CY 2006 OPPS (Transmittal 970,
determine copayment amounts for new this preamble. dated May 30, 2006). In this proposed
and revised APCs using the same Step 3. Multiply the percentage rule, we are soliciting public comments
methodology that we implemented for calculated in Step 1 by the payment rate on the status indicators and APC
CY 2004 (Refer to the November 7, 2003 calculated in Step 2. The result is the assignments of these services, which are
OPPS final rule with comment period, wage-adjusted copayment amount for listed in Table 5. Because of the timing
68 FR 63458.) The proposed unadjusted the APC. of this proposed rule, those codes
copayment amounts for services payable III. Proposed OPPS Ambulatory implemented through the July 2006
under the OPPS that would be effective Payment Classification (APC) Group OPPS update are not included in
January 1, 2007, are shown in Policies Addendum B of this proposed rule,
Addendum A and Addendum B of this while those codes based upon the April
proposed rule. A. Proposed Treatment of New HCPCS 2006 OPPS update are included in
and CPT Codes Addendum B. We intend to finalize the
(If you choose to comment on issues assignments for all of these services in
in this section, please include the the OPPS CY 2007 final rule.
TABLE 5.—NEW HCPCS CODES IMPLEMENTED IN APRIL OR JULY 2006
Assigned Implementation
HCPCS code Description status indi- Assigned APC date
cator

C9227 .............................. Injection, micafungin sodium, per 1 mg ......................................... G 9227 April 1, 2006.
C9228 .............................. Injection, tigecycline, per 1 mg ....................................................... G 9228 April 1, 2006.
C9229 .............................. Injection ibandronate sodium ......................................................... G 9229 July 1, 2006.
C9230 .............................. Injection, abatacept ........................................................................ G 9230 July 1, 2006.

2. Proposed Treatment of New CY 2007 New Category I and III CPT codes and service described by the code, as these
Category I and III CPT Codes and Level new Level II HCPCS codes, effective services could otherwise only be
II HCPCS Codes January 1, 2007, will be designated in reported using a Category I CPT unlisted
Addendum B of the CY 2007 OPPS final code. The AMA releases Category III
As has been our practice in the past, rule with Comment Indicator ‘‘NI.’’ The CPT codes in January, for
we implement new Category I and III status indicator, the APC assignment, or implementation beginning the following
CPT codes and new Level II HCPCS both for all such codes flagged with July, and in July, for implementation
codes, which are released in the fall of Comment Indicator ‘‘NI,’’ will be open beginning the following January. Prior
each year for annual updating, effective to public comment. We will respond to to CY 2006, we treated new Category III
January 1 in the final rule updating the all comments received in a subsequent CPT codes implemented in July of the
OPPS for the following calendar year. final rule. previous year or January of the OPPS
These codes are flagged with Comment update year in the same manner that
Indicator ‘‘NI’’ in Addendum B of the 3. Proposed Treatment of New Mid-Year
new Category I CPT codes and new
OPPS final rule to indicate that we are CPT Codes
Level II HCPCS codes implemented in
assigning them an interim payment Twice each year, the AMA issues January of the OPPS update year are
status which is subject to public Category III CPT codes, which the AMA treated; that is, we provided APC and
comment following publication of the defines as temporary codes for emerging status indicator assignments or both in
final rule that implements the annual technology, services, and procedures. the final rule updating the OPPS for the
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OPPS update. (See the discussion (In addition, AMA issues mid-year following calendar year. New Category I
immediately below concerning our Category I CPT codes for vaccines for and Category III CPT codes, as well as
modified policy for implementing new which FDA approval is imminent, to new Level II HCPCS codes, were flagged
Category I and III mid-year CPT codes.) ensure timely availability of a code.) with Comment Indicator ‘‘NI’’ in
We are proposing to continue this The AMA establishes these codes to Addendum B of the final rule to
recognition and process for CY 2007. allow collection of data specific to the indicate that we were assigning them an

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interim payment status which was ensure patient access to the services the are shown in Table 6. These codes are
subject to public comment following codes describe; and to eliminate not included in Addendum B of this
publication of the final rule that potential redundancy between Category proposed rule, which is based upon the
implemented the annual OPPS update. III CPT codes and some of the C-codes, April 2006 OPPS update. In this
As stated in the CY 2006 OPPS final which are payable under the OPPS and proposed rule, we are soliciting public
rule with comment period (70 FR created by us in response to comments on the status indicators and,
68567), we modified our process for applications for new technology if applicable, the APC assignments of
implementing the Category III codes that services. Therefore, beginning on July 1, these services. We intend to finalize the
the AMA releases each January for 2006, we implemented in the OPPS assignments of these Category III CPT
implementation in July to ensure timely seven Category III CPT codes that the codes implemented in July 2006 in the
collection of data pertinent to the AMA released in January 2006 for
CY 2007 OPPS final rule.
services described by the codes; to implementation in July 2006. The codes

TABLE 6.—CATEGORY III CPT CODES IMPLEMENTED IN JULY 2006


Status indi-
HCPCS code Long descriptor APC
cator

0155T ....................................... Laparoscopy, surgical, implantation or replacement of gastric stimulation elec- T 0130
trodes, lesser curvature (i.e., morbid obesity).
0156T ....................................... Laparoscopy, surgical, revision or removal of gastric stimulation electrodes, T 0130
lesser curvature (i.e., morbid obesity).
0157T ....................................... Laparotomy, implantation or replacement of gastric stimulation electrodes, C ........................
lesser curvature (i.e., morbid obesity).
0158T ....................................... Laparotomy, revision or removal of gastric stimulation electrodes, lesser cur- C ........................
vature (i.e., morbid obesity).
0159T ....................................... Computer aided detection, including computer algorithm analysis of MRI N ........................
image data for lesion detection/characterization, pharmacokinetic analysis,
with further physician review for interpretation, breast MRI.
0160T ....................................... Therapeutic repetitive transcranial magnetic stimulation treatment planning .... X 0340
0161T ....................................... Therapeutic repetitive transcranial magnetic stimulation treatment delivery and X 0340
management, per session.

Some of the new Category III CPT Therefore, for CY 2007, we are 1. Background
codes describe services that we have proposing to include in Addendum B of Section 1833(t)(2)(A) of the Act
determined to be similar in clinical the OPPS CY 2007 final rule the new requires the Secretary to develop a
characteristics and resource use to Category III CPT codes and the new classification system for covered
HCPCS codes in an existing APC. In Category I CPT codes for vaccines hospital outpatient services. Section
these instances, we may assign the released in January 2006 for 1833(t)(2)(B) of the Act provides that
Category III CPT code to the appropriate implementation on July 1, 2006 this classification system may be
clinical APC. Other Category III CPT (through the OPPS quarterly update composed of groups of services, so that
codes describe services that we have process) and the Category III and services within each group are
determined are not compatible with an vaccine Category I CPT codes released comparable clinically and with respect
existing clinical APC, yet are in July 2006 for implementation on to the use of resources. In accordance
appropriately provided in the hospital January 1, 2007. However, only those with these provisions, we developed a
outpatient setting. In these cases, we new Category III codes and the new grouping classification system, referred
may assign the Category III CPT code to to as the Ambulatory Payment
vaccine codes implemented effective
what we estimate is an appropriately Classification Groups (or APCs), as set
January 1, 2007, will be flagged with
priced New Technology APC. In other forth in § 419.31 of the regulations. We
cases, we may assign a Category III CPT Comment Indicator ‘‘NI’’ in Addendum
use Level I and Level II HCPCS codes
code one of several nonseparately B of the CY 2007 final rule to indicate
and descriptors to identify and group
payable status indicators, including N, that we are assigning them an interim
the services within each APC. The APCs
C, B, or E, which we believe is payment status which is subject to are organized such that each group is
appropriate for the specific code. We public comment. As discussed earlier, homogeneous both clinically and in
expect that we will have received Category III codes and Category I terms of resource use. Using this
applications for new technology status vaccine codes implemented in July classification system, we have
for some of the services described by 2006, which are listed in Table 6, are established distinct groups of surgical,
new Category III CPT codes, which may subject to comment through this diagnostic, and partial hospitalization
assist us in determining appropriate proposed rule and their status will be services, as well as medical visits. We
APC assignments. If the AMA made final in the CY 2007 OPPS final also have developed separate APC
establishes a Category III CPT code for rule. groups for certain medical devices,
a service for which an application has drugs, biologicals,
been submitted to CMS for new B. Proposed Changes—Variations
radiopharmaceuticals, and
sroberts on PROD1PC70 with PROPOSALS

technology status, CMS may not have to Within APCs


brachytherapy devices.
issue a temporary Level II HCPCS code (If you choose to comment on issues We have packaged into each
to describe the service, as has often been in this section, please include the procedure or service within an APC
the case in the past when Category III caption ‘‘OPPS: 2 Times Rule’’ at the group the costs associated with those
CPT codes were only recognized by the items or services that are directly related
beginning of your comment.)
OPPS on an annual basis. and integral to performing a procedure

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49550 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules

or furnishing a service. Therefore, we do by the Secretary) for an item or service OPPS perspective based on our CY 2007
not make separate payment for packaged in the group is more than 2 times greater proposed policies.
items or services. For example, than the lowest median cost for an item Addendum B of this proposed rule
packaged items and services include: (1) or service within the same group identifies with a comment indicator
Use of an operating, treatment, or (referred to as the ‘‘2 times rule’’). We ‘‘CH’’ those HCPCS codes for which we
procedure room; (2) use of a recovery use the median cost of the item or are proposing a change to the APC
room; (3) most observation services; (4) service in implementing this provision. assignment or status indicator as
anesthesia; (5) medical/surgical The statute authorizes the Secretary to assigned in the January 2006 Addendum
supplies; (6) pharmaceuticals (other make exceptions to the 2 times rule in B. These proposed reassignments of
than those for which separate payment unusual cases, such as low-volume APC or status indicator are subject to
may be allowed under the provisions items and services. public comment under this proposed
discussed in section V of this preamble); rule.
and (7) incidental services such as 2. Application of the 2 Times Rule
venipuncture. Our packaging 3. Exceptions to the 2 Times Rule
In accordance with section 1833(t)(2)
methodology is discussed in section of the Act and § 419.31 of the As discussed earlier, we may make
II.A. of this proposed rule. regulations, we annually review the exceptions to the 2 times limit on the
Under the OPPS, we pay for hospital items and services within an APC group variation of costs within each APC
outpatient services on a rate-per-service to determine, with respect to group in unusual cases such as low-
basis that varies according to the APC comparability of the use of resources, if volume items and services. Taking into
group to which the service is assigned. the median of the highest cost item or account the APC changes that we are
Each APC weight represents the hospital service within an APC group is more proposing for CY 2007 based on the
median cost of the services included in than 2 times greater than the median of APC Panel recommendations discussed
that APC relative to the hospital median the lowest cost item or service within in section III.D. of this preamble, the
cost of the services included in APC that same group (‘‘2 times rule’’). We proposed changes to status indicators
0606. The APC weights are scaled to make exceptions to this limit on the and APC assignments as identified in
APC 0606 because we are proposing it variation of costs within each APC Addendum B, and the use of CY 2005
to be the middle level clinic visit APC group in unusual cases such as low- claims data to calculate the median
(that is, where the Level III Clinic Visit volume items and services. costs of procedures classified in the
HCPCS code of five proposed levels of APCs, we reviewed all the APCs to
During the APC Panel’s March 1–2,
clinic visits is assigned), and because determine which APCs would not
2006 meeting, we presented median cost
middle level clinic visits are among the satisfy the 2 times rule. We used the
and utilization data for services
most frequently furnished services in following criteria to decide whether to
furnished during the period of January
the outpatient hospital setting. See propose exceptions to the 2 times rule
1, 2005, through September 30, 2005,
section II.A.3. of this preamble for a for affected APCs:
about which we had concerns or about
complete discussion of the reasons for • Resource homogeneity
choosing APC 0606 as the basis for which the public had raised concerns
regarding their APC assignments, status • Clinical homogeneity
scaling the APC relative weights.
Section 1833(t)(9)(A) of the Act indicator assignments, or payment rates. • Hospital concentration
requires the Secretary to review the The discussions of service-specific • Frequency of service (volume)
components of the OPPS not less than issues, the APC Panel recommendations • Opportunity for upcoding and code
annually and to revise the groups and if any, and our proposals for CY 2007 fragments.
relative payment weights and make are contained in section III.D. of this For a detailed discussion of these
other adjustments to take into account preamble. criteria, refer to the April 7, 2000 OPPS
changes in medical practice, changes in In addition to the assignment of final rule with comment period (65 FR
technology, and the addition of new specific services to APCs which we 18457).
services, new cost data, and other discussed with the APC Panel, we also Table 7 lists the APCs that we are
relevant information and factors. identified APCs with 2 times violations proposing to exempt from the 2 times
Section 1833(t)(9)(A) of the Act, as that were not specifically discussed rule based on the criteria cited above.
amended by section 201(h) of the BBRA with the APC Panel but for which we For cases in which a recommendation
of 1999, also requires the Secretary, are proposing changes to their HCPCS by the APC Panel appeared to result in
beginning in CY 2001, to consult with codes’ APC assignments in Addendum or allow a violation of the 2 times rule,
an outside panel of experts to review the B of this proposed rule. In these cases, we generally accepted the APC Panel’s
APC groups and the relative payment to eliminate a 2 times violation, we recommendation because those
weights (the APC Panel reassigned the codes to APCs that recommendations were based on
recommendations for specific services contained services that were similar explicit consideration of resource use,
for CY 2007 OPPS and our responses to with regard to both resource use and clinical homogeneity, hospital
them are discussed in section III.D. of clinical homogeneity. We also are specialization, and the quality of the
this preamble). proposing changes to the status data used to determine the APC
Finally, as discussed earlier, section indicators for some codes that are not payment rates that we are proposing for
1833(t)(2) of the Act provides that, specifically and separately discussed in CY 2007. The median costs for hospital
subject to certain exceptions, the items this proposed rule. In these cases, we outpatient services for these and all
and services within an APC group changed the status indicators for some other APCs which were used in
cannot be considered comparable with codes because we thought that another development of this proposed rule can
sroberts on PROD1PC70 with PROPOSALS

respect to the use of resources if the status indicator more accurately be found on the CMS Web site: http://
highest median (or mean cost, if elected describes their payment status from an www.cms.hhs.gov.

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Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules 49551

TABLE 7.—PROPOSED APC EXCEPTIONS TO THE 2 TIMES RULE FOR CY 2007


APC APC description

0007 ................................................ Level II Incision & Drainage.


0010 ................................................ Level I Destruction of Lesion.
0019 ................................................ Level I Excision/Biopsy.
0024 ................................................ Level I Skin Repair.
0031 ................................................ Smoking Cessation Services.
0040 ................................................ Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve.
0043 ................................................ Closed Treatment Fracture Finger/Toe/Trunk.
0058 ................................................ Level I Strapping and Cast Application.
0060 ................................................ Manipulation Therapy.
0081 ................................................ Non-Coronary Angioplasty or Atherectomy.
0085 ................................................ Level II Electrophysiologic Evaluation.
0093 ................................................ Vascular Reconstruction/Fistula Repair without Device.
0105 ................................................ Revision/Removal of Pacemakers, AICD, or Vascular.
0111 ................................................ Blood Product Exchange.
0112 ................................................ Apheresis, Photopheresis, and Plasmapheresis.
0204 ................................................ Level I Nerve Injections.
0235 ................................................ Level I Posterior Segment Eye Procedures.
0245 ................................................ Level I Cataract Procedures without IOL Insert.
0251 ................................................ Level I ENT Procedures.
0252 ................................................ Level II ENT Procedures.
0274 ................................................ Myelography.
0303 ................................................ Treatment Device Construction.
0307 ................................................ Myocardial Positron Emission Tomography (PET) Imaging.
0312 ................................................ Radioelement Applications.
0323 ................................................ Extended Individual Psychotherapy.
0330 ................................................ Dental Procedures.
0409 ................................................ Red Blood Cell Tests.
0418 ................................................ Insertion of Left Ventricular Pacing Elect.
0432 ................................................ Health and Behavior Services.
0437 ................................................ Level II Drug Administration.
0604 ................................................ Level I Clinic Visits.
0664 ................................................ Level I Proton Beam Radiation Therapy.

C. New Technology APCs other with status indicator ‘‘T,’’ allow us procedures in that transitional phase.
(If you choose to comment on issues to price new technology services more These requests, and their accompanying
in this section, please include the appropriately and consistently. estimates for expected Medicare
caption ‘‘New Technology APCs’’ at the Every year we receive many requests beneficiary or total patient utilization,
beginning of your comment.) for higher payment amounts for specific often reflect very low rates of patient
procedures under the OPPS because use, resulting in high per use costs for
1. Introduction they require the use of expensive which requesters believe Medicare
In the November 30, 2001 final rule equipment. We are taking this should make full payment. Medicare
(66 FR 59903), we finalized changes to opportunity to reiterate our response in does not, and we believe should not,
the time period a service was eligible for general to the issue of hospitals’ capital assume responsibility for more than its
payment under a New Technology APC. expenditures as they relate to the OPPS share of the costs of procedures based
Beginning in CY 2002, we retain and Medicare. on Medicare beneficiary projected
services within New Technology APC Under the OPPS, one of our goals is utilization and does not set its payment
groups until we gather sufficient claims to make payments that are appropriate rates based on initial projections of low
data to enable us to assign the service for the services that are necessary for utilization for services that require
to a clinically appropriate APC. This treatment of Medicare beneficiaries. The expensive capital equipment. For the
policy allows us to move a service from OPPS like other Medicare payment OPPS, we rely on hospitals to make
a New Technology APC in less than 2 systems is budget neutral and so, their business decisions regarding
years if sufficient data are available. It although we do not pay full hospital acquisition of high cost capital
also allows us to retain a service in a costs for procedures, we believe that our equipment taking into consideration
New Technology APC for more than 3 payment rates generally reflect the costs their knowledge about their entire
years if sufficient data upon which to that are associated with providing care patient base (Medicare beneficiaries
base a decision for reassignment have to Medicare beneficiaries in cost- included) and an understanding of
not been collected. We note that the cost efficient settings. Further, we believe Medicare’s and other payers’ payment
bands for new technology APCs range that our rates are adequate to assure policies.
from $0 to $50 in increments of $10, access to services for most beneficiaries. We note that in a budget neutral
from $50 to $100 in an increment of For many emerging technologies there environment, payments may not fully
sroberts on PROD1PC70 with PROPOSALS

$50, from $100 through $2,000 in is a transitional period during which cover hospitals’ costs, including those
intervals of $100, and from $2,000 utilization may be low, often because for the purchase and maintenance of
through $6,000 in intervals of $500. providers are first learning about the capital equipment. We rely on providers
These intervals, which are in two techniques and their clinical utility. to make their decisions regarding the
parallel sets of New Technology APCs, Quite often, the requests for higher acquisition of high cost equipment with
one with status indicator ‘‘S’’ and the payment amounts are for new the understanding that the Medicare

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program must be careful to establish its believe that we have sufficient data to believed there were sufficient claims
initial payment rates for new services assign nonmyocardial PET scans to a data to assign nonmyocardial PET scans
that lack hospital claims data based on clinically appropriate APC for CY 2007. to a single clinical APC. However, to
realistic utilization projections for all Note that we assign a service to a New minimize any potential impact that a
such services delivered in cost-efficient Technology APC only when we do not payment reduction resulting from this
hospital outpatient settings. As the have adequate claims data upon which move might have had on beneficiary
OPPS acquires claims data regarding to determine the median cost of access to this technology, we set the CY
hospital costs associated with new performing the procedure, and we 2005 OPPS payment rate for
procedures, we will regularly examine expect that the service’s clinical or nonmyocardial PET scans based on a
the claims data and any available new resource characteristics will differ from 50/50 blend of their median cost based
information regarding the clinical all other procedures already assigned to on CY 2003 claims data and the
aspects of new procedures to confirm clinical APCs. Each New Technology payment rate of the CY 2004 New
that our OPPS payments remain APC represents a particular cost band Technology APC to which they were
appropriate for procedures as they (for example, $1,400–1,500), and we assigned. Therefore, nonmyocardial PET
transition into mainstream medical assign procedures to these APCs based scans were assigned to New Technology
practice. on our analysis of the procedures’ costs. APC 1513 (New Technology—Level XIV
Payment for items assigned to a New ($1,000-$1,200) for a blended payment
2. Proposed Movement of Procedures
Technology APC is the midpoint of the rate of $1,150 in CY 2005. In CY 2005,
From New Technology APCs to Clinical
band (for example, $1,450). We move a in the context of an expansion in
APCs
service from a New Technology APC to Medicare coverage for PET procedures,
As we explained in the November 30, a clinical APC when we have adequate we also simplified coding for PET
2001 final rule (66 FR 59897), we claims data upon which to base its services by instructing hospitals to bill
generally keep a procedure in the New future payment rate. In the case of several more general CPT codes in place
Technology APC to which it is initially nonmyocardial PET services, we believe of numerous disease-specific G-codes.
assigned until we have collected data that we now have sufficient data to We continued with these coding and
sufficient to enable us to move the assign them to a clinically appropriate payment methodologies in CY 2006.
procedure to a clinically appropriate APC.
APC. However, in cases where we find For CY 2007, we are proposing the
We last proposed changes in
that our original New Technology APC assignment of nonmyocardial PET
payments for nonmyocardial PET
assignment was based on inaccurate or procedures for CY 2005. At that time, procedures to a clinically appropriate
inadequate information, or where the while we had large numbers of single APC as we have several years of robust
New Technology APCs are restructured, claims reflecting that the median cost of and stable claims data upon which to
we may, based on more recent resource PET procedures was substantially lower determine the median cost of
utilization information (including than their CY 2004 payment rate of performing these procedures. Based on
claims data) or the availability of refined $1,450, we had some concerns that analysis of our claims data, the median
New Technology APC bands, reassign abruptly lowering the payment rate for costs for nonmyocardial PET scans have
the procedure or service to a different nonmyocardial PET scans could hinder ranged between approximately $852 and
New Technology APC that most access to this technology. Therefore, we $924 for claims submitted from CY 2002
appropriately reflects its cost. proposed three options to develop the through CY 2005, yet our payment rates
The procedures presented below CY 2005 payment rate for these have been significantly higher than the
represent services assigned to New procedures in the August 16, 2004 median costs throughout this same time
Technology APCs for CY 2006 for which proposed rule (69 FR 50468). period. We have observed significant
we believe we have sufficient data to Specifically, we proposed the following growth in the number of nonmyocardial
reassign them to clinically appropriate options and invited comments on each PET scans performed on Medicare
APCs for CY 2007. Therefore, we are of the options. beneficiaries, from about 48,000 in CY
proposing to reassign them to clinically • Option 1: Continue in CY 2005 the 2002, to 68,000 in CY 2003, and once
appropriate APCs as indicated CY 2004 assignment of the scans to New again to 121,000 in CY 2004, the year
specifically in our discussion and in Technology APC 1516 prior to assigning when we first reduced the OPPS
Table 10. to a clinical APC. nonmyocardial PET scan payment rates
• Option 2: Assign the PET scans to from $1,450 to $1,150. For the CY 2007
a. Nonmyocardial Positron Emission proposed rule, we have about 45,000
a clinically appropriate APC priced
Tomography (PET) Scans single PET claims from CY 2005,
according to the median cost of the
Positron emission tomography (PET) scans based on CY 2003 claims data. yielding a stable median cost for PET
is a noninvasive diagnostic imaging Under this option, we would assign PET procedures of about $867. Although the
procedure that assesses the level of scans to APC 0420, PET imaging. CY 2005 claims data are not yet
metabolic activity and perfusion in • Option 3: Transition assignment to complete, the apparent decline in
various organ systems of the human a clinical APC in CY 2006 by setting numbers of claims for nonmyocardial
body. PET serves an important role in payment in CY 2005 based on a 50/50 PET scans alone in the CY 2005 claims
the clinical care of many Medicare blend of the median cost of PET scans data is likely related to the large number
beneficiaries. We recognize that PET is and their CY 2004 New Technology of claims for PET/CT scans now
a useful technology in many instances payment rate. We would assign the observed in CY 2005, when codes for
and want to ensure that the technology scans to New Technology APC 1513 for that combined service were first
remains available to Medicare a blended transition payment. available for billing. In fact, the total
sroberts on PROD1PC70 with PROPOSALS

beneficiaries when medically necessary. Based on comments received, we number of PET scans provided to
Since August 2000, nonmyocardial PET decided to set the CY 2005 payment rate Medicare beneficiaries in CY 2005,
procedures have been assigned to a New for nonmyocardial PET scans based on defined as PET scans and PET/CT scans,
Technology APC in the OPPS. As a option 3 at $1,150. We further stated in continued to climb to almost 128,000
result of our collection of 5 full years the November 15, 2004 final rule with based upon the CY 2005 claims data
worth of hospital claims data, we comment period (69 FR 65716) that we available for this proposed rule, in

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comparison to final claims for CY 2004 For CY 2007, we are proposing the Payment Changes for Drugs, Biologicals,
of approximately 121,000 for PET scans. assignment of concurrent PET/CT scans, and Radiopharmaceuticals) of the
Therefore, we are proposing to assign specifically CPT codes 78814, 78815, preamble of this proposed rule.
nonmyocardial PET scans, in particular, and 78816, to a clinically appropriate
CPT codes 78608, 78811, 78812, and c. Stereotactic Radiosurgery (SRS)
APC because we believe we have
78813, to new APC 0308 Treatment Delivery Services
adequate claims data from CY 2005
(Nonmyocardial PET Imaging) with a upon which to determine the median For the past several years, we have
median cost of $865.30 for CY 2007. We cost of performing these procedures. collected hospital costs associated with
are confident, in the face of our stable Based on our analysis of CY 2005 single the planning and delivery of stereotactic
median costs for nonmyocardial PET claims, the median cost of PET/CT scans radiosurgery services (hereafter referred
scans over the past 4 years, that their is $865 from over almost 64,000 single to as SRS). As new technology emerged
additional 2-year period of receiving claims. Comparison of the median cost in the field of SRS, public commenters
New Technology APC payments at the of nonmyocardial PET procedures of urged us to recognize cost differences
blended rate of $1,150 for CY 2005 and $867 with the median cost of concurrent associated with the various methods of
CY 2006 as we transitioned the services PET/CT scans demonstrates that the SRS planning and delivery. Beginning
to a clinical APC should ensure median costs of PET scans with or in CY 2001, we established G-codes to
continued availability of this technology without concurrent CT scans for capture any such cost variations
now that its services will be paid attenuation correction and anatomical associated with the various methods of
through a clinical APC for CY 2007, like localization are about the same. This planning and delivery of SRS. For CY
most other OPPS services. result is not unexpected because many 2004, based on comments received
newer PET scanners also have the regarding the G-codes used for SRS, we
b. PET/Computed Tomography (CT) made some modifications to the coding
Scans capability of rapidly acquiring CT
images for attenuation correction and (68 FR 63431 and 63432). First, we
Since August 2000, we have paid anatomical localization, sometimes with received comments regarding the
separately for PET and CT scans. In CY simultaneous image acquisition. descriptors for HCPCS codes G0173 and
2004, the payment rate for To explore the possibility that the G0251, indicating that these codes did
nonmyocardial PET scans was $1,450, similarity in median costs for PET and not distinguish image-guided robotic
while it was $193 for typical diagnostic PET/CT procedures could be related to SRS systems from other forms of linear
CT scans. Prior to CY 2005, different groups of hospitals billing the accelerator-based SRS systems to
nonmyocardial PET and the PET portion two types of PET services based on their account for the cost variation in
of PET/CT scans were described by G- available equipment, rather than the delivering these services. In response,
codes for billing to Medicare. Several true comparability of hospital resources for CY 2004 we created two new G-
commenters to the November 15, 2004 required for the two types of services, codes (G0339 and G0340) to describe
final rule with comment period (69 FR we analyzed claims from a subset of complete and fractionated image-guided
65682) urged that we replace the G- hospitals billing both PET and PET/CT robotic linear accelerator-based SRS
codes for nonmyocardial PET and PET/ scans in CY 2005. This analysis looked treatment. We placed HCPCS code
CT scan procedures with the established at 362 providers who billed a PET G0339 in APC 1528 at a payment rate
CPT codes. These commenters stated HCPCS code and a PET/CT CPT code at of $5,250, and HCPCS code G0340 in
that movement to the established CPT least one time each during CY 2005. The APC 1525 at a payment rate of $3,750.
codes would greatly reduce the burden median cost from this subset of claims Second, we received comments on
on hospitals of tracking and billing the for nonmyocardial PET scans was $890, HCPCS code G0242 which requested
G-codes which are not recognized by in comparison with $863 for the PET/CT that we modify the code descriptor to
other payers and would allow for more scans. Thus, we observed the same close avoid confusion and misuse of the code,
uniform hospital billing of these scans. relationship between median costs of and also to appropriately describe
We agreed with the commenters that PET and PET/CT procedures from treatment planning for both linear
movement from the G-codes to the hospitals billing both sets of services as accelerator-based and Cobalt 60-based
established CPT codes for we did for all OPPS CY 2005 claims SRS treatments. In response, for CY
nonmyocardial PET and PET/CT scans available for this proposed rule for these 2004, we created HCPCS code G0338 to
would allow for more uniform billing of scans. We believe that our claims data distinguish linear accelerator-based SRS
these scans. As a result of a Medicare accurately reflect the comparable treatment planning from Cobalt 60-
national coverage determination hospital resources required to provide based SRS treatment planning. We
(Publication 100–3, Medicare Claims PET and PET/CT procedures, and the placed HCPCS code G0338 in APC 1516
Processing Manual section 220.6) that scans have obvious clinical similarity as at a payment rate of $1,450.
was made effective January 28, 2005, we well. Therefore, for CY 2007 we are In CY 2005, there were no changes to
discontinued numerous G-codes that proposing to assign the CPT codes for the coding or New Technology APC
described myocardial PET and PET/CT scans, along with the CPT codes payment rates for the SRS planning or
nonmyocardial PET procedures and for PET scans, to the same new APC treatment delivery codes from CY 2004.
replaced them with the established CPT 0308 (Nonmyocardial PET Imaging) We stated in the CY 2005 OPPS final
codes. The CY 2005 payment rate for with a median cost of $865.30. rule with comment period (69 FR
concurrent PET/CT scans using the CPT We note that we have been paying 65711) that any SRS code changes
codes 78814, 78815, and 78816 was separately for fluorodeoxyglucose would be premature without cost data to
$1,250, which was $100 higher than the (FDG), the radiopharmaceutical support a code restructuring. Therefore,
payment rate for PET scans alone. These described by HCPCS code A9552 (F18 we maintained HCPCS codes G0173,
sroberts on PROD1PC70 with PROPOSALS

PET/CT CPT codes were placed in New fdg), that is commonly administered G0242, G0243, G0251, G0338, G0339,
Technology APC 1514 (New during nonmyocardial PET and PET/CT and G0340 in their respective New
Technology—Level XIV, $1,200–$1,300) procedures. For CY 2007, we are Technology APCs for CY 2005. We
for CY 2005. We continued with these proposing to continue paying separately further stated that until we had
coding and payment methodologies in for FDG, according to the methodology completed an analysis of claims for
CY 2006. described in section V. (Proposed OPPS these procedure codes, we would

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continue to maintain HCPCS codes Cobalt 60-based SRS treatment delivery through fifth sessions of image-guided,
G0173, G0242, G0243, G0251, G0338, described by G0243, we reassigned robotic linear accelerator-based SRS
G0339, and G0340 in their respective G0243 from a New Technology APC to treatment, have been $2,502 for CY 2004
New Technology APCs for CY 2005 as new clinical APC 0127 (Stereotactic and $2,917 for CY 2005 as determined
we considered the adoption of CPT Radiosurgery) with a payment rate of by over 1,000 single bills during each
codes to describe all SRS procedures for $7,305 established based on the CY year, significantly lower than its
CY 2006. 2004 median cost of G0243. We made payment rate of $3,750. Unquestionably,
At its February 2005 meeting, the APC no changes for CY 2006 to the New the claims data from CY 2004 and CY
Panel discussed the clinical and Technology APC assignments of the 2005 for linear accelerator-based SRS
resource cost similarities between other four SRS treatment codes, treatment delivery services reveal highly
planning for Cobalt 60-based and linear specifically, G0173, G0251, G0339, and stable median costs from year to year
accelerator-based SRS. The APC Panel G0340. based on significant claims volume.
also discussed the use of CPT codes
Since we first established the full Based on the above findings, we
instead of specific G-codes to describe
group of SRS treatment delivery codes believe that we have adequate claims
the services involved in SRS planning,
in CY 2004, we now have 2 years of data to assign the SRS treatment
noting the clinical similarities in
radiation treatment planning regardless hospital claims data reflecting the costs delivery procedures to clinically
of the mode of treatment delivery. Given of each of these services. Based on appropriate APCs, and we believe that
the APC Panel’s thoughts about the analysis of our claims data from CY such movement is appropriate. For CY
possible need for CMS to separately 2004 and CY 2005, the median costs for 2007, we are proposing to create several
track planning for SRS, the APC Panel linear accelerator-based SRS treatment new SRS clinical APCs of different
eventually recommended that we create delivery procedures as described by levels to assign the HCPCS codes
a single HCPCS code to encompass both HCPCS codes G0173, G0251, G0339, describing linear accelerator-based SRS
Cobalt 60-based and linear accelerator- and G0340 have been stable and treatment, G0173, G0251, G0339, and
based SRS planning. Because we had no generally lower than our New G0340, based on their clinical and
programmatic need to separately track Technology APC payment rates in effect hospital resource similarities and
SRS planning services, in the CY 2006 from CY 2004 through CY 2006. differences. In particular, we are
OPPS final rule with comment period Specifically, the payment rate for proposing to assign HCPCS codes G0339
(70 FR 68585) we discontinued HCPCS HCPCS code G0173, a complete course and G0173 to the same Level III SRS
codes G0242 and G0338 for the of non-image guided, non-robotic linear APC, because we believe these codes
reporting of charges for SRS planning accelerator-based SRS treatment, has that describe the complete or first
and instructed hospitals to bill charges been set at $5,250, yet our claims data fraction of all types of linear accelerator-
for SRS planning, regardless of the indicate a median cost of $2,802 from based SRS treatments have substantial
mode of treatment delivery, using all of CY 2004 claims and $3,665 from CY hospital resource and clinical similarity,
the available CPT codes that most 2005 claims, based upon hundreds of as observed in their median costs and
accurately reflect the services provided. single claims from each year. For recognized previously in their
Furthermore, the APC Panel HCPCS code G0251, fractionated non- equivalent New Technology APC
recommended that we make no changes image guided, non-robotic linear payments. The codes describing
to the coding or APC placement of SRS accelerator-based SRS treatment, the subsequent fractions of image-guided,
treatment delivery HCPCS codes G0173, corresponding median costs have been robotic and non-image guided, non-
G0243, G0251, G0339, and G0340 for CY $1,028 and $1,386 based upon over robotic linear accelerator-based SRS
2006. In addition, presenters to the APC 1,000 single claims from each year, and treatments will each be assigned to their
Panel described ongoing deliberations relatively consistent with the own clinical APCs, as they demonstrate
among interested professional societies procedure’s New Technology APC significant differences in resource
around the descriptions and coding for payment of $1,150. With respect to the utilization as reflected in their median
SRS. The APC Panel and presenters complete course of therapy in one costs. Their previous assignments to
suggested that we wait for the outcome session or first fraction of image-guided, different New Technology APCs
of these deliberations before making any robotic linear accelerator-based SRS, anticipated these resource distinctions.
significant changes to SRS delivery described by HCPCS code G0339, its We are proposing to continue our
coding or payment rates. To date, we median costs have been $4,917 and assignment of HCPCS code G0243 for
have received no report from $4,809 for CY 2004 and CY 2005 Cobalt 60-based SRS treatment delivery
participating professional societies as to respectively, based upon over 500 single to clinical APC 0127, renamed Level IV
the outcome of such deliberations. bills in each year, in comparison with Stereotactic Radiosurgery. Our proposed
In response to comments for CY 2006 the procedure’s payment rate of $5,250 reassignments of SRS services from New
regarding the mature technology and for those years. Lastly, the median costs Technology APCs to clinical APCs are
stable median costs associated with of HCPCS code G0340, the second listed in Table 8 below.

TABLE 8.—PROPOSED APC REASSIGNMENT FOR SRS TREATMENT DELIVERY SERVICES FOR CY 2007
CY 2006 Proposed Proposed CY
HCPCS CY 2006 Proposed CY
Short descriptor CY 2006 SI payment CY 2007 2007 APC me-
code APC 2007 SI
rate APC dian cost

G0173 .... Linear acc stereo radsur com .............. S 1528 $5,250.00 S 0067 $4,059.61
sroberts on PROD1PC70 with PROPOSALS

G0251 .... Linear acc based stereo radio ............. S 1513 1,150.00 S 0065 1,386.20
G0339 .... Robot lin-radsurg com, first .................. S 1528 5,250.00 S 0067 4,059.61
G0340 .... Robot lin-radsurg fractx 2–5 ................ S 1525 3,750.00 S 0066 2,916.68

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d. Magnetoencephalography (MEG) cost for CPT code 95967 based upon 1 magnetic fields. The individual hospital
Services single claim from CY 2005 claims is cost and charge data for specific services
Magnetoencephalography (MEG) is a $217. We have no hospital median cost demonstrate significant variations of up
non-invasive diagnostic tool that assists data for CPT code 95967 prior to CY to six fold across the hospitals, with an
surgeons presurgery by measuring and 2005. apparent inverse relationship between
mapping brain activity. It may be used In the November 10, 2005 final rule the numbers of services provided and
for epilepsy and brain tumor patients. with comment period (70 FR 68579), we the costs of the procedures. This finding
Since CY 2002, the MEG procedures stated that we carefully considered our is not unexpected, given the
described by CPT codes 95965 (Meg, claims data, information provided by dependence of MEG procedures on the
spontaneous), 95966 (Meg, evoked, the commenters, and the APC Panel use of expensive capital equipment. As
single), and 95967 (Meg, evoked, each recommendation for CY 2006 that we we have previously stated, our OPPS
additional) have been assigned to New retain the MEG procedures in New payment rates generally reflect the costs
Technology APCs. In the July 25, 2005 Technology APCs. As a result of this that are associated with providing care
proposed rule (70 FR 42709), we analysis, we determined that using a 50/ to Medicare beneficiaries in cost-
proposed to reassign MEG procedures to 50 blend of the code specific median efficient settings. For emerging
clinical APC 0430 using CY 2004 claims costs from our most recent CY 2004 technologies, we establish payment
data to establish median costs on which hospital claims data and the CY 2005 rates for new services that lack hospital
the CY 2006 payment rates would be New Technology APC code-specific claims data based on realistic utilization
based. This proposal involved the payments amounts as the basis for projections for all such services
reassignment of the three MEG assignment of the procedures for CY delivered in cost-efficient hospital
procedures, specifically CPT codes 2006 would be an appropriate way to outpatient settings. Given that we now
95965, 95966, and 95967, from three recognize both the current payment have 4 years of hospital claims data for
separate New Technology APCs into one rates for the procedures, which were MEG procedures, because MEG is no
new clinical APC with a status indicator originally based on the theoretical costs longer a new technology, we do not
of ‘‘T.’’ Commenters to this proposal to hospitals of providing MEG services, believe these external data from 6
believed that their assignment to and the median costs based upon our hospitals that performed MEG services
clinical APC 0430 would be hospital claims data regarding actual in CY 2005 provide a better estimate of
inappropriate because the proposed MEG services provided to Medicare the hospital resources used in MEG
payment level of $674 was inadequate beneficiaries by hospitals. Therefore, procedures during the care of Medicare
to cover the costs of the procedures, and CPT codes 95965, 95966, and 95967 beneficiaries than our standard OPPS
because the procedures should not be were assigned to different New historical claims methodology.
assigned to only one level as their Technology APCs for CY 2006 based on
required hospital resources differ this blended methodology, with We agree with the APC Panel and are
significantly. They further stated that payment rates of $2,750, $1,250, and proposing to accept their
our data did not represent the true costs $850 respectively. recommendation to move the MEG CPT
of the procedures because MEG At the March 2006 APC Panel codes into clinical APCs for CY 2007.
procedures are performed on very few meeting, the Panel recommended that While the volumes for the MEG
Medicare patients. CMS move CPT codes 95965 (MEG, procedures are low, almost all
Analysis of our hospital data for spontaneous), 95966 (MEG, evoked, procedures, including those with very
claims submitted from CY 2002 through single), and 95967 (MEG, evoked, each low Medicare volume, are assigned to
CY 2005 indicates that these procedures additional) from their CY 2006 New clinical APCs under the OPPS, with
are rarely performed on Medicare Technology APCs which were assigned their payment rates based on the median
beneficiaries. For claims submitted from based on the blended methodology costs of their assigned APCs. Therefore,
CY 2002 through CY 2005, our single described above to clinical APC(s) for we are proposing to assign CPT code
claims data show that there were CY 2007. Following that meeting, 95965 to new clinical APC 0038
annually only between 2 and 23 claims interested parties have provided us with (Spontaneous MEG) with a proposed
submitted for CPT code 95965, 3 and 7 CY 2005 charge and cost information median cost of $3,166.30 and to assign
claims for CPT code 95966, and only 1 from six hospitals that provided MEG both CPT codes 95966 and 95967 to
for CPT code 95967. Additionally, the services. These external data show wide APC 0209 (Level II MEG, Extended EEG
hospital claims median costs for these variation in hospitals’ costs and charges Studies, and Sleep Studies) with a
codes have varied widely, perhaps due for MEG procedures, with generally proposed median cost of $709.36. We
to our small volume of claims. The higher values for CPT code 95965 and believe that the assignment of CPT
median cost for CPT code 95965 has lower values for CPT codes 95966 and codes 95966 and 95967 to APC 0209 is
ranged from $332 using CY 2002 claims 95967 but no consistent proportionate appropriate because MEG studies are
to $3,166 based upon CY 2005 claims. relationship among those costs and similar to EEGs and sleep studies in
The median cost for CPT code 95966 charges. In some cases, the charges and measuring activity of the brain over a
has varied widely from CY 2002 to CY costs for CPT codes 95966 and 95967 significant time period, and our hospital
2005. For single claims submitted are quite similar for the two related claims data show that their hospital
during CY 2002, the median cost was services, one of which describes MEG resources are also relatively comparable.
$1,949, while it was $507 for CY 2003, for a single modality of evoked magnetic MEG procedures and their CY 2007
$1,435 for CY 2004, and $701 from 3 fields and the other that describes MEG proposed APC assignments are
single claims for CY 2005. The median for each additional modality of evoked displayed in Table 9.
sroberts on PROD1PC70 with PROPOSALS

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49556 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules

TABLE 9.—PROPOSED CY 2007 APC ASSIGNMENT FOR MEG


CY 2006 Proposed Proposed CY
HCPCS CY 2006 Proposed CY
Short descriptor CY 2006 SI payment CY 2007 2007 APC me-
Code APC 2007 SI
rate APC dian cost

95965 ..... Meg, spontaneous ................................ S .................. 1523 $2,750.00 S .................. 0038 $3,166.30
95966 ..... Meg, evoked, single ............................. S .................. 1514 1,250.00 S .................. 0209 709.36
95967 ..... Meg, evoked, each additional .............. S .................. 1510 850.00 S .................. 0209 709.36

As these procedures are performed on are optimistic that both increased public Services’’ at the beginning of your
very few Medicare patients, we expect awareness of Medicare coding for these comment.)
to continue to have small Medicare procedures and improved Other than the PET, PET/CT, and SRS
claims volumes for MEG services each understanding of the standard OPPS new technology services discussed
year. However, we are confident that methodology for establishing APC above, there are 23 procedures currently
over time our claims data for these payment rates should result in assigned to New Technology APCs for
procedures will become more consistent improved claims data in the future that which we believe we also have data
and reflective of the full hospital more accurately reflect the required adequate to support their assignment to
resources used in MEG services, hospital resources. clinical APCs. For CY 2007, we are
especially because only a small subset proposing to reassign these procedures
of hospitals provide MEG services. We e. Other Services in New Technology to clinically appropriate APCs, applying
have been told that hospitals performing APCs their CY 2005 claims data to develop
MEG procedure recently have been their clinical APC median costs on
paying increased attention to accurately (If you choose to comment on issues which payments would be based. These
reporting charges for all necessary in this section, please include the procedures and their proposed APC
hospital resources on their claims. We caption ‘‘Other New Technology assignments are displayed in Table10.
TABLE 10.—PROPOSED APC REASSIGNMENT OF OTHER NEW TECHNOLOGY PROCEDURES TO CLINICAL APCS FOR CY
2007
CY 2006 Proposed Proposed CY
HCPCS CY 2006 Proposed CY
Short descriptor CY 2006 SI payment CY 2007 2007 APC me-
Code APC 2007 SI
rate APC dian cost

0003T ..... Cervicography ...................................... S .................. 1492 $15.00 T .................. 0191 $9.22
0101T ..... Extracorp shockwv tx,hi enrg ............... T .................. 1547 850.00 T .................. 0050 1,548.05
0102T ..... Extracorp shockwv tx,anesth ............... T .................. 1547 850.00 T .................. 0050 1,548.05
0133T ..... Esophageal implant injexn ................... T .................. 1556 1,750.00 T .................. 0422 1,704.85
19296 ..... Place po breast cath for rad ................ S .................. 1524 3,250.00 T .................. 0030 2,533.62
19297 ..... Place breast cath for rad ..................... S .................. 1523 2,750.00 T .................. 0029 1,822.38
20982 ..... Ablate, bone tumor(s) perq .................. T .................. 1557 1,850.00 T .................. 0050 1,548.05
28890 ..... High energy eswt, plantar f .................. T .................. 1547 850.00 T .................. 0050 1,548.05
36566 ..... Insert tunneled cv cath ......................... T .................. 1564 4,750.00 T .................. 0623 1,703.97
77421 ..... Stereoscopic x-ray guidance ................ S .................. 1502 75.00 S .................. 0257 88.39
78804 ..... Tumor imaging, whole body ................. S .................. 1508 650.00 S .................. 0408 308.82
79403 ..... Hematopoietic nuclear tx ..................... S .................. 1507 550.00 S .................. 0413 315.17
90473 ..... Immune admin oral/nasal ..................... S .................. 1491 5.00 S .................. 0436 10.71
90474 ..... Immune admin oral/nasal addl ............. S .................. 1491 5.00 S .................. 0436 10.71
91035 ..... G-esoph reflx tst w/electrod ................. S .................. 1506 450.00 X .................. 0361 242.86
C9716 .... Radiofrequency energy to anu ............. S .................. 1519 1,750.00 T .................. 0150 1,818.31
G0248 .... Demonstrate use home inr mon .......... S .................. 1503 150.00 V .................. 0604 49.45
G0249 .... Provide test material,equipm ............... S .................. 1503 150.00 V .................. 0604 49.45
G0293 .... Non-cov surg proc,clin trial .................. S .................. 1505 350.00 X .................. 0340 38.52
G0294 .... Non-cov proc, clinical trial .................... S .................. 1502 75.00 X .................. 0340 38.52
G0375 .... Smoke/tobacco counseling 3–10 ......... S .................. 1491 5.00 X .................. 0031 10.60
G0376 .... Smoke/tobacco counseling >10 ........... S .................. 1491 5.00 X .................. 0031 10.60
G3001 .... Admin + supply, tositumomab .............. S .................. 1522 2,250.00 S .................. 0442 1,515.80

D. Proposed APC-Specific Policies additions, deletions, and revisions, containing codes for skin replacement
1. Skin Replacement Surgery and Skin accompanied by new and revised and skin substitute procedures was
Substitutes (APCs 0024, 0025, 0027) introductory language, parenthetical renamed, reorganized, and expanded.
(If you choose to comment on issues notes, subheadings and cross-references, New and existing CPT codes related to
in this section, please include the to the Integumentary, Repair (Closure) skin replacement surgery and skin
sroberts on PROD1PC70 with PROPOSALS

caption ‘‘Skin Replacement Surgery and subsection of surgery in the CPT book substitutes were organized into five
Skin Substitutes’’ at the beginning of to facilitate more accurate reporting of subsections: Surgical Preparation,
your comment.) skin grafts, skin replacements, skin Autograft/Tissue Cultured Autograft,
For CY 2006, the American Medical substitutes, and local wound care. In Acellular Dermal Replacement,
Association (AMA) made particular, the section of the CPT book Allograft/Tissue Cultured Allogeneic
comprehensive changes, including code previously titled ‘‘Free Skin Grafts’’ and Skin Substitute, and Xenograft.

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Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules 49557

As part of the CY 2006 CPT code • CPT 15176 (Acellular dermal genitalia, hands, feet and/or multiple
update in the newly named ‘‘Skin replacement, face, scalp, eyelids, mouth, digits; first 100 sq cm or less, or one
Replacement Surgery and Skin neck, ears, orbits, genitalia, hands, feet percent of body area of infants and
Substitutes’’ section, certain codes were and/or multiple digits; each additional children)
deleted that previously described skin 100 sq cm, or each additional one • CPT 15366 (Tissue cultured
allograft and tissue cultured and percent of body area of infants and allogeneic dermal substitute, face, scalp,
acellular skin substitute procedures, children, or part thereof) eyelids, mouth, neck, ears, orbits,
including CPT 15342 (Application of • CPT 15300 (Allograft skin for
genitalia, hands, feet and/or multiple
bilaminate skin substitute/neodermis; temporary wound closure, trunk, arms,
digits; first 100 sq cm or less, or one
25 sq cm); CPT 15343 (Application of legs; first 100 sq cm or less, or one
percent of body area of infants and
bilaminate skin substitute/neodermis; percent of body area of infants and
children)
each additional 25 sq cm); CPT 15350 children)
(Application of allograft, skin; 100 sq • CPT 15301 (Allograft skin for • CPT 15420 (Xenograft skin
cm or less), and CPT 15351 (Application temporary wound closure; trunk, arms, (dermal), for temporary wound closure,
of allograft, skin; each additional 100 sq legs; each additional 100 sq cm, or each face, scalp, eyelids, mouth, neck, ears,
cm). Thirty-seven new CPT codes were additional one percent of body area of orbits, genitalia, hands, feet and/or
created in the ‘‘Skin Replacement infants and children, or part thereof) multiple digits; first 100 sq cm or less,
Surgery and Skin Substitutes’’ section, • CPT 15320 (Allograft skin for or one percent of body area of infants
and these codes received interim final temporary wound closure, face, scalp, and children)
status indicators and APC assignments eyelids, mouth, neck, ears, orbits, • CPT 15421 (Xenograft skin
in the CY 2006 final rule with comment genitalia, hands, feet and/or multiple (dermal), for temporary wound closure,
period and were subject to comment. digits; first 100 sq cm or less, or one face, scalp, eyelids, mouth, neck, ears,
At its March 2006 meeting, the APC percent of body area of infants and orbits, genitalia, hands, feet and/or
Panel heard several presentations on children) multiple digits; each additional 100 sq
some of the new CY 2006 CPT codes for • CPT 15321 (Allograft skin for
cm, or each additional one percent of
skin replacement and skin substitute temporary wound closure, face, scalp,
body area of infants and children, or
procedures, and CMS has received eyelids, mouth, neck, ears, orbits,
part thereof)
additional information from the public genitalia, hands, feet and/or multiple
regarding a number of these services. In digits; each additional 100 sq cm, or • CPT 15430 (Acellular xenograft
particular, 18 new CPT codes that were each additional one percent of body area implant; first 100 sq cm or less, or one
created to more specifically describe of infants and children, or part thereof) percent of body area of infants and
skin allograft, skin replacement, and • CPT 15340 (Tissue cultured children)
skin substitute procedures were the allogeneic skin substitute; first 25 sq cm • CPT 15431 (Acellular xenograft
subject of the APC Panel discussion and or less) implant; each additional 100 sq cm, or
recommendations. These codes are as • CPT 15341 (Tissue cultured each additional one percent of body area
follows: allogeneic skin substitute; each of infants and children, or part thereof).
• CPT 15170 (Acellular dermal additional 25 sq cm)
replacement, trunk, arms, legs; first 100 • CPT 15360 (Tissue cultured The CY 2006 interim final APC
sq cm or less, or one percent of body allogeneic dermal substitute; trunk, assignments of these codes, the
area of infants and children) arms, legs; first 100 sq cm or less, or one recommendations made by the APC
• CPT 15171 (Acellular dermal percent of body area of infants and Panel at its March 2006 meeting, and
replacement, trunk, arms, legs; each children) our proposed placement of the codes for
additional 100 sq cm, or each additional • CPT 15361 (Tissue cultured CY 2007 are listed in Table 11 below.
one percent of body area of infants and allogeneic dermal substitute; trunk, Note that in general, biological skin
children, or part thereof) arms, legs; each additional 100 sq cm, substitutes and replacements used in
• CPT 15175 (Acellular dermal or each additional one percent of body procedures described by these CPT
replacement, face, scalp, eyelids, mouth, area of infants and children, or part codes are proposed for separate
neck, ears, orbits, genitalia, hands, feet thereof) payment under the OPPS for CY 2007,
and/or multiple digits; first 100 sq cm • CPT 15365 (Tissue cultured according to the methodology outlined
or less, or one percent of body area of allogeneic dermal substitute, face, scalp, in section V. of the preamble of this
infants and children) eyelids, mouth, neck, ears, orbits, proposed rule.

TABLE 11.—CY 2007 PROPOSED ASSIGNMENTS OF SKIN SUBSTITUTE AND SKIN REPLACEMENT PROCEDURES
CY 2006 assignment CY 2007 proposed assign-
ment
APC panel rec-
CPT code Short descriptor APC me- ommendation
APC SI APC me-
dian APC SI dian

15170 ..... Cell graft trunk/arm/legs ......................................... 24 T $92.22 27 25 T $314.58


15171 ..... Cell graft t/arm/leg add-on ..................................... 24 T 92.22 25 25 T 314.58
15175 ..... Acellular graft, f/n/hf/g ............................................ 24 T 92.22 27 25 T 314.58
15176 ..... Acell graft, f/n/hf/g/add-on ...................................... 24 T 92.22 25 25 T 314.58
sroberts on PROD1PC70 with PROPOSALS

15300 ..... Apply skin allograft, t/arm/lg ................................... 27 T 1081.66 N/A 25 T 314.58
15301 ..... Apply sknallograft t/a/l addl .................................... 25 T 315.37 N/A 25 T 314.58
15320 ..... Apply skin allogrft f/n/hf/g ....................................... 25 T 315.37 27 25 T 314.58
15321 ..... Apply sknallogrft f/n/hfg add .................................. 25 T 315.37 25 25 T 314.58
15340 ..... Apply cult skin substitute ....................................... 24 T 92.22 27 25 T 314.58
15341 ..... Apply cult skin sub add-on ..................................... 24 T 92.22 25 25 T 314.58
15360 ..... Apply cult derm sub, t/a/l ....................................... 24 T 92.22 27 25 T 314.58

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49558 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules

TABLE 11.—CY 2007 PROPOSED ASSIGNMENTS OF SKIN SUBSTITUTE AND SKIN REPLACEMENT PROCEDURES—
Continued
CY 2006 assignment CY 2007 proposed assign-
ment
APC panel rec-
CPT code Short descriptor APC me- ommendation
APC SI APC me-
dian APC SI dian

15361 ..... Aply cult derm sub t/a/l/ add-on ............................. 24 T 92.22 25 25 T 314.58
15365 ..... Apply cult derm sub f/n/hf/g ................................... 24 T 92.22 27 25 T 314.58
15366 ..... Apply cult derm f/hf/g add ...................................... 24 T 92.22 25 25 T 314.58
15420 ..... Apply skin xgraft, f/n/hf/g ....................................... 25 T 315.37 27 25 T 314.58
15421 ..... Apply skn xgraft, f/n/hf/g add ................................. 25 T 315.37 25 25 T 314.58
15430 ..... Apply acellular xenograft ........................................ 25 T 315.37 27 25 T 314.58
15431 ..... Apply acellular xgraft add ...................................... 25 T 315.37 25 25 T 314.58

We reviewed the presentations to the Similarly, presenters reasoned that when external fixation is used to treat
APC Panel; the APC Panel’s the related add-on codes (CPTs 15171, fractures. The commenters explained
recommendations; the CPT code 15176, 15321, 15342, 15361, 15366, that when external fixation devices are
descriptors, introductory explanations, 15421, and 15431) for procedures to used, the costs of the procedures
cross-references, and parenthetical treat additional body surface areas are increase, and, therefore, the current APC
notes; the clinical characteristic of the similar to CPT code 15301 (Allograft placement significantly underpays those
procedures; and the code-specific skin for temporary wound closure, procedures in those instances. In the CY
median costs for all related CPT codes trunk, arms, legs; each additional 100 sq 2006 final rule with comment period (70
available from our CY 2005 claims data. cm, or each additional one percent of FR 68607), we declined to reassign
While we agree with the APC Panel that body area of infants and children, or procedures that could include external
the codes currently placed in APC 0024 part thereof) in terms of required fixation at that time but we
(Level I Skin Repair) should be assigned hospital resources. CPT code 15301 is acknowledged that we had treated APC
to an APC with a higher median cost for assigned to APC 0025 for CY 2006. We 0046 as an exception to the 2 times rule
CY 2007, we disagree that these are proposing to maintain the for several years. For CY 2006, we again
procedures should be placed in APC assignment of CPT code 15301 to APC treated APC 0046 as an exception to the
0027 (Level IV Skin Repair). APC Panel 0025 for CY 2007 and to reassign the 2 times rule, but noted we would ask
presenters reasoned that some of the other add-on codes to this APC. Note the APC Panel to consider whether this
codes (CPTs 15170, 15175, 15320, that APC 0025 has a status indicator of APC could be reconfigured to improve
15340, 15360, 15365, 15420, and 15430) ‘‘T,’’ so that the add-on codes will its clinical and resource homogeneity.
experience the standard OPPS multiple At the March 2006 meeting of the
for the first increment of body surface
surgical procedure reduction when APC Panel, we asked the Panel to
area treated should be placed in APC
properly billed with the first body consider a possible reconfiguration of
0027 because they are similar to CPT
surface area treatment codes that are APC 0046 based on partial year CY 2005
code 15300 (Allograft skin for temporary
assigned to the same clinical APC. We claims data. The reconfiguration would
wound closure, trunk, arms, legs; first
believe that this reduction in payment create three new APCs and would
100 sq cm or less, or one percent of divide the codes in APC 0046 among
for the procedural resources associated
body area of infants and children). Upon them. The APC Panel recommended
with the add-on services is appropriate.
further review of the clinical and that CMS continue to evaluate the
expected hospital resource 2. Treatment of Fracture/Dislocation refinement of APC 0046 (Open/
characteristics of CPT code 15300, we (APC 0046) Percutaneous Treatment Fracture or
believe that this procedure is not (If you choose to comment on issues Dislocation) into at least three APC
appropriately placed in APC 0027. in this section, please include the levels, with consideration of a fourth
Split-thickness and full thickness skin caption ‘‘Treatment of Fracture/ level should data support this
autograft procedures currently assigned Dislocation’’ at the beginning of your additional level. We are accepting the
to APC 0027 are likely to require greater comment.) APC Panel’s recommendation and are
hospital resources, including additional APC 0046 is a large clinical APC to proposing for CY 2007 to split APC 0046
operating room time and special which many procedures related to the into three new APCs: APC 0062 (Level
equipment, in comparison to percutaneous or open treatment of I Treatment Fracture/Dislocation); APC
application of a separately paid allograft fractures and dislocations are assigned 0063 (Level II Treatment Fracture/
skin product. Instead, for CY 2007 we for CY 2006. Most of the approximately Dislocation); and APC 0064 (Level III
are proposing to reassign CPT code 100 procedures in the APC are relatively Treatment Fracture/Dislocation). To
15300 to APC 0025 (Level II Skin low volume, with even fewer single bills ensure clinical and resource
Repair), with an APC median cost of available for ratesetting. The median homogeneity in the new APCs, their
$314.58. We agree, in principle, that costs of the significant procedures in proposed configurations are based on
other CPT codes for the first increment this APC as configured for CY 2006 the procedure code descriptors, clinical
of body surface area treated with a skin range from a low of about $1,415 to a considerations specific to each
sroberts on PROD1PC70 with PROPOSALS

replacement or skin substitute are high of about $3,893. We received procedure, and service-specific hospital
similar clinically and from a hospital comments to the CY 2006 proposed rule resource utilization as shown in the
resource perspective to CPT code 15300 (70 FR 42674) requesting that we claims data from CY 2005. Restructuring
and are, therefore, proposing to assign distinguish procedures containing ‘‘with APC 0046 into these three new APCs
these procedures to APC 0025 as well or without external fixation’’ in their eliminates 2 times rule violations in the
for CY 2007. descriptors to provide greater payments Fracture/Dislocation series.

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We are not currently proposing a another service level. One code, CPT procedure outside of the Fracture/
fourth APC level in the Fracture/ 27615 (Radical resection of tumor (e.g., Dislocation series to APC 0050 (Level II
Dislocation series because we do not malignant neoplasm), soft tissue of leg Musculoskeletal Procedures Except
believe our claims data are sufficiently or ankle area), is not clinically coherent Hand and Foot) for CY 2007.
robust and consistent from year to year with the other procedures in APC 0046,
BILLING CODE 4120–01–P
to support differential payment for and we are proposing to reassign this
sroberts on PROD1PC70 with PROPOSALS

EP23AU06.016</GPH>

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sroberts on PROD1PC70 with PROPOSALS

EP23AU06.017</GPH>

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BILLING CODE 4120–01–C alignment. The presenter indicated that also assigned to APC 0087, and were,
3. Electrophysiologic Recording/ the median costs for these CPT codes therefore, clinically coherent with other
Mapping (APC 0087) were more than two times the median services in APC 0087. The APC Panel
cost of the least costly HCPCS code in did not believe that these three cardiac
(If you choose to comment on issues APC 0087 and, therefore, constituted a electrophysiologic mapping procedures
in this section, please include the 2 times violation. The presenter also were similar clinically or from a
caption ‘‘Electrophysiologic Recording/ indicated that the median cost of APC resource perspective to the intracardiac
Mapping’’ at the beginning of your 0087 had declined in recent years, and catheter ablation procedures residing in
comment.) argued that the payment rate for APC APC 0086. We agree with the APC
At its March 2006 meeting, the APC 0087 was too low to adequately Panel’s assessment and are accepting
Panel heard testimony from a presenter compensate providers for these services. this APC Panel recommendation.
who asked that the Panel recommend The APC Panel did not recommend Therefore, we are proposing that CPT
that CPT codes 93609 (intraventricular that CMS move these codes from APC codes 93609, 93613, and 93631 remain
and/or intra-atrial mapping of 0087 to APC 0086, but instead assigned to APC 0087 for CY 2007.
tachycardia, add-on), 93613 recommended that CMS maintain the 4. Insertion of Mesh or Other Prosthesis
(intracardiac electrophysiologic 3-D three codes in APC 0087 for CY 2007. (APC 0154)
mapping), and 93631 (intra-operative The APC Panel noted that, due to the
epicardial & endocardial pacing and low volume of these and other services (If you choose to comment on issues
sroberts on PROD1PC70 with PROPOSALS

mapping to localize zone of slow assigned to APC 0087, under the CMS’ in this section, please include the
conduction for surgical correction) be rules there was no 2 times violation in caption ‘‘Insertion of Mesh or Other
removed from APC 0087. The presenter APC 0087. Moreover, the APC Panel Prosthesis’’ at the beginning of your
asked the APC Panel to recommend that found that the services under discussion comment.)
these codes be placed in APC 0086 for were cardiac electrophysiologic During the March 2006 APC Panel
EP23AU06.018</GPH>

improved clinical and resource mapping services, like other procedures meeting, a presenter requested that we

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reassign CPT code 57267 (Insertion of APC median cost of $1,821 for CY 2007. 6,345 claims with reported charges for
mesh or other prosthesis for repair of However, the median cost of CPT code both CPT code 49568 and HCPCS code
pelvic floor defect, each site (anterior, 57267 is based on only 6 single claims C1781 on the same day. Costs developed
posterior compartment), vaginal of the total 1,038 submitted for the from these two claims subsets included
approach) to a more clinically and service. Because the procedure always is the cost of the implanted mesh device
resource-appropriate APC than its CY performed in addition to other related that was used in performing the
2006 assignment to APC 0154 (Hernia/ procedures, we expect that claims for procedure. Table 13 below displays the
Hydrocele Procedures). The presenter this service will be multiple claims. median costs from those claims. The
expressed concern that the procedure is Therefore, we are not confident that the costs shown in the column titled ‘‘Line-
currently assigned to an APC with a ‘‘T’’ procedure’s median cost based upon the item Median Cost’’ are those we
status indicator and stated that payment six single claims is accurate. obtained by looking at all CY 2005
would be more accurate if it were Therefore, in order to obtain more OPPS claims on which charges for both
assigned to an APC that has an ‘‘S’’ information about the cost of the the procedure code (either CPT code
status indicator. The mesh insertion procedure, we performed additional 57267 or 49568) and the code for the
procedure is a CPT add-on code and is, analyses of CY 2005 claims data in an implantable mesh (HCPCS code C1781)
by definition, performed at the same attempt to specifically explore the cost were reported. The costs shown in the
time as certain other procedures and of the mesh implant packaged into the column titled ‘‘Single Claims Median
will, therefore, be discounted every time payment for CPT code 57267. We Cost’’ are the median costs calculated
it is performed. The presenter objected believe that a significant portion of the using only single procedure claims for
to our assignment of CPT code 57267 to procedural cost should be related to the the specific procedure that also
an APC that is subject to the multiple cost of the mesh, based on information included the C-code for the mesh.
procedure discount because it is always presented at the March 2006 APC Panel
a secondary procedure, and the meeting. We looked at all claims that Our additional data analysis supports
discounted payment amount is not included charges for the HCPCS code the APC Panel presenter’s assertion that
adequate to pay even for the cost of the for implantable mesh (C1781) and either the cost of the mesh is greater than 50
implantable mesh. The presenter also CPT code 57267 or 49568 (Implantation percent of the total cost of CPT code
believed that its assignment to an APC of mesh or other prosthesis for 57267, but it also indicates that the
where hernia and hydrocele procedures incisional or ventral hernia repair). We mesh cost is far less than 50 percent of
were also assigned was clinically examined the bills for CPT code 49568 the payment amount for APC 0154. In
inappropriate. in addition to those for CPT code 57267 CY 2006 the payment rate for APC 0154
The APC Panel recommended that because it is a high volume procedure is $1,704.59, and the payment when the
CMS reassign CPT code 57267 to a more that also uses implantable mesh, and we multiple procedure discount is taken is
clinically and resource-appropriate expected that the extra volume would $852.30, which is much greater than
APC. improve our chances of identifying both the line-item median cost of the
In the CY 2005 claims data, the meaningful charge data. mesh and the median single claims cost
median cost for CPT code 57267 is We found 210 claims with charges of CPT code 57267 (which explicitly
$529.14, the lowest by far for reported for both CPT code 57267 and includes the implantable mesh)
procedures in APC 0154, which has an HCPCS code C1781 on the same day and reflected in our claims data.

TABLE 13.—MEDIAN COSTS OF HCPCS CODE C1781 AND ASSOCIATED PROCEDURES


CY 2006 APC
Line-item Single claims 0154 payment
HCPCS code Short descriptor median cost median cost amount
(T status)

57267 .............................................................. Insert mesh/pelvic flr add-on .......................... $423.28 $529.14 $1,704.59
C1781 (billed with 57267) ............................... Mesh (implantable) ......................................... 383.35 N/A N/A
49568 .............................................................. Hernia repair w/mesh ..................................... 363.41 1,323.29 1,704.59
C1781 (billed with 49568) ............................... Mesh (implantable) ......................................... 242.20 N/A N/A

We agree with the APC Panel that the procedure reduction is applied should Percutaneous Abdominal and Biliary
procedure should be assigned to a more be appropriate. While not affecting the Procedures). The presenter provided
clinically appropriate APC, and procedure’s payment significantly, this information about the costs of
therefore, we are proposing to accept its reassignment improves the clinical performing these procedures and
recommendation and reassign CPT code homogeneity of APCs 0154 and 0195. compared the resource requirements for
57267 to APC 0195 (Level IX Female 5. Percutaneous Renal Cryoablation the procedures to those for CPT code
Reproductive Procedures), with status (APC 0163) 47382 (Ablation, one or more liver
indicator ‘‘T’’ for CY 2007. The tumor(s), percutaneous,
(If you choose to comment on issues
proposed median cost of APC 0195 is in this section, please include the radiofrequency), which is currently
$1,777 for CY 2007, very comparable to caption ‘‘Percutaneous Renal assigned to APC 0423. The presenter
the CY 2006 median cost of APC 0154, Cryoablation’’ at the beginning of your proposed reassignment of CPT code
sroberts on PROD1PC70 with PROPOSALS

where CPT code 57267 is currently comment.) 0135T to APC 0423 because that is
assigned. The median cost for the During the March 2006 APC Panel where CPT code 47382 is assigned, and
procedure remains very low in meeting, a presenter requested that we stated that the costs of the two
comparison with other procedures reassign CPT code 0135T (Ablation procedures are very similar.
assigned to APC 0195, so that payment renal tumor(s), unilateral, percutaneous,
for the service when the multiple cryotherapy) to APC 0423 (Level II

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The APC Panel recommended that we it is likely to continue to be an into the OPPS payments for these other
assign CPT code 0135T to APC 0423 for uncommon procedure among Medicare services that are based on historical
CY 2007. beneficiaries, resulting in its persistent hospital claims data. The three Category
CPT code 0135T is new for CY 2006 small contribution to the median cost of III CPT codes specifically describe
and therefore, we have no claims data APC 0244. Therefore, for CY 2007 we medication therapy management
on which to base our APC assignment are proposing to create a new APC 0293 services provided by a pharmacist. We
decision. The procedure currently has (Level V Anterior Segment Eye have no need to distinguish medication
an interim assignment to APC 0163 Procedures) with a median cost of therapy management services provided
(Level IV Cystourethroscopy and Other $3,127.51 and to move CPT code 65770 by a pharmacist in a hospital from
Genitourinary Procedures), with a CY into that APC in order to more medication therapy management
2006 payment amount of $1,999.35. appropriately pay for the procedure and services provided by other hospital staff,
We are proposing to accept the APC the related device. as the OPPS only makes payments for
Panel’s recommendation to reassign services provided incident to
CPT code 0135T to APC 0423 for CY 7. Medication Therapy Management
physicians’ services. Hospitals
2007. We believe that assignment of Services
providing medication therapy
CPT code 0135T to APC 0423 is (If you choose to comment on issues management services incident to
clinically appropriate, and that the CY in this section, please include the physicians’ services may choose a
2007 median cost of APC 0423 of $2,410 caption ‘‘Medication Therapy variety of staffing configurations to
is reasonably close to our expectations Management Services’’ at the beginning provide those services, taking into
regarding the resource requirements for of your comment.) account other relevant factors such as
the renal cryoablation procedure. Following a presentation at its March State and local laws and hospital
2006 meeting, the APC Panel made two policies.
6. Keratoprosthesis (APC 0244) recommendations regarding Category III In general, we do not establish new
(If you choose to comment on issues CPT codes for pharmacist medication clinical APCs for new codes and set
in this section, please include the therapy management services that were payment rates for those APCs when we
caption ‘‘Keratophrosthesis’’ at the new for CY 2006. These services include have no cost data for any services
beginning of your comment.) CPT codes 0115T (medication therapy populating the APCs. New codes where
CPT code 65770 is a surgical management services provided by a we believe that there are no existing
procedure for implantation of a pharmacist, individual, face-to-face with clinical APCs compatible with their
keratoprosthesis, an artificial cornea. patient, initial 15 min., w/assessment expected clinical and hospital resource
The keratoprosthesis device that is and intervention if provided; initial characteristics are often assigned to New
required for the implantation is encounter), 0116T (medication therapy Technology APCs until we have
described by HCPCS code C1818 management; subsequent encounter), sufficient cost data to determine
(Integrated keratoprosthesis), a device and 0117T (medication therapy appropriate clinical APC assignments.
category that received transitional pass- management; additional 15 min.). These However, these medication therapy
through payment under the OPPS from codes were assigned status indicator management codes would not be
July 2003 through December 2005. ‘‘B’’ in the CY 2006 OPPS final rule with eligible to map to New Technology
When the device came off pass-through comment period, indicating that they APCs because they are not new services
status for CY 2006 and its costs were are not recognized by the OPPS when which are unrepresented in historical
packaged into the implantation submitted on an outpatient hospital Part hospital claims data. As stated earlier,
procedure, CPT code 65770 continued B bill type, with comment indicator because we believe the costs of
to be assigned to APC 0244 (Corneal ‘‘NI’’ to identify them as subject to medication therapy management
Transplant), with a payment rate of comment. The APC Panel recommended services are imbedded as a component
about $2,275, despite an increase in the that we create a new APC, with a within our claims data, we are confident
median cost of the implantation nominal payment, to which we would that our claims data reflect the costs of
procedure of about $1,200 associated assign these codes; implement the pharmacist medication management
with the packaging of the device. There assignment in July 2006, if possible, or services provided to hospital
is no 2 times violation in APC 0244 for otherwise in CY 2007; and provide outpatients who are receiving hospital
CY 2006. guidance to hospitals on how and when services.
At the March 2006 meeting of the these codes should be reported. We are
APC Panel, following a presentation not accepting the APC Panel’s 8. Complex Interstitial Radiation Source
regarding the procedure to implant a recommendations. Rather, we are Application (APC 0651)
keratoprosthesis that described the proposing to continue to assign status (If you choose to comment on issues
clinical and hospital resource indicator ‘‘B’’ to CPT codes 0115T, in this section, please include the
characteristics of CPT code 65770, the 0116T, and 0117T for CY 2007. caption ‘‘Complex Interstitial Radiation
Panel recommended moving CPT code According to the AMA, the purpose of Source Application’’ at the beginning of
65770 to a more appropriate APC in Category III CPT codes is to facilitate your comment.)
order to make appropriate payment. We data collection on and assessment of APC 0651 (Complex Interstitial
agree with the recommendation of the new services and procedures. Radiation Source Application), contains
APC Panel. Claims data from CY 2005 Medication therapy management only one code, CPT code 77778
demonstrate that the median cost for services are not new services in the (Complex interstitial application of
implantation of a keratoprosthesis of OPPS, as they have been provided to brachytherapy sources). The coding,
$3,127.51 remains significantly higher patients by hospitals in the past as APC assignment, median cost, and
sroberts on PROD1PC70 with PROPOSALS

than the median costs of other components of a wide variety of services resulting payment rate for CPT code
procedures assigned to APC 0244, provided by hospitals, including clinic 77778 have not been stable since the
although there is no 2 times violation. and emergency room visits, procedures, inception of the OPPS, and that
In addition, CPT code 65770 contributes and diagnostic tests. As such, we instability has been a source of concern
less than 1 percent of the single claims believe their associated hospital to hospitals that furnish the service and
in the APC available for ratesetting, and resource costs are already incorporated to specialty societies. The vast majority

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of claims for interstitial brachytherapy payment rates for CPT code 77778 and application of brachytherapy sources),
are for the treatment of patients with a the related service CPT code 55859 are shown in Table 14.
diagnosis of prostate cancer. The (Transperitoneal placement of needles
historical coding, APC assignments, and or catheters into the prostate for

TABLE 14.—HISTORICAL PAYMENT RATES FOR COMPLEX INTERSTITIAL APPLICATION OF BRACHYTHERAPY SOURCES
CPT code APC for CPT code APC for
OPPS CY Combination APC Source
77778 77778 55859 55859

2000 ................................................. N/A ............................... $198.31 APC 312 .. $848.04 APC 162 .. Pass-through.
2001 ................................................. N/A ............................... 205.495 APC 312 .. 878.72 APC 162 .. Pass-through.
2002 ................................................. N/A ............................... 6344.67 APC 312 .. 2068.23 APC 163 .. Pass-through with pro
rata reduction.
2003 (if prostate brachytherapy with G0261, APC 648, N/A N/A ........... N/A N/A ........... Packaged.
iodine sources). $5154.34.
2003 (if prostate brachytherapy with G0256, APC 649, N/A N/A ........... N/A N/A ........... Packaged.
palladium sources). $5998.24.
2003 (if not prostate brachytherapy, N/A ............................... 2853.58 APC 651 .. 1479.60 APC 163 .. Separate payment
not including sources). based on scaled me-
dian cost per source.
2004 ................................................. N/A ............................... 558.24 APC 651 .. 1848.55 APC 163 .. Cost.
2005 ................................................. N/A ............................... 1248.93 APC 651 .. 2055.63 APC 163 .. Cost.
2006 ................................................. N/A ............................... 666.21 APC 651 .. 1993.35 APC 163 .. Cost.

We have frequently been told by the sum the costs on multiple procedure In response to the APC Panel
public that the instability in our claims containing CPT codes 77778 and recommendations, we are explicitly
payment rates for APC 0651 creates 55859 (and no other separately payable analyzing the standard OPPS
difficulty in planning and budgeting for services not on the bypass list) and, methodology that we used in
hospitals. Moreover, we have been told excluding the costs of sources, split the determining our proposed payment rate
that in this case reliance on single resulting aggregate median cost on the for APC 0651 in this proposed rule in
procedure claims results in use of only multiple procedure claim according to a the context of alternative multiple bill
incorrectly coded claims for prostate preestablished attribution ratio between methodologies. In addition, we note that
brachytherapy because, for application CPT codes 77778 and 55859. Presenters we routinely accept requests from
to the prostate, which is estimated to be also urged that we provide hospital interested organizations to discuss their
85 percent of all occurrences of CPT education on correct coding of views about OPPS payment policy
code 77778, a correctly coded claim is brachytherapy services and devices of issues.
a multiple procedure claim. brachytherapy required to perform The organizations that the APC Panel
Specifically, we are told that a correctly brachytherapy procedures. They asked us to work with have frequently
coded claim for prostate brachytherapy indicated that any claim for a brought their concerns to our attention
should include, for the same date of brachytherapy service that did not also through the rulemaking process and
service, both CPT codes 55859 and report a brachytherapy source should be otherwise. We will consider the input of
77778, brachytherapy sources reported considered to be incorrectly coded and any individual or organization to the
with C-codes, and typically separately thus not reflective of the hospital extent allowed by Federal law including
coded imaging and radiation therapy resources required for the interstitial the Administrative Procedure Act (APA)
planning services. We are further source application procedure. They and the Federal Advisory Committee
advised that in the cases of complex believed that these claims should be Act (FACA). We establish the OPPS
interstitial brachytherapy where sources rates through regulations. We are
excluded from use in establishing the
are placed in sites other than the required to consider the timely
median cost for APC 0651. They
prostate, the charges for both placing the comments of interested organizations,
believed that hospitals which report the
needles or catheters and for applying establish the payment policies for the
brachytherapy sources on their claims
the sources may be reported by CPT forthcoming year, and respond to the
are more likely to report complete
code 77778 alone because there are no timely comments of all public
charges for the associated brachytherapy
other specific CPT codes for placement commenters in the final rule in which
procedure than hospitals that do not
of needles or catheters in those sites. In we establish the payments for the
report the separately payable forthcoming year.
other cases, the placement of needles or
brachytherapy sources. For this proposed rule, we developed
catheters may be reported with not
otherwise classified codes specific to The APC Panel recommended that a median cost for APC 0651 using single
the treated body area. CMS reevaluate the proposed payment procedure claims using the general
At the March 2006 APC Panel for brachytherapy services in APC 0651 OPPS process, but we also looked at
meeting, presenters urged the Panel to for CY 2007. The APC Panel also multiple procedure claims that contain
recommend that CMS use only single recommended that CMS formally work the most common combinations of
procedure claims that contain charges with the Coalition for the Advancement codes used with APC 0651. Our single
sroberts on PROD1PC70 with PROPOSALS

for brachytherapy sources on the same of Brachytherapy, American procedure claims process results in
claim with CPT code 77778 to set the Brachytherapy Society, and the using 1,123 claims to calculate a median
median cost for APC 0651. Presenters American Society for Therapeutic cost of $1028.93 for APC 0651. We have
also urged that CMS adopt a process for Radiology and Oncology to evaluate the added CPT code 76965, a CPT code for
using multiple procedure claims to set methodology for setting brachytherapy ultrasound guidance that commonly
the median for APC 0651 that would service payment rates in APC 0651. appears on claims for complex

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interstitial brachytherapy, to the bypass separately for brachytherapy sources two different ways: (1) Bypassing the
list for CY 2007 after close clinical again for CY 2007, we see no reason to line item charges for these three
review because we believe that it would believe that these few claims for ancillary codes; and (2) packaging the
typically have little associated brachytherapy services that included costs of these three ancillary codes. We
packaging. We believe that this change, sources, which also do not report CPT applied this methodology both (1) to all
along with maintenance of CPT code code 55859 for placement of needles or claims that met these criteria with and
77290 for complex therapeutic radiology catheters into the prostate, are more without sources and (2) to claims that
simulation-aided field setting on the correctly coded than those claims which met the criteria and also separately
bypass list, is responsible for the growth do not separately report brachytherapy reported brachytherapy sources that
in single procedure claims from the 381 sources. We believe it is possible that would be expected to be reported with
single bills on which the APC 0651 hospitals billing CPT code 77778 and CPT code 77778. See Tables 15 and 16
median cost was calculated for the CY not the associated brachytherapy below for the results of this
2006 OPPS final rule with comment sources may have bundled their charges investigation.
period. However, only 6 of these 1,123 for the brachytherapy sources into their
single and ‘‘pseudo’’ single claims also charge for CPT code 77778. We found 10,571 multiple procedure
included brachytherapy sources used in We also identified multiple procedure claims with CPT codes 55859 and 77778
complex interstitial brachytherapy claims that contained both CPT codes reported on the claim, including those
source application, and the median cost 77778 and 55859 and also included any both with and without separately
for these 6 claims at $600.68 is one or more of the following procedure reported sources. We found that 7,181 of
significantly less than the median cost codes, which have repeatedly appeared the 10,571 claims contained any
for all single claims. It is unclear why as common procedures that are reported combination of the 3 ancillary codes
so many of these claims do not contain on the same claim with CPT codes (76000, 76965, or 77290). Table 15
brachytherapy sources, which were 55859 and 77778: 76000, 76965, or shows the results of bypassing and
separately paid at cost in CY 2005. 77290. We then calculated median costs packaging the line-item costs of the 3
Because we are proposing to pay for interstitial prostate brachytherapy in ancillary procedures.

TABLE 15.—MULTIPLE PROCEDURE CLAIMS INCLUDING CPT CODES 55859 AND 77778
Minimum Maximum
Frequency Mean cost Median cost
cost cost

Ancillary Codes Packaged ....................................................................... * 7180 $828.46 $11,202.81 $3,326.50 $3,062.99


Ancillary Codes Bypassed ....................................................................... 7181 811.95 11,203.81 3,300.16 3,030.01
* 1 lost to trimming.

We found 9,791 multiple procedure used with CPT code 77778. We found bypassing and packaging the line-item
claims with CPT codes 55859 and 77778 that 6,748 of the 9,791 claims contained costs of the 3 ancillary procedures.
reported on the claim that also included any combination of the 3 ancillary
brachytherapy sources that would be codes. Table 16 shows the results of

TABLE 16.—MULTIPLE PROCEDURE CLAIMS INCLUDING CPT CODES 55859 AND 77778 AND ONE OR MORE
BRACHYTHERAPY SOURCES
Minimum Maximum
Frequency Mean cost Median cost
cost cost

Ancillary Codes Packaged ....................................................................... 6748 $890.56 $10,224.17 $3,240.13 $3,026.62


Ancillary Codes Bypassed ....................................................................... 6748 912.81 10,307.37 3,215.75 2,992.60

The claims containing CPT codes codes without regard to the separate APC 0163 results in an appropriate level
55859 and 77778 and any combination payments that would be made for CPT of full payment for the dominant type of
of the three identified ancillary codes codes 76000, 76965, and 77290, the sum service provided under APC 0651,
have mean and median costs that are of the CY 2007 proposed medians for interstitial prostate brachytherapy. We
very close to one another, regardless of APC 0651 and APC 0163 is $3,197.07, are proposing to use the median cost of
whether the hospital billed separately which is greater than the combination $1,028.93, as derived from all single
for the brachytherapy sources on the medians, even when the three ancillary bills for APC 0651 according to our
claim with the procedure codes. services are packaged into the standard OPPS methodology, to
Moreover, most of the multiple combination median. Under our establish the median for that APC.
procedure claims we identified proposed policies for CY 2007, hospitals We recognize that prostate
contained sources. This leads us to would also be paid separately for brachytherapy is not the sole use of CPT
conclude that the presence of sources on brachytherapy sources, guidance code 77778, although it is the
sroberts on PROD1PC70 with PROPOSALS

the claim does not make a significant services, and radiation therapy planning predominant use. Costs attributable to
difference in the median cost of the services that may be provided in the placement of needles and catheters
combined service. support of services reported with CPT and to the interstitial application of
Moreover, when we calculate the total codes 55859 and 77778. brachytherapy sources to sites other
median cost from single bills for the Therefore, we believe that the than the prostate may also be reported
APCs for the two major procedures summed median cost for APC 0651 and on claims whose data map to APC 0651.

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This clinically driven variability in the 10. Hyperbaric Oxygen Therapy (APC 11. Myocardial Positron Emission
claims data is difficult to assess without 0659) Tomography (PET) Scans (APCs 0306,
adding additional levels of complexity 0307)
to the issue by considering diagnoses in (If you choose to comment on issues
(If you choose to comment on issues
establishing payments rates. However, in this section, please include the
in this section, please include the
recognizing that a PPS is a system based caption ‘‘Hyperbaric Oxygen Therapy’’
caption ‘‘Myocardial PET Scans’’ at the
on averages and, to the extent that at the beginning of your comment.)
beginning of your comment.)
claims for all types of complex When hyperbaric oxygen therapy From August 2000 to December 31,
interstitial brachytherapy source (HBOT) is prescribed for promoting the 2005, under the OPPS we assigned to
application are included in the body of healing of chronic wounds, it typically one clinical APC all myocardial
claims used to set the median cost for is prescribed for 90 minutes and billed positron emission tomography (PET)
APC 0651, we believe that the payment using multiple units of HBOT on a scan procedures, which were reported
for these services is appropriate. single line or multiple occurrences of with multiple G-codes through March
HBOT on a claim. In addition to the 31, 2005. Effective April 1, 2005,
9. Single Allergy Tests (APC 0381) therapeutic time spent at full hyperbaric myocardial PET scans were reported
oxygen pressure, treatment involves with three CPT codes, specifically CPT
(If you choose to comment on issues
additional time for achieving full codes 78459, 78491, and 78492, under
in this section, please include the the OPPS. Public comments to the CY
caption ‘‘Allergy Testing’’ at the pressure (descent), providing air breaks
to prevent neurological and other 2006 OPPS proposed rule suggested that
beginning of your comment.) the HCPCS codes describing multiple
complications from occurring during the
We are proposing to continue with myocardial PET scans should be
course of treatment, and returning the
our methodology of differentiating assigned to a separate APC from single
patient to atmospheric pressure (ascent).
single allergy tests (‘‘per test’’) from study codes because their hospital
The OPPS recognizes HCPCS code
multiple allergy tests (‘‘per visit’’) by resource costs are significantly higher
C1300 (Hyperbaric oxygen under than single scans. Review of the CY
assigning these services to two different
pressure, full body chamber, per 30 2004 claims data for myocardial PET
APCs to provide accurate payments for
minute interval) for HBOT provided in scans revealed a median cost of $2,482
these tests in CY 2007. Multiple allergy
the hospital outpatient setting. for the 9 G-codes that describe multiple
tests are assigned to APC 0370, with a
median cost calculated based on the In the CY 2005 final rule with myocardial PET scans, based upon 978
standard OPPS methodology. We comment period (69 FR 65758 through single claims of 2,001 total claims for
provided billing guidance in CY 2006 in 65759), we finalized a ‘‘per unit’’ multiple scan procedures. The CY 2004
Transmittal 804 (issued on January 3, median cost calculation for HBOT using claims data showed a median cost of
2006) specifically clarifying that only claims with multiple units or $800 for the 6 G-codes describing single
multiple occurrences of HCPCS code PET studies, based on 391 single claims
hospitals should report charges for the
C1300 because delivery of a typical of 575 total claims. A review of CY 2003
CPT codes that describe single allergy
HBOT service requires more than 30 claims data showed a similar pattern of
tests to reflect charges ‘‘per test’’ rather significantly higher hospital costs for
than ‘‘per visit’’ and should bill the minutes. We observed that claims with
only a single occurrence of the code multiple myocardial PET studies in
appropriate number of units of these comparison with single studies,
CPT codes to describe all of the tests were anomalies, either because they
although there were fewer claims for the
provided. However, our CY 2005 claims reflected terminated sessions or because
procedures in CY 2003 in comparison
data available for the CY 2007 proposed they were incorrectly coded with a
with CY 2004. In response to the
rule do not yet reflect the improved and single unit. In the same rule, we also
comments received and based on this
more consistent hospital billing established that HBOT would not claims information, myocardial PET
practices of ‘‘per test’’ ‘‘for single allergy generally be furnished with additional services were assigned to two clinical
tests. Some claims for single allergy services that might be packaged under APCs for the CY 2006 OPPS. HCPCS
tests still appear to provide charges that the standard OPPS APC median cost codes for single scans were assigned to
represent a ‘‘per visit’’ charge, rather methodology. This enabled us to use APC 0306 with a payment rate of
than a ‘‘per test’’ charge. Therefore, claims with multiple units or multiple $800.55, and HCPCS codes for the
consistent with our payment policy for occurrences. Finally, we also used each multiple scan procedures were assigned
CY 2006, we are proposing to calculate hospital’s overall cost-to-charge ratio to APC 0307 with a payment rate of
a ‘‘per unit’’ median cost for APC 0381, (CCR) to estimate costs for HCPCS code $2,484.88.
based upon 349 claims containing C1300 from billed charges rather than Analysis of the latest CY 2005 claims
multiple units or multiple occurrences the CCR for the respiratory therapy cost data for myocardial PET scans reveals
of a single CPT code, where packaging center. Comments on the CY 2005 that the APC median costs for the single
on the claims is allocated equally to proposed rule effectively demonstrated and multiple myocardial PET codes are
each unit of the CPT code. Using this that hospitals report the costs and $836 and $680 respectively, based on
charges for HBOT in a wide variety of 296 single claims for single studies and
methodology, we are proposing a
cost centers. We used this methodology 1,150 single claims for multiple scan
median cost of $13.29 for APC 0381 for
to estimate payment for HBOT in CYs procedures. Despite more CY 2005
CY 2007. We are hopeful that the better
2005 and 2006. For CY 2007, we are single claims for multiple scan
and more accurate hospital reporting procedures, the median cost of these
sroberts on PROD1PC70 with PROPOSALS

and charging practices for these single proposing to continue using the same
methodology to estimate a ‘‘per unit’’ procedures declined significantly from
allergy test CPT codes beginning in CY CY 2004 to CY 2005, dropping below
2006 will allow us to calculate the median cost for HCPCS code C1300.
the median cost of single studies. As
median cost of APC 0381 using the Using 50,311 claims with multiple units
indicated earlier, there was a significant
standard OPPS process in future OPPS or multiple occurrences, we estimate a
coding change for myocardial PET
updates. median cost of $98.36. services in CY 2005, with the reporting

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of a single CPT code for multiple studies median costs from our CY 2005 claims When all myocardial PET scan
(CPT code 78492) for most of CY 2005, data for myocardial PET scan services, procedure codes are combined into a
in comparison with nine G-codes in CY calculated based upon our standard single clinical APC, as they were prior
2004. We examined the single bills for OPPS methodology and based on almost to CY 2006, the APC median cost for
multiple scan procedures from CY 2004 1,500 single claims, for both the single myocardial PET services is about $721,
and noted 17 hospitals were and multiple scans, should be reflective very similar to the $703 median cost of
represented, with the majority of those of the hospital resources required to their single CY 2005 clinical APC.
claims from a single hospital. In provide the services to Medicare Therefore, for CY 2007, we are
contrast, in the CY 2005 claims, 25 beneficiaries in the outpatient hospital proposing to assign CPT codes 78459,
hospitals were represented in the single setting. Based on these data, the 78491, and 78492 to a single APC,
bills for multiple scan procedures, and differential median costs of the single specifically, APC 0307 titled Myocardial
no single hospital contributed a majority and multiple study procedures do not Positron Emission Tomography (PET)
of claims to the median cost calculation. support the present two-level APC Imaging, with a proposed median cost of
We also examined differences in charges payment structure. Although we $721. We believe that the assignment of
associated with G-codes versus the CPT acknowledge that some people may these three CPT codes to APC 0307 is
code to determine if hospitals had appropriate as the CY 2005 claims data
believe that multiple scan procedures
adjusted the charge for the CPT code to reveal that more hospitals are providing
should require increased resources at
reflect the termination of the multiple multiple myocardial PET scan services,
some hospitals in comparison with
study G-codes. However, the individual most myocardial PET scans are multiple
single scans, particularly because of the
charging practices of hospitals did not studies, and the hospital resource costs
appear to vary with the use of a G-code longer scan times required for multiple of single and multiple studies are
versus the CPT code in either the CY studies, our data do not support a similar. We believe that the proposed
2004 or the CY 2005 claims. Greater resource differential that would median cost appropriately reflects the
volume of claims and consistent necessitate the placement of these single hospital resources associated with
charging for both the G-codes and CPT and multiple scan procedures into two providing myocardial PET scans to
code by hospitals suggest that the separate APCs. As myocardial PET Medicare beneficiaries in cost-efficient
median appropriately captures the scans are being provided more settings. Further, we believe that the
greater variability in relative hospital frequently at a greater number of proposed rates are adequate to ensure
costs for multiple myocardial PET hospitals than in the past, it is possible appropriate access to these services for
studies in the CY 2005 claims data. that most hospitals performing multiple Medicare beneficiaries. We are seeking
Based on our claims data, the use of PET scans are particularly efficient in comments on our proposal to provide a
myocardial PET scan technology has their delivery of higher volumes of these single payment rate for all myocardial
become more widely prevalent in services and, therefore, incur hospital PET scans in CY 2007. The myocardial
hospitals, and as a result, we now have costs that are similar to those of single PET scan CPT codes and their CY 2007
more data to support our proposed scans, which are provided less proposed APC assignments are
payment rates. We believe that the commonly. displayed in Table 17.

TABLE 17.—PROPOSED CY 2007 APC ASSIGNMENT FOR MYOCARDIAL PET


CY 2006 Proposed Proposed CY
HCPCS CY 2006 Proposed CY
Short descriptor CY 2006 SI payment CY 2007 2007 APC
code APC 2007 SI
rate APC median cost

78459 ..... Heart muscle imaging (PET) ................ S .................. 0306 $800.55 S .................. 0307 $721.26
78491 ..... Heart image (PET), single ................... S .................. 0306 800.55 S .................. 0307 721.26
78492 ..... Heart image (PET), multiple ................ S .................. 0307 2,484.88 S .................. 0307 721.26

12. Radiology Procedures (APCs 0333, • Recommending that CMS review session. Our analyses did not disprove
0662, and Other Imaging APCs) payment rates for computed tomography the commenters’ contentions that there
(If you choose to comment on issues (CT) and computed tomographic are efficiencies already reflected in their
in this section, please include the angiography (CTA) procedures to ensure hospital costs, and, therefore, their CCRs
caption ‘‘Radiology Procedures’’ at the that their payment rates are and the median costs for the procedures.
beginning of your comment.) comparatively consistent and that they Over the past 7 months, we have
At its March 2006 meeting, the APC accurately reflect resource use. conducted additional studies of our
Panel made three recommendations • Recommending that CMS invite hospital claims data for single and
regarding radiology services. These comments on ways that hospitals can multiple diagnostic imaging procedures,
include the following: uniformly and consistently report and our analyses to date support
• Reaffirming the CY 2005 charges and costs related to radiology continued deferral for CY 2007 of
recommendation that CMS postpone services. implementation of a multiple imaging
implementation of the multiple In the CY 2006 OPPS final rule with procedure payment reduction policy in
procedure reduction policy for imaging comment period (70 FR 68707), we the OPPS. Therefore, we are accepting
services as included in the CY 2006 indicated that based on the APC Panel’s
sroberts on PROD1PC70 with PROPOSALS

the APC Panel’s recommendation to not


OPPS proposed rule for CY 2007, to recommendations and public comments
adopt such a policy for CY 2007
allow CMS to gather more data on the received, we decided not to finalize our
efficiencies associated with multiple CY 2006 proposal to reduce OPPS pending the results of further analyses.
imaging procedures that may already be payments for some second and Depending upon the findings from such
reflected in OPPS payment rates for subsequent diagnostic imaging studies, in a future rulemaking we may
imaging services. procedures performed in the same propose revisions to the structure of our

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rates to further refine these rates in the complex CT services that, like CTA OPPS. Costs are estimated on claims by
context of additional study findings. procedures, include scans without matching cost-to-charge ratios for a
We also are accepting the APC Panel’s contrast material, followed by scans given hospital to their own claims data
recommendation to review the CY 2007 with contrast. Thus, we believe that our through a cost center-to-revenue code
proposed payment rates for CT and CTA CY 2007 proposed payment rates for CT crosswalk. OPPS relative weights are
procedures to ensure that their rates are and CTA procedures are generally based on the median cost for all services
comparatively consistent and accurately consistent with one another and in an APC. The components resulting in
reflective of hospitals’ resource costs. accurately reflective of hospitals’ CCRs for a given revenue code would
Presenters at the March 2006 APC Panel resource costs. have to be dramatically different for the
meeting indicated to the Panel that With respect to the APC Panel’s providers contributing the majority of
hospital resources for CTA procedures recommendation regarding the reporting claims used to calculate an APC’s
are similar to those for CT procedures of costs and charges for radiology median cost in order to impact relative
that include scans without contrast services, CMS requires hospitals to weights.
followed by scans with contrast, but report their costs and charges through We are accepting the APC Panel’s
additional resources are required for the the cost report with sufficient specificity recommendation and specifically
3-dimensional reconstruction that is to support CMS’ use of cost report data inviting comments on ways that
part of the CTA procedures. As a result for monitoring and payment. Within hospitals can uniformly and
of this image postprocessing, CTA scans generally accepted principles of cost consistently report charges and costs
accounting, we allow providers related to all cost centers, not just
display the vasculature in a 3-
flexibility to accommodate the unique radiology, that also acknowledge the
dimensional format rather than in the 2-
attributes of each institution’s ubiquitous tradeoff between greater
dimensional cross-sectional images of
accounting systems. For example, precision in developing CCRs and
conventional CT scans. Based upon CY
providers must match the generally administrative burden associated with
2005 claims data, the CY 2007 proposed
intended meaning of the line-item cost reduced flexibility in hospital
median cost for APC 0333 for CT
centers, both standard and nonstandard, accounting practices.
procedures that include scans without
to the unique configuration of
contrast material, followed by contrast IV. Proposed OPPS Payment Changes
department and service categories used
scans to complete the studies is $309, for Devices
by each hospital’s accounting system.
and the CY 2007 proposed median cost Also, while the cost report provides
for APC 0662 for CTA procedures is A. Proposed Treatment of Device-
recommended bases of allocation for the Dependent APCs
$304. As has been the case for the past general services cost centers, a provider
several years, the median costs is permitted, within specified (If you choose to comment on issues
associated with these two APCs are guidelines, to use an alternative basis in this section, please include the
virtually identical to one another and for a general service cost if it can justify caption ‘‘Device-Dependent APCs’’ at
are also quite consistent with their to its fiscal intermediary that the the beginning of your comment.)
historical costs from prior years of alternative is more accurate than the
claims data. The CY 2007 proposed 1. Background
recommended basis. This approach
median costs for APCs 0333 and 0662 creates internal consistency between a Device-dependent APCs are
are based on about 500,000 and 150,000 hospital’s accounting system and the populated by HCPCS codes that usually,
single claims, respectively. The stability cost report, but cannot guarantee the but not always, require that a device be
of these APC median costs, based on precise comparability of costs and implanted or used to perform the
large numbers of single claims, is charges for individual cost centers procedure. For the CY 2002 OPPS, we
consistent with our belief that the across institutions. used external data, in part, to establish
median costs of these APCs accurately However, we believe that achieving the device-dependent APC medians
reflect hospitals’ resource use. From CY greater uniformity by, for example, used for weight setting. At that time,
2004 to CY 2005 the number of CTA specifying the exact components of many devices were eligible for pass-
procedures performed in the outpatient individual cost centers, would be very through payment. For the CY 2002
department increased by 50 percent, burdensome for hospitals and auditors. OPPS, we estimated that the total
whereas the number of CT procedures Hospitals would need to tailor their amount of pass-through payments
that included a scan without contrast internal accounting systems to reflect a would far exceed the limit imposed by
followed by a scan with contrast to national definition of a cost center. It is statute. To reduce the amount of a pro
complete each full study increased by not clear that the marginal improvement rata adjustment to all pass-through
only about 1 percent. The large annual in precision created by such a items, we packaged 75 percent of the
increases in the OPPS frequencies of requirement would justify the cost of the devices, using external data
CTA procedures through CY 2005 additional administrative burden. The furnished by commenters on the August
provide no evidence that Medicare current hospital practice of matching 24, 2001 proposed rule and information
beneficiaries are experiencing difficulty costs to the general intended meaning of furnished on applications for pass-
accessing these services in the hospital a cost center ensures that most services through payment, into the median costs
outpatient setting. CTA procedures are in the cost center will be comparable for the device-dependent APCs
being more commonly performed for across providers, even if the precise associated with these pass-through
various clinical indications, likely composition of a cost center among devices. The remaining 25 percent of
resulting in more consistent and hospitals differs. Further, every hospital the cost was considered to be pass-
efficient use of the associated image provides a different mix of services. through payment.
sroberts on PROD1PC70 with PROPOSALS

postprocessing technology. Accordingly, Even if CMS specified the components In the CY 2003 OPPS, we determined
it is not surprising that the hospital of each cost center, costs and charges on APC medians for device-dependent
costs of typical CTA procedures in the cost report would continue to reflect APCs using a three-pronged approach.
contemporary medical practice are very each individual hospital’s mix of First, we used only claims with device
similar to the hospital costs of the more services. At the same time, internal codes on the claim to set the medians
involved and resource-intensive consistency is very important to the for these APCs. Second, we used

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external data, in part, to set the medians transitional step from the adjusted service, we removed the requirement for
for selected device-dependent APCs by medians of past years to the use of a device code for the individual
blending that external data with claims unadjusted medians based solely on procedure code but retained the device
data to establish the APC medians. hospital claims data with device codes requirement for other procedure codes
Finally, we also adjusted the median for in future years (70 FR 42714). We also assigned to that device-dependent APC.
any APC (whether device-dependent or incorporated, as part of our CY 2006 In its February 2005 meeting, the APC
not) that declined more than 15 percent. methodology, the recommendation to Panel recommended that we consider
In addition, in the CY 2003 OPPS we base payment on medians that were calculating the median costs for APCs
deleted the device codes (‘‘C’’ codes) calculated using only claims that passed 0107 (Insertion of Cardioverter
from the HCPCS file in the belief that the device edits. As stated in the CY Defibrillator) and 0108 (Insertion/
hospitals would include the charges for 2006 OPPS final rule with comment Replacement/Repair of Cardioverter-
the devices on their claims, period (70 FR 68620), we believed that Defibrillator Leads) by bypassing the
notwithstanding the absence of specific this policy provided a reasonable line-item costs of CPT code 33241
codes for devices used. transition to full use of claims data in (Subcutaneous removal of single or dual
In the CY 2004 OPPS, we used only CY 2007, which would include device chamber pacing cardioverter-
claims containing device codes to set coding and device editing, while better defibrillator pulse generator) and
the medians for device-dependent APCs moderating the amount of decline from packaging the line item-costs of CPT
and again used external data in a 50/50 the CY 2005 OPPS payment rates. codes 93640 (Electrophysiological
blend with claims data to adjust evaluation of single or dual chamber
medians for a few device-dependent 2. Proposed CY 2007 Payment Policy
For CY 2007, we are proposing to base pacing cardioverter-defibrillator leads
codes when it appeared that the
the device-dependent APC medians on including defibrillation threshold
adjustments were important to ensure
CY 2005 claims, the most current data evaluation (induction of arrhythmia,
access to care. However, hospital device
available. As stated earlier, in CY 2005 evaluation of sensing and pacing for
code reporting was optional.
In the CY 2005 OPPS, which was we reinstated the use of device codes arrhythmia termination) at time of
based on CY 2003 claims data, there and made the reporting of device codes initial implantation or replacement) and
were no device codes on the claims and, mandatory where an appropriate code 93641 (Electrophysiological evaluation
therefore, we could not use device- exists to describe a device utilized. In of single or dual chamber pacing
coded claims in median calculations as CY 2005, we also implemented HCPCS cardioverter-defibrillator leads
a proxy for completeness of the coding code edits to facilitate complete including defibrillation threshold
and charges on the claims. For the CY reporting of the charges for the devices evaluation (induction of arrhythmia,
2005 OPPS, we adjusted device- used in the procedures assigned to the evaluation of sensing and pacing for
dependent APC medians for those device-dependent APCs. We arrhythmia termination) at time of
device-dependent APCs for which the implemented the first set of device edits initial implantation or replacement;
CY 2005 OPPS payment median was on April 1, 2005, for those APCs for with testing of single or dual chamber
less than 95 percent of the CY 2004 which the CY 2005 payment rate was pacing cardioverter-defibrillator) when
OPPS payment median. In these cases, based on an adjusted median cost. We these codes, separately or in
the CY 2005 OPPS payment median was continued to take public comment on combination, are reported on the same
adjusted to 95 percent of the CY 2004 the remaining device edits after April 1, claim with HCPCS codes G0297
OPPS payment median. We also 2005, and implemented device edits for (Insertion of single chamber pacing
reinstated the device codes and made the remaining device-dependent APCs cardioverter defibrillator pulse
the use of the device codes mandatory on October 1, 2005. Subsequent to the generator), G0298 (Insertion of dual
where an appropriate code exists to implementation of the device edits, we chamber pacing cardioverter
describe a device utilized in a received public comments that caused defibrillator pulse generator), G0299
procedure. We also implemented us to remove the requirement for edits (Insertion or repositioning of electrode
HCPCS code edits to facilitate complete for several APCs on the basis that the lead for single chamber pacing
reporting of the charges for the devices services in them do not always require cardioverter defibrillator and insertion
used in the procedures assigned to the the use of a device or there may be no of pulse generator) and G0300 (Insertion
device-dependent APCs. suitable device codes available for or repositioning of electrode lead(s) for
In the CY 2006 OPPS, which was reporting all devices that may be used dual chamber pacing cardioverter
based on CY 2004 claims data, we set to perform the procedures. defibrillator and insertion of pulse
the median costs for device-dependent For example, we removed the generator), which are assigned to APCs
APCs for CY 2006 at the highest of: (1) requirement for device codes for APC 0107 and 0108. The APC Panel
The median cost of all single bills; (2) 0080 (Diagnostic Cardiac recommended bypassing the line-item
the median cost calculated using only Catheterization) based on the costs for CPT code 33241 because
claims that contained pertinent device information provided by hospitals that members believed that when a pacing
codes and for which the device cost is the codes assigned to this APC do not cardioverter-defibrillator (ICD) pulse
greater than $1; or (3) 90 percent of the always require a device for which there generator removal is performed in the
payment median that was used to set is an appropriate HCPCS code. same operative session as the insertion
the CY 2005 payment rates. We set 90 Therefore, we no longer consider this of a new pulse generator described by a
percent of the CY 2005 payment median APC to be device dependent and have procedure code assigned to APC 0107 or
as a floor rather than 85 percent as removed it from the list of device- 0108, the packaging on the claim is
proposed, in consideration of public dependent APCs. In the case of some appropriately assigned to the procedure
sroberts on PROD1PC70 with PROPOSALS

comments that stated that a 15-percent procedures assigned to other device- code in APC 0107 or 0108. Moreover,
reduction from the CY 2005 payment dependent APCs, where we determined CPT codes 93640 and 93641 may only
median was too large of a transitional that no device was required to provide be correctly coded when the
step. We noted in our CY 2006 proposed a particular service or where there were electrophysiologic evaluation of ICD
rule that we viewed our proposed 85- no HCPCS codes that described all leads is performed at the time of initial
percent payment adjustment as a devices that could be used to furnish the implantation or replacement of an ICD

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pulse generator and/or leads, with or single bills on which to set median costs would decline more than 10 percent in
without testing of the pulse generator. and also increases the median costs for median cost. This compares favorably to
Thus, the APC Panel expected that the APCs 0106, 0107, 0108, and 0418. the data for the CY 2006 OPPS final rule
costs of the evaluations of the ICD leads Therefore, we are proposing to package with comment period in which 12 APCs
(CPT codes 93640 and 93641) could be CPT codes 93640 and 93641 for CY declined more than 10 percent when the
appropriately packaged with the 2007. unadjusted median cost from the data
procedure codes that describe the We calculated the median cost for for the CY 2006 OPPS final rule with
insertion of ICD generators, which are device-dependent APCs using two comment period were compared to the
assigned to APCs 0107 and 0108, or the different sets of claims. We first adjusted median cost on which the CY
insertion of ICD leads assigned to APCs calculated a median cost using all single 2005 OPPS payments were based. Some
0106 (Insertion/Replacement/Repair of procedure claims for the procedure APC cost variation from year to year,
Pacemaker and/or Electrodes), 0108, codes in those APCs. We also calculated whether increasing or decreasing, is to
and 0418 (Insertion of Left Ventricular a second median cost using only claims be expected.
Pacing Elect). Because APCs 0107 and that contain allowed device codes and
0108 have typically had very few single also for which charges for all device Therefore, we are proposing to base
bills on which the medians have been codes were in excess of $1.00 (nontoken the payment rates for CY 2007 for these
based, and because the APC Panel charge device claims). We excluded device-dependent APCs on median
indicated that it believed that we could claims for which the charge for a device costs calculated using claims with
use many more claims if we bypassed was less than $1.01, in part, to recognize appropriate device codes and which
CPT code 33241 and packaged CPT hospital charging practices due to a have no token charges for devices
codes 93640 and 93641, we calculated recall of cardioverter defibrillator and reported on the claim. We do not
median costs for APCs 0107 and 0108 pacemaker pulse generators in CY 2005 believe that adjustment of these median
using these rules. We excluded claims for which the manufacturers provided costs is necessary to provide adequate
that did not meet the device edits, and replacement devices without cost to the payment for these services, and,
we also excluded token claims. beneficiary or hospital. We also found therefore, we are not proposing to adjust
The effect of packaging CPT codes that there are other devices for which the median costs for these APCs to
93640 and 93641 into claims that both the charge was less than $1.01, and we moderate any decreases in medians
pass the device edits and also contain removed those claims also. from CY 2006 to CY 2007. We recognize
no token charges for devices are shown As expected, the median costs that, notwithstanding the device edits, it
in Table 19 below. This affected APCs calculated using all single procedure may continue to be necessary for
0106, 0107, 0108, and 0418. Bypassing bills, including both bills that lack purposes of median cost calculations to
the line-item cost of CPT code 33241 appropriate device codes (where there remove claims that do not contain
could not be done for all claims on are edits) and bills with token charges devices because it is likely that there
which this CPT code was reported for devices, are, in many cases, less than would be incidental occurrences of
because there are clinical circumstances the medians calculated using only interrupted procedures in which a
in which the ICD pulse generator is claims that contain appropriate device
device is not used and does not appear
removed and no new device is codes and that have no token charges for
on the claim. (The interrupted
implanted. Therefore, the APC devices. In some cases the medians are
procedure modifier nullifies the device
assignment for CPT code 33241 and the significantly different when claims
either without device codes or which edit.) Moreover, there are likely to
payment for that code need to reflect the
have only token device charges are continue to be incidental occurrences of
packaging associated with the procedure
when it is performed alone. Because of removed. We believe that the claims token charges for devices as a result of
this problem with assigning packaging that reflect the best estimated costs for devices that are replaced without cost
in all the circumstances in which the these APCs, including the costs of the by the manufacturer. However, each of
procedure may be reported, we decided devices, are those claims that contain these circumstances could cause the
against proposing to bypass CPT code appropriate devices and which also procedure code median cost to
33241, either in general for all have no token charges for devices. (See underrepresent the cost of the complete
procedures or selectively, when it is section IV.A.4. below for our discussion procedure, including the device cost,
reported with the procedures in APCs of payments when the hospital incurs where the hospital purchases the
0107 and 0108. no cost for the principal device required device.
However, CPT codes 93640 and 93641 for the service.) Hence, we believe that use of claims
are always performed during an When we compare the proposed that meet the device edits and which do
operative procedure for ICD initial median costs calculated using only CY not contain token charges for devices
implantation or replacement or with 2005 claims that contain correct device are the appropriate claims to use to set
implantation, revision or replacement of codes and which do not contain token the median costs for the device-
leads, and, therefore, it would be charges for devices to the unadjusted dependent APCs, ensuring that the costs
appropriate to package them into the median costs that were derived from CY of the principal devices are included in
surgical procedure with which they are 2004 claims data, we find that the
the APC medians. In addition, we
performed. Moreover, as a result of the medians for only 2 APCs decline (6.3
believe that, with our proposed changes
descriptors of the lead evaluation CPT percent for APC 0061 (Laminectomy or
to the OPPS packaging status of two
codes, they should never be billed as Incision for Implantation of
Neurostimulator Electrodes, Excluding codes for electrophysiologic evaluation
single procedure claims and packaging
Cranial Nerve) and 2.78 percent for APC of ICD leads, no special payment
them would also resolve the problem of
sroberts on PROD1PC70 with PROPOSALS

setting their payment rates in part on 0115 (Cannula/Access Device policies are needed to establish payment
the basis of claims that reflect erroneous Procedures)). When we compared the rates that correctly reflect the relative
coding. Packaging the costs of the proposed CY 2007 medians to the costs of these procedures to other
intraoperative electrophysiologic testing adjusted medians used to set the procedures paid under the OPPS.
of the ICD leads yields many more payment rates for CY 2006, only 6 APCs BILLING CODE 4120–01–P

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BILLING CODE 4120–01–C

TABLE 19.—EFFECT OF PACKAGING CPT CODES 93640 AND 93641 ON ALL SINGLE BILLS
Proposed CY Proposed CY Proposed CY Proposed CY
2007 single bill 2007 single bill 2007 single bill 2007 single bill
Post cost total
APC SI APC group title frequency median 93640/ frequency median 93640/
frequency 93640/93641 93641 not 93640/93641 93641 pack-
not packaged packaged packaged aged

0106 ........................ T Insertion/Replacement/ 3819 457 $2,459.08 494 $2,549.70


Repair of Pacemaker
and/or Electrodes.
0107 ........................ T Insertion of Cardioverter- 16276 481 9,669.32 886 11,215.82
Defibrillator.
0108 ........................ T Insertion/Replacement/ 9075 929 18,030.96 2950 22,362.68
Repair of Cardioverter-
Defibrillator Leads.
0418 ........................ T Insertion of Left Ventric- 4824 142 5,098.03 225 9,696.51
ular Pacing Elect.

3. Devices Billed in the Absence of an We examined our CY 2005 claims regarding the specific associations of
Appropriate Procedure Code data and found that incorrect billing device codes and procedure codes be
occurs more often with some devices provided to the following e-mail
In the course of examining claims than with others. We are taking this address: OutpatientPPS@cms.hhs.gov.
data for creation of the payment rates for opportunity to inform the public that we This is the same e-mail address to
this proposed rule, we identified expect to implement device to which comments on the existing
circumstances in which hospitals billed procedure code edits for the specified procedure to device edits should be
a device code but failed to also bill any devices and their associated procedures, directed.
procedure code with which the device which we believe must be reported on Comments submitted on this issue to
could be used correctly. These errors in a claim with the specified device for the this mail box are not comments on this
billing lead to the costs of the device claim to be correctly coded and the proposed rule and we will not respond
being packaged with an incorrect device costs properly attributed to to them in the CY 2007 OPPS final rule.
procedure code and also cause the procedures with which they are used.
hospital to be paid incorrectly for the The devices for which we expect to TABLE 20.—DEVICES WHICH MUST BE
service furnished if the device was implement edits are shown below in BILLED WITH ASSOCIATED PROCE-
appropriately reported. We discussed Table 20 and are posted on the CMS DURE CODES
the billing of devices with incorrect outpatient hospital Web site, along with
procedure codes with the APC Panel at our initial draft of all the procedures Device Description
its March 2006 meeting, and the APC with which they could be appropriately
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Panel recommended that we explore the used and thus reported. We believe the C1721 .................... AICD, dual chamber.
C1722 .................... AICD, single chamber.
extent to which it would be appropriate establishment of claims edits reflects C1767 .................... Generator, neuro non-
to establish edits for HCPCS device merely operational and administrative recharg.
codes to ensure that hospitals also bill practice. However, as the public may C1777 .................... Lead, AICD, endo single
procedures in which the devices would assist in establishing appropriate edits, coil.
EP23AU06.021</GPH>

be used on the same claim. we, therefore, are asking that comments C1778 .................... Lead, neurostimulator.

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TABLE 20.—DEVICES WHICH MUST BE manufacturers, insurers, and the devices that may remain in the bodies
BILLED WITH ASSOCIATED PROCE- medical community, to ensure that of patients for their lifetimes, will be
DURE CODES—Continued device problems are recognized and essential to the timely recognition of
addressed as early as possible so that specific problems and patterns of
Device Description people’s health is protected and high complications. This information will
quality medical care is provided. We are facilitate early interventions to mitigate
C1779 .................... Lead, pmkr, taking several steps to assist in the early harm and improve the quality and
transvenous VDD. recognition and analysis of patterns of efficiency of health care services.
C1785 .................... Pmkr, dual, rate-resp. device problems to minimize the Moreover, data from registries may
C1786 .................... Pmkr, single, rate-resp. potential for harmful device-related help further the development of high
C1820 .................... Generator, neuro rechg effects on the health of Medicare quality, evidence-based clinical practice
bat sys. guidelines for the care of patients who
C1882 .................... AICD, other than sing/
beneficiaries and the public in general.
dual.
In recent years, CMS has recognized may receive device-intensive
C1895 .................... Lead, AICD, endo dual the importance of data collection as a procedures. In turn, widespread use of
coil. condition of Medicare coverage for evidence-based guidelines may reduce
C1896 .................... Lead, AICD, non sing/ selected services. In 2005, CMS issued variation in medical practice, leading to
dual. a National Coverage Determination improved personal and public health.
C1897 .................... Lead, neurostim test kit. (NCD) that expanded coverage of ICDs Registry information may also
C1898 .................... Lead, pmkr, other than and required registry participation when contribute to the development of more
trans. the devices were implanted for certain comprehensive and refined quality
C1899 .................... Lead, pmkr/AICD com- clinical indications. The NCD included metrics that may be used to
bination. this requirement in order to ensure that systematically assess and then improve
C1900 .................... Lead, coronary venous.
C2619 .................... Pmkr, dual, non rate-
the care received by Medicare the safety and quality of health care.
resp. beneficiaries was reasonable and Such improvements in the quality of
C2620 .................... Pmkr, single, non rate- necessary and, therefore, appropriately care that result in better personal health
resp. reimbursed. Presently, the American will require the sustained commitment
C2621 .................... Pmkr, other than sing/ College of Cardiology—National of industry, payers, health care
dual. Cardiovascular Data Registry (ACC— providers, and others towards that goal,
NCDR) collects these data and maintains along with excellent and open
4. Proposed Payment Policy When the registry. communication and rapid system-wide
Devices are Replaced Without Cost or In addition to ensuring appropriate responses in a comprehensive effort to
Where Credit for a Replaced Device Is payment of claims, collection, and protect and enhance the health of the
Furnished to the Hospital ongoing analysis of ICD implantation, public. We look forward to further
data can speed public health action in discussions with the public about new
As we discuss above in the context of the event of future device recalls. The strategies to recognize device problems
the calculation of median costs for ICDs systematic recording of device early and how to definitively address
and pacemakers, in recent years there manufacturer and model number can them, in order to minimize both the
have been several field actions and enhance patient and provider harmful health effects and increased
recalls with regard to failure of these notification. Analysis of registry data health care costs that may result.
devices. In many of these cases, the may uncover patterns in complication In addition, we believe that the
manufacturers have offered replacement rates (for example, device malfunction, routine identification of Medicare
devices without cost to the hospital or device-related infection, and early claims where hospitals identify and
credit for the device being replaced if battery depletion) associated with then appropriately report selected
the patient required a more expensive particular devices that signify the need services performed under the OPPS
device. In some circumstances for a more specific investigation. when devices are replaced without cost
manufacturers have also offered, Patterns found in registry data may to the hospital or with full credit to the
through a warranty package, to pay identify problems earlier than the hospital for the cost of the replaced
specified amounts for unreimbursed currently available mechanisms, which device, should provide comprehensive
expenses to persons who had do not systematically collect such information regarding the outpatient
replacement devices implanted. In detailed information surrounding hospital experiences of Medicare
addition, we believe that incidental procedures. beneficiaries with certain devices that
device failures that are covered by We encourage the medical community are being replaced. Because Medicare
manufacturer warranties occur to work to develop additional registries beneficiaries are common recipients of
routinely. While we understand that for implantable devices, so that timely implanted devices, this claims
some device malfunctions may be and comprehensive information is information may be particularly helpful
inevitable as medical technology grows available regarding devices, recipients in identifying patterns of device
increasingly sophisticated, we believe of those devices, and their health status problems early in their natural history
that early recognition of problems and outcomes. While participation in an so that appropriate strategies to reduce
would reduce the number of people ICD registry is required as a condition future problems may be developed.
with the potential to be adversely of coverage for ICD implantation for In addition to our concern for the
affected by these device problems. The certain clinical conditions, we believe public health, we also have a fiduciary
medical community needs heightened that the potential benefits of registries responsibility to the Medicare trust fund
and early awareness of patterns of extend well beyond their application in to ensure that Medicare pays only for
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device failures, voluntary field actions, Medicare’s specific national coverage covered services. Therefore, we are
and recalls so that they can take determinations. As medical technology proposing, effective for services
appropriate action to care for our continues to swiftly advance, data furnished on or after January 1, 2007, to
beneficiaries. Systematic efforts must be collection regarding the short and long reduce the APC payment and
undertaken by all interested and term outcomes of new technologies, and beneficiary copayment for selected
involved parties, including especially concerning implanted APCs in cases in which an implanted

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device is replaced without cost to the payment for the procedure into which which the full costs of the devices have
hospital or with full credit for the the device cost is packaged. In the case been packaged would result in excessive
removed device. Specifically, we are of devices of modest cost, we believe program payments and beneficiary
proposing to revise the existing that the averaging nature of payments copayments for the services being
regulations by adding new § 419.45, under the OPPS based on the furnished if the devices were provided
Payment and copayment reduction for conversion of charges to costs with without cost to hospitals. To avoid
replaced devices. This regulation is CCRs would incorporate any significant excessive payments in these
intended to cover certain devices for savings from a warranty replacement, circumstances, as noted previously we
which credit for the replaced device is field action, or recall into the payment are proposing to adjust the APC
given or which are replaced as a result rate for the associated procedural APC payment rates when implanted devices
of or pursuant to a warranty, field and that no specific adjustment would have been replaced without cost to the
action, voluntary recall, involuntary be necessary or appropriate. However, hospital or beneficiary or where full
recall, and certain devices which are in other cases, such as implantation of credit for such a device has been given
provided free of charge. It would an ICD, the cost of the device is the because the replacement device is of
provide for a reduction in the APC majority of the cost of the APC and greater cost than the originally
payment rate when we determine that payment at the full payment rate for the implanted device.
the device is replaced without cost to procedural APC would pay the hospital We are proposing that the adjustment
the provider or beneficiary or when the much in excess of its incurred cost of would be limited to the APCs listed in
provider receives full credit for the cost the service. Table 21, but only when the purpose of
of a replaced device. The amount of the As we discuss above, we are the procedure is to replace a device that
reduction to the APC payment rate proposing to set the APC payment rates is reported by a HCPCS code in Table
would be calculated in the same manner for device-dependent APCs for the CY 22 which was furnished without cost or
as the offset amount that would be 2007 OPPS using only claims that at full credit by the manufacturer. We
applied if the implanted device assigned contain appropriate devices to ensure are proposing that the following three
to the APC had pass-through status as that we make appropriate full payment criteria must each be met for an APC to
defined under § 419.66. The when the hospital initially incurs the be subject to the adjustment. We
beneficiary’s copayment amount would full cost of the device. Beginning in CY selected the APCs in Table 21 on the
be calculated based on the reduced APC 2005, we required that device codes be basis of these three criteria.
payment rate. billed for devices used and specifically The first criterion is that all
We believe that this is appropriate required that hospitals bill certain procedures assigned to the selected
because in these cases the full cost of device codes for some services. We are APCs must require implantable devices
the replaced device is not incurred and, using the CY 2005 claims to set the that would be reported if device
therefore, we believe that an adjustment payment rates for the CY 2007 OPPS. replacement procedures were
to the APC payment is necessary to Currently, where the device is furnished performed. Therefore, the device being
remove the cost of the device. We without cost to the hospital, we have replaced must be necessary for the
believe that the averaging nature of the authorized hospitals to charge less than service to be furnished and without the
calculation of the amount of the $1.01, although Medicare’s longstanding devices, the services assigned to the
adjustment causes it to be appropriately policy has been that, in these cases, APCs could not be performed. For
applied to cases of credit for the providers may not charge for the device services, and, therefore, their assigned
replaced device, regardless of whether furnished to them without cost. (See the APCs, where a device is not needed or
there is a residual cost due to the Medicare Internet Only Manual, where it may or may not be needed to
implantation of a more expensive Medicare Benefit Policy Manual, perform a procedure, we do not believe
device. Publication 100–02 Chapter 16, section that reducing the payment for the APCs
We also believe that the proposed 40.4.) would be appropriate because the
adjustment is consistent with section We authorized this charge because the charges for the devices are unlikely to
1862(a)(2) of the Act, which excludes CMS device edits require that the be a significant factor in establishing the
from Medicare coverage an item or hospital must report an appropriate rates for the APCs.
service for which neither the beneficiary device if they bill for certain codes that The second criterion is that the
nor anyone on his or her behalf has an cannot be performed without a device or required devices must be surgically
obligation to pay. Payment of the full the claim will be returned. Moreover, inserted or implanted devices that
APC payment rate in these cases in the Fiscal Intermediary Standard remain in the patient’s body after the
which the device was replaced under System will not accept the claim unless conclusion of the procedures, at least
warranty or in which there was a full there is a charge for each HCPCS code temporarily. We believe this is
credit for the price of the recalled or billed. In addition, we were seeking a necessary to establish that the
failed device effectively results in means of identifying these recall cases replacement device is a direct
Medicare payment for a noncovered in the data. Therefore, by authorizing replacement for the device being
item. Moreover, it results in creation of hospitals to charge less than $1.01 for removed. In cases of failures of devices
a beneficiary liability for the copayment the device we enabled the claim to be that are surgically inserted or implanted
associated with the device for which the paid and also provided a mechanism for but do not remain in the patient’s body
beneficiary has no liability. Therefore, identifying devices for which the after the conclusion of procedures, we
we are proposing to adjust the APC hospital incurred no expense. believe that it is highly likely that the
payment rate in these circumstances Where we set the payment rates for replacement device is not specifically
under the authority of section these device-dependent APCs using used to care for the patient on whom the
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1833(t)(2)(E) of the Act, which permits only claims that contain the full costs of original defective device was used and
us to make equitable adjustments to the devices when they are purchased by that, where a defective device of this
OPPS payment rates. hospitals and exclude claims for which type is used, there is no savings to the
We recognize that in many cases, the there is no appropriate device code or hospital. For example, if a vascular
packaged cost of the device is a a charge for the device of less than catheter fails during a procedure, we
relatively modest part of the APC $1.01, the proposed APC payments into believe that the physician will probably

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use another similar catheter to finish the for this purpose at a level other than 40 APC 0107 after adjustment would be
procedure. In these cases the hospital percent. $1862.27. That is, the adjusted payment
would correctly charge for the catheter For purposes of making the proposed rate would equal the unadjusted
that was used, and there would be no adjustment, we would adapt the payment rate for APC 0107 ($17,185.34)
savings to the hospital from that methodology that we have employed to less the warranty reduction percentage
procedure. The hospital would likely establish an offset for the device costs in Table 21 of 89.13 percent
charge for both the defective device and incorporated into APCs in cases where ($15,317.29). Because the adjustment
the device used to complete the a pass-through device is also being amount is set for the APC, the same
procedure because both catheters were billed. We currently calculate the offset adjustment amount would be removed if
used to provide the full service. We amount by first calculating a median devices reported under HCPCS code
believe that if a replacement catheter is including the device costs and then C1722 or C1882 were reported with
furnished to the hospital under calculating a median excluding device HCPCS code G0297. This is identical to
warranty from the manufacturer, it costs using single bills that contain the amount of adjustment that would
would be used at a much later date on devices. We then divide the ‘‘without apply to the payment for a pass-through
a different patient, it would most likely device’’ median by the ‘‘with device’’ device if there were, hypothetically, a
be charged to that patient account, and median and subtract the percent from new ICD to which we had given pass-
it would be unlikely to be specifically 100 to acquire the percent of cost through status (no ICD currently has
identified as being furnished without attributable to devices in the APC. We pass-through status).
cost to the hospital. In these cases, we apply this percent to the payment rate We are proposing to both adjust the
expect that any cost savings from the of the APC to determine the offset APC payment to remove payment for
replacement devices such as these (for amount. For example, this is the the device furnished without cost to the
example, catheters) that are furnished methodology we used to calculate the hospital or beneficiary and also to
without cost would be incorporated into offset amount for APC 0222 when decrease the beneficiary copayment in
the median costs for the procedures in current pass-through device C1820 proportion to the reduced APC payment
the normal course of the data process (Generator, neuro rechg bat sys) is billed so that the beneficiary would, in many
through application of the CCRs on the same claim. We believe that it is but not all cases, share in the cost
generated from the cost reports. appropriate to apply this same savings attributable to the provision of
The third criterion is that the offset methodology in circumstances when we the device without cost by the
percent for the APC (that is, the median need to remove the cost of the device manufacturer. We are proposing that
cost of the APC without device costs from the APC payment, not because the when a device is replaced without cost
divided by the median cost of the APC device is being paid under pass-through to the hospital under warranty or recall
but because the hospital is either not or a credit is provided for the cost of a
with devices) must be significant. For
incurring the cost for the replaced failed or recalled device (unlike cases of
this purpose, we are defining a
device or has been given full credit for offset for a pass-through device), the
significant offset percent as exceeding
the replaced device. In both cases, the beneficiary’s copayment would be
40 percent. We believe that this percent
intent is to remove the cost of the device calculated based on the reduced APC
is appropriate because our studies have
from the APC payment rate. payment rate, maintaining the same
shown that approximately 60 percent of Using this methodology, we percentage copayment as applies to the
the cost of OPPS services is wage- calculated the proposed offset amounts unadjusted APC payment if the
related, and that approximately 40 in Table 21 by first calculating an APC inpatient deductible is not exceeded.
percent of the cost of OPPS services is median cost including device costs and We believe that it is appropriate to
not wage related. This is why we wage then calculating a median cost reduce the beneficiary copayment in
adjust 60 percent of the APC payment excluding device costs, using only these cases because the device is being
rates for all APCs, including APCs for single bills that meet our device edits furnished or credited by the
which a greater percentage of the APC and do not have token charges for manufacturer without obligation on the
payment is for the cost of a device. devices. We then divided the ‘‘without part of the beneficiary. We note,
We believe that once the device share device’’ median cost by the ‘‘with however, that in the case of some high
of an APC exceeds the 40 percent we device’’ median cost and subtracted the cost APCs, making the payment
attribute to costs other than wage costs percent from 100 to acquire the percent adjustment in a recall or warranty
(for example, device costs, capital costs, of cost attributable to devices in the situation may not result in reduction of
plant costs, and supplies other than APC. We next applied this percent to the copayment because the copayment,
devices), the device cost is a significant the payment rate for the APC to although based on the reduced payment
part of the APC cost. Therefore, where determine the offset amount. rate, may continue to exceed the
the device costs in an APC exceed 40 The following is an example of the inpatient deductible and, therefore,
percent, which is the average of all payment reduction in the case of would continue to be set at the inpatient
types of nonwage-related costs across all replacement of an ICD under warranty. deductible.
APCs, we are proposing to define the Where the cardioverter defibrillator In contrast, in the case of pass-
device costs as ‘‘significant’’ for pulse generator described by HCPCS through devices, the beneficiary is liable
purposes of this proposed policy. code C1721 (AICD, dual chamber) is for the copayment on the full APC
We recognize that it may be replaced under warranty during a amount (which, in the case of high cost
appropriate to define ‘‘significant’’ for procedure described by HCPCS code APCs, is limited to the Medicare
this purpose at a different percentage of G0298 (Insertion of dual chamber inpatient deductible) but pays no
the APC cost because there are costs pacing cardioverter defibrillator pulse copayment for the incremental cost of
sroberts on PROD1PC70 with PROPOSALS

other than device costs (for example, generator), the hospital would report the pass-through device. This is
capital costs and other supply costs) in HCPCS code G0298 with a specified appropriate in the case of payment for
the 40 percent of service costs to which modifier and would also report HCPCS pass-through devices because the
the wage adjustment does not apply. We code C1721 with a token charge for the hospital incurs costs for both the service
would reassess for future years whether device. Assuming the hospital had a and the device, and Medicare pays for
it is appropriate to define ‘‘significant’’ wage index of 1, the payment rate for both the service through the full APC

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payment and for the incremental cost of The presence of the modifier would would serve as an additional source of
the pass-through device above the costs trigger the adjustment in payment for information to the medical community
of associated devices already reflected the APCs in Table 21. While we about patterns of device failures,
in the APC payment at charges reduced recognize that this creates a reporting voluntary field actions, and recalls,
to cost by a CCR. The pass-through burden for hospitals, we believe the contributing to improved awareness and
payment amount is reduced only to reporting requirement is unavoidable. understanding of problems.
prevent the program from making Only hospitals can report whether the Secondly, it would ensure equitable
duplicate payment for a portion of the circumstances for reduced payment as adjustment to the payments for surgical
device, once as part of the APC payment described above are met and, therefore,
procedures to replace problematic
and once through the pass-through we see no option other than to have
devices by providing payments to
payment. hospitals report this information to us.
We are proposing to implement the hospitals only for the nondevice related
We recognize that the current FB
adjustment through the use of an procedural costs when a device is
modifier (‘‘Item furnished without cost
appropriate modifier specific to a device replaced without cost to the hospital for
to provider, supplier or practitioner’’)
replacement without cost or crediting of the device or with full credit for the
may not be appropriate in cases in
the cost of a device by the manufacturer. removed device. Thirdly, it would also
which the replacement device is a more
Hospitals would be required to report identify those claims that contain
expensive device than the device being
the modifier appended to a specific reduced device charges due to the full
removed and may need to be changed to
procedure on claims for services when expand its use for all potential APC credit provided by the manufacturer for
two conditions are met. The first payment adjustment scenarios. a replaced device so that in the future
condition is that the procedure is Our proposed policy would we can assess the impact of these claims
assigned to one of the APCs in Table 21. accomplish three important goals. First on median costs for the services into
We have discussed above the criteria and foremost, it would advise us of the which the device costs are packaged.
that we employed for selecting the APCs extent to which devices are being This proposed policy would be
in Table 21. The second condition is replaced due to device failures so that, effective for services furnished on or
that the device for which the if patterns are identified, we can explore after January 1, 2007. We believe that
manufacturer furnished a replacement them to see if there are systemic this proposed policy is necessary to
device (or provided credit for the device problems with certain devices. The enable us to secure claims data that may
being replaced) is one of the devices reporting of a specific modifier with be used to identify trends in device
included in Table 22. We are restricting certain procedure codes would allow us problems that lead to device
the devices to which the adjustment to examine patterns of delivery of replacements. It is also necessary to
would apply to those included in Table specific hospital services when fulfill our fiduciary responsibility to the
22 in order to ensure that the implanted devices are replaced without Medicare program by not providing
adjustment is not triggered by the cost or with full credit for the cost of a payments for items that are excluded
replacement of an inexpensive device device by the manufacturer, in from coverage under Medicare law
whose cost does not constitute a comparison with publicly available because neither the beneficiary nor any
significant proportion of the total information about problematic devices. party on his or her behalf has an
payment rate for an APC. Analysis of outpatient hospital claims obligation to pay.

TABLE 21.—PROPOSED ADJUSTMENT TO APCS IN CASES OF REPLACEMENT OF OR FULL CREDIT FOR FAILED OR
RECALLED DEVICE
CY 2007
proposed
APC SI APC group title offset
percent

0039 ....... S Level I Implantation of Neurostimulator ................................................................................................................ 78.51%


0040 ....... S Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve ......................................... 54.66%
0061 ....... S Laminectomy or Incision for Implantation of Neurostimulator Electrodes, Excludin ............................................ 60.59%
0089 ....... T Insertion/Replacement of Permanent Pacemaker and Electrodes ...................................................................... 77.14%
0090 ....... T Insertion/Replacement of Pacemaker Pulse Generator ....................................................................................... 74.56%
0106 ....... T Insertion/Replacement/Repair of Pacemaker and/or Electrodes ......................................................................... 41.04%
0107 ....... T Insertion of Cardioverter-Defibrillator .................................................................................................................... 89.13%
0108 ....... T Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads ....................................................................... 89.15%
0222 ....... T Implantation of Neurological Device ..................................................................................................................... 78.10%
0225 ....... S Implantation of Neurostimulator Electrodes, Cranial Nerve ................................................................................. 80.62%
0226 ....... T Implantation of Drug Infusion Reservoir ............................................................................................................... 62.21%
0227 ....... T Implantation of Drug Infusion Device ................................................................................................................... 81.50%
0229 ....... T Transcatherter Placement of Intravascular Shunts .............................................................................................. 42.32%
0259 ....... T Level VI ENT Procedures ..................................................................................................................................... 84.03%
0315 ....... T Level II Implantation of Neurostimulator ............................................................................................................... 83.52%
0385 ....... S Level I Prosthetic Urological Procedures ............................................................................................................. 46.88%
0386 ....... S Level II Prosthetic Urological Procedures ............................................................................................................ 61.32%
0418 ....... T Insertion of Left Ventricular Pacing Elect ............................................................................................................. 86.11%
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0654 ....... T Insertion/Replacement of a permanent dual chamber pacemaker ...................................................................... 76.73%


0655 ....... T Insertion/Replacement/Conversion of a permanent dual chamber pacemaker ................................................... 76.89%
0680 ....... S Insertion of Patient Activated Event Recorders ................................................................................................... 77.03%
0681 ....... T Knee Arthroplasty ................................................................................................................................................. 73.26%

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TABLE 22.—DEVICES FOR WHICH THE currently have no category codes for 2. Provisions for Reducing Transitional
PROPOSED MODIFIER MUST BE RE- pass-through devices that will expire Pass-Through Payments To Offset Costs
PORTED WITH THE PROCEDURE January 1, 2007. We created one new Packaged Into APC Groups
CODE WHEN FURNISHED WITHOUT category effective January 1, 2006, for a. Background
C1820 (Generator, neurostimulator
COST OR AT FULL CREDIT FOR A In the November 30, 2001 OPPS final
(implantable), with rechargeable battery
REPLACED DEVICE and charging system), which we are rule, we explained the methodology we
proposing to continue to pay under the used to estimate the portion of each
Device Description APC payment rate that could reasonably
pass-through provision in CY 2007
be attributed to the cost of the
C1721 .... AICD, dual chamber. under the OPPS. This category was
associated devices that are eligible for
C1722 .... AICD, single chamber. created after we published
C1764 .... Event recorder, cardiac. pass-through payments (66 FR 59904).
modifications to our criteria in the CY
C1767 .... Generator, neurostim, imp. Beginning with the implementation of
2006 OPPS final rule with comment
C1771 .... Rep dev, urinary, w/sling. the CY 2002 OPPS quarterly update
period on November 10, 2005 (70 FR
C1772 .... Infusion pump, programmable. (April 1, 2002), we deducted from the
C1776 .... Joint device (implantable). 68628 through 68631) allowing CMS to pass-through payments for the
C1777 .... Lead, AICD, endo single coil. refine previous pass-through category identified devices an amount that
C1778 .... Lead, neurostimulator. descriptions that would have prevented reflected the portion of the APC
C1779 .... Lead, pmkr, transvenous VDD. us from making pass-through payments payment amount that we determined
C1785 .... Pmkr, dual, rate-resp. for a new technology that otherwise met
C1786 .... Pmkr, single, rate-resp. was associated with the cost of the
our criteria. These modifications device, as required by section
C1813 .... Prosthesis, penile, inflatab.
C1815 .... Pros, urinary sph, imp.
amended the original criteria and 1833(t)(6)(D)(ii) of the Act. In the
C1820 .... Generator, neuro rechg bat sys. process for creating additional device November 1, 2002 interim final rule
C1882 .... AICD, other than sing/dual. categories for pass-through payment that with comment period, we published the
C1891 .... Infusion pump, non-prog, perm. we published on November 2, 2001 (66 applicable offset amounts for CY 2003
C1895 .... Lead, AICD, endo dual coil. FR 55850 through 55857). Under our (67 FR 66801).
C1896 .... Lead, AICD, non sing/dual. established policy, we base the For the CY 2002 and CY 2003 OPPS
C1897 .... Lead, neurostim, test kit. expiration dates for the category codes
C1898 .... Lead, pmkr, other than trans. updates, to estimate the portion of each
C1899 .... Lead, pmkr/AICD combination. on the date on which a category was APC payment rate that could reasonably
C1900 .... Lead coronary venous. first eligible for pass-through payment. be attributed to the cost of an associated
C2619 .... Pmkr, dual, non rate-resp. In the November 1, 2002 OPPS final device eligible for pass-through
C2620 .... Pmkr, single, non rate-resp. rule, we established a policy for payment, we used claims data from the
C2621 .... Pmkr, other than sing/dual. period used for recalibration of the APC
C2622 .... Prosthesis, penile, non-inf.
payment of devices included in pass-
through categories that are due to expire rates. That is, for CY 2002 OPPS
C2626 .... Infusion pump, non-prog, temp. updating, we used CY 2000 claims data,
C2631 .... Rep dev, urinary, w/o sling. (67 FR 66763). For CY 2003 through CY
L8614 ..... Cochlear device/system. 2006, we packaged the costs of the and for CY 2003 OPPS updating, we
devices no longer eligible for pass- used CY 2001 claims data. For CY 2002,
through payments into the costs of the we used median cost claims data based
B. Proposed Pass-Through Payments for
procedures with which the devices were on specific revenue centers used for
Devices
billed in the claims data used to set the device-related costs because C-code cost
(If you choose to comment on issues data were not available until CY 2003.
in this section, please include the payment rates for those years.
Brachytherapy sources, which are now For CY 2003, we calculated a median
caption ‘‘Pass-Through Devices’’ at the cost for every APC without packaging
beginning of your comment.) separately paid in accordance with
the costs of associated C-codes for
section 1833(t)(2)(H) of the Act, are an
1. Expiration of Transitional Pass- device categories that were billed with
exception to this established policy
Through Payments for Certain Devices the APC. We then calculated a median
(with the exception of brachytherapy
cost for every APC with the costs of the
a. Background sources for prostate brachytherapy,
associated device category C-codes that
Section 1833(t)(6)(B)(iii) of the Act which were packaged in the CY 2003
were billed with the APC packaged into
requires that, under the OPPS, a OPPS only).
the median. Comparing the median APC
category of devices be eligible for b. Proposed Policy for CY 2007 cost without device packaging to the
transitional pass-through payments for median APC cost, including device
at least 2, but not more than 3, years. As we stated earlier, currently we packaging, enabled us to determine the
This period begins with the first date on have one effective device category for percentage of the median APC cost that
which a transitional pass-through pass-through payment, C1820, which is attributable to the associated pass-
payment is made for any medical device we created for pass-through payment through devices. By applying those
that is described by the category. The effective January 1, 2006. We are percentages to the APC payment rates,
device category codes became effective proposing to continue to make payment we determined the applicable amount to
April 1, 2001, under the provisions of under the pass-through provisions for be deducted from the pass-through
the BIPA. Prior to pass-through device category C1820 for CY 2007. We are payment, the ’’offset’’ amount. We
categories, Medicare payments for pass- proposing that this category would created an offset list comprised of any
through devices under the OPPS were expire from pass-through payment after APC for which the device cost was at
made on a brand-specific basis. All of December 31, 2007. This would provide least 1 percent of the APC’s cost.
sroberts on PROD1PC70 with PROPOSALS

the initial 97 category codes that were the category transitional pass-through The offset list that we published for
established as of April 1, 2001, have payment status for a 2-year period, in CY 2002 through CY 2004 was a list of
expired; 95 categories expired after CY accordance with the statutory offset amounts associated with those
2002, and 2 categories expired after CY requirement that no category be paid as APCs with identified offset amounts
2003. In addition, nine new categories a pass-through device for less than 2 developed using the methodology
have expired since their creation. We years, nor more than 3 years. described above. As a rule, we do not

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know in advance which procedures Therefore, we did not use CY 2004 Specifically, if we create a new device
residing in certain APCs may be billed claims with device coding to calculate category for payment in CY 2007, to
with new device categories. Therefore, CY 2006 device offset amounts. In calculate potential offsets we are
an offset amount is applied only when addition, we did not use the CY 2005 proposing to examine the most current
a new device category is billed with a methodology, for which we utilized the available claims data, including device
HCPCS procedure code that is assigned device percentages as developed for CY costs, to determine whether device costs
to an APC appearing on the offset list. 2004. Two years had passed since we associated with the new category are
For CY 2004, we modified our policy developed the device offsets for CY already packaged into the existing APC
for applying offsets to device pass- 2004, and the device offsets originally structure, as indicated earlier. If we
through payments. Specifically, we calculated from CY 2002 hospitals’ conclude that some related device costs
indicated that we would apply an offset claims data may either have are packaged into existing APCs, we are
to a new device category only when we overestimated or underestimated the proposing to use the methodology
could determine that an APC contains contributions of device costs to total described earlier and first used for the
costs associated with the device. We procedural costs in the outpatient CY 2003 OPPS to determine an
continued our existing methodology for hospital environment of CY 2004. In appropriate device offset percentage for
determining the offset amount, addition, a number of the APCs on the those APCs with which the new
described earlier. We were able to use CY 2004 and CY 2005 device offset category would be reported.
this methodology to establish the device percentage lists were either no longer in We did not publish a list of APCs
offset amounts for CY 2004 because existence or were so significantly with device percentages as a transitional
providers reported device codes (C- reconfigured that the past device offsets policy for CY 2006 because of the
codes) on the CY 2002 claims used for likely did not apply. previously discussed limitations of the
the CY 2004 OPPS update. For the CY For CY 2006, we reviewed the single CY 2004 OPPS data with respect to
2005 update to the OPPS, our data new device category established thus device costs associated with procedures.
consisted of CY 2003 claims that did not far, C1820, to determine whether device We stated in the CY 2006 final rule with
contain device codes and, therefore, for costs associated with the new category comment period (70 FR 68628) that we
CY 2005, we utilized the device are packaged into the existing APC expected to reexamine our previous
percentages as developed for CY 2004. structure. Under our established policy, methodology for calculating the device
In the CY 2004 OPPS update, we if we determine that the device costs percentages and offset amounts for the
reviewed the device categories eligible associated with the new category are CY 2007 OPPS update, which would be
for continuing pass-through payment in closely identifiable to device costs based on CY 2005 hospital claims data
CY 2004 to determine whether the costs packaged into existing APCs, we set the where device C-code reporting is
associated with the device categories are offset amount for the new category to an required.
packaged into the existing APCs. Based amount greater than $0. Our review of
b. Proposed Policy for CY 2007
on our review of the data for the device the service indicated that the median
categories existing in CY 2004, we costs for the applicable APC 0222 For CY 2007, we are proposing to
determined that there were no close or (Implantation of Neurological Device) continue to review each new device
identifiable costs associated with the contained costs for neurostimulators category on a case-by-case basis as we
devices relating to the respective APCs similar to the costs of the new device have done in CY 2004, CY 2005, and CY
that are normally billed with them. category C1820. Therefore, we 2006, to determine whether device costs
Therefore, for those device categories, determined that a device offset would associated with the new category are
we set the offset amount to $0 for CY be appropriate. We announced an offset packaged into the existing APC
2004. We continued this policy of amount for that category in Program structure. If we determine that, for any
setting the offset amount to $0 for the Transmittal No. 804, dated January 3, new device category, no device costs
device categories that continued to 2006. associated with the new category are
receive pass-through payment in CY For CY 2006, we are using available packaged into existing APCs, we are
2005. partial year CY 2005 hospital claims proposing to continue our current
For the CY 2006 OPPS update, CY data to calculate device percentages and policy of setting the offset amount for
2004 hospital claims were available for potential offsets for CY 2006 the new category to $0 for CY 2007.
analysis. Hospitals billed device C- applications for new device categories. There is currently one new device
codes in CY 2004 on a voluntary basis. Effective January 1, 2005, we require category that would continue for pass-
We reviewed our CY 2004 data and hospitals to report device C-codes and through payment in CY 2007. This
found that the numbers of claims for their costs when hospitals bill for category, described by HCPCS code
services in many of the APCs for which services that utilize devices described C1820, currently has an offset amount of
we calculated device percentages using by the existing C-codes. In addition, $8,647.81, which is applied to APC
CY 2004 data were quite small. We also during CY 2005, we implemented 0222. We are proposing to update this
found that many of these APCs already device edits for many services that offset for CY 2007 based on the full year
had relatively few single claims require devices and for which of claims data for CY 2005, the claims
available for median calculations appropriate device C-codes exist. data year for our CY 2007 rate update.
compared with the total bill frequencies Therefore, we expected that the number We are proposing an offset amount for
because of our inability to use many of claims that include device codes and C1820 of 78.1 percent of the proposed
multiple bills in establishing median their respective costs to be much more CY 2007 payment rate for APC 0222
costs for all APCs. In addition, we found robust and representative for CY 2005 based on the CY 2005 data used to
that our claims demonstrated that than for CY 2004. We believe that use calculate the proposed payment amount
sroberts on PROD1PC70 with PROPOSALS

relatively few hospitals specifically of the most current claims data to in this proposed rule. (See Addendum
coded for devices utilized in CY 2004. establish offset amounts when they are A of this proposed rule for a listing of
Thus, we were not confident that CY needed to ensure appropriate payment the proposed CY 2007 APC payment
2004 claims reporting C-codes is consistent with our stated policy; rates.)
represented the typical costs of all therefore, we are proposing to continue We are proposing to continue our
hospitals providing the services. to do so for the CY 2007 OPPS. existing policy to establish new

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49580 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Proposed Rules

categories in any quarter when we not being paid for as a hospital TABLE 23.—PROPOSED LIST OF
determine that the criteria for granting outpatient department service as of DRUGS AND BIOLOGICALS FOR
pass-through status for a device category December 31, 1996, and whose cost is WHICH PASS-THROUGH STATUS EX-
are met. If we create a new device ‘‘not insignificant’’ in relation to the PIRES DECEMBER 31, 2006
category and determine that our data OPPS payments for the procedures or
contain a sufficient number of claims services associated with the new drug or HCPCS APC Short descriptor
with identifiable costs associated with biological. Under the statute,
the new category of devices in any APC, transitional pass-through payments can C9220 .. 9220 .... Sodium hyaluronate.
we are proposing to adjust the APC be made for at least 2 years but not more C9221 .. 9221 .... Graftjacket Reg Matrix.
payment if the offset amount is greater than 3 years. In Addenda A and B of C9222 .. 9222 .... Graftjacket Sft Tis.
than $0. If we determine that a device this proposed rule, proposed CY 2007 J0128 .. 9216 .... Abarelix injection.
offset greater than $0 is appropriate for pass-through drugs and biological J0878 .. 9124 .... Daptomycin injection.
J2357 .. 9300 .... Omalizumab injection.
any new category that we create, we are agents are identified by status indicator J2783 .. 0738 .... Rasburicase.
proposing to announce the offset ‘‘G.’’ J2794 .. 9125 .... Risperidone, long acting.
amount in the program transmittal that The process to apply for transitional J7518 .. 9219 .... Mycophenolic acid.
announces the new category. pass-through payment for eligible drugs J9035 .. 9214 .... Bevacizumab injection.
In summary, for CY 2007, we are and biological agents can be found on J9055 .. 9215 .... Cetuximab injection.
proposing to use CY 2005 hospital our CMS Web site: http:// J9305 .. 9213 .... Pemetrexed injection.
claims data to calculate device www.cms.hhs.gov. If we revise the
percentages and potential offsets for CY application instructions in any way, we 3. Drugs and Biologicals With Proposed
2007 applications for new device will post the revisions on our Web site Pass-Through Status in CY 2007
categories. We are proposing to publish, and submit the changes to the Office of
through program transmittals, any new We are proposing to continue pass-
Management and Budget (OMB) for
or updated offsets that we calculate for through status in CY 2007 for nine drugs
approval, as required under the
CY 2007, corresponding to newly and biologicals. These items, which are
Paperwork Reduction Act (PRA).
created categories or existing categories, listed in Table 24 below, were given
Notification of new drugs and
respectively. pass-through status as of April 1, 2006.
biologicals application processes is
The APCs and HCPCS codes for drugs
V. Proposed OPPS Payment Changes for generally posted on the OPPS Web site
and biologicals that we are proposing to
Drugs, Biologicals, and at: http://www.cms.hhs.gov/providers/
continue with pass-through status in CY
Radiopharmaceuticals hopps.
2007 are assigned status indicator ‘‘G’’
A. Proposed Transitional Pass-Through 2. Expiration in CY 2006 of Pass- in Addenda A and B of this proposed
Payment for Additional Costs of Drugs Through Status for Drugs and rule.
and Biologicals Biologicals Section 1833(t)(6)(D)(i) of the Act sets
(If you choose to comment on issues Section 1833(t)(6)(C)(i) of the Act the payment rate for pass-through
in this section, please include the specifies that the duration of eligible drugs (assuming that no pro rata
caption ‘‘Pass-Through Drugs’’ at the transitional pass-through payments for reduction in pass-through payment is
beginning of your comment.) drugs and biologicals must be no less necessary) as the amount determined
than 2 years and no longer than 3 years. under section 1842(o) of the Act. We
1. Background The 12 drugs and biologicals listed in note that this section of the Act also
Section 1833(t)(6) of the Act provides Table 23, whose pass-through status states that if a drug or biological is
for temporary additional payments or will expire on December 31, 2006, meet covered under a competitive acquisition
‘‘transitional pass-through payments’’ that criterion. For all drugs and contract under section 1847B of the Act,
for certain drugs and biological agents. biologicals with pass-through status the payment rate is equal to the average
As originally enacted by the Medicare, expiring on December 31, 2006, that are price for the drug or biological for all
Medicaid, and SCHIP Balanced Budget currently assigned temporary C-codes, if competitive acquisition areas and the
Refinement Act (BBRA) of 1999 (Pub. L. there is a permanent HCPCS code year established as calculated and
106–113), this provision requires the available for CY 2007 that describes the adjusted by the Secretary.
Secretary to make additional payments product, then we are proposing to delete Section 1847A of the Act, as added by
to hospitals for current orphan drugs, as the C-code and use the permanent section 303(c) of Pub. L. 108–173,
designated under section 526 of the HCPCS code for purposes of OPPS establishes the use of the average sales
Federal Food, Drug, and Cosmetic Act billing and payment for the product in price (ASP) methodology as the basis for
(Pub. L. 107–186); current drugs and CY 2007. Based on our review of the payment of drugs and biologicals
biological agents and brachytherapy existing permanent HCPCS codes described in section 1842(o)(1)(C) of the
sources used for the treatment of cancer; available at the time of this proposed Act and furnished on or after January 1,
and current radiopharmaceutical drugs rule, we have determined that HCPCS 2005. This payment methodology is set
and biological products. For those drugs code J7344 (Nonmetabolic active tissue) forth in § 419.64 of the regulations.
and biological agents referred to as appropriately describes the product Section 1847B of the Act, as added by
‘‘current,’’ the transitional pass-through reported under HCPCS code C9221 in section 303(d) of Pub. L. 108–173,
payment began on the first date the the CY 2006 OPPS; therefore, we establishes the payment methodology
hospital OPPS was implemented (before propose to delete C9221 and pay for this for drugs and biologicals under the
enactment of the Medicare, Medicaid, product using J7344 in CY 2007. The competitive acquisition program. The
sroberts on PROD1PC70 with PROPOSALS

and SCHIP Benefits Improvement and coding changes for the other products competitive acquisition program was
Protection Act BIPA of 2000 (Pub. L. will depend on what the final HCPCS implemented as of July 1, 2006. The list
106–554), on December 21, 2000). codes are for CY 2007, which will be of drugs and biologicals covered under
Transitional pass-through payments included in the CY 2007 OPPS final this program can be found on http://
are also required for certain ‘‘new’’ rule. We specifically request comments www.cms.hhs.gov/
drugs and biological agents that were on this proposed policy for CY 2007. CompetitiveAcquisforBios, along with

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their payment rates and information on without HCPCS codes, as discussed in covered under a competitive acquisition
the program’s methodology. the CY 2006 OPPS final rule with contract), from the portion of the
Section 1833(t)(6)(D)(i) of the Act sets comment period (70 FR 68669). We otherwise applicable fee schedule
the payment rate for pass-through further note that with respect to items amount or the APC payment rate
eligible drugs as the amount determined for which we currently do not have ASP associated with the drug or biological
under section 1842(o) of the Act, or if data, once their ASP data become that would be the amount paid for drugs
a drug or biological is covered under a available in later quarter submissions, and biologicals under section 1842(o) of
competitive acquisition contract under their payment rates under OPPS will be the Act (or section 1847B of the Act, if
section 1847B of the Act, the payment adjusted so that the rates are based on the drug or biological is covered under
rate is equal to the average price for the the ASP methodology and set to ASP+6 a competitive acquisition contract), the
drug or biological for all competitive percent. resulting difference is equal to zero.
acquisition areas and the year Currently, there are no
established as calculated and adjusted radiopharmaceuticals that would have We are proposing to use payment
by the Secretary. For CY 2007, under the pass-through status in CY 2007. In the rates based on the ASP data from the
OPPS we are proposing payment for event that a new radiopharmaceutical fourth quarter of CY 2005 for budget
drugs and biologicals with pass-through agent receives pass-through status in CY neutrality estimates, impact analyses,
status that will also be covered under 2007, we propose to base its payment on and to complete Addenda A and B of
the competitive acquisition program to the WAC for the product as ASP data for this proposed rule because these are the
be based on the competitive acquisition radiopharmaceuticals are not available. most recent data available to us at this
program methodology. Similar to the We note, however, that if the WAC is time. These payment rates are also the
payment policy established for pass- also unavailable, then we would basis for drug payments in the physician
through drugs and biologicals in CY calculate payment for the office setting effective April 1, 2006. To
2006, we are proposing to pay under the radiopharmaceutical at 95 percent of its be consistent with the ASP-based
OPPS for all other drugs and biologicals most recent AWP. We are proposing to payments that would be made when
with pass-through status in CY 2007 adopt this interim payment these drugs and biologicals are
consistent with the provisions of section methodology in order to be consistent furnished in physician offices, we are
1842(o) of the Act, as amended by with how we pay for new drugs, proposing to make any appropriate
section 621 of Pub. L. 108–173, at a rate biologicals, and radiopharmaceuticals adjustments to the amounts shown in
that is equivalent to the payment these without HCPCS codes, as discussed in
Addenda A and B of this proposed rule
drugs and biologicals would receive in the CY 2006 OPPS final rule with
when we publish our CY 2007 OPPS
the physician office setting. comment period (70 FR 68669).
Table 24 lists the drugs and Section 1833(t)(6)(D)(i) of the Act also final rule and also on a quarterly basis
biologicals for which we are proposing sets the amount of additional payment on our Web site during CY 2007 if later
that pass-through status continue in CY for pass-through eligible drugs and quarter ASP submissions (or more
2007. Of these nine drugs and biologicals (the pass-through payment recent WACs or AWPs) indicate that
biologicals, only HCPCS codes J2503 amount). The pass-through payment adjustments to the payment rates for
(Pegaptanib sodium injection) and J9264 amount is the difference between the these pass-through drugs and biologicals
(Paclitaxel injection) are covered under amount authorized under section are necessary. The payment rate for a
the competitive acquisition program at 1842(o) of the Act (or under section radiopharmaceutical with pass-through
the time of the development of this 1847B of the Act, if the drug or status would also be adjusted
proposed rule. Therefore, in CY 2007, biological is covered under a accordingly. We also are proposing to
we are proposing to set payment for competitive acquisition contract), and make appropriate adjustments to the
HCPCS codes J2503 and J9264 at the the portion of the otherwise applicable payment rates for these drugs and
amounts determined under the fee schedule amount (that is, the APC biologicals in the event that they
competitive acquisition program, which payment rate) that the Secretary become covered under the competitive
will be a rate slightly different than the determines is associated with the drug acquisition program in the future. For
rate determined under the ASP or biological. drugs and biologicals that are currently
methodology. Payment for all other We discuss in section V.B.3.b. of the covered under the competitive
drugs and biologicals would be preamble that we are proposing to make acquisition program, we are proposing
equivalent to the payment these drugs separate payment in CY 2007 for new to use the payment rates calculated
and biologicals would receive in the drugs and biologicals with a HCPCS under this program that are in effect as
physician office setting in CY 2007, code, consistent with the provisions of of July 1, 2006. We are proposing to
where payment will be determined by section 1842(o) of the Act at a rate that update these payment rates if the rates
the methodology described in § 419.904 is equivalent to the payment they would change in the future.
and generally be equal to ASP+6 receive in a physician office setting (or
percent. In accordance with the ASP under section 1847B of the Act, if the Table 24 lists the drugs and
methodology, in the absence of ASP drug or biological is covered under a biologicals for which we are proposing
data, we are continuing the policy we competitive acquisition contract), that pass-through status continue in CY
implemented during CYs 2005 and 2006 whether or not we have received a pass- 2007. We assigned pass-through status
of using the wholesale acquisition cost through application for the item. to these drugs and biologicals as of
(WAC) for the product to establish the Accordingly, in CY 2007 the pass- April 1, 2006. We also have included in
initial payment rate. We note, however, through payment amount would equal Addenda A and B of this proposed rule,
that if the WAC is also unavailable, then zero for those new drugs and biologicals the proposed CY 2007 APC payment
sroberts on PROD1PC70 with PROPOSALS

we would make payment at 95 percent that we determine have pass-through rates for all pass-through drugs and
of the product’s most recent AWP. We status. That is, when we subtract the biologicals, based on ASP data from the
adopted this interim payment amount to be paid for pass-through fourth quarter of CY 2005 (or if
methodology in order to be consistent drugs and biologicals under section applicable, payment rates calculated
with how we pay for new drugs, 1842(o) of the Act (or section 1847B of under the competitive acquisition
biologicals, and radiopharmaceuticals the Act, if the drug or biological is program) as described above.

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TABLE 24.—PROPOSED LIST OF package as many costs as possible, we burden related to separate billing for
DRUGS AND BIOLOGICALS WITH are aware that packaging payments for more drugs, biologicals, and
PASS-THROUGH STATUS IN CY 2007 certain drugs, biologicals, and radiopharmaceuticals.
radiopharmaceuticals, especially those The second option we considered for
HCPCS APC Short descriptor that are particularly expensive or rarely CY 2007 was to increase the packaging
used, might result in insufficient threshold to a level much higher than
C9225 .. 9225 .... Fluocinolone acetonide. payments to hospitals, which could the current $50 threshold. This option
C9227 .. 9227 .... Injection, micafungin so- adversely affect beneficiary access to would result in the packaging of more
dium. medically necessary services. drugs, biologicals, and
C9228 .. 9228 .... Injection, tigecycline. Section 1833(t)(16)(B) of the Act, as radiopharmaceuticals and would be
J2278 .. 1694 .... Ziconotide injection. added by section 621(a)(2) of Pub. L. more consistent with OPPS packaging
J2503 .. 1697 .... Pegaptanib sodium in- 108–173, requires that the threshold for principles. This option would also
jection.
J8501 .. 0868 .... Oral aprepitant.
establishing separate APCs for drugs provide greater administrative
J9027 .. 1710 .... Clofarabine injection. and biologicals be set at $50 per simplicity for hospitals. However,
J9264 .. 1712 .... Paclitaxel injection. administration for CYs 2005 and 2006. implementation of this option might
Q4079 9126 .... Natalizumab injection. However, this requirement for result, in some cases, in the drug
establishing the packaging threshold administration payments being less than
B. Proposed Payment for Drugs, will expire at the end of CY 2006. For the cost of the packaged drugs.
Biologicals, and Radiopharmaceuticals CY 2006, we finalized our policy to Relatively expensive drugs, biologicals,
Without Pass-Through Status continue paying separately for drugs, and radiopharmaceuticals could also be
biologicals, and radiopharmaceuticals packaged under this option.
(If you choose to comment on issues whose per day cost exceeds $50 and The third packaging threshold option
in this section, please include the packaging the costs of drugs, biologicals, we evaluated was to maintain the
caption ‘‘OPPS: Nonpass-Through and radiopharmaceuticals whose per packaging threshold at $50. We believe
Drugs, Biologicals, and day cost is less than $50 into the that this is a reasonable policy option
Radiopharmaceuticals’’ at the beginning procedures with which they are billed. that would provide stability to the
of your comment.) For CY 2006, we also continued an payment system, as the packaging
1. Background exception policy to our packaging rule threshold has been set at $50 since CY
for one particular class of drugs, the oral 2004. This policy option would also be
Under the CY 2006 OPPS, we and injectable 5HT3 forms of anti- consistent with the APC Panel
currently pay for drugs, biologicals, and emetic treatments (70 FR 68635 through recommendation to maintain the
radiopharmaceuticals that do not have 68638). packaging threshold at $50 in CY 2007;
pass-through status in one of two ways: however, this policy would not take into
packaged payment within the payment 2. Proposed Criteria for Packaging account price inflation in determining
for the associated service or separate Payment for Drugs, Biologicals, and the drug packaging threshold since the
payment (individual APCs). We Radiopharmaceuticals $50 threshold was initially established.
explained in the April 7, 2000 OPPS During the March 2006 meeting of the Consequently, the fourth option we
final rule with comment period (65 FR APC Panel, the Panel recommended that considered and are proposing for CY
18450) that we generally package the CMS maintain the $50 packaging 2007 and subsequent years is to update
cost of drugs and radiopharmaceuticals threshold or if the threshold is the packaging threshold for inflation
into the APC payment rate for the reevaluated, that CMS provide the Panel using an inflation adjustment factor
procedure or treatment with which the with data that indicate the costs of based on the Producer Price Index (PPI)
products are usually furnished. packaged drugs that are incorporated for prescription preparations. In order to
Hospitals do not receive separate into drug administration payment rates. update the packaging threshold for CY
payment from Medicare for packaged As indicated above, in accordance 2007 under this proposal, we used the
items and supplies, and hospitals may with section 1833(t)(16)(B) of the Act, four quarter moving average PPI levels
not bill beneficiaries separately for any the threshold for establishing separate for prescription preparations to trend
packaged items and supplies whose APCs for drugs and biologicals was set the $50 threshold forward from the third
costs are recognized and paid within the to $50 per administration during CYs quarter of CY 2005 (when the Pub. L.
national OPPS payment rate for the 2005 and 2006. Because this packaging 108–173-mandated threshold became
associated procedure or service. threshold will expire at the end of CY effective) to the third quarter of CY
(Program Memorandum Transmittal A– 2006, we evaluated four options for 2007. We are proposing that for each
01–133, issued on November 20, 2001, packaging levels so that we could year beginning with CY 2007, we would
explains in greater detail the rules determine what the appropriate adjust the packaging threshold by the
regarding separate payment for packaging threshold proposal for drugs, PPI for prescription drugs, and the
packaged services.) biologicals, and radiopharmaceuticals adjusted dollar amount would be
Packaging costs into a single aggregate would be for the CY 2007 OPPS update. rounded to the nearest $5 increment in
payment for a service, procedure, or One of the packaging options we order to determine the new threshold.
episode of care is a fundamental considered for the CY 2007 OPPS The adjusted amount for CY 2007 was
principle that distinguishes a update was to pay separately for all calculated to be $55.99, which we are
prospective payment system from a fee drugs, biologicals, and rounding to $55. Therefore, for CY 2007,
schedule. In general, packaging the costs radiopharmaceuticals with a HCPCS we are proposing to pay separately for
of items and services into the payment code. This would be a straightforward drugs, biologicals, and
sroberts on PROD1PC70 with PROPOSALS

for the primary procedure or service policy that would speed the creation of radiopharmaceuticals whose per day
with which they are associated procedural APC medians. However, this cost exceeds $55 and packaging the
encourages hospital efficiencies and policy would be inconsistent with OPPS costs of drugs, biologicals, and
also enables hospitals to manage their packaging principles, reduce hospitals’ radiopharmaceuticals whose per day
resources with maximum flexibility. incentives for economy and efficiency, cost is less than or equal to $55 into the
Notwithstanding our commitment to and increase hospitals’ administrative procedures with which they are billed.

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This proposed policy is consistent To determine their CY 2007 proposed costs of drugs, biologicals, and
with the principle employed in many packaging status, we calculated the per radiopharmaceuticals and their
health care payment policy areas (and day cost of all drugs, biologicals, and packaging status in CY 2007.
many other areas of government policy) radiopharmaceuticals that had a HCPCS Subsequently, payment rates for CY
of acknowledging the real costs by using
code in CY 2005 and were paid (via 2007 separately payable drugs and
an inflation adjustment instead of static
packaged or separate payment) under biologicals will be updated to reflect
dollar values. We believe that our the OPPS using claims data from applicable ASP-based rates effective in
proposed policy is consistent with the January 1, 2005, to December 31, 2005. the physician office setting for services
APC Panel’s recommendation because In CY 2005, multisource drugs and effective January 1, 2007.
we would be maintaining the $50 radiopharmaceuticals had two HCPCS
threshold in terms of its real value codes that distinguished the innovator Because, for the CY 2007 OPPS final
during the calendar year in which it multisource (brand) drug or rule, we are proposing to use ASP data
would be in effect. Also, in the absence
radiopharmaceutical from the from the first quarter of CY 2006, which
of a mechanism to update the threshold,noninnovator multisource (generic) drug would be the basis for calculating
we believe that current relatively or radiopharmaceutical. We aggregated payment rates for drugs and biologicals
inexpensive drugs would begin to claims for both the brand and generic in the physician office setting using the
receive separate payment over time. TheHCPCS codes in our packaging analysis ASP methodology, effective July 1,
PPI for prescription preparations reflects
of these multisource products. In order 2006, along with updated hospital
price changes at the wholesale or to calculate the per day cost for drugs, claims data from CY 2005 to determine
manufacturer stage. Because OPPS biologicals, and radiopharmaceuticals to the final per day costs of drugs,
payment rates for drugs and biologicalsdetermine their packaging status in CY biologicals, and radiopharmaceuticals,
are generally based on average sales 2007, we are proposing to use the the packaging status of these items using
price (ASP) data that are reported by methodology that was described in the updated data may be different from
their manufacturers, we believe that the
detail in the CY 2006 OPPS proposed their packaging status determined based
PPI for prescription preparations wouldrule (70 FR 42723 through 42724) and on the data we are using for this
be an appropriate price index to use tofinalized in the CY 2006 OPPS final rule proposed rule. Under such
update the packaging threshold for CY with comment period (70 FR 68636 circumstances, we are proposing to
2007 and beyond. through 68638). However, in our apply the following policies to these
calculation of per day costs for this
For CY 2007, we are also proposing to drugs, biologicals, and
continue our policy of exempting the proposed rule for the CY 2007 OPPS radiopharmaceuticals whose
oral and injectable 5HT3 anti-emetic update, we used the payment rate for relationship to the $55 threshold
products from our packaging rule (Tableeach drug and biological at its ASP+5
changes based on the final updated data:
25), thereby making separate payment percent which was based on
manufacturer-submitted ASP data from • Drugs, biologicals, and
for all of the 5HT3 anti-emetic products.
the fourth quarter of CY 2005. The ASP radiopharmaceuticals that were paid
As stated in the CY 2005 OPPS final
rule with comment period (69 FR 65779 data from this period were also the basis separately in CY 2006 (which are
through 65780), chemotherapy is very for determining payments for drugs and proposed for separate payment in CY
biologicals in the physician office
difficult for many patients to tolerate, as 2007), and then have per day costs less
setting, effective April 1, 2006. The
the side effects are often debilitating. In than $55 based on the updated ASPs
order for Medicare beneficiaries to rationale for using ASP+5 percent as the and hospital claims data that would be
achieve the maximum therapeutic payment for drugs and biologicals is used for the CY 2007 final rule with
benefit from chemotherapy and other described in section V.B.3.a.2. of this comment period, would continue to
preamble. For items that did not have an
therapies with side effects of nausea and receive separate payment in CY 2007.
ASP-based payment rate, we used their
vomiting, anti-emetic use is often an • Drugs, biologicals, and
integral part of the treatment regimen.mean unit cost derived from the CY
radiopharmaceuticals that were
We believe that we should continue to 2005 hospital claims data to determine
their per day cost. We packaged the packaged in CY 2006, (which are
ensure that Medicare payment rules do proposed for separate payment in CY
items with per day cost less than or
not impede a beneficiary’s access to the
equal to $55 and made items with per 2007), and then have per day costs less
particular anti-emetic that is most than $55 based on the updated ASPs
effective for him or her as determined day cost greater than $55 separately
payable. We are requesting comments and hospital claims data that would be
by the beneficiary and his or her used for the CY 2007 final rule with
physician. We solicit comments on on the methodology we are proposing to
use to determine the per day cost of comment period, would remain
these packaging proposals.
drugs, biologicals, and packaged in CY 2007.
TABLE 25.—PROPOSED ANTI-EMETICS radiopharmaceuticals under the CY • Drugs, biologicals, and
TO EXEMPT FROM PROPOSED $55 2007 OPPS update. radiopharmaceuticals for which we
PACKAGING REQUIREMENT Our policy during previous cycles of propose packaged payment in CY 2007
the OPPS has been to use updated data but then have per day costs greater than
HCPCS for the final rules. For the CY 2007 $55 based on the updated ASPs and
Short description OPPS final rule, we are proposing to use
code hospital claims data that would be used
the ASP data from the first quarter of CY for the CY 2007 final rule with comment
J1260 ..... Dolasetron mesylate. 2006, which would be the basis for period, would receive separate payment
sroberts on PROD1PC70 with PROPOSALS

J1626 ..... Granisetron HCl injection. calculating payment rates for drugs and
J2405 ..... Ondansetron HCl injection.
in CY 2007.
biologicals in the physician office
J2469 ..... Palonosetron HCl. setting using the ASP methodology We are requesting specific comments
Q0166 .... Granisetron HCl 1 mg oral.
effective July 1, 2006, along with on these proposed policies for CY 2007.
Q0179 .... Ondansetron HCl 8 mg oral.
Q0180 .... Dolasetron mesylate oral.
updated hospital claims data from CY
2005 to determine the final per day

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3. Proposed Payment for Drugs, setting the CY 2006 payment rates for (2) Proposed Payment Policy for CY
Biologicals, and Radiopharmaceuticals drugs and biologicals. As described in 2007
Without Pass-Through Status That Are the CY 2006 OPPS final rule with
Not Packaged comment period (70 FR 68639 through The provision in section
1833(t)(14)(A)(iii) of the Act, as
a. Proposed Payment for Specified 68644), these data sources were the
described above, continues to be
Covered Outpatient Drugs GAO reported average purchase prices
applicable to determining payments for
for 55 specified covered outpatient drug specified covered outpatient drugs for
(1) Background
categories for the period July 1, 2003 to CY 2007. Similar to CY 2006, this
Section 1833(t)(14) of the Act, as June 30, 2004 collected via a survey of provision requires that in CY 2007
added by section 621(a)(1) of Public 1,400 acute care Medicare-certified payment for specified covered
Law 108–173, requires special hospitals; ASP data; and mean costs outpatient drugs be equal to the average
classification of certain separately paid derived from CY 2004 hospital claims acquisition cost for the drug for that
radiopharmaceuticals, drugs, and data used in developing the CY 2006 year as determined by the Secretary
biologicals and mandates specific final rule with comment period. For the subject to any adjustment for overhead
payments for these items. Under section CY 2006 final rule with comment costs and taking into account the
1833(t)(14)(B)(i) of the Act, a ‘‘specified period, we used ASP data from the hospital acquisition cost survey data
covered outpatient drug’’ is a covered second quarter of CY 2005, which were collected by the Government
outpatient drug, as defined in section
used to set payment rates for drugs and Accountability Office (GAO) in CYs
1927(k)(2) of the Act, for which a
biologicals in the physician office 2004 and 2005. If hospital acquisition
separate APC exists and that either is a
setting effective October 1, 2005. We cost data are not available, the law
radiopharmaceutical agent or is a drug
also used updated claims data, requires that payment be equal to
or biological for which payment was
reflecting all of the hospital claims data payment rates established under the
made on a pass-through basis on or
from CY 2004 and updated CCRs. methodology described in section
before December 31, 2002.
1842(o), section 1847A, or section
Under section 1833(t)(14)(B)(ii) of the In our data analysis for the CY 2006
1847B of the Act as calculated and
Act, certain drugs and biologicals are OPPS final rule with comment period, adjusted by the Secretary as necessary.
designated as exceptions and are not we compared the payment rates for Additionally, section 1833(t)(14)(E)(ii)
included in the definition of ‘‘specified drugs and biologicals using data from all authorizes the Secretary to adjust APC
covered outpatient drugs.’’ These three sources described above. We weights for specified covered outpatient
exceptions are— estimated aggregate expenditures for all drugs to take into account the MedPAC
• A drug or biological for which drugs and biologicals (excluding report relating to overhead and related
payment is first made on or after radiopharmaceuticals) that would be expenses, such as pharmacy services
January 1, 2003, under the transitional separately payable in CY 2006 and for and handling costs.
pass-through payment provision in the 55 drugs and biologicals reported by
section 1833(t)(6) of the Act. For the CY 2007 proposed rule, we
the GAO using mean costs from the evaluated two data sources that we have
• A drug or biological for which a claims data, the GAO mean purchase
temporary HCPCS code has not been available to us for setting the CY 2007
prices, and the ASP-based payment payment rates for drugs and biologicals.
assigned.
amounts (ASP+6 percent in most cases), The first source of drug pricing
• During CYs 2004 and 2005, an
orphan drug (as designated by the and then calculated the equivalent information that we have is the ASP
Secretary). average ASP-based payment rate under data from the fourth quarter of CY 2005,
Section 1833(t)(14)(A)(iii) of the Act, each of the three payment which were used to set payment rates
as added by section 621(a)(1) of Pub. L. methodologies. The results based on for drugs and biologicals in the
108 173, requires that payment for updated ASP and claims data were physician office setting effective April 1,
specified covered outpatient drugs in published in Table 24 of the CY 2006 2006. We have ASP-based prices for
CY 2006 and subsequent years be equal OPPS final rule with comment period. approximately 500 drugs and biologicals
to the average acquisition cost for the For a full discussion of our reasons for (including contrast agents) payable
drug for that year as determined by the using these data, refer to section V.B.3.a. under the OPPS; however, we currently
Secretary subject to any adjustment for of the CY 2006 OPPS final rule with do not have any ASP data on
overhead costs and taking into account comment period (70 FR 68639 through radiopharmaceuticals. Payments for
the hospital acquisition cost survey data 68644). most of the drugs and biologicals paid
collected by the Government in the physician office setting are based
As noted in the CY 2006 OPPS final on ASP+6 percent, and payments for
Accountability Office (GAO) in CYs rule with comment period, findings
2004 and 2005. If hospital acquisition items with no reported ASP are based
from a MedPAC survey of hospital on wholesale acquisition cost (WAC).
cost data are not available, the law charging practices indicated that
requires that payment be equal to The second source of cost data that
hospitals set charges for drugs,
payment rates established under the we have for drugs, biologicals, and
biologicals, and radiopharmaceuticals
methodology described in section radiopharmaceuticals are the mean and
1842(o), section 1847A, or section high enough to reflect their pharmacy median costs derived from the CY 2005
1847B of the Act as calculated and handling costs as well as their hospital claims data. As section
adjusted by the Secretary as necessary. acquisition costs. Therefore, we believe 1833(t)(14)(A)(iii) of the Act clearly
For CY 2006, we adopted a policy of the MedPAC survey indicated that specifies that payment for specified
sroberts on PROD1PC70 with PROPOSALS

paying for the acquisition and overhead payment for drugs and biologicals and covered outpatient drugs in CY 2007 be
costs of separately paid drugs and pharmacy overhead at a combined equal to the ‘‘average’’ acquisition cost
biologicals at a combined rate of ASP+6 ASP+6 percent rate would serve as the for the drug, we limited our analysis to
percent. To calculate the ASP+6 percent best proxy for the combined acquisition the mean costs of drugs determined
payment rate, we evaluated the three and overhead costs of each of these using the hospital claims data, instead
data sources that were available to us for products. of using median costs.

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In our data analysis, we compared the comments to the GAO on its draft requests from interested organizations to
payment rates for drugs and biologicals report, we will continue to consider the discuss their views about OPPS
using data from both sources described best approach for setting payment rates payment policy issues. We will consider
above. We estimated aggregate for drugs and biologicals in light of this the input of any individual or
expenditures for all drugs and recommendation. We also indicated that organization to the extent allowed by
biologicals (excluding we will continue to analyze the Federal law, including the
radiopharmaceuticals) that would be adequacy of ASP-based pricing in light Administrative Procedure Act (APA)
separately payable in CY 2007 using of our hospital claims data, which for and the Federal Advisory Committee
mean costs from the hospital claims this CY 2007 OPPS proposed rule Act (FACA). We establish the OPPS
data and the ASP-based payment indicates that ASP+5 percent would be rates through regulations. We are
amounts (ASP+6 percent in most cases), the best available proxy for hospitals’ required to consider the timely
and calculated the equivalent average average acquisition and handling costs comments of interested organizations,
ASP-based payment rate under both of drugs and biologicals in CY 2007. establish the payment policies for the
payment methodologies. We note that ASP data are unavailable forthcoming year, and respond to the
The results of our data analysis for some drugs and biologicals. For timely comments of all public
indicate that using mean unit cost to set these few drugs and biologicals, we are commenters in the final rule in which
the payment rates for the drugs and proposing to use the mean costs from we establish the payments for the
biologicals that would be separately the CY 2005 hospital claims data to forthcoming year.
payable in CY 2007 would be equivalent determine their packaging status for We are specifically requesting public
to basing their payment rates, on ratesetting. Until we receive ASP data comments on our proposal to pay for
average, at ASP+5 percent. As noted in for these items, payment will be based acquisition and overhead costs of drugs
the CY 2006 proposed and final rules, on their mean cost calculated from CY and biologicals under the OPPS at
findings from a MedPAC survey of 2005 hospital claims data. The payment ASP+5 percent and the adequacy of the
hospital charging practices indicated rates for separately payable drugs and payment rates to account for actual
that hospitals set charges for drugs, biologicals shown in Addenda A and B acquisition and overhead costs incurred
biologicals, and radiopharmaceuticals to this proposed rule represent by hospitals for these items.
high enough to reflect their pharmacy payments for their acquisition and In its October 31, 2005 letter of
handling costs as well as their overhead costs. comment on proposed 2006 SCOD rates
acquisition costs. Therefore, the mean Our proposal uses payment rates titled ‘‘Comments on Proposed 2006
costs calculated using charges from based on ASP data from the fourth SCOD Rates,’’ the GAO recommended
hospital claims data converted to costs quarter of 2005 because these are the that to better approximate hospitals’
are representative of hospital most recent numbers available to us at acquisition costs of SCODs the Secretary
acquisition costs for these products, as this time. To be consistent with the ASP reconsider the level of proposed
well as their related pharmacy overhead data that would be used to determine payment rates for drug SCODs, in
costs. Our calculations indicate that payments for these drugs and relation to survey data on average
using mean unit costs to set the biologicals when furnished in physician purchase price, the role of rebates in
payment rates for all separately payable offices, we propose to make any determining acquisition costs, and the
drugs and biologicals would be appropriate adjustments to the amounts desirability of setting payment rates for
equivalent to basing their payment rates shown in Addenda A and B to this SCODs at average acquisition costs. In
on the ASP+5 percent, on average. proposed rule for those items on a the CY 2006 OPPS proposed rule (70 FR
Because pharmacy overhead costs are quarterly basis as more recent ASP data 42726), we noted that the comparison
already built into the charges for drugs, become available and post the payment between the GAO purchase price data
biologicals, and radiopharmaceuticals, rate changes on our Web site during and the ASP data indicated that the
our current data therefore indicate that each quarter of CY 2007. We note that GAO data on average were equivalent to
payment for drugs and biologicals and we would determine the packaging ASP+3 percent. However, we also
pharmacy overhead at a combined status of each drug or biological only indicated that using mean unit cost from
ASP+5 percent rate would serve as the once during the year during the update the CY 2004 hospital claims data to set
best proxy for the combined acquisition process; however, for the separately the payment rates for the drugs and
and overhead costs of each of these payable drugs and biologicals, we biologicals that would be separately
products. Therefore, for CY 2007, we are would update their ASP-based payment payable in CY 2006 would be equivalent
proposing a policy of paying for the rates on a quarterly basis. to basing their payment rates, on
acquisition and overhead costs of During the March 2006 meeting of the average, at ASP+8 percent. Therefore,
separately paid drugs and biologicals at APC Panel, the Panel recommended that we had proposed to establish payment
a combined rate of ASP+5 percent. CMS examine pharmacy overhead costs for drugs and biologicals and their
In its final report on the hospital issues and work with appropriate overhead costs at a combined rate of
acquisition cost survey of specified associations to study how to measure ASP+8 percent, where ASP+6 percent
covered outpatient drugs titled pharmacy overhead costs. The Panel represented the acquisition cost of these
‘‘Medicare Hospital Pharmaceuticals: also recommended that CMS solicit items and 2 percent of ASP was for their
Survey Shows Price Variation and feedback on how pharmacy overhead overhead costs. For the CY 2006 OPPS
Highlights Data Collection Lessons and costs should be reimbursed in the final rule with comment period, where
Outpatient Rate-setting Challenges for future. more recent ASP data, updated CCRs,
CMS’’, the GAO recommended that In response to the APC Panel and updated CY 2004 hospital claims
Secretary validate, on an occasional recommendations, we will continue to data were available, we found that the
sroberts on PROD1PC70 with PROPOSALS

basis, manufacturers’ reported drug work on issues related to pharmacy comparison between the GAO purchase
ASPs as a measure of hospitals’ overhead costs and request comments price data and the ASP data indicated
acquisition costs using a survey of on other proposals that we can consider that the GAO data on average were
hospitals or other method that CMS when establishing a future pharmacy equivalent to ASP+4 percent, and using
determines to be similarly accurate and overhead cost methodology. In addition, mean unit cost from hospital claims to
efficient. As we indicated in our written we note that we routinely accept set the payment rates for the drugs and

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biologicals that would be separately setting where the fewer numbers alternative prospective payment
payable in CY 2006 would be equivalent (relative to the hospital outpatient methodologies for radiopharmaceuticals
to basing their payment rates, on setting) of radiopharmaceuticals are that could be used in place of our CY
average, at ASP+6 percent. Because priced locally by Medicare contractors. 2006 cost-based payment methodology.
pharmacy overhead costs are already Consequently, we do not have ASP data However, in its final report on the
built into the charges for drugs, for radiopharmaceuticals. However, the hospital acquisition cost survey of
biologicals, and radiopharmaceuticals, law also requires us to make payments specified covered outpatient drugs,
we noted in the CY 2006 OPPS final for specified covered outpatient drugs, titled ‘‘ Medicare Hospital
rule with comment period that our including radiopharmaceuticals, equal Pharmaceuticals: Survey Shows Price
claims data indicated that payment for to the average acquisition cost for the Variations and Highlights Data
drugs and biologicals and their drug as determined by the Secretary and Collection Lesson and Outpatient Rate-
pharmacy overhead at a combined subject to any adjustment for overhead setting Challenges for CMS,’’ the GAO
ASP+6 percent rate served as the best costs. We expect hospitals’ different acknowledged that the distinctive
proxy for the combined acquisition and purchasing and preparation and nature of radiopharmaceuticals as
overhead costs of each of these handling practices for compared with other drugs poses
products. For the CY 2007 proposed radiopharmaceuticals to be reflected in special challenges for collecting and
rule, as indicated earlier in the their charges. Therefore, for CY 2006, interpreting hospital cost data. They
preamble, we compared the CY 2005 we calculated per day costs of discussed the challenges of balancing
hospital claims data with more recent radiopharmaceuticals using mean unit accuracy and efficiency in obtaining
ASP data and determined that using costs from the CY 2004 hospital claims price data on radiopharmaceutical
mean unit cost to set payment rates for data to determine the items’ packaging specified covered outpatient drugs.
separately payable drugs and biologicals status similar to the drugs and They concluded that the best option
in CY 2007 would be equivalent to biologicals with no ASP data. For CY available to CMS, in terms of accuracy
basing their payment rates, on average, 2006, we implemented a 1-year and efficiency, is for the Secretary to
at ASP+5 percent. This is the policy we temporary policy to pay for separately collect and use ready-to-use unit-dose
are proposing for CY 2007, and we payable radiopharmaceuticals based on prices paid by hospitals when available
believe that this payment level would the hospital’s charge for each as the data source for setting and
serve as the best proxy for the combined radiopharmaceutical adjusted to cost. updating Medicare payment rates for
acquisition and overhead costs of We clearly stated in our CY 2006 OPPS radiopharmaceutical specified covered
separately payable drugs and biologicals final rule with comment period that we outpatient drugs. As we indicated in our
in CY 2007. did not intend to maintain the CY 2006 written comments to the GAO on its
In the CY 2006 OPPS final rule with methodology permanently (70 FR draft report, we remain uncertain about
comment period (70 FR 68661), we 68656) and that we would actively seek whether a survey to collect unit-dose
indicated that we will be paying for other methodologies for setting acquisition costs would be conducted as
blood clotting factors at ASP+6 percent payments for radiopharmaceuticals in a survey of hospitals or manufacturers.
during CY 2006 under the OPPS and CY 2007. We are also concerned about the level
providing payment for the furnishing During the March 2006 meeting of the of expense and administrative burden
fee that is also a part of the payment for APC Panel, the Panel recommended that that would be placed on the party
blood clotting factors furnished in CMS work with stakeholders to reporting such information, based on
physician offices under Medicare Part B. continue to develop a methodology to
the GAO’s experience in surveying
This furnishing fee will be updated each pay for radiopharmaceuticals. We note
hospitals regarding radiopharmaceutical
calendar year based on the consumer that we routinely accept requests from
acquisition costs. The survey approach
price index, and we will update the interested organizations to discuss their
could lead to a very inefficient
amount appropriately each year under views about OPPS payment policy
methodology for establishing payment
the OPPS based upon the final amount issues. We will consider the input of
rates. We also note that in conducting a
noted in the Medicare Physician Fee any individual or organization to the
survey to obtain ready-to-use unit-dose
Schedule final rule. In CY 2006, the extent allowed by Federal law,
prices for radiopharmaceuticals, we
furnishing fee is $0.146 per unit. For the including the Administrative Procedure
would be able to collect this information
CY 2007 OPPS, we are proposing to Act (APA) and the Federal Advisory
make payment for blood clotting factors Committee Act (FACA). We establish for only a small number of
at ASP+5 percent along with continuing OPPS rates through regulations. We are radiopharmaceuticals that are
payment for the furnishing fee using the required to consider the timely purchased in unit-dose forms by
updated amount for CY 2007. The comments of interested organizations, hospitals; however, we believe that it is
proposed CY 2007 regulations establish the payment policies for the important to apply a consistent payment
establishing the ASP methodology and forthcoming year, and respond to the methodology to determine payments for
the furnishing fee for blood clotting timely comments of all public all separately payable
factors under Medicare Part B can be commenters in the final rule in which radiopharmaceuticals. Even though we
found in the CY 2007 Medicare we establish the payments for the are not proposing to adopt the GAO’s
Physician Fee Schedule proposed rule. forthcoming year. We have considered recommendation for CY 2007, we will
The updated furnishing fee amount for comments and information from continue to explore this
CY 2007 under the OPPS will be interested organizations in developing recommendation for future updates of
announced in the CY 2007 OPPS final these policy options for CY 2007. the OPPS.
rule. Over this past year, despite reviews of In developing the payment policy
sroberts on PROD1PC70 with PROPOSALS

the literature and numerous discussions proposal for separately payable


(3) CY 2007 Proposed Payment Policy with interested individuals and radiopharmaceuticals for the CY 2007
for Radiopharmaceuticals organizations from the proposed rule, we considered several
Section 303(h) of Pub. L. 108–173 radiopharmaceutical industry, we have additional policy options. The first
exempted radiopharmaceuticals from received no specific suggestions from option we considered proposing was to
ASP pricing in the physician office hospitals or industry regarding package additional

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radiopharmaceuticals, either through radiopharmaceuticals under the OPPS, costs of services to vary substantially
packaging payments for all consistent with our packaging policies and unpredictably over time and if we
radiopharmaceuticals with payments for for implantable devices, we might need have hospital claims data available.
the services with which they are billed to establish edits to ensure that Paying for radiopharmaceuticals at cost
or increasing the packaging threshold radiopharmaceutical charges were provides hospitals with no incentive to
for radiopharmaceuticals from a cost of always included on claims for nuclear supply radiopharmaceuticals in the
$55 per day to a higher amount. In medicine procedures, as has been most efficient manner. In its comments
contrast to other separately payable suggested to us by interested on the CY 2006 OPPS proposed rule, the
drugs where the administration of many organizations. GAO expressed concern that this
drugs is reported with only a few drug However, under a policy of increased methodology would be likely to result
administration HCPCS codes, only a packaging of radiopharmaceuticals, in payments that exceed hospitals’
small number of specific payments for certain nuclear medicine acquisition costs for certain
radiopharmaceuticals may be procedures could potentially be less radiopharmaceuticals. Estimates of our
appropriately provided in the than the costs of some of the packaged CY 2006 payments for
performance of each particular nuclear radiopharmaceuticals and relatively radiopharmaceuticals reveal variation
medicine procedure. Because the expensive and high volume from the 25th to 75th payment
provision of nuclear medicine radiopharmaceuticals could become percentile of 2 to 9 fold, depending on
procedures always requires one or more packaged. In addition, our payment the specific radiopharmaceutical. We do
radiopharmaceuticals, packaging more policy could discourage selection of the not believe that the radiopharmaceutical
radiopharmaceuticals effectively results most clinically appropriate acquisition and handling costs for
in some increases in the costs of the radiopharmaceutical for a particular different hospitals to provide most
associated nuclear medicine procedures nuclear medicine procedure, especially radiopharmaceuticals should vary that
to reflect the greater packaging of the if that radiopharmaceutical were greatly. In addition, using hospitals’
radiopharmaceuticals. The specific expensive and not commonly used so overall CCRs to determine payments
increased procedural costs observed are that its costs were not fully reflected in likely results in an overstatement of
dependent upon the volumes and costs the payment for the nuclear medicine radiopharmaceutical costs, which are
of various radiopharmaceuticals used in procedure. In addition, the statutory likely reported in several cost centers
the procedures and thus reflect an definition of a ‘‘specified covered such as diagnostic radiology that have
average cost across clinical scenarios outpatient drug’’ for OPPS purposes that lower CCRs than hospitals’ overall
where providers may choose among includes radiopharmaceutical agents CCRs.
several radiopharmaceuticals for the appears more consistent with the
treatment of radiopharmaceuticals like The third option that we considered
procedures. A policy to package and are proposing for CY 2007 is to
additional radiopharmaceuticals would other drugs under the OPPS, at least
when this is feasible. We solicit public establish prospective payment rates for
be very consistent with OPPS packaging separately payable
principles and payment policies which comment on the merits of establishing a
higher packaging threshold for radiopharmaceuticals using mean costs
generally provide appropriate payment derived from the CY 2005 claims data,
for the average service and would radiopharmaceuticals, given their
unique characteristics. where the costs are determined using
provide greater administrative our standard methodology of applying
The second option that we considered
simplicity for hospitals. Because we hospital-specific departmental CCRs to
proposing was to continue the
believe that radiopharmaceutical radiopharmaceutical charges, defaulting
temporary CY 2006 methodology of
handling costs are included in hospitals paying for separately payable to hospital-specific overall CCRs only if
charges for the radiopharmaceuticals radiopharmaceuticals at charges appropriate departmental CCRs are
themselves, payments for the nuclear reduced to cost, where payment would unavailable. This proposal establishes
medicine procedures would include be determined using each hospital’s our packaging threshold for
payments for the handling costs of the overall CCR, and establishing our radiopharmaceuticals at $55, as for
radiopharmaceuticals used under this radiopharmaceutical packaging other drugs under the CY 2007 OPPS.
option. threshold at $55, as we are proposing for We believe this option provides us with
In examining our claims data for CY other drugs under the CY 2007 OPPS. the most consistent, accurate, and
2005, we noted that significant numbers This policy would provide stability to efficient methodology for prospectively
of claims for nuclear medicine the payment methodology for establishing payment rates for
procedures included no HCPCS codes radiopharmaceuticals from CY 2006 to separately payable
for radiopharmaceuticals. While it is CY 2007. As we indicated for CY 2007, radiopharmaceuticals. This is our
possible that hospitals used packaged this payment methodology provides an preferred payment proposal for
radiopharmaceuticals in some studies acceptable proxy for the average radiopharmaceuticals because this
and therefore chose not to report them acquisition of the radiopharmaceutical methodology is consistent with how
separately, it is also possible that some along with its handling cost. payment rates for other services are
hospitals may have included charges for However, as also indicated determined under the OPPS and
the required radiopharmaceuticals in previously, we stated in the CY 2006 provides for prospective payments that
their charges for the nuclear medicine OPPS final rule with comment period serve as appropriate proxies for the
procedures themselves. Packaging that this payment policy was intended average acquisition costs of the
additional radiopharmaceuticals would to be only a temporary policy, and that radiopharmaceuticals along with their
be consistent with the charging we would consider alternative handling costs. The MedPAC has
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practices of some hospitals that already methodologies to base indicated that hospitals currently
may not be separately reporting radiopharmaceutical payments on for include the charge for
radiopharmaceuticals, even when those the CY 2007 OPPS update. We generally radiopharmaceutical handling in their
radiopharmaceuticals would receive do not make payments under the OPPS charge for the radiopharmaceutical. In
separate payment under the OPPS. Were for items and services at cost, addition, this approach provides an
we to package additional particularly if we do not expect the average payment to hospitals, consistent

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with the statutory requirement that we CY 2006 OPPS final rule with comment are essentially the same. However, there
pay the average acquisition cost, in period, we finalized a temporary 1-year are several CY 2005 codes with
comparison with our CY 2006 cost- policy for CY 2006 to pay for descriptors specifying units of
based policy which paid each hospital radiopharmaceuticals that were radioactivity that were changed to per
differently for each claim based on the separately payable in CY 2006 based on study dose units in CY 2006. For these
claim’s charges and the hospital’s the hospital’s charge for each radiopharmaceuticals, we are proposing
overall CCR. radiopharmaceutical agent adjusted to to calculate their per day costs based on
We believe that this methodology cost. We noted that MedPAC has the CY 2005 codes and use those per
would likely pay more accurately for indicated that hospitals currently day costs as proxies for the per study
radiopharmaceuticals, and provide include the charge for pharmacy dose costs of the CY 2006 codes. We
incentives for their efficient acquisition overhead costs in their charge for the believe that patients would generally
and preparation. Also, as discussed radiopharmaceutical. Therefore, we receive one study dose of these
earlier, MedPAC indicated that believed that paying for these items on radiopharmaceuticals each day, and our
hospitals include charges for handling the basis of charges converted to cost CY 2005 claims data show that they
costs in their charge for would be the best available proxy for were most commonly billed with
radiopharmaceuticals; therefore, mean the average acquisition cost of the specific nuclear medicine procedures
costs based on our claims data would radiopharmaceutical along with its that normally include a single
represent both the acquisition and handling cost in CY 2006. We did not radiopharmaceutical dose on a given
overhead costs of the separately payable use the GAO hospital purchase prices as day. Therefore, the per day costs of
radiopharmaceuticals. We believe that the basis for setting payments because these radiopharmaceuticals calculated
this payment policy could also be an when we examined differences between based on claims reporting the CY 2005
appropriate long-term the CY 2005 payment rates for these codes should be an appropriate basis for
radiopharmaceutical payment policy nine radiopharmaceuticals and their determining the payment rates for the
that would allow us to consistently GAO mean purchase prices, we found CY 2006 HCPCS codes.
establish prospective OPPS payment that the GAO purchase prices were Out of the 39 radiopharmaceutical
rates for the acquisition and overhead substantially lower for several of these HCPCS codes that we are proposing to
costs of separately payable agents. We indicated that our intent was pay separately for in CY 2007, we are
radiopharmaceuticals. Because we will to maintain consistency, whenever able to directly crosswalk the CY 2005
be paying separately for possible, between the payment rates for cost data to 31 of these codes. The
radiopharmaceuticals with mean costs these agents from CY 2005 to CY 2006. descriptors for the remaining eight
per day greater than $55, without For CY 2007, however, we considered codes changed from per unit of
additional radiopharmaceutical several payment options for radioactivity in CY 2005 to new
packaging for CY 2007, we see no reason radiopharmaceuticals that we discussed descriptors based on per study doses in
to establish edits for the presence of above and are proposing to establish CY 2006. Therefore, we are proposing to
radiopharmaceutical codes on claims for prospective payment rates for separately use the per day costs based on the CY
nuclear medicine procedures as, in payable radiopharmaceuticals using 2005 claims data as proxies for the per
many cases, payments for the mean costs derived from the CY 2005 study dose costs for this subset of
procedures do not include payments for claims data. radiopharmaceutical HCPCS codes to be
the radiopharmaceuticals used. We note that the National HCPCS reported in CY 2007.
Under each of the payment options Panel changed the codes and the
There are three cases where two CY
for radiopharmaceuticals, we descriptors of many of the
2005 HCPCS codes were mapped to one
considered that beginning with CY 2007 radiopharmaceutical products effective
new CY 2006 code that will be reported
and going forward we would update the January 1, 2006, in some cases moving
in CY 2007. These three CY 2006
packaging threshold for inflation using from prior code descriptors based upon
HCPCS codes are A9550, A9553, and
an inflation adjustment factor based on units of radioactivity to new descriptors
A9559. Because of the complicated
the Producer Price Index (PPI) for based on study doses. The hospital
nature of crosswalking the cost data for
prescription preparations. As discussed claims data we used for our analysis are
two predecessor HCPCS codes with
elsewhere in the preamble, the adjusted based on radiopharmaceutical HCPCS
different units in their descriptors to
amount for CY 2007 was determined to codes that were in effect during CY
each of these new HCPCS codes, we are
be $55. 2005. Because there were significant
proposing to crosswalk the cost data
In its October 31, 2005 letter of changes in HCPCS code descriptors for
only from the predecessor HCPCS codes
comment on proposed 2006 SCOD rates several radiopharmaceuticals from CY
with the most claims volume in CY
titled ‘‘Comments on Proposed 2006 2005 to CY 2006, implementation of the
2005 to each of these three HCPCS
SCOD Rates’’, the GAO recommended proposed payment methodology for
codes to be reported for CY 2007.
that to better approximate hospitals’ radiopharmaceuticals requires us to
acquisition costs of SCODs that the crosswalk the cost data for these Table 26 below lists all of the CY 2007
Secretary reconsider the decision to radiopharmaceuticals that are in terms separately payable
base payment rates for of the CY 2005 codes to the updated CY radiopharmaceuticals and the
radiopharmaceutical SCODs exclusively 2006 codes that we expect to be in effect predecessor HCPCS codes whose claims
on estimated costs in light of the during CY 2007. The mean cost data per data were used to set the CY 2007
availability of data on actual prices paid unit of many CY 2005 codes can be proposed payment rates and notes the
for key radiopharmaceuticals. As we did directly crosswalked to the new CY crosswalk methodology used for the
proposed rates.
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not have ASPs for radiopharmaceuticals 2006 codes because the products and
that best represent market prices, in the units included in the code descriptors BILLING CODE 4120–01–P

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BILLING CODE 4120–01–C radiopharmaceuticals to provide greater While payments for drugs, biologicals
We specifically request public administrative simplicity for hospitals. and radiopharmaceuticals are taken into
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comment on the radiopharmaceutical Additionally, we request public account when calculating budget
payment methodology that we are comment on the crosswalk that we are neutrality, we note that we are
proposing for the CY 2007 OPPS update. proposing to use to determine the CY proposing to make payments for drugs,
We also seek public comment on the 2007 payment rates for separately biologicals, and radiopharmaceuticals
possibility of developing an alternative payable radiopharmaceuticals. without scaling these payment amounts.
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packaging threshold for

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Section 1833(t)(14)(A)(iii)(I) requires Medicare Physician Fee Schedule final new drugs and biologicals in the event
that, beginning in CY 2006, we pay for rule, where payment would generally be that they become covered under the
a separately payable drug on the basis equal to ASP+6 percent. In accordance competitive acquisition program in the
of ‘‘the average acquisition cost of the with the ASP methodology, in the future.
drug.’’ As we stated in the CY 2006 absence of ASP data, we are continuing As discussed in the CY 2005 OPPS
OPPS final rule with comment period the policy we implemented during CYs final rule with comment period (69 FR
(70 FR 42728), we believe that the best 2005 and 2006 of using the wholesale 65797), and the CY 2006 OPPS final rule
interpretation of the specific acquisition cost (WAC) for the product with comment period (70 FR 68666),
requirement that we pay for such drugs to establish the initial payment rate. We new drugs, biologicals, and
on the basis of average acquisition cost,