Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2008 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2008 Payment Rates; Medicare and Medicaid Programs: Proposed Changes to Hospital Conditions of Participation; Proposed Changes Affecting Necessary Provider Designations of Critical Access Hospitals
Federal RegisterAug 2, 2007
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 410, 411, 414, 416, 419, 482, and 485
[CMS-1392-P]
RIN 0938-AO71
Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2008 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2008 Payment Rates; Medicare and Medicaid Programs: Proposed Changes to Hospital Conditions of Participation; Proposed Changes Affecting Necessary Provider Designations of Critical Access Hospitals
AGENCY:
Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION:
Proposed rule.
SUMMARY:
This proposed rule would revise the Medicare hospital outpatient prospective payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2008.
In addition, this proposed rule would update the revised Medicare ambulatory surgical center (ASC) payment system to implement certain related provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). In this proposed rule, we propose the applicable relative payment weights and amounts for services furnished in ASCs, specific HCPCS codes to which the final policies of the ASC payment system would apply, and other pertinent ratesetting information for the CY 2008 ASC payment system. These changes would be applicable to services furnished on or after January 1, 2008.
In this proposed rule, we also are proposing changes to the policies relating to the necessary provider designations of critical access hospitals (CAHs) that are being recertified when a CAH enters into a new co-location arrangement with another hospital or CAH or when the CAH creates or acquires an off-campus location.
Further, we are proposing changes to several of the current conditions of participation that hospitals must meet to participate in the Medicare and Medicaid programs to require the completion and documentation in the medical record of medical histories and physical examinations of patients conducted after admission and prior to surgery or a procedure requiring anesthesia services and for postanesthesia evaluations of patients before discharge or transfer from the postanesthesia recovery area.
DATES:
To be assured consideration, comments on all sections of the preamble of this proposed rule must be received at one of the addresses provided in the
ADDRESSES
section no later than 5 p.m. on September 14, 2007.
ADDRESSES:
In commenting, please refer to file code CMS-1392-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates, please):
1.
Electronically.
You may submit electronic comments on specific issues in this regulation to
http://www.cms.hhs.gov/eRulemaking.
Click on the link “Submit electronic comments on CMS regulations with an open comment period.” (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.)
2.
By regular mail.
You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1392-P, P.O. Box 8011, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received before the close of the comment period.
3.
By express or overnight mail.
You may send written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1392-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4.
By hand or courier.
If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members.
(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain proof of filing by stamping in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.
For information on viewing public comments, see the beginning of the
SUPPLEMENTARY INFORMATION
section.
FOR FURTHER INFORMATION CONTACT:
Alberta Dwivedi, (410) 786-0378, Hospital outpatient prospective payment issues.
Dana Burley, (410) 786-0378, Ambulatory surgical center issues.
Suzanne Asplen, (410) 786-4558, Partial hospitalization and community mental health centers issues.
Sheila Blackstock, (410) 786-3502, Reporting of quality data issues.
Mary Collins, (410) 786-3189, and
Jeannie Miller, (410) 786-3164, Necessary provider designations for CAHs Issues.
Scott Cooper, (410) 786-9465, and
Jeannie Miller, (410) 786-3164, Hospital conditions of participation Issues.
SUPPLEMENTARY INFORMATION:
Submitting Comments:
We welcome comments from the public on all issues set forth in this proposed rule to assist us in fully considering issues and developing policies. You can assist us by referencing file code CMS-1392-P and the specific “issue identifier” that precedes the section on which you choose to comment.
Inspection of Public Comments:
All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received:
http://www.cms.hhs.gov/eRulemaking.
Click on the link “Electronic Comments on CMS Regulations” on that Web site to view public comments.
Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication
of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.
Electronic Access
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, a service of the U.S. Government Printing Office. Free public access is available on a Wide Area Information Server (WAIS) through the Internet and via asynchronous dial-in. Internet users can access the database by using the World Wide Web; the Superintendent of Documents' home page address is
http://www.gpoaccess.gov/index.html,
by using local WAIS client software, or by telnet to swais.access.gpo.gov, then login as guest (no password required). Dial-in users should use communications software and modem to call (202) 512-1661; type swais, then login as guest (no password required).
Alphabetical List of Acronyms Appearing in the Proposed Rule
ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AMA American Medical Association
APC Ambulatory payment classification
AMP Average manufacturer price
ASC Ambulatory Surgical Center
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113
BCA Blue Cross Association
BCBSA Blue Cross and Blue Shield Association
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 106-554
CAH Critical access hospital
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CCR Cost-to-charge ratio
CERT Comprehensive Error Rate Testing
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP [Hospital] Condition of participation
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2007, copyrighted by the American Medical Association
CRNA Certified registered nurse anesthetist
CY Calendar year
DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies
DMERC Durable medical equipment regional carrier
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
DSH Disproportionate share hospital
EACH Essential Access Community Hospital
E/M Evaluation and management
EPO Erythropoietin
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Pub. L. 92-463
FAR Federal Acquisition Regulations
FDA Food and Drug Administration
FFS Fee-for-service
FSS Federal Supply Schedule
FTE Full-time equivalent
FY Federal fiscal year
GAO Government Accountability Office
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HHA Home health agency
HIPAA Health Insurance Portability and Accountability Act of 1996, Pub. L. 104-191
HOPD Hospital outpatient department
HOP QDRP Hospital Outpatient Quality Data Reporting Program
ICD-9-CM International Classification of Diseases, Ninth Edition, Clinical Modification
IDE Investigational device exemption
IOL Intraocular lens
IPPS [Hospital] Inpatient prospective payment system
IVIG Intravenous immune globulin
MAC Medicare Administrative Contractors
MedPAC Medicare Payment Advisory Commission
MDH Medicare-dependent, small rural hospital
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432
MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NCD National Coverage Determination
NTIOL New technology intraocular lens
OCE Outpatient Code Editor
OMB Office of Management and Budget
OPD [Hospital] Outpatient department
OPPS [Hospital] Outpatient prospective payment system
PHP Partial hospitalization program
PM Program memorandum
PPI Producer Price Index
PPS Prospective payment system
PPV Pneumococcal pneumonia (virus)
PRA Paperwork Reduction Act
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RHQDAPU Reporting Hospital Quality Data for Annual Payment Update [Program]
RHHI Regional home health intermediary
SBA Small Business Administration
SCH Sole community hospital
SDP Single Drug Pricer
SI Status indicator
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248
TOPS Transitional outpatient payments
USPDI United States Pharmacopoeia Drug Information
WAC Wholesale acquisition cost
In this document, we address two payment systems under the Medicare program: the hospital outpatient prospective payment system (OPPS) and the revised ambulatory surgical center (ASC) revised payment system. The provisions relating to the OPPS are included in sections I. through XV., XVII., and XIX. through XXII. of this proposed rule and in Addenda A, B, C (Addendum C is available on the Internet only; see section XIX. of this proposed rule), D1, D2, E, L, and M to this proposed rule. The provisions related to the revised ASC payment system are included in sections XVI., XVII., and XIX. through XXII. of this proposed rule and in Addenda AA, BB, DD1, and DD2 to this proposed rule.
Table of Contents
I. Background for the OPPS
A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System
B. Excluded OPPS Services and Hospitals
C. Prior Rulemaking
D. APC Advisory Panel
1. Authority of the APC Panel
2. Establishment of the APC Panel
3. APC Panel Meetings and Organizational Structure
E. Provisions of the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006
F. Summary of the Major Contents of This Proposed Rule
1. Proposed Updates Affecting OPPS Payments
2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
3. Proposed OPPS Payment for Devices
4. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, and Devices
6. Proposed OPPS Payment for Brachytherapy Sources
7. Proposed OPPS Coding and Payment for Drug Administration Services
8. Proposed OPPS Hospital Coding and Payment for Visits
9. Proposed OPPS Payment for Blood and Blood Products
10. Proposed OPPS Payment for Observation Services
11. Proposed Procedures That Will Be Paid Only as Inpatient Services
12. Proposed Nonrecurring Technical and Policy Changes
13. Proposed OPPS Payment Status and Comment Indicators
14. OPPS Policy and Payment Recommendations
15. Proposed Update of the Revised ASC Payment System
16. Proposed Quality Data for Annual Payment Updates
17. Proposed Changes Affecting Necessary Provider Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs)
18. Regulatory Impact Analysis
II. Proposed Updates Affecting OPPS Payments
A. Proposed Recalibration of APC Relative Weights
1. Database Construction
a. Database Source and Methodology
b. Proposed Use of Single and Multiple Procedure Claims
(1) Proposed Use of Date of Service Stratification and a Bypass List To Increase the Amount of Data Used To Determine Medians
(2) Exploration of Allocation of Packaged Costs to Separately Paid Procedure Codes
c. Proposed Calculation of CCRs
2. Proposed Calculation of Median Costs
3. Proposed Calculation of OPPS Scaled Payment Weights
4. Proposed Changes to Packaged Services
a. Background
b. Addressing Growth in OPPS Volume and Spending
c. Proposed Packaging Approach
(1) Guidance Services
(2) Image Processing Services
(3) Intraoperative Services
(4) Imaging Supervision and Interpretation Services
(5) Diagnostic Radiopharmaceuticals
(6) Contrast Agents
(7) Observation Services
d. Proposed Development of Composite APCs
(1) Background
(2) Proposed Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
(a) Background
(b) Proposed Payment for LDR Prostate Brachytherapy
(3) Proposed Cardiac Electrophysiologic Evaluation and Ablation Composite APC
(a) Background
(b) Proposed Payment for Cardiac Electrophysiologic Evaluation and Ablation
e. Service-Specific Packaging Issues
B. Proposed Payment for Partial Hospitalization
1. Background
2. Proposed PHP APC Update
3. Proposed Separate Threshold for Outlier Payments to CMHCs
C. Proposed Conversion Factor Update
D. Proposed Wage Index Changes
E. Proposed Statewide Average Default CCRs
F. Proposed OPPS Payments to Certain Rural Hospitals
1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171 (DRA)
2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to Pub. L. 108-173 (MMA)
G. Proposed Hospital Outpatient Outlier Payments
H. Calculation of the Proposed National Unadjusted Medicare Payment
I. Proposed Beneficiary Copayments
1. Background
2. Proposed Copayment
3. Calculation of a Proposed Adjusted Copayment Amount for an APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
A. Proposed Treatment of New HCPCS and CPT Codes
1. Proposed Treatment of New HCPCS Codes Included in the April and July Quarterly OPPS Updates for CY 2007
2. Proposed Treatment of New Category I and III CPT Codes and Level II HCPCS Codes
B. Proposed Changes—Variations Within APCs
1. Background
2. Application of the 2 Times Rule
3. Proposed Exceptions to the 2 Times Rule
C. New Technology APCs
1. Introduction
2. Proposed Movement of Procedures From New Technology APCs to Clinical APCs
a. Positron Emission Tomography (PET)/Computed Tomography (CT) Scans (New Technology APC 1511)
b. IVIG Preadministration-Related Services (New Technology APC 1502)
c. Other Services in New Technology APCs
D. Proposed APC-Specific Policies
1. Hyperbaric Oxygen Therapy (APC 0659)
2. Skin Repair Procedures (APCs 0024, 0025, 0027, and 0686)
3. Cardiac Computed Tomography and Computed Tomographic Angiography (APCs 0282, 0376, 0377, and 0398)
4. Ultrasound Ablation of Uterine Fibroids With Magnetic Resonance Guidance (MRgFUS) (APCs 0195 and 0202)
5. Single Allergy Tests (APC 0381)
6. Myocardial Positron Emission Tomography (PET) Scans (APC 0307)
7. Implantation of Cardioverter-Defibrillators (APCs 0107 and 0108)
8. Implantation of Spinal Neurostimulators (APC 0222)
9. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 0066, and 0067)
10. Blood Transfusion (APC 0110)
11. Screening Colonscopies and Screening Flexible Sigmoidoscopies (APCs 0158 and 0159)
IV. Proposed OPPS Payment for Devices
A. Proposed Treatment of Device-Dependent APCs
1. Background
2. Proposed Payment
3. Proposed Payment When Devices Are Replaced With Partial Credit to the Hospital
B. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
b. Proposed Policy
2. Proposed Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged Into APC Groups
a. Background
b. Proposed Policy
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals
A. Proposed Transitional Pass-Through Payment for Additional Costs of Drugs and Biologicals
1. Background
2. Drugs and Biologicals with Expiring Pass-Through Status in CY 2007
3. Drugs and Biologicals With Proposed Pass-Through Status in CY 2008
B. Proposed Payment for Drugs, Biologicals, and Radiopharmaceuticals Without Pass-Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs and Biologicals
3. Proposed Payment for Drugs and Biologicals Without Pass-Through Status That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs
(1) Background
(2) Proposed Payment Policy
(3) Proposed Payment for Blood Clotting Factors
(4) Proposed Payment for Radiopharmaceuticals
(a) Background
(b) Proposed Payment for Diagnostic Radiopharmaceuticals
(c) Proposed Payment for Therapeutic Radiopharmaceuticals
b. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims Data
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices
A. Total Allowed Pass-Through Spending
B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Brachytherapy Sources
A. Background
B. Proposed Payment for Brachytherapy Sources
VIII. Proposed OPPS Drug Administration Coding and Payment
A. Background
B. Proposed Coding and Payment for Drug Administration Services
IX. Proposed Hospital Coding and Payments for Visits
A. Background
B. Proposed Policies for Hospital Outpatient Visits
1. Clinic Visits: New and Established Patient Visits and Consultations
2. Emergency Department Visits
C. Proposed Visit Reporting Guidelines
1. Background
2. CY 2007 Work on Visit Guidelines
3. Proposed Visit Guidelines
X. Proposed OPPS Payment for Blood and Blood Products
A. Background
B. Proposed Payment for Blood and Blood Products
XI. Proposed OPPS Payment for Observation Services
XII. Proposed Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
B. Proposed Changes to the Inpatient List
XIII. Proposed Nonrecurring Technical and Policy Changes
A. Outpatient Hospital Services and Supplies Incident to a Physician Service
B. Interrupted Procedures
C. Transitional Adjustments Hold Harmless Provisions
D. Reporting of Wound Care Services
E. Reporting of Cardiac Rehabilitation Services
F. Reporting of Bone Marrow and Stem Cell Processing Services
XIV. Proposed OPPS Payment Status and Comment Indicators
A. Proposed Payment Status Indicator Definitions
1. Proposed Payment Status Indicators to Designate Services That Are Paid under the OPPS
2. Proposed Payment Status Indicators to Designate Services That Are Paid Under a Payment System Other Than the OPPS
3. Proposed Payment Status Indicators to Designate Services That Are Not Recognized under the OPPS But That May Be Recognized by Other Institutional Providers
4. Proposed Payment Status Indicators to Designate Services That Are Not Payable by Medicare
B. Proposed Comment Indicator Definitions
XV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
B. APC Panel Recommendations
XVI. Proposed Update of the Revised Ambulatory Surgical Center Payment System
A. Legislative and Regulatory Authority for the ASC Payment System
B. Rulemaking for the Revised ASC Payment System
C. Revisions to the ASC Payment System Effective January 1, 2008
1. Covered Surgical Procedures under the Revised ASC Payment System
a. Definition of Surgical Procedure
b. Identification of Surgical Procedures Eligible for Payment under the Revised ASC Payment System
c. Payment for Covered Surgical Procedures under the Revised ASC Payment System
(1) General Policies
(2) Office-Based Procedures
(3) Device-Intensive Procedures
(4) Multiple and Interrupted Procedure Discounting
(5) Transition to Revised ASC Payment Rates
2. Covered Ancillary Services under the Revised ASC Payment System
a. General Policies
b. Payment Policies for Specific Items and Services
(1) Radiology Services
(2) Brachytherapy Sources
(3) Drugs and Biologicals
(4) Implantable Devices with Pass-Through Status under the OPPS
(5) Corneal Tissue Acquisition
3. General Payment Policies
a. Geographic Adjustment
b. Beneficiary Coinsurance
D. Proposed Treatment of New HCPCS Codes
1. Treatment of New CY 2008 Category I and III CPT Codes and Level II HCPCS Codes
2. Proposed Treatment of New Mid-Year Category III CPT Codes
3. Proposed Treatment of Level II HCPCS Codes Released on a Quarterly Basis
E. Proposed Updates to Covered Surgical Procedures and Covered Ancillary Services
1. Identification of Covered Surgical Procedures
a. General Policies
b. Proposed Changes in Designation of Covered Surgical Procedures as Office-Based
c. Proposed Changes in Designation of Covered Surgical Procedures as Device-Intensive
2. Proposed Changes in Identification of Covered Ancillary Services
F. Proposed Payment for Covered Surgical Procedures and Covered Ancillary Services
1. Proposed Payment for Covered Surgical Procedures
a. Proposed Update to Payment Rates
b. Payment Policies When Devices Are Replaced at No Cost or With Credit
(1) Policy When Devices Are Replaced at No Cost or With Full Credit
(2) Proposed Policy When Implantable Devices Are Replaced With Partial Credit
2. Proposed Payment for Covered Ancillary Services
G. Physician Payment for Procedures and Services Provided in ASC
H. Proposed Changes to Definitions of “Radiology and Certain Other Imaging Services” and “Outpatient Prescription Drugs”
I. New Technology Intraocular Lenses
1. Background
2. Changes to the NTIOL Determination Process Finalized for CY 2008
3. NTIOL Application Process for CY 2008 Payment Adjustment
4. Classes of NTIOLS Approved for Payment Adjustment
5. Payment Adjustment
6. Proposed CY 2008 ASC Payment for Insertion of IOLs
J. Proposed ASC Payment and Comment Indicators
K. ASC Policy and Payment Recommendations
L. Proposed Calculation of the ASC Conversion Factor and ASC Payment Rates
1. Overview
2. Budget Neutrality Requirement
3. Calculation of the ASC Payment Rates for CY 2008
4. Calculation of the ASC Payment Rates for CY 2009 and FutureYears
XVII. Reporting Quality Data for Annual Payment Rate Updates
A. Background
1. Reporting Hospital Outpatient Quality Data for Annual Payment Update
2. Reporting ASC Quality Data for Annual Payment Increase
B. Proposed Hospital Outpatient Measures
C. Other Proposed Hospital Outpatient Measures
D. Proposed Implementation of the HOP QDRP
E. Proposed Requirements for HOP Quality Data Reporting for CY 2009 and Subsequent Calendar Years
1. Administrative Requirements
2. Data Collection and Submission Requirements
3. HOP QDRP Validation Requirements
F. Publication of HOP QDRP Data Collected
G. Proposed Attestation Requirement for Future Payment Years
H. HOP QDRP Reconsiderations
I. Reporting of ASC Quality Data
XVIII. Proposed Changes Affecting Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs)
A. Proposed Changes Affecting CAHs
1. Background
2. Co-Location of Necessary Provider CAHs
3. Provider-Based Facilities of CAHs
4. Termination of Provider Agreement
5. Proposed Regulation Changes
B. Proposed Revisions to Hospital CoPs
1. Background
2. Provisions of the Proposed Regulations
a. Proposed Timeframes for Completion of the Medical History and Physical Examination
b. Proposed Requirements for Preanesthesia and Postanesthesia Evaluations
c. Proposed Technical Amendment to Nursing Services CoP
XIX. Files Available to the Public Via the Internet
A. Information in Addenda Related to the CY 2008 Hospital OPPS
B. Information in Addenda Related to the CY 2008 ASC Payment System
XX. Collection of Information Requirements
XXI. Response to Comments
XXII. Regulatory Impact Analysis
A. Overall Impact
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Small Rural Hospitals
4. Unfunded Mandates
5. Federalism
B. Effects of OPPS Changes in This Proposed Rule
1. Alternatives Considered
2. Limitation of Our Analysis
3. Estimated Impact of This Proposed Rule on Hospitals and CMHCs
4. Estimated Effect of This Proposed Rule on Beneficiaries
5. Conclusion
6. Accounting Statement
C. Effects of ASC Payment System Changes in This Proposed Rule
1. Alternatives Considered
2. Limitations on Our Analysis
3. Estimated Effects of This Proposed Rule on ASCs
4. Estimated Effects of This Proposed Rule on Beneficiaries
5. Conclusion
6. Accounting Statement
D. Effects of the Proposed Requirements for Reporting of Quality Data for Hospital Outpatient Settings
E. Effects of the Proposed Policy on CAH Off-Campus and Co-Location Requirements
F. Effects of Proposed Policy Revisions to the Hospital CoPs
G. Executive Order 12866
Regulation Text
Addenda
Addendum A—Proposed OPPS APCs for CY 2008
Addendum AA—Proposed ASC Covered Surgical Procedures for CY 2008 (Including Surgical Procedures for Which Payment is Packaged)
Addendum B—Proposed OPPS Payment By HCPCS Code for CY 2008
Addendum BB—Proposed ASC Covered Ancillary Services Integral to Covered Surgical Procedures for CY 2008 (Including Ancillary Services for Which Payment Is Packaged)
Addendum D1—Proposed OPPS Payment Status Indicators
Addendum D2—Proposed OPPS Comment Indicators
Addendum DD1—Proposed ASC Payment Indicators
Addendum DD2—Proposed ASC Comment Indicators
Addendum E—Proposed HCPCS Codes That Would Be Paid Only as Inpatient Procedures for CY 2008
Addendum L—Proposed Out-Migration Adjustment
Addendum M—Proposed HCPCS Codes for Assignment to Composite APCs for CY 2008
I. Background for the OPPS
A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System
When the Medicare statute was originally enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) added section 1833(t) to the Social Security Act (the Act) authorizing implementation of a PPS for hospital outpatient services (OPPS).
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113) made major changes in the hospital OPPS. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106-554) made further changes in the OPPS. Section 1833(t) of the Act was also amended by the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-173). The Deficit Reduction Act (DRA) of 2005 (Pub. L. 109-171), enacted on February 8, 2006, made additional changes in the OPPS. In addition, the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act (MIEA-TRHCA) of 2006 (Pub. L. 109-432), enacted on December 20, 2006, made further changes in the OPPS. A discussion of these provisions is included in sections I.E., VII., and XVII. of this proposed rule.
The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR Part 419.
Under the OPPS, we pay for hospital outpatient services on a rate-per-service basis that varies according to the ambulatory payment classification (APC) group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) codes (which include certain Current Procedural Terminology (CPT) codes) and descriptors to identify and group the services within each APC group. The OPPS includes payment for most hospital outpatient services, except those identified in section I.B. of this proposed rule. Section 1833(t)(1)(B)(ii) of the Act provides for Medicare payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by community mental health centers (CMHCs)) and hospital outpatient services that are furnished to inpatients who have exhausted their Part A benefits, or who are otherwise not in a covered Part A stay. Section 611 of Pub. L. 108-173 added provisions for Medicare coverage of an initial preventive physical examination, subject to the applicable deductible and coinsurance, as an outpatient department service, payable under the OPPS.
The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.
All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, services and items within an APC group cannot be considered comparable with respect to the use of resources if the highest median (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost for an item or service within the same APC group (referred to as the “2 times rule”). In implementing this provision, we use the median cost of the item or service assigned to an APC group.
Special payments under the OPPS may be made for New Technology items and services in one of two ways. Section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-through payments,” for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For New Technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group.
B. Excluded OPPS Services and Hospitals
Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section
1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. Section 614 of Pub. L. 108-173 amended section 1833(t)(1)(B)(iv) of the Act to exclude OPPS payment for screening and diagnostic mammography services. The Secretary exercised the authority granted under the statute to exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule (MPFS); laboratory services paid under the clinical diagnostic laboratory fee schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD composite rate; and services and procedures that require an inpatient stay that are paid under the hospital inpatient prospective payment system (IPPS). We set forth the services that are excluded from payment under the OPPS in § 419.22 of the regulations.
Under § 419.20(b) of the regulations, we specify the types of hospitals and entities that are excluded from payment under the OPPS. These excluded entities include Maryland hospitals, but only for services that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act; critical access hospitals (CAHs); hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service hospitals.
C. Prior Rulemaking
On April 7, 2000, we published in the
Federal Register
a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was first implemented for services furnished on or after August 1, 2000. Section 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, no less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors.
Since initially implementing the OPPS, we have published final rules in the
Federal Register
annually to implement statutory requirements and changes arising from our continuing experience with this system. We published in the
Federal Register
on November 24, 2006 the CY 2007 OPPS/ASC final rule with comment period (71 FR 67960). In that final rule with comment period, we revised the OPPS to update the payment weights and conversion factor for services payable under the CY 2007 OPPS on the basis of claims data from January 1, 2005, through December 31, 2005, and to implement certain provisions of Pub. L. 108-173 and Pub. L. 109-171. In addition, we responded to public comments received on the provisions of the November 10, 2005 final rule with comment period (70 FR 86516) pertaining to the APC assignment of HCPCS codes identified in Addendum B of that rule with the new interim (NI) comment indicator; and public comments received on the August 23, 2006 OPPS/ASC proposed rule for CY 2007 (71 FR 49506).
D. APC Advisory Panel
1. Authority of the APC Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of the BBRA, and redesignated by section 202(a)(2) of the BBRA, requires that we consult with an outside panel of experts to review the clinical integrity of the payment groups and their weights under the OPPS. The Act further specifies that the panel will act in an advisory capacity. The Advisory Panel on Ambulatory Payment Classification (APC) Groups (the APC Panel), discussed under section I.D.2. of this proposed rule, fulfills these requirements. The APC Panel is not restricted to using data compiled by CMS, and may use data collected or developed by organizations outside the Department in conducting its review.
2. Establishment of the APC Panel
On November 21, 2000, the Secretary signed the initial charter establishing the APC Panel. This expert panel, which may be composed of up to 15 representatives of providers subject to the OPPS (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data and advises CMS about the clinical integrity of the APC groups and their weights. For purposes of this Panel, consultants or independent contractors are not considered to be full-time employees. The APC Panel is technical in nature, and is governed by the provisions of the Federal Advisory Committee Act (FACA). Since its initial chartering, the Secretary has renewed the APC Panel's charter three times: on November 1, 2002; on November 1, 2004; and effective November 21, 2006. The current charter specifies, among other requirements, that the APC Panel continue to be technical in nature; be governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Officer (DFO); and is chaired by a Federal official designated by the Secretary.
The current APC Panel membership and other information pertaining to the APC Panel, including its charter,
Federal Register
notices, meeting dates, agenda topics, and meeting reports can be viewed on the CMS Web site at:
http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
3. APC Panel Meetings and Organizational Structure
The APC Panel first met on February 27, February 28, and March 1, 2001. Since the initial meeting, the APC Panel has held 11 subsequent meetings, with the last meeting taking place on March 7 and 8, 2007. Prior to each meeting, we publish a notice in the
Federal Register
to announce the meeting, and when necessary to solicit and announce nominations for the APC Panel's membership.
The APC Panel has established an operational structure that, in part, includes the use of three subcommittees to facilitate its required APC review process. The three current subcommittees are the Data Subcommittee, the Observation and Visit Subcommittee, and the Packaging Subcommittee. The Data Subcommittee is responsible for studying the data issues confronting the APC Panel, and for recommending options for resolving them. The Observation and Visit Subcommittee reviews and makes recommendations to the APC Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC payment weights). The Packaging Subcommittee studies and makes recommendations on issues pertaining to services that are not separately payable under the OPPS, but whose payments are bundled or packaged into APC payments. Each of these subcommittees was established by a majority vote from the full APC Panel during a scheduled APC Panel meeting, and their continuation as subcommittees was approved at the March 2007 APC Panel meeting. All subcommittee recommendations are discussed and voted upon by the full APC Panel.
Discussions of the recommendations resulting from the APC Panel's March
2007 meeting are included in the sections of this proposed rule that are specific to each recommendation. For discussions of earlier APC Panel meetings and recommendations, we reference previous hospital OPPS final rules or the Web site mentioned earlier in this section.
E. Provisions of the Medicare Improvements and Extension Act Under Division B of Title I of the Tax Relief and Health Care Act of 2006
The Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act (MIEA-TRHCA) of 2006, Pub. L. 109-432, enacted on December 20, 2006, included the following provisions affecting the OPPS:
1. Section 107(a) of the MIEA-TRHCA amended section 1833(t)(16)(C) of the Act to extend the period for payment of brachytherapy devices based on the hospital's charges adjusted to cost for 1 additional year, through December 31, 2007.
2. Section 107(b)(1) of the MIEA-TRHCA amended section 1833(t)(2)(H) of the Act by adding stranded and non-stranded devices furnished on or after July 1, 2007, as additional classifications of brachytherapy devices for which separate payment groups must be established for payment under the OPPS. Section 107(b)(2) of the MIEA-TRCHA provides that the Secretary may implement the section 107(b)(1) amendment to section 1833(t)(2)(H) of the Act “by program instruction or otherwise.”
3. Section 109(a) of the MIEA-TRHCA added new paragraph (17) to section 1833(t) of the Act which authorizes the Secretary, beginning in 2009 and each subsequent year, to reduce the OPPS full annual update by 2.0 percentage points if a hospital paid under the OPPS fails to submit data as required by the Secretary in the form and manner specified on selected measures of quality of care, including medication errors. In accordance with this provision, the selected measures are those that are appropriate for the measurement of quality of care furnished by hospitals in the outpatient setting, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more of the national consensus entities, and that may be the same as those required for reporting by hospitals paid under the IPPS. This provision specifies that a reduction for 1 year cannot be taken into account when computing the OPPS update for a subsequent year. In addition, this provision requires the Secretary to establish a process for making the submitted data available for public review.
F. Summary of the Major Contents of This Proposed Rule
In this proposed rule, we are setting forth proposed changes to the Medicare hospital OPPS for CY 2008. These changes would be effective for services furnished on or after January 1, 2008. We are also setting forth proposed changes to the Medicare ASC payment system for CY 2008. These changes would be effective for services furnished on or after January 1, 2008. The following is a summary of the major changes that we are proposing to make:
1. Proposed Updates Affecting OPPS Payments
In section II. of this proposed rule, we set forth—
• The methodology used to recalibrate the proposed APC relative payment weights.
• The proposed payment for partial hospitalization services, including the proposed separate threshold for outlier payments for CMHCs.
• The proposed update to the conversion factor used to determine payment rates under the OPPS.
• The proposed retention of our current policy to use the IPPS wage indices to adjust, for geographic wage differences, the portion of the OPPS payment rate and the copayment standardized amount attributable to labor-related cost.
• The proposed update of statewide average default CCRs.
• The proposed application of hold harmless transitional outpatient payments (TOPs) for certain small rural hospitals.
• The proposed payment adjustment for rural SCHs.
• The proposed calculation of the hospital outpatient outlier payment.
• The calculation of the proposed national unadjusted Medicare OPPS payment.
• The proposed beneficiary copayments for OPPS services.
2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
In section III. of this proposed rule, we discuss the proposed additions of new procedure codes to the APCs; our proposal to establish a number of new APCs; and our analyses of Medicare claims data and certain recommendations of the APC Panel. We also discuss the application of the 2 times rule and proposed exceptions to it; proposed changes to specific APCs; and the proposed movement of procedures from New Technology APCs to clinical APCs.
3. Proposed OPPS Payment for Devices
In section IV. of this proposed rule, we discuss proposed payment for device-dependent APCs and the pass-through payment for specific categories of devices.
4. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
In section V. of this proposed rule, we discuss the proposed CY 2008 OPPS payment for drugs, biologicals, and radiopharmaceuticals, including the proposed payment for drugs, biologicals, and radiopharmaceuticals with and without pass-through status.
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, and Devices
In section VI. of this proposed rule, we discuss the estimate of CY 2008 OPPS transitional pass-through spending for drugs, biologicals, and devices.
6. Proposed OPPS Payment for Brachytherapy Sources
In section VII. of this proposed rule, we discuss our proposal concerning coding and payment for brachytherapy sources.
7. Proposed OPPS Coding and Payment for Drug Administration Services
In section VIII. of this proposed rule, we set forth our proposed policy concerning coding and payment for drug administration services.
8. Proposed OPPS Hospital Coding and Payments for Visits
In section IX. of this proposed rule, we set forth our proposed changes to policies for the coding and reporting of clinic and emergency department visits and critical care services on claims paid under the OPPS.
9. Proposed OPPS Payment for Blood and Blood Products
In section X. of this proposed rule, we discuss our proposed payment for blood and blood products.
10. Proposed OPPS Payment for Observation Services
In section XI. of this proposed rule, we discuss the proposed payment policies for observation services furnished to patients on an outpatient basis.
11. Proposed Procedures That Will Be Paid Only as Inpatient Services
In section XII. of this proposed rule, we discuss the procedures that we are
proposing to remove from the inpatient list and assign to APCs.
12. Proposed Nonrecurring Technical and Policy Changes
In section XIII. of this proposed rule, we set forth our proposals for nonrecurring technical and policy changes and clarifications relating to outpatient hospital services and supplies incident to a physician service; payment for interrupted procedures prior to and after the administration of anesthesia; transitional adjustments to payments for covered outpatient services furnished by small rural hospitals and SCHs located in rural areas; and reporting requirements for wound care services, cardiac rehabilitation services, and bone marrow and stem cell processing services.
13. Proposed OPPS Payment Status and Comment Indicators
In section XIV. of this proposed rule, we discuss proposed changes to the definitions of status indicators assigned to APCs and present our proposed comment indicators for the OPPS/ASC final rule with comment period.
14. OPPS Policy and Payment Recommendations
In section XV. of this proposed rule, we address recommendations made by MedPAC and the APC Panel regarding the OPPS for CY 2008.
15. Proposed Update of the Revised ASC Payment System
In section XVI. of this proposed rule, we discuss the proposed update of the revised ASC payment system payment rates for CY 2008. We also discuss our proposed changes to our regulations § 414.22 (b)(5)(i)(A) and (B) regarding physician payment for performing noncovered ASC surgical procedures in ASCs. In addition, we are proposing to revise the definitions of “radiology and certain other imaging services” and “outpatient prescription drugs” when provided integral to an ASC covered surgical procedure.
16. Reporting Quality Data for Annual Payment Rate Updates
In section XVII. of this proposed rule, we discuss the proposed quality measures for reporting hospital outpatient quality data for CY 2009 and subsequent years and set forth the requirements for data collection and submission for the annual payment update. We also briefly discuss the legislative provisions of the MIEA-TRHCA that give the Secretary authority to develop quality measures for reporting by ASCs.
17. Proposed Changes Affecting Necessary Provider Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs)
In section XVIII. of this proposed rule, we discuss our proposed changes affecting necessary provider designations for CAHs that are being recertified when the CAH enters into a new co-location arrangement with another hospital or CAH or when the CAH creates or acquires an off-campus location. We also discuss our proposed changes relating to several hospital CoPs to require the completion of physical examinations and medical histories, and documentation in the medical records, for patients after admission and prior to surgery or a procedure requiring anesthesia services and for postanesthesia evaluations of patients before discharge or transfer from the postanesthesia recovery area.
18. Regulatory Impact Analysis
In section XXII. of this proposed rule, we set forth an analysis of the impact the proposed changes will have on affected entities and beneficiaries.
II. Proposed Updates Affecting OPPS Payments
A. Proposed Recalibration of APC Relative Weights
(If you choose to comment on issues in this section, please include the caption “APC Relative Weights” at the beginning of your comment.)
1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review and revise the relative payment weights for APCs at least annually. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we calculated the relative payment weights that were implemented on August 1, 2000, for each APC group. Except for some reweighting due to a small number of APC changes, these relative payment weights continued to be in effect for CY 2001. This policy is discussed in the November 13, 2000 interim final rule (65 FR 67824 through 67827).
We are proposing to use the same basic methodology that we described in the April 7, 2000 OPPS final rule with comment period to recalibrate the APC relative payment weights for services furnished on or after January 1, 2008, and before January 1, 2009. That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for outpatient services. We are proposing to use the most recent available data to construct the database for calculating APC group weights. For the purpose of recalibrating the proposed APC relative payment weights for CY 2008, we used approximately 131 million final action claims for hospital OPD services furnished on or after January 1, 2006, and before January 1, 2007. (For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this proposed rule on the CMS Web site at
http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/).
Of the 131 million final action claims for services provided in hospital outpatient settings, approximately 101 million claims were of the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the 101 million claims, approximately 46 million were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). We were able to use approximately 50 million whole claims of the approximately 54 million claims that remained to set the OPPS APC relative weights we are proposing for the CY 2008 OPPS. From the 50 million whole claims, we created approximately 88 million single records, of which approximately 58 million were “pseudo” single claims (created from multiple procedure claims using the process we discuss in this section). Approximately 822,000 claims trimmed out on cost or units in excess of ±3 standard deviations from the geometric mean, yielding approximately 87 million single bills used for median setting. Ultimately, we were able to use for proposed CY 2008 ratesetting some portion of 92 percent of the CY 2006 claims containing services payable under the OPPS.
The proposed APC relative weights and payments for CY 2008 in Addenda A and B to this proposed rule were calculated using claims from this period that were processed before January 1, 2007, and continue to be based on the median hospital costs for services in the APC groups. We selected claims for services paid under the OPPS and matched these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most
recently submitted cost reports to calculate the median costs which we are proposing to convert to relative payment weights for purposes of calculating the CY 2008 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
For CY 2008, in general, we are proposing to continue to use single procedure claims to set the medians on which the APC relative payment weights would be based, with some exceptions as discussed below. We have received many requests asking that we ensure that the data from claims that contain charges for multiple procedures are included in the data from which we calculate the relative payment weights. Requesters believe that relying solely on single procedure claims to recalibrate APC relative payment weights fails to take into account data for many frequently performed procedures, particularly those commonly performed in combination with other procedures. They believe that if a service is frequently performed in combination with others, the individual services are more complex and more resource-intensive than if they were performed alone. Stakeholders have suggested that including data from multiple procedure claims could increase the median cost estimates for the individual services. They believe that depending upon single procedure claims alone results in basing relative payment weights on the least costly services that are not representative of the typical services, thereby introducing downward bias to the medians on which the weights are based.
We generally use single procedure claims to set the median costs for APCs because we believe that it is important that the OPPS relative weights on which payment rates are based be appropriate when one and only one procedure is furnished and because we are, so far, unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service. We agree that, optimally, it is desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. We engaged in several efforts this year to improve our use of multiple procedure claims for ratesetting. As we have for several years, we continue to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. We also continued our internal efforts to better understand the patterns of services and costs from multiple bills toward the goal of using more multiple bill information by assessing the amount of packaging in the multiple bills and, specifically, by exploring the amount of packaging for drug administration services in the single and multiple bill claims. Moreover, in many cases, the proposed expansion of packaging also enables the use of more claims data by enabling us to treat claims with multiple procedure codes as single claims. We refer readers to section II.A.4. of this proposed rule for a full discussion of this proposal for CY 2008.
(1) Proposed Use of Date of Service Stratification and a Bypass List To Increase the Amount of Data Used To Determine Medians
By bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple “pseudo” single claims from claims that, as submitted, contained multiple separately paid procedures on the same claim. We refer to these newly created single procedure claims as “pseudo” single claims because they were submitted by providers as multiple procedure claims. The history of our use of a bypass list to generate “pseudo” single claims is well documented, most recently in the CY 2007 OPPS/ASC final rule with comment period (71 FR 67969 through 67970).
The date of service stratification and bypass list process we used for the CY 2007 OPPS (combined with the packaging changes we are proposing in section II.A.4. of this proposed rule) resulted in our being able to use some part of approximately 92 percent of the total claims that are eligible for use in the OPPS ratesetting and modeling for this proposed rule. This process enabled us to create, for CY 2008 approximately 58 million “pseudo” singles and approximately 30 million “natural” single bills. For this proposed rule, “pseudo” single procedure bills represented 66 percent of all single bills used to calculate median costs. This compares favorably to the CY 2007 OPPS final rule data in which “pseudo” single bills represented 68 percent of all single bills used to calculate the median costs on which the CY 2007 OPPS payment rates were based. We believe that the reduction in the percent of “pseudo” single bills and the corresponding increase in the proportion of “natural” single bills occurred largely because of our proposal to increase packaging as discussed in section II.A.4. of this proposed rule. In many cases, the packaging proposal for CY 2008 enabled us to use claims that would otherwise have been considered to be multiple procedure claims and, absent the proposal for additional packaging, could have been used for ratesetting only if we had been able to create “pseudo” single claims from them.
For CY 2008, we are proposing to bypass 425 HCPCS codes that are identified in Table 1 of this proposed rule. We are proposing to continue the use of the codes on the CY 2007 OPPS bypass list but to remove codes we are proposing to package for CY 2008. We also are proposing to remove codes that were on the CY 2007 bypass list that ceased to meet the empirical criteria under the proposed packaging changes when clinical review confirmed that their removal would be appropriate in the context of the full proposal for the CY 2008 OPPS. Since the inception of the bypass list, we have calculated the percent of natural single bills that contained packaging for each code and the amount of packaging in each “natural” single bill for each code. We retained the codes on the previous year's bypass list and used the update year's data to determine whether it would be appropriate to add additional codes to the previous year's bypass list. The entire list (including the codes that remained on the bypass list from prior years) was open to public comment. For this CY 2008 proposed rule, we explicitly reviewed all “natural” single bills against the empirical criteria for all codes on the CY 2007 bypass list because of the proposal for greater packaging discussed in section II.A.4. of this proposed rule, as this effort increased the packaging associated with some codes. We removed 106 HCPCS codes from the CY 2007 bypass list for the CY 2008 proposal. We note also that many of the codes we are proposing to newly package for CY 2008 were on the bypass list used for setting the OPPS payment rates for CY 2007 and are no longer proposed for bypass because we are proposing to package them, as discussed in more detail below. We also are proposing to add to the bypass list HCPCS codes that, using the proposed rule data, meet the same previously established empirical criteria for the bypass list that are reviewed below or which our clinicians believe would have little associated packaging if the services were correctly coded.
The CY 2008 packaging proposal minimally reduced the percentage of total claims that we were able to use, in whole or in part, from 93 percent for CY 2007 to 92 percent for this proposed rule. The proposed packaging approach increased the number of “natural” single bills, in spite of reducing the
universe of codes requiring single bills for ratesetting, but reduced the number of “pseudo” single bills. More “natural” single procedure bills can be created by the packaging of codes that always appear with another procedure because these dependent services are supportive of and ancillary to the primary independent procedures for which payment is being made. A claim containing two independent procedure codes on the same date of service and not on the bypass list previously could not be used for ratesetting, but packaging the cost of one of the codes on the claim frees the claim to be used to calculate the median cost of the procedure that is not packaged. On the other hand, our proposed packaging approach reduced the number of codes eligible for the bypass list because of the limitation on packaging set by our previously established empirical criteria. A smaller bypass list and the presence of greater packaging on claims reduced the final number of “pseudo” single claims. In prior years, roughly 68 percent of single bills were “pseudo” single bills, but based on the CY 2008 proposed rule data, 66 percent of single bills were “pseudo” singles. Moreover, the number of “natural” single bills and “pseudo” single bills are reduced by the volume of services that we are proposing to package. Hence, our CY 2008 proposal to package payment for some HCPCS codes with relatively high frequencies would eliminate for ratesetting the number of available “natural” and “pseudo” single bills attributable to the codes that we are proposing to package.
As in prior years, we are proposing to use the following empirical criteria to determine the additional codes to add to the CY 2007 bypass list to create the CY 2008 bypass list. We assume that the representation of packaging on the single claims for any given code is comparable to packaging for that code in the multiple claims:
• There are 100 or more single claims for the code. This number of single claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.
• Five percent or fewer of the single claims for the code have packaged costs on that single claim for the code. This criterion results in limiting the amount of packaging being redistributed to the payable procedure remaining on the claim after the bypass code is removed and ensures that the costs associated with the bypass code represent the cost of the bypassed service.
• The median cost of packaging observed in the single claims is equal to or less than $50. This limits the amount of error in redistributed costs.
• The code is not a code for an unlisted service.
In addition, we are proposing to add to the bypass list codes that our clinicians believe have minimal associated packaging based on their clinical assessment of the full CY 2008 OPPS proposal. We note that this list contains bypass codes that are appropriate to claims for services in CY 2006 and, therefore, includes codes that have been deleted for CY 2007. Moreover, there are codes on the bypass list that are new for CY 2007 and which are appropriate additions to the bypass list in preparation for use of the CY 2007 claims for creation of the CY 2009 OPPS.
In order to keep the established empirical criteria for the bypass list constant, we are seeking public comment on whether we should adjust the $50 packaging cost criterion for inflation each year and, if so, recommendations for the source of the adjustment. Adding an inflation adjustment factor would ensure that the same amount of packaging associated with candidate codes for the bypass list is reviewed each year relative to nominal costs.
Table 1.—Proposed CY 2008 Bypass Codes for Creating “Pseudo” Single Claims for Calculating Median Costs
HCPCS code
Short descriptor
11056
Trim skin lesions, 2 to 4.
11057
Trim skin lesions, over 4.
11300
Shave skin lesion.
11301
Shave skin lesion.
11719
Trim nail(s).
11720
Debride nail, 1-5.
11721
Debride nail, 6 or more.
11954
Therapy for contour defects.
17003
Destruct premalg les, 2-14.
31231
Nasal endoscopy, dx.
31579
Diagnostic laryngoscopy.
51798
Us urine capacity measure.
54240
Penis study.
56820
Exam of vulva w/scope.
67820
Revise eyelashes.
69210
Remove impacted ear wax.
69220
Clean out mastoid cavity.
70030
X-ray eye for foreign body.
70100
X-ray exam of jaw.
70110
X-ray exam of jaw.
70120
X-ray exam of mastoids.
70130
X-ray exam of mastoids.
70140
X-ray exam of facial bones.
70150
X-ray exam of facial bones.
70160
X-ray exam of nasal bones.
70200
X-ray exam of eye sockets.
70210
X-ray exam of sinuses.
70220
X-ray exam of sinuses.
70250
X-ray exam of skull.
70260
X-ray exam of skull.
70328
X-ray exam of jaw joint.
70330
X-ray exam of jaw joints.
70336
Magnetic image, jaw joint.
70355
Panoramic x-ray of jaws.
70360
X-ray exam of neck.
70370
Throat x-ray & fluoroscopy.
70371
Speech evaluation, complex.
70450
Ct head/brain w/o dye.
70480
Ct orbit/ear/fossa w/o dye.
70486
Ct maxillofacial w/o dye.
70490
Ct soft tissue neck w/o dye.
70544
Mr angiography head w/o dye.
70551
Mri brain w/o dye.
71010
Chest x-ray.
71015
Chest x-ray.
71020
Chest x-ray.
71021
Chest x-ray.
71022
Chest x-ray.
71023
Chest x-ray and fluoroscopy.
71030
Chest x-ray.
71034
Chest x-ray and fluoroscopy.
71035
Chest x-ray.
71100
X-ray exam of ribs.
71101
X-ray exam of ribs/chest.
71110
X-ray exam of ribs.
71111
X-ray exam of ribs/chest.
71120
X-ray exam of breastbone.
71130
X-ray exam of breastbone.
71250
Ct thorax w/o dye.
72010
X-ray exam of spine.
72020
X-ray exam of spine.
72040
X-ray exam of neck spine.
72050
X-ray exam of neck spine.
72052
X-ray exam of neck spine.
72069
X-ray exam of trunk spine.
72070
X-ray exam of thoracic spine.
72072
X-ray exam of thoracic spine.
72074
X-ray exam of thoracic spine.
72080
X-ray exam of trunk spine.
72090
X-ray exam of trunk spine.
72100
X-ray exam of lower spine.
72110
X-ray exam of lower spine.
72114
X-ray exam of lower spine.
72120
X-ray exam of lower spine.
72125
Ct neck spine w/o dye.
72128
Ct chest spine w/o dye.
72131
Ct lumbar spine w/o dye.
72141
Mri neck spine w/o dye.
72146
Mri chest spine w/o dye.
72148
Mri lumbar spine w/o dye.
72170
X-ray exam of pelvis.
72190
X-ray exam of pelvis.
72192
Ct pelvis w/o dye.
72202
X-ray exam sacroiliac joints.
72220
X-ray exam of tailbone.
73000
X-ray exam of collar bone.
73010
X-ray exam of shoulder blade.
73020
X-ray exam of shoulder.
73030
X-ray exam of shoulder.
73050
X-ray exam of shoulders.
73060
X-ray exam of humerus.
73070
X-ray exam of elbow.
73080
X-ray exam of elbow.
73090
X-ray exam of forearm.
73100
X-ray exam of wrist.
73110
X-ray exam of wrist.
73120
X-ray exam of hand.
73130
X-ray exam of hand.
73140
X-ray exam of finger(s).
73200
Ct upper extremity w/o dye.
73218
Mri upper extremity w/o dye.
73221
Mri joint upr extrem w/o dye.
73510
X-ray exam of hip.
73520
X-ray exam of hips.
73540
X-ray exam of pelvis & hips.
73550
X-ray exam of thigh.
73560
X-ray exam of knee, 1 or 2.
73562
X-ray exam of knee, 3.
73564
X-ray exam, knee, 4 or more.
73565
X-ray exam of knees.
73590
X-ray exam of lower leg.
73600
X-ray exam of ankle.
73610
X-ray exam of ankle.
73620
X-ray exam of foot.
73630
X-ray exam of foot.
73650
X-ray exam of heel.
73660
X-ray exam of toe(s).
73700
Ct lower extremity w/o dye.
73718
Mri lower extremity w/o dye.
73721
Mri jnt of lwr extre w/o dye.
74000
X-ray exam of abdomen.
74010
X-ray exam of abdomen.
74020
X-ray exam of abdomen.
74022
X-ray exam series, abdomen.
74150
Ct abdomen w/o dye.
74210
Contrst x-ray exam of throat.
74220
Contrast x-ray, esophagus.
74230
Cine/vid x-ray, throat/esoph.
74246
Contrst x-ray uppr gi tract.
74247
Contrst x-ray uppr gi tract.
74249
Contrst x-ray uppr gi tract.
76020
X-rays for bone age.
76040
X-rays, bone evaluation.
76061
X-rays, bone survey.
76062
X-rays, bone survey.
76065
X-rays, bone evaluation.
76066
Joint survey, single view.
76070
Ct bone density, axial.
76071
Ct bone density, peripheral.
76075
Dxa bone density, axial.
76076
Dxa bone density/peripheral
76077
Dxa bone density/v-fracture.
76078
Radiographic absorptiometry.
76100
X-ray exam of body section.
76400
Magnetic image, bone marrow.
76510
Ophth us, b & quant a.
76511
Ophth us, quant a only.
76512
Ophth us, b w/non-quant a.
76513
Echo exam of eye, water bath.
76514
Echo exam of eye, thickness.
76516
Echo exam of eye.
76519
Echo exam of eye.
76536
Us exam of head and neck.
76645
Us exam, breast(s).
76700
Us exam, abdom, complete.
76705
Echo exam of abdomen.
76770
Us exam abdo back wall, comp.
76775
Us exam abdo back wall, lim.
76778
Us exam kidney transplant.
76801
Ob us < 14 wks, single fetus.
76805
Ob us >/= 14 wks, sngl fetus.
76811
Ob us, detailed, sngl fetus.
76816
Ob us, follow-up, per fetus.
76817
Transvaginal us, obstetric.
76830
Transvaginal us, non-ob.
76856
Us exam, pelvic, complete.
76857
Us exam, pelvic, limited.
76870
Us exam, scrotum.
76880
Us exam, extremity.
76970
Ultrasound exam follow-up.
76977
Us bone density measure.
76999
Echo examination procedure.
77300
Radiation therapy dose plan.
77301
Radiotherapy dose plan, imrt.
77315
Teletx isodose plan complex.
77326
Brachytx isodose calc simp.
77327
Brachytx isodose calc interm.
77328
Brachytx isodose plan compl.
77331
Special radiation dosimetry.
77336
Radiation physics consult.
77370
Radiation physics consult.
77401
Radiation treatment delivery.
77402
Radiation treatment delivery.
77403
Radiation treatment delivery.
77404
Radiation treatment delivery.
77407
Radiation treatment delivery.
77408
Radiation treatment delivery.
77409
Radiation treatment delivery.
77411
Radiation treatment delivery.
77412
Radiation treatment delivery.
77413
Radiation treatment delivery.
77414
Radiation treatment delivery.
77416
Radiation treatment delivery.
77418
Radiation tx delivery, imrt.
77470
Special radiation treatment.
77520
Proton trmt, simple w/o comp.
77523
Proton trmt, intermediate.
80500
Lab pathology consultation.
80502
Lab pathology consultation.
85097
Bone marrow interpretation.
86510
Histoplasmosis skin test.
86850
RBC antibody screen.
86870
RBC antibody identification.
86880
Coombs test, direct.
86885
Coombs test, indirect, qual.
86886
Coombs test, indirect, titer.
86890
Autologous blood process.
86900
Blood typing, ABO.
86901
Blood typing, Rh (D).
86903
Blood typing, antigen screen.
86904
Blood typing, patient serum.
86905
Blood typing, RBC antigens.
86906
Blood typing, Rh phenotype.
86930
Frozen blood prep.
86970
RBC pretreatment.
88104
Cytopath fl nongyn, smears.
88106
Cytopath fl nongyn, filter.
88107
Cytopath fl nongyn, sm/fltr.
88108
Cytopath, concentrate tech.
88112
Cytopath, cell enhance tech.
88160
Cytopath smear, other source.
88161
Cytopath smear, other source.
88162
Cytopath smear, other source.
88172
Cytopathology eval of fna.
88173
Cytopath eval, fna, report.
88182
Cell marker study.
88184
Flowcytometry/tc, 1 marker.
88185
Flowcytometry/tc, add-on.
88300
Surgical path, gross.
88302
Tissue exam by pathologist.
88304
Tissue exam by pathologist.
88305
Tissue exam by pathologist.
88307
Tissue exam by pathologist.
88311
Decalcify tissue.
88312
Special stains.
88313
Special stains.
88321
Microslide consultation.
88323
Microslide consultation.
88325
Comprehensive review of data.
88331
Path consult intraop, 1 bloc.
88342
Immunohistochemistry.
88346
Immunofluorescent study.
88347
Immunofluorescent study.
88348
Electron microscopy.
88358
Analysis, tumor.
88360
Tumor immunohistochem/manual.
88365
Insitu hybridization (fish).
88368
Insitu hybridization, manual.
88399
Surgical pathology procedure.
89049
Chct for mal hyperthermia.
89230
Collect sweat for test.
89240
Pathology lab procedure.
90761
Hydrate iv infusion, add-on.
90766
Ther/proph/dg iv inf, add-on.
90801
Psy dx interview.
90802
Intac psy dx interview.
90804
Psytx, office, 20-30 min.
90805
Psytx, off, 20-30 min w/e&m.
90806
Psytx, off, 45-50 min.
90807
Psytx, off, 45-50 min w/e&m.
90808
Psytx, office, 75-80 min.
90809
Psytx, off, 75-80, w/e&m.
90810
Intac psytx, off, 20-30 min.
90812
Intac psytx, off, 45-50 min.
90816
Psytx, hosp, 20-30 min.
90818
Psytx, hosp, 45-50 min.
90826
Intac psytx, hosp, 45-50 min.
90845
Psychoanalysis.
90846
Family psytx w/o patient.
90847
Family psytx w/patient.
90853
Group psychotherapy.
90857
Intac group psytx.
90862
Medication management.
92002
Eye exam, new patient.
92004
Eye exam, new patient.
92012
Eye exam established pat.
92014
Eye exam & treatment.
92020
Special eye evaluation.
92081
Visual field examination(s).
92082
Visual field examination(s).
92083
Visual field examination(s).
92135
Opthalmic dx imaging.
92136
Ophthalmic biometry.
92225
Special eye exam, initial.
92226
Special eye exam, subsequent.
92230
Eye exam with photos.
92240
Icg angiography.
92250
Eye exam with photos.
92275
Electroretinography.
92285
Eye photography.
92286
Internal eye photography.
92520
Laryngeal function studies.
92541
Spontaneous nystagmus test.
92546
Sinusoidal rotational test.
92548
Posturography.
92552
Pure tone audiometry, air.
92553
Audiometry, air & bone.
92555
Speech threshold audiometry.
92556
Speech audiometry, complete.
92557
Comprehensive hearing test.
92567
Tympanometry.
92582
Conditioning play audiometry.
92585
Auditor evoke potent, compre.
92603
Cochlear implt f/up exam 7 >.
92604
Reprogram cochlear implt 7 >.
92626
Eval aud rehab status.
93005
Electrocardiogram, tracing.
93225
ECG monitor/record, 24 hrs.
93226
ECG monitor/report, 24 hrs.
93231
Ecg monitor/record, 24 hrs.
93232
ECG monitor/report, 24 hrs.
93236
ECG monitor/report, 24 hrs.
93270
ECG recording.
93271
Ecg/monitoring and analysis.
93278
ECG/signal-averaged.
93727
Analyze ilr system.
93731
Analyze pacemaker system.
93732
Analyze pacemaker system.
93733
Telephone analy, pacemaker.
93734
Analyze pacemaker system.
93735
Analyze pacemaker system.
93736
Telephonic analy, pacemaker.
93741
Analyze ht pace device sngl.
93742
Analyze ht pace device sngl.
93743
Analyze ht pace device dual.
93744
Analyze ht pace device dual.
93786
Ambulatory BP recording.
93788
Ambulatory BP analysis.
93797
Cardiac rehab.
93798
Cardiac rehab/monitor.
93875
Extracranial study.
93880
Extracranial study.
93882
Extracranial study.
93886
Intracranial study.
93888
Intracranial study.
93922
Extremity study.
93923
Extremity study.
93924
Extremity study.
93925
Lower extremity study.
93926
Lower extremity study.
93930
Upper extremity study.
93931
Upper extremity study.
93965
Extremity study.
93970
Extremity study.
93971
Extremity study.
93975
Vascular study.
93976
Vascular study.
93978
Vascular study.
93979
Vascular study.
93990
Doppler flow testing.
94015
Patient recorded spirometry.
94690
Exhaled air analysis.
95115
Immunotherapy, one injection.
95117
Immunotherapy injections.
95165
Antigen therapy services.
95805
Multiple sleep latency test.
95806
Sleep study, unattended.
95807
Sleep study, attended.
95808
Polysomnography, 1-3.
95812
Eeg, 41-60 minutes.
95813
Eeg, over 1 hour.
95816
Eeg, awake and drowsy.
95819
Eeg, awake and asleep.
95822
Eeg, coma or sleep only.
95869
Muscle test, thor paraspinal.
95900
Motor nerve conduction test.
95921
Autonomic nerv function test.
95925
Somatosensory testing.
95930
Visual evoked potential test.
95950
Ambulatory eeg monitoring.
95953
EEG monitoring/computer.
95970
Analyze neurostim, no prog.
95972
Analyze neurostim, complex.
95974
Cranial neurostim, complex.
95978
Analyze neurostim brain/1h.
96000
Motion analysis, video/3d.
96101
Psycho testing by psych/phys.
96111
Developmental test, extend.
96116
Neurobehavioral status exam.
96118
Neuropsych tst by psych/phys.
96119
Neuropsych testing by tec.
96150
Assess hlth/behave, init.
96151
Assess hlth/behave, subseq.
96152
Intervene hlth/behave, indiv.
96153
Intervene hlth/behave, group.
96415
Chemo, iv infusion, addl hr.
96423
Chemo ia infuse each addl hr.
96900
Ultraviolet light therapy.
96910
Photochemotherapy with UV-B.
96912
Photochemotherapy with UV-A.
96913
Photochemotherapy, UV-A or B.
96920
Laser tx, skin < 250 sq cm.
98925
Osteopathic manipulation.
98926
Osteopathic manipulation.
98927
Osteopathic manipulation.
98940
Chiropractic manipulation.
98941
Chiropractic manipulation.
98942
Chiropractic manipulation.
99204
Office/outpatient visit, new.
99212
Office/outpatient visit, est.
99213
Office/outpatient visit, est.
99214
Office/outpatient visit, est.
99241
Office consultation.
99242
Office consultation.
99243
Office consultation.
99244
Office consultation.
99245
Office consultation.
0144T
CT heart wo dye; qual calc.
C8951
IV inf, tx/dx, each addl hr.
C8955
Chemotx adm, IV inf, addl hr.
G0008
Admin influenza virus vac.
G0101
CA screen;pelvic/breast exam.
G0127
Trim nail(s).
G0130
Single energy x-ray study.
G0166
Extrnl counterpulse, per tx.
G0175
OPPS Service,sched team conf.
G0332
Preadmin IV immunoglobulin.
G0340
Robt lin-radsurg fractx 2-5.
G0344
Initial preventive exam.
G0365
Vessel mapping hemo access.
G0367
EKG tracing for initial prev.
G0376
Smoke/tobacco counseling >10.
M0064
Visit for drug monitoring.
Q0091
Obtaining screen pap smear.
(2) Exploration of Allocation of Packaged Costs to Separately Paid Procedure Codes
During its August 23-24, 2006 meeting, the APC Panel recommended that CMS provide claims analysis of the contributions of packaged costs (including packaged revenue code charges and charges for packaged HCPCS codes) to the median cost of each drug administration service. (We refer readers to Recommendation #28 in the August 23-24, 2006 meeting recommendation summary on the CMS Web site at:
http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage
.) In our continued effort to better understand the multiple claims in order to extract single bill information from them, we examined the extent to which the packaging in multiple procedure claims differs from the packaging in the single procedure claims on which we base the median costs both in general and more specifically for drug administration services. We performed this analysis using the claims data on which we based the CY 2007 OPPS/ASC final rule with comment period. We examined the amount of packaging in multiple procedure versus single procedure claims in general and in claims for drug administration services in particular. We conducted this analysis without taking into account the proposed packaging approach presented in this proposed rule. However, we do not expect the services newly proposed for packaged payment to commonly appear with a drug administration service. Therefore, we believe that the analysis conducted on the CY 2007 final rule with comment period data is sufficient to inform our development of this proposed rule.
In general, we do not believe that the proportionate amount of packaged costs in the multiple bills relative to the number of primary services is greater than that in the single bills. The costs in uncoded revenue codes and HCPCS codes with a packaged status indicator account for 22 percent of observed costs in the universe of all CY 2005 claims that we used to model the CY 2007 OPPS (including both the single and multiple procedure bills). Similarly, the costs in uncoded revenue codes and HCPCS codes with a packaged status indicator account for 18 percent of the total cost in the subset of CY 2005 single bills that we used to calculate the median costs on which the relative weights are based.
However, the bypass methodology creates a “pseudo” single bill for all claims for services or items on the bypass list, and these “pseudo” single bills have no associated packaging, by definition of the application of the bypass list. Excluding the total cost associated with bypass codes, 28 percent of observed costs in the single
bills are attributable to packaged services, and 29 percent of observed costs across all claims are attributable to packaged services. Therefore, we conclude that, in general, the extent of packaging in all bills is similar to the amount of packaging in the single procedure bills we use to set median costs for most APCs.
We recognize that aggregate numbers do not address the packaging associated with single and multiple procedure claims for specific services. We have received comments stating that the amount of packaging in the single bills for drug administration services is not representative of the typical packaged costs of these drug administration services, which are usually performed in combination with one another, because the single bills represent less complex and less resource-intensive services than the usual cases.
We published a study in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68120 through 68121) that discussed the amount of packaging on the single bills for drug administration procedure codes, and we promised to replicate that study for the APC Panel. We discussed the results of this study with the APC Panel at its March 2007 meeting, in accordance with the APC Panel's August 2006 recommendation. Table 2 below shows the drug administration HCPCS codes and their descriptors, status indicators, deleted code status, and CY 2007 APC assignments in columns 1, 2, 3, and 4, respectively. HCPCS codes for additional hours of infusion services are not presented because these codes were included on the CY 2007 bypass list and, therefore, we explicitly associated no packaged costs with them, as discussed in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68117 through 68118). Column 6 of the table contains the number of single bills relative to total occurrences of the code in the CY 2005 claims, and column 8 shows the percentage of single bills used to set payment rates. Drug administration services demonstrate reasonable single bill representation in comparison with other OPPS services. Single bills for drug administration constitute, roughly, 30 percent of all observed occurrences of drug administration services, varying by code from 7 to 55 percent. Columns 10 through 13 of the table show measures of central tendency for packaged costs as a percentage of total cost on each single claim. Columns 10 and 11 show the mean and median of all packaged costs as a percentage of total costs, and columns 12 and 13 break out the costs of packaged drug HCPCS codes and uncoded pharmacy revenue code charges for revenue codes in the 0250 series (Pharmacy), 0260 series (IV Therapy), and 0630 series (Pharmacy—Extension). These columns demonstrate that packaged costs substantially contribute to median cost estimates for the majority of drug administration HCPCS codes.
For all single bills for CPT code 90780 (Intravenous infusion for therapy/diagnosis, administered by physician or under direct supervision of physician; up to one hour), on average, packaged costs were 31 percent of total cost (median 27 percent). For the same code, packaged drug and pharmacy costs comprised, on average, 23 percent of total costs (median 15 percent). Single bills make up 34 percent of all line-item occurrences of the service, suggesting that this single bill median cost was fairly robust and probably captured packaging adequately. On the other hand, CPT code 90784 (Therapeutic, prophylactic or diagnostic injection (specify material injected); subcutaneous or intramuscular) demonstrates limited packaging (median 0 percent and mean 17 percent), and the median cost for the code is derived from only 7 percent of all occurrences of the code. Across all drug administration codes, over half show significant median packaged costs largely attributable to packaged drug and pharmacy costs.
Table 2.—Packaged Cost Data for CY 2005 Single Claims for Drug Administration Services
HCPCS code
Short descriptor
SI
Deleted code
APC
Single bills
Total frequency
Percent single bills
Median cost ($)
All packaged costs as a percent of total cost
Median
Mean
Packaged drug and pharmacy costs as a percent of total cost
Median
Mean
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
90780
IV infusion therapy, 1 hour
S
X
0440
1,008,055
2,974,785
33.9
110.43
27.1
30.8
15.3
22.6
90782
Injection, sc/im
S
X
0437
1,326,094
2,894,231
45.8
24.77
0.0
10.1
0.0
8.7
90783
Injection, ia
S
X
0438
427
3,012
14.2
51.35
0.0
10.9
0.0
6.8
90784
Injection, iv
S
X
0438
183,096
2,812,204
6.5
49.54
0.0
16.7
0.0
9.7
90788
Injection of antibiotic
S
X
0437
19,400
141,293
13.7
45.96
24.6
32.3
20.7
30.4
96400
Chemotherapy, sc/im
S
0438
57,472
81,546
70.5
51.98
0.0
6.3
0.0
4.5
96405
Chemo intralesional, up to 7
S
0438
142
181
78.5
193.65
0.0
12.0
0.0
10.5
96406
Chemo intralesional over 7
S
0438
2
7
28.6
46.42
0.0
0.0
0.0
0.0
96408
Chemotherapy, push technique
S
0439
21,113
134,447
15.7
96.85
10.6
21.3
2.4
13.6
96410
Chemotherapy, infusion method
S
0441
161,872
555,170
29.2
151.55
21.4
27.0
12.4
19.6
96414
Chemo, infuse method add-on
S
0441
2,370
14,561
16.3
182.89
15.4
23.0
8.6
15.6
96420
Chemo, ia, push tecnique
S
0439
170
933
18.2
99.86
9.6
27.6
4.2
15.4
96422
Chemo ia infusion up to 1 hr
S
0441
556
1,814
30.7
162.94
45.9
46.5
31.0
35.1
96425
Chemotherapy, infusion method
S
0441
149
557
26.8
216.68
29.4
33.5
14.7
24.4
96440
Chemotherapy, intracavitary
S
0439
38
104
36.5
37.12
0.0
2.1
0.0
1.5
96445
Chemotherapy, intracavitary
S
0439
43
137
31.4
61.98
23.8
25.0
23.7
21.1
96450
Chemotherapy, into CNS
S
0441
394
869
45.3
160.03
25.8
28.7
2.0
8.3
96520
Port pump refill & main
S
0440
9,771
23,928
40.8
140.66
29.0
31.5
16.8
23.6
96530
Syst pump refill & main
S
0440
8,334
19,283
43.2
100.00
7.4
22.2
0.7
13.7
96542
Chemotherapy injection
S
0438
511
929
55.0
51.56
0.0
10.8
0.0
6.5
By definition, we are unable to precisely assess the amount of packaging associated with drug administration codes in the multiple bills. As a proxy, we estimated packaging as a percent of total cost on
each claim for two subsets of claims. Both analyses suggest the presence of moderate packaged costs, especially drug and pharmacy costs, associated with drug administration services in the multiple bills. Table 3 below shows measures of central tendency for packaging percentages in the multiple bills or portions of multiple bills remaining after “pseudo” singles have been created. We refer to this group of the multiple bills as the “hardcore” multiple bills. For the first subset of “hardcore” multiple bills with only drug administration codes, that is, where multiple drug administration codes are the only separately paid procedure codes on the claim (defined as procedure codes with a status indicator of “S,” “T,” “V,” “X,” or “P”), we estimate that packaged costs are 22 percent of total costs (27 percent, on average), where total costs consist of costs for all payable codes. Costs for packaged drug HCPCS codes and pharmacy revenue codes comprise 13 percent of total cost at the median (19 percent, on average). For the second subset of “hardcore” multiple bills with any drug administration code, that is, where a drug administration code appears with other payable codes (largely radiology services and visits), we estimate packaged costs are 13 percent of total cost at the median (19 percent, on average). Costs for packaged drugs and pharmacy revenue codes comprise 6 percent of total cost at the median (10 percent, on average). The amount of packaging in both proxy measures, but especially the first subset, closely resembles the packaged costs as a percentage of drug administration costs observed in the single bills for drug administration services. While finding a way to accurately use data from the “hardcore” multiple bills to estimate drug administration median costs undoubtedly would impact medians, these comparisons suggest that the multiple bill data probably would support current median estimates.
Table 3.—Packaged Costs on Multiple Bill Claims for Drug Administration Services
Total frequency
All packaged costs as a percent of total cost
Median
Mean
Packaged drug and pharmacy costs as a percent of total cost
Median
Mean
Subset 1: “Hardcore” Multiple Claims with Only Drug Administration Codes
693,925
21.6
26.8
12.7
19.3
Subset 2: “Multiple” Claims with At Least One Drug Administration Code
4,816,338
13.2
19.4
5.8
10.0
We have received several comments over the past few years offering algorithms for packaging the costs associated with specific revenue codes or packaged drugs with certain drug administration codes. Because of the complexity of even routine OPPS claims, prior research suggests that such algorithms have limited power to generate additional single bill claims and do little to change median cost estimates. We continue to look for simple, but powerful, methodologies like the bypass list and packaging of HCPCS codes for additional ancillary and supportive services to assign packaged costs to all services within the “hardcore” multiple bills. Ideally, these methodologies should be intuitive to the provider community, easily integrated into the complexity of OPPS median cost estimation, and simple to maintain from year to year. We solicit and will carefully consider methodologies for creation of single bills that meet these criteria.
c. Proposed Calculation of CCRs
We calculate hospital-specific overall CCRs and hospital-specific departmental CCRs for each hospital for which we have claims data in the period of claims being used to calculate the median costs that we convert to scaled relative weights for purposes of setting the OPPS payment rates. We apply the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage
. Comments on the proposed configuration of the crosswalk for CY 2008 should be included with comments on this section of this proposed rule. We calculate CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculate CCRs is the hospital-specific departmental level.
Following the expiration of most medical devices from pass-through status in CY 2003, prior to which devices were paid at charges reduced to cost using the hospital's overall CCR, we received comments that our OPPS cost estimates for device implantation procedures systematically underestimate the cost of the devices included in the packaged payment for the procedures. Commenters informed us that hospitals routinely mark up charges for low cost items to a much greater extent than they mark up high cost items, and that these items are often combined in a single cost center on their Medicare cost report. Commenters stated that when items with widely varying costs are combined in a single cost center using that cost center's CCR to estimate costs from charges for those items, this approach will overestimate the cost of low cost items and underestimate the cost of high cost items. This is commonly known as “charge compression.” They stated that, in the case of implantable devices, the charges for both high cost devices and low cost supplies typically are reported under the medical supply revenue code series and that the costs of both typically are reported in the medical supply cost center on the cost report. Commenters stated that the application of one medical supply CCR to charges for all items reported under the medical supply revenue code underestimates the cost of expensive medical supplies and overestimates the cost of inexpensive supplies. They indicated that when these costs are packaged into the costs of the procedures in which they are used, the result is inaccurate median costs for the HCPCS codes and APCs, and thus the standard OPPS ratesetting methodology systematically distorts
relative payment weights for procedures using devices.
In CY 2006, the device industry commissioned a study to interpolate a device-specific CCR from the medical supply CCR, using publicly available hospital claim and Medicare cost report data rather than proprietary data on device costs. After reviewing the device industry's data analysis and study model, CMS contracted with RTI International (RTI) to study the impact of charge compression on the cost-based weight methodology adopted in the FY 2007 IPPS final rule, to evaluate this model and to propose solutions. For more information, interested individuals can view RTI's report on the CMS Web site at:
http://www.cms.hhs.gov/reports/downloads/Dalton.pdf
.
Any study of cost estimation in general, and charge compression specifically, has obvious importance for both the OPPS and the IPPS. RTI's research explicitly focused on the IPPS for several reasons, which include greater Medicare expenditure under the IPPS, a desire to evaluate the model quickly given IPPS regulation deadlines, and a focus on other components of the new FY 2007 IPPS cost-based weight methodology (CMS Contract No. 500-00-0024-T012, “A Study of Charge Compression in Calculating DRG Relative Weights,” page 5). The study first addressed the possibility of cross-aggregation bias in the CCRs used to estimate costs under the IPPS created by the IPPS methodology of aggregating cost centers into larger departments before calculating CCRs. The report also addressed potential bias created by estimating costs using a CCR that reflects the combined costs and charges of services with wide variation in the amount of hospital markup. In its assessment of the latter, RTI targeted its attempt to identify the presence of charge compression to those cost centers presumably associated with revenue codes demonstrating significant IPPS expenditures and utilization. RTI assessed the correlation between cost report CCRs and the percent of charges in a cost center attributable to a set of similar services represented by a group of revenue codes. RTI did not examine the correlation between CCRs and revenue codes without significant IPPS expenditures or a demonstrated concentration in a specific Diagnosis Related Group (DRG). For example, RTI did not examine revenue code groups within the pharmacy cost center with low proportionate inpatient charges that might be important to the OPPS, such as “Pharmacy Incident to Radiology.” RTI states this limitation in its study and specifically recommends that disaggregated CCRs be reestimated for outpatient hospital charges.
Cost report CCRs combine both inpatient and outpatient services. Ideally, RTI would be able to examine the correlation between CCRs for Medicare inpatient services and inpatient claim charges and the correlation between CCRs for Medicare outpatient services and outpatient claim charges. However, the comprehensive nature of the cost report CCR (which combines inpatient and outpatient services) argues for an analysis of the correlation between CCRs and combined inpatient and outpatient claim charges. As noted, the RTI study accepted some measurement error in its analysis by matching an “all charges” CCR to inpatient estimates of charges for groups of similar services represented by revenue codes because of short timelines and because inpatient costs dominate outpatient costs in many ancillary cost centers. We believe that CCR adjustments used to calculate payment should be based on the comparison of cost report CCRs to combined inpatient and outpatient charges. An “all charges” model would reduce measurement error and estimate adjustments to disaggregated CCRs that could be used in both hospital inpatient and outpatient payment systems.
RTI made several short-term recommendations for improving the accuracy of DRG weight estimates from a cost-based methodology to address bias in combining cost centers and charge compression that could be considered in the context of OPPS policy. We discuss each recommendation within the context of the OPPS and provide our assessment of its application to the OPPS. We do not discuss RTI's recommendations to change cost report policy, which, by definition, would not have an effect on payment weight estimates until several years in the future.
(1) RTI recommends expansion of the number of CCRs used under the IPPS (RTI study, pages 11 and 85). Our OPPS methodology is already more specific than the RTI recommendation. To the extent possible, the OPPS uses hospital-specific cost centers, both standard and nonstandard, to reduce charges to estimated costs and, therefore, the OPPS ratesetting methodology is already more specific than the RTI recommendation.
(2) RTI recommends disaggregation of emergency department and blood products from the “other services” CCR used in the IPPS (RTI study, pages 11 and 85). Because we use standard and nonstandard cost center data, our OPPS methodology already comports with this RTI recommendation. Further, we estimate a CCR for blood that is often higher than that in the cost report based on a special methodology that is discussed further in section X of this proposed rule. Therefore, the OPPS is already meeting, and in several cases exceeding, the RTI recommendation for specificity with regard to estimating the costs associated with emergency department and blood product services.
(3) RTI recommends reclassification of intermediate care charges from the intensive care unit to the routine cost center (RTI study, pages 10 and 85). This recommendation is not relevant to the OPPS because our methodology for calculating costs under the OPPS relies solely on ancillary cost centers and does not use either cost center included in the recommendation to estimate costs for hospital outpatient services.
(4) RTI recommends establishment of regression-based estimates as a temporary or permanent method for disaggregating national average CCRs for medical supplies, drugs, and radiology services under the IPPS (RTI study, pages 11 and 86). With regard to radiology services, RTI estimated significantly lower CCRs for the cost centers for computed tomography (CT) scans and magnetic resonance imaging (MRI) services. RTI triangulated its findings with lower observed CCRs for the one-third of providers reporting nonstandard cost centers, specifically MRI Scan and CT Scan. However, in using CCRs for nonstandard cost centers, including MRI Scan and CT Scan, the OPPS already has partially implemented RTI's recommendation to use lower CCRs to estimate costs for those OPPS services allocated to these two imaging cost centers.
For reasons discussed in more detail below, we are proposing to develop an all-charges model that would compare variation in CCRs with variation in combined inpatient and outpatient charges for sets of similar services and establish disaggregated CCRs that could be applied to both inpatient and outpatient charges. We are proposing to evaluate the results of that methodology for purposes of determining whether the resulting disaggregated CCRs should be proposed for use in developing the CY 2009 OPPS payment rates. The revised all-charges model and resulting disaggregated CCRs will not be available in time for use in the CY 2008 OPPS/ASC final rule with comment period.
There are several reasons that we are not proposing to use the intradepartmental CCRs that RTI estimated using IPPS charges for the CY 2008 OPPS estimation of median costs. We agree with RTI that the
intradepartmental CCRs it calculated for the IPPS would not always be appropriate for application to the OPPS (RTI study, pages 34 and 35). While RTI recommends that the model be recalibrated for outpatient charges before it is applied to the OPPS, we believe that the combined nature of the CCRs available from the cost report prevents an accurate outpatient recalibration that would be appropriate for the OPPS alone. The addition of outpatient charges could change the variability of combined charges for some groups of services. For example, if hospitals use a high volume of less complex devices with lower charges in the outpatient department, the inclusion or omission of the outpatient charges for these high volume and lower cost devices could change the estimated disaggregated device CCR. Furthermore, RTI's analysis excluded some revenue codes with extensive outpatient charges because these revenue codes play a minor role in the IPPS. Therefore, we believe that an all-charges model examining an expanded subset of revenue codes is most appropriate, and that this model must be developed before we could apply the resulting disaggregated CCRs to the charges for supplies paid under the OPPS.
Moreover, to implement the disaggregated IPPS-based CCRs in the OPPS that RTI estimated for CY 2008 could result in greater instability in relative payment weights for CY 2008 than would otherwise occur. Significant changes in CCRs, both increases and decreases, could prompt the reassignment of services to different APCs due to the new estimates of median costs and require modification of the overall APC structure. Not only might there be significant fluctuations in payment between the CY 2007 and CY 2008 OPPS, but a subsequent change to application of the disaggregated CCRs resulting from development of an all-charges model might also result in significant fluctuations in median costs and increased instability in payments from CY 2008 to CY 2009. Therefore, these sequential changes could result in significant increases in median costs in one year and significant declines in median costs in the next year.
Therefore, we are not proposing to adopt the RTI disaggregated CCRs under the CY 2008 OPPS. We will consider whether it would be appropriate to adopt disaggregated CCRs for the OPPS after we analyze the results of the use of both inpatient and outpatient charges across all payers to recalculate disaggregated CCRs.
2. Proposed Calculation of Median Costs
In this section of this proposed rule, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2008. The hospital OPPS page on the CMS Web site on which this proposed rule is posted provides an accounting of claims used in the development of the proposed rates on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS
. The accounting of claims used in the development of this proposed rule is included on the Web site under supplemental materials for the CY 2008 proposed rule. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below we discuss the files of claims that comprise the data sets that are available for purchase under a CMS data user contract. Our CMS Web site,
http://www.cms.hhs.gov/HospitalOutpatientPPS
, includes information about purchasing the following two OPPS data files: “OPPS Limited Data Set” and “OPPS Identifiable Data Set.”
We used the following methodology to establish the relative weights we are proposing to use in calculating the OPPS payment rates for CY 2008 shown in Addenda A and B to this proposed rule. This methodology is as follows:
We used outpatient claims for the full CY 2006, processed before January 1, 2007, to set the proposed relative weights for CY 2008. To begin the calculation of the relative weights for CY 2008, we pulled all claims for outpatient services furnished in CY 2006 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, CAH claims and hospital claims for clinical laboratory services for persons who are neither inpatients nor outpatients of the hospital).
We then excluded claims with condition codes 04, 20, 21, and 77. These are claims that providers submitted to Medicare knowing that no payment will be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare and document that a service is not covered. We then excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands because hospitals in those geographic areas are not paid under the OPPS.
We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 101 million claims that contain hospital bill types paid under the OPPS.
1. Claims that were not bill types 12X, 13X, 14X (hospital bill types), or 76X (CMHC bill types). Other bill types are not paid under the OPPS and, therefore, these claims were not used to set OPPS payment.
2. Claims that were bill types 12X, 13X, or 14X (hospital bill types). These claims are hospital outpatient claims.
3. Claims that were bill type 76X (CMHC). (These claims are later combined with any claims in item 2 above with a condition code 41 to set the per diem partial hospitalization rate determined through a separate process.)
For the CCR calculation process, we used the same general approach as we used in developing the final APC rates for CY 2007, using the revised CCR calculation which excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those for hospitals that filed outpatient claims in CY 2006 before determining whether the CCRs for such hospitals were valid.
We then calculated the CCRs for each cost center and the overall CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Healthcare Cost Report Information System (HCRIS). We used the most recent available cost report data, in most cases, cost reports for CY 2005. We used the most recently submitted cost report to calculate the CCRs to be used to calculate median costs for the proposed CY 2008 OPPS rates. If the most recent available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall CCR, and we then adjusted the most recent available submitted but not settled cost report using that ratio. We calculated both an overall CCR and cost center-specific CCRs for each hospital. We used the overall CCR calculation discussed in section II.A.1.c. of this proposed rule for all purposes that require use of an overall CCR.
We then flagged CAH claims, which are not paid under the OPPS, and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclusive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less than .0001); and those from hospitals with
overall CCRs that were identified as outliers (3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded ±3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs to match a cost center to every possible revenue code appearing in the outpatient claims, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing,” so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall CCR for the revenue code in question. For example, if a visit was reported under the clinic revenue code, but the hospital did not have a clinic cost center, we mapped the hospital-specific overall CCR to the clinic revenue code. The hierarchy of CCRs is available for inspection and comment on the CMS Web site:
http://www.cms.hhs.gov/HospitalOutpatientPPS.
We then converted the charges to costs on each claim by applying the CCR that we believed was best suited to the revenue code indicated on the line with the charge. Table 4 of this proposed rule contains a list of the allowed revenue codes. Revenue codes not included in Table 4 are those not allowed under the OPPS because their services cannot be paid under the OPPS (for example, inpatient room and board charges), and thus charges with those revenue codes were not packaged for creation of the OPPS median costs. One exception is the calculation of median blood costs, as discussed in section X. of this proposed rule.
Thus, we applied CCRs as described above to claims with bill types 12X, 13X, or 14X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals for which CCRs were flagged as invalid.
We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. These claims were combined with the 76X claims identified previously to calculate the partial hospitalization per diem rate.
We then excluded claims without a HCPCS code. We moved to another file claims that contained nothing but influenza and pneumococcal pneumonia (“PPV”) vaccines. Influenza and PPV vaccines are paid at reasonable cost and, therefore, these claims are not used to set OPPS rates. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above. Unlike years past, we did not create a separate file of claims containing observation services because we are proposing to package all observation care for the CY 2008 OPPS.
We next copied line-item costs for drugs, blood, and devices (the lines stay on the claim, but are copied onto another file) to a separate file. No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit mean and median and a per day mean and median for drugs, radiopharmaceutical agents, blood and blood products, and devices, including, but not limited to, brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.
We then divided the remaining claims into the following five groups:
1.
Single Major Claims:
Claims with a single separately payable procedure (that is, status indicator “S,” “ T,” “V,” or “X”).
2.
Multiple Major Claims:
Claims with more than one separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X”), or multiple units for one payable procedure. As discussed below, some of these can be used in median setting. We also included in this set claims that contain one unit of one code when the bilateral modifier is appended to the code and the code is one that is conditionally or independently bilateral. In these cases, these claims represent more than one unit of the service described by the code, notwithstanding that only one unit is billed.
3.
Single Minor Claims:
Claims with a single HCPCS code that is assigned to status indicator “F,” “G,” “H,” “K,” “L,” or “N.”
4.
Multiple Minor Claims:
Claims with multiple HCPCS codes that are assigned to status indicator “F,” “G,” “H,” “K,” “L,” or “N.”
5.
Non-OPPS Claims:
Claims that contain no services payable under the OPPS (that is, all status indicators other than those listed for major or minor status). These claims are excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment or clinical laboratory tests, and do not contain either a code for a separately paid service or a code for a packaged service.
We use status indicator “Q” in Addendum B to this proposed rule to identify services that receive separate HCPCS code-specific payment when specific criteria are met, and payment for the individual service is packaged in all other circumstances. We are proposing several different sets of criteria to determine whether separate payment would be made for specific services. For example, HCPCS code G0379 (Direct admission of patient for hospital observation care) is assigned to status indicator “Q” in Addendum B to this proposed rule because we are proposing that it receive separate payment only if it is billed on the same date of service as HCPCS code G0378 (Hospital observation service, per hour), without any services with status indicator “T” or “V,” or Critical Care (APC 0617). Proposed payment for observation services is discussed in section XI. of this proposed rule. The specific services in the proposed composite APCs discussed in section II.A.4. of this proposed rule also are assigned to status indicator “Q” in Addendum B to this proposed rule because we are proposing that their payment would be bundled into a single composite payment for a combination of major procedures under certain circumstances. These services would only receive separate code-specific payment if certain criteria are met. The same is true for those less intensive outpatient mental health treatment services for which payment is limited to the partial hospitalization per diem rate and which also are assigned to status indicator “Q” in Addendum B to this proposed rule. According to longstanding OPPS payment policy (65 FR 18455), payment for these individual mental health services is bundled into a single payment, APC 0034 (Mental Health Services Composite), when the sum of the individual mental health service payments for all of these mental health services provided on the same day would exceed payment for a day of partial hospitalization services. However, the largest number of specific HCPCS codes identified by status indicator “Q” in Addendum B to this proposed rule are those codes that we identify as “special” packaged codes, where we are proposing that a service receives separate payment when it appears on the same day on a claim without another service that is assigned to status indicator “S,” “T,” “V,” or “X.” We are proposing to package payment for these HCPCS codes when the code appears on the same date of service with any other service that is
assigned to status indicator “S,” “T,” “V,” or “X.”
This last and largest subset of conditionally packaged services have to be integrated into the identification of single and multiple bills to ensure that the costs for these services are appropriately packaged when they appear with any other separately paid service. We handle these conditionally packaged services in the data by assigning the HCPCS code an APC and a data status indicator of “N.” When the conditionally packaged HCPCS code appears with a HCPCS code with a status indicator of “S,” “T,” “V,” or “X” on the same date of service, it is treated as a packaged code. The costs that appear on the line with the code are packaged into the cost of the HCPCS code with a status indicator of “S,” “T,” “V,” or “X.” When the conditionally packaged HCPCS code appears by itself, we change the status indicator on the line to the status indicator of the APC to which the conditionally packaged code is assigned, converting the service from a minor to a major procedure. This creates single bills for these conditionally packaged services that are then used to set the median cost for the conditionally packaged code and for the APC to which it is assigned when it is separately paid.
The claims listed in numbers 1, 2, 3, and 4 above are included in the data files that can be purchased as described above.
In years prior to the CY 2007 OPPS, we made a determination of whether each HCPCS code was a major code or a minor code or a code other than a major or minor code. We used those code-specific determinations to sort claims into the five groups identified above. For the CY 2007 OPPS, we used status indicators to sort the claims into these groups. We defined major procedures as any procedure having a status indicator of “S,” “T,” “V,” or “X;” defined minor procedures as any code having a status indicator of “N;” and classified “other” procedures as any code having a status indicator other than “S,” “T,” “V,” “X,” or “N.” For the CY 2007 OPPS proposed rule limited data set and identifiable data set, these definitions excluded claims on which hospitals billed drugs and devices without also billing separately paid procedure codes and, therefore, these public use files did not contain all claims used to calculate the drug and device frequencies and medians. We corrected this for the CY 2007 OPPS/ASC final rule with comment period limited data set and identifiable data set by extracting claims containing drugs and devices from the set of “other” claims and adding them to the public use files.
At its March 2007 meeting, the APC Panel recommended that CMS edit and return for correction claims that contain a HCPCS code for a separately paid drug or device but that also do not contain a HCPCS code assigned to a procedural APC (that is, those not assigned status indicator “S,” “T,” “V,” or “X”). The APC Panel stated that this edit should improve the claims data and may increase the number of single bills available for ratesetting. We note that such an edit would be broader than the device-to-procedure code edits we implemented for CY 2007 for selected devices. While we encourage hospitals to code correctly in accordance with CPT, CMS, and local contractor guidance, in general we have historically implemented claims processing edits under the OPPS when we believe that these edits help ensure complete claims data for ratesetting. In the case of such Outpatient Code Editor (OCE) edits for drugs and devices that are separately paid, it is unclear to us that these edits would improve our claims data for median cost calculation because the items receive separate payment and do not result in multiple procedure claims when they are reported. We also are uncertain about the clinical circumstances that could result in a hospital submitting an OPPS claim that only reported a separately paid drug or device. We are soliciting comments specifically on the impact of establishing such edits on hospital billing processes and on related potential improvements to claims data used for median setting.
Therefore, in view of the prior public comments and our desire to ensure that the public data files contain all appropriate data, for the CY 2008 OPPS, we are proposing to define major procedures as HCPCS codes that have a status indicator of “S,” “T,” “V,” or “X.” We are proposing to define minor procedures as HCPCS codes that have a status indicator of “F,” “G,” “H,” “K,” “L,” or “N” but, as we discuss above, to make single bills out of any claims for single procedures with a minor code that also has an APC assignment. This ensures that the claims that contain only codes for drugs and biologicals or devices but that do not contain codes for procedures are included in the limited data set and the identifiable data set. It also ensures, as discussed above, that conditionally packaged services that receive separate payment only when they are billed without any other separately payable OPPS services are treated appropriately for purposes of median cost calculations. We are proposing to define “other” services as HCPCS codes that have a status indicator other than those defined as major or minor procedures.
We continue to believe that using status indicators, with the proposed changes, is an appropriate way to sort the claims into these groups and also to make our process more transparent to the public. We further believe that this proposed method of sorting claims would enhance the public's ability to derive useful information for analysis and public comment on this proposed rule.
We set aside the single minor, multiple minor, and non-OPPS claims (numbers 3, 4, and 5 above) because we did not use these claims in calculating median costs of procedural APCs. We then examined the multiple major claims for dates of service to determine if we could break them into single procedure claims using the dates of service on all lines on the claim. If we could create claims with single major procedures by using date of service, we created a single procedure claim record for each separately paid procedure on a different date of service (that is, a “pseudo” single).
We then used the bypass codes listed in Table 1 of this proposed rule and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures that we determined contain limited costs or no packaged costs or were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claims records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges.
We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single claims by dividing the cost for the multiple units by the number of units on the line. Where one unit of a single, separately paid procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used. We excluded those claims that we were not able to
convert to single claims even after applying all of the techniques for creation of “pseudo” singles. Among those excluded were claims that contain codes that are viewed as independently or conditionally bilateral and that contain the bilateral modifier (Modifier 50, Bilateral procedure) because the line-item cost for the code represents the cost of two units of the procedure, notwithstanding that the code appears with a unit of one. Therefore, the charge on the line represents the charge for two services rather than a single service and using the line as reported would overstate the cost of a single procedure. We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this proposed rule) and packaged revenue codes into the cost of the single major procedure remaining on the claim.
The list of packaged revenue codes is shown in Table 4 of this proposed rule. At its March 2007 meeting the APC Panel recommended that CMS review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the OCE edit accordingly. We compared the packaged revenue codes in the OCE to the finalized list of packaged revenue codes for the CY 2007 OPPS (71 FR 67989 through 67990) that we used for packaging costs in median calculation. As a result of that analysis, we are accepting the APC Panel's recommendation and we are proposing to change the list of packaged revenue codes for the CY 2008 OPPS in the following manner. First, we are proposing to remove revenue codes 0274 (Prosthetic/Orthotic devices) and 0290 (Durable Medical Equipment) from the list of packaged revenue codes because we do not permit hospitals to report implantable devices in these revenue codes (Internet Only Manual 100-4, Chapter 4, section 20.5.1.1). We also are proposing to add revenue code 0273 (Take Home Supplies) to the list of packaged revenue codes because we believe that the charges under this revenue code are for the incidental supplies that hospitals sometimes provide for patients who are discharged at a time when it is not possible to secure the supplies needed for a brief time at home. We are proposing to conform the list of packaged revenue codes in the OCE to the OPPS for CY 2008.
We packaged the costs of the HCPCS codes that are shown with status indicator “N” into the cost of the independent service to which the packaged service is ancillary or supportive. We refer readers to section II.A.4. of this proposed rule for a more complete discussion of the packaging changes we are proposing for CY 2008.
After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 54 million claims were left. Of these 54 million claims, we were able to use some portion of approximately 50 million whole claims (92 percent of approximately 54 million potentially usable claims) to create approximately 88 million single and “pseudo” single claims, of which we used 87 million single bills (after trimming out just over 822,000 claims as discussed below) in the CY 2008 median development and for ratesetting.
We also excluded (1) claims that had zero costs after summing all costs on the claim and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the OCE assigns packaging flag number 3 to claims on which hospitals submit token charges for a service with status indicator “S” or “T” (a major separately paid service under the OPPS) for which the fiscal intermediary is required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the weight for the APC to which each code is assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equal the revenue center payment (that is, the Medicare payment) on the assumption that where the charge equals the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost.
For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. As has been our policy since the inception of the OPPS, we are proposing to use the pre-reclassified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the post-reclassification wage indices and, therefore, would result in the most accurate unadjusted median costs.
We also excluded claims that were outside 3 standard deviations from the geometric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multiple units of the bypass codes).
We used the remaining claims to calculate the CY 2008 proposed median costs for each separately payable HCPCS code and each APC. The comparison of HCPCS and APC medians determines the applicability of the “2 times” rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median (or mean cost, if elected by the Secretary) for an item or service in the group is more than 2 times greater than the lowest median cost for an item or service within the same group (“the 2 times rule”). Finally, we reviewed the medians and reassigned HCPCS codes to different APCs where we believed that it was appropriate. Section III. of this proposed rule includes a discussion of certain proposed HCPCS code assignment changes that resulted from examination of the medians and for other reasons. The APC medians were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS medians and the APC medians were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single bills.
In our review of median costs for HCPCS codes and their assigned APCs, we have frequently noticed that some services are consistently rarely performed in the hospital outpatient setting for the Medicare population. In particular, there are a number of services, such as several procedures related to the care of pregnant women, that have annual Medicare claims volume of 100 or fewer occurrences. By definition, these services also have a small number of single bills from which to estimate median costs. In addition, in some cases, these codes have been historically assigned to clinical APCs where all the services are low volume. Therefore, the median costs for these services and APCs often fluctuate from year to year, in part due to the variability created by such a small number of claims. One of the benefits of basing payment on the median cost of many HCPCS codes with sufficient single bill representation in an APC is that such fluctuation is moderated by the increased number of observations for similar services on which the APC median cost is also based. We considered proposing a distinct methodology for calculation of the
median cost of low total volume APCs in order to provide more stability in payment from year to year for these low total volume services. However, after examination of the low total volume OPPS services and their assigned APCs, we concluded that there were other clinical APCs with higher volumes of total claims to which these low total volume services could be reassigned, while ensuring the continued clinical and resource homogeneity of the clinical APCs to which they would be newly reassigned. Therefore, we believe that it is more appropriate to reconfigure clinical APCs to eliminate most of the low total volume APCs. These low volume services differ from other OPPS services only because they are not often furnished to the Medicare population. Therefore, we are proposing to reconfigure certain clinical APCs for CY 2008 as a way to promote stability and appropriate payment for the services assigned to them, including low total volume services. We believe that these proposed reconfigurations maintain APC clinical and resource homogeneity. We are proposing these changes as an alternative to developing specific quantitative approaches to treating low total volume APCs differently for purposes of median calculation. As a result of this proposal, 3 APCs proposed for CY 2008 (all of which are New Technology APCs) have a total volume of services less than 100, and only 17 APCs have a total volume of less than 1,000, in comparison with CY 2007 where 9 APCs (including 3 New Technology APCs) had a total volume of less than 100 and 36 APCs had a total volume of less than 1,000.
A detailed discussion of the medians for blood and blood products is included in section X. of this proposed rule. A discussion of the medians for APCs that require one or more devices when the service is performed is included in section IV.A. of this proposed rule. A discussion of the median for partial hospitalization is included below in section II.B. of this proposed rule.
Table 4.—Proposed CY 2008 Packaged Revenue Codes
Revenue code
Description
0250
PHARMACY.
0251
GENERIC.
0252
NONGENERIC.
0254
PHARMACY INCIDENT TO OTHER DIAGNOSTIC.
0255
PHARMACY INCIDENT TO RADIOLOGY.
0257
NONPRESCRIPTION DRUGS.
0258
IV SOLUTIONS.
0259
OTHER PHARMACY.
0260
IV THERAPY, GENERAL CLASS.
0262
IV THERAPY/PHARMACY SERVICES.
0263
SUPPLY/DELIVERY.
0264
IV THERAPY/SUPPLIES.
0269
OTHER IV THERAPY.
0270
M&S SUPPLIES.
0271
NONSTERILE SUPPLIES.
0272
STERILE SUPPLIES.
0273
TAKE HOME SUPPLIES.
0275
PACEMAKER DRUG.
0276
INTRAOCULAR LENS SOURCE DRUG.
0278
OTHER IMPLANTS.
0279
OTHER M&S SUPPLIES.
0280
ONCOLOGY.
0289
OTHER ONCOLOGY.
0343
DIAGNOSTIC RADIOPHARMS.
0344
THERAPEUTIC RADIOPHARMS.
0370
ANESTHESIA.
0371
ANESTHESIA INCIDENT TO RADIOLOGY.
0372
ANESTHESIA INCIDENT TO OTHER DIAGNOSTIC.
0379
OTHER ANESTHESIA.
0390
BLOOD STORAGE AND PROCESSING.
0399
OTHER BLOOD STORAGE AND PROCESSING.
0560
MEDICAL SOCIAL SERVICES.
0569
OTHER MEDICAL SOCIAL SERVICES.
0621
SUPPLIES INCIDENT TO RADIOLOGY.
0622
SUPPLIES INCIDENT TO OTHER DIAGNOSTIC.
0624
INVESTIGATIONAL DEVICE (IDE).
0630
DRUGS REQUIRING SPECIFIC IDENTIFICATION, GENERAL CLASS.
0631
SINGLE SOURCE.
0632
MULTIPLE.
0633
RESTRICTIVE PRESCRIPTION.
0681
TRAUMA RESPONSE, LEVEL I.
0682
TRAUMA RESPONSE, LEVEL II.
0683
TRAUMA RESPONSE, LEVEL III.
0684
TRAUMA RESPONSE, LEVEL IV.
0689
TRAUMA RESPONSE, OTHER.
0700
CAST ROOM.
0709
OTHER CAST ROOM.
0710
RECOVERY ROOM.
0719
OTHER RECOVERY ROOM.
0720
LABOR ROOM.
0721
LABOR.
0762
OBSERVATION ROOM.
0810
ORGAN ACQUISITION.
0819
OTHER ORGAN ACQUISITION.
0942
EDUCATION/TRAINING.
3. Proposed Calculation of OPPS Scaled Payment Weights
Using the median APC costs discussed previously, we calculated the proposed relative payment weights for each APC for CY 2008 shown in Addenda A and B to this proposed rule. In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid Level Clinic Visit) because it is one of the most frequently performed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC.
Beginning with the CY 2007 OPPS, we standardized all of the relative payment weights to APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of the visit APCs. We chose APC 0606 as the base because under our proposal to reconfigure the APCs where clinic visits are assigned for CY 2007, APC 0606 is the middle level clinic visit APC (that is, Level 3 of five levels). We have historically used the median cost of the middle level clinic visit APC (that is APC 0601 through CY 2006) to calculate unscaled weights because mid-level clinic visits are among the most frequently performed services in the hospital outpatient setting. Therefore, to maintain consistency in using a median for calculating unscaled weights representing the median cost of some of the most frequently provided services, we proposed to continue to use the median cost of the mid-level clinic APC, proposed APC 0606, to calculate unscaled weights. Following our standard methodology, but using the CY 2007 median for APC 0606, for CY 2007 we assigned APC 0606 a relative payment weight of 1.00 and divided the median cost of each APC by the median cost for APC 0606 to derive the unscaled relative payment weight for each APC. The choice of the APC on which to base the relative weights for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality. We are again proposing to use APC 0606 as the base for the CY 2008 OPPS relative weights.
Section 1833(t)(9)(B) of the Act requires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a manner that assures that aggregate payments under the OPPS for CY 2008 are neither greater than nor less than the aggregate payments that would have been made without the changes. To comply with this requirement concerning the APC changes, we compared aggregate payments using the CY 2007 relative weights to aggregate payments using the CY 2008 proposed relative weights. This year, we included payments to CMHCs in our comparison. Based on this comparison, we adjusted the relative weights for purposes of budget neutrality. The unscaled relative payment weights were adjusted by a weight scaler of 1.3665 for budget neutrality. In addition to adjusting for increases and decreases in weight due to the recalibration of APC medians, the scaler also accounts for any change in the base, other than changes in volume, which are not a factor in the weight scaler.
The proposed relative payment weights listed in Addenda A and B to this proposed rule incorporate the recalibration adjustments discussed in sections II.A.1. and 2. of this proposed rule.
Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of Pub. L. 108-173, states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting and other adjustment factors for 2004 and 2005 under paragraph (9) but shall be taken into account for subsequent years.” Section 1833(t)(14) of the Act provides the payment rates for certain “specified covered outpatient drugs.” Therefore, the cost of those specified covered outpatient drugs (as discussed in section V. of this proposed rule) is included in the budget neutrality calculations for the CY 2008 OPPS.
4. Proposed Changes to Packaged Services
(If you choose to comment on the issues in this section, please include the caption “OPPS: Packaged Services” at the beginning of your comment.)
a. Background
When the Medicare program was first implemented, it paid for hospital services (inpatient and outpatient) based on hospital-specific reasonable costs attributable to furnishing services to Medicare beneficiaries. Later the law was amended to limit payment to the lesser of the hospital's reasonable cost or customary charges for services furnished to Medicare beneficiaries. Specific service-based methodologies were then developed for certain types of services, such as clinical laboratory tests and durable medical equipment, while payments for outpatient surgical procedures and other diagnostic tests were based on a blend of the hospital's aggregate Medicare costs for these services and Medicare's payment for similar services in other ambulatory settings. While this mix of different payment methodologies was in use, hospital outpatient services were growing rapidly following the implementation of the IPPS in 1983. The brisk increase in hospital outpatient services led to an interest in creating payment incentives to promote more efficient delivery of hospital outpatient services through a Medicare prospective payment system for hospital outpatient services, and the final statutory requirements for the OPPS were established by the BBA and the BBRA. During the period of time when different approaches to prospective payment for hospital outpatient services were being considered, a variety of reports to Congress (June 1988, September 1990, and March 1995) discussed three major issues related to defining the unit of payment for the payment system, specifically the extent to which clinically similar procedures should be grouped for payment purposes and the logic that should be used for the groupings; the extent to which payment for minor, ancillary services associated with a significant
procedure should be packaged into a single payment for the procedure (which we refer to as “packaging”); and the extent to which payment for multiple significant procedures related to an outpatient encounter or to an episode of care should be bundled into a single unit of payment (which we refer to as “bundling”). Both packaging and bundling were presented as approaches to creating incentives for efficiency, with their potential policy disadvantages including inconsistency with other ambulatory fee schedules, reduced transparency of service-specific payment, and the potential for hospitals shifting the delivery of packaged or bundled services to delivery settings other than the hospital outpatient department (HOPD).
The OPPS, like other prospective payment systems, relies on the concept of averaging, where the payment may be more or less than the estimated costs of providing a service or package of services for a particular patient, but with the exception of outlier cases, it is adequate to ensure access to appropriate care. Decisions about packaging and bundling payment involve a balance between ensuring some separate payment for individual services and establishing incentives for efficiency through larger units of payment. In many situations, the final payment rate for a package of services may do a better job of balancing variability in the relative costs of component services compared to individual rates covering a smaller unit of service without packaging or bundling. Packaging payments into larger payment bundles promotes the stability of payment for services over time, a characteristic that reportedly is very important to hospitals. Unlike packaged services, the costs of individual services typically show greater variation because the higher variability for some component items and services cannot be balanced with lower variability for others and because relative weights are typically estimated using a smaller set of claims. When compared to service-specific payment, packaging or bundling payment for component services may change payment at the hospital level to the extent that there are systematic differences across hospitals in their performance of the services included in that unit of payment. Hospitals spending more per case than payment received would be encouraged to review their service patterns to ensure that they furnish services as efficiently as possible. Similarly, we believe that unpackaging services heightens the hospital's focus on pricing individual services, rather than the efficient delivery of those services. Over the past several years of the OPPS, greater unpackaging of payment has occurred simultaneously with continued tremendous growth in OPPS expenditures as a result of increasing volumes of individual services, as discussed in further detail below. Also discussed in further detail below, most recently in its comments to the CY 2007 OPPS/ASC proposed rule and in the context of this rapid spending growth, the Medicare Payment Advisory Commission (MedPAC) encouraged CMS to broaden the payment bundles under the OPPS to encourage providers to use resources efficiently.
As permitted under section 1833(t)(2)(B) of the Act, the OPPS establishes groups of covered HOPD services, namely APC groups, and uses them as the basic unit of payment. During the evolution of the OPPS over the past 7 years, significant attention has been concentrated on service-specific payment for services furnished to particular patients, rather than on creating incentives for the efficient delivery of services through encounter or episode-of-care-based payment. Overall packaging included in the clinical APCs has decreased, and the procedure groupings have become smaller as the focus has shifted to refining service-level payment. Specifically, in the CY 2003 OPPS, there were 569 APCs, but by CY 2007, the number of APCs had grown to 862, a 51-percent increase in 4 years. Similarly, the percentage of CPT codes for procedural services that receive packaged payment declined by over 10 percent between CY 2003 and CY 2007.
Currently, the APC groups reflect a modest degree of packaging, including packaged payment for minor ancillary services, inexpensive drugs, medical supplies, implantable devices, capital-related costs, operating and recovery room use, and anesthesia services. Bundling payment for multiple significant services provided in the same hospital outpatient encounter or during an episode of care is not currently a common OPPS payment practice, because the APC groups generally reflect only the modest packaging associated with individual procedures or services. Unconditionally packaged services with HCPCS codes are identified by the status indicator “N.” Conditionally packaged services, specifically those services whose payment is packaged unless specific criteria for separate payment are met, are assigned to status indicator “Q.” To the extent possible, hospitals may use HCPCS codes to report any packaged services that were performed, consistent with CPT or CMS coding guidelines, but packaged costs also may be uncoded and included in specific revenue code charges. Hospitals include charges for packaged services on their claims, and the costs associated with those packaged services are then added into the costs of separately payable procedures on the same claims in establishing payment rates for the separately payable services.
Packaging and bundling payment for multiple interrelated services into a single payment creates incentives for providers to furnish services in the most efficient way by enabling hospitals to manage their resources with maximum flexibility, thereby encouraging long-term cost containment. For example, where there are a variety of supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the least expensive item that meets the patient's needs, rather than to routinely use a more expensive item. Packaging also encourages hospitals to negotiate carefully with manufacturers and suppliers to reduce the costs of purchased items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care. Similarly, packaging encourages hospitals to establish protocols that ensure that services are furnished only when they are important and to carefully scrutinize the services ordered by practitioners to maximize the efficient use of hospital resources. Finally, packaging payments into larger payment bundles promotes the stability of payment for services over time. Packaging also may reduce the importance of refining service-specific payment because there is more opportunity for hospitals to average payment across higher cost cases requiring many ancillary services and lower cost cases requiring fewer ancillary services.
b. Addressing Growth in OPPS Volume and Spending
Creating additional incentives for providing only necessary services in the most efficient manner is of vital importance to Medicare today, in view of the recent explosion of growth in program expenditures for hospital outpatient services paid under the OPPS. As illustrated in Table 5 below, total spending has been growing at a rate of roughly 10 percent per year under the OPPS, and the Medicare Trustees project that total spending under the OPPS will increase by more than $3 billion from CY 2007 through CY 2008 to nearly $35 billion. Implementation of the OPPS has not
slowed outpatient spending growth over the past few years; in fact, double-digit spending growth has generally been occurring. We are greatly concerned with this rate of increase in program expenditures under the OPPS.
Table 5.—Growth in Expenditures Under OPPS From CY 2001-CY 2008
[Projected Expenditures for CY 2006-CY 2008, in Billions]
OPPS growth
CY 2001
CY 2002
CY 2003
CY 2004
CY 2005
CY 2006
CY 2007
CY 2008
Incurred Cost
17.702
19.561
21.156
23.866
26.572
29.338
31.641
34.960
Percent Increase
10.5
8.2
12.8
11.3
10.4
7.8
10.5
Source: CY 2007 Medicare Trustees' Report.
As with the other Medicare fee-for-service payment systems that are experiencing rapid spending growth, brisk growth in the intensity and utilization of services is the major reason for the current rates of growth in the OPPS, rather than general price or enrollment changes. Table 6 below illustrates the increases in the volume and intensity of hospital outpatient services over the past several years.
Table 6.—Percent Increase in Volume and Intensity of Hospital Outpatient Services
CY 2002
CY 2003
CY 2004
CY 2005
CY 2006
(Est.)
CY 2007
(Est.)
CY 2008
(Est.)
Percent Increase
3.5
2.5
7.6
7.4
8.6
6.4
5.8
Source: CY 2007 Medicare Trustees' Report.
For hospital outpatient services, the volume and intensity of services are estimated to have continued to increase significantly in recent years, at a rate of 8.6 percent between CY 2005 and CY 2006, the last two completed calendar years. As we discussed in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68189 through 68190), the rapid growth in utilization of services under the OPPS shows that Medicare is paying mainly for more services each year, regardless of their quality or impact on beneficiary health. In its March 2007 Report to Congress (pages 55 and 56), MedPAC confirmed that much of the growth in service volume from 2003 to 2005 resulted from increases in the number of services per beneficiary who received care, rather than from increases in the number of beneficiaries served. The MedPAC found that while the rate of growth in service volume declined over that time period, the complexity of services, defined as the sum of the relative payment weights of all OPPS services divided by the volume of all services, increased, and that most of the growth was attributable to the insertion of devices and the provision of complex imaging services. The MedPAC further found that regression analysis suggested that relatively complex hospital outpatient services may be more profitable for hospitals than less complex services. In addition, its analysis indicated that favorable payments for complex services give hospitals an incentive to provide more of those complex services rather than fewer basic services, which increases overall service complexity. The MedPAC expressed concern about this relationship and concluded that the historically large increases in outpatient volume and service complexity suggest a need to recalibrate the OPPS. In the future, MedPAC plans to examine options for recalibrating the payment system to accurately match payments to the costs of individual services (Medicare Payment Advisory Commission Report to the Congress: Medicare Payment Policy, March 2007, pages 55 and 56).
As proposed for the CY 2007 OPPS and finalized for the CY 2009 OPPS, we developed a plan to promote higher quality services under the OPPS, so that Medicare spending would be directed toward those higher quality services (71 FR 68189 through 68197). We believe that Medicare payments should encourage physicians and other providers in their efforts to achieve better health outcomes for Medicare beneficiaries at a lower cost. In the CY 2007 OPPS/ASC final rule with comment period, we discussed the concept of “value-based purchasing” in the OPPS as well as in other Medicare payment systems. “Value-based purchasing” may use a range of incentives to achieve identified quality and efficiency goals, as a means of promoting better quality of care and more effective resource use in the Medicare payment systems. In developing the concept of value-based purchasing for Medicare, we have been working closely with stakeholder partners.
We continue to believe that the collection and submission of performance data and the public reporting of comparative information are strong incentives for hospital accountability in general and quality improvement in particular, while encouraging the most efficient and effective care. Measurement and reporting can focus the attention of hospitals and consumers on specific goals and on hospitals' performance relative to those goals. Development and implementation of performance measurement and reporting by hospitals can thus produce quality improvement in health care delivery. Hospital performance measures may also provide a foundation for performance-based rather than volume-based payments.
In the CY 2007 OPPS/ASC final rule with comment period, as a first step in the OPPS toward value-based purchasing, we finalized a policy that would employ our equitable adjustment authority under section 1833(t)(2)(E) of the Act to establish an OPPS Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program based on measures specifically developed to characterize the quality of outpatient care (71 FR 68197). We finalized implementation of the program for CY 2009, when we would implement a 2.0 point reduction to the OPPS conversion factor update for those hospitals that do not meet the specific requirements of the CY 2009 OPPS RHQDAPU program. We described the
CY 2009 program which would be based upon CY 2008 hospital reporting of appropriate measures of the quality of hospital outpatient care that have been carefully developed and evaluated, and endorsed as appropriate, with significant input from stakeholders. We reiterated our belief that ensuring that Medicare beneficiaries receive the care they need and that such services are of high quality are the necessary initial steps to incorporating value-based purchasing into the OPPS. We explained that we are specifically seeking to encourage care that is both efficient and of high quality in the HOPD.
Subsequent to the publication of the CY 2007 OPPS/ASC final rule with comment period, section 109(b) of the MIEA-TRHCA specifies that in the case of a subsection (d) hospital (defined under section 1886(d)(1)(B) of the Act as hospitals that are located in the 50 States or the District of Columbia other than those categories of hospitals or hospital units that are specifically excluded from the IPPS, including psychiatric, rehabilitation, long-term care, children's, and cancer hospitals or hospital units) that does not submit to the Secretary the quality reporting data required for CY 2009 and each subsequent year, the OPPS annual update factor shall be reduced by 2.0 percentage points. The quality reporting program proposed for CY 2008 according to this provision
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