# Medicare Program: Changes to the Hospital Outpatient Prospective Payment System and CY 2008 Payment Rates, the Ambulatory Surgical Center Payment System and CY 2008 Payment Rates, the Hospital Inpatient Prospective Payment System and FY 2008 Payment Rates; and Payments for Graduate Medical Education for Affiliated Teaching Hospitals in Certain Emergency Situations Medicare and Medicaid Programs: Hospital Conditions of Participation; Necessary Provider Designations of Critical Access Hospitals > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A07-5507 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** November 27, 2007 - **Citation:** 72 FR 66580 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 410, 411, 412, 413, 414, 416, 419, 482, and 485 [CMS-1392-FC], [CMS-1533-F2], and [CMS-1531-IFC2] RIN 0938-AO71, RIN 0938-AO70, and RIN 0938-AO35 Medicare Program: Changes to the Hospital Outpatient Prospective Payment System and CY 2008 Payment Rates, the Ambulatory Surgical Center Payment System and CY 2008 Payment Rates, the Hospital Inpatient Prospective Payment System and FY 2008 Payment Rates; and Payments for Graduate Medical Education for Affiliated Teaching Hospitals in Certain Emergency Situations Medicare and Medicaid Programs: Hospital Conditions of Participation; Necessary Provider Designations of Critical Access Hospitals AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Interim and final rule with comment period. SUMMARY: This final rule with comment period revises the Medicare hospital outpatient prospective payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system. We describe the 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 are applicable to services furnished on or after January 1, 2008. In addition, the rule sets forth 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 apply, and other pertinent rate setting information for the CY 2008 ASC payment system. Furthermore, this final rule with comment period will make changes to the policies relating to the necessary provider designations of critical access hospitals and changes to several of the current conditions of participation requirements. The attached document also incorporates the changes to the FY 2008 hospital inpatient prospective payment system (IPPS) payment rates made as a result of the enactment of the TMA, Abstinence Education, and QI Programs Extension Act of 2007, Public Law 110-90. In addition, we are changing the provisions in our previously issued FY 2008 IPPS final rule and are establishing a new policy, retroactive to October 1, 2007, of not applying the documentation and coding adjustment to the FY 2008 hospital-specific rates for Medicare-dependent, small rural hospitals (MDHs) and sole community hospitals (SCHs). In the interim final rule with comment period in this document, we are modifying our regulations relating to graduate medical education (GME) payments made to teaching hospitals that have Medicare affiliation agreements for certain emergency situations. DATES: Effective Date: The provisions of this rule are effective on January 1, 2008. IPPS Payment Rates: The FY 2008 IPPS payment rates, provided in section XIX of the preamble of this document, became effective October 1, 2007. Comment Period: We will consider comments on the payment classifications assigned to HCPCS codes identified in Addenda B, AA, and BB to this final rule with the “NI” comment indicator, and other areas specified throughout this rule, at the appropriate address, as provided below, no later than 5 p.m. EST on January 28, 2008. We will also consider comments relating to the Medicare GME teaching hospital affiliated agreement provisions, as provided below, no later than 5 p.m. EST on January 28, 2008. Application Deadline—New Class of New Technology Intraocular Lens: Requests for review of applications for a new class of new technology intraocular lenses must be received by 5 p.m. EST on April 1, 2008. Deadline for Submission of Written Medicare GME Affiliation Agreements: Written Medicare GME affiliation agreements must be received by 5 p.m. EST on January 1, 2008. ADDRESSES: In commenting, please refer to file codes CMS-1392-FC (for OPPS and ASC matters) or CMS-1531-IFC (for Medicare GME matters), as appropriate. 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-FC (for OPPS and ASC matters), Attention: CMS-1531-IFC (for Medicare GME matters), P.O. Box 8013, 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-FC (for OPPS and ASC matters), Attention: CMS-1531-IFC (for Medicare GME matters), 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 who wish to retain proof of filing by stamping in and retain 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. Applications for a new class of new technology intraocular lenses: Requests for review of applications for a new class of new technology intraocular lenses must be sent by regular mail to:ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services,7500 Security Boulevard,Baltimore, MD 21244-1850. Submissions of written Medicare GME affiliation agreements: Written Medicare GME affiliation agreements must be sent by regular mail to:Centers for Medicare and Medicaid Services, Division of Acute Care, Attention: Elizabeth Troung or Renate Rockwell,Mailstop C4-08-06,7500 Security Boulevard, Baltimore, MD 21244-1850. 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 center 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. Miechal Lefkowitz, (410) 786-5316, Hospital inpatient prospective payment system issues. Tzvi Hefter, (410) 786-4487, Graduate medical education program issues. SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments from the public on the OPPS APC assignments and/or status indicators assigned to HCPCS codes identified in Addendum B to this final rule with comment period with comment indicator “NI” and on the ASC payment indicators assigned to HCPCS codes identified in Addenda AA and BB to this final rule with comment period with comment indicator “NI” in order to assist us in fully considering issues and developing OPPS and ASC payment policies for those services. You can assist us by referencing file code CMS-1392-FC. We also welcome comments from the public on all issues set forth regarding the revised regulations regarding the Medicare GME affiliation agreements to assist us in fully considering issues and developing policies. You can assist us by referencing the file code CMS-1531-IFC2 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 This Federal Register document is also available from the Federal Register online database through GPO Access , 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 This Final Rule With Comment Period 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 GME Graduate medical education 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 IME Indirect medical education 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 vaccine 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 several payment systems under the Medicare program: The hospital outpatient prospective payment system (OPPS); the revised ambulatory surgical center (ASC) payment system; the hospital inpatient prospective payment system (IPPS); and payments for direct and indirect graduate medical education (GME). The provisions relating to the OPPS are included in sections I. through XV., XVII., XXI. through XXIV. of this final rule with comment period and in Addenda A, B, C (Addendum C is available on the Internet only; see section XXI. of this final rule with comment period), D1, D2, E, L, and M to this final rule with comment period. The provisions related to the revised ASC payment system are included in sections XVI., XVII., and XXI. through XXIV. of this final rule with comment period and in Addenda AA, BB, DD1, DD2, and EE (Addendum EE is available on the Internet only; see section XXI. of this final rule with comment period) to this final rule with comment period. The provisions relating to the IPPS payment rates are included in section XIX., XXIV., and XXV. of this document. The provisions relating to policy changes to the Medicare GME affiliation provisions for teaching hospitals in certain emergency situations are included in sections XX., XXIV., and XXV. of this document. 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, Title I of the Tax Relief and Health Care Act of 2006 F. Summary of the Major Contents of the CY 2008 OPPS/ASC Proposed Rule 1. Updates Affecting OPPS Payments 2. OPPS Ambulatory Payment Classification (APC) Group Policies 3. OPPS Payment for Devices 4. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 5. Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, and Devices 6. OPPS Payment for Brachytherapy Sources 7. OPPS Coding and Payment for Drug Administration Services 8. OPPS Hospital Coding and Payment for Visits 9. OPPS Payment for Blood and Blood Products 10. OPPS Payment for Observation Services 11. Procedures That Will Be Paid Only as Inpatient Services 12. Nonrecurring Technical and Policy Changes 13. OPPS Payment Status and Comment Indicators 14. OPPS Policy and Payment Recommendations 15. Update of the Revised ASC Payment System 16. Quality Data for Annual Payment Updates 17. Changes Affecting Necessary Provider Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs) 18. Regulatory Impact Analysis G. Public Comments Received in Response to the CY 2008 OPPS/ASC Proposed Rule H. Public Comments Received on the November 24, 2006 OPPS/ASC Final Rule with Comment Period II. Updates Affecting OPPS Payments A. Recalibration of APC Relative Weights 1. Database Construction a. Database Source and Methodology b. Use of Single and Multiple Procedure Claims (1) 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. Calculation of CCRs 2. Calculation of Median Costs 3. Calculation of OPPS Scaled Payment Weights 4. Changes to Packaged Services a. Background b. Addressing Growth in OPPS Volume and Spending c. 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. Development of Composite APCs (1) Background (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (a) Background (b) Payment for LDR Prostate Brachytherapy (3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC (a) Background (b) Payment for Cardiac Electrophysiologic Evaluation and Ablation e. Service-Specific Packaging Issues B. Payment for Partial Hospitalization 1. Background 2. PHP APC Update 3. Separate Threshold for Outlier Payments to CMHCs C. Conversion Factor Update D. Wage Index Changes E. Statewide Average Default CCRs F. OPPS Payments to Certain Rural Hospitals 1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171 (DRA) 2. Adjustment for Rural SCHs Implemented in CY 2006 Related to Pub. L. 108-173 (MMA) G. Hospital Outpatient Outlier Payments H. Calculation of an Adjusted Medicare Payment from the National Unadjusted Medicare Payment I. Beneficiary Copayments 1. Background 2. Copayment 3. Calculation of an Adjusted Copayment Amount for an APC Group III. OPPS Ambulatory Payment Classification (APC) Group Policies A. Treatment of New HCPCS and CPT Codes 1. Treatment of New HCPCS Codes Included in the April and July Quarterly OPPS Updates for CY 2007 a. Background b. Implantation of Interstitial Devices (APC 0156) c. Other New HCPCS Codes Implemented in April or July 2007 2. Treatment of New Category I and III CPT Codes and Level II HCPCS Codes a. Establishment and Assignment of New Codes b. Electronic Brachytherapy (New Technology APC 1519) c. Other Mid-Year CPT Codes B. Variations within APCs 1. Background 2. Application of the 2 Times Rule 3. Exceptions to the 2 Times Rule C. New Technology APCs 1. Introduction 2. Movement of Procedures from New Technology APCs to Clinical APCs a. Positron Emission Tomography (PET)/Computed Tomography (CT) Scans (APC 0308) b. IVIG Preadministration-Related Services (APC 0430) c. Other Services in New Technology APCs (1) Breast Brachytherapy Catheter Implantation (APC 0648) (2) Preoperative Services for Lung Volume Reduction Surgery (LVRS) (APCs 0209 and 0213) D. APC Specific Policies 1. Cardiac Procedures a. Cardiac Computed Tomography and Computed Tomographic Angiography (APCs 0282 and 0383) b. Coronary and Non-Coronary Angioplasty (PTCA/PTA)(APCs 0082, 0083, and 0103) c. Implantation of Cardioverter-Defibrillators (APCs 0107 and 0108) d. Removal of Patient-Activated Cardiac Event Recorder (APC 0109) e. Stress Echocardiography (APC 0697) 2. Gastrointestinal Procedures a. Computed Tomographic Colonography (APC 0332) b. Laparoscopic Neurostimulator Electrode Implantation (APC 0130) c. Screening Colonoscopies and Screening Flexible Sigmoidoscopies (APCs 0158 and 0159) 3. Genitourinary Procedures a. Cystoscopy with Stent (APC 0163) b. Percutaneous Renal Cryoablation (APC 0423) c. Prostatic Thermotherapy (APC 0163) d. Radiofrequency Ablation of Prostate (APC 0163) e. Ultrasound Ablation of Uterine Fibroids with Magnetic Resonance Guidance (MRgFUS) (APC 0067) f. Uterine Fibroid Embolization (APC 0202) 4. Nervous System Procedures a. Chemodenervation (APC 0206) b. Implantation of Intrathecal or Epidural Catheter (APC 0224) c. Implantation of Spinal Neurostimulators (APC 0222) 5. Nuclear Medicine and Radiation Oncology Procedures a. Adrenal Imaging (APC 0391) b. Injection for Sentinel Node Identification (APC 0389) c. Myocardial Positron Emission Tomography (PET) Scans (APC 0307) d. Nonmyocardial Positron Emission Tomography (PET) Scans (APC 0308) e. Proton Beam Therapy (APCs 0664 and 0667) 6. Ocular and Ear, Nose and Throat Procedures a. Amniotic Membrane for Ocular Surface Reconstruction (APC 0244) b. Keratoprosthesis (APC 0293) c. Palatal Implant (New Technology APC 1510) 7. Orthopedic Procedures a. Arthroscopic Procedures (APCs 0041 and 0042) b. Closed Fracture Treatment (APC 0043) c. Insertion of Posterior Spinous Process Distraction Device (APC 0050) d. Intradiscal Annuloplasty (APC 0050) e. Kyphoplasty Procedures (APC 0052) 8. Vascular Procedures a. Blood Transfusion (APC 0110) b. Endovenous Ablation (APC 0092) c. Insertion of Central Venous Access Device (APC 0625) d. Noninvasive Vascular Studies (APC 0267) 9. Other Procedures a. Hyperbaric Oxygen Therapy (APC 0659) b. Skin Repair Procedures (APCs 0133, 0134, 0135, 0136, and 0137) c. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 0066, and 0067) 10. Medical Services a. Single Allergy Tests (APC 0381) b. Continuous Glucose Monitoring (APC 0097) c. Home International Normalized Ratio (INR) Monitoring (APC 0097) d. Mental Health Services (APC 0322, 0323, 0324, 0325) IV. OPPS Payment for Devices A. Treatment of Device Dependent APCs 1. Background 2. Payment under the OPPS 3. 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. Final Policy 2. Provisions for Reducing Transitional Pass Through Payments to Offset Costs Packaged into APC Groups a. Background b. Final Policy V. OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals A. 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 Pass-Through Status in CY 2008 B. Payment for Drugs, Biologicals, and Radiopharmaceuticals without Pass Through Status 1. Background 2. Criteria for Packaging Payment for Drugs and Biologicals 3. Payment for Drugs and Biologicals without Pass Through Status That Are Not Packaged a. Payment for Specified Covered Outpatient Drugs (1) Background (2) Payment Policy (3) Payment for Blood Clotting Factors (a) Background (b) Payment for Diagnostic Radiopharmaceuticals (c) Payment for Therapeutic Radiopharmaceuticals b. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with HCPCS Codes, But without OPPS Hospital Claims Data VI. Estimate of OPPS Transitional Pass Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Total Allowed Pass Through Spending B. Estimate of Pass Through Spending VII. OPPS Payment for Brachytherapy Sources A. Background B. Payment for Brachytherapy Sources VIII. OPPS Drug Administration Coding and Payment A. Background B. Coding and Payment for Drug Administration Services IX. Hospital Coding and Payments for Visits A. Background B. Policies for Hospital Outpatient Visits 1. Clinic Visits: New and Established Patient Visits and Consultations 2. Emergency Department Visits C. Visit Reporting Guidelines 1. Background 2. CY 2007 Work on Visit Guidelines 3. Visit Guidelines X. OPPS Payment for Blood and Blood Products A. Background B. Payment for Blood and Blood Products XI. OPPS Payment for Observation Services A. Observation Services (HCPCS Code G0378) B. Direct Admission to Observation (HCPCS Code G0379) XII. Procedures That Will Be Paid Only as Inpatient Procedures A. Background B. Changes to the Inpatient List XIII. 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 G. Reporting of Alcohol and/or Substance Abuse Assessment and Intervention Services XIV. OPPS Payment Status and Comment Indicators A. Payment Status Indicator Definitions 1. Payment Status Indicators to Designate Services That Are Paid under the OPPS 2. Payment Status Indicators to Designate Services That Are Paid under a Payment System Other Than the OPPS 3. Payment Status Indicators to Designate Services That Are Not Recognized under the OPPS But That May Be Recognized by Other Institutional Providers 4. Payment Status Indicators to Designate Services That Are Not Payable by Medicare B. Comment Indicator Definitions XV. OPPS Policy and Payment Recommendations A. MedPAC Recommendations B. APC Panel Recommendations XVI. 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. General Payment Policies a. Adjustment for Geographic Wage Differences b. Beneficiary Coinsurance D. Treatment of New HCPCS Codes 1. Treatment of New CY 2008 Category I and III CPT Codes and Level II HCPCS Codes 2. Treatment of New Mid-Year Category III CPT Codes 3. Treatment of Level II HCPCS Codes Released on a Quarterly Basis E. Updates to Covered Surgical Procedures and Covered Ancillary Services 1. Identification of Covered Surgical Procedures a. General Policies b. Changes in Designation of Covered Surgical Procedures as Office-Based c. Changes in Designation of Covered Surgical Procedures as Device Intensive 2. Changes in Identification of Covered Ancillary Services F. Payment for Covered Surgical Procedures and Covered Ancillary Services 1. Payment for Covered Surgical Procedures a. 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) Policy When Implantable Devices Are Replaced with Partial Credit 2. Payment for Covered Ancillary Services G. Physician Payment for Procedures and Services Provided in ASC H. Changes to Definitions of “Radiology and Certain Other Imaging Services” and “Outpatient Prescription Drugs” I. New Technology Intraocular Lenses (NTIOLs) 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. CY 2008 ASC Payment for Insertion of IOLs J. ASC Payment and Comment Indicators K. ASC Policy and Payment Recommendations L. Calculation of the ASC Conversion Factor and ASC Payment Rates 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 3. Reporting Hospital Inpatient Quality Data for Annual Payment Update B. Hospital Outpatient Measures C. Other Hospital Outpatient Measures D. Implementation of the HOP QDRP and Request for Additional Suggested Measures E. 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. Attestation Requirement for Future Payment Years H. HOP QDRP Reconsiderations I. Reporting of ASC Quality Data J. FY 2009 IPPS Quality Measures under the RHQDAPU Program XVIII. Changes Affecting Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs) A. Changes Affecting CAHs 1. Background 2. Co-Location of Necessary Provider CAHs 3. Provider-Based Facilities of CAHs 4. Termination of Provider Agreement 5. Regulation Changes B. Revisions to Hospital CoPs 1. Background 2. Provisions of the Final Regulation a. Timeframes for Completion of the Medical History and Physical Examination b. Requirements for Preanesthesia and Postanesthesia Evaluations c. Technical Amendment to Nursing Services CoP XIX. Changes to the FY 2008 Hospital Inpatient Prospective Payment System (IPPS) Payment Rates A. Background B. Revised IPPS Payment Rates 1. MS-DRG Documentation and Coding Adjustment 2. Application of the Documentation and Coding Adjustment to the Hospital Specific Rates XX. Medicare Graduate Medical Education Affiliation Provisions for Teaching Hospitals in Certain Emergency Situations A. Background 1. Legislative Authority 2. Existing Medicare Direct GME and Indirect GME Policies 3. Regulatory Changes Issued in 2006 to Address Certain Emergency Situations B. Additional Changes in This Interim Final Rule with Comment Period 1. Summary of Regulatory Changes 2. Discussion of Training in Nonhospital Settings C. Responses to Comments on the April 12, 2006 Interim Final Rule with Comment Period and This Interim Final Rule with Comment Period XXI. Files Available to the Public Via the Internet A. Information in Addenda Related to the Revised CY 2008 Hospital OPPS B. Information in Addenda Related to the Revised CY 2008 ASC Payment System XXII. Collection of Information Requirements XXIII. Response to Comments XXIV. Regulatory Impact Analysis A. Overall Impact of Changes to the OPPS and ASC Payment Systems 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 Final Rule with Comment Period 1. Alternatives Considered 2. Limitation of Our Analysis 3. Estimated Impact of This Final Rule with Comment Period on Hospitals and CMHCs 4. Estimated Effect of This Final Rule with Comment Period on Beneficiaries 5. Conclusion 6. Accounting Statement C. Effects of ASC Payment System Changes in This Final Rule with Comment Period 1. Alternatives Considered 2. Limitations on Our Analysis 3. Estimated Effects of This Final Rule with Comment Period on ASCs 4. Estimated Effects of This Final Rule with Comment Period on Beneficiaries 5. Conclusion 6. Accounting Statement D. Effects of the Requirements for Reporting of Quality Data for Hospital Outpatient Settings E. Effects of the Policy on CAH Off-Campus and Co-Location Requirements F. Effects of the Policy Revisions to the Hospital CoPs G. Effects of the Changes to the Hospital Inpatient Prospective Payment System (IPPS) Payment Rates 1. Overall Impact 2. Objectives 3. Limitations of Our Analysis 4. Quantitative Effects of the IPPS Policy Changes on Operating Costs 5. Analysis of Table I a. Effects of All Changes with CMI Adjustment Prior to Estimated Growth (Columns 2a and 2b) b. Effects of All Changes with CMI Adjustment and Estimated Growth (Column 3) 6. Overall Conclusion 7. Accounting Statement 8. Executive order 12866 H. Impact of the Policy Revisions to the Emergency Medicare GME Affiliated Groups for Hospitals in Certain Declared Emergency Areas 1. Overall Impact 2. RFA 3. Small Rural Hospitals 4. Unfunded Mandates 5. Federalism 6. Anticipated Effects 7. Alternatives Considered 8. Conclusion 9. Executive Order 12866 XXV. Waiver of Proposed Rulemaking, Waiver of Delay in Effective Date, and Retroactive Effective Date A. Requirements for Waivers and Retroactive Rulemaking B. IPPS Payment Rate Policies C. Medicare GME Affiliation Agreement Provisions Regulation Text Addenda Addendum A-OPPS APCs for CY 2008 Addendum AA-ASC Covered Surgical Procedures for CY 2008 (Including Surgical Procedures for Which Payment is Packaged) Addendum B-OPPS Payment By HCPCS Code for CY 2008 Addendum BB-ASC Covered Ancillary Services Integral to Covered Surgical Procedures for CY 2008 (Including Ancillary Services for Which Payment Is Packaged) Addendum D1-OPPS Payment Status Indicators Addendum DD1-ASC Payment Indicators Addendum D2-OPPS Comment Indicators Addendum DD2-ASC Comment Indicators Addendum E-HCPCS Codes That Would Be Paid Only as Inpatient Procedures for CY 2008 Addendum L-Out-Migration Adjustment Addendum M-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. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113) made major changes in the hospital outpatient prospective payment system (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, also 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 changes is included in sections I.E., VII., and XVII. of this final rule with comment period. 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 final rule with comment period. 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 generally use the median cost of the item or service assigned to an APC group. For new technology items and services, special payments under the OPPS may be made 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 payment for screening and diagnostic mammography services from the OPPS. The Secretary exercised the authority granted under the statute to also 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, not 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). On August 2, 2007, we issued in the Federal Register (72 FR 42628) a proposed rule for the CY 2008 OPPS/ASC to implement statutory requirements and changes arising from our continuing experience with both systems. We received approximately 2,180 pieces of timely correspondence in response to the proposed rule. A summary of the public comments we received and our responses to those comments are included in the specific sections of this final rule with comment period. 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 final rule with comment period, 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 payment 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, membership, 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 12 subsequent meetings, with the last meeting taking place on September 5 and 6, 2007. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting, and when necessary, to solicit nominations for APC Panel membership, and to announce new members. 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 last approved at the September 2007 APC Panel meetings. 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 and September 2007 meetings are included in the sections of this final rule with comment period that are specific to each recommendation. For discussions of earlier APC Panel meetings and recommendations, we refer readers to previously published 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 the CY 2008 OPPS/ASC Proposed Rule On August 2, 2007, we published a proposed rule in the Federal Register (72 FR 42628) that set forth proposed changes to the Medicare hospital OPPS for CY 2008 to implement statutory requirements and changes arising from our continuing experience with the system and to implement certain statutory provisions. In addition, we proposed changes to the revised Medicare ASC payment system for CY 2008 such as adding procedures to the list of covered surgical procedures and adjusting the ASC rates so that the revised ASC payment system is budget neutral. We also proposed to make changes to the policies relating to the necessary provider designations of 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 proposed 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. Finally, we set forth proposed quality measures for a Hospital Outpatient Quality Data Reporting (HOP QDRP) program for reporting quality data for annual payment rate updates for CY 2009 and subsequent calendar years. We also briefly discussed the legislative provisions of the MIEA-TRHCA that give the Secretary authority to develop quality measures for reporting data by ASCs. The following is a summary of the major changes included in the CY 2008 OPPS/ASC proposed rule: 1. Updates Affecting OPPS Payments In section II. of the 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. OPPS Ambulatory Payment Classification (APC) Group Policies In section III. of the proposed rule, we discussed 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 discussed 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. OPPS Payment for Devices In section IV. of the proposed rule, we discussed proposed payment for device dependent APCs and pass-through payment for specific categories of devices. 4. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals In section V. of the proposed rule, we discussed 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. Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, and Devices In section VI. of the proposed rule, we discussed the estimate of CY 2008 OPPS transitional pass-through spending for drugs, biologicals, and devices. 6. OPPS Payment for Brachytherapy Sources In section VII. of the proposed rule, we discussed our proposal concerning coding and payment for brachytherapy sources. 7. OPPS Coding and Payment for Drug Administration Services In section VIII. of the proposed rule, we set forth our proposed policy concerning coding and payment for drug administration services. 8. OPPS Hospital Coding and Payments for Visits In section IX. of the proposed rule, we set forth our proposed policies for the coding and reporting of clinic and emergency department visits and critical care services on claims paid under the OPPS. 9. OPPS Payment for Blood and Blood Products In section X. of the proposed rule, we discussed our proposed payment for blood and blood products. 10. Proposed OPPS Payment for Observation Services In section XI. of the proposed rule, we discussed the proposed payment policies for observation services furnished to patients on an outpatient basis. 11. Procedures That Will Be Paid Only as Inpatient Services In section XII. of the proposed rule, we discussed the procedures that we proposed to remove from the inpatient list and assign to APCs. 12. Nonrecurring Technical and Policy Changes In section XIII. of the proposed rule, we set forth our proposals for nonrecurring technical and policy changes and clarifications relating to outpatient services and supplies incident to physicians' services; 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. OPPS Payment Status and Comment Indicators In section XIV. of the proposed rule, we discussed proposed changes to the definitions of status indicators assigned to APCs and presented our proposed comment indicators for the OPPS/ASC final rule with comment period. 14. OPPS Policy and Payment Recommendations In section XV. of the proposed rule, we addressed recommendations made by the Medicare Payment Advisory Commission (MedPAC) in its March and June 2007 Reports to Congress and by the APC Panel regarding the OPPS for CY 2008. 15. Update of the Revised ASC Payment System In section XVI. of the proposed rule, we discussed the proposed update of the revised ASC payment system payment rates for CY 2008. We also discussed our proposed changes to our regulations at §§ 414.22(b)(5)(i)(A) and (B) regarding physician payment for performing excluded surgical procedures in ASCs. In addition, we set forth our proposal 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 the proposed rule, we discussed 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 discussed the legislative provisions of the MIEA-TRHCA that give the Secretary authority to develop quality measures for reporting by ASCs. (We note that, as discussed in section XVII.J. of this final rule with comment period, we are also finalizing a proposal from the FY 2008 IPPS proposed rule relating to the FY 2009 RHQDAPU quality measures. Specifically, we are finalizing the inclusion of SCIP Infection 4: Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose and SCIP Infection 6: Surgery Patients with Appropriate Hair Removal in the FY 2009 RHQDAPU measure set, bringing the total number of measures in that measure set to 30.) 17. Changes Affecting Necessary Provider Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs) In section XVIII. of the proposed rule, we discussed our proposed changes affecting CAHs both when the CAH enters into a new co-location arrangement with another hospital or CAH and when the CAH creates or acquires a provider-based off campus location. We also discussed 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 after surgery or a procedure requiring anesthesia services but before discharge or transfer from the postanesthesia recovery area. 18. Regulatory Impact Analysis In section XXII. of the proposed rule, we set forth an analysis of the impact the proposed changes would have on affected entities and beneficiaries. (We note that this regulatory impact analysis section is redesignated as section XXIV. of this final rule with comment period.) G. Public Comments Received in Response to the CY 2008 OPPS/ASC Proposed Rule We received approximately 2,180 timely pieces of correspondence containing multiple comments on the CY 2008 OPPS/ASC proposed rule. We note that we received some comments that were outside the scope of the CY 2008 OPS/ASC proposed rule. These comments are not addressed in this CY 2008 OPPS/ASC final rule with comment period. Summaries of the public comments that are within the scope of the proposals and our responses to those comments are set forth in the various sections of this final rule with comment period under the appropriate headings. H. Public Comments Received on the November 24, 2006 OPPS/ASC Final Rule with Comment Period We received approximately 21 timely items of correspondence on the CY 2007 OPPS/ASC final rule with comment period, some of which contained multiple comments on the interim final APC assignments and/or status indicators of HCPCS codes identified with comment indicator “NI” in Addendum B to that final rule with comment period. Summaries of those public comments and our responses to them are set forth in the various sections of this final rule with comment period under the appropriate headings. II. Updates Affecting OPPS Payments A. Recalibration of APC Relative Weights 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). In the CY 2008 OPPS/ASC proposed rule, we proposed 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 proposed to recalibrate the relative payment weights for each APC based on claims and cost report data for outpatient services. We proposed 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 outpatient department (HOPD) 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 the proposed rule on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/). Of the 141 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2008 OPPS payment rates for this final rule with comment period, approximately 103 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 103 million claims, approximately 45 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 54 million whole claims of the approximately 58 million claims that remained to set the OPPS APC relative weights for the CY 2008 OPPS. From the 54 million whole claims, we created approximately 97 million single records, of which approximately 65 million were “pseudo” single claims (created from multiple procedure claims using the process we discuss in this section). Approximately 926,000 claims trimmed out on cost or units in excess of +/−3 standard deviations from the geometric mean, yielding approximately 96 million single bills used for median setting. Ultimately, we were able to use for CY 2008 ratesetting some portion of 93 ercent of the CY 2006 claims containing services payable under the OPPS. This is approximately the same percentage of CY 2005 claims where some portion could be used for CY 2007 ratesetting as described in the CY 2007 OPPS/ASC final rule with comment period (71 FR 67970). As proposed, the final APC relative weights and payments for CY 2008 in Addenda A and B to this final rule with comment period were calculated using claims from this period that were processed before June 30, 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 proposed to convert to relative payment weights for purposes of calculating the CY 2008 payment rates. We did not receive any comments on our proposal to base the CY 2008 APC relative weights on the most currently available cost reports and on claims for services furnished in CY 2006. Therefore, we are finalizing our data source for the recalibration of the CY 2008 APC relative payment weights as proposed, without modification, as described in this section of this final rule with comment period. b. Use of Single and Multiple Procedure Claims For CY 2008, in general, we proposed 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 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 continued 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 packaging approach that we proposed for the CY 2008 OPPS also allows 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 the proposed rule for a full discussion of the packaging approach for CY 2008. We received several public comments on our proposed use of single bills to calculate the APC median costs for ratesetting under the CY 2008 OPPS. A summary of the public comments and our responses follow. Comment: Some commenters supported the “natural” and “pseudo” single methodology but asked that CMS continue to refine the approach in order to improve the accuracy of the estimates because the medians are used to develop payment rates for services on both single and multiple procedure claims. Other commenters asserted that continued reliance on single procedure bills to establish the medians from which the rates were calculated failed to produce a statistically valid sample of services for ratesetting, in particular for brachytherapy services that are often provided in combination with one another in a single encounter. Other commenters requested that CMS explore additional revisions to the current methodology to ensure that OPPS payment would be based on a substantial number of accurate hospital claims. Response: We generally base median costs for services on single procedure claims to ensure that the median cost captures the full cost of a service when it is the only service furnished. We recognize that this approach has limitations and, in some cases, prevents us from using many of the claims for services that are most commonly furnished at the same time as other services. For this reason, we have developed a number of different strategies, such as date of service stratification and the use of the bypass list, that enable us to break multiple procedure claims into “pseudo” single procedure claims where we have confidence that the “pseudo” single claim contains the full cost of the service, including related packaged costs. In recent years, however, we have increasingly used multiple procedure claims to develop median costs for individual services or groups of services. We have developed these methodologies so that we can use more naturally occurring claims data in cases in which care is most commonly reported with multiple major procedure codes on the same date, such as observation services, hyperbaric oxygen therapy (HBOT), and single allergy tests. Similarly, for CY 2008, we developed and proposed composite APCs for low dose rate prostate brachytherapy (APC 8001 (LDR Prostate Brachytherapy Composite)) and cardiac electrophysiology services (APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite)). These APCs are designed to use multiple procedure claims to establish a median cost and APC payment for multiple major procedures when they are furnished together. As we discuss in section II.A.4.d. of this final rule with comment period, we intend to explore the creation of additional composite APCs for services that frequently are provided in the same HOPD encounter. We also plan to continue to develop and refine methods to increase the amount of claims data that we can use for setting OPPS payment rates in a manner that gives us the most confidence that the costs derived from these approaches are valid reflections of the costs of the services described by HCPCS codes or, in the case of composite APCs, described by the APCs. We anticipate that the Data Subcommittee of the APC Panel will continue to provide us with valuable advice regarding possible methodologies for increasing the OPPS use of multiple procedure claims for ratesetting. After consideration of the public comments received, we are finalizing our proposal, without modification, to calculate median costs for APCs using single and “pseudo” single procedure claims, except where otherwise specified. (1) Use of Date of Service Stratification and a Bypass List To Increase the Amount of Data Used To Determine Medians Through 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 numerous separately paid procedures reported on the same date on one 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 (sorting the lines by date of service and treating all lines with the same date of service as a separate claim) and bypass list process we used for the CY 2007 OPPS (combined with the packaging changes we proposed in section II.A.4. of the proposed rule) resulted in our being able to use some part of approximately 92 percent of the total claims that were eligible for use in the OPPS ratesetting and modeling for the proposed rule. This process enabled us to create, for the CY 2008 proposed rule, approximately 58 million “pseudo” singles and approximately 30 million “natural” single bills. For the proposed rule, “pseudo” single procedure bills represented 66 percent of all single bills used to calculate median costs. This compared 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 believed that the reduction in the percent of “pseudo” single bills and the corresponding increase in the proportion of “natural” single bills observed for the CY 2008 proposed rule occurred largely because of our proposal to increase packaging as discussed in section II.A.4. of the 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 proposed to bypass 425 HCPCS codes that are identified in Table 1 of the proposed rule. We proposed to continue the use of the codes on the CY 2007 OPPS bypass list but to remove codes we proposed to package for CY 2008. We also proposed 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 the 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 the 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. In addition, we note that many of the codes we proposed to newly package for CY 2008 were on the bypass list used for setting the OPPS payment rates for CY 2007 and were not proposed for bypass because we also proposed to package them. We proposed to add to the bypass list HCPCS codes that, using the proposed rule data, met the same previously established empirical criteria for the bypass list that are reviewed below or which our clinicians believed would have little associated packaging if the services were coded correctly. 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 the 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. Similarly, for this final rule with comment period, 66 percent of single bills were “pseudo” singles. Moreover, the numbers of “natural” single bills and “pseudo” single bills were reduced by the volume of services that we proposed 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 proposed to package. As in prior years, we proposed 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 assumed that the representation of packaging in the single claims for any given code was 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 separately 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 proposed to add to the bypass list codes that our clinicians believe have minimal associated packaging based on their clinical assessment of the complete CY 2008 OPPS proposal. As proposed, this list contained bypass codes that were appropriate to claims for services in CY 2006 and, therefore, included codes that were deleted for CY 2007. Moreover, there were codes on the proposed bypass list that were new for CY 2007 and which were appropriate additions to the bypass list in preparation for use of the CY 2007 claims for creation of the CY 2009 OPPS. We received a number of public comments on the use of the bypass list for creation of “pseudo” single procedure claims. A summary of the comments and our responses follow. Comment: Some commenters objected to the removal of HCPCS codes from the bypass list because the codes ceased to meet the criteria for the bypass list as a result of increased packaging in the “natural” single claims due to the proposed packaging approach. The commenters objected to the removal of codes from the bypass list for this reason because they asserted that it caused claims that would otherwise have become “pseudo” single claims to not be used and, thereby, reduced the number of single bills that were available for ratesetting for certain services. Response: We agree with the commenters, so we have reevaluated the bypass list for this final rule with comment period and restored a number of codes on the bypass list prior to the CY 2008 proposal to maximize the creation of single and “pseudo” single procedure bills. As we discuss later in this section and in section II.A.4. of this final rule with comment period, we have made changes to the data process to ensure that we capture as much data as possible for services assigned status indicator “Q.” Although we revised the process to apply the specific “Q” status indicator policies before assessment of the bypass list so that additional HCPCS codes could be considered for the bypass list without risk of losing their data regarding packaging, we determined that no codes with status indicator “Q” were appropriate for addition to the final CY 2008 bypass list because of their significant associated packaging. Comment: Several commenters asked that CMS add certain HCPCS codes to the bypass list so that more single bills would be available for median setting. Some commenters specifically objected to the removal of the following radiation oncology services that they indicated should seldom have any associated packaging: CPT codes 77280 (Therapeutic radiology simulation-aided field setting; simple); 77285 (Therapeutic radiology simulation-aided field setting; intermediate); 77290 (Therapeutic radiology simulation-aided field setting; complex); 77295 (Therapeutic radiology simulation-aided field setting; 3-dimensional); 77332 (Treatment devices, design and construction; simple (simple block, simple bolus)); 77333 (Treatment devices, design and construction; intermediate (multiple blocks, stents, bite blocks, special bolus)); 77334 (Treatment devices, design and construction; complex (irregular blocks, special shields, compensators, wedges, molds or casts)); and 77417 (Therapeutic radiology port film(s)). One commenter explained that there was an interaction with the packaging of image guided radiation therapy codes that reduced the percentage of single bills for high dose rate (HDR) brachytherapy from 62 percent to 48 percent of the total frequency. The commenter believed that the payment for APC 0313 (Brachytherapy) dropped from $789.70 in CY 2007 to $739.46 in the CY 2008 proposed rule because there were packaged costs on claims that could no longer be used because the multiple procedure claims included codes that were removed from the bypass list. The commenter asked that these codes be restored to the bypass list so that these claims could be used. Other commenters asked that CMS place CPT code 93017 (Cardiovascular stress test using maximal or submaximal treadmill or bicycle exercise, continuous electrocardiographic monitoring, and/or pharmacological stress; tracing only, without interpretation and report) on the bypass list because it is typically performed with single photon emission computed tomography (SPECT) procedures (CPT code 78465 (Myocardial perfusion imaging; tomographic (SPECT), multiple studies (including attenuation correction when performed), at rest and/or stress (exercise and/or pharmacologic) and redistribution and/or rest injection, without or without quantification)). These commenters believed that significant data from multiple procedure claims were lost because CPT code 93017 was not bypassed. Other commenters asked that CMS add the following drug administration CPT codes to the bypass list because doing so would enable use of more multiple procedure claims data to establish median costs for drug administration services: CPT codes 90767 (Intravenous infusion, for therapy, prophylaxis, or diagnosis (specify substance or drug); additional sequential infusion, up to 1 hour (List separately in addition to code for primary procedure)); 90768 (Intravenous infusion, for therapy, prophylaxis, or diagnosis (specify substance or drug); concurrent infusion (List separately in addition to code for primary procedure); 90775 (Therapeutic, prophylactic or diagnostic injection (specify substance or drug); each additional sequential intravenous push of a new substance/drug (List separately in addition to code for primary procedure)); 96411 (Chemotherapy administration; intravenous, push technique, each additional substance/drug (List separately in addition to code for primary procedure)); and 96417 (Chemotherapy administration, intravenous infusion technique; each additional sequential infusion (different substance/drug), up to 1 hour (List separately in addition to code for primary procedure)). A commenter asked that we add HCPCS code 88307 (Level V Surgical pathology, gross and microscopic examination) because it is so similar to HCPCS codes 88305 (Level III Surgical pathology, gross and microscopic examination) and 88306 (Level IV Surgical pathology, gross and microscopic examination) that were already included on the bypass list. Response: We have reviewed the requests to add these codes to the bypass list and we have made the following decisions for CY 2008 for the reasons stated below: We have added the radiation oncology services listed above, with the exception of CPT code 77417, to the bypass list because we agree that they are of the type that should not have packaging associated with them. We recognize that including them on the bypass list may yield significantly more single procedure bills and may also increase the number of claims that we can use for calculation of the low dose rate prostate brachytherapy composite APC (APC8001). We have not added CPT code 77417 to the CY 2008 bypass list because, based on its final CY 2008 unconditionally packaged status, the code would not be a candidate for the bypass list. Unconditionally packaged codes are not included on the bypass list because their presence on a claim does not make that claim a multiple procedure bill. We have added CPT code 93017 to the bypass list because we agree that it should not have significant associated packaging, and we recognize that including it on the bypass list may yield significantly more single procedure bills for median setting. We have not added the drug administration services listed above to the bypass list. Four of these five codes are for sequential drug infusion services or injections of additional drugs and, therefore, by definition, new drugs and medical supplies that are associated with these codes should be reported in all cases in which the services are furnished. We note that, beginning in CY 2007, we placed the CPT codes for additional hours of infusion on the bypass list, recognizing that all packaging related to these hours would be associated with the initial services on the claim. We proposed and finalized this approach for CY 2007, because we were unable to accurately assign representative portions of packaged costs to multiple different drug administration services. We expected that the packaging related to additional hours of infusion of drugs that spanned several hours would be appropriately assigned to the code for the first hour of infusion on the same claim. If we had not placed the codes for additional hours of infusion on the bypass list, we would have had a substantial set of drug administration multiple procedure claims that were unusable for ratesetting purposes. However, adding the sequential drug administration services to the bypass list too would force all of the costs of the associated additional drugs and supplies to be packaged into the payment for the initial drug administration service for another drug, which we do not believe is an appropriate allocation of packaging. While we understand the concerns of the commenters regarding the challenges associated with setting appropriate payment rates for these sequential services reported on multiple procedure claims, we have very little CY 2006 claims data for the four codes because they were not recognized for payment under the CY 2006 OPPS. We will reconsider the treatment of these CPT codes for the CY 2009 OPPS update when CY 2007 data, where these codes were separately paid under the OPPS, are available. We have not added CPT code 90768 to the bypass list because our final CY 2008 policy unconditionally packages payment for this service and, therefore, it is not a candidate for the bypass list. We agree that HCPCS code 88307 (which was on the proposed bypass list for the CY 2008 OPPS) is appropriate and we have added it to the final CY 2008 bypass list. In addition to these responses to comments, we have added six other HCPCS codes to the final CY 2008 bypass list that met the empirical criteria for inclusion using the final rule data, and we have also added three HCPCS codes for clinical consistency with codes that are already on the bypass list. New bypass codes for this final rule with comment period are identified in Table 1 with an asterisk. Comment: One commenter objected to the use of the bypass list to create “pseudo” single claims for median setting on the basis that it artificially lowers the median cost of the services on the bypass list by sending all packaging on the claim to the other major separately paid service on the claim. Specifically, the commenter believed that inclusion of CPT code 93880 (Duplex scan of extracranial arteries; complete bilateral study) on the bypass list resulted in the use of the cost data for the lowest cost services and, thereby, lowered the cost of this service. The commenter stated that CMS should work with stakeholders on use of the bypass list, its impact on median costs, and ways that CMS could use data that were more reflective of the real costs for these procedures. The commenter believed that the median cost of CPT code 93880 should be based on the cost of the typical patient and not the least expensive patient because the OPPS payment caps payment in the physician's office for the service. The commenter explained that using the bypass list to generate more “pseudo” single claims without any packaging resulted in stagnation in payment that encouraged hospitals to pressure physicians to order more expensive tests and threatened access to care for beneficiaries who would be served well by simpler tests that were being underpaid as a result of inclusion of CPT code 93880 on the bypass list. One commenter asked that CMS provide a code-specific analysis of the impact of bypassing each code on the bypass list because the commenter believed that removing and using the line item costs for the bypass codes to set the median costs for the APCs to which the bypass codes are assigned results in understatement of the median costs for those APCs. Response: The bypass list has been very effective in enabling us to use claims data that would not otherwise be available for median calculation. Since its origin for the CY 2004 OPPS, we have been very careful in determining the codes to be placed on the bypass list. As described above, we use a standard set of criteria to select claims that seldom have packaging (that is, fewer than 5 percent of “natural” single bills); that have little packaging (that is, less than $50); for which we have at least 100 “natural” single bills; and that are not unlisted codes (for which there is no specified service). In addition to codes that pass these criteria, we also have added HCPCS codes to the bypass list that have been recommended to us by members of the public, including the specialty societies that are most familiar with them, as services with which packaging should be seldom, if ever, associated. Therefore, we believe that we have been very prudent with regard to our selection of the codes to be added to the bypass list and with our use of the list. Moreover, we open the criteria and the list to public comment each year and we respond to comments in the final rule for the update year. We also make available the claims data used to calculate the median costs on which the relative weights are based, and we provide an extensive narrative description of our data process. Hence, we provide commenters with the tools to conduct any further analyses they chose with regard to the codes on the bypass list or otherwise. In the case of CPT code 93880, the median packaged cost on “natural” single procedure claims (of which there were 403,106) was $0 and the percent of natural single procedure claims on which there was any packaging was 0.47 percent (1,899 claims out of 403,106 ). Therefore, the code meets the criteria for inclusion on the bypass list and will remain on it for CY 2008. We have no evidence that physicians or hospitals are billing more expensive tests as a result of the OPPS payment rate for CPT code 93880, and our data show there is very little packaging associated with the service in the typical case. In order to keep the established empirical criteria for the bypass list constant, we specifically solicited 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. We believed that adding an inflation adjustment factor would ensure that the same amount of packaging associated with candidate codes for the bypass list was reviewed each year relative to nominal costs. We received one public comment on the appropriateness of updating the $50 packaging cost criteria for inclusion of a code on the bypass list to account for annual inflation. A summary of the comment and our response follow. Comment: One commenter stated that CMS should update the $50 maximum “natural” single bill median packaging cost criterion for including HCPCS codes on the bypass list on the basis of empirical criteria. The commenter did not suggest a methodology we might use for the update. Response: We have not changed the $50 maximum “natural” bill median packaging cost criterion for this final rule with comment period. However, we will consider whether to update the criterion and, if so, what methodology would be used, as part of the development of the proposals for the CY 2009 OPPS. After consideration of the public comments received, we are adopting, as final, the proposed “pseudo” single claims process and the CY 2008 bypass codes listed in Table 1 below. This list has been modified from the CY 2008 proposed list, with the addition of HCPCS codes that meet the empirical criteria based on updated claims data and certain HCPCS codes recommended by commenters, as discussed above. As stated earlier, the new bypass codes for this final rule with comment period are identified in Table 1 with an asterisk. Table 1.—CY 2008 Final Bypass Codes for Creating “Pseudo” Single Claims for Calculating Median Costs HCPCS code Short description Added for this final rule 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 53661 Dilation of urethra * 54240 Penis study 56820 Exam of vulva w/scope 57150 Treat vagina infection * 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 Contrast x-ray exam of throat 74220 Contrast x-ray, esophagus 74230 Cine/vid x-ray, throat/esoph 74246 Contrast 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 77280 Set radiation therapy field * 77285 Set radiation therapy field * 77290 Set radiation therapy field * 77295 Set radiation therapy field * 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 77332 Radiation treatment aid(s) * 77333 Radiation treatment aid(s) * 77334 Radiation treatment aid(s) * 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 88361 Tumor immunohistochem/comput * 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 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 Ophth dx imaging post seg 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 93017 Cardiovascular stress test * 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 95250 Glucose monitoring, cont * 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 95872 Muscle test, one fiber * 95900 Motor nerve conduction test 95921 Autonomic nerv function test 95925 Somatosensory testing 95926 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 the CY 2008 OPPS/ASC proposed rule. However, we did not expect the services newly proposed for packaged payment to commonly appear with a drug administration service. Therefore, we believed that the analysis conducted on the CY 2007 final rule with comment period data was sufficient to inform our development of the CY 2008 OPPS/ASC proposed rule. In general, we did not believe that the proportionate amount of packaged costs in the multiple bills relative to the number of primary services would be greater than that in the single bills. Our findings supported our hypothesis. The costs in uncoded revenue codes and HCPCS codes with a packaged status indicator accounted 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 accounted 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 were 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 were attributable to packaged services, and 29 percent of observed costs across all claims were attributable to packaged services. Therefore, we concluded that, in general, the extent of packaging in all bills was similar to the amount of packaging in the single procedure bills we used to set median costs for most APCs. In the CY 2008 proposed rule (72 FR 42640), we recognized that aggregate numbers do not address the packaging associated with single and multiple procedure claims for specific services. In past years, we received comments stating that the amount of packaging in the single bills for drug administration services was not representative of the typical packaged costs of these drug administration services, which were usually performed in combination with one another, because the single bills represented 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 and also published the results in the CY 2008 OPPS/ASC proposed rule (72 FR 42640 through 42641). As discussed in the proposed rule, we found that drug administration services demonstrated reasonable single bill representation in comparison with other OPPS services. Single bills for drug administration constituted, roughly, 30 percent of all observed occurrences of drug administration services, varying by code from 7 to 55 percent. The study also demonstrated that packaged costs substantially contributed to median cost estimates for the majority of drug administration HCPCS codes (72 FR 42640 through 42641). 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 made 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) demonstrated limited packaging (median 0 percent and mean 17 percent), and the median cost for the code was derived from only 7 percent of all occurrences of the code. Across all drug administration codes, over half showed significant median packaged costs largely attributable to packaged drug and pharmacy costs. By definition, we were 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 suggested the presence of moderate packaged costs, especially drug and pharmacy costs, associated with drug administration services in the multiple bills. We calculated measures of central tendency for packaging percentages in the multiple bills or portions of multiple bills remaining after “pseudo” singles were created. We referred 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 were the only separately paid procedure codes on the claim, we estimated that packaged costs were 22 percent of total costs (27 percent, on average), where total costs consisted of costs for all payable codes. Costs for packaged drug HCPCS codes and pharmacy revenue codes comprised 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 appeared with other payable codes (largely radiology services and visits), we estimated packaged costs were 13 percent of total cost at the median (19 percent, on average). Costs for packaged drugs and pharmacy revenue codes comprised 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 resembled 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 suggested that the multiple bill data probably would support current median estimates. In the CY 2008 OPPS/ASC proposed rule (72 FR 42641), we noted that we had received several comments over the past few years offering algorithms for packaging the costs associated with specific revenue codes or packaging drugs with certain drug administration codes. Because of the complexity of even routine OPPS claims, prior research suggested that such algorithms have limited power to generate additional single bill claims and do little to change median cost estimates. In the proposed rule (72 FR 42641), we explained that 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 specifically solicited methodologies for creation of single bills that meet these criteria. We received several public comments with regard to the use of data from single and multiple procedure claims for ratesetting. A summary of the public comments and our responses follow. Comment: Several commenters expressed appreciation for CMS' analysis of packaged costs included on single and multiple procedure claims for drug administration services. One commenter encouraged CMS to further analyze the total amount and percentage of packaged costs associated with all packaged HCPCS codes, as well as other packaged services reported by hospitals, and examine this information on single versus multiple procedure claims in order to increase hospitals' understanding of the actual packaged costs used in the ratesetting process. Once again, several commenters encouraged CMS to consider specific packaging algorithms to allocate packaged costs on multiple procedures claims, in order to create additional “pseudo” single claims for ratesetting. Response: The packaging of associated costs into payment for major procedures is a longstanding principle of the OPPS. The OPPS packages payment for the operating and capital-related costs that are directly related and integral to furnishing a service on an outpatient basis. These packaged costs have historically included costs related to use of an operating or treatment room, anesthesia, medical supplies, implantable devices, inexpensive drugs, etc. Our findings related to the packaged costs on single and multiple claims for drug administration services confirm that the packaging on the single bills used for ratesetting resembles the drug and pharmacy-related packaged costs on multiple procedure claims. The packaging associated with drug administration services on single and multiple claims has historically been of particular concern to the public, so we are reassured by this finding. We are not convinced that developing this information for all other HCPCS codes would provide further useful information to hospitals. Instead, we prefer to direct our analytic resources toward exploring additional approaches to using more cost data from multiple procedure claims for ratesetting. If we are eventually able to use all OPPS claims in developing median costs, then all packaged costs on claims would also be incorporated in ratesetting under the OPPS. We remind hospitals that they should continue to take into consideration all costs associated with providing HOPD services in establishing their charges for the services. In addition, hospitals should report packaged HCPCS codes and charges, consistent with all CPT, OPPS, and local contractor instructions, whenever those services are provided to ensure that the associated costs are included in ratesetting for the major services. As we have stated previously regarding our exploration of specific packaging algorithms, we have found that these approaches, while resource-intensive on our part, have limited power to generate additional single bill claims and do little to change median cost estimates. We received no other specific suggestions for other approaches to allocating packaged costs on “hardcore” multiple bills that would be intuitive to the provider community, easily integrated into t [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A07-5507. Public record. Not legal advice.