Medicare Program; Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2011 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2011 Payment Rates; Proposed Changes to Payments to Hospitals for Certain Inpatient Hospital Services and for Graduate Medical Education Costs; and Proposed Changes to Physician Self-Referral Rules and Related Changes to Provider Agreement Regulations

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 412, 413, 416, 419, 482, and 489

[CMS-1504-P]

RIN 0938-AP82

Medicare Program; Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2011 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2011 Payment Rates; Proposed Changes to Payments to Hospitals for Certain Inpatient Hospital Services and for Graduate Medical Education Costs; and Proposed Changes to Physician Self-Referral Rules and Related Changes to Provider Agreement Regulations

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) to implement applicable statutory requirements and changes arising from our continuing experience with this system and to implement certain provisions of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (Affordable Care Act). In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These proposed changes would be applicable to services furnished on or after January 1, 2011.

In addition, this proposed rule would update the revised Medicare ambulatory surgical center (ASC) payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system and to implement certain provisions of the Affordable Care Act. In this proposed rule, we set forth the proposed applicable relative payment weights and amounts for services furnished in ASCs, specific HCPCS codes to which these proposed changes would apply, and other pertinent ratesetting information for the CY 2011 ASC payment system. These proposed changes would be applicable to services furnished on or after January 1, 2011.

This proposed rule also includes proposals to implement provisions of the Affordable Care Act relating to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs; and new limitations on certain physician referrals to hospitals in which they have an ownership or investment interest.

DATES:

To be assured consideration, comments on all sections of this proposed rule must be received at one of the addresses provided in the

ADDRESSES

section no later than 5 p.m. EST on August 31, 2010.

ADDRESSES:

In commenting, please refer to file code CMS-1504-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (no duplicates, please):

1.

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov

. Follow the instructions under the “More Search Options” tab.

2.

By regular mail.

You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1504-P, 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 to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1504-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4.

By hand or courier.

If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses:

a. For delivery in Washington, DC— Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

b. For delivery in Baltimore, MD— Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

Submission of comments on paperwork requirements.

You may submit comments on this document's paperwork requirements by following the instructions at the end of the “Collection of Information Requirements” section in this document.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Alberta Dwivedi, (410) 786-0378, Hospital outpatient prospective payment issues.

Paula Smith, (410) 786-0378, Ambulatory surgical center issues.

Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-4533, Partial hospitalization and community mental health center issues.

James Poyer, (410) 786-2261, Reporting of quality data issues.

Tzvi Hefter, (410) 786-4487, and Ing-Jye Cheng, (410) 786-4548, Hospital preadmission services and direct graduate medical education and indirect medical education payments issues.

Jacqueline Proctor, (410) 786-8852, Physician ownership and investment in hospitals issues.

SUPPLEMENTARY INFORMATION:

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.regulations.gov

. Follow the search instructions 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. EST. 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 Proposed Rule

ACEP American College of Emergency Physicians

AHA American Hospital Association

AHIMA American Health Information Management Association

AMA American Medical Association

AMP Average manufacturer price

AOA American Osteopathic Association

APC Ambulatory payment classification

ASC Ambulatory Surgical Center

ASP Average sales price

AWP Average wholesale price

BBA Balanced Budget Act of 1997, Public Law 105-33

BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Public Law 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, Public Law 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 Conditions of Participation

CORF Comprehensive outpatient rehabilitation facility

CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2009, copyrighted by the American Medical Association

CY Calendar year

DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies

DMERC Durable medical equipment regional carrier

DRA Deficit Reduction Act of 2005, Public Law 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, Public Law 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

HCERA Health Care and Education Reconciliation Act of 2010, Public Law 111-152

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, Public Law 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

ICD-10-CM International Classification of Diseases, Tenth Revision, Clinical Modification

ICD-10-PCS International Classification of Diseases, Tenth Revision, Procedure Coding System

IDE Investigational device exemption

IHS Indian Health Service

IME Indirect medical education

I/OCE Integrated Outpatient Code Editor

IOL Intraocular lens

IPPE Initial preventive physical examination

IPPS [Hospital] Inpatient prospective payment system

IVIG Intravenous immune globulin

MAC Medicare Administrative Contractor

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, Public Law 109-432

MIPPA Medicare Improvements for Patients and Providers Act of 2008, Public Law 110-275

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110-173

MPFS Medicare Physician Fee Schedule

MSA Metropolitan Statistical Area

NCCI National Correct Coding Initiative

NCD National Coverage Determination

NTIOL New technology intraocular lens

OIG [HHS] Office of the Inspector General

OMB Office of Management and Budget

OPD [Hospital] Outpatient department

OPPS [Hospital] Outpatient prospective payment system

PHP Partial hospitalization program

PM Program memorandum

PPACA Patient Protection and Affordable Care Act, Public Law 111-148

PPI Producer Price Index

PPPS Personalized preventive plan services

PPS Prospective payment system

PR Pulmonary rehabilitation

PRA Paperwork Reduction Act

QAPI Quality Assessment and Performance Improvement

QIO Quality Improvement Organization

RAC Recovery Audit Contractor

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, Public Law 97-248

TOPS Transitional outpatient payments

USPDI United States Pharmacopoeia Drug Information

USPSTF United States Preventive Services Task Force

WAC Wholesale acquisition cost

In this document, we address two payment systems under the Medicare program: The hospital outpatient prospective payment system (OPPS) and the revised ambulatory surgical center (ASC) payment system. In addition, we are addressing provisions of the Affordable Care Act, relating to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs; we are also addressing provisions relating to new limitations on certain physician referrals to hospitals in which they have an ownership or investment interest and proposing related changes to provider agreement regulations. The provisions relating to the OPPS are included in sections I. through XIV., XVI, and XIX. through XXII. of this proposed rule and in Addenda A, B, C (Addendum C is available on the Internet only; we refer readers to section XIX.A. of this proposed rule), D1, D2, E, L, and M to this proposed rule. The provisions related to the revised ASC payment system are included in sections XV., XVI., and XIX. through XXII. of this proposed rule and in Addenda AA, BB, DD1, DD2, and EE to this proposed rule. (Addendum EE is available on the Internet only; we refer readers to section XIX.B. of this proposed rule.) The provisions related to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs are included in section XVII. of this proposed rule. The provisions relating to the new limitations on certain physician referrals to hospitals in which

they have an ownership or investment interest and proposed related changes to provider agreement regulations are included in section XVIII. of this proposed rule.

Table of Contents

I. Background and Summary of the CY 2011 OPPS/ASC Proposed Rule

A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System

B. Excluded OPPS Services and Hospitals

C. Prior Rulemaking

D. The Affordable Care Act

E. Advisory Panel on Ambulatory Payment Classification (APC) Groups

1. Authority of the APC Panel

2. Establishment of the APC Panel

3. APC Panel Meetings and Organizational Structure

F. Background and Summary of This Proposed Rule

1. Proposed Updates Affecting OPPS Payments

2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies

3. Proposed OPPS Payment for Devices

4. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals

5. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices

6. Proposed OPPS Payment for Brachytherapy Sources

7. Proposed OPPS Payment for Drug Administration Services

8. Proposed OPPS Payment for Hospital Outpatient Visits

9. Proposed Payment for Partial Hospitalization Services

10. Proposed Procedures That Would Be Paid Only as Inpatient Procedures

11. Proposed OPPS Nonrecurring Technical and Policy Changes and Clarifications

12. Proposed OPPS Payment Status and Comment Indicators

13. OPPS Policy and Payment Recommendations

14. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment System

15. Reporting Quality Data for Annual Payment Rate Updates

16. Proposed Changes Relating to Payments to Hospitals for Preadmission Services and GME and IME Costs

17. Proposed Changes to Whole Hospital and Rural Provider Exceptions to the Physician Self-Referral Prohibition and Related Changes to Provider Agreement Regulations

18. Regulatory Impact Analysis

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

1. Database Construction

a. Database Source and Methodology

b. Proposed Use of Single and Multiple Procedure Claims

c. Proposed Calculation of CCRs

(1) Development of the CCRs

(2) Charge Compression

2. Proposed Data Development Process and Calculation of Median Costs

a. Claims Preparation

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims

(1) Splitting Claims

(2) Creation of “Pseudo” Single Procedure Claims

c. Completion of Claim Records and Median Cost Calculations

d. Proposed Calculation of Single Procedure APC Criteria-Based Median Costs

(1) Device-Dependent APCs

(2) Blood and Blood Products

(3) Single Allergy Tests

(4) Hyperbaric Oxygen Therapy (APC 0659)

(5) Payment for Ancillary Outpatient Services When Patient Expires (APC 0375)

(6) Pulmonary Rehabilitation

e. Proposed Calculation of Composite APC Criteria-Based Median Costs

(1) Extended Assessment and Management Composite APCs (APCs 8002 and 8003)

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)

(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC (APC 8000)

(4) Mental Health Services Composite APC (APC 0034)

(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008)

3. Proposed Changes to Packaged Services

a. Background

b. Packaging Issues

(1) Packaged Services Addressed by the February 2010 APC Panel Recommendations

(2) Other Service-Specific Packaging Issues

4. Proposed Calculation of OPPS Scaled Payment Weights

B. Proposed Conversion Factor Update

C. Proposed Wage Index Changes

D. Proposed Statewide Average Default CCRs

E. Proposed OPPS Payment to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Pub. L. 111-148

2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to Public Law 108-173 (MMA)

F. Proposed OPPS Payments to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act

1. Background

2. Study of Cancer Hospital Costs Relative to Other Hospitals

3. Proposed Adjustment for Certain Cancer Hospitals

G. Proposed Hospital Outpatient Outlier Payments

1. Background

2. Proposed Outlier Calculation

H. Proposed Calculation of an Adjusted Medicare Payment From the National Unadjusted Medicare Payment

I. Proposed Beneficiary Copayments

1. Background

2. Proposed OPPS Copayment Policy

3. Proposed Calculation of an Adjusted Copayment Amount for an APC Group

III. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies

A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes

1. Proposed Treatment of New Level II HCPCS Codes and Category I CPT Vaccine Codes and Category III CPT Codes for Which We Are Soliciting Public Comments in This Proposed Rule

2. Proposed Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comments in the CY 2011 OPPS/ASC Final Rule With Comment Period

B. Proposed OPPS Changes—Variations Within APCs

1. Background

2. Application of the 2 Times Rule

3. Proposed Exceptions to the 2 Times Rule

C. New Technology APCs

1. Background

2. Proposed Movement of Procedures From New Technology APCs to Clinical APCs

D. Proposed OPPS APC-Specific Policy: Skin Repair (APCs 0134 and 0135)

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices

2. Proposed Provisions for Reducing Transitional Pass-Through Payments To Offset Costs Packaged Into APC Groups

a. Background

b. Proposed Policy

B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit Devices

1. Background

2. Proposed APCs and Devices Subject to the Adjustment Policy

V. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals

A. Proposed OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals

1. Background

2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2010

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2011

4. Proposed Provision for Reducing Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals and Contrast Agents To Offset Costs Packaged Into APC Groups

a. Background

b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals

c. Proposed Payment Offset Policy for Contrast Agents

B. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals Without Pass-Through Status

1. Background

2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals

a. Background

b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic

Radiopharmaceuticals (“Threshold-Packaged Drugs”)

c. Proposed Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological But Different Dosages

d. Proposed Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals (“Policy-Packaged” Drugs and Devices)

3. Proposed Payment for Drugs and Biologicals Without Pass-Through Status That Are Not Packaged

a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and Biologicals, Including Therapeutic Radiopharmaceuticals

b. Proposed Payment Policy

4. Proposed Payment for Blood Clotting Factors

5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims Data

VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices

A. Background

B. Proposed Estimate of Pass-Through Spending

VII. Proposed OPPS Payment for Brachytherapy Sources

A. Background

B. Proposed OPPS Payment Policy

VIII. Proposed OPPS Payment for Drug Administration Services

A. Background

B. Proposed Coding and Payment for Drug Administration Services

IX. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

B. Proposed Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits

2. Emergency Department Visits

3. Visit Reporting Guidelines

X. Proposed Payment for Partial Hospitalization Services

A. Background

B. Proposed PHP APC Update for CY 2011

C. Proposed Changes to Regulations To Incorporate Provisions of HCERA of 2010

D. Proposed Separate Threshold for Outlier Payments to CMHCs

XI. Proposed Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

B. Proposed Changes to the Inpatient List

XII. Proposed OPPS Nonrecurring Technical and Policy Issues

A. Physician Supervision

1. Background

a. Outpatient Therapeutic Services

b. Outpatient Diagnostic Services

2. Issues Regarding the Supervision of Hospital Outpatient Services Raised by Hospitals and Other Stakeholders

3. Proposed Policies for Supervision of Outpatient Therapeutic Services in Hospital and CAHs

4. Supervision of Hospital Outpatient Diagnostic Services

B. Proposed Payment for Preventive Services

1. Definition of “Preventive Services”

2. Coinsurance and Deductible for Preventive Services

3. Extension of Waiver of Deductible to Services Furnished in Connection With or in Relation to a Colorectal Cancer Screening Test That Becomes Diagnostic or Therapeutic

C. Payment for Pulmonary Rehabilitation, Cardiac Rehabilitation, and Intensive Cardiac Rehabilitation Services Furnished to Hospital Outpatients

D. Expansion of Multiple Procedure Payment Reduction Under the Medicare Physician Fee Schedule (MPFS) to Therapy Services

XIII. Proposed OPPS Payment Status and Comment Indicators

A. Proposed OPPS Payment Status Indicator Definitions

1. Proposed Payment Status Indicators To Designate Services That Are Paid Under the OPPS

2. Proposed Payment Status Indicators To Designate Services That Are Paid Under a Payment System Other Than the OPPS

3. Proposed Payment Status Indicators To Designate Services That Are Not Recognized Under the OPPS But That May Be Recognized by Other Institutional Providers

4. Proposed Payment Status Indicators To Designate Services That Are Not Payable by Medicare on Outpatient Claims

B. Proposed Comment Indicator Definitions

XIV. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

B. APC Panel Recommendations

C. OIG Recommendations

XV. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment System

A. Background

1. Legislative Authority for the ASC Payment System

2. Prior Rulemaking

3. Policies Governing Changes to the Lists of Codes and Payment Rates for ASC Covered Surgical Procedures and Covered Ancillary Services

B. Proposed Treatment of New Codes

1. Proposed Process for Recognizing New Category I and III CPT Codes and Level II HCPCS Codes

2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April and July 2010

C. Proposed Update to the List of ASC Covered Surgical Procedures and Covered Ancillary Services

1. Covered Surgical Procedures

a. Proposed Additions to the List of ASC Covered Surgical Procedures

b. Proposed Covered Surgical Procedures Designated as Office-Based

(1) Background

(2) Proposed Changes to Covered Surgical Procedures Designated as Office-Based for CY 2011

c. ASC Covered Surgical Procedures Designated as Device-Intensive

(1) Background

(2) Proposed Changes to List of Covered Surgical Procedures Designated as Device-Intensive for CY 2011

d. ASC Treatment of Surgical Procedures Proposed for Removal From the OPPS Inpatient List for CY 2011

2. Covered Ancillary Services

D. Proposed ASC Payment for Covered Surgical Procedures and Covered Ancillary Services

1. Proposed Payment for Covered Surgical Procedures

a. Background

b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for CY 2011

c. Proposed Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit Devices

d. Proposed Waiver of Coinsurance and Deductible for Certain Preventive Services

2. Proposed Payment for Covered Ancillary Services

a. Background

b. Proposed Payment for Covered Ancillary Services for CY 2011

E. New Technology Intraocular Lenses (NTIOLs)

1. Background

2. NTIOL Application Process for Payment Adjustment

3. Classes of NTIOLs Approved and New Requests for Payment Adjustment

a. Background

b. Request To Establish New NTIOL Class for CY 2011 and Deadline for Public Comment

4. Proposed Payment Adjustment

5. Proposed ASC Payment for Insertion of IOLs

F. Proposed ASC Payment and Comment Indicators

1. Background

2. Proposed ASC Payment and Comment Indicators

G. ASC Policy and Payment Recommendations

H. Calculation of the Proposed ASC Conversion Factor and the Proposed ASC Payment Rates

1. Background

2. Calculation of the Proposed ASC Payment Rates

a. Updating the Proposed ASC Relative Payment Weights for CY 2011 and Future Years

b. Updating the ASC Conversion Factor With Application of a Productivity Adjustment to the Update Factor

3. Display of Proposed ASC Payment Rates

XVI. Reporting Quality Data for Annual Payment Rate Updates

A. Background

1. Overview

2. Hospital Outpatient Quality Data Reporting Under Section 109(a) of Public Law 109-432

3. Reporting ASC Quality Data for Annual Payment Update

4. HOP QDRP Quality Measures for the CY 2009 Payment Determination

5. HOP QDRP Quality Measures for the CY 2010 Payment Determination

6. HOP QDRP Quality Measures, Technical Specification Updates, and Data

Publication for the CY 2011 Payment Determination

a. Quality Measures

b. Maintenance of Technical Specifications for Quality Measures

c. Publication of HOP QDRP Data

B. Proposed Expansion of HOP QDRP Quality Measures for the CY 2012, CY 2013, and CY 2014 Payment Determinations

1. Considerations in Expanding and Updating Quality Measures Under the HOP QRDP Program

2. Retirement of HOP QDRP Quality Measures

3. Proposed HOP QDRP Quality Measures for the CY 2012 Payment Determination

a. Proposed Retention of Existing HOP QDRP Measures for the CY 2012 Payment Determination

b. Proposed New Structural Measure for CY 2012 Payment Determination

c. Proposed New Claims-Based Measures for CY 2012 Payment Determination

d. Proposed New Chart-Abstracted Measures for CY 2012 Payment Determination

4. Proposed HOP QDRP Quality Measures for the CY 2013 Payment Determination

a. Proposed Retention of CY 2012 HOP QDRP Measures for the CY 2013 Payment Determination

b. Proposed New Structural Measure for the CY 2013 Payment Determination

c. Proposed New Chart-Abstracted Measures for the CY 2013 Payment Determination

5. Proposed HOP QDRP Quality Measures for the CY 2014 Payment Determination

a. Proposed Retention of CY 2013 HOP QDRP Measures for the CY 2014 Payment Determination

b. Proposed New Chart-Abstracted Measures for the CY 2014 Payment Determination

6. Possible Quality Measures Under Consideration for Future Inclusion in HOP QDRP

C. Proposed Payment Reduction for Hospitals That Fail To Meet the HOP QDRP Requirements for the CY 2011 Payment Update

1. Background

2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2011

D. Proposed Requirements for HOPD Quality Data Reporting for CY 2012 and Subsequent Years

1. Administrative Requirements

2. Data Collection and Submission Requirements

a. General Data Collection and Submission Requirements

b. Extraordinary Circumstance Extension or Waiver for Reporting Quality Data

3. HOP QDRP Validation Requirements for Abstracted Data: Data Validation Approach for CY 2012 and Subsequent Years

a. Background

b. Proposed Data Validation Requirements for CY 2012

c. Additional Data Validation Conditions Under Consideration for CY 2013 and Subsequent Years

E. Proposed HOP QDRP Reconsideration and Appeals Procedures

F. Reporting of ASC Quality Data

G. Electronic Health Records

XVII. Proposed Changes Relating to Payments to Hospitals for Preadmission Services and for Direct Graduate Medical Education (GME) and Indirect Medical Education (IME) Costs

A. Proposed Changes Relating to Payments to Hospitals for Direct GME and IME Costs

1. Background

2. Counting Resident Time in Nonprovider Settings (Section 5504 of the Affordable Care Act)

a. Background and Changes Made by the Affordable Care Act

b. Elimination of the “All or Substantially All of the Costs for the Training Program in the Nonhospital Setting” Requirement and New Cost Requirements for Hospitals

c. Proposed Revision to Regulations To Allow More Than One Hospital To Incur the Costs of Training Programs at Nonhospital Settings, Either Directly or Through a Third Party

d. Proposed Changes to Regulations Regarding Recordkeeping and Comparison to a Base Year

3. Counting Resident Time for Didactic and Scholarly Activities and Other Activities (Section 5505 of the Affordable Care Act)

a. Background and Changes Made by the Affordable Care Act

b. Definition of “Nonprovider Setting That Is Primarily Engaged in Furnishing Patient Care”

c. Distinguishing Between Allowed “Nonpatient Care Activities” and Nonallowable Research Time

d. Approved Leave of Absence

4. Reductions of and Increases in Hospitals' FTE Resident Caps for GME Payment Purposes

a. General Background on Methodology for Determining the FTE Resident Count

b. Reduction of Hospitals' FTE Resident Caps Under the Provisions of Section 5503 of the Affordable Care Act

c. Hospitals Subject to the FTE Resident Cap Reduction

d. Exemption From FTE Resident Cap Reduction for Certain Rural Hospitals

e. Application of Section 5503 to Hospitals That Participate in Demonstration Projects or Voluntary Reduction Programs and Certain Other Hospitals

f. Determining the Estimated Number of FTE Resident Slots Available for Redistribution

g. Reference Cost Reports That Are Under Appeal

h. Determining the Possible Reduction to a Hospital's FTE Resident Cap

i. Application of Section 5503 to Hospitals That File Low Utilization Medicare Cost Reports

j. Treatment of Hospitals With Caps That Have Been Reduced or Increased Under Section 422 of Public Law 108-173

k. Criteria for Determining Hospitals That Will Receive Increases in Their FTE Resident Caps

l. Application Process for the Increases in Hospitals' FTE Resident Caps

m. CMS Evaluation of Applications for Increases in FTE Resident Caps

n. CMS Evaluation of Application for Increases in FTE Resident Caps

o. Exception If Positions Are Not Redistributed by July 1, 2011

p. Application of Direct GME PRAs for Primary Care and Nonprimary Care Residents and Conforming Changes for the IME Multiplier

q. Other Issues Related to a Request for Increase in the FTE Caps Under Section 5503

5. Preservation of Resident Cap Positions From Closed Hospitals (Section 5506 of the Affordable Care Act)

a. Background

b. Definition of a “Closed Hospital”

c. Priority for Hospitals in Certain Areas

d. Application Process

e. Ranking Criteria

f. Demonstrated Likelihood of Filling the Positions Within a Certain Time Period

g. No Duplication of FTE Cap Slots

h. Other Payment Issues Regarding Hospitals That Receive Slots From Closed Hospitals

i. Application—No Reopening of Settled Cost Reports

XVIII. Proposed Changes to Whole Hospital and Rural Provider Exceptions to the Physician Self-Referral Prohibition and Related Changes to Provider Agreement Regulations

A. Background

B. Changes Made by the Affordable Care Act Relating to the Whole Hospital and Rural Provider Exceptions to Ownership and Investment Prohibition

C. Proposed Changes to Physician Self-Referral Regulations

1. Physician Ownership and Provider Agreement

2. Limitation on Expansion of Facility Capacity

3. Preventing Conflicts of Interest

4. Ensuring

Bona Fide

Investment

5. Patient Safety

6. Conversion From Ambulatory Surgery Center (ASC)

7. Publication of Information Reported

8. Enforcement

D. Proposed Related Changes to Provider Agreement Regulations

XIX. Files Available to the Public via the Internet

A. Information in Addenda Related to the Proposed CY 2011 Hospital OPPS

B. Information in Addenda Related to the Proposed CY 2011 ASC Payment System

XX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. Requirements in Regulation Text

C. Associated Information Collections Not Specified in Regulatory Text

1. Hospital Outpatient Quality Data Reporting Program (HOP QDRP)

2. Proposed HOP QDRP Quality Measures for the CY 2011 and CY 2012 Payment Determinations

3. Proposed HOP QDRP Validation Requirements

4. Proposed HOP QDRP Reconsideration and Appeals Procedures

5. Additional Topics

XXI. Response to Comments

XXII. Regulatory Impact Analysis

A. Overall Impact

1. Executive Order 12866

2. Regulatory Flexibility Act

3. Small Rural Hospitals

4. Unfunded Mandates

5. Federalism

B. Effects of OPPS Changes in This Proposed Rule

1. Alternatives Considered

2. Limitations of Our Analysis

3. Estimated Effects of This Proposed Rule on Hospitals

4. Estimated Effects of This Proposed Rule on CMHCs

5. Estimated Effects of This Proposed Rule on Beneficiaries

6. Conclusion

7. Accounting Statement

C. Effects of ASC Payment System Changes in This Proposed Rule

1. Alternatives Considered

2. Limitations of Our Analysis

3. Estimated Effects of This Proposed Rule on Payments to ASCs

4. Estimated Effects of This Proposed Rule on Beneficiaries

5. Conclusion

6. Accounting Statement

D. Effects of Proposed Requirements for Reporting of Quality Data for Annual Hospital Payment Update

E. Effects of Proposed Changes in Payments to Hospitals for Direct GME and IME Costs

F. Effects of Proposed Changes to Physician Self-Referral Regulations and Related Proposed Changes to Provider Agreement Regulations

G. Executive Order 12866

Regulation Text

Addenda

Addendum A—Proposed OPPS APCs for CY 2011

Addendum AA—Proposed ASC Covered Surgical Procedures for CY 2011 (Including Surgical Procedures for Which Payment Is Packaged)

Addendum B—Proposed OPPS Payment by HCPCS Code for CY 2011

Addendum BB—Proposed ASC Covered Ancillary Services Integral to Covered Surgical Procedures for CY 2011 (Including Ancillary Services for Which Payment Is Packaged)

Addendum D1—Proposed OPPS Payment Status Indicators for CY 2011

Addendum DD1—Proposed ASC Payment Indicators for CY 2011

Addendum D2—Proposed OPPS Comment Indicators for CY 2011

Addendum DD2—Proposed ASC Comment Indicators for CY 2011

Addendum E—Proposed HCPCS Codes That Would Be Paid Only as Inpatient Procedures for CY 2011

Addendum L—Proposed CY 2011 OPPS Out-Migration Adjustment

Addendum M—Proposed HCPCS Codes for Assignment to Composite APCs for CY 2011

I. Background and Summary of the CY 2011 OPPS/ASC Proposed Rule

A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System

When Title XVIII of the Social Security Act (the Act) was 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 Act authorizing implementation of a PPS for hospital outpatient services. 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.

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 following Acts made additional changes to the OPPS: the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106-554); 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; 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; the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007 (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008 (Pub. L. 110-275), enacted on July 15, 2008; and most recently the Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010. We refer readers to section I.D. of this proposed rule for a summary of the provisions of Public Law 111-148, as amended by Public Law 111-152, that we are proposing to implement in this proposed rule.

Under the OPPS, we pay for hospital outpatient services on a rate-per-service basis that varies according to the ambulatory payment classification (APC) group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) codes (which include certain Current Procedural Terminology (CPT) codes) and descriptors to identify and group the services within each APC group. The OPPS includes payment for most hospital outpatient services, except those identified in section I.B. of this proposed rule. Section 1833(t)(1)(B)(ii) of the Act provides for 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.

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, items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost (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. It also excludes screening mammography, diagnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized prevention plan services. 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 (IHS) 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. These rules can be viewed on the CMS Web site at:

http://www.cms.gov/HospitalOutpatientPPS/

. The CY 2010 OPPS/ASC final rule with comment period appears in the November 20, 2009

Federal Register

(74 FR 60316). 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 2010 OPPS on the basis of claims data from January 1, 2008, through December 31, 2008, and to implement certain provisions of Public Law 110-173 and Public Law 110-275. In addition, we responded to public comments received on the provisions of the November 18, 2008 final rule with comment period (73 FR 68502) pertaining to the APC assignment of HCPCS codes identified in Addendum B to that rule with the new interim (“NI”) comment indicator, and public comments received on the July 20, 2009 OPPS/ASC proposed rule for CY 2010 (74 FR 35232).

D. Provisions of the Patient Protection and Affordable Care Act (Pub. L. 111-148), as Amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152)

On March 23, 2010, the Patient Protection and Affordable Care Act, Public Law 111-148, was enacted. Following the enactment of Public Law 111-148, the Health Care and Education Reconciliation Act of 2010, Public Law 111-152 (enacted on March 30, 2010), amended certain provisions of Public Law 111-148. (These two public laws are collectively known as the Affordable Care Act.) A number of the provisions of the Affordable Care Act affect the OPPS and the ASC payment system and the providers and suppliers addressed in this proposed rule. Listed below are the provisions of the Affordable Care Act that we are proposing to implement in this proposed rule. We note that, due to the timing of the passage of the legislation, we were unable to address some of the provisions of the Affordable Care Act that affect the IPPS and the LTCH PPS in the FY 2011 IPPS/LTCH PPS proposed rule published in the

Federal Register

on May 4, 2010. Therefore, we also are including some proposals to implement certain provisions relating to the IPPS and LTCH PPS in this proposed rule. In addition, we note that we have issued or plan to issue separate documents in the

Federal Register

addressing other provisions of the Affordable Care Act (75 FR 30756 and 75 FR 31118).

• Section 1301 of the Affordable Care Act amended sections 1861(ff)(3)(A) and (B) of the Act to establish new additional requirements for CMHCs applicable to items or services furnished to Medicare beneficiaries on or after the first day of the first calendar quarter that begins at least 12 months after the date of enactment of Public Law 111-152 (that is, beginning April 1, 2011). The new requirements specify that a CMHC provide at least 40 percent of its services to individuals who are not eligible for Medicare benefits under Title XVIII of the Act and that a partial hospitalization program must be a distinct and organized intensive ambulatory treatment service offering less than 24-hour daily care “other than an individual's home or in an inpatient or residential setting.” This provision is addressed in section X. of this proposed rule.

• Section 3121(a) of the Affordable Care Act amended section 1833(t)(7)(D)(i) of the Act to extend hold harmless payment adjustments (called transitional corridor payments or transitional outpatient payments (TOPS)) to rural hospitals with 100 or fewer beds and that are not sole community hospitals for covered OPD services furnished on or after January 1, 2006 and before January 1, 2011. Section 3121(b) amended section 1833(t)(7)(D)(i)(III) of the Act to provide that, for SCHs, in the case of covered OPD services furnished on or after January 1, 2010, and before January 1, 2011, the hold harmless TOPS provisions shall be applied without regard to the 100-bed limitation. These provisions are addressed in section II.E. of this proposed rule.

• Section 3138 of the Affordable Care Act amended section 1833(t) of the Act to direct the Secretary to conduct a study to determine if costs incurred by cancer hospitals (described in section 1886(d)(1)(B)(v) of the Act) for outpatient hospital services with respect to APC groups exceed those costs

incurred by other hospitals furnishing these services. In so far as the Secretary determines that such costs exceed those costs incurred by other hospitals, the Secretary shall provide for an appropriate adjustment under the authority of section 1833(t)(2)(E) to reflect those higher costs effective for services furnished on or after January 1, 2011. This provision is addressed in section II.F. of this proposed rule.

• Section 3401(i) of the Affordable Care Act amended section 1833(t)(3) of the Act by, among other things, adding new paragraphs (C)(iv)(F) and (G) to reduce the OPD fee schedule increase factor by a productivity adjustment and an additional adjustment for payments to hospital OPDs beginning in various years from CY 2010 through CY 2019 as applicable. These hospital OPD provisions are addressed in section II.B.1. of this proposed rule. Section 3401(k) of the Affordable Care Act amended section 1833(i)(2)(D) of the Act by adding a new subsection (iv) to provide for a similar productivity adjustment for payment for ASC services. This ASC provision is addressed in section XV.H.2.b. of this proposed rule.

• Section 4103(a) of the Affordable Care Act amended section 1861(s)(2) of the Act by adding a new subsection (FF) to provide Medicare coverage of “personalized prevention plan services,” beginning January 1, 2011. Section 4103(b) of the Affordable Care Act amended section 1861 of the Act by adding a new subsection (hhh) to define “personalized prevention plan services” (also cited as the “annual wellness visit”). Section 4103(c) of the Affordable Care Act excludes the annual wellness visit from payment under the OPPS and provides for the elimination of beneficiary coinsurance requirements for these preventive services in outpatient hospital settings and for waiver of application of the deductible for these services. These provisions are addressed in section XII.B. of this proposed rule.

• Section 4104(a) of the Affordable Care Act amended section 1861(ddd) of the Act to define “preventive services” under Medicare to include screening and preventive services described under subsection (ww)(2) of the Act (other than services under subparagraph (M)); an initial preventive physical examination as defined in subsection (ww) of the Act; and personalized prevention plan services as defined in subsection (hhh)(1) of the Act. Section 4104(b) of the Affordable Care Act amended section 1833(a)(1) of the Act, as amended by section 4103(c)(1) of the Affordable Care Act, to provide for the elimination of coinsurance for most preventive services, and section 4104(c) amended section 1833(b) of the Act to provide for the waiver of the application of the deductible for most preventive services and, specifically, for colorectal cancer screening tests that become diagnostic and any related services performed with that diagnostic colorectal cancer screening test performed in the same clinical encounter, effective for items and services furnished on or after January 1, 2011. These provisions are addressed in section XII.B. of this proposed rule.

• Sections 5503, 5504, 5505, and 5506 of the Affordable Care Act made a number of changes to various sections of the Act relating to payment for direct GME and IME costs to hospitals.

(1) Section 5503 amended the Act to add a provision to redistribute medical residency positions that have been unfilled during a prior cost reporting period to other hospitals and to direct slots for training primary care physicians beginning July 1, 2011.

(2) Section 5504 amended sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act to allow any time spent by residents training in a nonprovider setting to count toward direct GME and IME costs if the hospital incurs the costs of residents' salaries and fringe benefits, effective for cost reporting periods beginning on or after July 1, 2010, for direct GME, and for discharges occurring on or after July 1, 2010, for IME.

(3) Section 5505 amended section 1886(h) and section 1886(d)(5)(B) of the Act to add a provision to allow hospitals to count resident time spent in certain non-patient care activities while training in certain nonhospital settings for direct GME purposes, effective for cost reporting periods beginning on or after July 1, 2009; to allow hospitals to count resident time spent in certain non-patient care activities while training in certain hospital settings for IME purposes for cost reporting periods beginning on or after January 1, 1983; and to prohibit the counting of time spent by residents in research not associated with the treatment or diagnosis of a particular patient for IME purposes effective October 1, 2001 (with certain limitations).

(4) Section 5506 amended section 1886(h)(4)(H) and section 1886(d)(5)(B)(iv) of the Act to add a provision to allow for the redistribution to other hospitals in the same or contiguous areas of FTE resident positions from a hospital that closes (on or after the date that is 2 years before the date of enactment of Pub. L. 111-148). These provisions are addressed in section XVII.B. of this proposed rule.

• Section 6001 of the Affordable Care Act amended section 1877 of the Act to add provisions under new subsection (i) relating to the prohibition against referrals to a hospital by a physician who has an ownership or investment interest in the hospital. This provision is addressed in section XVIII. of this proposed rule.

• Section 10324(b) of the Affordable Care Act amended section 1833(t) of the Act by adding a new subsection (19) to provide for a floor on the area wage adjustment factor for hospital outpatient department services furnished on or after January 1, 2011, in a State in which at least 50 percent of the counties in the State are frontier counties, that is, a county in which the population per square mile is less than 6. This provision is addressed in section II.C. of this proposed rule.

E. Advisory Panel on Ambulatory Payment Classification (APC) Groups

1. Authority of the Advisory Panel on Ambulatory Payment Classification (APC) Groups (the APC Panel)

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 106-113, 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 APC Panel, discussed under section I.E.2. of this proposed rule, fulfills these requirements. The APC Panel is not restricted to using data compiled by CMS, and it 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 (currently employed full-time, not as consultants, in their respective areas of expertise) subject to the OPPS, reviews clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights. The APC Panel is technical in nature, and it 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 four times: on November 1, 2002; on November 1, 2004; on November 21, 2006; and on November 2, 2008. The

current charter specifies, among other requirements, that: the APC Panel continues to be technical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Official (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 through March 1, 2001. Since the initial meeting, the APC Panel has held 17 meetings, with the last meeting taking place on February 17 and 18, 2010. 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 Visits and Observation 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 Visits and Observation 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 the APC Panel recommended that the subcommittees continue at the February 2010 APC Panel meeting. We accept those recommendations of the APC Panel. All subcommittee recommendations are discussed and voted upon by the full APC Panel.

Discussions of the other recommendations made by the APC Panel at the February 2010 meeting are included in the sections of this proposed rule that are specific to each recommendation. For discussions of earlier APC Panel meetings and recommendations, we refer readers to previously published hospital OPPS/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at:

http://fido.gov/facadatabase/public.asp

.

F. Summary of the Contents of This Proposed Rule

In this proposed rule, we set forth proposed changes to the Medicare hospital OPPS for CY 2011 to implement statutory requirements and changes arising from our continuing experience with the system and to implement certain provisions of Public Law 111-148, as amended by Public Law 111-152 (collectively known as the Affordable Care Act). In addition, we set forth proposed changes to the revised Medicare ASC payment system for CY 2011, including proposed updated payment weights, covered surgical procedures, and covered ancillary items and services based on the proposed OPPS update. We set forth proposed quality measures for the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) for reporting quality data for annual payment rate updates for CY 2012 and subsequent calendar years, the proposed requirements for data collection and submission for the annual payment update, and a proposed reduction in the OPPS payment for hospitals that fail to meet the HOP QDRP requirements for the CY 2011 payment update, in accordance with the statutory requirement. We also set forth proposed changes to implement provisions of the Affordable Care Act relating to payments to hospitals for direct GME and IME costs and the rules relating to physician self-referrals to hospitals in which they have an ownership or investment interest. In addition, we are setting forth proposals affecting certain payments under the Medicare IPPS. The following is a summary of the major proposed changes that we are proposing to make:

1. Proposed Updates Affecting OPPS Payments

In section II. of this proposed rule, we set forth—

• The methodology used to recalibrate the proposed APC relative payment weights.

• The proposed changes to packaged services.

• The proposed update to the conversion factor used to determine payment rates under the OPPS. In this section, we set forth proposed changes in the amounts and factors for calculating the full annual update increase to the conversion factor.

• 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. This proposal addresses the provisions of section 10324 of the Affordable Care Act relating to the establishment of a floor for the area wage adjustment factor for OPD services furnished in frontier States.

• The proposed update of statewide average default CCRs.

• The proposed application of hold harmless transitional outpatient payments (TOPs) for certain small rural hospitals, extended by section 3121 of the Affordable Care Act.

• The proposed payment adjustment for rural SCHs.

• The proposed calculation of the hospital outpatient outlier payment.

• The calculation of the proposed national unadjusted Medicare OPPS payment.

• The proposed beneficiary copayments for OPPS services.

2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies

In section III. of this proposed rule, we discuss—

• The proposed additions of new HCPCS codes to APCs.

• The proposed establishment of a number of new APCs.

• Our analyses of Medicare claims data and certain recommendations of the APC Panel.

• The application of the 2 times rule and proposed exceptions to it.

• The proposed changes to specific APCs.

• The proposed movement of procedures from New Technology APCs to clinical APCs.

3. Proposed OPPS Payment for Devices

In section IV. of this proposed rule, we discuss the proposed pass-through payment for specific categories of devices and the proposed adjustment for devices furnished at no cost or with partial or full credit.

4. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals

In section V. of this proposed rule, we discuss the proposed CY 2011 OPPS

payment for drugs, biologicals, and radiopharmaceuticals, including the proposed payment for drugs, biologicals, and radiopharmaceuticals with and without pass-through status.

5. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices

In section VI. of this proposed rule, we discuss the estimate of CY 2011 OPPS transitional pass-through spending for drugs, biologicals, and devices.

6. Proposed OPPS Payment for Brachytherapy Sources

In section VII. of this proposed rule, we discuss our proposal for payment for brachytherapy sources.

7. Proposed OPPS Payment for Drug Administration Services

In section VIII. of this proposed rule, we set forth our proposed policy concerning coding and payment for drug administration services.

8. Proposed OPPS Payment for Hospital Outpatient Visits

In section IX. of this proposed rule, we set forth our proposed policies for the payment of clinic and emergency department visits and critical care services based on claims data.

9. Proposed Payment for Partial Hospitalization Services

In section X. of this proposed rule, we set forth our proposed payment for partial hospitalization services, including the proposed separate threshold for outlier payments for CMHCs. We also set for our proposals to implement the new requirements for CMHCs established by section 1301 of the Affordable Care Act.

10. Proposed Procedures That Would Be Paid Only as Inpatient Procedures

In section XI. of this proposed rule, we discuss the procedures that we are proposing to remove from the inpatient list and assign to APCs for payment under the OPPS.

11. Proposed OPPS Nonrecurring Technical and Policy Changes and Clarifications

In section XII. of this proposed rule, we discuss nonrecurring technical issues and proposed policy changes relating to physician supervision of OPD services in hospitals, including CAHs. We also are proposing to implement the provisions of sections 4103 and 4104 of the Affordable Care Act relating to payment for preventive services, including personalized prevention plan services, and the waiver of beneficiary coinsurance and deductibles.

12. Proposed OPPS Payment Status and Comment Indicators

In section XIII. of this proposed rule, we discuss our proposed changes to the definitions of status indicators assigned to APCs and present our proposed comment indicators for the final rule with comment period.

13. OPPS Policy and Payment Recommendations

In section XIV. of this proposed rule, we address recommendations made by the Medicare Payment Advisory Commission (MedPAC) in its March 2010 report to Congress, by the Office of Inspector General (OIG), and by the APC Panel regarding the OPPS for CY 2011.

14. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment System

In section XV. of this proposed rule, we discuss the proposed updates of the revised ASC payment system and payment rates for CY 2011.

15. Reporting Quality Data for Annual Payment Rate Updates

In section XVI. of this proposed rule, we discuss the proposed quality measures for reporting hospital outpatient (HOP) quality data for the annual payment update factor for CY 2012 and subsequent calendar years; set forth the requirements for data collection and submission for the annual payment update; and discuss the reduction in the OPPS payment for hospitals that fail to meet the HOP Quality Data Reporting Program (QDRP) requirements for CY 2011.

16. Bundling of Payments for Inpatient and Outpatient Services and Payments to Hospitals for Direct GME and IME Costs

In section XVII. of this proposed rule, we discuss our proposed implementation of the provisions of section 5503, 5504, 5505, and 5506 of the Affordable Care Act relating to redistribution of FTE resident slots of closed hospitals and policy changes for the counting of FTE residents in determining payments to hospitals for direct GME and IME costs.

17. Physician Self-Referrals to Hospitals

In section XVIII. of this preamble, we discuss our proposal to implement the changes made by section 6001 of the Affordable Care Act relating to the rules governing the prohibition on referrals to a hospital by a physician who has an ownership or investment interest in the hospital.

18. Regulatory Impact Analysis

In section XXII. of this proposed rule, we set forth an analysis of the impact that the proposed changes would have on affected entities and beneficiaries.

II. Proposed Updates Affecting OPPS Payments

A. Proposed 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.

For CY 2011, we are proposing to use the same basic methodology that we described in the November 20, 2009 OPPS final rule with comment period to recalibrate the APC relative payment weights for services furnished on or after January 1, 2011, and before January 1, 2012 (CY 2011). That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services. We are proposing to use the most recent available data to construct the database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2011, we used approximately 133 million final action claims for hospital outpatient department services furnished on or after January 1, 2009, and before January 1, 2010. (For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this proposed rule on the CMS Web site at:

http://www.cms.gov/HospitalOutpatientPPS/HORD/.

)

Of the 133 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2011 OPPS payment rates for this proposed rule, approximately 102 million claims were 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 102 million claims, approximately 4 million claims 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). From the remaining 98 million claims, we created approximately 95 million single records, of which approximately 64 million were “pseudo” single or “single session” claims (created from 24 million multiple procedure claims using the process we discuss later in this section). Approximately 696,000 claims were trimmed out on cost or units in excess of +/− 3 standard deviations from the geometric mean, yielding approximately 95 million single bills for median setting. As described in section II.A.2. of this proposed rule, our data development process is designed with the goal of using appropriate cost information in setting the APC relative weights. The bypass process is described in section II.A.1.b. of this proposed rule. This section discusses how we develop “pseudo” single procedure claims, with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes. Ultimately, we were able to use for CY 2011 ratesetting some portion of 95 percent of the CY 2009 claims containing services payable under the OPPS.

The proposed APC relative weights and payments for CY 2011 in Addenda A and B to this proposed rule were calculated using claims from CY 2009 that were processed before January 1, 2010, 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 underpinning the APC relative payment weights and the CY 2011 payment rates.

b. Proposed Use of Single and Multiple Procedure Claims

For CY 2011, in general, we are proposing to continue to use single procedure claims to set the medians on which the APC relative payment weights would be based, with some exceptions as discussed below in this section. We generally use single procedure claims to set the median costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one unit of one procedure and because, in many circumstances, we are 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. 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. 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 procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that 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 procedure claims. The history of our use of a bypass list to generate “pseudo” single procedure claims is well documented, most recently in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60324 through 60342). In addition, for CY 2008, we increased packaging and created the first composite APCs. We have continued our packaging policies and the creation of composite APCs for CY 2009 and 2010, and we are proposing to continue them for CY 2011. This also increased the number of bills that we were able to use for median calculation by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the composite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the number of bills we were able to use to calculate APC median costs. We have continued the composite APCs for multiple imaging services for CY 2010, and we are proposing to continue to create them for CY 2011. We refer readers to section II.A.2.e. of this proposed rule for discussion of the use of claims to establish median costs for composite APCs.

We are proposing to continue to apply these processes to enable us to use as much claims data as possible for ratesetting for the CY 2011 OPPS. This methodology enabled us to create, for this proposed rule, approximately 64 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.e.(5) of this proposed rule for further discussion), to add to the approximately 31 million “natural” single procedure claims. For this proposed rule, “pseudo” single procedure and “single session” procedure bills represent approximately 67 percent of all single procedure bills used to calculate median costs.

For CY 2011, we are proposing to bypass 448 HCPCS codes for CY 2011 that are identified in Table 1 of this proposed rule. Since the inception of the bypass list, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year's bypass list and use the update year's data (for CY 2011, data available for the February 2010 APC Panel meeting from CY 2009 claims processed through September 30, 2009, and CY 2008 claims data processed through June 30, 2009, used to model the payment rates for CY 2010) to determine whether it would be appropriate to propose to add additional codes to the previous year's bypass list. For CY 2011, we are proposing to continue to bypass all of the HCPCS codes on the CY 2010 OPPS bypass list. We updated HCPCS codes on the CY 2010 bypass list that were mapped to new HCPCS codes for CY 2011 ratesetting by adding the new replacement codes and also removing the deleted codes, which are listed in Table 2. None of these deleted codes were “overlap bypass codes” (those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs). We also are proposing to add to the bypass list for CY 2011 all HCPCS codes not on the CY 2010 bypass list that, using both CY 2010 final rule data (CY 2008 claims) and February 2010 APC Panel data (first 9 months of CY 2009 claims), met the same previously established empirical criteria for the bypass list that are summarized below. The entire list proposed for CY 2011 (including the codes that remain on the bypass list from prior years) is open to public comment. Because we must make some assumptions about packaging in the multiple procedure claims in order to

assess a HCPCS code for addition to the bypass list, we assume that the representation of packaging on “natural” single procedure claims for any given code is comparable to packaging for that code in the multiple procedure claims. The proposed criteria for the bypass list are:

• There are 100 or more “natural” single procedure claims for the code. This number of single procedure claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.

• Five percent or fewer of the “natural” single procedure claims for the code have packaged costs on that single procedure claim for the code. This criterion results in limiting the amount of packaging being redistributed to the separately payable procedures 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 “natural” single procedure claims is equal to or less than $50. This criterion also limits the amount of error in redistributed costs. Throughout the bypass process, we do not know the dollar value of the packaged cost that should be appropriately attributed to the other procedures on the claim. Ensuring that redistributed costs associated with a bypass code are small in amount and volume protects the validity of cost estimates for low cost services billed with the bypassed service.

In response to comments to the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we noted that we would consider whether it would be appropriate to update the $50 packaged cost threshold for inflation when examining potential bypass list additions (74 FR 60328). For the CY 2011 OPPS, based on CY 2009 claims data, we are proposing to apply the final market basket of 3.6 percent published in the CY 2009 OPPS/ASC final rule with comment period (73 FR 26584) to the $50 packaged cost threshold used in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60325) that we initially established in the CY 2005 OPPS final rule based on our analysis of the data (69 FR 65731), rounded to the nearest $5 increment. This calculation would lead us to a proposed packaged cost threshold for bypass list additions of $50 ($51.80 rounded to $50). We believe that applying the market basket from the year of claims data to the packaged cost threshold, rounded to the nearest $5 increment, would appropriately account for the effects of inflation when considering additions to the bypass list because the market basket increase percentage reflects the extent to which the cost of inputs for hospital services has increased compared to the cost of inputs for hospital services in the prior year. As discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the packaged cost threshold more restrictive over time when considering additions to the bypass list. Therefore, adjusting the threshold by the market basket would prevent continuing decline in the threshold's real value. The dollar threshold would not change for CY 2011 under this proposed policy, because when rounded to the nearest $5 increment after adjustment for the market basket increase, the threshold would for CY 2011 remain at $50. Therefore, we are not proposing to add any additional bypass codes for CY 2011 as a result of this proposed policy.

• The code is not a code for an unlisted service.

In addition, we are proposing to continue to include, on the bypass list, HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2011 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also are proposing to continue to include on the bypass list certain HCPCS codes in order to purposefully direct the assignment of packaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital critical care service) and the CPT codes for additional hours of drug administration to the bypass list (73 FR 68513 and 71 FR 68117 through 68118).

As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “pseudo” single procedure claims from bypassed codes that are also members of multiple imaging composite APCs changed. When creating the set of “pseudo” single procedure claims, claims that contain “overlap bypass codes” (those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs), were identified first. These HCPCS codes were then processed to create multiple imaging composite “single session” bills, that is, claims containing HCPCS codes from only one imaging family, thus suppressing the initial use of these codes as bypass codes. However, these “overlap bypass codes” were retained on the bypass list because, at the end of the “pseudo” single processing logic, we reassessed the claims without suppression of the “overlap bypass codes” under our longstanding “pseudo” single process to determine whether we could convert additional claims to “pseudo” single procedure claims. (We refer readers to section II.A.2.b. of this proposed rule for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” bills that could be used for calculating composite APC median costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs are identified by asterisks (*) in Table 1 below.

Table 1 below includes the proposed list of bypass codes for CY 2011. The list of bypass codes contains codes that were reported on claims for services in CY 2009 and, therefore, includes codes that were in effect in 2009 and used for billing but were deleted for CY 2010. We retain these deleted bypass codes on the proposed CY 2011 bypass list because these codes existed in CY 2009 and were covered OPD services in that period. Since these bypass codes were deleted for billing in CY 2010, we will not need to retain them for the CY 2010 bypass list. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs are identified by asterisks (*) in the third column of Table 1 below. HCPCS codes that we are proposing to add for CY 2011 also are identified by asterisks (*) in the fourth column of Table 1. Table 2 contains the list of codes that we are proposing to remove from the CY 2011 bypass list because they were deleted from the HCPCS before CY 2009. None of these proposed deleted codes were “overlap bypass” codes.

BILLING CODE 4120-01-P

EP03AU10.067

EP03AU10.068

EP03AU10.069

EP03AU10.070

EP03AU10.071

EP03AU10.072

EP03AU10.073

EP03AU10.074

EP03AU10.075

EP03AU10.076

EP03AU10.077

EP03AU10.078

EP03AU10.079

EP03AU10.080

BILLING CODE 4120-01-C

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)

For CY 2011, we are proposing to continue to use the hospital-specific overall ancillary and departmental CCRs to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk. To calculate the APC median costs on which the proposed CY 2011 APC payment rates are based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2009 claims data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2008. For the CY 2011 OPPS proposed rates, we used the set of claims processed during CY 2009. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at:

http://www.cms.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.

To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2009 (the year of the claims data we are using to calculate the CY 2011 OPPS proposed payment rates). For CY 2009, there were several changes to these revenue codes. The National Uniform Billing Committee (NUBC) is the organization that is responsible for the data specifications for the Uniform Bill (currently the UB-04). For CY 2009, the NUBC changed the title of revenue code series 076X from “Specialty Room—Treatment/Observation Room” to “Specialty Services” and changed the title of subclassification revenue code 0762 from “Observation Room” to “Observation Hours”. We are not proposing to change the revenue code-to-cost center crosswalk as a result of this change because we believe that hospitals have historically reported charges for observation based on hours of care and that this change reflects existing practices. In addition, for CY 2009, NUBC removed a note that indicated that subcategory revenue codes 0912, Behavioral Health Treatment/Services (also see 091X, an extension of 090X), and 0913, Behavioral Health Treatment/Services—Extension of 090X, were designed as zero-billed revenue codes (that is, no dollar in the amount field). This change has no impact on the revenue code-to-cost center crosswalk. We note that the addition of revenue codes with effective dates in CY 2010 is not relevant to this process because the revenue codes were not applicable to claims for services furnished during CY 2009.

We calculated CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. For a discussion of the hospital-specific overall ancillary CCR calculation, we

refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 67983 through 67985). One longstanding exception to this general methodology for calculation of CCRs used for converting charges to costs on each claim is the calculation of median blood costs, as discussed in section II.A.2.d.(2) of this proposed rule and which has been our standard policy since the CY 2005 OPPS.

For the CCR calculation process, we used the same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCR calculation that excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those for hospitals that filed outpatient claims in CY 2009 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information System (HCRIS). We used the most recent available cost report data, in most cases, cost reports with cost reporting periods beginning in CY 2007. For this proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate median costs for the proposed CY 2011 OPPS payment rates. If the most recent available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted but not settled cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced in section II.A.1.c. of this proposed rule for all purposes that require use of an overall ancillary CCR.

Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher-cost services and a higher charge markup to lower-cost services. As a result, the cost-based weights may reflect some aggregation bias, undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center.

To explore this issue, in August 2006 we awarded a contract to RTI International (RTI) to study the effects of charge compression in calculating the IPPS cost-based relative weights, particularly with regard to the impact on inpatient diagnosis-related group (DRG) payments, and to consider methods to better capture the variation in cost and charges for individual services when calculating costs for the IPPS relative weights across services in the same cost center. RTI issued a report in March 2007 with its findings on charge compression, which is available on the CMS Web site at:

http://www.cms.gov/reports/downloads/Dalton.pdf.

Although this report was focused largely on charge compression in the context of the IPPS cost-based relative weights, because several of the findings were relevant to the OPPS, we discussed that report in the CY 2008 OPPS/ASC proposed rule (72 FR 42641 through 42643) and reiterated them in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66599 through 66602).

In August 2007, we contracted with RTI to evaluate the cost estimation process for the OPPS relative weights because its 2007 report had concentrated on IPPS DRG cost-based relative weights. The results of RTI's analyses had implications for both the OPPS APC cost-based relative weights and the IPPS MS-DRG (Medicare severity) cost-based relative weights. The RTI final report can be found on RTI's Web site at:

http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf.

For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527).

We addressed the RTI finding that there was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule. Specifically, we finalized our proposal for both the OPPS and IPPS to create one cost center for “Medical Supplies Charged to Patients” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current CCR for “Medical Supplies and Equipment” into one CCR for low-cost medical supplies and another CCR for high-cost implantable devices in order to mitigate some of the effects of charge compression. Accordingly, in Transmittal 20 of the Provider Reimbursement Manual, Part II (PRM-II), Chapter 36, Form CMS-2552-96, which was issued in July 2009, we created a new subscripted Line 55.01 on Worksheet A for the “Implantable Devices Charged to Patients” cost center. This new subscripted cost center, placed under the standard line for “Medical Supplies Charged to Patients,” is available for use for cost reporting periods beginning on or after May 1, 2009. A subscripted cost center is the addition of a separate new cost center line and description which bears a logical relationship to the standard cost center line and is located immediately following a standard cost center line. Subscripting a cost center line adds flexibility and cost center expansion capability to the cost report. For example, Line 55 of Worksheet A on Form CMS 2552-96 (the Medicare hospital cost report) is “Medical Supplies Charged to Patients.” The additional cost center, which isolates the costs of “Implantable Medical Supplies Charged to Patients”, was created by adding subscripted Line 55.01 to Worksheet A.

Because there is approximately a 3-year lag in the availability of cost report data for IPPS and OPPS ratesetting purposes in a given calendar year, we believe we will be able to use data from the revised cost report form to estimate costs from charges for implantable devices for the CY 2013 OPPS relative weights. For a complete discussion of the rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” public comments, and our responses, we refer readers to the FY 2009 IPPS final rule (73 FR 48458 through 45467).

In the CY 2009 OPPS/ASC final rule with comment period, we indicated that we would be making some OPPS-specific changes in response to the RTI report recommendations. Specifically, these changes included modifications to the cost reporting software and the addition of three new nonstandard cost centers. With regard to modifying the cost reporting preparation software in order to offer additional descriptions for nonstandard cost centers to improve the accuracy of reporting for nonstandard cost centers, we indicated that the change would be made for the next release of the cost report software. These changes have been made to the cost reporting software with the implementation of CMS Transmittal 21, under Chapter 36 of the Provider Reimbursement Manual—Part II, available online at

http://www.cms.hhs.gov/Manuals/PBM/,

which is effective for cost reporting

periods ending on or after October 1, 2009.

We also indicated that we intended to add new nonstandard cost centers for Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and Lithotripsy. We note that in January 2010, CMS issued Transmittal 21 which updated the PRM-II, Chapter 36, Form CMS-2552-96. One of the updates in this transmittal established nonstandard cost centers for Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and Lithotripsy for use on Worksheet A. These three new nonstandard cost centers are now available for cost reporting periods ending on or after October 1, 2009.

Furthermore, we noted in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43781 through 43782) that we were updating the cost report form to eliminate outdated requirements, in conjunction with the Paperwork Reduction Act (PRA), and that we had proposed actual changes to the cost reporting form, the attending cost reporting software, and the cost report instructions in Chapters 36 and 40 of the PRM-II. The new draft hospital cost report Form CMS-2552-10 was published in the

Federal Register

on July 2, 2009, and was subject to a 60-day review and comment period, which ended on August 31, 2009. We received numerous comments on the draft hospital cost report Form CMS-2552-10, specifically regarding the creation of new cost centers from which data might be used in the OPPS cost-based relative weights calculation. We had proposed to create new standard cost centers for Computed Tomography (CT), Magnetic Resonance Imaging (MRI), and Cardiac Catheterization in Form CMS-2552-10. If these standard cost centers are finalized, when the data become available, we would analyze the cost and charge data to determine if it is appropriate to use those data to create distinct CCRs from these cost centers in setting the relative weights. For a discussion of these cost centers, we refer readers to the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23878 through 23880). Comments will be addressed in detail in the

Federal Register

notice that will finalize Form CMS-2552-10. The revised draft of hospital cost report Form CMS-2552-10 went on public display on April 23, 2010, and appeared in the

Federal Register

on April 30, 2010 (75 FR 22810) with a 30-day public comment period. The public comment period ended on June 1, 2010.

We believe that improved cost report software, the incorporation of new standard and nonstandard cost centers, and the elimination of outdated requirements will improve the accuracy of the cost data contained in the electronic cost report data files and, therefore, the accuracy of our cost estimation processes for the OPPS relative weights. We will continue our standard practice of examining ways in which we can improve the accuracy of our cost estimation processes.

2. Proposed Data Development Process and Calculation of Median Costs

In this section of this proposed rule, we discuss the use of claims to calculate proposed OPPS payment rates for CY 2011. The hospital OPPS page on the CMS Web site on which this proposed rule is posted provides an accounting of claims used in the development of the proposed payment rates at:

http://www.cms.gov/HospitalOutpatientPPS

. The accounting of claims used in the development of this proposed rule is included on the CMS Web site under supplemental materials for the CY 2011 OPPS/ASC proposed rule. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section, we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. Our CMS Web site,

http://www.cms.gov/HospitalOutpatientPPS

, includes information about purchasing the “OPPS Limited Data Set,” which now includes the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2009 claims that were used to calculate the proposed payment rates for the CY 2011 OPPS.

We used the methodology described in sections II.A.2.a. through II.A.2.e. of this proposed rule to calculate the median costs we use to establish the relative weights used in calculating the proposed OPPS payment rates for CY 2011 shown in Addenda A and B to this proposed rule. We refer readers to section II.A.4. of this proposed rule for a discussion of the conversion of APC median costs to scaled payment weights.

a. Claims Preparation

We used the CY 2009 hospital outpatient claims processed before January 1, 2010 to calculate the median costs of APCs that underpin the proposed relative weights for CY 2011. To begin the calculation of the relative weights for CY 2011, we pulled all claims for outpatient services furnished in CY 2009 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory services for persons who are neither inpatients nor outpatients of the hospital).

We then excluded claims with condition codes 04, 20, 21, and 77. These are claims that providers submitted to Medicare knowing that no payment would be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare and document that a service is not covered. We then excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands because hospitals in those geographic areas are not paid under the OPPS.

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 102 million claims that contain hospital bill types paid under the OPPS.

1. Claims that were not bill types 12X, 13X (hospital bill types), 14X (laboratory specimen bill types), or 76X (CMHC bill types). Other bill types are not paid under the OPPS and, therefore, these claims were not used to set OPPS payment.

2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 13X are hospital outpatient claims. Claims with bill type 14X are laboratory specimen claims, of which we use a subset for the limited number of services in these claims that are paid under the OPPS.

3. Claims that were bill type 76X (CMHC).

To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hospital specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this proposed rule. We then flagged and excluded CAH claims (which are not paid under the OPPS) and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclusive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less than .0001); and those from hospitals with overall ancillary CCRs that were identified as outliers (3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded +/− 3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost

center CCRs, which is the revenue code-to-cost center crosswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that is relevant to OPPS services, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing” so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall ancillary CCR for the revenue code in question as the default CCR. For example, if a visit was reported under the clinic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code. The revenue code-to-cost center crosswalk is available for inspection and comment on the CMS Web site:

http://www.cms.gov/HospitalOutpatientPPS

. Revenue codes that we do not use to set medians or to model impacts are identified with an “N” in the revenue code-to-cost center crosswalk.

At the February 17-18, 2010 APC Panel Meeting, the Panel recommended that CMS present to the Data Subcommittee an analysis of the effect of using a different lower-level threshold in the overall CCR error trim as part of the standard methodology. The Panel members were concerned that our current CCR trimming policy (excluding providers with an overall ancillary CCR greater than 90 or less than .0001 or above and then excluding remaining providers with overall ancillary CCRs beyond +/− 3 standard deviations from the geometric mean) could result in the exclusion of claims from providers that could otherwise be used for ratesetting and modeling. We are accepting this recommendation. We will study the issue and provide the relevant data to the Data Subcommittee at an upcoming meeting.

We applied CCRs as described above to claims with bill type 12X, 13X, or 14X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals for which CCRs were flagged as invalid.

We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above.

We then excluded claims without a HCPCS code. We moved to another file claims that contained nothing but influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost and, therefore, these claims are not used to set OPPS rates.

We next copied line-item costs for drugs, blood, and brachytherapy sources (the lines stay on the claim, but are copied onto another file) to a separate file. No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit mean and median cost and a per day mean and median cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.

To implement our proposed policy to redistribute some portion of total cost for packaged drugs and biologicals to the separately payable drugs and biologicals as acquisition and pharmacy overhead and handling costs discussed in section V.B.3. of this proposed rule, we used the line-item cost data for drugs and biologicals for which we had a HCPCS code with ASP pricing information to calculate the ASP+X values, first for all drugs and biologicals, and then for separately payable drugs and biologicals and for packaged drugs and biologicals, respectively, by taking the ratio of total claim cost for each group relative to total ASP dollars (per unit of each drug or biological HCPCS code's April 2010 ASP amount multiplied by total units for each drug or biological in the CY 2009 claims data). These values are ASP+14 percent (for all drugs and biologicals with HCPCS codes, whether separately paid or packaged), ASP+0 percent (for drugs and biologicals that are separately paid), and ASP+283 percent (for drugs and biologicals that have HCPCS codes and that are packaged), respectively. As we discuss in section V.B.3. of this proposed rule, we are proposing a policy to redistribute $150 million of the total cost in our claims data for packaged drugs and biologicals that have an associated ASP from packaged drugs with an ASP to separately payable drugs and biologicals. We also are proposing a policy to redistribute an additional $50 million of the total cost in our claims data for drugs and biologicals lacking an ASP, largely for estimated costs associated with uncoded charges billed under pharmacy revenue code series 025X (Pharmacy (also see 063X, an extension of 025X)), 026X (IV Therapy), and 063X (Pharmacy—Extension of 025X). We observe about $623 million for drugs lacking an ASP in our CY 2009 claims data. This total excludes the cost of diagnostic and therapeutic radiopharmaceuticals because they are not reported under pharmacy revenue codes or under the pharmacy cost center on the hospital cost report.

Removing a total of $150 million in pharmacy overhead cost from packaged drugs and biologicals reduces the $593 million to $443 million, approximately a 25 percent reduction. Removing $50 million from the cost of drugs lacking an ASP reduces the $623 million to $573 million, approximately an 8 percent reduction. To implement our proposed CY 2011 policy to redistribute $150 million in claim cost from packaged drugs and biologicals with an ASP to separately payable drugs and biologicals and $50 million in claim cost from packaged drugs and biologicals lacking an ASP, including uncoded pharmacy revenue code charges, we multiplied the cost of each packaged drug or biological with a HCPCS code and ASP pricing information in our CY 2009 claims data by 0.75, and we multiplied all other packaged drug costs in our CY 2009 claims data, excluding those for diagnostic radiopharmaceuticals, by 0.92. We also added the redistributed $200 million to the total cost of separately payable drugs and biologicals in our CY 2009 claims data, which increased the relationship between the total cost for separately payable drugs and biologicals and ASP dollars for the same drugs and biologicals from ASP+0 percent to ASP+6 percent. We refer readers to section V.B.3. of this proposed rule for a complete discussion of our proposal to pay for separately paid drugs and biologicals and pharmacy overhead for CY 2011.

We then removed line-items that were not paid during claim processing, presumably for a line-item rejection or denial. We added this process to our median cost calculation methodology for the CY 2010 OPPS, as discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60359). The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator for the claim year and a status indicator of “S,” “T,” “V,” or “X” when separately paid under the prospective

year's payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly proposed to come off the inpatient list for CY 2010 that were assigned status indicator “C” in the claim year.

For CY 2011, we are proposing to expand the application of this trim to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2009) and nonpass-through drugs and biologicals (status indicator “K” for CY 2009) where the charges reported on the claim for the line were either denied or rejected during claims processing. Removing lines that were eligible for payment but were not paid ensures that we are using appropriate data. The trim avoids using cost data on lines that we believe were defective or invalid because those rejected or denied lines did not meet the Medicare requirements for payment. For example, edits may reject a line for a separately paid drug because the number of units billed exceeded the number of units that would be reasonable and, therefore, is likely a billing error (for example, a line reporting 55 units of a drug for which 5 units is known to be a fatal dose). For approximately 90 percent of the codes with status indicators “G” and “K” in their claims year, to which the expansion of the trim would apply, between 0 and 10 percent of lines would be removed due to receiving zero payment. As with our trimming in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60359) of line items with a status indicator of “S,” “T,” “V,” or “X”, we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the single bills used to determine the mean unit costs for use in the ASP+X calculation described in section V.B.3. of this proposed rule.

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims

(1) Splitting Claims

We then split the remaining claims into five groups: Single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups follow below.) For CY 2011, we are proposing to continue our current policy of defining major procedures as any HCPCS code having a status indicator of “S,” “T,” “V,” or “X;” defining minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N,” and classifying “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2011, we are proposing to continue assigning status indicator “R” to blood and blood products; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “STVX-packaged codes;” status indicator “Q2” to all “T-packaged codes;” and status indicator “Q3” to all codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met. As discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of codes. We are proposing to treat these codes in the same manner for data purposes for CY 2011 as we have treated them since CY 2008. Specifically, we are proposing to continue to evaluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are carried through the data either with status indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” single procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs and, therefore, they carry the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the median costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.e. of this proposed rule.

Specifically, we divided the remaining claims into the following five groups:

1.

Single Procedure Major Claims:

Claims with a single separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”); claims with one unit of a status indicator “Q1” code (“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T-packaged”) where there was no code with a status indicator “T” on the same claim on the same date.

2.

Multiple Procedure Major Claims:

Claims with more than one separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”), or multiple units of one payable procedure. These claims include those codes with a status indicator “Q2” code (“T-packaged”) where there was no procedure with a status indicator “T” on the same claim on the same date of service but where there was another separately paid procedure on the same claim with the same date of service (that is, another code with status indicator “S,” “V,” or “X”). We also include, in this set, claims that contained one unit of one code when the bilateral modifier was appended to the code and the code was conditionally or independently bilateral. In these cases, the claims represented more than one unit of the service described by the code, notwithstanding that only one unit was billed.

3.

Single Procedure Minor Claims:

Claims with a single HCPCS code that was assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N” and not status indicator “Q1” (“STVX-packaged”) or status indicator “Q2” (“T-packaged”) code.

4.

Multiple Procedure Minor Claims:

Claims with multiple HCPCS codes that are assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N;” claims that contain more than one code with status indicator “Q1” (“STVX-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” “V,” or “X” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q1,” or more than one unit of a code with status indicator “Q2” but no code with status indicator “T” on the same date of service.

5.

Non-OPPS Claims:

Claims that contain no services payable under the OPPS (that is, all status indicators other than those listed for major or minor status). These claims were excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment or clinical laboratory tests, and do not contain a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS).

The claims listed in numbers 1, 2, 3, and 4 above are included in the data file that can be purchased as described above. Claims that contain codes to which we have assigned status indicators “Q1” (“STVX-packaged”) and “Q2” (“T-packaged”) appear in the data for the single major file, the multiple major file, and the multiple minor file used in this proposed rule. Claims that contain codes to which we have assigned status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major files used in this proposed rule, depending on the specific composite calculation.

(2) Creation of “Pseudo” Single Procedure Claims

To develop “pseudo” single procedure claims for this proposed rule, we examined both the multiple procedure major claims and the multiple procedure minor claims. We first examined the multiple major procedure claims for dates of service to determine if we could break them into “pseudo” single procedure claims using the dates of service for all lines on the claim. If we could create claims with single major procedures by using dates of service, we created a single procedure claim record for each separately payable procedure on a different date of service (that is, a “pseudo” single).

We also used the bypass codes listed earlier in Table 1 and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures that we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The proposed CY 2011 “overlap bypass codes” are listed in Table 1 in section II.A.1.b. of this proposed rule. When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. Where one unit of a single, separately payable procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.e.(5) of this proposed rule, were met. Where the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be packaged and, if so, the code ceased to be available for further assessment as part of the composite APC. Because the packaged code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC median cost. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

We also examined the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2010 relative weight, set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2010 relative weight to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q1” HCPCS code with the highest CY 2010 relative weight; other codes with status indicator “Q1”; and all other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for selected codes from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC median cost for the status indicator “Q1” HCPCS code.

Similarly, where a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or multiple units of a single code with status indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest CY 2010 relative weight, set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2010 relative weight to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2010 relative weight; other codes with status indicator “Q2;” and other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim.

Lastly, where a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STVX-packaged”), we selected the status indicator “Q2” HCPCS code (“T-packaged”) that had the highest relative weight for CY 2010 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T packaged”) HCPCS code to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2010 relative weight; other codes with status indicator “Q2;” codes with status indicator “Q1” (“STVX-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We favor status indicator “Q2” over “Q1”

HCPCS codes because “Q2” HCPCS codes have higher CY 2010 relative weights. If a status indicator “Q1” HCPCS code had a higher CY 2010 relative weight, it would become the primary code for the simulated single bill process. We changed the status indicator for the selected status indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim.

In public comments received on the CY 2010 OPPS/ASC proposed rule, a public commenter suggested that CMS could use more claims data to develop medians for these conditionally packaged codes if CMS applied the “pseudo” single creation process to the conditionally packaged codes in the multiple major claims that still contained unusable data. We agree and, for this CY 2011 OPPS/ASC proposed rule, we are proposing to use the otherwise unusable multiple procedure claims data that remain after the standard pseudo single creation process is applied to them, in order to create more pseudo single procedure claims. We would do this by treating the conditionally packaged codes that do not meet the criteria for packaging as if they were separately payable major codes and applying the pseudo single process to the claims data to create single procedure claims from them if they meet the criteria for single procedure claims. Conditionally packaged codes are identified using status indicators “Q1” and “Q2,” and are described in section XIII.A.1. of this proposed rule. Using the February 2010 APC Panel data, we estimate that the impact of adding this proposed additional step to the pseudo single creation process would result in a small increase in the number of claims usable for ratesetting in most cases, but with more significant increases of between 5 to 10 percent of claims for a few codes. For most of the codes affected by adding this proposed additional step to the “pseudo” single creation process, we found no significant changes to the APC medians. Some HCPCS codes do experience some fluctuations, with the impact of additional claims causing their APC median to decrease. We believe that this change is consistent with our goal of using more available data from within the existing set of claims information and results in a more accurate estimation of the APC median cost for conditionally packaged services.

We excluded those claims that we were not able to convert to single procedure claims even after applying all of the techniques for creation of “pseudo” single procedure claims to multiple procedure major and to multiple procedure minor claims. As has been our practice in recent years, we also excluded claims that contained codes that were viewed as independently or conditionally bilateral and that contained the bilateral modifier (Modifier 50 (Bilateral procedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that hospitals billed the code with a unit of one.

c. Completion of Claim Records and Median Cost Calculations

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this proposed rule and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the services reported under packaged revenue codes in Table 3 that appeared on the claim without a HCPCS code into the cost of the single major procedure remaining on the claim.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that CMS should review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. As we have in the past, we will continue to compare the final list of packaged revenue codes that we adopt for CY 2011 to the revenue codes that the I/OCE will package for CY 2011 to ensure consistency.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the proposed list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment to the CY 2010 proposed list of packaged revenue codes. For this CY 2011 OPPS proposed rule, we reviewed the changes to revenue codes that were effective during CY 2009 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we would propose to package for the CY 2011 OPPS. As we discuss in the context of the revenue code-to-cost center crosswalk in section II.A.1.c. of this proposed rule, for CY 2009, the NUBC changed the title of revenue code series 076x from “Specialty Room—Treatment/Observation Room” to “Specialty Services” and changed the title of subclassification revenue code 0762 from “Observation Room” to “Observation Hours”. In addition, the NUBC deleted an explanatory note following revenue code 0913, “Behavioral Health Treatment Services—Extension of 090x.” We are proposing to revise the title for revenue code 076x, Observation Hours, in Table 3 to comport to the CY 2009 revenue code title for revenue code 076x. There is no need to revise the table as a result of the deletion of the explanatory note. We believe that the charges reported under the revenue codes listed in Table 3 continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, we are proposing to continue to package the costs that we derive from the charges reported under the revenue codes displayed in Table 3 below for purposes of calculating the median costs on which the CY 2011 OPPS would be based.

BILLING CODE 4120-01-P

EP03AU10.081

EP03AU10.082

BILLING CODE 4120-01-C

In accordance with our longstanding policy, we are proposing to continue to exclude: (1) Claims that had zero costs after summing all costs on the claim; and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a service with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the fiscal intermediary or MAC was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative weight of the APC to which each code was assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equaled the revenue center payment (that is, the Medicare payment) on the assumption that where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. We are proposing to continue these processes for the CY 2011 OPPS.

For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. As has been our policy since the inception of the OPPS, we are proposing to use the pre-reclassified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the post-reclassification wage indices and, therefore, would result in the most accurate unadjusted median costs.

In accordance with our longstanding practice, we also excluded single and pseudo single procedure claims for

which the total cost on the claim was outside 3 standard deviations from the geometric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multiple units of the bypass codes).

After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 98 million claims were left. Using these 98 million claims, we created approximately 96 million single and “pseudo” single procedure claims, of which we used 95 million single bills (after trimming out approximately 696,000 claims as discussed above in this section) in the proposed CY 2011 median development and ratesetting.

We used these claims to calculate the proposed CY 2011 median costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC medians determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median (or mean cost, if elected by the Secretary) for an item or service in the group is more than 2 times greater than the lowest median cost for an item or service within the same group (the 2 times rule). Finally, we reviewed the median costs for the services for which we are proposing to pay separately under this proposed rule, and we reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and resource homogeneity within the APCs. Section III. of this proposed rule includes a discussion of many of the HCPCS code assignment changes that resulted from examination of the median costs and for other reasons. The APC medians were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific medians and the APC medians were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single procedure claims.

As we discuss in sections II.A.2 d. and II.A.2.e. and in section X.B. of this proposed rule, in some cases, APC median costs are calculated using variations of the process outlined above. Specifically, section II.A.2.d. of this proposed rule addresses the proposed calculation of single APC criteria-based median costs. Section II.A.2.e. of this proposed rule discusses the proposed calculation of composite APC criteria-based median costs. Section X.B. of this proposed rule addresses the methodology for calculating the proposed median cost for partial hospitalization services.

At the February 2010 APC Panel Meeting, we provided the APC Panel a list of all APCs decreasing by more than 5 percent and increasing by more than 15 percent when comparing the proposed CY 2011 median costs based on data available for the February 2010 APC Panel meeting from CY 2009 claims processed through September 30, 2009, to those based on CY 2010 OPPS/ASC final rule data (CY 2008 claims). The APC Panel reviewed these fluctuations in the APC median costs but did not express particular concerns with the median cost changes.

As we stated earlier, at the February 2010 APC Panel Meeting, the APC Panel also recommended that the Data Subcommittee continue its work. We are proposing to accept that recommendation.

d. Proposed Calculation of Single Procedure APC Criteria-Based Median Costs

(1) Device-Dependent APCs

Device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure. For a full history of how we have calculated payment rates for device-dependent APCs in previous years and a detailed discussion of how we developed the standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the procedure-to-device edits and device-to-procedure edits used in ratesetting for device-dependent APCs are available in the CY 2005 OPPS final rule with comment period (69 FR 65761 through 65763) and the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 through 68071).

For CY 2011, we are proposing to continue to use the standard methodology for calculating median costs for device-dependent APCs that was finalized in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60365). This methodology utilizes claims data that generally represent the full cost of the required device. Specifically, we are proposing to calculate the median costs for device-dependent APCs for CY 2011 using only the subset of single procedure claims from CY 2009 claims data that pass the procedure-to-device and device-to-procedure edits; do not contain token charges (less than $1.01) for devices; do not contain the “FB” modifier signifying that the device was furnished without cost to the provider, supplier, or practitioner, or where a full credit was received; and do not contain the “FC” modifier signifying that the hospital received partial credit for the device. The “FC” modifier became effective January 1, 2008, and was present for the first time on claims that were used in OPPS ratesetting for CY 2010. We continue to believe the standard methodology for calculating median costs for device-dependent APCs gives us the most appropriate proposed median costs for device-dependent APCs in which the hospital incurs the full cost of the device.

The median costs for the majority of device-dependent APCs that are calculated using the CY 2011 proposed rule claims data are generally stable, with most median costs increasing moderately compared to the median costs upon which the CY 2010 OPPS payment rates were based. However, the median costs for APC 0225 (Implantation of Neurostimulator Electrodes, Cranial Nerve) and APC 0418 (Insertion of Left Ventricular Pacing Electrode) demonstrate significant fluctuation. Specifically, the proposed CY 2011 median cost for APC 0225 increased approximately 40 percent compared to its final CY 2010 median cost, while the proposed CY 2011 median cost for APC 0418, which had increased approximately 53 percent from CY 2009 to CY 2010, showed a decrease of approximately 27 percent based on the claims data available for this CY 2011 proposed rule. We believe the fluctuations in median costs for these two APCs are a consequence of the small number of single bills upon which the median costs are based and the small number of providers of these services. As we have stated in the past, some fluctuation in relative costs from year to year is to be expected in a prospective payment system for low volume device-dependent APCs, particularly where there are small numbers of single bills from a small number of providers. The additional single bills available for ratesetting in the CY 2011 final rule data and updated cost report data may result in less fluctuation in the median costs for these APCs for CY 2011.

Table 4 below lists the APCs for which we are proposing to use our standard device-dependent APC ratesetting methodology for CY 2011. We refer readers to Addendum A to this proposed rule for the proposed payment rates for these APCs.

EP03AU10.083

BILLING CODE 4120-01-C

(2) Blood and Blood Products

Since the implementation of the OPPS in August 2000, we have made separate payments for blood and blood products through APCs rather than packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood products, as well as for the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs.

For CY 2011, we are proposing to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a significant difference in CCRs for those hospitals with and without blood-specific cost centers, and past comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimation of the true hospital costs for blood and blood products. Specifically, in order to address the differences in CCRs and to better reflect hospitals' costs, we are proposing to continue to simulate blood CCRs for each hospital that does not report a blood cost center by calculating the ratio of the blood-specific CCRs to hospitals' overall CCRs for those hospitals that do report costs and charges for blood cost centers. We would then apply this mean ratio to the overall CCRs of hospitals not reporting costs and charges for blood cost centers on their cost reports in order to simulate blood-specific CCRs for those hospitals. We calculated the median costs upon which the proposed CY 2011 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

We continue to believe the hospital-specific, blood-specific CCR methodology better responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each provider, we believe that it yields more accurate estimated costs for these products. We believe that continuing with this methodology in CY 2011 would result in median costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We refer readers to Addendum B to this proposed rule for the proposed CY 2011 payment rates for blood and blood products, which are identified with status indicator “R.” For more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).

(3) Single Allergy Tests

We are proposing to continue with our methodology of differentiating single allergy tests (“per test”) from multiple allergy tests (“per visit”) by assigning these services to two different APCs to provide accurate payments for these tests in CY 2011. Multiple allergy tests are currently assigned to APC 0370 (Allergy Tests), with a median cost calculated based on the standard OPPS methodology. We provided billing guidance in CY 2006 in Transmittal 804 (issued on January 3, 2006) specifically clarifying that hospitals should report charges for the CPT codes that describe single allergy tests to reflect charges “per test” rather than “per visit” and should bill the appropriate number of units (as defined in the CPT code descriptor) of these CPT codes to describe all of the tests provided. Our CY 2009 claims data available for this proposed rule for APC 0381 do not reflect improved and more consistent hospital billing practices of “per test” for single allergy tests. The median cost of APC 0381, calculated for this proposed rule according to the standard single claims OPPS methodology, is approximately $52, significantly higher than the CY 2010 median cost of APC 0381 of approximately $29 calculated according to the “per unit” methodology, and greater than we would expect for these procedures that are to be reported “per test” with the appropriate number of units. Some claims for single allergy tests still appear to provide charges that represent a “per visit” charge, rather than a “per test” charge. Therefore, consistent with our payment policy for single allergy tests since CY 2006, we are proposing to calculate a “per unit” median cost for APC 0381, based upon 595 claims containing multiple units or multiple occurrences of a single CPT code. The proposed CY 2011 median cost for APC 0381 using the “per unit” methodology is approximately $29. For a full discussion of this methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66737).

(4) Hyperbaric Oxygen Therapy (APC 0659)

Since the implementation of OPPS in August 2000, the OPPS has recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full body chamber, per 30 minute interval) for hyperbaric oxygen therapy (HBOT) provided in the hospital outpatient setting. In the CY 2005 final rule with comment period (69 FR 65758 through 65759), we finalized a “per unit” median cost calculation for APC 0659 (Hyperbaric Oxygen) using only claims with multiple units or multiple occurrences of HCPCS code C1300 because delivery of a typical HBOT service requires more than 30 minutes. We observed that claims with only a single occurrence of the code were anomalies, either because they reflected terminated sessions or because they were incorrectly coded with a single unit. In the same rule, we also established that HBOT would not generally be furnished with additional services that might be packaged under the standard OPPS APC median cost methodology. This enabled us to use claims with multiple units or multiple occurrences. Finally, we also used each hospital's overall CCR to estimate costs for HCPCS code C1300 from billed charges rather than the CCR for the respiratory therapy or other departmental cost centers. The public comments on the CY 2005 OPPS proposed rule effectively demonstrated that hospitals report the costs and charges for HBOT in a wide variety of cost centers. Since CY 2005, we have used this methodology to estimate the median cost for HBOT. The median costs of HBOT using this methodology have been relatively stable for the last 5 years. For CY 2011, we are proposing to continue using the same methodology to estimate a “per unit” median cost for HCPCS code C1300. This methodology results in a proposed APC median cost of approximately $109 using 328,960 claims with multiple units or multiple occurrences for HCPCS code C1300 for CY 2011.

(5) Payment for Ancillary Outpatient Services When Patient Expires (APC 0375)

In the November 1, 2002 final rule with comment period (67 FR 66798), we discussed the creation of the new HCPCS modifier -CA to address situations where a procedure on the OPPS inpatient list must be performed to resuscitate or stabilize a patient (whose status is that of an outpatient) with an emergent, life-threatening condition, and the patient dies before being admitted as an inpatient. HCPCS modifier -CA is defined as a procedure payable only in the inpatient setting when performed emergently on an outpatient who expires prior to admission. In Transmittal A-02-129, issued on January 3, 2003, we instructed hospitals on the use of this modifier. For a complete description of the history of the policy and the development of the payment methodology for these services, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 68157 through 68158).

For CY 2011, we are proposing to continue to use our established ratesetting methodology for calculating the median cost of APC 0375 (Ancillary Outpatient Services When Patient Expires) and to continue to make one payment under APC 0375 for the services that meet the specific conditions for using HCPCS modifier -CA. We are proposing to calculate the relative payment weight for APC 0375 by using all claims reporting a status indicator “C” (inpatient procedures) appended with HCPCS modifier -CA, using estimated costs from claims data for line-items with a HCPCS code assigned to status indicators “G,” “H,” “K,” “N,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” and “X” and charges for packaged revenue codes without a HCPCS code (we refer readers to section XIII.A.1. of this proposed rule for a complete listing of status indicators). We continue to believe that this methodology results in the most appropriate aggregate median cost for the ancillary services provided in these unusual clinical situations.

We believe that hospitals are reporting the HCPCS modifier -CA according to the policy initially established in CY 2003. We note that the claims frequency for APC 0375 has been relatively stable over the past few years. Although the median cost for APC 0375 has increased, the median in the CY 2009 OPPS claims data used for development of proposed rates for CY 2011 was only slightly higher than that for CY 2010. Variation in the median cost for APC 0375 is expected because of the small number of claims and because the specific cases are grouped by the presence of the HCPCS modifier -CA appended to an inpatient procedure and not according to the standard APC criteria of clinical and resource homogeneity. Cost variation for APC 0375 from year to year is anticipated and acceptable as long as hospitals continue judicious reporting of the HCPCS modifier -CA. Table 5 below shows the number of claims and the final median costs for APC 0375 for CYs 2007, 2008, 2009, and 2010. For CY 2011, we are proposing a median cost of approximately $6,566 for APC 0375 based on 117 claims.

EP03AU10.084

(6) Pulmonary Rehabilitation

Section 144(a)(1) of Public Law 110-275 (MIPPA) added section 1861(fff) to the Act to provide Medicare Part B coverage and payment for a comprehensive program of pulmonary rehabilitation services furnished to beneficiaries with chronic obstructive pulmonary disease, effective January 1, 2010. Accordingly, in the CY 2010 OPPS/ASC final rule with comment period, we established a policy to pay for pulmonary rehabilitation (PR) services furnished as a part of the comprehensive PR program benefit (74 FR 60567). We created new HCPCS code G0424 (Pulmonary rehabilitation, including exercise (includes monitoring), one hour, per session, up to two sessions per day) and assigned it to new APC 0102 (Level II Pulmonary Treatment).

For CY 2011, we are proposing to continue to require hospitals to report PR services provided under the comprehensive PR benefit in section 1861(fff) of the Act using HCPCS code G0424. We also are proposing to continue to use the methodology described in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60567 through 60570) to calculate the median cost on which the proposed payment rate for CY 2011 is based. Specifically, we are proposing to continue to assign HCPCS code G0424 to APC 0102 and to calculate a median “per session” cost simulated from historical hospital claims data for similar pulmonary therapy services for the CY 2011 OPPS.

To simulate the proposed “per session” median cost of HCPCS code G0424 from claims data for existing services, we used only claims that contained at least one unit of HCPCS code G0239 (Therapeutic procedures to improve respiratory function or increase strength or endurance of respiratory muscles, two or more individuals (includes monitoring)), the group code that is without limitation on time duration, and one unit of HCPCS code G0237 (Therapeutic procedures to increase strength or endurance of respiratory muscles, face to face, one on one, each 15 minutes (includes monitoring)) or G0238 (Therapeutic procedures to improve respiratory function, other than described by G0237, one on one, face to face, per 15 minutes (includes monitoring)), the individual, face-to-face codes that report 15 minutes of service on the same date of service. We continue to believe that patients in a PR program would typically receive individual and group services in each session of

approximately 1 hour in duration. This proposal is consistent with public comments on the CY 2010 OPPS/ASC proposed rule that were addressed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60569) that suggested that PR is often provided in group sessions in the HOPD, although patients commonly require additional one-on-one care in order to fully participate in the program. We note that our use of “per session” claims reporting one unit of HCPCS code G0237 or G0238 and one unit of HCPCS code G0239 in this simulation methodology is also consistent with our overall finding of approximately 2.4 service units of the HCPCS G-codes per day on a single date of service, usually consisting of both individual and group services, for patients receiving pulmonary therapy services in the HOPD based upon CY 2008 claims used for CY 2010 OPPS final rule ratesetting. We continue to believe that the typical session of PR is 1 hour based on public comments that indicated that a session of PR is typically 1 hour and based on our findings that the most commonly reported HCPCS code for pulmonary treatment is HCPCS code G0239, which has no time definition for this group service.

In the calculation of the proposed median cost for APC 0102, we included all costs of the related tests and assessment services, including CPT codes 94620 (Pulmonary stress testing, simple (e.g. 6-minute walk test, prolonged exercise test for bronchospasm with pre- and post-spirometry and oximetry)), 94664 (Demonstration and/or evaluation of patient utilization of an aerosol generator, nebulizer, metered dose inhaler or IPPB device), and 94667 (Manipulation chest wall, such as cupping, percussing, and vibration to facilitate lung function; initial demonstration and/or evaluation and all the costs of all CPT codes for established patient clinic visits) on the same date of service as the HCPCS codes in the claims we used to simulate the median cost for HCPCS code G0424, which is the only HCPCS code in APC 0102. After identifying these “per session” claims, which we believe represent 1 hour of care, we summed the costs and calculated the median cost for the set of selected claims. In light of the cost and clinical similarities of PR and the existing services described by HCPCS codes G0237, G0238, and G0239 and the CPT codes for related assessments and tests, and the significant number of “per session” hospital claims we found, we are confident that the proposed simulated median cost for HCPCS code G0424 and APC 0102 of approximately $68 is a valid estimate of the expected hospital cost of a PR session. We note that this proposed median cost is higher than the CY 2010 final rule median cost for HCPCs code G0424 and APC 0102 of approximately $50 on which the CY 2010 payment is based.

e. Proposed Calculation of Composite APC Criteria-Based Median Costs

As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide only necessary, high quality care and to provide that care as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Combining payment for multiple independent services into a single OPPS payment in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An additional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which may be low in volume and/or incorrectly coded. Under the OPPS, we currently have composite APC policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, and multiple imaging services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652).

At its February 2010 meeting, the APC Panel recommended that, in order to support stem cell transplantation, CMS consider creating a composite APC or custom APC that captures the costs of stem cell acquisition performed in conjunction with recipient transplantation and preparation of tissue. We are accepting this APC Panel recommendation to consider creating a composite APC or custom APC that captures the costs of stem cell acquisition performed in conjunction with recipient transplantation and preparation of tissue, and will report the results of our assessment to the APC Panel at a future meeting.

For CY 2011, we are proposing to continue our established composite APC policies for extended assessment and management, LDR prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, mental health services, and multiple imaging services, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), and II.A.2.e.(5), respectively, of this proposed rule.

(1) Extended Assessment and Management Composite APCs (APCs 8002 and 8003)

For CY 2011, we are proposing to continue to include composite APC 8002 (Level I Extended Assessment and Management Composite) and composite APC 8003 (Level II Extended Assessment and Management Composite) in the OPPS. For CY 2008, we created these two composite APCs to provide payment to hospitals in certain circumstances when extended assessment and management of a pati

This text is long and has been trimmed here. Open the source document for the complete record.