# Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Short Inpatient Hospital Stays; Transition for Certain Medicare-Dependent, Small Rural Hospitals Under the Hospital Inpatient Prospective Payment System > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2015-16577 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** July 8, 2015 - **Citation:** 80 FR 39200 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 410, 412, 416, and 419 [CMS-1633-P] RIN 0938-AS42 Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Short Inpatient Hospital Stays; Transition for Certain Medicare-Dependent, Small Rural Hospitals Under the Hospital Inpatient Prospective Payment System 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) and the Medicare ambulatory surgical center (ASC) payment system for CY 2016 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. Further, this proposed rule includes certain proposals relating to the hospital inpatient prospective payment system: proposed changes to the 2-midnight rule under the short inpatient hospital stay policy, as well as a discussion of the related −0.2 percent payment adjustment; and a proposed transition for Medicare-dependent, small rural hospitals located in all-urban States. DATES: Comment Period: 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, 2015. ADDRESSES: In commenting, please refer to file code CMS-1633-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 (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the “submit a comment” 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-1633-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 via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1633-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. For information on viewing public comments, we refer readers to the beginning of the “ SUPPLEMENTARY INFORMATION ” section. FOR FURTHER INFORMATION CONTACT: Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact Carol Schwartz at (410) 786-0576. Ambulatory Surgical Center (ASC) Payment System, contact Erick Chuang at (410) 786-1816. Ambulatory Surgical Center Quality Reporting (ASCQR) Program Administration, Validation, and Reconsideration Issues, contact Anita Bhatia at (410) 786-7236. Ambulatory Surgical Center Quality Reporting (ASCQR) Data Measures, contact Vinitha Meyyur at (410) 786-8819. Blood and Blood Products, contact Lela Strong at (410) 786-3213. Cancer Hospital Payments, contact David Rice at (410) 786-6004. Chronic Care Management (CCM) Services, contact Twi Jackson at (410) 786-1159. CPT and Level II Alphanumeric HCPCS Codes, contact Marjorie Baldo at (410) 786-4617. CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck Braver at (410) 786-9379. Composite APCs (Extended Assessment and Management, Low Dose Brachytherapy, Multiple Imaging), contact Twi Jackson at (410) 786-1159. Comprehensive APCs, contact Elisabeth Daniel at (410) 786-0237. Hospital Observation Services, contact Twi Jackson at (410) 786-1159. Hospital Outpatient Quality Reporting (OQR) Program Administration, Validation, and Reconsideration Issues, contact Elizabeth Bainger at (410) 786-0529. Hospital Outpatient Quality Reporting (OQR) Program and Data Issues, contact Vinitha Meyyur at (410) 786-8819. Hospital Outpatient Visits (Emergency Department Visits and Critical Care Visits), contact Twi Jackson at (410) 786-1159. Inpatient Only Procedures List, contact Lela Strong at (410) 786-3213. New Technology Intraocular Lenses (NTIOLs), contact John McInnes at (410) 786-0791. No Cost/Full Credit and Partial Credit Devices, contact Carol Schwartz at (410) 786-0576. OPPS Brachytherapy, contact Elisabeth Daniel at (410) 786-0237. OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier Payments, and Wage Index), contact David Rice at (410) 786-6004. OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar Products, contact Elisabeth Daniel at (410) 786-0237. OPPS Exceptions to the Two Times Rule, contact Marjorie Baldo at (410) 786-4617. OPPS Packaged Items/Services, contact Elisabeth Daniel at (410) 786-0237. OPPS Pass-Through Devices and New Technology Procedures/Services, contact Carol Schwartz at (410) 786-0576. OPPS Status Indicators (SI) and Comment Indicators (CI), contact Marina Kushnirova at (410) 786-2682. Partial Hospitalization Program (PHP) and Community Mental Health Center (CMHC) Issues, contact Dexter Dickey at (410) 786-6856. Rural Hospital Payments, contact David Rice at (410) 786-6004. Stereotactic Radiosurgery Services (SRS), contact Elisabeth Daniel at (410) 786-0237. Transition for Medicare-Dependent, Small Rural Hospitals in All-Urban States, contact Shevi Marciano at (410) 786-4487. Two-Midnight Policy—General Issues, contact Twi Jackson at (410) 786-1159. Two-Midnight Policy—Medical Review, contact Steven Rubio at (410) 786-1782. All Other Issues Related to Hospital Outpatient and Ambulatory Surgical Center Payments Not Previously Identified, contact Marjorie Baldo at (410) 786-4617. 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, generally beginning approximately 3 weeks after publication of the rule, 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 4:00 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 Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/. Addenda Available Only Through the Internet on the CMS Web site In the past, a majority of the Addenda referred to in our OPPS/ASC proposed and final rules were published in the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 OPPS/ASC proposed rule, all of the Addenda no longer appear in the Federal Register as part of the annual OPPS/ASC proposed and final rules to decrease administrative burden and reduce costs associated with publishing lengthy tables. Instead, these Addenda are published and available only on the CMS Web site. The Addenda relating to the OPPS are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html. Alphabetical List of Acronyms Appearing in This Federal Register Document AHA American Hospital Association AMA American Medical Association AMI Acute myocardial infarction APC Ambulatory Payment Classification APU Annual payment update ASC Ambulatory surgical center ASCQR Ambulatory Surgical Center Quality Reporting 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 BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Public Law 106-554 BLS Bureau of Labor Statistics CAH Critical access hospital CAHPS Consumer Assessment of Healthcare Providers and Systems CAP Competitive Acquisition Program C-APC Comprehensive Ambulatory Payment Classification CASPER Certification and Survey Provider Enhanced Reporting CAUTI Catheter-associated urinary tract infection CBSA Core-Based Statistical Area CCM Chronic care management CCN CMS Certification Number CCR Cost-to-charge ratio CDC Centers for Disease Control and Prevention CED Coverage with Evidence Development CERT Comprehensive Error Rate Testing CFR Code of Federal Regulations CI Comment indicator CLABSI Central Line [Catheter] Associated Blood Stream Infection CLFS Clinical Laboratory Fee Schedule CMHC Community mental health center CMS Centers for Medicare & Medicaid Services CoP Condition of participation CPI-U Consumer Price Index for All Urban Consumers CPT Current Procedural Terminology (copyrighted by the American Medical Association) CR Change request CRC Colorectal cancer CSAC Consensus Standards Approval Committee CT Computed tomography CV Coefficient of variation CY Calendar year DFO Designated Federal Official DIR Direct or indirect remuneration DME Durable medical equipment DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and Supplies DRA Deficit Reduction Act of 2005, Public Law 109-171 DSH Disproportionate share hospital EACH Essential access community hospital EAM Extended assessment and management EBRT External beam radiotherapy ECG Electrocardiogram ED Emergency department EDTC Emergency department transfer communication EHR Electronic health record E/M Evaluation and management ESRD End-stage renal disease ESRD QIP End-Stage Renal Disease Quality Improvement Program FACA Federal Advisory Committee Act, Public Law 92-463 FDA Food and Drug Administration FFS [Medicare] Fee-for-service FY Fiscal year GAO Government Accountability Office GI Gastrointestinal HAI Healthcare-associated infection HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems HCERA Health Care and Education Reconciliation Act of 2010, Public Law 111-152 HCP Health care personnel HCPCS Healthcare Common Procedure Coding System HCRIS Healthcare Cost Report Information System HCUP Healthcare Cost and Utilization Project HEU Highly enriched uranium HH QRP Home Health Quality Reporting Program HHS Department of Health and Human Services HIE Health information exchange HIPAA Health Insurance Portability and Accountability Act of 1996, Public Law 104-191 HOP Hospital Outpatient Payment [Panel] HOPD Hospital outpatient department HOP QDRP Hospital Outpatient Quality Data Reporting Program HPMS Health Plan Management System IBD Inflammatory bowel disease ICC Interclass correlation coefficient ICD Implantable cardioverter defibrillator ICD-9-CM International Classification of Diseases, Ninth Revision, Clinical Modification ICD-10 International Classification of Diseases, Tenth Revision ICH In-center hemodialysis IDTF Independent diagnostic testing facility IGI IHS Global Insight, Inc. IHS Indian Health Service I/OCE Integrated Outpatient Code Editor IOL Intraocular lens IORT Intraoperative radiation treatment IPFQR Inpatient Psychiatric Facility Quality Reporting IPPS [Hospital] Inpatient Prospective Payment System IQR [Hospital] Inpatient Quality Reporting IRF Inpatient rehabilitation facility IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program IT Information technology LCD Local coverage determination LDR Low dose rate LTCH Long-term care hospital LTCHQR Long-Term Care Hospital Quality Reporting MAC Medicare Administrative Contractor MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public Law 114-10 MAP Measure Application Partnership MDH Medicare-dependent, small rural hospital MedPAC Medicare Payment Advisory Commission MEG Magnetoencephalography MFP Multifactor productivity MGCRB Medicare Geographic Classification Review Board 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 MLR Medical loss ratio MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173 MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110-173 MPFS Medicare Physician Fee Schedule MR Medical review MRA Magnetic resonance angiography MRgFUS Magnetic Resonance Image Guided Focused Ultrasound MRI Magnetic resonance imaging MRSA Methicillin-Resistant Staphylococcus Aures MS-DRG Medicare severity diagnosis-related group MSIS Medicaid Statistical Information System MUC Measure under consideration NCCI National Correct Coding Initiative NDC National Drug Code NEMA National Electrical Manufacturers Association NHSN National Healthcare Safety Network NOS Not otherwise specified NPI National Provider Identifier NPWT Negative Pressure Wound Therapy NQF National Quality Forum NQS National Quality Strategy NTIOL New technology intraocular lens NUBC National Uniform Billing Committee OACT [CMS] Office of the Actuary OBRA Omnibus Budget Reconciliation Act of 1996, Public Law 99-509 OIG [HHS] Office of the Inspector General OMB Office of Management and Budget ONC Office of the National Coordinator for Health Information Technology OPD [Hospital] Outpatient Department OPO Organ Procurement Organization OPPS [Hospital] Outpatient Prospective Payment System OPSF Outpatient Provider-Specific File OQR [Hospital] Outpatient Quality Reporting OT Occupational therapy PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93 PCHQR PPS-Exempt Cancer Hospital Quality Reporting PCR Payment-to-cost ratio PDC Per day cost PDE Prescription Drug Event PE Practice expense PEPPER Program Evaluation Payment Patterns Electronic Report PHP Partial hospitalization program PHSA Public Health Service Act, Public Law 96-88 PMA Premarket approval PN Pneumonia POS Place of service PPI Producer Price Index PPS Prospective payment system PQRI Physician Quality Reporting Initiative PQRS Physician Quality Reporting System QDC Quality data code QIO Quality Improvement Organization RFA Regulatory Flexibility Act RHQDAPU Reporting Hospital Quality Data for Annual Payment Update RTI Research Triangle Institute, International RVU Relative value unit SAD Self-administered drug SAMS Secure Access Management Services SCH Sole community hospital SCOD Specified covered outpatient drugs SES Socioeconomic status SI Status indicator SIR Standardized infection ratio SNF Skilled nursing facility SRS Stereotactic radiosurgery SSA Social Security Administration SSI Surgical site infection TEP Technical Expert Panel TIP Transprostatic implant procedure TOPs Transitional Outpatient Payments USPSTF United States Preventive Services Task Force VBP Value-based purchasing WAC Wholesale acquisition cost Table of Contents I. Summary and Background A. Executive Summary of This Document 1. Purpose 2. Summary of the Major Provisions 3. Summary of Costs and Benefits B. Legislative and Regulatory Authority for the Hospital OPPS C. Excluded OPPS Services and Hospitals D. Prior Rulemaking E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel) 1. Authority of the Panel 2. Establishment of the Panel 3. Panel Meetings and Organizational Structure F. Public Comments Received on the CY 2015 OPPS/ASC Final Rule With Comment Period II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Payment Weights 1. Database Construction a. Database Source and Methodology b. Proposed Use of Single and Multiple Procedure Claims c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs) 2. Proposed Data Development Process and Calculation of Costs Used for Ratesetting 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 Geometric Mean Cost Calculations (1) General Process (2) Recommendations of the Panel Regarding Data Development d. Proposed Calculation of Single Procedure APC Criteria-Based Costs (1) Blood and Blood Products (2) Brachytherapy Sources e. Proposed Comprehensive APCs (C-APCs) for CY 2016 (1) Background (2) Proposed C-APCs to be Paid under the C-APC Payment Policy for CY 2016 (3) Proposed CY 2016 Policies for Specific C-APCs f. Proposed Calculation of Composite APC Criteria-Based Costs (1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) (2) Mental Health Services Composite APC (APC 0034) (3) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) 3. Proposed Changes to Packaged Items and Services a. Background and Rationale for Packaging in the OPPS b. Proposed Packaging Policies for CY 2016 (1) Ancillary Services (2) Drugs and Biologicals that function as Supplies When Used in a Surgical Procedure (3) Clinical Diagnostic Laboratory Tests 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 Adjustment for Rural SCHs and EACHs under Section 1833(t)(13)(B) of the Act F. Proposed OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act 1. Background 2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2016 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 CY 2015 Level II HCPCS and CPT Codes Effective April 1, 2015 and July 1, 2015 for Which We Are Soliciting Public Comments in this CY 2016 OPPS/ASC Proposed Rule 2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2015 and January 1, 2016 for Which We Will Be Soliciting Public Comments in the CY 2016 OPPS/ASC Final Rule with Comment Period 3. Proposed Treatment of New and Revised CY 2016 Category I and III CPT Codes That Will be Effective January 1, 2016 for Which We Are Soliciting Public Comments in This CY 2016 OPPS/ASC Proposed Rule B. Proposed OPPS Changes—Variations Within APCs 1. Background 2. Application of the 2 Times Rule 3. Proposed APC Exceptions to the 2 Times Rule C. Proposed New Technology APCs 1. Background 2. Additional New Technology APC Groups 3. Proposed Procedures Assigned to New Technology APCs a. Transprostatic Urethral Implant Procedure b. Retinal Prosthesis Implant Procedure D. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies 1. Airway Endoscopy Procedures 2. Diagnostic Tests and Related Services 3. Excision/Biopsy and Incision and Drainage Procedures 4. Gastrointestinal (GI) Procedures 5. Imaging Services 6. Orthopedic Procedures 7. Skin Procedures 8. Urology and Related Services Procedures 9. Vascular Procedures (Excluding Endovascular Procedures) IV. Proposed OPPS Payment for Devices A. Proposed Pass-Through Payments for Devices 1. Expiration of Transitional Pass-Through Payments for Certain Devices a. Background b. Proposed CY 2016 Policy 2. Proposed Annual Rulemaking Process in Conjunction with Quarterly Review Process for Device Pass-through Payment Applications a. Background b. Proposed Revision to Application Process for Device Pass-through Payments c. Criterion for Newness 3. Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups a. Background b. Proposed CY 2016 Policy B. Proposed Device-Intensive Procedures 1. Background 2. Proposed Changes to Device Edit Policy 3. Proposed Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit Devices a. Background b. Proposed Policy for CY 2016 4. Proposed Adjustment to OPPS Payment for Discontinued Device-Intensive Procedures 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. Proposed Drugs and Biologicals with Expiring Pass-Through Status in CY 2015 3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with New or Continuing Pass-Through Status in CY 2016 4. Proposed Provisions for Reducing Transitional Pass-Through Payments for Policy-Packaged Drugs and Biologicals 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 d. Proposed Payment Offset Policy for Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure (Other Than Diagnostic Radiopharmaceuticals and Contrast Agents and Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure) 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, Certain Biologicals, and Therapeutic Radiopharmaceuticals (“Threshold-Packaged Drugs”) c. Proposed High Cost/Low Cost Threshold for Packaged Skin Substitutes d. Proposed Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological But Different Dosages 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 b. Proposed CY 2016 Payment Policy 4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals 5. Proposed Payment Adjustment Policy for Radioisotopes Derived From Non-Highly Enriched Uranium Sources 6. Proposed Payment for Blood Clotting Factors 7. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital Claims Data C. Self-Administered Drugs (SADs) Technical Correction D. Proposed OPPS Payment for Biosimilar Biological Products 1. Background 2. Proposed Payment Policy for Biosimilar Biological Products 3. Proposed OPPS Transitional Pass-Through Payment Policy for Biosimilar Biological Products 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 Hospital Outpatient Visits A. Proposed Payment for Hospital Outpatient Clinic and Emergency Department Visits B. Proposed Payment for Critical Care Services C. Proposed Payment for Chronic Care Management Services VIII. Proposed Payment for Partial Hospitalization Services A. Background B. Proposed PHP APC Update for CY 2016 1. Proposed PHP APC Geometric Mean Per Diem Costs 2. PHP Ratesetting Process a. Development of PHP claims b. Determination of CCRs for CMHCs and Hospital-Based PHPs (1) Calculation and Assessment of CMHC PHP CCRs (2) Calculation and Assessment of Hospital-Based PHP CCRs c. Identification of PHP Allowable Charges d. Determination of PHP APC Per Diem Costs e. Development of Service Days and Cost Modeling f. Issues Regarding Correct Coding and Reasonable Charges C. Proposed Separate Threshold for Outlier Payments to CMHCs IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures A. Background B. Proposed Changes to the Inpatient List X. Proposed Nonrecurring Policy Changes A. Changes for Payment for Computed Tomography (CT) B. Lung Cancer Screening with Low Dose Computed Tomography C. Payment for Corneal Tissue in the HOPD and the ASC 1. Background 2. Proposed CY 2016 Change to Corneal Tissue Payment Policy in the HOPD and the ASC XI. Proposed CY 2016 OPPS Payment Status and Comment Indicators A. Proposed CY 2016 OPPS Payment Status Indicator Definitions B. Proposed CY 2016 Comment Indicator Definitions XII. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment System A. Background 1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment System 2. 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 and Revised Codes 1. Background on Current Process for Recognizing New and Revised Category I and Category III CPT Codes and Level II HCPCS Codes 2. Proposed Treatment of New and Revised Level II HCPCS Codes and Category III CPT Codes Implemented in April 2015 and July 2015 for Which We Are Soliciting Public Comments in this Proposed Rule 3. Proposed Process for Recognizing New and Revised Category I and Category III CPT Codes That Will Be Effective January 1, 2016 a. Current Process for Accepting Comments on New and Revised CPT Codes That Are Effective January 1 b. Proposed Modification of the Current Process for Accepting Comments on New and Revised Category I and III CPT Codes That Are Effective January 1 4. Proposed Process for New and Revised Level II HCPCS Codes That Will Be Effective October 1, 2015 and January 1, 2016 for Which We Will be Soliciting Public Comments in the CY 2016 OPPS/ASC Final Rule with Comment Period C. Proposed Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Proposed Covered Surgical Procedures Designated as Office-Based b. ASC Covered Surgical Procedures Designated as Device-Intensive—Finalized Policy for CY 2015 and Proposed Policy for CY 2016 c. Proposed Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit Devices d. Proposed Adjustment to ASC Payments for Discontinued Device-Intensive Procedures e. Proposed Additions to the List of ASC Covered Surgical Procedures f. ASC Treatment of Surgical Procedures Proposed for Removal from the OPPS Inpatient List for CY 2016 2. Covered Ancillary Services a. Proposed List of Covered Ancillary Services b. Proposal to Exclude Corneal Tissue Procurement from the Covered Ancillary Services List When Used for Nontransplant Procedures c. Proposal to Remove Certain Services from the Covered Ancillary Services List That Are Not Used as Ancillary and Integral to a Covered Surgical Procedure D. Proposed ASC Payment for Covered Surgical Procedures and Covered Ancillary Services 1. Proposed ASC Payment for Covered Surgical Procedures a. Background b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for CY 2016 c. Waiver of Coinsurance and Deductible for Certain Preventive Services d. Payment for Cardiac Resynchronization Therapy Services e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite 2. Proposed Payment for Covered Ancillary Services a. Background b. Proposed Payment for Covered Ancillary Services for CY 2016 E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Application Cycle 2. Requests to Establish New NTIOL Classes for CY 2016 3. Payment Adjustment 4. Proposed Newness Criterion F. Proposed ASC Payment and Comment Indicators 1. Background 2. Proposed ASC Payment and Comment Indicators G. Calculation of the Proposed ASC Conversion Factor and the Proposed ASC Payment Rates 1. Background 2. Proposed Calculation of the ASC Payment Rates a. Updating the ASC Relative Payment Weights for CY 2016 and Future Years b. Updating the ASC Conversion Factor 3. Display of Proposed CY 2016 ASC Payment Rates XIII. Requirements for the Hospital Outpatient Quality Reporting (OQR) Program A. Background 1. Overview 2. Statutory History of the Hospital OQR Program B. Hospital OQR Program Quality Measures 1. Considerations in the Selection of Hospital OQR Program Quality Measures 2. Retention of Hospital OQR Program Measures Adopted in Previous Payment Determinations 3. Removal of Quality Measures from the Hospital OQR Program Measure Set a. Considerations in Removing Quality Measures from the Hospital OQR Program b. Criteria for Removal of “Topped-Out” Measures 4. Hospital OQR Program Quality Measures Adopted in Previous Rulemaking 5. Proposed Hospital OQR Program Quality Measure for Removal for CY 2017 Payment Determination and Subsequent Years 6. Proposed New Hospital OQR Program Quality Measures for the CY 2018 and CY 2019 Payment Determinations and Subsequent Years a. Proposed New Quality Measure for the CY 2018 Payment Determination and Subsequent Years: OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) b. Proposed New Hospital OQR Program Quality Measure for the CY 2019 Payment Determination and Subsequent Years: OP-34: Emergency Department Transfer Communication (EDTC) (NQF #0291) 7. Hospital OQR Program Measures and Topics for Future Consideration 8. Maintenance of Technical Specifications for Quality Measures 9. Public Display of Quality Measures C. Administrative Requirements 1. QualityNet Account and Security Administrator 2. Proposed Requirements Regarding Participation Status D. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program 1. Proposed Change Regarding Hospital OQR Program Annual Percentage Update (APU) Determinations 2. Requirements for Chart-Abstracted Measures Where Patient-Level Data Are Submitted Directly to CMS 3. Claims-Based Measure Data Requirements 4. Proposed Data Submission Requirements for Measure Data Submitted via a Web-Based Tool a. Previously Finalized Measures b. Proposed Data Submission Requirements for Web-Based Measure OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) for the CY 2018 Payment Determination and Subsequent Years c. Proposed Data Submission Requirements for Web-Based Measure OP-34: Emergency Department Transfer Communication (EDTC) Measure for the CY 2019 Payment Determination and Subsequent Years 5. Population and Sampling Data Requirements for the CY 2018 Payment Determination and Subsequent Years 6. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2018 Payment Determination and Subsequent Years 7. Extension or Exemption Process for the CY 2018 Payment Determination and Subsequent Years 8. Hospital OQR Program Reconsideration and Appeals Procedures for the CY 2018 Payment Determination and Subsequent Years E. Proposed Payment Reduction for Hospitals That Fail to Meet the Hospital Outpatient Quality Reporting (OQR) Program Requirements for the CY 2016 Payment Determination 1. Background 2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2016 XIV. Requirements for the Ambulatory Surgical Center Quality Reporting (ASCQR) Program A. Background 1. Overview 2. Statutory History of the Ambulatory Surgical Center Quality Reporting (ASCQR) Program 3. Regulatory History of the ASCQR Program B. ASCQR Program Quality Measures 1. Considerations in the Selection of ASCQR Program Quality Measures 2. Policies for Retention and Removal of Quality Measures from the ASCQR Program 3. ASCQR Program Quality Measures Adopted in Previous Rulemaking 4. ASCQR Program Quality Measures for the CY 2018 Payment Determination and Subsequent Years 5. ASCQR Program Measures for Future Consideration a. Normothermia Outcome b. Unplanned Anterior Vitrectomy 6. Maintenance of Technical Specifications for Quality Measures 7. Public Reporting of ASCQR Program Data C. Administrative Requirements 1. Requirements Regarding QualityNet Account and Security Administrator 2. Requirements Regarding Participation Status D. Form, Manner, and Timing of Data Submitted for the ASCQR Program 1. Requirements Regarding Data Processing and Collection Periods for Claims-Based Measures Using Quality Data Codes (QDCs) 2. Minimum Threshold, Minimum Case Volume, and Data Completeness for Claims-Based Measures Using QDCs 3. Requirements for Data Submitted Via a CMS Online Data Submission Tool 4. Claims-Based Measure Data Requirements for the ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy Measure for the CY 2018 Payment Determination and Subsequent Years 5. Proposals for Indian Health Service (IHS) Hospital Outpatient Departments to Not Be Considered ASCs for the Purpose of the ASCQR Program 6. ASCQR Program Validation of Claims-Based and CMS Web-Based Measures 7. Extraordinary Circumstances Extensions or Exemptions for the CY 2018 Payment Determination and Subsequent Years 8. ASCQR Program Reconsideration Procedures E. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements XV. Short Inpatient Hospital Stays A. Background for the 2-Midnight Rule B. Proposed Policy Clarification for Medical Review of Inpatient Hospital Admissions under Medicare Part A XVI. Proposed Transition for Medicare-Dependent, Small Rural Hospitals (MDHs) in All-Urban States under the Hospital Inpatient Prospective Payment System A. Background on the Medicare-Dependent, Small Rural Hospital (MDH) Program B. Implementation of New OMB Delineations and Urban to Rural Reclassifications XVII. Files Available to the Public Via the Internet XVIII. Collection of Information Requirements A. Legislative Requirements for Solicitation of Comments B. Proposed Associated Information Collections Not Specified in Regulatory Text 1. Hospital OQR Program 2. ASCQR Program Requirements XIX. Response to Comments XX. Economic Analyses A. Regulatory Impact Analysis 1. Introduction 2. Statement of Need 3. Overall Impacts for the OPPS and ASC Payment Provisions 4. Detailed Economic Analyses a. Estimated Effects of Proposed OPPS Changes in this Proposed Rule (1) Limitations of Our Analysis (2) Estimated Effects of Proposed OPPS Changes on Hospitals (3) Estimated Effects of Proposed OPPS Changes on CMHCs (4) Estimated Effect of Proposed OPPS Changes on Beneficiaries (5) Estimated Effects of Proposed OPPS Changes on Other Providers (6) Estimated Effects of Proposed OPPS Changes on the Medicare and Medicaid Programs (7) Alternative OPPS Policies Considered b. Estimated Effects of Proposed CY 2016 ASC Payment System Policies (1) Limitations of Our Analysis (2) Estimated Effects of Proposed CY 2016 ASC Payment System Policies on ASCs (3) Estimated Effects of Proposed ASC Payment System Policies on Beneficiaries (4) Alternative ASC Payment Policies Considered c. Accounting Statements and Tables d. Effects of Proposed Requirements for the Hospital OQR Program e. Effects of Proposed Policies for the ASCQR Program f. Impact of the Proposed Policy Change for Medical Review of Inpatient Hospital Admissions Under Medicare Part A g. Impact of Proposed Transition for MDHs in All-Urban States under the IPPS B. Regulatory Flexibility Act (RFA) Analysis C. Unfunded Mandates Reform Act Analysis D. Conclusion XXI. Federalism Analysis I. Summary and Background A. Executive Summary of This Document 1. Purpose In this proposed rule, we are proposing to update the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) beginning January 1, 2016. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the payment rates for services payable under the Hospital Outpatient Prospective Payment System (OPPS). Specifically, section 1833(t)(9)(A) 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. In addition, under section 1833(i) of the Act, we annually review and update the ASC payment rates. We describe these and various other statutory authorities in the relevant sections of this proposed rule. In addition, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. Further, we are proposing certain changes relating to the hospital inpatient prospective payment system (IPPS): Proposed changes to the 2-midnight rule under the short inpatient hospital stay policy and a discussion of the related −0.2 percent payment adjustment; and a proposed transition for Medicare-dependent, small rural hospitals (MDHs) in all-urban States. 2. Summary of the Major Provisions • OPPS Update: For CY 2016, we are proposing to increase the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.9 percent. This proposed increase is based on the proposed hospital inpatient market basket percentage increase of 2.7 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the proposed multifactor productivity (MFP) adjustment of 0.6 percentage point, and minus a 0.2 percentage point adjustment required by the Affordable Care Act. In addition, we are proposing to apply a 2.0 percent reduction to the conversion factor to redress the inflation in OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests that are excepted from our final CY 2014 laboratory packaging policy, as discussed in section II.B. of this proposed rule. Under this proposed rule, we estimate that total payments for CY 2016, including beneficiary cost-sharing, to the approximate 3,800 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and community mental health centers (CMHCs)), would decrease by approximately $43 million compared to CY 2015 payments, excluding our estimated changes in enrollment, utilization, and case-mix. We are proposing to continue to implement the statutory 2.0 percentage point reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a proposed reporting factor of 0.980 to the OPPS payments and copayments for all applicable services. • Rural Adjustment: We are proposing to continue the adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This proposed adjustment would apply to all services paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to cost. • Cancer Hospital Payment Adjustment: For CY 2016, we are proposing to continue to provide additional payments to cancer hospitals so that the cancer hospital's payment-to-cost ratio (PCR) after the additional payments is equal to the weighted average PCR for the other OPPS hospitals using the most recently submitted or settled cost report data. Based on those data, a proposed target PCR of 0.90 would be used to determine the CY 2016 cancer hospital payment adjustment to be paid at cost report settlement. That is, the proposed payment adjustments would be the additional payments needed to result in a PCR equal to 0.90 for each cancer hospital. • Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2016, proposed payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status are set at the statutory default of average sales price (ASP) plus 6 percent. • Payment of Biosimilar Biological Products: For CY 2016, we are proposing to pay for biosimilar biological products based on the payment allowance of the product as determined under section 1847A of the Act. We also are proposing to extend pass-through payment eligibility to biosimilar biological products and to set payment at the difference between the amount paid under section 1842(o) of the Act (that is, the payment allowance of the product as determined under section 1847A of the Act) and the otherwise applicable HOPD fee schedule amount. • Packaging Policies: In CY 2015, we conditionally packaged certain ancillary services when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service. For CY 2016, we are proposing to expand the set of conditionally packaged ancillary services to include three new APCs. • Conditionally Packaged Outpatient Laboratory Tests: For CY 2016, we are proposing to conditionally package laboratory tests (regardless of the date of service) on a claim with a service that is assigned status indicator “S,” “T,” or “V” unless an exception applies or the laboratory test is “unrelated” to the other HOPD service or services on the claim. We are proposing to establish a new status indicator “Q4” for this purpose. When laboratory tests are the only services on the claim, a separate payment at CLFS payment rates would be made. The “L1” modifier would still be used for “unrelated” laboratory tests. • Comprehensive APCs: We implemented the comprehensive APCs (C-APCs) policy for CY 2015 with a total of 25 C-APCs. In CY 2016, we are not proposing extensive changes to the already established methodology used for C-APCs. However, we are proposing to create nine new C-APCs that meet the previously established criteria. • APC Restructuring: Section 1833(t)(9)(A) 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. For CY 2016, we conducted a comprehensive review of the structure of the APCs and codes and are proposing to restructure the OPPS APC groupings for nine APC clinical families based on the following principles: (1) Improved clinical homogeneity; (2) improved resource homogeneity; (3) reduced resource overlap in longstanding APCs; and (4) greater simplicity and improved understandability of the OPPS APC structure. • New Process for Device Pass-Through Payment: Beginning in CY 2016, we are proposing to add a rulemaking component to the current quarterly device pass-through payment application process. Specifically, we are proposing to supplement the quarterly process by including a description of applications received (whether they are approved or denied) as well as our rationale for approving or denying the application in the next applicable OPPS proposed rule. This proposed change would help achieve the goals of increased transparency and stakeholder input. In addition, the proposal would align a portion of the OPPS device pass-through payment application process with the already established IPPS application process for new medical services and new technology add-on payments. We also are proposing that a device that requires FDA premarket approval or clearance is eligible to apply for device pass-through payment only if it is “new,” meaning that the pass-through payment application is submitted within 3 years from the date of the applicable FDA premarket approval, clearance, or investigational device exemption. • Two-Midnight Rule: The 2-midnight rule was adopted effective October 1, 2013. Under the 2-midnight rule, an inpatient admission is generally appropriate for Medicare Part A payment if the physician (or other qualified practitioner) admits the patient as an inpatient based upon the expectation that the patient will need hospital care that crosses at least 2 midnights. In assessing the expected duration of necessary care, the physician (or other practitioner) may take into account outpatient hospital care received prior to inpatient admission. If the patient is expected to need less than 2 midnights of care in the hospital, the services furnished should generally be billed as outpatient services. In this proposed rule, we are proposing to modify our existing “rare and unusual” exceptions policy under which the only exceptions to the 2-midnight benchmark were cases involving services designated by CMS as inpatient only, and those rare and unusual circumstances published on the CMS Web site or other subregulatory guidance, to also allow exceptions to the 2-midnight benchmark to be determined on a case-by-case basis by the physician responsible for the care of the beneficiary, subject to medical review. However, we continue to expect that stays under 24 hours would rarely qualify for an exception to the 2-midnight benchmark. In addition, we are revising our medical review strategy and announcing that no later than October 1, 2015, we are changing the medical review strategy and have Quality Improvement Organization (QIO) contractors conduct reviews of short inpatient stays rather than the Medicare administrative contractors (MACs). • Chronic Care Management (CCM): For CY 2016, we are proposing additional requirements for hospitals to bill and receive OPPS payment for CCM services described by CPT code 99490. These requirements include scope of service elements analogous to the scope of service elements finalized as requirements in the CY 2015 Medicare Physician Fee Schedule (MPFS) final rule with comment period (79 FR 6715 through 67728). • National Electrical Manufacturers Association (NEMA) Modifier: Effective for services furnished on or after January 1, 2016, section 218(a) of the PAMA amended section 1834 of the Act by establishing a new subsection 1834(p), which reduces payment for the technical component (TC) (and the TC of the global fee) under the MPFS and the OPPS (5 percent in 2016 and 15 percent in 2017 and subsequent years) for applicable computed tomography (CT) services identified by certain CPT HCPCS codes furnished using equipment that does not meet each of the attributes of the National Electrical Manufacturers Association (NEMA) Standard XR-29-2013, entitled “Standard Attributes on CT Equipment Related to Dose Optimization and Management.” The provision requires that information be provided and attested to by a supplier and a hospital outpatient department that indicates whether an applicable CT service was furnished that was not consistent with the NEMA CT equipment standard. To implement this provision, we are proposing to establish a new modifier that would be reported with specific CPT codes, effective January 1, 2016. • New Process for Requesting Comments on New and Revised Category I and III CPT Codes: In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66842 through 66844), we finalized a revised process of assigning APC and status indicators for new and revised Category I and III CPT codes that would be effective January 1. Specifically, we stated that we would include the proposed APC and status indicator assignments for the vast majority of new and revised CPT codes before they are used for payment purposes under the OPPS if the AMA provides CMS with the codes in time for the OPPS/ASC proposed rule. For the CY 2016 OPPS update, we received the CY 2016 CPT codes from AMA in time for inclusion to this CY 2016 OPPS/ASC proposed rule. The new and revised CY 2016 Category I and III CPT codes can be found in OPPS Addendum B and assigned to new comment indicator “NP” to indicate that the code is a new code for the next calendar year or the code is an existing code with substantial revision to its code descriptor in the next calendar year as compared to the current calendar year with a proposed APC assignment and that comments will be accepted on the proposed APC assignment and status indicator. • Ambulatory Surgical Center Payment Update: For CY 2016, we are proposing to increase payment rates under the ASC payment system by 1.1 percent. This proposed increase is based on a projected CPI-U update of 1.7 percent minus a multifactor productivity adjustment required by the Affordable Care Act that is projected to be 0.6 percentage point. Based on this proposed update, we estimate that proposed total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2016 would be approximately $4.293 billion, an increase of approximately $186 million compared to estimated CY 2015 Medicare payments. In addition, we are proposing a revised process of assigning ASC payment indicators for new and revised Category I and III CPT codes that would be effective January 1, similar to the OPPS process we finalized in the CY 2015 OPPS/ASC final rule with comment period. Specifically, we are proposing to include the proposed ASC payment indicator assignments in the OPPS/ASC proposed rule for the vast majority of new and revised CPT codes before they are used for payment purposes under the ASC payment system if the American Medical Association (AMA) provides CMS with the codes in time for the OPPS/ASC proposed rule. • Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are making proposals for the CY 2017 payment determination and subsequent years, the CY 2018 payment determination and subsequent years, and the CY 2019 payment determination and subsequent years. For CY 2017 and subsequent years, we are proposing to: (1) Remove the OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache measure, effective January 1, 2016 (no data for this measure will be used for any payment determination); (2) change the deadline for withdrawing from the Hospital OQR Program from November 1 to August 31; (3) shift the quarters on which we base payment determinations; (4) change the data submission timeframe for measures submitted via the CMS Web-based tool (QualityNet Web site) from July 1 through November 1 to January 1 through May 15; (5) rename our extension and exception policy to extension and exemption policy; (6) change the deadline for submitting a reconsideration request from the first business day of the month of February of the affected payment year to the first business day on or after March 17 of the affected payment year; and (7) amend 42 CFR 419.46(f)(1) and 42 CFR 419.46(e)(2) to replace the term “fiscal year” with the term “calendar year.” For CY 2018 and subsequent years, we are proposing a new measure: OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF # 1822). For CY 2019 and subsequent years, we also are proposing a new measure: OP-34: Emergency Department Transfer Communication (EDTC) (NQF # 0291). In addition, we are exploring electronic clinical quality measures (eCQMs) and whether, in future rulemaking, we would propose that hospitals have the option to voluntarily submit data for OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients electronically beginning with the CY 2019 payment determination. • Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are proposing to align data submission end dates for data submitted using a Web-based tool, to align policies regarding paid claims to be included in the calculation for all claims-based measures, to modify the submission date for reconsideration requests, to modify our policy for the facility identifier for public reporting of ASCQR Program data, and to not consider IHS hospital outpatient departments that bill as ASCs to be ASCs for purposes of the ASCQR Program. We also are proposing to codify a number of existing and proposed policies and are soliciting public comments on the possible inclusion of two measures in the ASCQR Program measure set in the future. 3. Summary of Costs and Benefits In sections XX. and XXI. of this proposed rule, we set forth a detailed analysis of the regulatory and federalism impacts that the proposed changes would have on affected entities and beneficiaries. Key estimated impacts are described below. a. Impacts of the Proposed OPPS Update (1) Impacts of All OPPS Proposed Changes Table 65 in section XX. of this proposed rule displays the distributional impact of all the proposed OPPS changes on various groups of hospitals and CMHCs for CY 2016 compared to all estimated OPPS payments in CY 2015. We estimate that the proposed policies in this proposed rule would result in a 0.2 percent overall decrease in OPPS payments to providers. We estimate that proposed total OPPS payments for CY 2016, including beneficiary cost-sharing, to the approximate 3,800 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) would decrease by approximately $43 million compared to CY 2015 payments, excluding our estimated changes in enrollment, utilization, and case-mix. We estimated the isolated impact of our proposed OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the provider-specific structure that we adopted beginning in CY 2011 and basing payment fully on the type of provider furnishing the service, we estimate a 14.8 percent increase in CY 2016 payments to CMHCs relative to their CY 2015 payments. (2) Impacts of the Proposed Updated Wage Indexes We estimate that our proposed update of the wage indexes based on the FY 2016 IPPS proposed rule wage indexes results in a 0.1 percent increase for urban hospitals and a −0.4 percent decrease for rural hospitals under the OPPS. These wage indexes include the continued implementation of the OMB labor market area delineations based on 2010 Decennial Census data. (3) Impacts of the Proposed Rural Adjustment and the Cancer Hospital Payment Adjustment There are no significant impacts of our proposed CY 2016 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not proposing to make any change in policies for determining the rural and cancer hospital payment adjustments, and the adjustment amounts do not significantly impact the budget neutrality adjustments for these policies. (4) Impacts of the Proposed OPD Fee Schedule Increase Factor As a result of the proposed OPD fee schedule increase factor, the proposed 2.0 percent reduction to the conversion factor to redress the inflation in OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests that are excepted from our final CY 2014 laboratory packaging policy, and other proposed budget neutrality adjustments, we estimate that urban and rural hospitals would experience decreases of approximately 0.1 percent for urban hospitals and 0.3 percent for rural hospitals. Classifying hospitals by teaching status or type of ownership suggests that these hospitals would receive similar decreases. b. Impacts of the Proposed ASC Payment Update For impact purposes, the surgical procedures on the ASC list of covered procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The proposed percentage change in estimated total payments by specialty groups under the proposed CY 2016 payment rates compared to estimated CY 2015 payment rates ranges between 5 percent for auditory system services and -5 percent for hematologic and lymphatic system procedures. c. Impacts of the Hospital OQR Program We do not expect our proposed CY 2016 policies to significantly affect the number of hospitals that do not receive a full annual payment update. d. Impacts of the ASCQR Program We do not expect our proposed CY 2016 policies to significantly affect the number of ASCs that do not receive a full annual payment update. B. Legislative and Regulatory Authority for the Hospital OPPS When Title XVIII of the Social Security 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 of 1997 (BBA) (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 parts 410 and 419. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the OPPS: The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (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 of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; 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 (these two public laws are collectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93), enacted on March 27, 2014; and the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015. Under the OPPS, we pay for hospital Part B services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to identify and group the services within each APC. The OPPS includes payment for most hospital outpatient services, except those identified in section I.C. of this proposed rule. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by CMHCs), and certain inpatient hospital services that are paid under Medicare Part B. 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 (or mean cost, if elected by the Secretary) 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 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 clinical information and cost 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. C. 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 exercises the authority granted under the statute to also exclude from the OPPS certain 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); certain laboratory services paid under the Clinical Laboratory Fee Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that require an inpatient stay that are paid under the hospital IPPS. We set forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22. Under § 419.20(b) of the regulations, we specify the types of hospitals that are excluded from payment under the OPPS. These excluded hospitals include: Critical access hospitals (CAHs); hospitals located in Maryland and paid under the Maryland All-Payer Model; hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service (IHS) hospitals. D. 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)(A) 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html . E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel) 1. Authority of the 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 external advisory panel of experts to annually review the clinical integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act which gives discretionary authority to the Secretary to convene advisory councils and committees, the Secretary expanded the panel's scope to include the supervision of hospital outpatient therapeutic services in addition to the APC groups and weights. To reflect this new role of the panel, the Secretary changed the panel's name to the Advisory Panel on Hospital Outpatient Payment (the HOP Panel, or the Panel). The Panel is not restricted to using data compiled by CMS, and in conducting its review, it may use data collected or developed by organizations outside the Department. 2. Establishment of the Panel On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, and at that time named the APC Panel. This expert panel is composed of appropriate representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data, and advises CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, the Panel also is charged with advising the Secretary on the appropriate level of supervision for individual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). The current charter specifies, among other requirements, that: The 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 Panel's charter was amended on November 15, 2011, renaming the Panel and expanding the Panel's authority to include supervision of hospital outpatient therapeutic services and to add Critical Access Hospital (CAH) representation to its membership. The current charter was renewed on November 6, 2014 (80 FR 23009) and the number of panel members was revised from up to 19 to up to 15 members. The current Panel membership and other information pertaining to the 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.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html . 3. Panel Meetings and Organizational Structure The Panel has held multiple meetings, with the last meeting taking place on March 9, 2015. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for Panel membership and to announce new members. The Panel has established an operational structure that, in part, currently includes the use of three subcommittees to facilitate its required review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups and Status Indicator (SI) Assignments. The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for resolving them. The Visits and Observation Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC relative payment weights). The Subcommittee for APC Groups and SI Assignments advises the Panel on the following issues: The appropriate status indicators to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APC placement of HCPCS codes regarding services for which separate payment is made. Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended at the March 9, 2015 meeting that the subcommittees continue. We accepted this recommendation. Discussions of the other recommendations made by the Panel at the March 9, 2015 Panel meeting are included in the sections of this proposed rule that are specific to each recommendation. For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at: http://facadatabase.gov/ . F. Public Comments Received on the CY 2015 OPPS/ASC Final Rule With Comment Period We received approximately 38 timely pieces of correspondence on the CY 2015 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 10, 2014 (79 FR 66770), as well as in the correction notice that was published on February 24, 2015 (80 FR 9629), some of which contained comments on the interim APC assignments and/or status indicators of new or replacement HCPCS codes (identified with comment indicator “NI” in Addenda B, AA, and BB to that final rule). Summaries of the public comments on new or replacement codes will be set forth in the CY 2016 OPPS/ASC final rule with comment period under the appropriate subject-matter headings. II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Payment Weights 1. Database Construction a. Database Source and Methodology Section 1833(t)(9)(A) of the Act requires that the Secretary review not less often than annually and revise the relative payment weights for APCs. 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 this CY 2016 OPPS/ASC proposed rule, we are proposing to recalibrate the APC relative payment weights for services furnished on or after January 1, 2016, and before January 1, 2017 (CY 2016), using the same basic methodology that we described in the CY 2015 OPPS/ASC final rule with comment period. 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, using the most recent available data to construct a database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2016, we used approximately 151 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2014, and before January 1, 2015. For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this CY 2016 OPPS/ASC proposed rule on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html . Of the approximately151 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2016 OPPS payment rates for this proposed rule, approximately 117 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 approximately 117 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 approximately 113 million claims, we created approximately 88 million single records, of which approximately 38 million were “pseudo” single or “single session” claims (created from approximately 16 million multiple procedure claims using the process we discuss later in this section). Approximately 3 million claims were trimmed out on cost or units in excess of +/− 3 standard deviations from the geometric mean or other trims, yielding approximately 85 million single bills for ratesetting. 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 payment 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 (as defined below), 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. The proposed APC relative weights and payments for CY 2016 in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2014 that were processed through December 31, 2014. While prior to CY 2013 we historically based the payments on median hospital costs for services in the APC groups, beginning with the CY 2013 OPPS, we established the cost-based relative payment weights for the OPPS using geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2016 OPPS, we are proposing to use this same methodology, basing payments on geometric mean costs. Under this methodology, we select claims for services paid under the OPPS and match 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 relative costs underpinning the APC relative payment weights and the CY 2016 payment rates. b. Proposed Use of Single and Multiple Procedure Claims For CY 2016, in general, we are proposing to continue to use single procedure claims to set the costs on which the APC relative payment weights are based. We generally use single procedure claims to set the estimated 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. It is generally 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 are proposing to continue to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. 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 2015 OPPS/ASC final rule with comment period (79 FR 66780 through 66783). In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and created the first composite APCs, and continued those policies through CY 2015. Increased packaging and creation of composite APCs also increased the number of bills that we were able to use for ratesetting 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 in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for multiple imaging services through CY 2015, and we are proposing to continue this policy for CY 2016. We refer readers to section II.A.2.f. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66810 through 66816) for a discussion of the use of claims in modeling the costs for composite APCs and to section II.A.3. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66817 through 66823) for a discussion of our packaging policies for CY 2015. In addition, we are proposing to establish additional packaging policies for the CY 2016 OPPS, as discussed in section II.A.3. of this proposed rule. 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 2016 OPPS. This methodology enabled us to create, for this proposed rule, approximately 38 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.f.(4) of this proposed rule for further discussion), to add to the approximately 49 million “natural” single procedure claims. In addition, we are proposing to continue our broader initiative to review, revise, and reorganize APCs across the OPPS to collectively group services that are clinically similar and have similar resource costs within the same APC. The proposed restructuring of APCs are discussed in the applicable sections of this proposed rule. In conjunction with this initiative, we are proposing to renumber the APCs (except for the composite APCs) primarily to achieve consecutive numbering of APCs within each clinical family of APCs, as discussed in section III.D. of this proposed rule. We are providing a crosswalk from the existing APC numbers to the proposed new APC renumber in Addendum Q to this proposed rule (which is available via the Internet on the CMS Web site). For CY 2016, we are proposing to bypass 178 HCPCS codes that are identified in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, 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 updated year's data (for CY 2016, data available for the March 9, 2015 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2014 claims processed through September 30, 2014) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. For CY 2016, we are proposing to continue to bypass all of the HCPCS codes on the CY 2015 OPPS bypass list, with the exception of HCPCS codes that we are proposing to delete for CY 2016, which are listed in Table 1 of this proposed rule. (We refer readers to Addendum N to the CY 2015 OPPS/ASC final rule with comment period for the CY 2015 OPPS bypass list. Addendum N is available via the Internet on the CMS Web site.) We also are proposing to remove HCPCS codes that are not separately paid under the OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. Some of the codes we are proposing to remove from the CY 2016 bypass list are affected by the CY 2016 proposed packaging policy, discussed in section II.A.3. of this proposed rule. Some of the codes we are proposing to remove have packaged cost patterns associated with their natural single major claims that would no longer meet the bypass list criterion of 5 percent or fewer of the single major claims having packaged costs on the claim. In addition, we are proposing to add to the bypass list for CY 2016 HCPCS codes that are not on the CY 2015 bypass list that, using the March 9, 2015 Panel data (first 9 months of CY 2014 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2016 proposal to continue to develop OPPS relative payment weights based on geometric mean costs, we also are proposing that the packaged cost criterion continue to be based on the geometric mean cost. The entire list proposed for CY 2016 (including the codes that remain on the bypass list from prior years) is open to public comment in this CY 2016 OPPS/ASC proposed rule. 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 assumed 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 geometric mean cost of packaging observed in the “natural” single procedure claims is equal to or less than $55. This criterion also limits the amount of error in redistributed costs. During the assessment of claims against the bypass criteria, we do not know the dollar value of the packaged cost that should be appropriately attributed to the other procedures on the claim. Therefore, 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. We note that, as we did for CY 2015, we are proposing to continue to establish the CY 2016 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifying cost patterns, we are proposing to use the geometric mean cost of packaging to identify potential codes to add to the bypass list. In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we considered whether it would be appropriate to update the $50 packaged cost threshold for inflation when examining potential bypass list additions. 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 increase would prevent continuing decline in the threshold's real value. Based on the same rationale described for the CY 2015 OPPS/ASC final rule with comment period (79 FR 66781), we are proposing for CY 2016 to continue to update the packaged cost threshold by the market basket increase. By applying the final CY 2015 market basket increase of 2.2 percent (79 FR 66825) to the prior nonrounded dollar threshold of $55.66 (79 FR 66781), we determined that the proposed threshold would remain for CY 2016 at $55 ($56.88 rounded to $55, the nearest $5 increment). Therefore, we are proposing to set the geometric mean packaged cost threshold on the CY 2014 claims at $55 for a code to be considered for addition to the CY 2016 OPPS bypass list. For inclusion on the bypass list, a code cannot be a code for an unlisted service. Unlisted codes do not describe a specific service, and therefore their costs would not be appropriate for bypass list purposes. In addition, we are proposing to continue to include on the bypass list HCPCS codes that we believe have minimal associated packaging, based on our clinical assessment of the complete CY 2016 OPPS proposal. Some of these codes were identified by CMS, 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 certain HCPCS codes on the bypass list 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) to the bypass list (73 FR 68513). 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 costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs are identified by asterisks (*) in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). Addendum N to this proposed rule includes the proposed list of bypass codes for CY 2016. The proposed list of bypass codes contains codes that were reported on claims for services in CY 2014 and, therefore, includes codes that were in effect in CY 2014 and used for billing but were deleted for CY 2015. We are retaining these deleted bypass codes on the proposed CY 2016 bypass list because these codes existed in CY 2014 and were covered OPD services in that period, and CY 2014 claims data are used to calculate CY 2016 payment rates. 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 Addendum N to this proposed rule. HCPCS codes that we are proposing to add for CY 2016 are identified by asterisks (*) in the fourth column of Addendum N. Table 1 below contains the list of codes that we are proposing to remove from the CY 2016 bypass list. Table 1—HCPCS Codes Proposed To Be Removed From the CY 2016 Bypass List HCPCS Code HCPCS Short descriptor 11057 Trim skin lesions over 4. 57454 Bx/curett of cervix w/scope. 88348 Electron microscopy. 92240 Icg angiography. 92546 Sinusoidal rotational test. c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs) For CY 2016, we are proposing to continue to use the hospital-specific overall ancillary and departmental cost-to-charge ratios (CCRs) to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk. To calculate the APC costs on which the proposed CY 2016 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 2014 claims data by comparing these claims data to the most recently available hospital cost reports, which, in most cases, are from CY 2013. For the CY 2016 OPPS proposed rates, we used the set of claims processed during CY 2014. 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html . To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2014 (the year of claims data we used to calculate the proposed CY 2016 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2014 Data Specifications Manual. In accordance with our longstanding policy, 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). The calculation of blood costs is a longstanding exception (since the CY 2005 OPPS) to this general methodology for calculation of CCRs used for converting charges to costs on each claim. This exception is discussed in detail in the CY 2007 OPPS/ASC final rule with comment period and discussed further in section II.A.2.d.(1) of this proposed rule. 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 hospitals that filed outpatient claims in CY 2014 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, which, in most cases, were from cost reports with cost reporting periods beginning in CY 2013. For this proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2016 OPPS payment rates. If the most recently 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 above for all purposes that require use of an overall ancillary CCR. We are proposing to continue this longstanding methodology for the calculation of costs for CY 2016. 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. This issue was evaluated in a report by the Research Triangle Institute, International (RTI). 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 (73 FR 48458 through 45467). Specifically, we created one cost center for “Medical Supplies Charged to Patients” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current cost center for “Medical Supplies Charged to Patients” into one cost center for low-cost medical supplies and another cost center for high-cost implantable devices in order to mitigate some of the effects of charge compression. In determining the items that should be reported in these respective cost centers, we adopted commenters' recommendations that hospitals should use revenue codes established by the AHA's NUBC to determine the items that should be reported in the “Medical Supplies Charged to Patients” and the “Implantable Devices Charged to Patients” cost centers. For a complete discussion of the rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” a summary of public comments received, and our responses to those public comments, we refer readers to the FY 2009 IPPS final rule. The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginning on or after May 1, 2009. In the CY 2013 OPPS/ASC final rule with comment period, we determined that a significant volume of hospitals were utilizing the “Implantable Devices Charged to Patients” cost center. Because a sufficient amount of data from which to generate a meaningful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Implantable Devices Charged to Patients” cost center (77 FR 68225). We retained this policy through CY 2015, and we are proposing to continue this practice for the CY 2016 OPPS. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create new standard cost centers for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac Catheterization,” and to require that hospitals report the costs and charges for these services under these new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the costs and charges of CT scans, MRIs, and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI concluded that both the IPPS and the OPPS relative payment weights would better estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization. The new standard cost centers for CT scans, MRIs, and cardiac catheterization were effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10. Using the December 2014 HCRIS update to estimate costs in the proposed CY 2016 OPPS ratesetting process, we were able to calculate a valid implantable device CCR for 2,940 hospitals, a valid MRI CCR for 1,978 hospitals, a valid CT scan CCR for 2,069 hospitals, and a valid Cardiac Catheterization CCR for 1,429 hospitals. In our CY 2014 OPPS/ASC proposed rule discussion (78 FR 43549), we noted that, for CY 2014, the estimated changes in geometric mean estimated APC cost of using data from the new standard cost centers for CT scans and MRIs appeared consistent with RTI's analysis of cost report and claims data in the July 2008 final report (pages 5 and 6). RTI concluded that “in hospitals that aggregate data for CT scanning, MRI, or nuclear medicine services with the standard line for Diagnostic Radiology, costs for these services all appear substantially overstated, while the costs for plain films, ultrasound and other imaging procedures are correspondingly understated.” We also noted that there were limited additional impacts in the implantable device-related APCs from adopting the new cost report Form CMS 2552-10 because we had used data from the standard cost center for implantable medical devices beginning in CY 2013 OPPS ratesetting, as discussed above. As we indicated in prior rulemaking (77 FR 68223 through 68225), once we determined that cost report data for the new standard cost centers were sufficiently available, we would analyze that data and, if appropriate, we would propose to use the distinct CCRs for new standard cost centers described above in the calculation of the OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), we conducted our analysis and concluded that we should develop distinct CCRs for each of the new cost centers and use them in ratesetting. Therefore, we began in the CY 2014 OPPS, continued in the CY 2015 OPPS, and we are proposing to retain this practice for the CY 2016 OPPS, to calculate the OPPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, MRI, and implantable medical devices. Section XIX. of this proposed rule includes the impacts of calculating the proposed CY 2016 OPPS relative payment weights using these standard cost centers that were adopted in CY 2014. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), we finalized a policy to remove claims from providers that use a cost allocation method of “square feet” to calculate CCRs used to estimate costs associated with the CT and MRI APCs. This change allows hospitals additional time to use one of the more accurate cost allocation methods, and thereby improve the accuracy of the CCRs on which the OPPS relative payment weights are developed. In Table 2 below, we display CCR values for providers based on various cost allocation methods. Table 2—CCR Statistical Values Based on Use of Different Cost Allocation Methods Cost allocation method CT Median CCR Mean CCR MRI Median CCR Mean CCR All Providers 0.0451 0.0589 0.0890 0.1124 Square Feet Only 0.0364 0.0493 0.0787 0.1019 Direct Assign 0.0641 0.0732 0.1078 0.1286 Dollar Value 0.0536 0.0692 0.1001 0.1235 Direct Assign and Dollar Value 0.0534 0.0690 0.1004 0.1237 As part of this transitional policy to estimate the CT and MRI APC relative payment weights using only cost data from providers that do not use “square feet” as the cost allocation statistic, we adopted a policy in the CY 2014 OPPS/ASC final rule with comment period that we will sunset this policy in 4 years once the updated cost report data become available for ratesetting purposes. We stated that we believe 4 years is sufficient time for hospitals that have not done so to transition to a more accurate cost allocation method and for the related data to be available for ratesetting purposes. Therefore, in CY 2018, we will estimate the CT and MRI APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed. In Table 3 below, we display the impact of excluding claims based on the “square feet” cost allocation method from estimates of CT and MRI costs in CY 2016. Table 3—Percentage Change in Estimated Cost for CT and MRI APCs When Excluding Claims From Providers Using “Square Feet” as the Cost Allocation Method Proposed CY 2016 APC Proposed CY 2016 APC descriptor Percent change 5570 * Computed Tomography without Contrast 13.2 5571 * Level 1 Computed Tomography with Contrast and Computed Tomography Angiography 9.3 5581 * Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast 7.6 5582 * Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast 6.2 8005 CT & CTA without Contrast Composite 12.1 8006 CT & CTA with Contrast Composite 9.0 8007 MRI & MRA without Contrast Composite 7.1 8008 MRI & MRA with Contrast Composite 6.8 * Proposed renumbered APC. We refer readers to Addendum Q to this proposed rule (which is available via the Internet on the CMS Web site) for a crosswalk of the existing APCs to the proposed renumbered APCs. In summary, we are proposing to continue to use data from the “Implantable Devices Charged to Patients” and “Cardiac Catheterization” cost centers to create distinct CCRs for use in calculating the OPPS relative payment weights for the CY 2016 OPPS. For the “Magnetic Resonance Imaging (MRI)” and “Computed Tomography (CT) Scan” APCs identified in Table 3 of this proposed rule, we are proposing to continue our policy of removing claims from cost modeling for those providers using “square feet” as the cost allocation statistic for CY 2016. 2. Proposed Data Development Process and Calculation of Costs Used for Ratesetting In this section of this proposed rule, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2016. The Hospital OPPS page on the CMS Web site on which this proposed rule is posted ( http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html ) provides an accounting of claims used in the development of the proposed payment rates. 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. The CMS Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html , 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 2014 claims that were used to calculate the proposed payment rates for the CY 2016 OPPS. In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this policy changed the cost metric on which the relative payments are based, the data process in general remained the same, under the methodologies that we used to obtain appropriate claims data and accurate cost information in determining estimated service cost. For CY 2016, we are proposing to continue to use geometric mean costs to calculate the relative weights on which the proposed CY 2016 OPPS payment rates are based. We used the methodology described in sections II.A.2.a. through II.A.2.f. of this proposed rule to calculate the costs we used to establish the proposed relative payment weights used in calculating the proposed OPPS payment rates for CY 2016 shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We refer readers to section II.A.4. of this proposed rule for a discussion of the conversion of APC costs to scaled payment weights. a. Claims Preparation For this proposed rule, we used the CY 2014 hospital outpatient claims processed through December 31, 2014, to calculate the geometric mean costs of APCs that underpin the proposed relative payment weights for CY 2016. To begin the calculation of the proposed relative payment weights for CY 2016, we pulled all claims for outpatient services furnished in CY 2014 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 tests for persons who are neither inpatients nor outpatients of the hospital). We then excluded claims with condition codes 04, 20, 21, and 77 because 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, and, therefore, we do not use claims for services furnished in these areas in ratesetting. We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 117 million claims that contain hospital bill types paid under the OPPS. 1. Claims that were not bill types 12X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital—Laboratory Services Provided to Nonpatients), or 76X (Clinic—Community Mental Health Center). Other bill types are not paid under the OPPS; 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. 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 0.0001); and those from hospitals with overall ancillary CCRs that were identified as outliers (that exceeded +/− 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 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html . Revenue codes that we do not use in establishing relative costs or to model impacts are identified with an “N” in the revenue code-to-cost center crosswalk. We applied the 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 excluding all claims from 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 only influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost; therefore, these claims are not used to set OPPS rates. We next copied line-item costs for drugs, blood, and brachytherapy sources to a separate file (the lines stay on the claim, but are copied onto another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit arithmetic and geometric mean and median cost and a per day arithmetic and geometric 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. Prior to CY 2013, our payment policy for nonpass-through separately paid drugs and biologicals was based on a redistribution methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid for separately payable drugs and biologicals under the OPPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not redistribute the pharmacy overhead costs from packaged drugs to separately paid drugs. We retained the CY 2013 payment policy for separately payable drugs and biologicals through CY 2015, and we are proposing to continue this payment policy for CY 2016. We refer readers to section V.B.3. of this proposed rule for a complete discussion of our CY 2016 proposed payment policy for separately paid drugs and biologicals. We then removed line-items that were not paid during claims processing, presumably for a line-item rejection or denial. 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 that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” and “V” in 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 removed from the inpatient list for CY 2015 that were assigned status indicator “C” in the claim year. It also preserves charges for packaged services so that the costs can be included in the cost of the services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of another service that was reported on the same claim or the code otherwise violates claims processing edits. For CY 2016, we are proposing to continue the policy we implemented for CY 2013 and retained in subsequent years to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2013) and nonpass-through drugs and biologicals (status indicator “K” for CY 2013) 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). As with our trimming in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66788) of line-items with a status indicator of “S,” “T,” or “V,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting (we note that the deletion of status indicator “X” was finalized in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66821)). We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the data used for ratesetting purposes. For the CY 2016 OPPS, as part of our proposal to continue packaging of clinical diagnostic laboratory tests, we also are proposing to apply the line item trim to these services if they did not receive payment in the claims year. Removing these lines ensures that, in establishing the CY 2016 OPPS relative payment weights, we appropriately allocate the costs associated with packaging these services. b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims (1) Splitting Claims For the CY 2016 OPPS, 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 are presented below.) We note that, in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66819 through 66821), we deleted status indicator “X” and revised the title and description of status indicator “Q1” to reflect that deletion. We also finalized the creation of status indicator “J1” in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66800 through 66809) to reflect the comprehensive APCs (C-APCs). For CY 2016, we are proposing to define major procedures as any HCPCS code having a status indicator of “J1,” “J2,” “S,” “T,” or “V,” to define minor procedures as an [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2015-16577. Public record. Not legal advice.