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; Provider Administrative Appeals and Judicial Review

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 412, 413, 416, and 419

[CMS-1633-FC; CMS-1607-F2]

RIN 0938-AS42; 0938-AS11

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; Provider Administrative Appeals and Judicial Review

AGENCY:

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

ACTION:

Final rule with comment period; final rule.

SUMMARY:

This final rule with comment period revises 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 final rule with comment period, we describe the 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 final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

Further, this document includes certain finalized policies relating to the hospital inpatient prospective payment system: Changes to the 2-midnight rule under the short inpatient hospital stay policy; and a payment transition for hospitals that lost their status as a Medicare-dependent, small rural hospital (MDH) because they are no longer in a rural area due to the implementation of the new Office of Management and Budget delineations in FY 2015 and have not reclassified from urban to rural before January 1, 2016.

In addition, this document contains a final rule that finalizes certain 2015 proposals, and addresses public comments received, relating to the changes in the Medicare regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports.

DATES:

Effective Date:

This final rule with comment period and final rule are effective on January 1, 2016.

Comment Period:

To be assured consideration, comments on the payment classifications assigned to HCPCS codes identified in Addenda B, AA, and BB with the “NI” comment indicator and on other areas specified throughout this final rule with comment period must be received at one of the addresses provided in the

ADDRESSES

section no later than 5 p.m. EST on December 29, 2015.

Application Deadline—New Class of New Technology Intraocular Lenses:

Requests for review of applications for a new class of new technology intraocular lenses must be received by 5 p.m. EST on March 1, 2016, at the following address: ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

ADDRESSES:

In commenting, please refer to file code CMS-1633-FC. 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-FC, 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-FC, 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 Elisabeth Daniel at (410) 786-0237.

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) Program 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) Hospital Services, contact Twi Jackson at (410) 786-1159.

CPT and Level II Alphanumeric HCPCS Codes—Process for Requesting Comments, 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 Lela Strong at (410) 786-3213.

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 Measures, 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.

Medicare Cost Reports: Appropriate Claims and Provider Appeals, contact Kellie Shannon at (410) 786-0416.

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 2 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 Former Medicare-Dependent, Small Rural Hospitals, 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, Pub. L. 105-33

BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 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, Pub. L. 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

EJR Expedited judicial review

E/M Evaluation and management

ESRD End-stage renal disease

ESRD QIP End-Stage Renal Disease Quality Improvement Program

FACA Federal Advisory Committee Act, Pub. L. 92-463

FDA Food and Drug Administration

FFS [Medicare] Fee-for-service

FTE Full-time equivalent

FY Fiscal year

GAO Government Accountability Office

GI Gastrointestinal

GME Graduate medical education

HAI Healthcare-associated infection

HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems

HCERA Health Care and Education Reconciliation Act of 2010, Pub. L. 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, Pub. L. 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

IME Indirect medical education

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, Pub. L. 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, Pub. L. 109-432

MIPPA Medicare Improvements for Patients and Providers Act of 2008, Pub. L. 110-275

MLR Medical loss ratio

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173

MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 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

NPR Notice of program reimbursement

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, Pub. L. 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, Pub. L. 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, Pub. L. 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

PRM Provider Reimbursement Manual

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

G. Public Comments Received on the CY 2016 OPPS/ASC Proposed Rule

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

b. Use of Single and Multiple Procedure Claims

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

2. 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. Calculation of Single Procedure APC Criteria-Based Costs

(1) Blood and Blood Products

(2) Brachytherapy Sources

e. Comprehensive APCs (C-APCs) for CY 2016

(1) Background

(2) C-APCs To Be Paid Under the C-APC Payment Policy for CY 2016

(3) CY 2016 Policies for Specific C-APCs

f. Calculation of Composite APC Criteria-Based Costs

(1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC

(2) Mental Health Services Composite APC

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

3. Changes to Packaged Items and Services

a. Background and Rationale for Packaging in the OPPS

b. 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. Calculation of OPPS Scaled Payment Weights

B. Conversion Factor Update

C. Wage Index Changes

D. Statewide Average Default CCRs

E. Adjustment for Rural SCHs and EACHs Under Section 1833(t)(13)(B) of the Act

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

1. Background

2. Payment Adjustment for Certain Cancer Hospitals for CY 2016

G. Hospital Outpatient Outlier Payments

1. Background

2. Outlier Calculation

3. Final Outlier Calculation

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

I. Beneficiary Copayments

1. Background

2. OPPS Copayment Policy

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

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

1. Treatment of New CY 2015 Level II HCPCS and CPT Codes Effective April 1, 2015 and July 1, 2015 for Which We Solicited Public Comments in the CY 2016 OPPS/ASC Proposed Rule

2. Process for New Level II HCPCS Codes That Became Effective October 1, 2015 and New Level II HCPCS Codes That Will Be Effective January 1, 2016 for Which We Are Soliciting Public Comments in this CY 2016 OPPS/ASC Final Rule With Comment Period

3. Treatment of New and Revised CY 2016 Category I and III CPT Codes That Will Be Effective January 1, 2016 for Which We Solicited Public Comments in the CY 2016 OPPS/ASC Proposed Rule

B. OPPS Changes—Variations Within APCs

1. Background

2. Application of the 2 Times Rule

3. APC Exceptions to the 2 Times Rule

C. New Technology APCs

1. Background

2. Additional New Technology APC Groups

3. Procedures Assigned to New Technology APCs for CY 2016

a. Transprostatic Urethral Implant Procedure

b. Retinal Prosthesis Implant Procedure

D. OPPS Ambulatory Payment Classification (APC) Group Policies

1. Airway Endoscopy Procedures

2. Cardiovascular Procedures and Services

a. Cardiac Contractility Modulation (CCM) Therapy

b. Cardiac Rehabilitation

c. Cardiac Telemetry

3. Diagnostic Tests and Related Services

4. Excision/Biopsy and Incision and Drainage Procedures

5. Eye Surgery and Other Eye-Related Procedures

a. Implantable Miniature Telescope (CPT Code 0308T)

b. Other Ocular Procedures

6. Gastrointestinal (GI) Procedures

7. Gynecologic Procedures and Services

8. Imaging Services

6. Orthopedic Procedures

9. Skin Procedures

10. Pathology Services

11. Radiology Oncology Procedures and Services

a. Therapeutic Radiation Treatment Preparation

b. Radiation Therapy (Including Brachytherapy)

c. Fractionated Stereotactic Radiosurgery (SRS)

12. Skin Procedures

a. Negative Pressure Wound Therapy (NPWT)

b. Platelet Rich Plasma (PRP)

13. Urology and Related Services

14. Vascular Procedures (Excluding Endovascular Procedures)

15. Other Procedures and Services

a. Ear, Nose, Throat (ENT) Procedures

b. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS)

c. Stem Cell Transplant

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

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

a. Background

b. CY 2016 Policy

2. Annual Rulemaking Process in Conjunction With Quarterly Review Process for Device Pass-Through Payment Applications

a. Background

b. Revision to the 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. CY 2016 Policy

B. Device-Intensive Procedures

1. Background

2. Changes to Device Edit Policy

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

a. Background

b. Policy for CY 2016

4. Adjustment to OPPS Payment for Discontinued Device-Intensive Procedures

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

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

1. Background

2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2015

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2016

4. Provisions for Reducing Transitional Pass-Through Payments for Policy-Packaged Drugs and Biologicals to Offset Costs Packaged Into APC Groups

a. Background

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals

c. Payment Offset Policy for Contrast Agents

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

1. Background

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

a. Background

b. Cost Threshold for Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals (“Threshold-Packaged Drugs”)

c. High Cost/Low Cost Threshold for Packaged Skin Substitutes

d. Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological but Different Dosages

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

a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and Biologicals

b. CY 2016 Payment Policy

4. Payment Policy for Therapeutic Radiopharmaceuticals

5. Payment Adjustment Policy for Radioisotopes Derived From Non-Highly Enriched Uranium Sources

6. Payment for Blood Clotting Factors

7. 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. OPPS Payment for Biosimilar Biological Products

1. Background

2. Payment Policy for Biosimilar Biological Products

3. OPPS Transitional Pass-Through Payment Policy for Biosimilar Biological Products

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

A. Background

B. Estimate of Pass-Through Spending

VII. OPPS Payment for Hospital Outpatient Visits

A. Payment for Hospital Outpatient Clinic and Emergency Department Visits

B. Payment for Critical Care Services

C. Payment for Chronic Care Management Services

VIII. Payment for Partial Hospitalization Services

A. Background

B. PHP APC Update for CY 2016

1. 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

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. Separate Threshold for Outlier Payments to CMHCs

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

B. Changes to the Inpatient Only List

X. Nonrecurring Policy Changes

A. Advance Care Planning Services

B. Changes for Payment for Computed Tomography (CT)

C. Lung Cancer Screening With Low Dose Computed Tomography

D. Payment for Procurement of Corneal Tissue Used in Procedures in the HOPD and the ASC

1. Background

2. CY 2016 Change to Corneal Tissue Payment Policy in the HOPD and the ASC

XI. CY 2016 OPPS Payment Status and Comment Indicators

A. CY 2016 OPPS Payment Status Indicator Definitions

B. CY 2016 Comment Indicator Definitions

XII. 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. 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. Treatment of New and Revised Level II HCPCS Codes and Category III CPT Codes Implemented in April 2015 and July 2015 for Which We Solicited Public Comments in the Proposed Rule

3. 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. Modification of the Current Process for Accepting Comments on New and Revised Category I and III CPT Codes That are Effective January 1

4. Process for New and Revised Level II HCPCS Codes That Will Be Effective October 1, 2015 and January 1, 2016 for Which We Are Soliciting Public Comments in This CY 2016 OPPS/ASC Final Rule With Comment Period

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

1. Covered Surgical Procedures

a. Covered Surgical Procedures Designated as Office-Based

b. ASC Covered Surgical Procedures Designated as Device-Intensive—Finalized Policy for CY 2015 and Policy for CY 2016

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

d. Adjustment to ASC Payments for Discontinued Device-Intensive Procedures

e. Additions to the List of ASC Covered Surgical Procedures

f. ASC Treatment of Surgical Procedures That Are Removed From the OPPS Inpatient List for CY 2016

2. Covered Ancillary Services

a. List of Covered Ancillary Services

b. Exclusion of Corneal Tissue Procurement From the Covered Ancillary Services List When Used for Nontransplant Procedures

c. Removal of Certain Services from the Covered Ancillary Services List That are Not Used as Ancillary and Integral to a Covered Surgical Procedure

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

1. ASC Payment for Covered Surgical Procedures

a. Background

b. 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. Payment for Covered Ancillary Services

a. Background

b. 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. Newness Criterion

5. Announcement of CY 2016 Deadline for Submitting Requests for CMS Review of Applications for a New Class of NTIOLs

F. ASC Payment and Comment Indicators

1. Background

2. ASC Payment and Comment Indicators

G. Calculation of the ASC Conversion Factor and the ASC Payment Rates

1. Background

2. 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 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. Hospital OQR Program Quality Measure Removed for the CY 2017 Payment Determination and Subsequent Years

6. New Hospital OQR Program Quality Measures for the CY 2018 and CY 2019 Payment Determinations and Subsequent Years

a. 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. Requirements Regarding Participation Status

D. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program

1. 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. Data Submission Requirements for Measure Data Submitted Via a Web-Based Tool

a. Previously Finalized Measures

b. 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. 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. 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 7-Day Risk-Standardized Hospital Visit Rate After Outpatient Colonoscopy Measure for the CY 2018 Payment Determination and Subsequent Years

5. Indian Health Service (IHS) Hospital Outpatient Departments Not 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. Policy Clarification for Medical Review of Inpatient Hospital Admissions under Medicare Part A

XVI. Transition for Former Medicare-Dependent, Small Rural Hospitals (MDHs) 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. Final Rule: Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review

A. Proposed Changes Included in the FY 2015 IPPS/LTCH PPS Proposed Rule

B. Summary of Related Changes Included in the FY 2015 IPPS/LTCH PPS Final Rule

C. Specific Provisions of the FY 2015 IPPS/LTCH PPS Proposed Rule

1. Background for Payments and Cost Reporting Requirements

2. Background for Administrative Appeals by Providers and Judicial Review

3. Background for Appropriate Claims in Provider Cost Reports

D. Addition to the Cost Reporting Regulations of the Substantive Reimbursement Requirement of an Appropriate Cost Report Claim

1. Proposed Provisions (New § 413.24(j))

2. Statutory Authority and Rationale for Proposed § 413.24(j)

3. Summary of Public Comments, CMS Responses, and Statement of Finalized Policies for § 413.24(j)

E. Revisions to the Provider Reimbursement Appeals Regulations

1. Elimination of the Jurisdictional Requirement of an Appropriate Cost Report Claim

a. Proposed Revisions to §§ 405.1835 and 405.1840

b. Summary of Public Comments and Our Responses and Finalized Policies

2. Board Review of Compliance With Cost Report Claim Requirements Under § 413.24(j)

a. Proposed Addition of New § 405.1873

b. Summary of Public Comments and Our Responses and Finalized Policies

3. Related Revisions to § 405.1875 Regarding Administrator Review

4. Conforming Changes to the Board Appeals Regulations and Corresponding Revisions to the Contractor Hearing Regulations

a. Technical Corrections to 42 CFR part 405, subpart R and All Subparts of 42 CFR Part 413

b. Technical Corrections and Conforming Changes to §§ 405.1801 and 405.1803

c. Technical Corrections and Conforming Changes to §§ 405.1811, 405.1813, and 405.1814

d. Addition of New § 405.1832

e. Revisions to § 405.1834

f. Technical Corrections and Conforming Changes to §§ 405.1836, 405.1837, and 405.1839

F. Collection of Information Requirements

G. Impact of Requiring Appropriate Claims in Provider Cost Reports and Eliminating That Requirement for Administrative Appeals by Providers

XVIII. Files Available to the Public Via the Internet

XIX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. Associated Information Collections Not Specified in Regulatory Text

1. Hospital OQR Program

2. ASCQR Program Requirements

XX. Response to Comments

XXI. 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 OPPS Changes in This Final Rule With Comment Period

(1) Limitations of Our Analysis

(2) Estimated Effects of OPPS Changes on Hospitals

(3) Estimated Effects of OPPS Changes on CMHCs

(4) Estimated Effect of OPPS Changes on Beneficiaries

(5) Estimated Effects of OPPS Changes on Other Providers

(6) Estimated Effects of OPPS Changes on the Medicare and Medicaid Programs

(7) Alternative OPPS Policies Considered

b. Estimated Effects of CY 2016 ASC Payment System Policies

(1) Limitations of Our Analysis

(2) Estimated Effects of CY 2016 ASC Payment System Policies on ASCs

(3) Estimated Effects of ASC Payment System Policies on Beneficiaries

(4) Alternative ASC Payment Policies Considered

c. Accounting Statements and Tables

d. Effects of Requirements for the Hospital OQR Program

e. Effects of Policies for the ASCQR Program

f. Impact of the Policy Change for Medical Review of Inpatient Hospital Admissions Under Medicare Part A

g. Impact of Transition for Former MDHs under the IPPS

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXII. Federalism Analysis

I. Summary and Background

A. Executive Summary of This Document

1. Purpose

In this document, we are updating 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 final rule with comment period. In addition, this document updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

Further, we are making certain changes relating to the hospital inpatient prospective payment system (IPPS): Changes to the 2-midnight rule under the short inpatient hospital stay policy; and a payment transition for hospitals that lost their MDH status because they are no longer in a rural area due to the implementation of the new OMB delineations in FY 2015 and have not reclassified from urban to rural under 42 CFR 412.103 before January 1, 2016.

In addition, we are finalizing certain 2015 proposed policies, and addressing public comments, relating to the changes in the Medicare regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports.

2. Summary of the Major Provisions

• OPPS Update:

For CY 2016, we are decreasing the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of -0.3 percent. This increase factor is based on the hospital inpatient market basket percentage increase of 2.4 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the multifactor productivity (MFP) adjustment of 0.5 percentage point, and minus a 0.2 percentage point adjustment required by the Affordable Care Act. In addition, we are applying 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 final rule with comment period. Under this rule, we estimate that total payments for CY 2016, including beneficiary cost-sharing, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and community mental health centers (CMHCs)), will decrease by approximately $133 million compared to CY 2015 payments, excluding our estimated changes in enrollment, utilization, and case-mix.

We are continuing 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 continuing the adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This adjustment will 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 continuing 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 target PCR of 0.92 will be used to determine the CY 2016 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment adjustments will be the additional payments needed to result in a PCR equal to 0.92 for each cancer hospital.

•

Payment of Drugs, Biologicals, and Radiopharmaceuticals:

For CY 2016, 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 Skin Substitutes:

Payment for skin substitutes will utilize the high/low cost APC structure based on exceeding a threshold based on mean unit cost (MUC) or per day cost (PDC). Further, for CY 2016, skin substitutes with pass-through payment status will be assigned to the high cost category. Skin substitutes with pricing information but without claims data to calculate either an MUC or PDC will be assigned to either the high cost or low cost category based on the product's ASP+6 percent payment rate. Moreover, any new skin substitutes without pricing information will be assigned to the low cost category until pricing information is available to compare to the CY 2016 thresholds.

•

Payment of Biosimilar Biological Products:

For CY 2016, we are paying for biosimilar biological products based on the payment allowance of the product as determined under section 1847A of the Act. We also are extending 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 expanding the set of conditionally packaged ancillary services to include three new APCs.

•

Conditionally Packaged Outpatient Laboratory Tests:

For CY 2016, we are conditionally packaging 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 establishing 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 will be made. The “L1” modifier will 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 making extensive changes to the already established methodology used for C-APCs. However, we are creating 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 restructuring 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 adding a rulemaking component to the current quarterly device pass-through payment application process. Specifically, we are supplementing the quarterly process by including a description of applications received as well as our rationale for approving the application in the next applicable OPPS proposed rule. Applications that we do not approve based on the evidence available during the quarterly review process will be described in the next applicable OPPS proposed rule, unless the applicant withdraws its application. The addition of rulemaking to the device pass-through application process will help achieve the goals of increased transparency and stakeholder input. In addition, this change will 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 establishing policy 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 initial FDA premarket approval or clearance, or, in the case of a delay of market availability, within 3 years of market availability.

•

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 final rule, we are modifying our existing “exceptions” policy under which previously the only exceptions to the 2-midnight benchmark were cases involving services designated by CMS as inpatient only, and those published on the CMS Web site or other subregulatory guidance. Specifically, we are finalizing our proposal 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 revised our medical review strategy to have Quality Improvement Organization (QIO) contractors conduct reviews of short inpatient stays rather than the Medicare administrative contractors (MACs), and the QIOs assumed medical responsibility for hospital stays affected by the 2-midnight rule on October 1, 2015.

•

Advanced Care Planning (ACP):

For CY 2016, we are conditionally packaging payment for the service described by CPT code 99497 (Advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; first 30 minutes, face-to-face with the patient, family member(s), and/or surrogate). Consequently, this code is assigned to a conditionally packaged payment status indicator of “Q1.” When this service is furnished with another service paid under the OPPS, payment will be package; when it is the only service furnished, payment will be made separately. CPT code 99498 (Advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; each additional 30 minutes (List separately in addition to code for primary procedure)) is an add-on code and therefore payment for the service described by this code is unconditionally packaged (assigned status indicator “N”) in the OPPS in accordance with 42 CFR 419.2(b)(18).

•

Chronic Care Management (CCM):

For CY 2016, we are adding 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 establishing a new modifier that will 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 will 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 for inclusion in the CY 2016 OPPS/ASC proposed rule. We received public comments on the proposed OPPS status indicators for the new CY 2016 CPT codes, which we address in this final rule with comment period.

•

Ambulatory Surgical Center Payment Update:

For CY 2016, we are increasing payment rates under the ASC payment system by 0.3 percent for ASCs that meet the quality reporting requirements under the ASCQR Program. This increase is based on a projected CPI-U update of 0.8 percent minus a multifactor productivity adjustment required by the Affordable Care Act of 0.5 percentage point. Based on this update, we estimate that total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2016 will be approximately $4.221 billion, an increase of approximately $128 million compared to estimated CY 2015 Medicare payments. In addition, we are establishing 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 including 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. We received public comments on the proposed ASC payment indicators for the new CY 2016 CPT codes, which we address in this final rule with comment period.

•

Hospital Outpatient Quality Reporting (OQR) Program:

For the Hospital OQR Program, we are establishing requirements for the CY 2017 payment determination and subsequent years and the CY 2018 payment determination and subsequent years. For CY 2017 and subsequent years, we are: (1) Removing 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) changing the deadline for withdrawing from the Hospital OQR Program from November 1 to August 31 and revising the related regulations to reflect this change; (3) transitioning to a new payment determination timeframe that will use only three quarters of data for the CY 2017 payment determination; (4) making conforming changes to our validation scoring process to reflect changes in the APU determination timeframe; (5) changing the data submission timeframe for measures submitted via the CMS Web-based tool (QualityNet Web site) to January 1 through May 15; (6) fixing a typographical error to correct the name of our extension and exception policy to extension and exemption policy; (7) changing the deadline for submitting a reconsideration request to the first business day on or after March 17 of the affected payment year; and (8) amending 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 (1) adding a new measure: OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) with a modification to the proposed manner of data submission, and (2) shifting the quarters on which we base payment determinations to again include four quarters of data.

In addition, we are exploring use of electronic clinical quality measures (eCQMs) and whether, in future rulemaking, we will propose that hospitals have the option to voluntarily submit data for the OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients measure electronically possibly beginning with the CY 2019 payment determination.

•

Ambulatory Surgical Center Quality Reporting (ASCQR) Program:

For the ASCQR Program, we are aligning our policies regarding paid claims to be included in the calculation for all claims-based measures, modifying the submission date for reconsideration requests, modifying our policy for the facility identifier for public reporting of ASCQR Program data, and finalizing our policy to not consider IHS hospital outpatient departments that bill as ASCs to be ASCs for purposes of the ASCQR Program. In addition, we are continuing to use the existing submission deadlines for data submitted via an online data submission tool. We also are codifying a number of existing and new policies. We also address public comments that we solicited in the proposed rule on the possible inclusion of two measures in the ASCQR Program measure set in the future.

3. Summary of Costs and Benefits

In sections XXI. and XXII. of this final rule with comment period, we set forth a detailed analysis of the regulatory and Federalism impacts that the changes will have on affected entities and beneficiaries. Key estimated impacts are described below.

a. Impacts of the OPPS Update

(1) Impacts of All OPPS Changes

Table 70 in section XXI. of this final rule with comment period displays the distributional impact of all the 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 policies finalized in this final rule with comment period will result in a 0.4 percent overall decrease in OPPS payments to providers. We estimate that total OPPS payments for CY 2016, including beneficiary cost-sharing, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) will decrease by approximately $133 million compared to CY 2015 payments, excluding our estimated changes in enrollment, utilization, and case-mix.

We estimated the isolated impact of our 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 23.1 percent increase in CY 2016 payments to CMHCs relative to their CY 2015 payments.

(2) Impacts of the Updated Wage Indexes

We estimate that our update of the wage indexes based on the FY 2016 IPPS final wage indexes results in no change 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 Rural Adjustment and the Cancer Hospital Payment Adjustment

There are no significant impacts of our CY 2016 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not making 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 OPD Fee Schedule Increase Factor

As a result of the OPD fee schedule increase factor, the 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 budget neutrality adjustments, we estimate that urban and rural hospitals will experience decreases of approximately 0.4 percent for urban hospitals and 0.6 percent for rural hospitals. Classifying hospitals by teaching status or type of ownership suggests that these hospitals will receive similar decreases.

b. Impacts of the 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 percentage change in estimated total payments by specialty groups under the 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 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 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 final rule with comment period. 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 Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 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 August 24, 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 assignment 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 August 24, 2015 meeting that the subcommittees continue. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the August 24, 2015 Panel meeting are included in the sections of this final rule with comment period 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 are set forth in this CY 2016 OPPS/ASC final rule with comment period under the appropriate subject-matter headings.

G. Public Comments Received on the CY 2016 OPPS/ASC Proposed Rule

We received approximately 670 timely pieces of correspondence on the CY 2016 OPPS/ASC proposed rule that appeared in the

Federal Register

on July 8, 2015 (80 FR 39200). We note that we received some public comments that were outside the scope of the proposed rule. Out-of-scope public comments are not addressed in this CY 2016 OPPS/ASC final rule with comment period. Summaries of the public comments that are within the scope of the proposed rule and our responses are set forth in the various sections of this final rule with comment period under the appropriate headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative 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.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39210), for the CY 2016 OPPS, we proposed 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 proposed 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 HOPD services furnished on or after January 1, 2014, and before January 1, 2015. For this final rule with comment period, for the purpose of recalibrating the final APC relative payment weights for CY 2016, we used approximately 163 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for HOPD services furnished on or after January 1, 2014, and before January 1, 2015. For exact numbers of claims used, we refer readers to the claims accounting narrative under supporting documentation for the CY 2016 OPPS/ASC proposed rule and this final rule with comment period on the CMS Web site at:

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

Of the approximately 163 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2016 OPPS payment rates for this final rule with comment period, approximately 125 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 125 million claims, approximately 3 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 122 million claims, we created approximately 95 million single records, of which approximately 43 million were “pseudo” single or “single session” claims (created from approximately 52 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 92 million single claims for ratesetting. As described in section II.A.2. of this final rule with comment period, 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 final rule with comment period. 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 final APC relative weights and payments for CY 2016 in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2014 that were processed through June 30, 2015. 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, as we proposed, we used 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. Use of Single and Multiple Procedure Claims

For CY 2016, in general, we proposed 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 proposed 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 enabled 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 proposed 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 proposed to establish additional packaging policies for the CY 2016 OPPS, as discussed in section II.A.3. of this final rule with comment period.

In the proposed rule, we proposed 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 the 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 the proposed rule for further discussion), to add to the approximately 49 million “natural” single procedure claims.

In addition, we proposed 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 restructuring of APCs are discussed in the applicable sections of this final rule with comment period. In conjunction with this initiative, we proposed 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 final rule with comment period. For the proposed rule, we provided a crosswalk from the existing APC numbers to the proposed new APC renumber in Addendum Q to the proposed rule (which is available via the Internet on the CMS Web site).

For CY 2016, in the proposed rule, we proposed to bypass 197 HCPCS codes that were identified in Addendum N to the 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 claims that contained packaging for each HCPCS code and the amount of packaging on each “natural” single claim 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 proposed rule from CY 2014 claims processed through December 31, 2014) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. For CY 2016, we proposed to continue to bypass all of the HCPCS codes on the CY 2015 OPPS bypass list, with the exception of HCPCS codes that we proposed to delete for CY 2016, which were listed in Table 1 of the 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 proposed 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 proposed to remove from the CY 2016 bypass list were affected by the CY 2016 proposed packaging policy, discussed in section II.A.3. of this final rule with comment period. Some of the codes we proposed 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 proposed to add to the bypass list for CY 2016 HCPCS codes that are not on the CY 2015 bypass list that, using the proposed rule data (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 proposed to establish that the packaged cost criterion would 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) was open to public comment in the 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 were:

• 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 proposed 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 proposed 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 proposed 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 proposed to set the geometric mean packaged cost threshold based on the CY 2014 claims data 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 proposed 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 proposed 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” claims, 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 the proposed rule and this final rule with comment period for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” claims that could be used for calculating composite APC costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs were identified by asterisks (*) in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site).

Addendum N to the proposed rule included 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 retained 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 allowed us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the proposed multiple imaging composite APCs were identified by asterisks (*) in the third column of Addendum N to the proposed rule. HCPCS codes that we proposed to add for CY 2016 were identified by asterisks (*) in the fourth column of Addendum N.

We did not receive any public comments on our proposals for use of single and multiple procedure code claims for ratesetting. Therefore, we are adopting as final the proposed “pseudo” single claims process and the final CY 2016 bypass list of 197 HCPCS codes, as displayed in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site). Table 1 below contains the list of codes that we are removing from the CY 2016 bypass list.

Table 1—HCPCS Codes 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. Calculation and Use of Cost-to-Charge Ratios (CCRs)

In the CY 2016 OPPS/ASC proposed rule (80 FR 39213), we proposed 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 were 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, were 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 the proposed rule and this final rule with comment period.

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 the 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 proposed 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 proposed 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 June 2015 HCRIS update to estimate costs in the final CY 2016 OPPS ratesetting process, of the 3,830 impact providers, we were able to calculate a valid implantable device CCR for 2,969 hospitals (78 percent), a valid MRI CCR for 2,080 hospitals (54 percent), a valid CT scan CCR for 2,166 hospitals (57 percent), and a valid Cardiac Catheterization CCR for 1,434 hospitals (37 percent).

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 proposed 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 the proposed rule and section XXI. of this final rule with comment period include the impacts of calculating the 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 Statiscal Values Based on Use of Different Cost Allocation Methods

Cost allocation method

CT

Median CCR

Mean CCR

MRI

Median CCR

Mean CCR

All Providers

0.0436

0.0582

0.0874

0.1111

Square Feet Only

0.0361

0.0507

0.0780

0.1026

Direct Assign

0.0638

0.0716

0.1076

0.1273

Dollar Value

0.0508

0.0667

0.0972

0.1204

Direct Assign and Dollar Value

0.0508

0.0668

0.0976

0.1203

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—Percent Change in Estimated Cost for CT and MRI APCs When Excluding Claims From Providers Using “Square Feet” as the Cost Allocation Method

CY 2016 APC

CY 2016 APC descriptor

Percent change

5570 *

Computed Tomography without Contrast

15.4

5571 *

Level 1 Computed Tomography with Contrast and Computed Tomography Angiography

10.2

5572 *

Level 2 Computed Tomography with Contrast and Computed Tomography Angiography

10.5

5581 *

Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast

8.1

5582 *

Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast

6.2

8005

CT & CTA without Contrast Composite

13.7

8006

CT & CTA with Contrast Composite

9.8

8007

MRI & MRA without Contrast Composite

6.9

8008

MRI & MRA with Contrast Composite

6.8

* Renumbered APC for CY 2016.

In summary, we proposed 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 the proposed rule, we proposed to continue our policy of removing claims from cost modeling for those providers using “square feet” as the cost allocation statistic for CY 2016.

Comment:

Several commenters supported CMS' proposal to continue removing claims submitted by providers that use the “square feet” cost allocation methodology from cost modeling for the CT and MRI APCs. A few commenters suggested that CMS continue its policy of removing claims from providers that use this method for the CY 2018 OPPS update and subsequent calendar years.

Response:

We appreciate the commenters' support. As described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), the current policy of calculating CT and MRI APC relative payment weights using only data from providers that do not use the “square feet” cost allocation method was part of a transitional policy to allow providers to adopt cost allocation methods that improve data and payment accuracy. In the CY 2014 OPPS/ASC final rule with comment period, we noted that we would sunset that policy in 4 years and estimate the CY 2018 CT and MRI APC relative payment weights using cost data from all providers, regardless of which cost allocation method the provider employed. While some commenters believe that we should continue this transition policy of excluding “square feet” data from OPPS ratesetting for the CY 2018 OPPS update and subsequent calendar years, we believe that we have given providers sufficient time to adopt one of the more precise cost allocation methodologies.

After consideration of the public comments we received, we are finalizing our proposal 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 above, we are continuing our policy of removing claims from providers that use the “square feet” cost allocation methodology for CY 2016 CT and MRI APC cost modeling.

2. Data Development Process and Calculation of Costs Used for Ratesetting

In this section of this final rule with comment period, we discuss the use of claims to calculate the OPPS payment rates for CY 2016. The Hospital OPPS page on the CMS Web site on which this final rule with comment period 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 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 and final 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 proposed to continue to use geometric mean costs to calculate the relative weights on which the 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 final rule with comment period to calculate the costs we used to establish the relative payment weights used in calculating the OPPS payment rates for CY 2016 shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We refer readers to section II.A.4. of the proposed rule and this final rule with comment period for a discussion of the conversion of APC costs to scaled payment weights.

Comment:

A few commenters suggested that CMS increase the transparency of its cost estimation process and provide additional detail on how various types of HCPCS code are treated within CMS' claims processing.

Response:

We thank the commenters for these suggestions. We have updated the claims accounting narrative for this

final rule with comment period to include additional information on the requested various types of HCPCS code where feasible. This updated claims accounting narrative is available on the 2016 OPPS Final Rule page of the CMS Web site (

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html

).

Comment:

One commenter suggested that CMS present proposals for significant payment changes, such as expanded packaging, APC configurations, or new comprehensive APCs, at least 1 year before issuance of a proposed rule. The commenter believed that this would increase the transparency of policy changes and facilitate stakeholder review and analysis of the proposed changes.

Response:

We thank the commenter for this suggestion. We believe that, for each proposed policy change, we assess the appropriate timeframe for implementation and will continue to do so in the future. We understand that modeling the OPPS is time-consuming and technically complex, and we strive to aid these efforts by providing numerous data files, public use files, and narrative descriptions of the claims accounting process for each rule.

a. Claims Preparation

For the 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. For this final rule with comment period, we used the CY 2014 hospital outpatient claims processed through June 30, 2015, to calculate the geometric mean costs of APCs that underpin the final relative payment weights for CY 2016. To begin the calculation of the relative payment weights for CY 2016, we selected 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 claims are submitted by providers to Medicare with the knowledge that no payment would be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare to document that a service is not covered under the OPPS. 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 125 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 rates.

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 final rule with comment period. 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 as we proposed, we are continuing this payment policy for CY 2016. We refer readers to section V.B.3. of this final rule with comment period for a complete discussion of our CY 2016 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 proposed 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 and adoption of our proposal to continue packaging payment for clinical diagnostic laboratory tests, as we proposed, we also are applying 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. Additional details and a summary of public comments received and our responses regarding packaging payment for clinical laboratory tests can be found in section II.A.3.b.(3) of this final rule with comment period.

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

(1) Splitting Claims

In the CY 2016 OPPS/ASC proposed rule (80 FR 39217), for the CY 2016 OPPS, we proposed to 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 proposed to define major procedures as any procedure described by a HCPCS code that is assigned a status indicator of “J1,” “J2,” “S,” “T,” or “V,” to define minor procedures as any procedure described by a HCPCS code that is assigned a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N,” and to classify “other” procedures as any procedure described by a HCPCS code that is assigned a status indicator other than one that we have classified as major or minor. For CY 2016, we proposed to continue to assign status indicator “R” to HCPCS codes for blood and blood products; status indicator “U” to HCPCS codes for brachytherapy sources; status indicator “Q1” to all HCPCS “STV-packaged codes”; status indicator “Q2” to all HCPCS “T-packaged codes”; status indicator “Q3” to all HCPCS codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met; and new status indicator “Q4” to HCPCS codes for laboratory tests that will be conditionally packaged 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. For more information on status indicator “Q4,” we refer readers to section II.A.3.b.(3) of this final rule with comment period.

As discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of codes. We proposed to treat these codes in the same manner for data purposes for CY 2016 as we have treated them since CY 2008. Specifically, for CY 2016, we are continuing to evaluate whether the criteria for separate payment of codes with a status indicator of “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Claims containing codes with a status indicator of “Q1” or “Q2” are processed through the data system either with status indicator “N” to indicate that the services are packaged for payment or, if they meet the criteria for separate payment, they are assigned the status indicator of the APC to which they are assigned and are considered as “pseudo” single procedure claims for major codes. Claims containing codes that are assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs

and, therefore, they are assigned the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.f. of this final rule with comment period. HCPCS codes with status indicator “Q4” only appear in the OPPS model if they are packaged on a claim with a service that is assigned status indicator “S,” “T,” or “V.”

Specifically, we proposed to divide the remaining claims into the following five groups:

1.

Single Procedure Major Claims:

Claims with a single separately payable procedure (that is, status indicator “S,” “T,” or “V” which includes codes with status indicator “Q3”); claims with status indicator “J1” or “J2,” which receive special processing for C-APCs, as discussed in section II.A.2.e. of this final rule with comment period; claims with one unit of a status indicator “Q1” code (“STV-packaged”) where there was no code with status indicator “S,” “T,” or “V” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T-packaged”) where there was no code with a status indicator “T” on the same claim on the same date.

2.

Multiple Procedure Major Claims:

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

3.

Single Procedure Minor Claims:

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

4.

Multiple Procedure Minor Claims:

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

5.

Non-OPPS Claims:

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

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

In the CY 2016 OPPS/ASC proposed rule (80 FR 39217), we proposed to adjust the claims sorting process to determine whether a claim has a bilateral procedure modifier (Modifier 50) before claims are assigned to one of the five claims categories. This proposed adjustment shifts some claims that might otherwise be considered a single major procedure claim to the multiple major procedure claim category due to the presence of the bilateral modifier. We stated that we believe that this proposed adjustment more accurately sorts claims that have a bilateral modifier.

We did not receive any public comments on the proposed process to categorize claims used in CY 2016 OPPS cost modeling. Therefore, we are finalizing our policy as proposed.

(2) Creation of “Pseudo” Single Procedure Claims

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

We also proposed to use the bypass codes listed in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site) and discussed in section II.A.1.b. of the proposed rule and this final rule with comment period to remove separately payable procedures which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignored the “overlap bypass codes,” that is, those HCPCS codes that were both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The proposed CY 2016 “overlap bypass codes” were listed in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. If one unit of a single, separately payable procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record,

which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.f.(3) of the proposed rule and this final rule with comment period, were met. If the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be packaged and, if so, the code ceased to be available for further assessment as part of the composite APC. Because the packaged code will not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC costs on which the CY 2016 OPPS relative payment weights are based. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

We also examined the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STV-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2015 relative payment weight, and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2015 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2015 relative payment weight; other codes with status indicator “Q1”; and all other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC geometric mean cost for the status indicator “Q1” HCPCS code.

Similarly, we proposed that if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or multiple units of a single code with status indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest CY 2015 relative payment weight and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2015 relative payment weight to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2015 relative payment weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim.

If a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STV-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest relative payment weight for CY 2015 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T-packaged”) HCPCS code to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2015 relative payment weight; other codes with status indicator “Q2”; codes with status indicator “Q1” (“STV-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2015 relative payment weights. If a status indicator “Q1” HCPCS code had a higher CY 2015 relative payment weight, it became the primary code for the simulated single bill process. We changed the status indicator for the selected status indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim.

We then applied our revised process for creating “pseudo” single procedure claims to the conditionally packaged codes that do not meet the criteria for packaging, which enabled us to create single procedure claims from them, if they met the criteria for single procedure claims. Conditionally packaged codes are identified using status indicators “Q1” and “Q2,” and are described in section XI.A. of this final rule with comment period.

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

We did not receive any public comments on our proposed methodology for creating “pseudo” single procedure claims. Therefore, we are finalizing our proposal to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2016 OPPS. The final CY 2016 bypass codes and “overlap bypass codes” are listed in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site).

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

We proposed to then package the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site) and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the

services reported under packaged revenue codes in Table 4 of the proposed rule (Table 4 below in this final rule with comment period) that appeared on the claim without a HCPCS code into the cost of the single major procedure remaining on the claim. For a more complete discussion of our CY 2016 OPPS packaging policy, we refer readers to section II.A.3. of this final rule with comment period.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that CMS should review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. As we have in the past, we are continuing to compare the final list of packaged revenue codes that we adopt for CY 2016 to the revenue codes that the I/OCE will package for CY 2016 to ensure consistency.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment on the CY 2010 proposed list of packaged revenue codes.

For CY 2016, as we did for CY 2015, we reviewed the changes to revenue codes that were effective during CY 2014 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we proposed to package for CY 2016. We stated in the proposed rule that we believe that the charges reported under the revenue codes listed in Table 4 of the proposed rule continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2016, we proposed to continue to package the costs that we derive from the charges reported without HCPCS codes under the revenue codes displayed in Table 4 of the proposed rule for purposes of calculating the geometric mean costs on which the CY 2016 OPPS/ASC payment rates are based.

Comment:

One commenter suggested that CMS revisit its ratesetting methodology to prevent items or services that are more costly than a primary service from being packaged into the payment for the primary service. The commenter also suggested that only items or services that are clinically relevant to a primary service be packaged for payment with a primary service.

Response:

We thank the commenter for these suggestions. Since the beginning of the OPPS and throughout its development, we have striven to find ways to improve our methodologies for estimating the costs associated with providing services, including our methodology for packaging services. We will continue to look at ways to improve our ratesetting process, including improving our packaging logic, in future payment years. We only assign packaged status indicators to services that we determine are ancillary, supportive, dependent, or adjunctive to a primary service. We disagree with the commenter that only payment for less costly services should be packaged into payment for a primary service, as the cost of a packaged service relative to a primary service is not necessarily determinative of packaged status.

For the reasons set forth in the proposed rule, we are finalizing the proposed packaged revenue codes for CY 2016, without modification, which are identified in Table 4 below.

Table 4—CY 2016 Packaged Revenue Codes

Revenue code

Description

250

Pharmacy; General Classification.

251

Pharmacy; Generic Drugs.

252

Pharmacy; Non-Generic Drugs.

254

Pharmacy; Drugs Incident to Other Diagnostic Services.

255

Pharmacy; Drugs Incident to Radiology.

257

Pharmacy; Non-Prescription.

258

Pharmacy; IV Solutions.

259

Pharmacy; Other Pharmacy.

260

IV Therapy; General Classification.

261

IV Therapy; Infusion Pump.

262

IV Therapy; IV Therapy/Pharmacy Svcs.

263

IV Therapy; IV Therapy/Drug/Supply Delivery.

264

IV Therapy; IV Therapy/Supplies.

269

IV Therapy; Other IV Therapy.

270

Medical/Surgical Supplies and Devices; General Classification.

271

Medical/Surgical Supplies and Devices; Non-sterile Supply.

272

Medical/Surgical Supplies and Devices; Sterile Supply.

275

Medical/Surgical Supplies and Devices; Pacemaker.

276

Medical/Surgical Supplies and Devices; Intraocular Lens.

278

Medical/Surgical Supplies and Devices; Other Implants.

279

Medical/Surgical Supplies and Devices; Other Supplies/Devices.

280

Oncology; General Classification.

289

Oncology; Other Oncology.

331

Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—Injected.

332

Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—Oral.

335

Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—IV.

343

Nuclear Medicine; Diagnostic Radiopharmaceuticals.

344

Nuclear Medicine; Therapeutic Radiopharmaceuticals.

360

Operating Room Services; General Classification.

361

Operating Room Services; Minor Surgery.

362

Operating Room Services; Organ Transplant—Other than Kidney.

369

Operating Room Services; Other OR Services.

370

Anesthesia; General Classification.

371

Anesthesia; Anesthesia Incident to Radiology.

372

Anesthesia; Anesthesia Incident to Other DX Services.

379

Anesthesia; Other Anesthesia.

390

Administration, Processing and Storage for Blood and Blood Components; General Classification.

392

Administration, Processing and Storage for Blood and Blood Components; Processing and Storage.

399

Administration, Processing and Storage for Blood and Blood Components; Other Blood Handling.

410

Respiratory Services; General Classification.

412

Respiratory Services; Inhalation Services.

413

Respiratory Services; Hyperbaric Oxygen Therapy.

419

Respiratory Services; Other Respiratory Services.

621

Medical Surgical Supplies—Extension of 027X; Supplies Incident to Radiology.

622

Medical Surgical Supplies—Extension of 027X; Supplies Incident to Other DX Services.

623

Medical Supplies—Extension of 027X, Surgical Dressings.

624

Medical Surgical Supplies—Extension of 027X; FDA Investigational Devices.

630

Pharmacy—Extension of 025X; Reserved.

631

Pharmacy—Extension of 025X; Single Source Drug.

632

Pharmacy—Extension of 025X; Multiple Source Drug.

633

Pharmacy—Extension of 025X; Restrictive Prescription.

681

Trauma Response; Level I Trauma.

682

Trauma Response; Level II Trauma.

683

Trauma Response; Level III Trauma.

684

Trauma Response; Level IV Trauma.

689

Trauma Response; Other.

700

Cast Room; General Classification.

710

Recovery Room; General Classification.

720

Labor Room/Delivery; General Classification.

721

Labor Room/Delivery; Labor.

722

Labor Room/Delivery; Delivery Room.

724

Labor Room/Delivery; Birthing Center.

729

Labor Room/Delivery; Other Labor Room/Delivery.

732

EKG/ECG (Electrocardiogram); Telemetry.

760

Specialty Services; General Classification.

761

Specialty Services; Treatment Room.

762

Specialty services; Observation Hours.

769

Specialty Services; Other Specialty Services.

770

Preventive Care Services; General Classification.

801

Inpatient Renal Dialysis; Inpatient Hemodialysis.

802

Inpatient Renal Dialysis; Inpatient Peritoneal Dialysis (Non-CAPD).

803

Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal Dialysis (CAPD).

804

Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis (CCPD).

809

Inpatient Renal Dialysis; Other Inpatient Dialysis.

810

Acquisition of Body Components; General Classification.

819

Acquisition of Body Components; Other Donor.

821

Hemodialysis—Outpatient or Home; Hemodialysis Composite or Other Rate.

824

Hemodialysis—Outpatient or Home; Maintenance—100%.

825

Hemodialysis—Outpatient or Home; Support Services.

829

Hemodialysis—Outpatient or Home; Other OP Hemodialysis.

942

Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training.

943

Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation.

948

Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation.

In accordance with our longstanding policy, we proposed to continue to exclude: (1) Claims that had zero costs after summing all costs on the claim; and (2) claims containing packaging flag number 3. Effective for services furnished after July 1, 2014, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a service with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the Medicare Administrative Contractor (MAC) was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative payment weight of the APC to which each code was assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equaled the revenue center payment (that is, the Medicare payment) on the assumption that, where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. We are continuing these processes for the CY 2016 OPPS.

For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. The claims accounting that we provide for the proposed rule and final rule with comment period contains the formula we use to standardize the total cost for the effects of the wage index

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