Medicare Program; Criteria for Medicare Coverage of Lung Transplants

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[BPD-812-NC]

RIN 0938-AG83

Medicare Program; Criteria for Medicare Coverage of Lung

Transplants

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice with comment period.

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SUMMARY: This notice announces a Medicare national coverage decision

for lung and heart-lung transplantations. Lung transplantation refers

to the transplantation of one or both lungs from a single cadaver

donor. Heart-lung transplantation refers to the transplantation of one

or both lungs and the heart from a single cadaver donor.

We have determined that, under certain circumstances, lung

transplants and heart-lung transplants are a medically reasonable and

necessary service when furnished to patients with progressive end-stage

pulmonary or cardiopulmonary disease and when furnished by Medicare

participating facilities that meet specific criteria, including patient

selection criteria.

DATES: This notice is effective February 2, 1995. For information on

how this notice effects Medicare payment for lung and heart-lung

transplants, see sections E and F of this notice.

ADDRESSES: Applications. A facility seeking Medicare coverage and

payment for lung transplantation should mail 10 copies of the

application to the address below in a manner which provides the

facility with documentation that it was received by us: Director,

Office of Hospital Policy, Room 189 East High Rise, 6325 Security

Boulevard, Baltimore, Maryland 21207.

Comments. Comments will be considered if we received them at the

appropriate address, as provided below, no later than 5 p.m. on April

3, 1995.

Mail written comments (1 original and 3 copies) to the following

address: Health Care Financing Administration, Department of Health and

Human Services, Attention: BPD-812-NC, P.O. Box 26676, Baltimore, MD

21207.

If you prefer, you may deliver your written comments (1 original

and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,

Washington, DC 20201, or

Room 132, East High Rise Building, 6325 Security Building, Baltimore,

MD 21207.

Because of staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. In commenting, please refer

to file code BPD-812-NC. Comments received timely will be available for

public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 309-G of

the Department's offices at 200 Independence Avenue, SW., Washington,

DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

If you wish to submit comments on the information collection

requirements contained in this rule, you may submit comments to: Office

of Information and Regulatory Affairs, Office of Management and Budget,

Room 3001, New Executive Office Building, Washington, DC 20503, Attn:

Allison Herron Eydt, HCFA Desk Officer.

FOR FURTHER INFORMATION CONTACT:

Claude Mone, (410) 966-5666.

SUPPLEMENTARY INFORMATION:

I. Background

Administration of the Medicare program is governed by the Medicare

law, title XVIII of the Social Security Act (the Act). The Medicare law

provides coverage for broad categories of benefits, including inpatient

and outpatient hospital care, skilled nursing facility (SNF) care, home

health care, and physicians' services. It places general and

categorical limitations on the coverage of the services furnished by

certain health care practitioners, such as dentist, chiropractors and

podiatrists, and it specifically excludes some categories of services

from coverage, such as cosmetic surgery, personal comfort items,

custodial care, routine physical checkups, and procedures that are not

reasonable and necessary for diagnosis or treatment of an illness or

injury.

The Act also provides direction as to the manner in which payment

is made for Medicare services, the rules governing eligibility for

services, and the health, safety, and quality standards to be met in

institutions furnishing services to Medicare beneficiaries. The

Medicare law does not, however, provide an all-inclusive list of

specific items, services, treatments, procedures, or technologies

covered by Medicare. Thus, except for the examples of durable medical

equipment in section 1861(n) of the Act, and some of the medical and

other health services listed in section 1861(s) and 1862(a) of the Act,

the Act does not specify medical devices, surgical procedures, or

diagnostic or therapeutic services that should be covered or excluded

from coverage.

The intention of the Congress, at the time the Medicare Act was

enacted in 1965, was that Medicare would provide health insurance to

protect the elderly or disabled from the substantial costs of acute

health care services, principally hospital care. The program was

designed generally to cover services ordinarily furnished by hospitals,

SNFs, and physicians licensed to practice medicine. The Congress

understood that questions as to coverage of specific services would

invariably arise and would require specific coverage decisions by those

administering the program. It vested in the Secretary the authority to

make those decisions.

Section 1862(a)(1)(A) of the Act prohibits payment for any expenses

incurred for items or services ``which are not reasonable or necessary

for the diagnosis or treatment of illness or injury or to improve the

functioning of a malformed body member.'' We have interpreted this

statutory provision to exclude from Medicare coverage those medical and

health care services that have not been demonstrated by acceptable

clinical evidence to be safe and effective. Effectiveness in this

context is defined as the probability of benefit to individuals from a

medical item, service, or procedure for a given medical problem under

average conditions of use, that is, day-to-day medical practice.

To date, the Medicare program has not issued a national coverage

policy on lung or heart-lung transplantation. In the absence of

national coverage policy, the contractors that process Medicare claims

are authorized to develop Medicare coverage policy for their service

area using medical literature, the advice of medical consultants and

local medical societies, and their private line business practices.

Several contractors have determined lung transplantation to be a

Medicare covered service prior to this notice, and a small number of

contractors have covered heart-lung transplant. However, most of these

contractors do not have a clearly defined coverage policy that would

allow a beneficiary to know in advance if the procedure would be

covered. Rather, they review each case individually after it has

occurred and determine coverage without published

[[Page 6538]]

criteria. Other Medicare contractors do not cover the procedure at all.

Thus, there is inconsistency within the nation.

On January 30, 1989, we published a proposed rule in the Federal

Register, at 54 FR 4302, which describes our process for formulating

new national coverage decisions and reevaluating existing decisions. As

discussed in that notice, we sometimes rely on the Office of Health

Technology Assessment (OHTA) in the Agency for Health Care Policy and

Research (AHCPR) of the Public Health Service (PHS) for medical

consultation and advice. We also rely on other PHS components, such as

the National Institutes of Health.

The AHCPR evaluates the risks, benefits, and clinical effectiveness

of new, existing, or unestablished medical technologies. The assessment

process includes a comprehensive review of the medical literature and

emphasis broad participation from within and outside the Federal

government. The OHTA conducted an assessment of lung transplantation in

1991 and concluded that experience has shown that lung transplants can

provide adequate pulmonary function for extended periods in some

patients with otherwise fatal lung disease. In addition, the National

Heart, Lung, and Blood Institute (NHLBI) in the National Institutes of

Health, Public Health Service, reported to us in 1993 that lung

transplantation in carefully selected patients and by experienced teams

yields significant increases in survival with reasonable quality of

life.

We believe it is appropriate in the face of these findings to issue

a national policy rather than to maintain the current system of

inconsistency among the contractors. In addition, we believe it is more

beneficial to develop a national policy where facilities and

beneficiaries will know in advance the criteria and facilities covered

rather than to maintain the system in many areas of making coverage

decisions on a case by case basis without clearly defined criteria.

II. Provisions

We have carefully reviewed the reports and recommendations of the

Office of Health Technology Assessment and the National Heart, Lung,

and Blood Institute. Based on these reports, the opinions of our

medical advisors, consultations with PHS, and review of the medical

literature, consultation with medical advisors and reconsultation with

NHLBI since the OHTA assessment, we are establishing national coverage

of lung transplant under the Medicare program, under the authority of

section 1862(a)(1)(A) of the Act.

Sections 1869(b)(3)(B) and 1871(a)(2) of the Act specifically

exempt national coverage decisions from the notice-and-comment

rulemaking process ordinarily required by section 553 of the

Administrative Procedure Act. Despite this authority, we have indicated

that we would use the prior comment process in discontinuing coverage

of procedures. However, we do not believe that the establishment of

this policy is a discontinuation of coverage. Rather, we view this

policy as establishment of national coverage policy where no such

policy previously existed. Consequently, we are proceeding with a final

notice in this regard. Nonetheless, we wish to receive comments on

these criteria within 60 days of the publication of this notice.

Medicare will cover lung transplants for beneficiaries with

progressive end-stage pulmonary disease and when performed by

facilities that (1) make an application to HCFA for approval as a lung

transplant facility under the criteria established by this notice; (2)

supply documentation showing their satisfaction of compliance with the

criteria discussed later in this notice; and (3) are approved by HCFA

under these criteria. Medicare will also cover lung transplantation for

end-stage cardiopulmonary disease when it is expected that transplant

of the lung will result in improved cardiac function.

In addition, Medicare will also cover heart-lung transplants for

beneficiaries with progressive end-stage cardiopulmonary disease when

they are provided in a facility that has been approved by Medicare for

both heart and lung transplantation. The NHLBI's studies of this

procedure have persuaded us that, though provided infrequently, this

procedure is sometimes the appropriate intervention for specific

patients. We believe the procedure may be safely and effectively done

in a facility that is Medicare approved for both heart and lung

transplantation. We are not establishing specific patient selection

criteria for the procedure; however, we expect that facilities that

perform heart-lung transplants will develop and use appropriate

criteria.

Organs transplanted as a heart-lung procedure should be included in

the volume and survival statistics for each organ. Thus, facilities may

meet the volume and survival criteria delineated in this notice through

both lung and heart-lung transplant procedures.

A. Specific Clinical Conditions Required for Lung Transplantation

Coverage

Medicare will cover lung transplants only for those beneficiaries

who are diagnosed as having progressive end-state pulmonary disease

(or, in some instances, end-stage cardiopulmonary disease) and when the

procedure is performed in a participating facility that meets specific

criteria.

Note: See effective date section for further explanation.

We are requiring that facilities meet specific criteria in areas

such as patient selection, patient management, commitment, plans,

experience and survival rates, maintenance of data, organ procurement,

laboratory services, and billing. Facilities must have patient

selection criteria for determining suitable candidates for lung

transplants.

B. Facility Requirements

Under current Medicare policies, a procedure can be considered

medically reasonable and necessary only if its safety and efficacy have

been demonstrated adequately by scientific evidence, such as controlled

clinical studies, and it has been generally accepted by the medical

community. Normally, surgical procedures and medical regimens, although

requiring competent, skilled personnel, are of a nature that they can

be performed successfully on most patients who require them in most

facilities that meet the Medicare conditions of participation for

hospitals in 42 CFR part 482. In the case of lung transplantation,

however, we believe many other factors are related to the safety and

efficacy of the procedure. Thus, coverage of lung transplants requires

detailed criteria to identify the context in which lung

transplantations can be considered medically reasonable and necessary.

We are covering only those lung transplantations performed in

facilities that demonstrate good patient outcomes (for example,

initially a 1-year survival rate of 69 percent for patients receiving a

lung transplant) and compliance with the facility criteria. While we

believe that survival rates are important measures of successful

outcomes, we do not believe that they can serve as the only criteria a

center has to meet in order to be approved for Medicare payment for

lung transplants. Once a facility applies for approval under these

criteria and is approved as a lung transplant facility for Medicare

purposes, it is obliged to report immediately to HCFA any events or

changes that would affect its approved status. Specifically, a facility

is required to report, within a reasonable period of time, any

significant decrease in its experience level or survival rates, the

departure of key members of the transplant team or any other major

[[Page 6539]]

changes that could affect the performance of lung transplants at the

facility. Changes from the terms of approval may lead to prospective

withdrawal of approval for Medicare coverage of lung transplants

performed at the facility.

A discussion of the criteria that we are requiring facilities to

meet in order to receive Medicare payment for lung transplantation

follows. A very similar approach is being used in determining

eligibility of heart and liver transplant facilities and has proved

very successful.

1. Patient Selection Criteria

The NHLBI of the National Institutes of Health, Public Health

Service, has reported to us that lung transplantation in carefully

selected patients and by experienced teams yields significant increases

in survival with reasonable quality of life. Therefore, we believe that

careful patient selection for lung transplants, as suggested by NHLBI,

is essential to achieve optimal results. We require that facilities

have written patient selection criteria that they follow in determining

suitable candidates for lung transplants, such as the following:

a. A patient is selected based upon both a critical medical need

for transplantation and a strong likelihood of successful clinical

outcome.

b. A patient who is selected for a lung transplant has

irreversible, progressively disabling, end-stage pulmonary disease (or,

in some instances, end-stage cardiopulmonary disease).

c. The facility has tried or considered all other medically

appropriate medical and surgical therapies that might be expected to

yield both short- and long-term survival comparable to that of

transplantation.

d. Plans for long-term adherence to a disciplined medical regimen

are feasible and realistic for the individual patient.

Many factors must be recognized as exerting an adverse influence

upon the patient's outcome after transplantation. The following adverse

factors are among those that should be considered in selecting patients

for transplantation:

Primary or metastatic malignancies of the lung.

Current significant acute illness that is likely to

contribute to a poor outcome if the patient receives a lung transplant

or current use of mechanical ventilation for more than a very brief

period.

Significant or advanced heart, liver, kidney,

gastrointestinal or other systemic or multi-system disease that is

likely to contribute to a poor outcome after lung transplantation.

Significant extra-pulmonary infection.

Chronic pulmonary infection in candidates for single lung

transplantation.

Continued cigarette smoking or failure to have abstained

for long enough to indicate low likelihood of recidivism.

Systemic hypertension that requires more than two drugs

for adequate control.

Cachexia, even in the absence of major end-organ failure.

Obesity.

Previous thoracic or cardiac surgery or other bases for

pleural adhesions.

Age beyond that at which there has been substantial

favorable experience.

Chronic corticoid therapy that cannot be tapered to a low

dose (10 mg prednisone per day) or discontinued prior to

transplantation.

A history of behavior pattern or psychiatric illness

considered likely to interfere significantly with a disciplined medical

regimen.

Except for the matter of primary or metastatic malignancies of the

lung, all these factors were explicitly enumerated in the National

Heart, Lung, and Blood Institute memorandum upon which we primarily

relied in developing this notice. Primary or metastatic malignancies of

the lung are implicit in the National Heart, Lung, and Blood

Institute's listing of systemic and multi-system diseases as an adverse

factor. We are explicitly listing primary or metastatic malignancy of

the lung to emphasize it should be an adverse factor in patient

selection. We note that we have received a report which surveyed major

lung transplant facilities regarding, among other things, appropriate

patient selection criteria for lung transplants. The results of the

survey indicate Medicare coverage criteria for lung transplantation

should include patient selection criteria that exclude malignancies.

The American College of Cardiology believes that malignancy (other than

basal cell carcinoma) is an absolute contraindication for heart-lung

transplant. (See Health Technology Assessment ``Institutional and

Patient Criteria for Heart/Lung Transplantation,'' Agency for Health

Care Policy and Research). In addition, a New England Journal of

Medicine article by Steven E. Weinberger, M.D. (Volume 328, Number 20,

May 20, 1993) indicated that lung transplant patients ``* * * should

not have an underlying cancer or other systemic illness,'' and that

same view was reflected in a survey of lung transplant programs.

These criteria take into consideration advances in the

transplantation field and reflect discussions with experts in pulmonary

medicine, infectious diseases, transplantation, surgery, biostatistics,

and other experts. We realize that the indicators to measure the safety

and efficacy of lung transplantations will continue to evolve. Thus, we

may need to update the criteria periodically to recognize further

developments in lung transplantation technology. We intend to re-

evaluate the criteria through survey and data gathering within the next

3 years.

2. Patient Management

A facility must have adequate patient management plans and

protocols that include the following:

Therapeutic and evaluative procedures for the acute and

long-term management of a patient, including commonly encountered

complications. The facility must state the basis for confidence in

these plans.

Patient management and evaluation during the waiting and

immediate post-discharge, as well as in-hospital, phases of the

program.

Long-term management and evaluation, including education

of the patient, liaison with the patient's attending physician, and the

maintenance of active patient records for a period of at least 5 years.

3. Commitment

A facility must make a sufficient commitment of resources and

planning to the lung transplant program to carry through its

application. Indications of this commitment should include a commitment

by the facility to the lung transplant program at all levels and which

is broadly evident throughout the facility. (A lung transplantation

program requires a major commitment of resources, which may

intermittently include many other departments as well as the principal

sponsoring departments.)

The facility must have expertise in medical, surgical, and other

relevant areas, particularly thoracic surgery, vascular surgery,

anesthesiology, immunology, infectious diseases, pulmonary diseases,

pathology, radiology, nursing, blood banking, and social services. The

facility must identify individuals in these areas in order to achieve

an identifiable and stable transplant team. Responsible medical/

surgical members of the team must be board certified or eligible to

take the boards in their respective disciplines or have, in the opinion

of the non-Federal experts discussed in section II.D. of this notice,

demonstrated

[[Page 6540]]

competence irrespective of board status. We believe board eligibility

is required to assure high quality care.

The facility's commitment should also be evident by the following:

The component teams must be integrated into a

comprehensive team with clearly defined leadership and corresponding

responsibility.

The anesthesia service must identify a team for

transplantation that must be available at all times.

The infectious disease service must have both the

professional skills and laboratory resources needed to discover,

identify, and manage the complications from a whole range of organisms,

may of which are uncommonly encountered.

The nursing service must identify a team or teams trained

not only in hemodynamic support of the patient, but also in the special

problems of managing immunosuppressed patients.

Pathology resources must be available for studying and

reporting promptly the pathological responses to transplantation.

Adequate social service resources must be available.

Mechanisms must be in place for managing the lung

transplant program that assure that patient selection criteria are

consistent with those set forth in the facility's written patient

selection criteria and that the facility is responsible for the ethical

and medical considerations involved in the patient selection process

and application of patient selection criteria.

Adequate plans exist for organ procurement meeting legal

and ethical criteria, as well as yielding viable transplantable organs

in reasonable numbers.

4. Facility Plans

The facility must have overall facility plans, commitments, and

resources for a program that will ensure a reasonable concentration of

experience; specifically, 10 or more lung transplantation cases per

year in patients who have end-state pulmonary or cardiopulmonary

disease. The facility must show that this level of activity is feasible

and likely to continue on the basis of plans, commitments, and

resources.

5. Experience and Survival Rates

The facility must demonstrate experience and success with a

clinical organ transplantation program involving immunosuppressive

technique. The facility must have an established lung transplantation

program with documented evidence of 10 or more patients, who have end-

stage pulmonary or cardiopulmonary disease, in each of the two

preceding 12-month periods. The facility can use single lung, double

lung and heart-lung transplant patients in meeting this criterion. The

Medicare cardiac and liver transplant criteria require a minimum volume

of 12 transplants annually. However, based on the recommendation of the

National Heart, Lung, and Blood Institute, we have established 10 cases

per year as the basic standard for a lung transplant program.

We are establishing a minimum volume criterion because we believe a

significant number of transplants is generally needed to maintain the

entire transplant team commitment and skills to assure that procedures

are of appropriate quality and safety. Our own research in heart

transplantation has documented improved survival associated with

Medicare approved facilities over those that do not meet the Medicare

criteria, which includes minimum volume thresholds. In addition,

Jeffrey Hosenpud, M.D. et al., reported in the Journal of the American

Medical Association (volume 271, No. 23, June 15, 1994, page 1844) on

the effect of transplant center volume on cardiac transplant outcome.

These researchers found increased risk of mortality in centers

performing fewer than 9 cardiac transplants per year. Further, research

conducted by Erick B. Edward, et al and presented in the Fifteenth

world Congress of the Transplantation Society demonstrated that, after

correcting for patient mix covariates, patients mortality following

liver transplantation in the United States is a function of center

transplant volume. Such articles confirm our view that volume generally

is a strong factor in predicting survival. Although we are not aware of

published studies such as those with heart and liver transplants,

empirically demonstrating that volume is associated with successful

outcome and team proficiency in lung transplantion, we believe it is

reasonable to assume a similar relationship would exist for lung

transplants.

We have established the minimum volume of 10 transplants per year

for lungs based on the fact that there are fewer lungs than hearts and

livers available for transplanation. The NHLBI recommended 10

transplants as an appropriate number.

We have contacted a large sample of active lung transplant programs

to gather data regarding the volume of transplants performed over the

past three years. In arraying the results of these data, we found that

the vast majority of centers that are designated as lung transplant

centers perform a very small number of procedures. In fact, a

significant number of these centers performed less than two transplants

annually. Over 80 percent of the total transplants in the data were

performed in those centers that exceeded the volume thereshold

recommended by NHLBI. Thus, although a relatively small number of the

total facilities designated to perform lung transplants by the organ

Procurement and Transplanation Network are expected to qualify

initially (approximately 15 of 77), we expect the facilities that are

approved initially to perform over 80 percent of the lung transplants.

Thus, we do not anticipate adverse impact on beneficiary access as a

result of this criterion.

Based on the results of this analysis, we believe that 10 is a

reasonable threshold for volume criteria. However, we welcome comments

during the comment period as to the appropriateness of the number.

Further, as we discuss later, exceptions to the facility criteria,

including the number of persons who received transplants, may be

warranted if there is justification. However, as a general matter, we

believe less than 10 transplants a year is not sufficient to maintain

the standard of performance needed for approval.

Survival rates may be influenced by many factors including random

chance and patient selection. However, most authorities agree that a

patient who is not free of adverse prognostic factors warrants lung

transplantation only if he or she has a reasonable prognosis and the

donor lung cannot be used in a patient who is a good candidate with at

least a moderately urgent need and who is in reasonable geographic

proximity. Based on data from the NHLBI report for the 996 patients

receiving lung transplants in the United States prior to January 1,

1993, Kaplan-Meier actuarial survivals at 1, 2, and 3 years are 72

percent, 66 percent, and 63 percent, respectively. For patients

receiving a single lung transplant (669 patients), and sequential

bilateral transplantation of two lungs (161 patients), survival data

are similar--73 percent, and 75 percent, respectively, at 1 year, and

67 percent and 71 percent at 2 years. With the two lungs transplanted

while joined (``en bloc''), results seem less favorable, with 63

percent and 57 percent 1 and 2-year survivals. When all lung and heart-

lung data are aggregated, the U.S. experience for 1,287 patients (1987

through 1992) is 69 percent, 62 percent and 59 percent actuarial

survival at 1, 2, and 3 years, respectively.

[[Page 6541]]

Since we will be covering single, double and heart-lung transplants

and collecting data for all these types of transplants in evaluating

volume and survival statistics for applicant hospitals, we believe that

we should use the NHLBI reported aggregate survival. That survival is

69 percent at 1 year and 62 percent at 2 years. These numbers reflect

the same types of organ transplants (single lung, double lung and

heart-lung) as are used by facilities in meeting volume criteria.

At the time of the application, the facility must demonstrate

actuarial 1-year survival rates of 69 percent for patients who have

end-stage pulmonary or cardiopulmonary disease and who have had lung or

heart-lung transplants at that facility using the Kaplan-Meier

technique described below and a 2-year survival rate of 62 percent. All

patients transplanted after 1989 should be included in the calculation.

We have chosen 1990 as the beginning date for the facility's survival

rate experience because the procedure was infrequently performed before

that date. We specifically invite comment on these percentages.

In reporting their actuarial survival rates, facilities must use

the Kaplan-Meier technique and must report both 1-year and 2-year

survival rates for all transplant cases occurring on or after January

1, 1990. Generally, we would expect applicants to have at least 3 years

of lung transplant experience to be used in the data array and survival

calculations. The following definitions and rules also must be used:

a. The date of transplantation (or, if more than one

transplantation is performed, the date of the first transplantation)

must be the starting date for calculation of the survival rate.

b. For those dead, the date of death if used, if known. If the date

of death is unknown, it must be assumed as 1 day after the date of the

last ascertained survival.

c. For those who have been ascertained as surviving within 60 days

before the fiducial date (the point in time when the facility's

survival rates are calculated and its experience is reported), survival

is considered to be the date of the last ascertained survival, except

for patients described in paragraph (e) below.

Note: The fiducial date cannot be in the future; it must be within

90 days before the date we receive the application.

d. Any patient who is not known to be dead but whose survival

cannot be ascertained to a date that is within 60 days before the

fiducial date, must be considered as ``lost to followup'' for the

purposes of this analysis.

e. Any patient who receives a lung transplant between 61 and 120

days before the fiducial date must be considered as ``list to

followup'' if he or she is not known to be dead and his or her survival

has not been ascertained for at least 60 days before the fiducial date.

Any patient transplanted within 60 days before the fiducial date must

be considered as ``lost to followup'' if he or she is not known to be

dead and his or her survival has not been ascertained on the fiducial

date.

f. A facility must submit its survival analyses using the

assumption that each patient in the ``lost to followup'' category died

1 day after the last date of ascertained survival. However, a facility

may submit additional analyses that reflect each patient in the ``lost

to followup'' category as alive at the date of the last ascertained

survival.

g. Survival is calculated based on patient survival, not graft

survival. Consequently, facilities should not consider

retransplantation as termination.

h. In addition to reporting actuarial survival rates, the facility

must submit the following actual information on every Medicare and non-

Medicare patient who received a lung transplant between January 1, 1990

and the date of the application:

Patient transplant number.

Age.

Sex.

Clinical indication for transplant (diagnosis).

Date of transplant.

Date of most recent ascertained survival.

Date of death.

Category of patient (living, dead or ``lost to

followup'').

Survival after lung transplant in days.

Type of lung transplant (for example, single, bilateral,

double lung or heart-lung).

Date of retransplant.

Number of retransplants.

Unique patient identifiers are not needed for data prior to the

application. The facility may submit additional information on any of

the cases that it would like considered in the review.

Although we are not requiring that these data be submitted in a

particular format, our review will be facilitated if the data are

submitted as follows:

Data are tabulated in twelve columns, with data for each

patient appearing as one line and listed in the sequence of date of

transplant.

The fiducial date should appear on each page.

The transplant numbers listed may be existing lung

transplant numbers used by the applicant facility. If so, the basis for

any missing numbers should be explained.

The tabulation should include no more than these required

data. If more data are provided, they should be provided through

additional tables or supplemental explanation.

In addition to the data above on the individual patient, the

facility must submit its retransplantation rate per year for the last 2

years for lung transplants.

6. Maintenance of Data

The facility must agree to maintain and, when requested,

periodically submit data to HCFA, in standard format, about patients

selected (including patient identifiers), protocols used, and short-

and long-term outcome on all patients who undergo lung transplantation,

not only those for whom payment under Medicare is sought. Such data are

necessary to provide a data base for an ongoing assessment of lung

transplantation and to ensure that approved facilities maintain

appropriate patient selection criteria, adequate experience levels and

satisfactory patient outcomes. In addition, facilities must agree to

notify HCFA immediately of any change related to the facility's

transplant program (including turnover of key staff members) that could

affect the health or safety of patients selected for covered Medicare

lung transplants or that would otherwise alter specific elements in

their application. For example, a facility must report any significant

decrease in its experience level or survival rates, the departure of

key members of the transplant team, the transplantation of patients who

do not meet the facility's patient selection criteria, or any other

major changes that could affect the performance of lung transplants at

the facility. Changes from the terms of approval may lead to withdrawal

of approval for Medicare coverage of lung transplants performed at the

facility.

Facilities not approved for Medicare covered lung transplants are

not required to maintain data in standard format. However, if and when

these facilities apply for Medicare approval, they will be required to

submit such data for all patients receiving a lung transplant.

7. Organ Procurement

The facility must be a member of the Organ Procurement and

Transplantation Network as a lung transplant center and abide by the

Network's approved rules. The Organ Procurement and

[[Page 6542]]

Transplantation Network is currently administered under an HHS contract

by the United Network for Organ Sharing. The facility must participate

in an organ procurement program to obtain donor organs.

If a lung transplantation center is not a Medicare approved organ

procurement organization, it must have a written arrangement with such

an approved organization to share organs. The authority for this

requirement is section 1138(a)(1) of the Act. The lung transplantation

center must notify HCFA in writing within 30 days of terminating such

arrangements.

An ``organ procurement organization'' is defined as an organization

that meets the criteria in section 371(b) of the Public Health Service

Act, 42 U.S.C. 273(b), and has been designated by HCFA as an organ

procurement organization under section 1138(b) of the Act. Such an

agency performs or coordinates all of the following services:

Retrieval of donated lungs.

Preservation of donated lungs.

Transportation of donated lungs.

Maintenance of a system to locate prospective recipients

for retrieved organs.

8. Laboratory Services

The facility must make available, directly or under arrangements,

laboratory services (including blood banking) to meet the needs of

patients. Laboratory services are performed in a laboratory facility

certified for those services under the Clinician Laboratories

Improvement Amendments of 1988.

9. Billing

The facility must agree to submit claims to Medicare only for lung

transplants performed on individuals who have been diagnosed as having

end-stage pulmonary or cardiopulmonary disease.

10. Pediatric Hospitals

The Congress addressed the issue of Medicare coverage of pediatric

heart transplants. It enacted section 4009(b) of the Omnibus Budget

Reconciliation Act of 1987 (Pub. L. 100-203) which essentially deemed

pediatric facilities to be certified as heart transplant facilities if

they met certain specified conditions. We have adopted these same

conditions that were specified for pediatric heart centers for use in

pediatric liver transplantation, and we believe it is appropriate to do

so likewise for pediatric lung transplantation.

There fore, lung transplantation will be covered for Medicare

beneficiaries when performed in a pediatric hospital that performs

pediatric lung transplants if the hospital submits an application that

HCFA approves as documenting the following:

The hospital's pediatric lung transplant program is operated

jointly by the hospital and another facility that has been found by

HCFA to meet the institutional coverage criteria in this notice; the

unified program shares the same transplant surgeons and quality

assurance program (including oversight committee, patient protocol, and

patient selection criteria); and the hospital is able to provide the

specialized facilities, services, and personnel that are required by

pediatric lung transplant patients.

C. Application Procedure

We will accept and begin to review applications after the

publication date of this notice. The application procedure is as

follows.

An original and 10 copies of the application must be submitted to

HCFA on 8\1/2\ by 11 inch paper, signed by a person authorized to do

so. The facility must be a participating hospital under Medicare and

must specify its provider number, the name and title of its chief

executive officer, and the name and telephone number of an individual

we could contact should we have questions regarding the application.

Information and data must be clearly stated, well organized, and

appropriately indexed to aid in review against the criteria specified

in this notice. Each page must be numbered. To the extent possible, the

application should be organized into nine sections corresponding to

each of the nine major criteria and addressing, in order, each of the

sub-criteria identified.

The application should be mailed to the address below in a manner

which provides the facility with documentation that it was received by

us: Director, Office of Hospital Policy, Room 189 East High Rise, 6325

Security Boulevard, Baltimore, Maryland 21207.

D. Process for Review and Approval of Facilities

We are requiring that facilities that wish to obtain lung

transplantation coverage for their Medicare patients under this notice

submit an application and supply documentation showing their compliance

with the criteria at the time of application, and, in some instances,

their ongoing compliance with the criteria. We will approve facilities

based on a review of the materials submitted regarding their experience

and expertise, as well as their commitment to the lung transplant

program. We intend to conduct the review using the aid and advice of

non-Federal expert consultants in relevant fields. Generally, the

consultants will have the responsibility of reviewing applications at

the request of HCFA, making recommendations to HCFA on a timely basis

concerning qualified facilities, and supporting each recommendation

with written documentation. Consensus of the consultants is not

required. The individual consultants report to us on their findings

with respect to individual applications. Based on these findings and

our evaluations and review, HCFA makes decisions as to the approval or

disapproval of such applications.

Based on our experience in using a similar approach to review

applications from hospitals seeking approval as Medicare heart or liver

transplant programs, we believe this method is the most effective way

to determine promptly and efficiently whether applicants meet the lung

transplant facility criteria. It permits relatively rapid

implementation of the criteria and should help assure applicants that

their qualifications have been thoroughly and objectively reviewed by

experts in the field of lung transplantation. While the amount of time

needed to process applications will vary depending on the quality of

the application and the volume of applications on hand, we believe

those applications that fully address and demonstrate meeting all of

the criteria may be completed within 60-90 days.

In approving facilities, we compare the facility's submission

against the criteria specified in this notice. In addition to reviewing

applications, the individual expert consultants may propose specific

changes to the coverage criteria. Changes in coverage criteria will not

be implemented, however, without appropriate notice and opportunity for

public comment.

Finally, in certain limited cases, exceptions to the strict

criteria may be warranted if there is justification and if the facility

ensures our objectives of safety and efficacy. We would consider an

exception or waiver of a particular criterion if all other criteria are

met and the facility is able to provide reasonable justification for

not meeting the criterion. For example, we have granted exceptions

under the heart transplant program to facilities that fail to meet the

volume or survival criteria in one year by a small number due to

extraordinary circumstances. We would also consider exceptions for a

facility that has only minimally missed the volume criteria but has

displayed exemplary survival performance. Another example of a

potential exception situation may involve patient selection criteria

that do

[[Page 6543]]

not comply with those in this notice due to participation in ongoing

research work.

Under no circumstances will exceptions be made for facilities whose

transplant programs have been in existence for less than 2 years, and

applications from consortia will not be approved. We do not believe

programs that have been in existence for less than 2 years have data to

demonstrate, in a statistically meaningful way, the quality of their

program. Further, it is difficult to demonstrate continued commitment

to the program without ongoing experience.

We do not believe waivers to allow consortia are appropriate

because we have no assurance that the individual facilities that make

up the consortia independently meet the conditions of this notice. We

believe these conditions must be met individually by a facility in

order to demonstrate substantial experience with the procedure.

Although we will not approve consortia as lung transplant centers,

individual members of a consortium may submit individual applications

at any time, and, if they meet the criteria, they will be approved. In

these cases, disapprovals would be made by HCFA and do not require

prior reviews by the expert consultants. Additionally, exceptions will

not be granted on the basis of geographic considerations.

E. Effective Dates

1. Summary of Effective Dates

A facility that submits a completed application to HCFA by

May 3, 1995 and meets all the requirements of this notice will be

approved for lung transplants performed beginning February 2, 1995 or

the date on which they meet the conditions, whichever is later.

A facility that submits a completed application to HCFA

after May 3, 1995 and meets all the requirements of this notice will be

approved for lung transplants performed beginning on the date of the

Administrator's approval letter.

A facility that does not submit application or has not met

the requirements of this notice by July 31, 1995 is not eligible for

Medicare payment for lung transplants effective July 31, 1995 except as

provided below.

A facility that has received Medicare payment for lung

transplants performed based on individual determinations made by the

Medicare carrier before July 31, 1995 may continue to receive payment

for lung transplants performed for patients who are on a waiting list

with that facility as of February 2, 1995.

2. Discussion of Effective Dates

It is not our intent to disrupt the availability of covered lung

transplants for Medicare beneficiaries. Consequently, the 180-day limit

on Medicare coverage in facilities not meeting the approved criteria in

this notice does not apply to those beneficiaries already on the

waiting lists of facilities that are currently being paid under the

Medicare contractors' local Medicare coverage policy. The contractor

will process the claims for all beneficiaries on the lung or heart-lung

transplant waiting list as of February 2, 1995 using its current

coverage policy regardless of whether the facility meets the criteria

contained in this notice. This policy will continue until all Medicare

beneficiaries on the waiting list as of February 2, 1995, have been

transplanted.

A beneficiary who is not currently on the lung or heart-lung

transplant waiting list will be limited to procedures performed in

those facilities that meet the provisions of this notice, unless the

beneficiary receives a transplant before July 31, 1995 publication that

would have been paid under the Medicare contractors' local Medicare

coverage policy that was in effect as of the effective date of this

notice. We recognize that those beneficiaries not presently on the

waiting lists will not know with assurance which facilities will

ultimately be approved for coverage before July 31, 1995. However, we

wish to point out that if the facility where a beneficiary is wait-

listed is not approved for Medicare coverage as the patient nears the

time of transplant, the beneficiary may transfer to an approved center

without lose of waiting time. That is, the patient will be transferred

to the new center with the date he or she was originally wait-listed at

the old facility as the start date.

We recognize that 180 days is more than we generally permit for

advance notice of implementation of new policy. However, based on

previous experience in the heart and liver transplant center approval

process, we anticipate that some facilities that meet the criteria will

delay application until the last month of the initial 90 day period.

Because it generally takes us approximately 2 months to process a

complete application we believe it is a reasonable expectation that

facilities will have been notified of the decision on their application

by that time. By delaying implementation for 180 days, we will assume

that there are not lapses in Medicare coverage due to processing time.

At the end of the 180 day period, Medicare coverage for transplants

other than for beneficiaries on the waiting list as of February 2, 1995

will be limited to approved facilities.

For facilities that apply within 90 days of publication of this

notice, and are approved based on that application, payment may be made

for transplants as early as the date of publication of this notice, or

the date on which they met the conditions, whichever is later.

For facilities that apply more than 90 days from the date of this

notice, coverage (for beneficiaries other than those on the facility's

waiting list as of the date of this notice in those States where the

contractors cover lung transplantation) is effective the date of the

Administrator's approval letter. Some contractors are currently

covering lung transplants in facilities that may not meet the criteria

in this notice. Coverage under the contractors' criteria will be

maintained until July 31, 1995. After this date, (except for the

beneficiaries identified above) only those facilities approved for

national coverage may receive Medicare payment for lung transplants.

F. Payment

For facilities that are approved to perform lung transplants,

Medicare covers under Part A (Hospital Insurance) all medically

reasonable and necessary inpatient services. For discharges occurring

before October 1, 1994, lung transplants were assigned to DRG 75, Major

Chest Procedures. As of that date, we established a new DRG 495, Lung

Transplant, for lung transplant cases.

We have assigned a relative weight of 12.8346 to DRG 495. This

weight is based on Medicare bill data from the federal fiscal year (FY)

1993 Medicare Provider Analysis and Review (MedPAR) file updated

through December 1993. The MedPAR file contains 100 percent of the

hospital discharge bills for Medicare beneficiaries received by HCFA.

We used the same methodology to calculate the weight for DRG 495 as

we do every year in recalibrating the weights for all DRGs. The final

rule implementing the FY 1995 changes to the hospital inpatient

prospective payment system, which was published in the Federal Register

on September 1, 1994 (59 FR 45348), contains a complete description of

the methodology used to calculate weights.

The Medicare DRG grouping program used under the prospective

payment system already groups heart-lung transplant procedures to DRG

103. The weight for DRG 103 is higher than that

[[Page 6544]]

assigned to DRG 495, the new lung transplantation DRG. We intend to

continue to pay for heart-lung transplants under DRG 103. The

mechanisms by which DRG weights are updated allows us to continue to

examine the costs associated with heart and heart-lung transplants to

assure that payments reflect service intensity.

Organ acquisition costs will be paid separately on a cost basis, in

the same manner as kidney acquisition costs are handled in the End-

Stage Renal Disease program under Medicare. Physician services, as well

as other non-hospital services related to the transplant, and pre- and

post-transplant care, may be covered under Medicare Part B and paid

under the physician fee schedule or on a reasonable cost basis or other

bases.

In accordance with section 1861(s) of the Act, outpatient drugs

used in immunosuppressive therapy, including drugs that a patient can

self-administer, such as cyclosporine, are covered under Medicare for a

period of up to 1 year beginning with the beneficiary's date of

discharge from the inpatient hospital stay during which a covered organ

transplant was performed. Beginning in 1995, Medicare coverage will be

extended to 18 months after the date of discharge for the covered

transplant procedure. During 1996, Medicare coverage will be extended

to 24 months, and during 1997 to 30 months. For all years thereafter,

Medicare coverage will be extended to 36 months after the date of

discharge for the covered transplant procedure.

If a Medicare beneficiary receives a covered lung transplant from

an approved facility, reasonable and necessary services for follow up

care and for complications are covered, as determined by our

contractors. In fact, as discussed below, such follow-up or remedial

services may be covered even if they are furnished by a hospital that

is eligible for Medicare payment but was not specifically approved by

Medicare for lung transplantation at the time the lung transplant was

performed.

With the exception of those individuals on the waiting list of a

facility currently approved for coverage by the fiscal intermediary on

the date of this notice, noted earlier, Medicare will not cover lung

transplants or retransplants in facilities that have not been approved

as Medicare lung transplant facilities under the criteria of this

notice as of July 31, 1995. If a Medicare beneficiary received a lung

transplant from a facility that is not approved by Medicare for lung

transplantation at the time the lung transplant was performed, we will

not cover any hospital inpatient services associated with the

transplantation procedure. Nor will we cover physician services

associated with the transplantation procedure in such cases. Thus,

payment will not be made for the performance of the transplant or for

any other services associated with the transplantation procedure if

performed in a nonapproved facility.

However, after a beneficiary has been discharged from a hospital

(whether or not it has been approved by Medicare as a lung transplant

center) in which he or she received the noncovered lung transplant,

subsequent medical and hospital services required as a result of the

transplant are covered in a facility otherwise eligible for in a

facility otherwise eligible for Medicare payment if they are reasonable

and necessary in all other respects. Thus, coverage is provided for

subsequent inpatient stays or outpatient treatment ordinarily covered

by Medicare even if the need for treatment arose because of a previous

noncovered lung transplant procedure. These services also are covered

for Medicare beneficiaries who were not beneficiaries at the time they

received a lung transplant, regardless of whether or not the transplant

was performed at an approved facility.

We will pay those hospitals currently receiving coverage by local

contractors for transplants furnished on or before July 31, 1995. For

transplants furnished after that date, except for those beneficiaries

on their waiting list on the date of this notice, we will pay only

approved facilities. For facilities approved for coverage, we will pay

for any covered transplants furnished on or after the date of

publication of this notice (if the facility applied during the initial

90 day period) or the date the facility is approved, whichever is

later.

III. Waiver of Proposed Notice

We ordinarily publish a proposed notice in the Federal Register

and invite prior public comment before issuing a final notice. However,

the Medicare law, at sections 1871(a)(2) and 1869(b)(3)(B), provide for

exception of prior public notice in the establishment of national

coverage policy. Specifically, section 1871(a)(2) of the Act states

that ``No rule, requirement, or other statement of policy (other than a

national coverage determination) that establishes * * * shall take

effect unless it is promulgated by the Secretary under regulation * *

*'' Section 1869(b)(3)(B) of the Act further specifies that a national

coverage determination under section 1862(a)(1) shall not be set aside

on the grounds that publication in the Federal Register or an

opportunity for public comment was not satisfied.

Despite this clear statutory authority to issue national coverage

policy without prior public comment, we have historically offered an

opportunity for prior public comment in establishing our national

coverage policy for heart and liver transplantation. However, in the

case of these organ transplants, we had previously established a

uniform non-coverage policy. In the case of lung transplants, there is

not pre-existing national coverage policy and differing policies have

been established by our local intermediaries. Consequently, we believe

it is impracticable, unnecessary and contrary to public interest to

delay the implementation of this policy while awaiting public comment.

In this final notice with comment period, we are extending Medicare

coverage to lung transplantation in facilities that meet specified

criteria. Patients currently on the waiting list in facilities that are

being paid under the Medicare contractor's local policy will continue

to retain coverage regardless of whether the facility is approved under

the criteria contained in this notice.

Patients not currently on a waiting list for a lung transplant may

be listed at the facility of their choice pending approval of the

facility by the Administrator. If the facility is not approved when the

patient is getting close to the top of the list, the patient my be

transferred to an approved center without loss of waiting time. That

is, it is the policy of the United Network for Organ Sharing (UNOS) to

manually adjust the waiting time for patients who transfer facilities

so that patients are credited wait time from when they were first

listed. UNOS has adopted this policy to encourage patients to be

transplanted at centers that are most proficient in transplantation.

Consequently, no Medicare beneficiaries would be adversely impacted by

this rule.

On the other hand, delay of this final notice until we could

publish a proposed notice would result in the unavailability of

coverage of lung transplantion to some facilities that would meet the

quality standards, due to the fact that the contractor in their area

has not determined the procedure to be covered under Medicare. In an

informal survey of the Medicare contractors, we believe at least 16

contractors are not currently covering lung transplantation and even do

not cover heart-lung transplantation. Further, immunosuppressive drug

therapy is covered only if the transplant is covered. Thus,

beneficiaries currently being denied coverage under local contractor

policies are excluded from coverage of needed drug therapy.

[[Page 6545]]

More importantly, we are concerned that Medicare beneficiaries may

be receiving transplants in facilities that do not offer the assurance

of high quality services that are commensurate with the criteria

contained in this notice. That is, given the reliance on outcome and

patient care practices inherent in this coverage policy, we are

convinced that facilities meeting the criteria set forth in this notice

clearly provide significantly superior services from a quality

perspective as demonstrated by the facility's patient care polices and

survival data. We are concerned that beneficiaries electing to have

lung transplants performed in facilities that do not meet this criteria

may not be aware of the increased risk of poor outcome that is

associated with this decision.

Further, we are concerned that due to individual contractor local

decisions, Medicare program expenditures may be spent in facilities

that are not yet proficient in the procedure so as to produce high

quality outcomes. Thus, continued coverage of lung transplants in these

high risk situations may result in increased expenditures for

complications that may arise from the transplant procedure that may

have been avoided had the procedure been performed in a facility that

meets these criteria.

Thus, it would be impracticable, unnecessary, and contrary to the

public interest to delay this extension of coverage until we could

publish a proposed notice and solicit comments. That is, since no

beneficiaries are disadvantaged by this notice due to the construction

of the effective date in a fashion that recognizes the coverage for

patients already on the waiting list of facilities so covered, it is

impracticable and contrary to public interest to delay implementation

of these standards that promote highest quality services to Medicare

beneficiaries and the extension of coverage to qualified facilities

located in areas where the Medicare contractor local policy excludes or

restricts coverage. We, therefore, find good cause to waive prior

proposed notice.

IV. Response to Comments

Because of the large number of items of correspondence we normally

receive on FR documents published for comment, we are not able to

acknowledge or respond to them individually. We will consider all

comments we receive by the date and time specified in the DATES section

of this preamble, and, if we proceed with a subsequent document, we

will respond to the comments in that document.

V. Paperwork Burden

This notice contains information collection requirements that are

subject to the Office of Management and Budget approval under the

Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.). When OMB

approves these provisions, we will publish a notice to that effect. The

information collection concerns the requirement that a facility that

wishes to obtain Medicare coverage for lung transplantation submit an

application for approval and, once approved, report events or changes

that would affect its approved status. We also require that the

facility periodically submit data documenting such things as patients

selected for transplants, protocols used, short- and long-term outcomes

on patients who undergo lung transplantation. Public reporting burden

for this collection of information is expected to be 100 hours.

Organizations and individuals desiring to submit comments on the

information collection and recordkeeping requirements should direct

them to the OMB official whose name appears in the ADDRESSES section of

this notice.

VI. Regulatory Impact Analysis

A. Introduction

We generally prepare a regulatory flexibility analysis that is

consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601

through 612) unless the Secretary certifies that a final notice will

not have a significant economic impact on a substantial number of small

entities. For purposes of the RFA, all facilities that consider

themselves capable of performing lung transplants are considered to be

small entities. Individuals and States are not included in the

definition of a small entity.

In addition, section 1102(b) of the Act requires the Secretary to

prepare a regulatory impact analysis for any notice that may have a

significant impact on the operations of a substantial number of small

rural hospitals. This analysis must also conform to the provisions of

section 604 of the RFA. For purposes of section 1102(b) of the Act, we

define a small rural hospital as a hospital which is located outside a

Metropolitan Statistical Area and has fewer than 50 beds.

This notice will affect all facilities that are, or are planning

on, performing lung transplants and may have an effect on the ability

of those facilities to compete. We believe this notice will not have a

significant impact on a substantial number of small rural hospitals

since it is unlikely that small rural hospitals will be performing lung

transplants. However, if there are any, they will not be affected by

this notice differently than any other hospital. We have prepared the

following analysis which, in combination with the other sections of

this notice, is intended to conform to the objectives of the RFA and

section 1102(b) of the Act.

B. Entities Affected

This notice provides for Medicare coverage of lung transplants

furnished to patients with certain conditions in facilities approved by

HCFA as meeting the minimum criteria specified in the notice. Lung

transplantation, as many developing procedures, grew rapidly--from 11

in 1987 to 535 in 1992. However, donor availability is a significant

limitation, and the rate of growth is slowing--in 1993 only 654

persons, from a waiting list of 1,300, received lung transplants.

Although we do not have complete data, based on informal interviews

with staff from a large sample of active lung transplant programs, we

believe only a small number of Medicare beneficiaries (approximately

100) presently are lung transplant candidates because of their age and

the presence of other complicating conditions. Our billing data

indicate that, in 1993, Medicare contractors approved payments

associated with 90 transplants.

Typically, a small number of facilities are involved in initially

developing procedures such as lung transplantation. As of January 1994,

the number of medical institutions in the United States with lung

transplant programs had grown to 76 (according to information from the

United Network for Organ Sharing). However, data indicate that there

still is a concentration of experience among a much smaller number of

facilities. We believe that the demand for lung transplants will grow

as more physicians and patients recognize lung transplantation as a

treatment resulting in increased life expectancy and in improved

quality of life, and that the demand will be met by facilities offering

the procedure.

The number of lung transplants performed is dependent upon many

factors, including the supply of suitable donor organs (only 5 to 10

percent of available donors have lungs considered acceptable for

transplantation), the existence of qualified facilities and personnel,

and the availability of funding for the procedure.

Payment for lung transplants is available from some third party

insurers, some State Medicaid programs,

[[Page 6546]]

private funds, and public fund-raising efforts. In the absence of a

national Medicare coverage policy, each of the Medicare contractors

uses its customary review and approval procedures to determine whether

bills or claims associated with lung transplants should be paid.

Payment data indicate that Medicare beneficiaries make up only a

small portion of lung transplant recipients. The proportion of

transplants covered by Medicare is assumed to grow slightly over time--

from 13 percent in 1993 to 20 percent in 1995, and up to 24 percent in

1999--as improved techniques allow transplantation of older and

disabled patients.

The United Network for Organ Sharing currently lists 77 facilities

as lung transplant centers. Seven of these facilities are children's

hospitals and not subject to the criteria in sections II.B.1-9 of this

notice. Of the remaining 70 facilities, 40 do not maintain an active

ongoing lung transplant program. Although these facilities operate

active transplant programs for other organs, they do lung

transplantation sporadically, sometimes going an entire year without a

single lung transplant. These centers currently have less than 10

people on their waiting list, and based on an informal survey of a

sample of these centers, we estimate that it is rare for a Medicare

beneficiary to be listed at one of these centers. Consequently, we do

not believe that these centers are significantly impacted by this

notice.

Based on our experience with application of a similar approval

process to liver transplant facilities and review of available data on

volume, we estimate that application of the criteria in this notice

will result in the approval of 10 to 15 of the remaining 30 facilities

within the first year, with the total rising to approximately 20 within

the next year. Thus, we expect to approve at least two-thirds of the

active lung transplant programs within the first 2 years. Many of the

remaining third are expected to qualify by the third year, and we

estimate the addition to the list of approved facilities of at least

one facility per year for several more years. Ultimately, we expect all

30 of the active programs will be approved for Medicare coverage.

Many facilities that have performed few lung transplants will not

meet the levels of experience and success required under the facility

criteria. However, some might be found to have acceptable clinical

programs with an adequate prospect for successful outcomes. We would

encourage these facilities to apply when they have achieved that

success. We recognize that the criteria for experience, survival rates,

and facility commitment are demanding. However, our goal in requiring

facilities to meet certain criteria is not to restrict competition but

to maintain the quality of services required by this complex procedure.

Facilities that apply (or reapply) will continue to be approved as

they come to meet the facility criteria. There will be neither a cutoff

date for receipt of applications nor a limit on the number of approved

facilities. For the purpose of estimating the costs of covering lung

transplants, we expect, by fiscal year 1998, that many, if not most, of

the hospitals actively performing lung transplants could meet the

criteria if they desire Medicare approval. We do not have any advance

information on which facilities will apply or meet the criteria.

Medicare approval status could eventually provide those hospitals

that meet the criteria for performing lung transplants with what are

perceived to be advantages over non-approved facilities. In addition to

the guaranteed Medicare payment for approved procedures, these

hospitals might expect to see their prestige and standing as health

care providers increase as a result of their approval as a Medicare

lung transplant center. This, in turn, could enable them to increase

their overall market share of lung transplants and other complicated

procedures at the expense of hospitals that also perform lung

transplants but do not meet our criteria. Therefore, those facilities

that do not meet the criteria may view our notice as having a

significant adverse effect on competition.

Some facilities may choose to not apply for approval as a

transplant facility and to discontinue their transplant programs. So as

to not curtail availability of coverage to individuals currently on a

waiting list at a facility now recognized by a fiscal intermediary

under procedures in effect prior to the date of this notice, we are

making a special exception. Lung transplants furnished by a facility to

a Medicare patient on its waiting list on the date of this notice, will

continue to be paid by Medicare using the contractor's current coverage

criteria, even if the procedure occurs more than 180 days after the

publication of the notice and the facility is not approved under the

criteria of this notice on the date the transplant occurs. Thus, we do

not believe that the criteria would in any way reduce the number or

availability of transplants to patients that are currently on a waiting

list for a lung transplant.

We expect that Medicare coverage of lung transplantation could

prompt additional third party payers, including some State Medicaid

plans, to consider covering this procedure and to create incentives for

some facilities to establish lung transplant programs. However, third

party payers that either already cover or intend to cover lung

transplants are not required to adopt our coverage standards.

C. Projected Expenditures Under Medicare

It is difficult to make a precise estimate of future Medicare

costs, largely due to the difficulty of predicting the availability of

donor organs over the next few years. All dollar estimates depend on

assumptions and estimates related to the number of covered transplants.

In 1993, Medicare beneficiaries received 122 of the 654 lung

transplants performed. In the absence of a national Medicare coverage

policy, Medicare contractors approved payments associated with 90 of

the 122 transplants.

Our projected estimates are based on some facilities meeting our

requirements effective on the date of this notice. In developing these

estimates, we made assumptions about the total number of lung

transplants performed nationwide and the future rate of increase of the

number of transplants performed at approved facilities. We assumed this

would go up with the number of facilities, but the rate of increase

would level off due to competition for suitable recipients and donor

organs. The estimates include not only the cost of transplantation in

an approved facility, but associated immunosuppressive drugs, and

follow-up care resulting from the extension of this coverage.

Due to the sensitivity of these assumptions and the uncertainty of

actual outcomes, we view our projection of expenditure increases as an

opinion, rather than an estimate.

[[Page 6547]]

----------------------------------------------------------------------------------------------------------------

Number of

Projected Number paid additional

total by Medicare Medicare costs LTs as a Additional

Fiscal year number of under under current result of Medicare

LTs current policy(millions) expanded costs(millions)

policy coverage

----------------------------------------------------------------------------------------------------------------

1995.................................. 817 162 (20%) $18 7 $1

1996.................................. 878 183 (21%) 22 8 2

1997.................................. 939 205 (22%) 26 9 3

1998.................................. 1003 229 (23%) 31 9 3

1999.................................. 1068 254 (24%) 36 10 4

----------------------------------------------------------------------------------------------------------------

D. Projected Savings Under Medicaid

Medicaid coverage of transplants is a decision of the individual

State. As of 1990, lung transplants were covered by 15 States. We

cannot predict whether Medicare coverage will increase the number of

State Medicaid programs that will cover lung transplants or whether the

Medicare coverage criteria will cause more restrictive policies than

would otherwise occur. Medicare coverage of lung transplants will

reduce States' payments for transplantation in Medicare beneficiaries

who also qualify under Medicaid. To the extent that Medicare payment

supplants Medicaid funding, the Federal budget receives an offset for

the Federal share of Medicaid expenditures. Under current policy, we

estimate the annual offset to be $5 million.

E. Alternatives Considered

We considered allowing all Medicare participating hospitals to

establish transplant programs without additional facility criteria. Our

major reason for rejecting this alternative was that it would permit

uncontrolled proliferation of transplant facilities, raising questions

about the quality of services, given the limited availability of donor

organs and experienced teams. Further, because the procedure would be

spread among a larger number of facilities, it is likely the average

experience level would be lower and would probably result in lower

success and survival rates among recipients. Our responsibilities for

the well-being of Medicare beneficiaries and for the prudent

expenditure of Medicare trust funds dictate that we pursue a cautious

policy with respect to a procedure as complex as lung transplantation.

F. Conclusion

We believe that the criteria we have developed are the most

effective means available to ensure that the lung transplants that are

made available to Medicare beneficiaries are provided in a safe and

effective manner so that they can be considered to be reasonable and

necessary within the meaning of the law. We believe that the conditions

set forth in this notice would maintain the quality of services

required by this complex procedure, provide Medicare coverage of the

procedure only at facilities and under conditions that have been shown

to be safe and effective, and allow entry of new qualified providers.

Although the criteria are somewhat restrictive, we believe this

approach is justified, particularly in view of the typical relationship

between experience and quality of service.

In accordance with the provisions of Executive Order 12866, this

notice was reviewed by the Office of Management and Budget.

Authority: Section 1862(a)(1)(A) of the Social Security Act (42

U.S.C. 1395y(a)).

(Catalog of Federal Domestic Assistance Program No. 13.773

Medicare--Hospital Insurance Program; and No. 13.774, Medicare--

Supplementary Medical Insurance Program)

Dated: September 26, 1994.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: December 7, 1994.

Donna E. Shalala,

Secretary .

[FR Doc. 95-2559 Filed 2-1-95; 8:45 am]

BILLING CODE 4120-01-M