Medicare Program; Update of Ratesetting Methodology, Payment Rates, Payment Policies, and the List of Covered Surgical Procedures for Ambulatory Surgical Centers Effective October 1, 1998
Federal RegisterJun 12, 1998
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SUMMARY: In this rule we propose to--
Update the criteria for determining which surgical
procedures can be appropriately and safely performed in an ambulatory
surgical center (ASC);
Make additions to and deletions from the current list of
Medicare covered ASC procedures based on the revised criteria;
Rebase the ASC payment rates using cost, charge, and
utilization data collected by a 1994 survey of ASCs;
Refine the ratesetting methodology that was implemented by
a final notice published on February 8, 1990 in the Federal Register;
Require that ASC payment, coverage, and wage index updates
be implemented annually on January 1 rather than having these updates
occur randomly throughout the year;
Reduce regulatory burden; and
Make several technical policy changes.
This proposed rule implements requirements of section 1833(i)(1)
and (2) of the Social Security Act.
DATES: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on August
11, 1998.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-1885-P, P.O. Box 26688,
Baltimore, MD 21207-5178.
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 C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
FOR FURTHER INFORMATION CONTACT: Joan H. Sanow, (410) 786-5723.
SUPPLEMENTARY INFORMATION: Because of staffing and resource
limitations, we cannot accept comments by facsimile (FAX) transmission.
In commenting, please refer to file code HCFA-1885-P. 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
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Table of Contents
I. Background
A. Legislative History
B. Published Changes to ASC List
C. Published Changes to ASC Payment Rates
D. Payment Rate for Extracorporeal Shock Wave Lithotripsy
E. ASC Town Meeting (July 1996)
F. Revisions to the Conditions for Coverage of ASCs
II. Comments
III. Provisions of the Proposed Regulations
A. Basis and Scope (proposed Sec. 416.1)
B. Definitions (Sec. 416.2)
C. Basic requirements (proposed Sec. 416.3 and Sec. 416.4)
D. Additions to/Deletions from the ASC list
1. Revision of 42 CFR 416.65
2. Eliminate Numeric Thresholds
3. Formation of Advisory Group
4. Proposed Additions to the ASC List
a. Additions Suggested by Commenters
b. Proposed Additions Resulting from Changes to CPT
c. Proposed Additions Resulting from Ambulatory Payment
Classification (APC) Groupings
5. Proposed Deletions and Exclusions from the ASC List
a. Procedures Excluded For Reasons of Safety, Reasonableness and
Medical Necessity
b. Unlisted procedures
c. Exclusion of Office-Based Procedures
d. Suggested Additions Not Accepted
e. Procedures Deleted Because of CPT Coding Changes
f. Procedures Recommended by Commenter for Deletion
6. Comments on the ASC List
E. Ratesetting Methodology
1. Current method
2. Proposed ratesetting method--Determine a per-procedure cost
for every reported CPT code at the individual facility level
a. Use 1994 Survey Data
b. Audit Representative Sample of Facilities
c. Adjust Audited Surveys
d. Standardize Unaudited Costs and Charges
e. Calculate Facility-Specific Cost-to-Charge Ratio
5f. Convert Each Procedure Charge to a Procedure Cost
g. Remove Intraocular Lens (IOL) Costs from Four Lens Insertion
Procedures
h. Calculate Facility Specific Portion of Procedure Cost
Attributable to Labor Expenses
i. Deflation by Wage Index Value
j. Adjust Reported Costs for Inflation to Offset Fiscal Year
Differences Among Facilities
3. Proposed ratesetting method:--Determine the median per-
procedure cost, across all facilities, for each reported CPT code
a. Weights
b. Determination of weighted, trimmed median per procedure cost
across all facilities
4. Proposed ratesetting method:--Establish procedure groupings
a. Current Classification System
b. Proposed Ambulatory Payment Classification System
5. Proposed ratesetting methodology:--Determine a standard
payment rate for the procedures within each group
a. Setting rates based on ASC survey data
b. Setting Rates for Procedures with Limited Medicare Volume or
Aberrant Cost Data
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c. Payment rate for CPT code 67027, Implantation of intravitreal
drug delivery system
6. Payment Policy Indicators
7. Comments on proposed ambulatory payment classification
groups, payment policy indicators and payment rates
8. Carrier adjustment of base rates to determine payment amounts
9. Using Resource Costing to Determine Procedure Costs
We are disappointed by our lack of success in the 1994 ASC survey
in gathering usable resource cost data. Our inability to establish
weights and base ASC payment rates on the resource cost data that we
did collect is particularly frustrating in light of the fact that we
expect, beginning January 1, 1999, to make payments to physicians under
the Medicare physicians' fee schedule that are determined in part on
the basis of resource-based practice expense relative units. We have
been closely monitoring the development of the resource-based practice
expense relative value units under the physicians' fee schedule and the
ratesetting method for the hospital outpatient prospective payment
system, which is also scheduled for implementation effective January 1,
1999. When we rebase ASC payment rates following the next ASC survey,
we are committed to reexamining the resource-based practice expense
relative value units established under the Medicare physicians' fee
schedule and the weights developed under the hospital outpatient
prospective payment system for their applicability to ASC ratesetting
in order to advance towards our goal of setting rates in a manner that
is consistent across different sites of service.
F. Scope of ASC Services (Sec. 416.21)
1. ASC Services
2. Venous Access Portals are ASC Facility Services
3. Acquisition of corneal tissue is an ASC service
4. Outside the Scope of ASC Services
G. Basis for Payment (Sec. 416.30)
1. Hospital outpatient department (HOPD)
2. ASCs Operated by a Hospital
3. Medicare approved ASCs
H. Extracorporeal Shock Wave Lithotripsy (ESWL)
1. Background
2. Comments
I. Schedule and Publication of Updates
1. Update of ASC list
2. Update of ASC Payment Rates
J. Technical Changes to 42 CFR Part 416
1. ASC payment rates
2. ASC survey
K. Explanation and Use of Addenda
IV. Collection of Information Requirements
V. Regulatory Impact Analysis
A. Rebased payment rates
1. Impact on ASCs
B. Additions to/Deletions from the ASC list
C. Impact of Technical Changes
D. Impact on Hospitals and Small Rural Hospitals
SUPPLEMENTARY INFORMATION:
I. Background
A. Legislative History
Section 1832(a)(2)(F)(i) of the Social Security Act (the Act)
provides that benefits under the Medicare Supplementary Medical
Insurance program (Part B) include payment for facility services
furnished in connection with surgical procedures specified by the
Secretary and performed in an ambulatory surgical center (ASC).
The Secretary is to review and update the list of ASC procedures
biennially.
To participate in the Medicare program as an ASC, a facility must
meet the standards specified under section 1832(a)(2)(F)(i) of the Act
and 42 CFR 416.25, which sets forth general conditions and requirements
for ASCs.
Generally, there are two primary elements in the total cost of
performing a surgical procedure: the cost of the physician's
professional services for performing the procedure, and the cost of
services furnished by the facility where the procedure is performed
(for example, surgical supplies and equipment and nursing services).
Section 1833(i)(2)(A) of the Act addresses what the ASC facility fee is
intended to represent and how the amount of the Medicare payment for
ASC facility services is to be determined. It requires us to review and
update ASC payment amounts annually.
The ASC payment rate is to be a standard overhead amount
established on the basis of our estimate of a fair fee that takes into
account the costs incurred by ASCs generally in providing facility
services in connection with performing a specific procedure. The Report
of the Conference Committee accompanying section 934 of the Omnibus
Budget Reconciliation Act of 1980 (Public Law 96-499), which enacted
the ASC benefit in December 1980, states, ``This overhead factor is
expected to be calculated on a prospective basis * * * utilizing sample
survey and similar techniques to establish reasonable estimated
overhead allowances for each of the listed procedures which take
account of volume (within reasonable limits).'' (See H.R. Rep. No 1479,
96th Cong., 2nd Sess. 134 (1980).)
In order to estimate the amount of those reasonable allowances, we
are required by section 1833(i)(2)(A)(i) of the Act to survey the
actual audited costs incurred by a representative sample of facilities
in connection with a representative sample of procedures. This survey
is to be conducted every five years, beginning no later than January 1,
1995.
Because payment for ASC facility services is subject to the usual
Medicare Part B deductible and coinsurance requirements, Medicare pays
participating ASCs 80 percent of the prospectively-determined rate,
adjusted for regional wage variations.
Section 1833(i)(2)(A)(ii) requires that the ASC payment rates
result in substantially lower Medicare expenditures than would have
been paid if the same procedure had been performed on an inpatient
basis in a hospital. Section 1833(i)(2)(A)(iii) requires that payment
for insertion of an intraocular lens (IOL) include an allowance for the
IOL that is reasonable and related to the cost of acquiring the class
of lens involved.
Under section 1833(i)(3)(A), the aggregate payment to hospital
outpatient departments for covered ASC procedures is equal to the
lesser of the following amounts:
The amount paid for the same services that would be paid
to the hospital under section 1833(a)(2)(B) (that is, the lower of the
hospital's reasonable costs or customary charges less deductibles and
coinsurance).
The amount determined under section 1833(i)(3)(B)(i) based
on a blend of the lower of the hospital's reasonable costs or customary
charges, less deductibles and coinsurance, and the amount that would be
paid to a free-standing ASC in the same area for the same procedures.
Under section 1833(i)(3)(B)(i), the blend amount for a cost
reporting period is the sum of the hospital cost proportion and the ASC
cost proportion. Under section 1833(i)(3)(B)(ii), the hospital cost
proportion and the ASC cost proportion for portions of cost reporting
periods beginning on or after January 1, 1991 are 42 and 58 percent,
respectively. Section 4521 of the Balanced Budget Act of 1997 (BBA
1997) (Public Law 105-33) amended section 1833(i)(3)(B)(i)(II) of the
Act to eliminate the formula-driven overpayment (FDO) for ASC
procedures.
Section 13531 of the Omnibus Budget Reconciliation Act of 1993
(OBRA 1993) (Public Law 103-66), prohibited the Secretary from
providing for any inflation update in the payment amounts for ASCs
determined under section 1833(i)(2)(A) of the Act for fiscal years
(FYs) 1994 and 1995. Section 13533 of OBRA 1993 established $150 as the
amount of payment allowed for an IOL inserted during or subsequent to
cataract surgery in an ASC on or after
[[Page 32292]]
January 1, 1994, and before January 1, 1999.
Section 141(a)(1) of the Social Security Act Amendments of 1994
(SSAA 1994) (Public Law 103-432) amended section 1833(i)(2)(A)(i) of
the Act to require that a quinquennial survey of ASCs be taken
beginning not later than January 1, 1995.
Section 141(a)(2) of SSAA 1994 added section 1833(i)(2)(C) to the
Act to provide that, beginning with FY 1996, there be an adjustment for
inflation during fiscal years when the Secretary does not update ASC
rates based on actual audited costs determined by surveying a
representative sample of facilities. Section 1833(i)(2)(C) of the Act
provides that ASC payment rates are to increased by the percentage
increase in the consumer price index for urban consumers (CPI-U), as
estimated by the Secretary for the 12-month period ending with the
midpoint of the year involved, beginning with FY 1996.
Section 141(a)(3) of SSAA 1994 amended section 1833(i)(1) of the
Act to require the Secretary to consult with appropriate trade and
professional organizations in specifying the procedures that constitute
the ASC list.
Section 141(b) of SSAA 1994 requires the Secretary to establish a
process for reviewing the appropriateness of the payment amount
provided under section 1833(i)(2)(A)(iii) of the Act for IOLs with
respect to a class of new-technology IOLs. That process is the subject
of a separate notice of proposed rulemaking entitled ``Adjustment in
Payment Amounts for New Technology Intraocular Lenses'' (BPD-831-P)
published in the Federal Register on September 9, 1997 at 62 FR 46698.
Section 4555 of BBA 1997 amended section 1833(i)(2)(C) of the Act
to limit the annual adjustment of ASC payment rates provided for in
that paragraph to the CPI-U increase reduced by 2.0 percentage points
(but not below zero) for fiscal years 1998 through 2002.
B. Published Changes to ASC List
We published a final notice in the Federal Register on February 8,
1990 (55 FR 4526) in which we implemented a new ratesetting methodology
that increased the number of ASC payment groups from four to the
current eight groups. We assigned a new payment rate to each of the
nearly 1500 current procedural technology (CPT) codes on the ASC list
at that time, and we revised the ASC list to be consistent with CPT
coding changes effected by The American Medical Association in 1988 and
1989.
Federal Register notices adding codes to and deleting codes from
the ASC list were subsequently published as follows:
December 31, 1991 notice with comment period (56 FR 67666)
in which we added approximately 900 CPT codes to the ASC list,
including CPT code 50590, Extracorporeal shock wave lithotripsy (ESWL).
January 26, 1995 final notice with comment period (60 FR
5185) in which we updated the ASC list to reflect CPT changes that had
occurred during the interval since publication of the December 31, 1991
notice. We deleted five codes from the ASC list on the basis of
modified quantitative criteria that we adopted to determine whether or
not a procedures should be retained on the list. We added nearly 30
codes that met our numeric criteria of adding to the list procedures
performed at least 20 percent of the time on a hospital inpatient basis
but no more than 50 percent of the time in a physician's office, based
on national claims history data. We solicited public comment on certain
additions to and deletions from the ASC list and the payment rates
assigned to the additions. We respond to those comments in this notice.
C. Published Changes to ASC Payment Rates
In a final notice published in the Federal Register on February 8,
1990 (55 FR 4526), we explained the new ASC ratesetting methodology and
increased the number of ASC payment groups from four to the current
eight groups on the basis of ASC survey data collected in 1986. The
rates that Medicare paid for services furnished on or after March 12,
1990 under the new eight-group payment methodology were published in a
separate notice with comment period in the same February 8, 1990
Federal Register (55 FR 4577). Subsequent updates of the ASC payment
rates are as follows:
July 5, 1990 Federal Register notice with comment period
(55 FR 27690) increased payment rates by a CPI-U factor of 4.21
percent;
December 31, 1991 Federal Register notice with comment
period (56 FR 67666) increased payment rates by a CPI-U factor of 5.1
percent and added a ninth payment group for ESWL;
October 1, 1992 Federal Register notice with comment
period (57 FR 45544) increased payment rates by a CPI-U factor of 3.5
percent;
September 26, 1995 Federal Register notice (60 FR 49619)
increased payment rates by a CPI-U factor of 3.2 percent;
October 1, 1996 Federal Register notice (61 FR 51295)
increased payment rates by a CPI-U factor of 2.6 percent;
February 19, 1998 Federal Register notice (62 FR 8462)
Increased payments rates by 0.6 percent effective for services
furnished on or after October 1,1997. The ASC payment rates implemented
by this notice, which are currently in effect, are:
Group 1--$314............................. Group 5--$678.
Group 2--$422............................. Group 6--$789 (639 + 150 for
IOL).
Group 3--$482............................. Group 7--$941.
Group 4--$595............................. Group 8--$928 (778 + 150 for
IOL).
There is no payment rate shown for group 9 because of the decision
in American Lithotripsy Society v. Sullivan, 785 F. Supp. 1034 (D.D.C.
1992) that prohibits payment for these services under the ASC benefit
at this time. Payment for ESWL as an ASC service is discussed below.
D. Payment Rate for Extracorporeal Shock Wave Lithotripsy
In the Federal Register published December 7, 1990, (55 FR 50590),
we published a notice proposing additions to and deletions from the ASC
list. We solicited comments on our proposal to add CPT code 50590,
Lithotripsy, extracorporeal shock wave, to the ASC list and on the
Group 7 payment rate of $812 that we proposed as the ASC facility fee
for the procedure. We also requested detailed information on facility
charges and costs associated with providing ESWL services to help us
evaluate the appropriateness of the proposed payment rate.
In the final notice with comment period published December 31, 1991
in the Federal Register (56 FR 67666), we established a payment rate
for ESWL as new ASC payment group 9. We set the group 9 rate at $1,150,
effective for services furnished on or after January 30, 1992. On
January 30, 1992, the American Lithotripsy Society filed a complaint
and motion to enjoin enforcement and implementation of the December 31,
1991 notice insofar as it concerned ESWL. In American Lithotripsy
Society v. Louis W. Sullivan, M.D., et al, 785 F. Supp. 1034 (D.D.C.
1992), the American Lithotripsy Society challenged HCFA's determination
that ESWL is a surgical procedure under the ASC benefit and the amount
payable for ESWL services in an ASC. The plaintiff alleged that the
$1,150 rate was not based on an estimate of a ``fair fee'' that took
into account costs incurred by ASCs performing such services as
required by section 1833(i)(2)(A) of the
[[Page 32293]]
Act and that the rate was not supported by the administrative record.
On March 12, 1992, the United States District Court for the
District of Columbia held that HCFA's decision to classify ESWL as a
surgical procedure was rationally justified. However, it remanded the
final notice setting a rate for lithotripsy to the Secretary for
further consideration and stayed the regulation, insofar as it related
to ESWL, pending remand. On remand, the Secretary is required to
publish all material information that is relevant to the setting of the
ESWL rate, receive comments, and publish a final notice in accordance
with the applicable statutes and regulations.
To comply with the court order, Medicare ceased paying an ASC
facility fee for ESWL services furnished in Medicare approved ASCs and
resumed making payment on a reasonable cost basis for ESWL furnished in
a hospital outpatient setting. On October 1, 1993, we published a
proposed notice with comment period in the Federal Register (58 FR
51355) in which we proposed a revised ASC payment rate of $1,000, based
on further consideration of the data and methodology that we used to
determine the rate. We explained in detail in the October 1, 1993
notice how we arrived at the proposed rate, and we solicited
information on ESWL costs, charges, and utilization to enable us to
further evaluate the appropriateness of the assumptions that we used to
develop the proposed rate. The information submitted during the public
comment period persuaded us to defer publication of a final notice and
implementation of an ASC facility fee for ESWL, pending completion of
the 1994 ASC survey that was about to be conducted. In this notice of
proposed rulemaking we respond to the comments that were submitted
timely following publication of the October 1, 1993 notice, and we
propose an ASC payment rate for ESWL services that we have determined
in accordance with the ratesetting methodology that is also proposed in
this notice. In accordance with applicable statutes and regulations,
this notice of proposed rulemaking includes all material information
that is relevant to the setting of ASC payment rates, which includes a
payment rate for ESWL. Publication of this notice of proposed
rulemaking is followed by a 60-day public comment period. When the
comment period closes, and following review of all comments submitted
timely, we shall publish a final notice to implement rebased ASC
payment rates for procedures on the ASC list, including ESWL.
E. ASC Town Meeting (July 1996)
Many of the policy changes proposed in this notice had their
genesis in discussions and comments that emanated from an ASC ``Town
Meeting'' that was held at the central office of the Health Care
Financing Administration on July 25-26, 1996. The purpose of the Town
Meeting was to give representatives of professional and trade
associations and other parties with an interest in ASCs an opportunity
to come together with HCFA staff to exchange information and ideas
regarding Medicare ASC policy. More than 100 people from across the
country attended, including physicians, nurses, ASC administrators, and
representatives of independent and chain facilities, State licensing
and certification agencies, and numerous professional societies and ASC
trade associations. From the Town Meeting, we gained a greater
understanding of some of the immediate and long-term issues and
concerns facing ASC staff and partners, and we received numerous
suggestions and recommendations on ways to strengthen the ASC benefit
on behalf of Medicare beneficiaries.
The first day's meetings focussed on performance outcome measures
for ASCs and conditions for coverage of ASCs. The second day of the
meeting focussed on the criteria HCFA uses to determine which
procedures should be placed on the ASC list and the method HCFA uses to
set ASC payment rates. Following the Town Meeting, we received 79
written comments reiterating concerns and suggestions that were raised
during the meeting itself.
Virtually every commenter submitted a critique of a grouping system
that we presented at the meeting as a possible alternative to the
current eight ASC payment groups. We had distributed to participants a
listing of CPT surgical codes arranged in ``Ambulatory Patient Groups''
(APGs). These groups were developed by 3M Health Information Systems
with the support of HCFA. The list was taken from The Ambulatory
Patient Groups Definitions Manual, Version 2.0. Only groups of CPT
codes were shown; no payment rates or procedure costs were given. We
were primarily interested in whether or not participants found the
groups to be clinically homogeneous as well as consistent in terms of
resource costs. Commenters were unanimous in disagreeing with the
internal consistency of numerous APG groups across most body systems.
The commenters' examples and reasons for taking issue with the
homogeneity of the APGs prompted us to re-examine the groups. We did
so, which resulted in the revision and reclassification of most of the
groups. The product of that exercise is the ambulatory payment
classification (APC) system that we propose in this notice as the basis
for ASC ratesetting.
F. Revisions to the Conditions for Coverage of ASCs
The standards and conditions for coverage of an ASC currently found
in subpart C of 42 CFR part 416 are being revised and are the subject
of a separate notice currently under development.
II. Comments
In the final notice with comment period published January 26, 1995
in the Federal Register (60 FR 5185), we solicited comments on certain
changes to the ASC list that we had not included in the proposed notice
published on December 14, 1993 (58 FR 65357). Specifically, we asked
for comments on our deletion from the ASC list of any codes that had
been deleted in CPT 1994, and we asked for comments about our deletion
from the ASC list of CPT code 36522 Photopheresis, extracorporeal. We
received 9 comments supporting the deletion of CPT code 36522 from the
ASC list and no comments disagreeing with our decision. We received no
comments regarding the other deletions from the ASC list.
We also requested comments on the addition of, and assignment of
payment groups for, certain CPT codes that were not proposed in the
December 14, 1993 Federal Register. We have limited our response to
comments that were submitted timely regarding the specified codes.
We specifically solicited comments on the addition to the ASC list
of certain codes that were added to CPT 1994 as well as the
appropriateness of the payment groups to which we assigned those codes.
No commenters disagreed with adding the codes to the ASC list. However,
commenters indicated that they believed the payment rate assigned to
the following CPT codes was too low:
19125
19126
29804
31235
31238
31239
31248
31249
31251
31266
31269
31271
31280
31281
[[Page 32294]]
31282
31283
31284
31286
31287
31288
43216
43259
44394
45339
56309
56316
56317
56351
56356
64421
66172
Response: As a consequence of the following codes being deleted
from CPT in 1995, we excluded them from the ASC list: 31248, 31249,
31251, 31266, 31269, 31271, 31280, 31281, 31282, 31283, 31284, 31286.
CPT code 64421 is one of the codes that we are proposing in this notice
to delete from the ASC list (section III.D). For all but four of the
remaining codes, consistent with commenters' recommendations, the
payment rates that we propose in this notice using the revised
ratesetting methodology and 1994 survey data are higher than what we
proposed in the January 26, 1995 Federal Register. However, the same
revised ratesetting methodology and 1994 survey data result in payment
rates for CPT codes 19125 (APC 197), 19126 (APC 197), 43259 (APC 449),
and 66172 (APC 652) that are lower than the rates we proposed in the
January 26, 1995 Federal Register, which is at variance with
commenters' recommendations. We welcome comments on the rebased rates
that are proposed as payments for all of these codes, but request that
arguments for changes in payment rates be supported by data regarding
direct costs (supplies, equipment, labor, time) relative to other
procedures in the same APC group that would justify a change in either
the APC group assignment or the payment rate determined for the code.
III. Provisions of the Proposed Regulations
Many of the changes that we are proposing to make in 42 CFR part
416, Ambulatory Surgical Services, were stimulated by our commitment to
assist in the President and Vice President's continuing drive to
reinvent government and government regulations and to reform the
Federal government's regulatory process. The reorganization of 42 CFR
part 416 represents an effort to balance a reduction in regulatory
requirements with adequate assurances that the ambulatory surgical
services that we are purchasing for Medicare beneficiaries are of the
highest quality and consistent with our commitment to work in
partnership with the rest of the health care community to institute
better, more common sense ways of operating that are in the best
interests of Medicare beneficiaries. An outline of the reorganization
that we propose to make to part 416 in this notice follows:
----------------------------------------------------------------------------------------------------------------
Current organization Citation Proposed organization Citation
----------------------------------------------------------------------------------------------------------------
Subpart A--General Provisions Subpart A--Definitions
and Definitions: and General Provisions
and Requirements:
Basis and Scope............ 416.1........................ Basis and Scope...... 416.1
Definitions................ 416.2........................ Definitions.......... 416.2
Subpart B--General Conditions
and Requirements:
Basic requirements......... 416.25....................... Basic requirements..... 416.3
Qualifying for an agreement 416.26
Deemed Compliance...... 416.26(a).................... Currently addressed in 42 CFR 488
42 CFR 488.
Survey of ASCs......... 416.26(b).................... Currently addressed in 42 CFR 488
42 CFR 488.
Acceptance of the ASC.. 416.26(c).................... Replaced by 416.3(h) 416.3(h), (i)
and (i).
Filing of agreement.... 416.26(d).................... Replaced by 416.3(h) 416.3(h), (i)
and (i).
Acceptance; Appeal 416.26(e)-(f)................ Replaced by 416.3 (h) 416.3(h), (i)
Rights. and (i).
Terms of agreement with 416.30(a)-(e)................ Moves to Basic 416.3
HCFA. requirements.
ASC operated by a hospital. 416.30(f).................... Moved to 416.2 & 416.30
``Definitions'' and
``Basis for payment''.
Additional provisions...... 416.30(g).................... Deleted................ N.A.
Termination of agreement... 416.35....................... Termination of 416.4
participation,
including billing
privileges.
Subpart C--Specific Conditions ........................... Subpart D--Specific
for Coverage: Conditions of
Coverage:
Compliance with State 416.40....................... Basic Requirements... 416.3
licensure law.
Conditions for Coverage.... 416.41-416.49................ Proposed Subpart D... 416.41-416.49
Subpart D--Scope of Benefits: Subpart B--Scope of
Benefits:
General rules.............. 416.60....................... General rules........ 416.20
Scope of facility services. 416.61....................... Scope of ASC Services 416.21
Covered surgical procedures 416.65....................... ASC List............. 416.22
Performance of listed 416.75....................... Performance of 416.23
surgical procedures on an procedures on the ASC
inpatient hospital basis. list in a hospital
inpatient setting.
Subpart E--Payment for Facility Subpart C--Payment for
Services: Facility Services:
Basis for payment.......... 416.120...................... Basis for payment.... 416.30
ASC facility services 416.125...................... ASC payment rates.... 416.31
payment rate.
Publication of revised 416.130...................... Publication of 416.32
payment methodologies. revised payment
rates.
Surveys.................... 416.140...................... Surveys.............. 416.33
Beneficiary appeals........ 416.150...................... Beneficiary appeals.. 416.34
----------------------------------------------------------------------------------------------------------------
A. Basis and Scope (Proposed Sec. 416.1)
Most of the changes in this section are of a technical nature. In
Sec. 416.1(a)(1) we propose to revise the description of the ASC
benefit to make it more consistent with section 1832(a)(2)(F)(i) of the
Act. We further propose to add the statutory basis for the conditions
for coverage of ASCs as new Sec. 416.1(a)(2). And, we have deleted the
reference to ``a hospital outpatient department'' in new paragraph
Sec. 416.1(a)(3) because the content of part 416 of the Code of Federal
Regulations pertains exclusively to ASCs under the benefit provided in
section 1832(a)(2)(F)(i) of the Act. The
[[Page 32295]]
current Sec. 416.1(a)(3) would become new Sec. 416.1(a)(4).
In Sec. 416.1(b), which defines the scope of the regulation, we
propose to reorder paragraphs (1), (2), and (3) to parallel the
reorganization of 42 CFR part 416. We are reorganizing the regulations
to make them simpler, more understandable, less prescriptive, less
process-oriented, and more focussed on patient-centered outcomes.
Section 416.1(b)(1) applies to renamed subpart B, which describes the
scope of the ASC benefit, including the scope of ASC services and the
criteria that HCFA uses to determine those procedures for which
Medicare pays an ASC facility fee. Section 416.1(b)(2) applies to new
subpart C, which sets forth the manner in which Medicare determines and
makes payments for ASC services. Section 416.1(b)(3) refers to new
subpart D, to which we propose to move the conditions for coverage of a
Medicare approved ASC. Revisions to the conditions for coverage that an
ASC must meet in order to be certified for participation in Medicare
are the subject of a separate notice of proposed rulemaking currently
under development entitled ``Conditions for Coverage of Ambulatory
Surgical Centers'' (HCFA-1887-P). In the reorganized part 416, there is
no subpart E.
B. Definitions (Sec. 416.2)
We propose to update and clarify the definition of several basic
terms as they are used in 42 CFR part 416. Rather than being generic,
these definitions are specific to Medicare approved ASCs and the
implementation of the Medicare ASC benefit.
When section 934 of the Omnibus Reconciliation Act of 1980 added to
the benefits available under Part B of Medicare facility services
associated with certain surgical procedures provided in an ASC, the Act
did not define an ASC other than to imply that it was a facility that
is different from a hospital outpatient department, a physician's
office, and a rural primary care hospital. Therefore, in order to
implement the benefit, we must identify ASCs in order to be able to
distinguish them from other types of facilities. Otherwise, we would
not know if Medicare payments for ASC facility services under section
1832(a)(2)(F) were being made properly, in accordance with the statute
and with Medicare rules and regulations.
The definition of an ASC that is currently found at Sec. 416.2
became effective following publication on August 5, 1982 of the final
rule (47 FR 34082) that implemented the ASC benefit initially. Since
1982, ASCs as a type of facility have evolved significantly. In 1982
there were approximately 40 ASCs in existence. By the end of 1997, the
number of Medicare-approved ASCs exceeded 2400. We have found the 1982
definition of an ASC to be so broad and general that it is increasingly
difficult for us to make a definitive determination whether a facility
is an ASC for the purposes of Medicare approval. This is especially
true in the health care delivery system of the late 1990s, which is in
a state of dynamic and constant reformation. Therefore, we have revised
the definition of an ASC in Sec. 416.2 to be more specific in
distinguishing ASCs from other categories of facilities.
The first important criterion in distinguishing ASCs is to
recognize that, for Medicare purposes, an ASC is a supplier of health
care services. It is not a Medicare provider, as that term is defined
by statute and regulation.
A second criterion critical to understanding how HCFA defines ASCs
for purposes of entitlement to Medicare payment is that an ASC is an
entity that is separate and must be distinguishable from any other
entity or type of facility. We define ``separate'' as meaning totally
separate with respect to licensure, accreditation, governance,
professional supervision, administrative functions, clinical services,
recordkeeping, financial and accounting systems, and national
identifier or supplier number. The word ``separate'' does not
necessarily refer to the actual physical space the ASC occupies. An ASC
may be physically located within the space of another entity and still
be considered separate for Medicare payment purposes within this
definition.
If a facility that considers itself an ``ASC'' were to bill
Medicare for services using a hospital's identification number,
Medicare could not pay the facility under the benefit established in
the Act at section 1832(a)(2)(F). Though a facility may be called an
``ASC'' and may be located in a separate building or at a site removed
from a hospital's campus, Medicare does not consider the facility to be
an ASC unless the facility has its own license and accreditation,
governing board, system for professional supervision, clinical
services, and administrative functions, and its own Medicare billing
and identification number.
Similarly, Medicare cannot pay an ASC facility fee for procedures
performed in a suite, treatment room, office or clinic unless the site
has been approved by Medicare as an ASC in accordance with the
regulations.
We recognize that this requirement that an ASC be a separate entity
may be onerous to ASCs that are owned by a large health system seeking
to share services or to consolidate with other member entities. The
statutory requirement for setting ASC payment rates is at the heart of
our requirement that an ASC be an entity or facility that is separate
from any other entity or facility and that its administrative, fiscal,
clinical, and patient care services be clearly distinguishable from
those of any other entity or facility in every respect. In order for us
to determine by survey what costs ASCs incur to furnish facility
services in connection with performing a specific surgical procedure,
we at HCFA and the ASC administrators must be able to distinguish costs
and charges as they emanate strictly from the ASC. If costs incurred by
the ASC are commingled with another entity's activities, it will be
difficult for the ASC to isolate the portion of costs properly
attributable only to the ASC, and therefore difficult for us to be
assured that the data we are using to determine payment rates are truly
reflective of ASC costs alone, and not the costs or services of another
entity, such as other hospital outpatient services or the functioning
of a clinic or physician's office.
We have added a definition of ``hospital operated ASC'' to
Sec. 416.2 both to clarify what we mean by ``hospital operated ASC''
and to distinguish a ``hospital operated ASC'' from a hospital
outpatient department that furnishes surgical services.
In order to be considered a Medicare approved ASC, the entity's
function and purpose must be to supply facility services, as opposed to
physician or practitioner services, in connection with performing
certain surgical procedures. We define such services as ASC services,
and under the benefit established at section 1832(a)(2)(F) of the Act,
Medicare pays a prospectively determined fee for ASC services. Section
416.21 of the revised regulation proposed in this notice lists the
types of services that fall within the scope of ASC services. They
include but are not limited to nursing and technician services,
supplies, drugs and biologicals, surgical dressings, housekeeping
services, and use of the facility. We emphasize that the professional
services of physicians and other practitioners do not fall within the
scope of ASC facility services, and the ASC facility fee does not
include payment for the professional services of physicians and other
practitioners.
Medicare pays an ASC facility fee only for procedures on the ASC
list.
[[Page 32296]]
HCFA determines which procedures will constitute the ASC list on the
basis of certain criteria related to the safety, appropriateness, and
effectiveness of performing the procedure in an ASC setting. The
criteria that HCFA used as the standard for determining a procedure's
suitability for the ASC list in this notice are proposed in
Sec. 416.22. The procedures for which a Medicare participating ASC
furnishes services and for which Medicare makes payment of an ASC
facility fee are of a nature that does not require Medicare patients to
be admitted to a hospital as inpatients either to have the procedure
performed or to recover from the procedure. By ``hospital,'' we mean an
institution that meets the definition of ``hospital'' in section
1861(e) of the Act.
Within the framework of the definition of an ASC that we are
proposing in Sec. 416.2, Medicare would not consider an entity devoted
exclusively to furnishing services such as clinical laboratory
services, chemotherapy, radiation treatment, cardiac catheterization,
dialysis services, magnetic resonance imaging, or other diagnostic
tests, to be an ASC because these are not services that are necessary
to enable surgical procedures to be performed. However, an entity that
meets the conditions for coverage as an ASC could also be recognized
and paid by Medicare as a non-physician supplier of radiology services,
as an independent diagnostic testing facility (IDTF), or as a supplier
of durable medical equipment, prosthetics, and orthotics as long as it
supplied these services in accordance with the statute and Medicare
payment rules and regulations.
C. Basic Requirements (Proposed Sec. 416.3 and Sec. 416.4)
We propose to renumber Sec. 416.25 as Sec. 416.3. Paragraph (a)
does not change. We have moved current Sec. 416.40 to become new
paragraph (b) in Sec. 416.3, to reinforce the fundamental importance of
State licensure as a basic requirement for an ASC wanting to qualify
for participation and billing privileges in the Medicare program.
We have also moved Secs. 416.30(a) through 416.30(e) to proposed
Sec. 416.3, Basic Requirements. By incorporating these provisions
directly into the regulations at Sec. 416.3, we emphasize their
significance as binding requirements with which ASCs wishing to
participate and have billing privileges in the Medicare program must
agree to comply.
Section 416.3(h) replaces current Sec. 416.26(a) and Sec. 416.26(b)
by cross-referencing part 488, ``Survey, Certification, and Enforcement
Procedures'' and establishes compliance with the regulations in that
part that pertain to suppliers generally and to ASCs in particular as a
basic requirement for ASCs to participate in Medicare. In order to make
this link, we propose to add ASCs to the definition of ``supplier''
found in Sec. 488.1.
Proposed Sec. 416.3(i) replaces Sec. 416.25(b). An ASC can satisfy
the requirement that it have an agreement to abide by the Medicare laws
and regulations by possessing a Form HCFA-855, ``Medicare Health Care
Provider/Supplier Enrollment Application'' that has been validated by
HCFA.
We are proposing one technical change in Sec. 416.3(g). This change
requires ASCs to accept the Medicare-approved amount as full payment
for all items and services covered under Part B of Medicare that it
furnishes to Medicare beneficiaries. ASCs must agree to accept
assignment for all facility services furnished in connection with
procedures on the ASC list. We are proposing to extend the ASC's
assignment acceptance to include all items and services that the ASC
supplies to a beneficiary, whether those items and services are
considered ASC facility services as listed in Sec. 416.21(a) or are
items and services for which payment may be made under other provisions
of Medicare, Part B, such as those listed in Sec. 416.21(b).
Proposed Sec. 416.4 basically restates the provisions of
Sec. 416.35 yet revises the language to reflect our proposed
substitution of the ``Medicare Health Care Provider/Supplier Enrollment
Application'' (Form HCFA 855) for the ``Health Insurance Benefits
Agreement--(Agreement with Ambulatory Surgical Center Pursuant to
Section 1832(a)(2)(F) of the Social Security Act)'' (Form HCFA 370).
Since May 1996, HCFA has required all ASCs with an interest in
participating and obtaining billing privileges in Medicare to complete
Form HCFA 855. The certification statement that is a part of the Form
HCFA 855 includes a provision that the applicant is familiar with and
agrees to abide by the Medicare laws and regulations that apply to its
provider/supplier type. In 42 CFR part 416, we have expanded the list
of basic requirements for ASCs to include all of the provisions that
are currently listed in the Form HCFA 370. We have also added to
Sec. 416.3 the provision that an ASC, in order to participate and to
have billing privileges in Medicare, must have in effect a Form HCFA
855 that has been validated by HCFA. Given these changes, we propose to
discontinue use of Form HCFA-370 for ASCs seeking to participate and to
obtain billing privileges in Medicare beginning on the effective date
of the final rule that implements the proposals contained in this
notice. For ASCs whose agreement with HCFA consists of a Form HCFA 370
that has been duly executed in accordance with the provisions currently
found in Secs. 416.26 and 416.30, the Form HCFA 370 and the ASC's
agreement with HCFA remain in effect until such time as the ASC
completes a Form HCFA-855 that is validated by HCFA. We invite comments
on our proposal to retire the Form HCFA 370 and replace it with a
validated Form HCFA 855.
Revisions to the ASC conditions for coverage are the subject of a
separate notice entitled ``Conditions for Coverage of Ambulatory
Surgical Centers'' (HCFA-1887-P) that is currently being developed.
Pending publication of that notice of proposed rulemaking, we propose
to move the conditions for coverage found currently in sections
Sec. 416.41 through Sec. 416.49 to subpart D, which we propose to
rename ``Specific Conditions for Coverage.''
D. Additions to/Deletions From the ASC List
Section 934 of the Omnibus Reconciliation Act of 1980 amended
sections 1832(a)(2) and 1833 of the Act to authorize the Secretary to
specify, in consultation with appropriate medical organizations,
surgical procedures that, although appropriately performed in an
inpatient hospital setting, can also be performed safely on an
ambulatory basis in an ASC, a hospital outpatient department, or a
rural primary care hospital. The report accompanying the legislation
explained that the Congress intended procedures currently performed on
an ambulatory basis in a physician's office, which do not generally
require the more elaborate facilities of an ASC, not be included in the
list of covered procedures (H.R. Rep. No. 1167, 96th Cong. 2d Sess.
390, reprinted in the 1980 U.S.C.C.A.N 5526, 5753). In a final rule
published August 5, 1982 in the Federal Register (47 FR 34082), we
established regulations which included criteria for specifying which
surgical procedures were to be included for purposes of implementing
the ASC facility benefit. These criteria are found at 42 CFR 416.65,
and include both general and specific standards. The general standards
in Sec. 416.65(a) define ASC procedures as--
Commonly performed on an inpatient basis but may be safely
performed in an ASC;
Not of a type that are commonly performed or that may be
safely performed in physicians' offices;
[[Page 32297]]
Requiring a dedicated operating room or suite and
generally requiring a post-operative recovery room or short-term (not
overnight) convalescent room; and,
Not otherwise excluded from Medicare coverage.
The specific standards in Sec. 416.65(b) limit ASC procedures to
those that do not generally exceed 90 minutes operating time, a total
of 4 hours recovery or convalescent time, and, if anesthesia is
required, the anesthesia must be local or regional anesthesia or
general anesthesia of not more than 90 minutes duration. Section
416.65(c) excludes from the ASC list procedures that generally result
in extensive blood loss, that require major or prolonged invasion of
body cavities, that directly involve major blood vessels, or that are
generally emergency or life-threatening in nature.
In April 1987, we adopted numerical criteria as a tool for
identifying procedures that were commonly performed either in a
hospital inpatient setting or in a physician's office. Collectively,
commenters responding to a notice published in the Federal Register on
February 16, 1984 (49 FR 6023) had recommended that virtually every
surgical CPT code be included on the ASC list. Consulting with other
specialist physicians and medical organizations as appropriate, our
medical staff reviewed the recommended additions to the list to
determine which code or series of codes were appropriately performed on
an ambulatory basis within the framework of the regulatory criteria in
Sec. 416.65. However, when we arrayed the proposed procedures by the
site where they were most frequently performed according to our claims
payment data files (1984 Part B Medicare Data (BMAD)), we found that
many codes were not commonly performed on an inpatient basis or were
performed in a physician's office a majority of the time, contrary to
our regulations. Therefore, we decided that if a procedure was
performed on an inpatient basis 20 percent of the time or less, or in a
physician's office 50 percent of the time or more, it should be
excluded from the ASC list. (See Federal Register of April 21, 1987,
(52 FR 13176).) At the time, we believed that these utilization
thresholds best reflected the legislative objectives of moving
procedures from the more expensive hospital inpatient setting to the
less expensive ASC setting without encouraging the migration of
procedures from the less expensive physician's office setting to the
ASC. We applied these place of service tests not only to codes proposed
for addition to the ASC list, but also to the codes that were currently
on the list, to delete codes that did not meet the 20/50 site of
service thresholds.
The trend towards performing surgery on an ambulatory or outpatient
basis grew steadily, and by 1995, we discovered that a number of
procedures that were on the ASC list at the time fell short of the 20/
50 threshold even though the procedures were obviously appropriate to
the ASC setting. The most notable of these was cataract extraction with
intraocular lens insertion, very few cases of which were being
performed on an inpatient basis by the early 1990's. We were also
excluding from the ASC list certain newer procedures, such as CPT code
66825, Repositioning of intraocular lens prosthesis, requiring an
incision (separate procedure), that from their inception were almost
never performed on a hospital inpatient basis but that were certainly
appropriate for the ASC setting. And, strict adherence to the same 20/
50 thresholds both to add and remove procedures did not provide
latitude for minor fluctuations in utilization settings or errors that
could occur in the site-of-service data drawn from the National Claims
History File that we were using, replacing BMAD data, for analysis. In
an effort to avoid these anomalies but still retain a relatively
objective standard for determining which procedures should comprise the
ASC list, we adopted in the last revision of the list, which was
published in the Federal Register on January 26, 1995 (60 FR 5185), a
modified standard for deleting procedures already on the ASC list. We
deleted from the list only those procedures whose combined inpatient,
hospital outpatient, and ASC site-of-service volume was less than 46
percent of the procedure's total volume, and that were performed 50
percent of the time or more in a physician's office or 10 percent of
the time or less in an inpatient hospital setting. We retained the 20/
50 standard to determine which procedures should be added to the ASC
list.
The applicability and appropriateness of the standards HCFA uses to
specify procedures that constitute the ASC list were the subject of
lengthy discussion at the July 1996 ASC Town Meeting. The comments of
those attending the Town Meeting, as well as written comments received
following the meeting, repeatedly characterized the 20/50 numerical
thresholds as simplistic, arbitrary, artificial, and outdated and urged
us to ``modernize'' the standards by which we select procedures for the
ASC list. Similarly, most commenters characterized the 90 minute limit
on surgery and the four hour limit on recovery as obsolete, outdated,
arbitrary and without medical significance and blind to the numerous
technical advances in surgery and the development of short-acting
anesthesia which have radically altered surgical practices since the
early 1980's when those criteria were established. Commenters urged us
to supplement or preferably replace quantitative thresholds with
qualitative considerations that recognize the capabilities of modern
ASCs. Some commenters took the position that the list be abandoned
altogether; others recommended leaving the choice of where a surgical
procedure is to be performed to those best able to determine which
setting is most appropriate, namely, the physician, in consultation
with the patient, and the anesthesiologist. Commenters argued that
eliminating the list would allow Medicare beneficiaries who are
medically unstable and for whom an office would not be a safe setting
for even very simple surgery to have access to an ASC as an alternative
to the hospital. Conversely, an ASC could be an appropriate alternative
to the hospital for more complex procedures for beneficiaries who are
healthy. At least one commenter suggested that the ASC list include any
procedure which we would recognize as appropriate in a hospital
outpatient setting.
The statute prevents us from eliminating the ASC list. However, in
response to discussions at the Town Meeting, written comments submitted
after the Town Meeting, and the growing consensus expressed by the ASC
community in comments we received following publication in the Federal
Register of proposed notices on December 7, 1990 (55 FR 50590) and
December 14, 1993 (58 FR 65367), we propose to modify our approach to
selecting the procedures for which Medicare pays an ASC facility fee.
1. Revision of 42 CFR 416.65
The intent of the revision to Sec. 416.65 is to render the
regulation less prescriptive in defining the kinds of procedures that
are appropriate for the ASC list while allowing it to still remain
within the constraints imposed by the statute. The changes to 42 CFR
416.65 that we are proposing are based on certain basic premises.
First, we continue to focus on procedures that fall within the surgical
range (10000 through 69999) of the HCFA Common Procedure Coding System
(HCPCS) or the American Medical Association (AMA) Physicians' Current
Procedural
[[Page 32298]]
Terminology (CPT). (The AMA's CPT terminology and coding is included,
with permission, in the HCPCS system. For surgical procedures, the
codes are the same.) Second, we limit ASC procedures to those surgical
procedures that require the kind of supplies, equipment, physical
environment, staffing, and health and safety protocols that are typical
of a hospital setting and required of an ASC, including a dedicated
operating room or suite or procedure room that is equipped, staffed,
and maintained solely for the performance of surgical procedures, and a
designated recovery room or area that is equipped, staffed, and
maintained solely for the use of post-operative patients. However,
while necessitating the resources and set-up typical of a hospital
surgical department, ASC procedures must not be those for which
patients are expected to be admitted to the hospital on an inpatient
basis due to the severity or risks inherent in the procedure or to the
need for inpatient post-operative care before the patient can be safely
discharged to recuperate at home. Finally, the ASC list must not
include procedures that are excluded from Medicare coverage by statute.
We propose to remove the references to ``commonly performed'' found
in Sec. 416.65(a) and the time limits on operating, anesthesia, and
recovery time that are currently spelled out in Sec. 416.65(b)(1) and
(2). With the ambulatory payment classification (APC) system, we can
rely on clinical homogeneity at least as much as site of service
patterns in determining which procedures are appropriate for the ASC
list. Precisely because the APC groups are clinically coherent, as a
general rule we did not split up APC groups by including some
procedures from an APC group on the ASC list while excluding from the
list other procedures in the same APC group. We either regarded all of
the procedures in an APC as appropriate for the ASC list or none of the
procedures in an APC as appropriate for the ASC list.
We propose to retain the specific standards found at
Sec. 416.65(b)(3), and we shall continue to exclude from the ASC list
procedures that generally result in extensive blood loss, require major
or prolonged invasion of body cavities, directly involve major blood
vessels, or are generally emergent or life-threatening in nature.
Because of the risks inherent in procedures that involve these
characteristics, any of which suggests that the well-being of the
patient could be in jeopardy, we are excluding such procedures from the
ASC list because performing them in an ambulatory setting violates the
statutory safety standard of the Act (1833(i)(1)(A)). One of our
reasons for revising 42 CFR Part 416 is to highlight that procedures
with any of the characteristics listed in proposed Sec. 416.22(b) are,
by their nature, unsafe and inappropriate in an ASC setting and are
therefore not reasonable and not medically necessary when performed in
an ASC setting. Procedures with these characteristics are excluded from
the ASC list and payment of a Medicare ASC facility fee for services
furnished in connection with such procedures is not allowed.
Conversely, we discuss below in greater detail, procedures that do
not satisfy the criteria in proposed Secs. 416.22(a)(1), 416.22(a)(2),
or 416.22(a)(3) are excluded from the ASC list because such procedures
do not require the generally more elaborate and costly services and
resources that characterize Medicare approved ASCs.
We solicit comments on the reasonableness and validity of the
criteria that we are proposing as the basis for excluding procedures
from the ASC list. We solicit comments on the reasonableness and
validity of the changes to Sec. 416.65 of the regulations, which we
propose to incorporate in proposed Sec. 416.22. We also solicit
comments regarding the appropriateness of all the codes on the ASC list
in Addendum B. Specifically, we welcome comments regarding any
procedure in Addendum B that should be excluded from the ASC list
because it is not safe outside a hospital inpatient setting or any
procedure in Addendum B that can be safely and effectively performed in
an office setting without the more elaborate services typical of an
ASC. Comments should be framed within the context of the revised
criteria proposed in proposed Sec. 416.22.
2. Eliminate Numeric Thresholds
Although the 20/50 numeric thresholds for adding procedures to the
ASC list and the 46/10/50 threshold for keeping procedures on the list
were not a part of the regulations, they have been the basis of our
policy for determining whether a procedure belonged on the ASC list.
However, beginning with this notice, we propose to discontinue using
site-of-service as the principal determinant of which procedures to add
to or delete from the ASC list. Instead, we regard site-of-service data
as but one of several factors, such as the criteria proposed in
proposed Sec. 416.22, to be taken into account in determining whether
or not a procedure should be on the ASC list.
By adhering to the principle of keeping APC groups intact, we
included on the ASC list or excluded from the list all of the
procedures in a clinically homogeneous APC, notwithstanding anomalous
site of service data for individual procedures within the groups.
3. Formation of Advisory Group
A number of commenters, both during and subsequent to the ASC Town
Meeting, urged the creation of an advisory committee or council to work
with HCFA on keeping the ASC list up-to-date. One commenter suggested
adding a review of the ASC list to the annual CPT/Relative Value Update
Committee (RUC) process. We are deferring a decision on the creation of
an advisory committee pending implementation of the provisions that are
proposed in this notice and until we can investigate further the
possibility of utilizing an existing group, such as the RUC or the
Medicare Carriers Medical Directors Workgroup, whose members might give
us timely advice regarding procedures that are appropriate in an ASC
setting. In the meantime, we propose to continue relying on
consultations with professional and medical societies and trade
associations; on correspondence and comments from these groups, from
individual members of the ASC community, and from the public generally;
as well as on the judgement of our medical advisors to determine the
appropriateness of procedures for the ASC list both within the context
of the criteria we have proposed in renumbered Sec. 416.22 and the
composition of APC groups.
4. Proposed Additions to the ASC List
We propose to add 422 CPT codes to the ASC list, consistent with
the standards we propose in the new Sec. 416.22. In applying the
principles proposed in Sec. 416.22 for the purpose of specifying
additions to the ASC list, we recognized that an ASC might be
appropriate for some procedures shifting from an inpatient to an
outpatient setting for the patient who is generally healthy and is
capable, but that an ASC would be a questionable setting for those
procedures among the greater Medicare population whose health is more
likely to be compromised by age or disability. Overall, based on the
advice of our medical advisors and on the written comments we have
received from ASC administrators, physicians, professional societies,
and trade associations since the January 26, 1995 update of ASC
procedures, we have determined that the procedure codes we are
proposing to add to the ASC list could be safely performed in an ASC on
the general Medicare
[[Page 32299]]
population in at least a significant number of cases.
One commenter expressed apprehension that expanding the ASC list
could result in edicts from HCFA or other purchasers of health care
that once added to the ASC list, a procedure must be performed in an
ASC, without taking into account the individual patient's condition or
the suitability of an ASC for a particular procedure. We recognize that
for individuals with certain medical conditions, no procedure on the
ASC list may be safely performed except on an inpatient basis.
Therefore, we emphasize that the choice of operating site remains
ultimately a matter for the professional judgement of the patient's
physician, in consultation with the patient and, often, the
anesthesiologist, irrespective of whether a procedure is on the ASC
list. Section 416.23 in the proposed regulations reinforces this point.
All of the proposed additions to the ASC list are designated in
Addendum A, along with the ambulatory payment classification (APC)
group proposed for each. We invite and encourage comments on the
appropriateness of these additions to the ASC list in light of the
criteria in Sec. 416.22.
a. Additions Suggested by Commenters
Of the 422 additions to the ASC list that we are proposing, the
following 52 codes were specifically suggested by the ASC community in
correspondence and comments that we have received since the publication
of the last Federal Register update of the list on January 26, 1995 (60
FR 5185). We invite comments on the appropriateness for the ASC list of
the procedures identified by these CPT codes:
15822............ 43244 56353 67110
15823............ 43249 56355 67145
15824............ 43761 57288 67208
15825............ 45330 62287 67210
15826............ 49568 62298 67228
26608............ 50080 63244 67900
29848............ 50081 65436 68810
33222............ 51715 65855 68811
35875............ 52601 66761 68815
36862............ 52647 66762 68830
37731............ 52648 66825
40720............ 55859 67028
42415............ 57288 67101
43205............ 62287 67105
b. Proposed Additions Resulting From Changes to CPT
The CPT is updated annually, and occasionally new codes added to
CPT affect the ASC list. The following procedures were added to the ASC
list because they were added to the CPT, usually to replace a deleted
code. We are requesting comments on the appropriateness of adding to
the ASC list the codes new to CPT in 1995 that are indicated below,
which we were unable to include in the Federal Register notice
published on January 26, 1995 (60 FR 5185). We are also requesting
comments on the appropriateness of adding to the ASC list codes new to
CPT in 1996, 1997, and 1998, which are indicated below.
New CPT codes added effective January 1, 1995: 31254; 31255; 31256;
31267; 31276; 57522
New CPT codes added effective January 1, 1996: 19290; 19291; 22103;
22328; 43249; 56301; 56302; 56343; 56344; 62350; 62351; 62360; 62361;
62362; 62365; 62367; 62368
New CPT codes effective January 1, 1997: 15756; 15757; 15758; 26551;
26553; 26554; 68810; 68811; 68815
New 1998 CPT codes: We are proposing to add to the ASC list the
following HCPCS codes that were new in 1998: 29860; 29861; 29863;
29891; 29892; 29893; 52282; 53850; 53852; 56318; 56318; 56346; 59871;
67027; G0104; G0105
c. Proposed Additions Resulting From Ambulatory Payment Classification
(APC) Groupings
We have determined that the remaining codes that we are proposing
to add to the ASC list are consistent with the criteria in Sec. 416.22,
and we believe that they would be safe, appropriate, and effective if
performed in an ASC setting.
5. Proposed Deletions and Exclusions From the ASC List
a. Procedures Excluded for Reasons of Safety, Reasonableness and
Medical Necessity
There are a total of 2,361 CPT codes in the surgical range that are
not on the revised ASC list proposed in this notice. Of these 2,361
procedures, 203 are codes that we are proposing to delete from the
current ASC list because they are not safe or otherwise reasonable and
necessary in an ASC setting. The proposed deletions are flagged in
Addendum A.
b. Unlisted Procedures
In most surgical categories, CPT includes codes for unlisted
procedures. Because codes for ``unlisted'' procedures, by definition,
contradict the statutory mandate for an ASC list, and because there is
no way of knowing in advance whether a procedure for which there is no
appropriate description in CPT is consistent with our standards for the
ASC list, we are continuing our policy of excluding those codes from
the ASC list.
c. Exclusion of Office-Based Procedures
Some comments made during and after the ASC Town Meeting supported
expansion of the ASC list to allow Medicare payment of an ASC facility
fee for procedures that are ordinarily performed in an office setting
but that require the more extensive resources typical of an ASC to
accommodate the special health needs of a patient. We considered the
effect of expanding the ASC list to include procedures that are
ordinarily performed safely and appropriately in a physician's office
or a physician's clinic or treatment room. Our 1994 ASC survey did not
capture charge information on office-based procedures, but we had the
benefit of hospital outpatient claims data and practice expense data
compiled for the Medicare physician fee schedule (see the proposed rule
in the Federal Register published June 18, 1997, 62 FR 33158, entitled
``Revisions to Payment Policies Under the Physician Fee Schedule, Other
Part B Payment Policies and Establishment of the Clinical Psychologist
Fee Schedule for Calendar Year 1998''). We theorized that we would not
encourage office-based procedures to migrate to the ASC setting by
paying the ASC instead of the physician the amount allowed for in-
office practice expenses in connection with an office-based procedure
on the few occasions when a patient needed a more intensive level of
support because of individual health considerations. Relating payment
to the costs intrinsic to performing the procedure would also move
closer towards achieving a level playing field where payments are based
on the service, rather than on the site where the service is furnished.
In the final analysis, we have decided that we would not, at this
time, propose to add to the ASC list 340 HCPCS codes that describe
procedures that can be performed safely and effectively in a
physician's office, clinic or treatment room and for which the more
elaborate facility services of an ASC are not required. Further, we
propose to remove 63 codes that are currently on the ASC list which, we
have determined, fail to meet the criteria in Sec. 416.22(a), i.e.
these procedures do not require surgical facilities, they are not
services of the kind that are typically provided in a hospital
inpatient setting, or do they do not require a dedicated operating room
or room for post-operative recovery. Including procedures that are
office-based on the ASC list might be construed as running counter to
Congressional intent expressed in the conference report cited above.
Also, paying ASC facility fees of $5 or $10
[[Page 32300]]
appeared administratively frivolous. Finally, office-based procedures
are readily identifiable precisely because they do not satisfy the ASC-
appropriate standards that we are proposing in Sec. 416.22. Therefore,
we are continuing, at this time, our policy of not including office-
based procedures on the ASC list. However, we do not rule out the
possibility of a future change of policy on this point after we have
had an opportunity to evaluate the impact of incorporating resource-
based practice expense relative value units (PE RVUs) into the Medicare
Physician Fee Schedule and of implementing a prospective payment system
for hospital outpatient surgical services, each of which is scheduled
to occur in 1999.
We have given an ASC payment policy indicator ``5'' to the 403 CPT
codes that we consider to be office-based procedures to indicate that
no payment for expenses incurred to perform these office-based
procedures is allowed other than the Medicare payment to the physician
performing the procedure. An ASC payment policy indicator ``5''
precludes additional payment if these procedures are performed in an
ASC. Refer to section III.E. of this notice for a more detailed
discussion of the ASC payment policy indicators.
d. Suggested Additions Not Accepted
The following procedures have been suggested by the ASC community
for addition to the list since publication of the last Federal Register
update of the list on January 26, 1995 (60 FR 5185), but we propose to
exclude them from the ASC list for the reasons given.
19240--Mastectomy, modified radical. (This procedure can result in
extensive blood loss; admission to a hospital on an inpatient basis to
recover from the procedure is appropriate.)
21356 & 21366--Repair heel bone fracture; 31225-- Removal of upper
jaw; 33212 & 33213--Insertion or replacement of pacemaker pulse
generators; 37201-- Transcatheter therapy, infusion for thrombolysis;
41130-- Partial removal of tongue; 41153--Tongue, mouth, neck surgery;
51840 & 51841--Anterior vesicourethropexies; 51845--Abdomino-vaginal
vesical neck suspension; 54430--Revision of penis; 56308--Laparoscopy,
surgical and vaginal hysterectomy; 63030--Laminotomy (hemilaminectomy),
with decompression of nerve root(s). (These procedures require
admission to a hospital on an inpatient basis in order to have the
procedure performed or in order to recover from the procedure.)
33216, 33217, & 33218--Insertion/replacement of electrodes and
repair of pacemaker electrodes; 35475 & 35476--Transluminal balloon
angioplasties; 56340, 56341 & 56342--Laparoscopy, surgical
cholecystectomies. (These procedures directly involve major blood
vessels, and with respect to the Medicare population in particular, the
latter procedures would necessitate admission to a hospital on an
inpatient basis to perform or to recover from the procedure.) One
professional society takes the position that laparoscopic
cholecystectomy should only be performed in a setting that is equipped
and prepared to switch intra-operatively to an open procedure in the
event problems arise during the laparoscopic procedures.
e. Procedures Deleted Because of CPT Coding Changes
The CPT is updated annually, and occasionally, the deletions affect
the ASC list. The following is a list of procedures that were deleted
from the ASC list because they were deleted from the CPT.
Deleted effective April 1, 1995: 25005; 25317; 25318; 26527; 31245;
31246; 31247; 31248; 31249; 31251; 31261; 31262; 31264; 31266; 31269;
31271; 31280; 31281; 31282; 31283; 31284; 31286; 31659; 36840; 36845;
45180; 52650
Deleted effective March 31, 1996: 28236; 63750; 63780; 67109
Deleted effective April 1, 1997: 15755; 20960; 20971; 25330; 25331;
26522; 26557; 26558; 26559; 42880; 56360; 56361; 68825
None of the procedures deleted from CPT 1998 were on the ASC list.
f. Procedures Recommended by Commenter for Deletion
One correspondent suggested that we remove several codes from the
ASC list because they describe procedures that may not be safely and
effectively performed in the ASC setting. Our medical staff concurs
with the opinion of the correspondent, and the following codes are
among those we are proposing to exclude from the ASC list: 15756;
15757; 15758.
6. Comments on the ASC List
We propose to add 422 procedures to the ASC list and to delete 203
procedures from the ASC list, consistent with the standards discussed
previously in this notice. The net effect of these changes would expand
the ASC list from 2280 CPT codes to 2499 CPT codes.
We solicit comments on whether we have made appropriate
determinations regarding the following:
Procedures that are excluded from the ASC list because
they involve one or more of the criteria in proposed Sec. 416.22(b) and
are not, as a consequence, safely performed in an ASC. (These
procedures are listed in Addendum A with an ASC payment policy
indicator of ``3.'');
Procedures that are not on the ASC list because they do
not satisfy one or more of the criteria in proposed Sec. 416.22(a).
(These procedures are listed in Addendum A with an ASC payment policy
indicator of ``5.'');
Procedures that are prepared as the ASC list for which
Medicare should not be paying an ASC facility fee because the
procedures are not consistent with the criteria in Sec. 416.22. (The
proposed ASC list is presented as Addendum B.)
We also solicit comments on 203 codes that we are proposing to
delete from the current ASC list and the 422 codes that we are
proposing to add to the ASC list. (See Addendum A.) We ask that all
comments regarding the appropriateness of procedures for the ASC list
be framed within the context of the revised criteria proposed in re-
numbered Sec. 416.22.
E. Ratesetting Methodology
1. Current method
There are currently eight payment levels under the Medicare ASC
benefit. Based on its cost, each of the 2280 CPT codes on the ASC list
is paid one of eight prospectively determined payment rates.
Collectively, all of the codes that are paid a particular rate
constitute a payment group. (A ninth payment rate for extracorporeal
shock wave lithotripsy (ESWL) was established in a notice published
December 31, 1991 in the Federal Register (56 FR 67666). Medicare
stopped paying for ESWL as an ASC service beginning in March 1992 under
the provisions of a court stay, which is discussed in section III.H. of
this notice.) The method by which the current eight ASC payment levels
or rates were calculated is explained in the Federal Register that was
published on February 8, 1990 (55 FR 4526). The steps involved in the
1990 ratesetting methodology which based rates on ASC facility overhead
expenses and procedure-specific charges reported in the 1986 ASC Survey
are summarized as follows:
Adjust reported costs and charges on the basis of audit
findings, eliminate incorrectly reported survey data, and adjust costs
that exceed allowable limits;
[[Page 32301]]
Inflate per procedure charges across all facilities using
the consumer price index for all urban consumers (CPI-U);
Using the hospital prospective payment system wage index,
neutralize the effect of regional wage differences across all
facilities by deflating that portion of per-procedure charges
attributable on average to labor costs (34.45 percent);
Identify the median charge for each procedure (CPT code)
across all facilities, weighting individual procedure charges in each
facility by the total number of times the procedure was performed
multiplied by the facility's ratio of Medicare patients to total number
of patients;
Calculate the median Medicare cost-to-charge ratio for
audited facilities and adjust the weighted median charge for each
procedure (CPT code) by the cost-to-charge ratio (0.776) to calculate a
cost value;
Form groups at $75 intervals and set the payment rate for
each group at the weighted median cost of the procedures in the group;
Incorporate as part of the ASC facility fee for
intraocular lens (IOL) insertion procedures an allowance for the lens.
(Section 13533 of the Omnibus Budget Reconciliation Act of 1993 (OBRA
93) (Public Law 103-66), enacted on August 10, 1993, requires that the
payment for an IOL furnished by an ASC be equal to $150 for the period
beginning January 1, 1994 through December 31, 1998).
Both the current and proposed ASC ratesetting methodology consist
of four major components: (I) Determine a per-procedure cost for every
reported CPT code at the individual facility level; (II) Determine a
per-procedure cost for every reported CPT code across all facilities;
(III) Group procedures, and (IV) Determine a standard payment rate that
is generally a fair fee for all the procedures within each group. The
standard payment rate arrived at in the final step becomes the Medicare
ASC facility fee or payment rate.
In developing the payment rates proposed in this notice, we have
retained the same basic methodology that is explained in the final
notice published in the Federal Register on February 8, 1990 (52 FR
4526) and outlined above. We have introduced a few refinements that we
believe enable us to measure more precisely the costs incurred by ASCs
individually and collectively to perform procedures on the ASC list.
The most notable modification of the current ratesetting methodology
that we are proposing affects the third component of the ratesetting
process: We propose to adopt a different approach to grouping
procedures, using an ambulatory payment classification system (APCS),
instead of creating groups based on $75 cost increments. The following
steps explain how we arrived at the ASC payment rates that are proposed
in this notice.
2. Proposed Ratesetting Method
Determine a per-procedure cost for every reported CPT code at the
individual facility level:
a. Use 1994 Survey Data
Data on facility overhead expenses and procedure specific charges
that were collected in 1994 via the Medicare Ambulatory Surgical Center
Payment Rate Survey are the basis for the payment rates proposed in
this notice. Part I of the survey instrument, ``General Information and
Charge Schedules'' (Form HCFA-452A), was mailed in July 1992 to all
ASCs that were Medicare participating at that time (1,396) for the
purpose of gathering demographic data to serve as the frame for
selecting a representative sample of ASCs that would be asked to
complete a more comprehensive cost survey in 1994. One thousand one
hundred forty-three ASCs completed and returned Part I of the ASC
survey. In establishing the sample of facilities to complete Part II of
the ASC survey, we excluded facilities that had been in operation for
less than two years, facilities that performed fewer than 250
procedures during the 12-month survey period, and facilities whose most
recently completed fiscal year exceeded or was less than 12 months. The
remaining 832 ASCs were stratified into four categories based on
reported procedure volume: high, medium, and low procedure volume, and
eye specialty facilities. Eye specialty facilities were defined as any
facility where procedures in the CPT range between 65000 and 68900 (Eye
and Ocular Adnexa) comprised 50 percent or more of total surgical
volume. We used these strata because we found them most likely to
result in a sample of facilities that would be representative of the
universe of Medicare participating ASCs that completed Part I of the
survey in terms of type and volume of procedures typically performed
and costs incurred to furnish facility services in connection with
those procedures.
Available resources for data entry required us to limit the size of
the sample to approximately 300 facilities. In accordance with
generally recognized statistical conventions, 320 facilities were
randomly selected. In March 1994, we mailed the Medicare Ambulatory
Surgical Center Payment Rate Survey, Part II--Facility Overhead and
Procedure Specific Costs (Form HCFA-452B) to the survey sample.
Facilities were initially required to complete Form HCFA-452B by May
31, 1994, but because a large number of facilities experienced
difficulties in meeting the deadline, we complied with most requests to
extend the due date.
Part II of the survey gathered information from each ASC's most
recently completed 12-month fiscal year. Most facilities reported
calendar year 1993 data, with a few facilities reporting data from
other fiscal years. The survey yielded a data set of procedure-specific
information for 1516 of the nearly 2250 CPT codes that were on the ASC
list as of December 31, 1993, including the number of times each
procedure was performed on Medicare and on non-Medicare patients and
the charge billed on average to all patients, both Medicare and non-
Medicare, for each surgical CPT code. The survey also collected data on
operating room time for high volume procedures on the ASC list and
aggregate utilization and charges for procedures performed that were
not on the ASC list. In addition, the survey elicited facility overhead
costs for plant and property, equipment, supplies, contractual labor,
employee labor, owner's compensation, bad debt, and general
administrative costs. We asked ASCs to report the costs they incurred
to procure intraocular lenses and to purchase ``non-routine'' supplies,
e.g., any supply whose net unit cost exceeded $100. Information
regarding any relationship between the ASC and other organizations or
entities and the ASC's financial statement for the fiscal period
reported in the survey were also solicited. Part II of the ASC survey
included a section intended to capture procedure specific statistical
and resource cost data for 29 CPT codes, including time allocations,
staffing patterns and labor costs, supply costs, and medical equipment
costs.
b. Audit Representative Sample of Facilities
In accordance with the statutory requirement at section
1833(i)(2)(A)(i) that we set rates in such a way as to take into
account actual audited facility costs, and in order to validate the
accuracy and reasonableness of survey responses, we conducted a
nationwide audit of a sample of the ASCs that completed Part II of the
survey. One hundred ASCs, 25 from each sampling stratum (high
utilization, medium utilization, low utilization, and eye specialty),
were randomly selected for audit in accordance with standard
[[Page 32302]]
statistical sampling procedures. The nationwide audit was conducted
from November 1994 through January 1995 by Medicare fiscal
intermediaries. Although ASC claims are processed by Medicare carriers,
we believe intermediaries' familiarity and experience with Medicare
audits better equipped them to carry out this task. In addition, the
Office of Inspector General (OIG) conducted an audit of the home
offices of the two principal ASC chain organizations with facilities
included in the sample. We instructed the auditors to determine
reasonable facility costs in accordance with Medicare payment
principles.
Of the 320 facilities randomly selected to complete Part II of the
Medicare ASC survey, 16 were exempted from completing the survey
because of termination of Medicare participation or change in ownership
prior to receipt of the survey form; inability to identify and properly
allocate facility operating costs as a separate and distinct entity;
or, incomplete records due to facility damage. In addition, we excluded
nine other surveys from consideration in setting the rates proposed in
this notice for the following various reasons: The audits revealed four
facilities to have incorrectly reported their charge and utilization
information; one form could not be accounted for and the facility did
not have a copy to resubmit; two facilities reported data for less than
a 12 month period; and, two facilities were unable to capture charge
data from their record keeping systems in the manner requested.
c. Adjust Audited Surveys
We accepted the auditors' findings, which resulted in net
adjustments that reduced reported aggregate costs by 9 percent and
increased reported aggregate charges by 3 percent. The major cost
reductions occurred in the areas of general administrative expenses and
bad debts. We then made two additional adjustments to audited adjusted
wage and administrative cost data, as follows.
After an analysis of audited contractual labor expenses, employee
salaries and fringe benefits, and owner's compensation, we set a
maximum compensation limit for each staffing category to eliminate
unreasonable, and therefore unallowable, labor expenses from our
determination of facility costs. (Because payment for the professional
services of physicians and certified registered nurse anesthetists is
made under other provisions of Medicare, Part B, the cost of these
services is excluded from determining ASC facility costs.)
We calculated the hourly wages for administrative and
medical staff, taking into account fringe benefits and paid leave,
using audited 1994 survey data. In calculating hourly pay rates for
each staff category, we excluded data reported as owner's compensation
because the reported hourly rates of owner's compensation were
excessively high relative to the hourly pay for non-owners in the same
positions.
We selected the 75th percentile as the maximum allowable
hourly wage rate in each staffing category. We considered using higher
levels (80th or 90th percentile) as a cap, but we found the wage rates
above the 75th percentile to be too erratic. We found the wage rates at
the 75th percentile to be consistent and reasonable across all staff
categories.
We adjusted audited hourly wage rates that exceeded the
75th percentile of each staffing category to the maximum allowable
hourly wage rate and recalculated labor costs by multiplying the
adjusted hourly wage rate by the number of reported paid hours.
We believe that this approach is an improvement over the current
methodology because it adjusts unreasonable labor costs for all
categories of staffing, not just administrator and medical director
pay; it takes actual compensated hours into account rather than using
full-time equivalents (FTEs); and, we base the maximum allowable factor
on the 75th percentile of labor costs rather than on an average. Table
1 shows the limits applied to ASC labor expenses.
Table 1.--Hourly Wage Caps at 75th Percentile
----------------------------------------------------------------------------------------------------------------
Approx. 75th Approx.
Staff category Number of Median annual percentile annual
observations hourly wage salary hourly wage salary
----------------------------------------------------------------------------------------------------------------
Administrator................................. 66 35.39 $73,611 45.23 $94,078
Director/Manager.............................. 87 24.13 50,190 31.53 65,582
Supervisors................................... 52 21.41 44,533 26.07 54,226
Clerical...................................... 116 11.33 23,566 13.24 27,539
Nurse......................................... 117 19.53 40,622 23.60 49,088
Medical Technician............................ 92 13.31 27,685 16.60 34,528
Other Medical................................. 49 10.99 22,859 15.61 32,469
Other Non-medical............................. 83 11.94 24,865 15.65 32,552
----------------------------------------------------------------------------------------------------------------
In addition to making adjustments to unreasonable labor costs, we
excluded from our calculation of facility costs those expenses reported
in the 96 audited surveys for services which are not allowable under
Medicare Part B principles of payment. Examples of costs that were not
allowed include expenses for advertising, employee morale, gifts and
memorials, entertainment, and parties.
d. Standardize Unaudited Costs and Charges
For the 96 audited surveys, aggregated audit adjusted expenses,
including our adjustments for unreasonable labor and administrative
costs, were 12 percent lower than reported overhead costs. To
standardize the costs of the 199 unaudited facilities with those of the
96 audited facilities, we adjusted each category of overhead expense
(plant and property, equipment, supplies, IOL, contractual labor,
employee, owner's compensation, bad debts, and other expenses) in the
unaudited surveys by the percent of difference between reported and
audit adjusted data in each category of overhead expense for the 96
audited surveys. To standardize unaudited charges, we determined the
percent of difference between aggregated reported charges and
aggregated audited charges for the 96 audited surveys. We increased
per-procedure charges in each of the 199 unaudited surveys by the 3.07
percent of difference between reported and audit adjusted aggregate
charges.
[[Page 32303]]
e. Calculate Facility-Specific Cost-to-Charge Ratio
When we rebased ASC payment rates using 1986 data, we used a median
cost-to-charge ratio based on data from 90 audited surveys. At that
time, we considered using a facility-specific cost-to-charge ratio that
would have taken into account the differences in the relationship
between charges and cost that exist among facilities, but we elected
not to do so because the data from unaudited 1986 surveys were
seriously deficient. Because most of those earlier deficiencies have
been ameliorated in the 1994 survey database, we are revising our
ratesetting methodology to use a facility-specific cost-to-charge
ratio.
For each of the 295 surveys, we summed costs reported for
plant and property, equipment, supplies, contractual labor, salaries,
owner's compensation, bad debts, and miscellaneous other administrative
expenses to calculate total net adjusted costs. Note that we exclude
costs incurred by ASCs to furnish intraocular lenses (IOLs) from the
calculation of the facility specific cost-to-charge ratio. Otherwise,
the cost of an IOL would be spread across all procedures rather than
being allocated specifically to the four procedures that require IOLs.
We treat IOL costs separately, as we explain below.
For each of the 295 surveys, we calculated total net
adjusted procedure charges, including charges both for procedures on
the ASC list and for procedures performed at the ASC that were not on
the ASC list.
We divided each facility's total net adjusted costs by the
facility's total net adjusted charges to determine the ratio of the
facility's overall costs to its charges.
f. Convert Each Procedure Charge to a Procedure Cost
We multiplied the net adjusted charge reported for each CPT code by
the facility-specific cost-to-charge ratio in order to convert every
net adjusted per-procedure charge to a per-procedure cost value. We
believe that using a facility specific cost-to-charge ratio to arrive
at per-procedure costs is a distinct improvement over the current
methodology of using a median facility cost-to-charge ratio across all
facilities because the facility specific ratio takes into account
facility variations (single vs. multi-specialty, small vs. large,
single vs. multiple ownership, etc.) which may affect the relationship
between facility costs and charges.
g. Remove Intraocular Lens (IOL) Costs From Four Lens Insertion
Procedures
Section 4063(b) of the Omnibus Budget and Reconciliation Act of
1987 (OBRA 1987) (Public Law 100-203) amended section 1833(i)(2)(A) of
the Act to mandate that HCFA include payment for an IOL furnished by an
ASC for insertion during or subsequent to cataract surgery as part of
the ASC facility fee rather than paying for the prosthetic lens
separately, in addition to the facility fee. The payment amount must be
reasonable and related to the cost of acquiring the class of IOL
involved.
Section 4151(c)(3) of the Omnibus Budget Reconciliation Act of 1990
(OBRA 1990) (Public Law 101-508) froze the IOL payment amount at $200
for the period beginning November 5, 1990 and ending December 31, 1992,
and we continued the $200 IOL allowance from January 1, 1993 through
December 31, 1993. Therefore, Medicare payments to ASCs performing IOL
insertion procedures in calendar year 1993, the survey period for most
facilities completing the 1994 ASC survey, included a $200 allowance
for the IOL.
Section 13533 of the Omnibus Budget and Reconciliation Act of 1993
(OBRA 1993) (Public Law 103-66) mandated that, notwithstanding section
1833(i)(2)(A)(iii) of the Act, payment for an IOL furnished by an ASC
must be equal to $150 beginning January 1, 1994 through December 31,
1998.
Although the statute at section 1833(i)(2)(A)(iii) defines IOLs as
an ASC facility service and mandates that the ASC facility fee for lens
insertion procedures include payment for the IOL that is reasonable and
related to the cost of acquiring the class of lens involved, amendments
to the statute have mandated a specific dollar amount that Medicare is
to pay for the IOL, irrespective of the costs incurred by ASCs
generally to furnish the IOL.
Because IOLs are considered a facility service, ASCs do not bill
for them separately. Rather, the charge for an IOL is included within
the procedure charge for CPT codes 66983, 66984, 66985, and 66986.
After we converted procedure charges to procedure costs, we subtracted
the IOL cost from the procedure cost for each of the four lens
insertion codes before we neutralized per-procedure costs for regional
wage variations, adjusted procedure costs for inflation, and grouped
procedures in order to set payment rates. The amount that we subtracted
is a facility-specific mean IOL cost based on data collected in the
1994 survey regarding the quantity and models of IOLs purchased and the
total amount paid for each model net of all discounts, rebates, and
credits. If we did not subtract the IOL cost from the procedure cost of
the lens insertion procedures at this juncture, Medicare would be
recognizing IOL costs twice: once as part of the rebased payment rate
for the procedure, and again through the mandated IOL allowance that is
to be added onto the payment rates set for CPT codes 66983, 66984,
66985, and 66986. Note that the payment rate of $863 determined for CPT
codes 66983, 66984, 66985 and 66986 (APC 668) includes a $150 IOL
allowance.
Rates for lens insertion procedures beginning January 1, 1999. The
1994 survey data reveal that the current IOL allowance of $150 is
neither reasonable nor related to the cost of acquiring the lens, but
rather, represents an overpayment by Medicare and a lost opportunity
for beneficiary and program savings. The 1994 ASC survey data show that
ASCs were acquiring IOLs in 1993 for substantially less than the $200
that Medicare was paying ASCs for IOLs at that time. Based on survey
data reported by 215 ASCs (72 audited and 143 standardized by
increasing IOL costs by 1.93 percent) that purchased 197,289 lenses,
the weighted mean lens cost was $100, and the weighted median cost was
$97 (weighted by frequency). Of the 215 ASCs on which these findings
are based, 76 are eye specialty facilities. For eye specialty ASCs
alone, the weighted mean IOL cost was $82, and the weighted median IOL
cost was $70. Table 2 shows that even inflating 1993 IOL costs to 1998
dollars, ASCs can still acquire IOLs on average well below the $150
allowance mandated by Congress through December 31, 1998.
Table 2.--1994 ASC Survey: Intraocular Lens (IOL) Cost Inflated to 1998
Dollars
------------------------------------------------------------------------
CPI-U
CY 1993 inflation CY 1998
dollars factor dollars
------------------------------------------------------------------------
Mean Cost, weight by frequency... $100 1.14915 $115
Median Cost, weight by frequency. 97 1.14915 108
[[Page 32304]]
Medicare IOL allowance........... 200 NA 150
------------------------------------------------------------------------
(Based on 1994 ASC survey reported by 215 ASCs that purchased 197,289
lenses).
Prior to expiration of the $150 IOL allowance on December 31, 1998,
we shall propose a revised payment rate for the four lens insertion
procedures in APC 668 in order to be consistent with section
1833(i)(2)(A)(iii) of the statute, which states that lens insertion
procedures are to include an IOL allowance that is reasonable and
related to the cost of the lens involved. In rebasing the payment rates
for the four lens insertion procedures, we expect to follow the basic
ratesetting methodology proposed in this notice, with one difference:
We would neutralize the charge-converted per procedure cost determined
for CPT codes 66983, 66984, 66985, and 66986 to offset the effect of
regional wage variations, and then, we would add the facility-specific
mean IOL cost to the procedure cost for these codes. The resulting cost
for the four lens insertion codes would be adjusted for inflation, and
the payment rate for APC 668 would be recalculated. IOL costs would
then be subject to interim year annual adjustments for inflation
because they would be packaged within the facility fee for lens
insertion procedures. Under the current payment method, the fixed add-
on IOL allowance in payment group 6 and payment group 8 is not subject
to an annual adjustment for inflation.
We solicit comments on this approach to rebasing the payment rate
for IOL insertion procedures for services furnished beginning on
January 1, 1999.
h. Calculate Facility Specific Portion of Procedure Cost Attributable
to Labor Expenses
Having converted per procedure charges to cost values and
subtracted IOL costs from CPT codes 66983, 66984, 66985, and 66986, we
determined for the 295 audited and standardized surveys the percentage
of facility costs attributable to labor.
We summed each facility's expenses for contractual
personnel, employee salaries and fringe benefits, and owner's
compensation (labor-related costs);
We summed each facility's net total costs including plant
and property, equipment, supplies, contractual labor, employee salaries
and fringe benefits, owner's compensation, bad debts, and miscellaneous
other administrative expenses.
We divided each facility's total labor-related costs by
its net total costs to determine the percentage of the facility's costs
related to labor.
We multiplied each facility's per-procedure cost by the
facility's percentage of labor-related costs to apportion each
procedure cost into labor-related and non-labor related components.
Under the current ratesetting methodology, as explained in the
final notice published in the Federal Register on February 8, 1990 (55
FR 4526), we use an average of the labor-related percentage for all
facilities based on 1986 survey data to determine the portion of
procedure charges attributable to labor costs. Using 1994 survey data
to determine as precisely as possible costs incurred by a facility to
perform an individual surgical procedure, we reasoned that a facility
specific labor-related percentage would be a more sensitive gauge of
variations in hiring practices, staffing patterns, and employee
expenses that influence ASC procedure costs than a national average
which, by definition, flattens these variations. Therefore, to capture
the influence on per procedure costs of individual facility staffing
patterns and practices, we calculated a facility specific labor-related
percentage preliminary to deflating per procedure costs to offset
variations in labor costs that are the result of broader regional
demographic differences. However, we shall continue the current method
of calculating actual payment amounts for ASC facility services using
an average labor-related factor to adjust rates for regional wage
differences, which is consistent with the Congressional intent that
Medicare pay ASCs a prospectively determined standard overhead fee.
Using 1994 audited survey data, we found that, on average, the
percentage of facility costs attributable to labor expenses
(contractual personnel, employee salaries and fringe benefits, and
owner's compensation) is 37.66 percent, a slight increase over the
34.45 percent labor-related factor based on 1986 data that carriers use
currently to adjust base rates for regional wage differences.
i. Deflation by Wage Index Value
In order to remove variations in ASC per procedure costs that could
be due solely to geographical differences in labor costs, we
neutralized or deflated the portion of each ASC's per procedure costs
attributable to labor expenses.
We calculated a facility-specific percentage of overall
costs attributable to labor expenses as explained in section 2-h,
above.
We multiplied each facility's per-procedure cost (see
section 2-f, above) by the facility's percentage of labor-related costs
to determine the labor-related portion of the procedure cost.
We divided the labor-related portion by the wage index
value applicable to the ASC's location.
We added the deflated labor-related portion of the
procedure's cost to its nonlabor-related portion to arrive at a per
procedure cost that is not influenced by geographic wage variations.
As part of the ratesetting methodology explained in the final
notice published in the February 8, 1990 Federal Register (55 FR 4526),
we state as a matter of policy our intention to use the most recent
Medicare hospital inpatient prospective payment system (PPS) wage index
values both to determine ASC base payment rates and to calculate
payment amounts for individual claims for ASC facility services.
Therefore, the updated ASC base rates published in the February 8, 1990
notice reflect the fiscal year (FY) 1990 hospital inpatient PPS wage
index that was effective for hospital discharges beginning October 1,
1989. We also included wage index values for rural counties deemed
urban under sections 1886(d)(8)(B) and 1886(d)(8)(C) of the Act.
In the Federal Register published December 31, 1991 (56 FR 67666),
we announced that we would continue to use the most recently updated
hospital inpatient PPS wage index values for urban areas and rural
areas to calculate ASC payment amounts; that we would limit recognition
of reclassified wage index values resulting from reclassifications
approved by the Medicare Geographic Classification Review Board (MGCRB)
under section 1886(d)(10) of the Act to rural counties deemed urban
under section 1886(d)(8)(B) of the Act; and, that we would annually
update ASC payment
[[Page 32305]]
rates concurrently with the annual update of the hospital inpatient PPS
wage index.
Use of pre-reclassification wage index values. Both the method of
setting ASC payment rates and the method of calculating payment amounts
for individual claims for ASC facility services proposed in this notice
include a wage index adjustment to offset the effects of geographic
wage differences. In this notice, we propose to continue using the most
recent index that HCFA has determined from hospital wage and salary
data collected from hospital cost reports. However, we propose to use
wage index values that are calculated from wage and salary data before
HCFA makes certain adjustments. That is, the wage index that we propose
to use to adjust ASC payment rates reflects neither the effects of
hospitals being redesignated or reclassified from one area to another
under the provisions of sections 1886(d)(8)(B), 1886(d)(8)(C), and
1886(d)(10) of the Act, nor the requirement stated in sections 4410 (a)
and (b) of the Balanced Budget Act of 1997 (Pub. L. 105-33) that the
wage index for an urban hospital not be lower than the Statewide rural
wage index. We believe this ``pre-classification// pre-floor'' wage
index more directly reflects salary and wage levels for health care
personnel within a given geographic area than does a wage index that is
the result of a series of hospital-specific adjustments.
A description of how HCFA determines the FY 1998 pre-
reclassification//pre-floor wage index values for urban and rural areas
that we used to determine the rebased rates that are proposed in this
notice and that carriers will use to calculate wage-adjusted payments
to individual ASCs is in the Federal Register published on August 29,
1997 (62 FR 45985).
For the same reason that we are using pre-reclassification// pre-
floor wage index values, we propose to eliminate special wage index
designations for ASCs in rural counties deemed urban under section
1886(d)(8)(B) of the Act. The counties affected by this proposed change
of policy are listed in Table 3. We propose to have carriers use the
wage index value for the geographic area in which the facility is
located rather than a reclassified wage index value when they calculate
Medicare facility fees for ASCs in these designated counties. We
solicit comments from ASCs located in these areas if they believe they
will be adversely affected by our no longer providing an ASC-specific
wage index value for counties deemed urban under section 1886(d)(8)(B)
of the Act.
There is precedent for our decision to use pre-reclassification
hospital inpatient PPS wage index values: We use pre-reclassification
wage index values to determine allowable costs and Medicare payment
limits for skilled nursing facilities (SNFs) and home health agencies
(HHAs). We further reason that because the decisions of the MGCRB apply
solely to individual hospitals, and because there is no mechanism by
which we can link ASCs with individual hospitals, pre-reclassification/
/ pre-floor wage index values adequately measure wage and wage-related
costs for short-term, acute care hospitals located within the labor
market areas defined by the Office of Management and Budget (OMB) upon
which we base our definition of geographic areas. OMB updates the
definitions of metropolitan areas (MAs) each June, adding new areas
that qualify as MAs and cities that qualify as central areas for MAs,
keeping the definitions of these geographic areas current. We also
include in our definition of hospital labor market areas the New
England County Metropolitan Areas (NECMAs), as defined by OMB and the
special reclassification of Stanly County, North Carolina (a rural
county) as part of the Charlotte-Gastonia-Rock Hill, North Carolina-
South Carolina MSA ( a large urban area) under section 4408 of the BBA
of 1997.
If the FY 1998 hospital inpatient PPS wage index is updated prior
to publication of the final rule implementing the provisions of this
notice, we shall recalculate all procedure costs and payment rates
accordingly. The final rebased ASC rates may therefore vary somewhat
from the rates proposed in this notice as a result of our using pre-
reclassification//pre-floor hospital inpatient PPS wage index values
that are more current at the time of publication of the final notice.
During the time between implementation of the final rates proposed
in this notice and the next cycle of ratesetting to rebase rates using
newer survey data, we shall freeze the base rates other than to adjust
them for inflation in accordance with section 1833(i)(2)(C) of the Act,
as amended by section 4555 of BBA 1997. That is, we do not intend to
reset the base rates during these interim years to reflect the annual
update of the wage index, although carriers will continue to calculate
payment amounts to facilities using the most currently available wage
index values, as they do currently.
We note that one consequence of our proposal to move all ASC
updates to a calendar year cycle is a three-month delay in applying to
the calculation of ASC facility fees the hospital inpatient PPS wage
index values, which are updated on a fiscal year basis every October 1.
We believe that the advantages of consolidating the updates of ASC
rates, the ASC list, and wage index values to be effective every
January 1, concurrent with the update of the Medicare Physician Fee
Schedule, the Physicians' Current Procedural Terminology, and the
Health Care Financing Administration (HCFA) Common Procedure Coding
System (HCPCS), far outweigh any disadvantages that might result from
delaying for three months implementation of the most recent wage index.
We solicit comments on this point and on the other modifications we
propose to make with respect to our policy for adjusting ASC payment
rates to offset the effects of geographic wage differences.
Table 3.--Counties That Will No Longer be Deemed Urban Under Section
1886(d)(8)(B) of the Act to Calculate ASC Payments
County
Barry, MI
Cass, MI
Caswell, NC
Christian, IL
Harnett, NC
Henry, IN
Indian River, FL
Ionia, MI
Jefferson, KS
Jefferson, WI
Lawrence, PA
Lincoln, WV
Macoupin, IL
Marshall, AL
Mason, IL
Morrow, OH
Owen, IN
Preble, OH
Shiawassee, MI
Tuscola, MI
Van Wert, OH
Walworth, WI
j. Adjust Reported Costs for Inflation to Offset Fiscal Year
Differences Among Facilities
The most recently completed 12-month fiscal period for the majority
of ASCs that submitted the 1994 survey coincided with calendar year
1993, but there were some surveys with data reported for a 12-month
period ending on a date other than December 31, 1993. (The earliest
beginning date for a survey period was January 1, 1992; the latest
ending date for a survey period was June 30, 1994.) Therefore, both to
ensure comparability in our cost assumptions and to express procedure
costs in equivalent dollars, we inflated the cost
[[Page 32306]]
amount established for every procedure at the facility level from the
midpoint of the facility's reporting period to a common end period
using the Consumer Price Index--All Items (Urban). We used July 1,
1998, the midpoint of the calendar year during which the rates in this
notice are proposed for implementation, as the common end period. Table
4 shows the factors we used to express procedure costs in dollar levels
projected for July 1, 1998. The only difference between using the
factors in this table to adjust procedure costs for actual and
projected changes resulting from inflation and the factors that we used
to inflate the 1986 base rates is that the factors used here are
sensitive to quarterly rather than just annual inflationary trends.
Table 4.--Factors to Inflate Ambulatory Surgical Center Per Procedure Costs to July 1, 1998 Dollars Using CPI-
All Items, Urban
----------------------------------------------------------------------------------------------------------------
Factor
needed to
adjust to
Survey year starts Survey mid-point Survey year ends common end
period (7/1/
98)
----------------------------------------------------------------------------------------------------------------
Jan-1-92............................. Jul-1-92..................... Dec-31-92.................... 1.18268
Feb-1-92............................. Aug-1-92..................... Jan-31-93.................... 1.17961
Mar-1-92............................. Sep-1-92..................... Feb-28-93.................... 1.17653
Apr-1-92............................. Oct-1-92..................... Mar-31-93.................... 1.17347
May-1-92............................. Nov-1-92..................... Apr-30-93.................... 1.17043
Jun-1-92............................. Dec-1-92..................... May-31-93.................... 1.16748
Jul-1-92............................. Jan-1-93..................... Jun-30-93.................... 1.16466
Aug-1-92............................. Feb-1-93..................... Jul-31-93.................... 1.16198
Sep-1-92............................. Mar-1-93..................... Aug-31-93.................... 1.15936
Oct-1-92............................. Apr-1-93..................... Sep-30-93.................... 1.15676
Nov-1-92............................. May-1-93..................... Oct-31-93.................... 1.15417
Dec-1-92............................. Jun-1-93..................... Nov-30-93.................... 1.15163
Jan-1-93............................. Jul-1-93..................... Dec-31-93.................... 1.14915
Feb-1-93............................. Aug-1-93..................... Jan-31-94.................... 1.14674
Mar-1-93............................. Sep-1-93..................... Feb-28-94.................... 1.14439
Apr-1-93............................. Oct-1-93..................... Mar-31-94.................... 1.14208
May-1-93............................. Nov-1-93..................... Apr-30-94.................... 1.13982
Jun-1-93............................. Dec-1-93..................... May-31-94.................... 1.13751
Jul-1-93............................. Jan-1-94..................... Jun-30-94.................... 1.13505
----------------------------------------------------------------------------------------------------------------
Source: DRI/McGraw-Hill, 4th Qtr1996;@USSIM/TRENDLONG1196@CISSIM/CONTROL964.
3. Proposed Ratesetting Method
Determine the median per-procedure cost, across all facilities, for
each reported CPT code.
a. Weights
In the 1986 ASC survey, we collected data on the total number of
times a specific procedure, as defined by a CPT code, was performed in
the facility. To determine Medicare utilization, the 1986 survey asked
for a total count of Medicare patients served by the ASC during the
survey period. The number of times specific procedures were performed
on Medicare patients was not identified. Therefore, the only way to
weight 1986 survey data by Medicare utilization was to apply a
facility-specific ratio of Medicare patients to all patients served
during the survey period to the total number of times a specific
procedure was performed. As a result, cost data for procedures with
high Medicare utilization, such as cataract extraction, were weighted
the same as cost data for procedures that were performed only rarely
for Medicare beneficiaries.
In the 1994 ASC survey, to obtain a more accurate measure of
Medicare utilization, we not only collected information on how many
times a procedure on the ASC list was performed during the survey
period, but also, how many times the patient was a Medicare beneficiary
when the procedure was performed. Having this utilization information
available for each CPT code enables us to weight 1994 survey data with
greater precision than we could with the 1986 survey data. After we
adjust and then convert per procedure charges to per procedure costs,
we use the procedure's total volume as a weighting factor to determine
the median per procedure cost across all facilities that reported
charge and utilization data for the procedure. Then, as we explain in a
later section, after we assign procedures to payment groups, we use the
procedure's Medicare volume as a weighting factor to determine the
median cost of all the procedures in the group. This final median cost
becomes the payment rate for all the procedures in the group.
b. Determination of Weighted, Trimmed Median Per Procedure Cost Across
All Facilities
To determine the median cost of a procedure across all the
facilities where it was performed, we arrayed each facility's net,
wage-neutral, inflation adjusted cost for the procedure in descending
order of cost, weighted by the number of times the procedure was
performed in the facility for all patients, both Medicare and non-
Medicare. After trimming observations above the 90th and below the 10th
percentile, to remove costs that were aberrant extremes, we determined
the median cost for the procedure code. We repeated this process for
every procedure on the ASC list for which utilization was reported in
the 1994 survey to arrive at a weighted median procedure cost for the
1516 CPT codes in the survey data set.
Because Medicare volume for most procedures is but a fraction of
total utilization, we believe that weighting by total volume gives us a
truer per procedure median cost across all ASCs than weighting by
Medicare volume alone. Weighting by total volume expands our data set
by pulling in
[[Page 32307]]
procedures for which no Medicare volume was reported. Use of the median
rather the mean procedure cost further minimizes the effect of
individual facility cost extremes.
Having established a weighted median procedure cost that represents
costs incurred by ASCs generally to perform the procedure based on
audited and standardized 1994 survey data, we proceed to the final step
in the ratesetting process, which is grouping procedures for the
purpose of calculating prospective ASC payment rates.
4. Proposed Ratesetting Method
Establish procedure groupings.
a. Current Classification System
When we rebased ASC payment rates using 1986 survey data, we
expanded from four to eight payment rates or levels, as explained in
the February 8, 1990 Federal Register (55 FR 4539). (We explain
elsewhere in this notice that a ninth payment level was established
effective January 30, 1992 to accommodate payment for CPT code 50590,
extracorporeal shock wave lithotripsy, but that payments of an ASC
facility fee for this procedure were suspended following the issuance
of a court stay on March 10, 1992.) We currently group codes by
assigning each procedure, depending on its cost, to the appropriate
level within a series of predetermined $75 intervals. The only factor
roughly common to all procedures within the six currently active non-
IOL ASC payment groups is the approximate cost of performing the
procedure based on 1986 survey data and/or our estimate of that cost
when data are lacking.
b. Proposed Ambulatory Payment Classification System
We propose to replace the current method of grouping procedures on
the ASC list with a classification system that takes factors such as
time, type of surgery, and body system into account, in addition to the
costs incurred by facilities in connection with performing the
procedure. Addendum B lists the resulting ambulatory payment
classification system (APCS) groups that are the basis for determining
the payment rates for ASC facility services that we are proposing in
this notice. Although the genesis of these groups was in the ambulatory
patient groups (APGs) that were developed by 3M Health Care under a
HCFA grant, the APC groups are not the same as APGs, and Medicare
regulations and policy governing payments to ASCs using these groups do
not necessarily follow the 3M APG model.1
---------------------------------------------------------------------------
\1\ Health Information Systems, 3M Health Care. The Ambulatory
Patient Groups Definitions Manual, Version 2.0. Wallingford,
Connecticut, 1995.
---------------------------------------------------------------------------
The APC groups are the result of intensive work on the part of HCFA
staff and medical advisors who started with the 3M APGs but then
reorganized the groups on the basis of several factors. First, we had a
data set of 1516 CPT codes with cost and utilization information from
295 ASCs that was collected through the 1994 ASC survey. In addition,
we had comments from 79 correspondents, including ASC administrators,
State agencies, professional organizations and societies, trade
associations, and physicians following the July 1996 Medicare ASC Town
Meeting in Baltimore, that were virtually unanimous in questioning the
internal consistency of a number of the 3M APG groups. (We had
circulated 3M's Version 2.0 significant procedure APGs at the ASC Town
Meeting, without any costs or rates attached, and asked for comments on
the homogeneity of the groups.) A number of commenters suggested
regrouping codes, and they supported their recommendations on the basis
of the time required to perform procedures in the new groups and the
costs associated with supplies and equipment needed to perform the
procedures. Of particular concern were the grouping of gastrointestinal
endoscopies, arthroscopies, a number of urinary tract procedures, and
groups where diagnostic and therapeutic surgical procedures were put in
the same APG. In cases where our data supported a recommendation, we
modified a payment group accordingly. If we did not make a recommended
change, it was because our data did not support the change, or because
the change was inconsistent with our standards for determining
procedures that are safe and appropriate in an ASC. Once we began
shifting codes from one group to another, we found that other groups
were affected, so we ended up reviewing and modifying virtually every
grouping of surgical procedure codes.
To classify procedures with limited or aberrant ASC survey data, we
relied on the medical judgement of our staff physicians in conjunction
with 1993 hospital outpatient department claims data and physician
practice expense relative value units (RVU) from the Medicare physician
fee schedule. We also took into account Medicare utilization patterns
based on 1995 physician claims site-of-service data to aid in
determining levels of procedure complexity.
By adding clinical consistency to cost as a determinant for
classifying surgical procedures for ratesetting purposes, we propose to
expand from eight to 105 the number of ASC payment groups. Our lowest
payment rate would drop to $53 (APC #207, Closed Treatment Fracture
Finger/Toe/Trunk), and our highest payment rate would increase to
$2,107 (APC #527, Lithotripsy). We believe this classification system
rectifies distortions that have developed under the current ASC groups
which have resulted in underpayments for a number of procedures and
overpayments for some others.
Using groups that are characterized by homogeneous clinical
characteristics as well as costs enables us to set rates more
accurately for new procedures that are appropriate and safe in an ASC
but for which we have minimal data or for infrequently performed
procedures for which cost data are questionable or non-existent.
Following the ASC Town Meeting, some commenters urged a ratesetting
method for ASCs that would promote equitable reimbursement for
procedures across all settings. At least one commenter stated that
Medicare payment policy ought to be neutral as to site of service. In
fact, one of the reasons that we have devoted so much attention to
developing the APC surgical groups for ASC ratesetting is in
anticipation of using them as part of the prospective payment system
that is to be implemented on January 1, 1999 for hospital outpatient
department services. It is our intent to keep the APC surgical groups
comparable for ASCs and hospital outpatient departments (HOPDs).
Currently under development is the HOPD prospective payment system,
which contains as one of its elements APC surgical groups that parallel
the APC surgical groups we are proposing for ASCs. In order to keep the
groups comparable in the two settings, we propose to review comments on
the composition of the APC groups that are submitted during the public
comment period following publication of both this ASC notice and the
HOPD notice. We further propose to coordinate any adjustments to the
composition of the APC surgical groups that may result from our
analysis of both sets of comments to ensure that the final APC surgical
groups not only reflect and take into account both sets of comments,
but also remain comparable for ASCs and HOPDs to the maximum extent
possible within the constraints imposed by statutory and regulatory
requirements.
[[Page 32308]]
Every CPT code within the surgical range of 1998 Physicians'
Current Procedural Terminology is accounted for in Addendum A either in
an APC group or in a non-payment category. We propose to expand the
list of Medicare covered procedures from 2280 to 2499, which includes
the addition of 422 procedures and the deletion of 203 procedures
currently on the list, consistent with the standards discussed in
section II.A. of this notice. We move to the final step in determining
prospective payment rates for procedures on the ASC list.
5. Proposed Ratesetting Methodology
Determine a standard payment rate for the procedures within each
group.
a. Setting Rates Based on ASC Survey Data
Having classified procedures that are safe and appropriate in an
ASC setting into 105 payment groups, we arrayed the procedures within
each group in descending order of facility-specific procedure cost,
weighted by each facility's procedure-specific Medicare volume, to
determine the median cost of procedures in that APC. Weighting by the
number of times the procedures were performed on Medicare patients
gives recognition to the relative importance of each facility in
furnishing procedures covered by the Medicare program. The derived
median cost determined the payment rate for the group.
b. Setting Rates for Procedures With Limited Medicare Volume or
Aberrant Cost Data
When we determined individual procedure costs (see section III.E.2,
above), we eliminated information on costs, charges, and utilization
from the ASC survey database for 345 CPT codes that were reported by
fewer than 3 facilities and 199 CPT codes for which there was no
reported Medicare volume. We also lacked 1994 survey data for the 422
proposed additions to the ASC list. After procedures had been assigned
to APC groups (section III.E.4, above), we found 6 surgical APCs
comprised entirely of codes for which we had no reported ASC survey
data. In addition, there were 43 APCs with fewer than 200 Medicare
cases across all procedures in the group. (We determined that using the
median cost of fewer than 200 Medicare cases to set payment rates for
these 43 APCs failed to represent adequately the majority of procedures
within the group and did not result in a reasonable group payment
rate.) We also identified 15 APCs with Medicare volume greater than 200
cases for which we did not rely on reported ASC data to determine a
payment rate because we believed that reported procedure charges for
codes in these groups were based more on historical ASC payment rates
than on the cost of performing the procedure. We also questioned the
reliability of the data reported for procedures within these groups
when we found in the majority of cases that the per procedure costs of
simple procedures were higher than the costs determined for similar but
more complex procedures.
In order to set a payment rate for the 64 APC groups for which we
had little or no Medicare volume or reliable cost data, we calculated a
relative value factor for each of the 41 surgical APC groups for which
we did have reliable data, which we extrapolated as a standard against
which to compare and rank the 64 data deficient APC groups. To
calculate the relative value factors, we divided the payment rate
already set for each of the 41 APCs with adequate ASC survey data (see
section III.E.5.a, above) by 504, the median rate of those 41 groups.
We used the relative value factors as a gauge to compare the data-
deficient groups with the 41 groups with data in terms of the type and
duration of surgery, supply and equipment costs, and clinical labor
requirements characteristic of each group. We reasoned that we could
infer a relative value factor for each of the data-deficient groups on
the basis of these comparisons. Using this analysis, combined with the
expertise of our staff physicians, the comments we received following
the 1996 ASC Town Meeting, and our analysis of other data sources, such
as 1993 hospital outpatient claims data and relative value units
established under the Medicare Physician Fee Schedule, we estimated
relative value factors for the 64 ASC data-deficient APC groups. The
relative value factors for procedures on the ASC list are shown in
Addendum A and Addendum C.
We then multiplied the relative value factor estimated for each
data-deficient group by 504 to determine a payment rate for each of the
64 data-deficient APC groups. We viewed 504 as the most reasonable
value to use as a conversion factor to set ASC payment rates for the
data-deficient APCs because 504 was the median rate of the APC groups
that had the highest ASC Medicare volume and for which we had
substantive 1994 survey data.
Using this approach, we determined payment rates for 1058 CPT codes
(42 percent of the 2499 codes proposed for the ASC list) for which we
had little or no cost data. Of the 43 APCs that had fewer than 200
Medicare cases, nearly half were assigned a higher payment rate than
would have been the case if we had relied on the limited ASC data that
were available as the basis for the payment rate. In the case of two
groups with more than 200 Medicare cases, one of which consisted of
corneal transplant procedures, we increased the payment rate because
the data-referenced costs were too low.
c. Payment Rate for CPT Code 67027, Implantation of Intravitreal Drug
Delivery System
This is a new 1998 CPT code that we are proposing to add to the ASC
list. Because it is new, we have no cost data in connection with this
code. We ask for comments on which of the APC groups proposed for
ophthalmic procedures (APC groups 649, 651, 652, 667, 668, 670, 676,
677, 683, 684, or 690) this procedure code would be most appropriately
assigned both in terms of its clinical characteristics and resource
costs. We request that commenters support their suggestions with
information and data that elucidates the clinical characteristics and
resource costs of this procedure relative to other procedures in the
various APC groups for eye surgery.
6. Payment Policy Indicators
We have developed a set of payment policy indicators to assist ASCs
and fiscal contractors in determining whether Medicare allows payment
to an ASC for a particular procedure, item or service. Addendum A shows
a payment indicator for every 1998 HCPCS code.
ASC payment policy indicators are intended to supplement, not
replace, the correct coding initiative (CCI) edits that carriers
already apply to claims for ASC services. (The CCI edits identify code
pairs which, when billed together, represent either unbundling (the
reporting of a comprehensive procedure and its component procedures) or
mutually exclusive procedures (procedures which by definition cannot
occur during the same operative session.)) The ASC payment policy
indicators are defined as follows:
a. We use ``1'' to designate a procedure for which Medicare pays
Medicare approved ASCs a prospectively determined ASC facility fee for
ASC services. Collectively, the CPT codes with an ASC payment indicator
of ``1'' make up the ASC list. (See Addendum B.) Medicare allows
payment of an ASC facility fee only for codes with an ASC payment
policy indicator of ``1.''
b. We use ``2'' to indicate a procedure, item, or service for which
Medicare
[[Page 32309]]
does not allow a separate payment when the procedure, item, or service
is furnished at a Medicare approved ASC. If the procedure, item, or
service is covered, payment is always packaged into and subsumed within
payment(s) made for other services not specified. Some codes with a
``2'' indicator describe items or services that fall within the scope
of ASC facility services, whose costs are taken into account within the
ASC facility fee. Examples of these include CPT code 36000,
Introduction of needle or intracatheter; or, CPT code 81002,
Urinalysis, by dip stick or tablet reagent; or, alphanumeric HCPCS code
V2632, Posterior chamber intraocular lens. When these services are
furnished at an ASC, payment for them is included as part of the ASC
facility fee.
c. We use ``3'' to indicate a procedure, item or service that is
excluded from the ASC list because it is not reasonable, not necessary,
and not appropriate in an ASC setting. We have assigned an ASC payment
policy indicator of ``3'' to procedures that our medical advisors
consider to be unsafe in an ASC based on the criteria in
Sec. 416.22(b), and to CPT codes that are for unlisted procedures.
d. Codes with an ASC payment policy indicator ``4'' are not valid
for Medicare purposes, although Medicare recognizes a 90-day grace
period during which the code may be used. If Medicare covers the
service, another code is to be used to bill for it. Codes with an ASC
payment policy indicator ``4'' are assigned a procedure status code of
``G'' on the Medicare Physician's Fee Schedule.
e. We use ``5'' to indicate a procedure, item, or service that is
safely and appropriately performed or furnished in a physician's office
or clinic. We consider procedures with an ASC payment policy indicator
``5'' to be office-based because they do not generally require the more
elaborate facility services of an ASC and they do not satisfy the
criteria proposed in Sec. 416.22(a). Procedures with an ASC payment
policy indicator ``5'' are not considered to be on the ASC list.
Medicare takes into account and pays for the costs incurred to
perform these procedures under the Physician Fee Schedule. If a
procedure with an ASC payment policy indicator ``5'' were performed at
an ASC and the ASC billed Medicare for the procedure, payment would be
denied. The denial would be based on two factors: first, the procedure
is not on the ASC list, and secondly, because the procedure is
designated as an office-based procedure, Medicare payment for the
procedure is made in full to the physician as determined by the
physician's fee schedule. Any payment in addition to what Medicare pays
the physician under the Medicare Physician Fee Schedule for procedures
with an ASC payment policy indicator ``5'' is redundant and is not
allowed. After any applicable deductible and copayment amounts are
satisfied, we consider the beneficiary's obligation for a procedure
with an ASC payment policy indicator ``5'' to be met in full by
Medicare's payment to the physician.
If a procedure code with an ASC payment policy indicator ``5'' is
subject to the site-of-service differential under the Medicare
Physician Fee Schedule, the site-of-service practice expense reduction
is not applied if the procedure is performed in an ASC because we do
not consider the procedure to be on the ASC list and because we regard
the ASC as a surrogate physician's office with respect to these
procedures.
f. We use ASC payment policy indicator ``6'' to indicate that a
procedure, item or service either falls outside the scope of ASC
facility services as proposed in Sec. 416.21(b) or that the procedure,
item or service is one to which the concepts of an ASC facility fee or
the ASC benefit are not relevant and do not apply. In the latter case,
the procedure, item or service is outside the realm of ASC facility
services and would never, by definition, be furnished by an ASC, e.g.,
clinical laboratory tests, maternity care and delivery, emergent
procedures, or physician evaluation and management.
In the former case, although the ASC facility fee for a surgical
procedure on the ASC list does not include payment for the cost of
items, procedures, or services that have an ASC payment policy
indicator ``6'', if these procedures, items, or services are covered
and are reasonable and necessary, Medicare could allow a separate
payment under another Part B benefit as long as Medicare recognizes and
approves the entity as a supplier of the item or service. For example,
we do not consider prosthetic implants, except IOLs, to fall within the
scope of ASC facility services. But if an entity that is approved by
Medicare as an ASC is also approved as a supplier of prosthetic
implants, Medicare allows payment to the entity for a prosthetic
implant in accordance with the prosthetic fee schedule in addition to
payment of an ASC facility fee for services furnished by the entity in
connection with a procedure on the ASC list that is performed to insert
the prosthetic implant. See section III.F for further discussion of
items and services that fall outside the scope of ASC services.
g. We use ``7'' to indicate a procedure to which special coverage
instructions apply, such as CPT code 11950, Subcutaneous injection of
``filling'' material, (e.g. collagen); 1 cc or less, about which
carriers must make a determination of reasonableness and medical
necessity. If a surgical procedure with an ASC payment policy indicator
``7'' is performed in a Medicare approved ASC and a claim for ASC
services is submitted, payment depends on whether the carrier
determines that the procedure is reasonable and necessary. If the
carrier determines that the procedure was reasonable and necessary, an
ASC payment rate is given and the procedure would be considered to be
on the ASC list for the purposes of the specific claim. Procedures with
a status indicator ``R'' under the Medicare Physicians' Fee Schedule
automatically receive an ASC payment policy indicator of ``7.''
h. We have reserved payment policy indicator ``8'' for future use.
i. We use ``9'' to indicate a procedure, item or service that is
not covered by Medicare and for which Medicare never makes payment. ASC
payment policy indicator ``9'' corresponds to procedure status codes
``I'', ``N'', and ``E'' under the Medicare Physician Fee Schedule.
(Status code ``I'' is used to indicate codes that are not valid for
Medicare purposes with no grace billing period allowed; status code
``N'' is used to indicate codes that describe a noncovered service;
status code ``E'' is used to indicate codes that are excluded from the
Medicare Physician Fee Schedule by regulation.)
7. Comments on Proposed Ambulatory Payment Classification Groups,
Payment Policy Indicators and Payment Rates
Addendum A lists all 1998 HCPCS codes in numeric order by code and
includes an ASC payment policy indicator for each code and, where
applicable, a notation as to whether or not the code is proposed for
addition to or deletion from the ASC list. Addendum B presents the ASC
list by APC group. Addendum C is a list of 105 surgical APC groups with
their respective titles, ASC relative values, and ASC payment rates. We
solicit comments on the payment rates, APC grouping, and payment policy
indicators proposed in these tables. However, we request that
commenters who question the appropriateness of the rate or APC
assignment proposed for a particular procedure support their argument
with specific details related to intra-operative time, staffing
requirements, and costs incurred by the
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facility to furnish disposable and non-disposable supplies,
pharmaceuticals, instrumentation, and equipment in connection with the
procedure and that procedures more closely related in terms of cost be
identified. We also solicit comments on the changes to the ASC
ratesetting methodology that are proposed in this section.
8. Carrier Adjustment of Base Rates to Determine Payment Amounts
The payment rates proposed in this notice are standard base rates
that have been adjusted to remove the effects of regional wage
variations. When carriers process claims for ASC facility services,
they adjust the base rates to reflect the wage index value applicable
to the area in which the ASC is located. The Medicare payment for ASC
facility services is equal to 80 percent of the wage-adjusted standard
payment rate. Beneficiaries are responsible for a 20 percent copayment
for ASC facility services once their deductible is satisfied. Below are
some examples of how carriers adjust the ASC base rates to calculate
facility fees.
Example 1
The following is an example of how to determine the wage adjusted
payment rate for CPT code 28230, Tenotomy, open, flexor; foot, single
or multiple (separate procedure) performed at an ASC located in Denver,
Colorado. The procedure is in APC group 271, Level I foot
musculoskeletal procedures. The base rate for the procedure is $510.
The ASC wage index value for Denver, Colorado is 1.0386. The labor
related portion of the base rate is $192 ($510 x 37.66 percent); the
non-labor related portion of the base rate is $318 ($510 x 62.34
percent).
Wage Adjusted Rate:
= ($192 x 1.0386) + $318
= $199 + $318
= $517
Example 2
The following is an example of how to determine payment for CPT
code 66984, Extracapsular cataract removal with insertion of
intraocular lens prosthesis (one stage procedure), manual or mechanical
technique (e.g, irrigation and aspiration or phacoemulsification). The
procedure is in APC group 668, Cataract procedures with IOL insert. The
base rate for the procedure is $863, which includes a $150 IOL
allowance. Because IOLs are not subject to adjustment for labor costs,
the IOL allowance ($150) must be subtracted from the composite payment
rate before applying the wage index adjustment. The ASC wage index
value for Denver, Colorado is 1.0386. The labor related portion subject
to wage index adjustment is 37.66 percent of the base rate from which
the IOL allowance has been deducted.
Wage Adjusted Rate:
= [{($863-150) x .3766} x 1.0386] + [{863-150} x .6234]
= [($713 x .3766) x 1.0386] + [$713 x .6234]
= ($269 x 1.0386) + $444
= $279 + $444
= $723
Composite Adjusted Rate:
= $723 + $150
= $873
9. Using Resource Costing to Determine Procedure Costs
Resource costing involves the measurement of all the direct and
indirect costs involved in the performance of a specific procedure.
Direct costs include all activities, materials, and equipment that are
traceable to a specific procedure. Indirect costs, such as rent,
utilities, and insurance, cannot be directly traced to a specific
procedure. Rather, a factor such as units or time is used to allocate
indirect costs uniformly at the individual procedure level.
We introduced the collection of resource cost data in the 1994 ASC
survey primarily in response to industry recommendations that we do so
on the grounds that procedure-specific cost studies measure facility
resource expenditures more accurately and reliably than using a cost-
to-charge ratio to convert procedure charges into a proxy for procedure
costs. Part II of the 1994 ASC survey collected procedure specific
statistical and resource cost data for the following 29 ASC procedures.
1. 14060 Adjacent tissue transfer or rearrangement, eyelids, nose,
ears and/or lips; defect 10 sq cm or less.
2. 19120 Excision of cyst, fibroadenoma, or other benign or
malignant tumor aberrant breast tissue, duct lesion or nipple lesion
(except 19140), male or female, one or more lesions.
3. 28285 Hammertoe operation; one toe (e.g., interphalangeal
fusion, filleting, phalangectomy).
4. 28292 Hallux valgus (bunion) correction, with or without
sesamoidectomy; Keller, McBride or Mayo type procedure.
5. 29881 Arthroscopy, knee, surgical; with meniscectomy (medial or
lateral including any menuiscal shaving).
6. 43235 Upper gastrointestinal endoscopy including esophagus,
stomach, and either the duodenum and/or jejunum as appropriate; complex
diagnostic.
7. 43239 Upper gastrointestinal endoscopy including esophagus,
stomach, and either the duodenum and/or jejunum as appropriate; for
biopsy and/or collection of specimen by brushing or washing.
8. 45378 Colonoscopy, fiberoptic, beyond splenic flexure;
diagnostic procedure.
9. 45380 Colonoscopy, fiberoptic, beyond splenic flexure; for
biopsy and/or collection of specimen by brushing or washing.
10. 45385 Colonoscopy, fiberoptic, beyond splenic flexure; with
removal of polypoid lesion(s).
11. 49505 Repair inguinal hernia, age 5 or over.
12. 50590 Lithotripsy, extracorporeal shock wave.
13. 52000 Cystourethroscopy (separate procedure).
14. 55700 Biopsy, prostate; needle or punch, single or multiple,
any approach.
15. 56350 Hysteroscopy, diagnostic (separate procedure).
16. 58120 Dilation and curettage, diagnostic and/or therapeutic
(nonobstetrical).
17. 62278 Injection of anesthetic substance (including narcotics),
diagnostic or therapeutic; lumbar or caudal epidural, single.
18. 62289 Injection of substance other than anesthetic, contrast,
or neurolytic solutions; lumbar or caudal epidural (separate
procedure).
19. 64721 Neuroplasty and/or transposition; median nerve at carpal
tunnel.
20. 65730 Keratoplasty (corneal transplant); penetrating (except in
aphakia).
21. 66170 Fistulization of sclera for glaucoma; trabeculectomy ab
externo.
22. 66821 Discission of secondary membranous cataract (opacified
posterior lens capsule and/or anterior hyaloid); laser surgery (e.g..
YAG laser) (one or more stages).
23. 66984 Extracapsular cataract removal with insertion of
intraocular lens prosthesis (one stage procedure), manual or
phacoemulsification technique (e.g., irrigation and aspiration or
phacoemulsification).
24. 66985 Insertion of intraocular lens prosthesis (secondary
implant), not associated with concurrent cataract removal.
25. 66986 Exchange of intraocular lens.
26. 67010 Removal of vitreous, anterior approach (open sky
technique or limbal incision); subtotal removal with mechanical
vitrectomy.
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27. 67036 Vitrectomy, mechanical, pars plana approach.
28. 67107 Repair of retinal detachment, one or more sessions;
scleral buckling (such as lamellar excision, imbrication or encircling
procedure), with or without implant, may include procedures 67101,
67105.
29. 67904 Repair of blepharoptosis; (tarso) levator resection or
advancement, external approach.
We selected these procedures because they are either high volume
ASC procedures (such as 66984, 66821, 52000) or they are procedures
that include an unusual cost or service (such as 67036, 65730, 50590).
We asked facilities to report typical resource utilization and cost
information regarding time allocations, staffing patterns and labor
costs, supply costs, and equipment costs on a procedure-specific,
single case basis. In order to calculate an overall per procedure cost
based on the resource cost data reported in the 1994 ASC survey, we
first calculated a facility-specific procedure cost for each of the 29
CPT codes targeted in the 1994 ASC survey. We then determined the
median procedure cost across all facilities, weighted by total volume.
We also looked at weighting by Medicare volume. We used the same wage
index values and inflation factors to adjust resource based cost data
that we used to convert procedure charges to costs, as explained in the
preceding sections.
Step a--To remove the effect of geographical wage differences, we
divided indirect and direct labor-related procedure costs by the pre-
classification/pre-floor hospital inpatient prospective payment system
wage index value applicable to the facility's location.
Step b--We calculated an overhead factor by which to step down
indirect overhead costs to a single procedure level. To determine this
factor, we summed the costs reported by a facility for its plant and
property; office equipment; medical equipment other than procedure
specific equipment; office and housekeeping supplies; wages and fringe
benefits for administrators, directors, managers, supervisors,
clerical, and other non-medical personnel; bad debt; and general
administrative overhead such as taxes, insurance, and interest. We
divided the facility's aggregated overhead expenses by the total number
of procedures performed at the facility during the survey period. The
resulting figure represents the amount of indirect overhead costs
apportioned to each surgical case performed in the ASC.
Step c--We summed the costs incurred by the facility to furnish the
disposable and reusable supplies, pharmaceuticals, equipment, and labor
that it typically furnishes in connection with the procedure (direct
costs).
Step d--We added the facility's procedure-specific direct costs
(Step c) to the facility's indirect cost allocation (Step b).
Step e--We inflated the facility's procedure cost to July 1998
using the appropriate inflation factor.
Step f--To ascertain what it costs ASCs generally to perform the
target procedures, based on audited direct and indirect costs, we
determined the median cost across all facilities, weighted by total
volume.
Analysis of Resource-Based Procedure Cost Methodology: We found
that for 11 of the 29 target procedures for which we collected resource
cost data, the per procedure cost was lower using resource costing than
it was using a cost-to-charge ratio conversion, whereas for 18 of the
29 target procedures, the per procedure cost was higher using resource-
based costing. Variations in procedure costs between the two methods
were extreme, and for only 11 procedures was the resource-based cost
within 20% of the cost-to-charge converted cost.
In seeking an explanation for the lack of consistency between
resource costing and cost-to-charge conversion as a descriptor of
procedure cost, we found resource cost data to be irretrievably flawed.
We attribute the flaws in the resource cost data in part to the fact
that the 1994 survey was our first attempt to capture resource costs.
In spite of our efforts at clarity and several sessions in 1994 during
which we met with ASC representatives to answer questions about the
survey, the data reported indicate that our instructions were either
misinterpreted or misunderstood altogether. In addition, we attribute
the highly variable resource cost data to ASCs' lack of familiarity
with the new survey form and to inconsistencies among ASC recordkeeping
systems.
Our intent was for each facility to furnish a catalog or inventory
of the direct resources it typically expends to perform each of the 29
target procedures. But in many instances the use of disposable and
reusable supplies and pieces of equipment for the same procedure were
reported inconsistently across facilities. Equipment required to
perform a procedure was not listed or information reported about the
useful life of equipment or its purchase price was not given, making it
impossible to prorate the full cost of equipment to a single case. The
unit cost of numerous items and services was omitted altogether or ASCs
misinterpreted unit supply cost as the full cost of a single item or
service, instead of prorating the full cost of an item or service to a
single case. ASCs provided incomplete sets of resource cost data, e.g.,
labor costs for a procedure would be reported without the corresponding
supply costs. Entries were illegible on several forms.
Because of the many problems encountered with reported resource
cost data, we used only the audited data from the 96 facilities to
compute resource cost. However, in many cases even audited surveys
lacked direct resource cost data reported in the manner requested.
Although we did consult resource cost data in our analysis of procedure
costs and in assigning CPT codes to APC groups, we believe that
shortcomings inherent in our resource cost data base and the limitation
of cost data to only 29 codes preclude our relying on resource costing
as a basis for setting payment rates at this time. Therefore, we have
based the rates proposed in this notice on the methodology explained
previously.
We are disappointed by our lack of success in the 1994 ASC survey
in gathering usable resource cost data. Our inability to establish
weights and base ASC payment rates on the resource cost data that we
did collect is particularly frustrating in light of the fact that we
expect, beginning January 1, 1999, to make payments to physicians under
the Medicare physicians' fee schedule that are determined in part on
the basis of resource-based practice expense relative units. We have
been closely monitoring the development of the resource-based practice
expense relative value units under the physicians' fee schedule and the
ratesetting method for the hospital outpatient prospective payment
system, which is also scheduled for implementation effective January 1,
1999. When we rebase ASC payment rates following the next ASC survey,
we are committed to reexamining the resource-based practice expense
relative value units established under the Medicare physicians' fee
schedule and the weights developed under the hospital outpatient
prospective payment system for their applicability to ASC ratesetting
in order to advance towards our goal of setting rates in a manner that
is consistent across different sites of service.
F. Scope of ASC Services (Sec. 416.21)
We are proposing to renumber Sec. 416.61 to become Sec. 416.21, and
to clarify those items and services that we consider to fall within the
scope of facility services for which payment is
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made as part of the ASC facility fee. In addition, this section of the
regulation lists the types of items and services that are considered to
fall outside the scope of ASC facility services, for which payment is
not included in the ASC facility fee but for which payment could be
made under other provisions of Medicare Part B. Recurring questions
have prompted these changes, such as inquiries as to whether or not ASC
facility services include fixation devices and orthopedic pins,
fluoroscopy us
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