Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Physician-Owned Hospitals: Data Sources for Expansion Exception; Physician Certification of Inpatient Hospital Services; Medicare Advantage Organizations and Part D Sponsors: CMS-Identified Overpayments Associated with Submitted Payment Data

AGENCY:

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

ACTION:

Final rule with comment period.

SUMMARY:

This final rule with comment period revises the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2015 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this final rule with comment period, we describe the changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

In this document, we also are making changes to the data sources permitted for expansion requests for physician-owned hospitals under the physician self-referral regulations; changes to the underlying authority for the requirement of an admission order for all hospital inpatient admissions and changes to require physician certification for hospital inpatient admissions only for long-stay cases and outlier cases; and changes to establish a formal process, including a three-level appeals process, to recoup overpayments that result from the submission of erroneous payment data by Medicare Advantage (MA) organizations and Part D sponsors in the limited circumstances in which the organization or sponsor fails to correct these data.

DATES:

Effective Date: This final rule with comment period is effective on January 1, 2015.

Comment Period: To be assured consideration, comments on the payment classifications assigned to HCPCS codes identified in Addenda B, AA, and BB to this final rule with comment period with the “NI” comment indicator, and on other areas specified throughout this final rule with comment period must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on December 30, 2014.

Application Deadline—New Class of New Technology Intraocular Lenses: Requests for review of applications for a new class of new technology intraocular lenses must be received by 5 p.m. EST on March 2, 2015, at the following address: ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

ADDRESSES:

In commenting, please refer to file code CMS-1613-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

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

1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the “submit a comment” tab.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1613-FC, P.O. Box 8013, Baltimore, MD 21244-1850.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1613-FC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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

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

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

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

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

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

For information on viewing public comments, we refer readers to the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION:

Marjorie Baldo, (410) 786-4617, for issues related to new CPT and Level II HCPCS codes, revised process for soliciting comments related to new Category I and III CPT codes, and exceptions to the 2 times rule.

Elizabeth Bainger, (410) 786-0529, for issues related to the Hospital Outpatient Quality Reporting—Program Administration, Validation, and Reconsideration Issues.

Anita Bhatia, (410) 786-7236, for issues related to the Ambulatory Surgical Center Quality Reporting (ASCQR) Program—Program Administration and Reconsideration Issues.

Chuck Braver, (410) 786-9379, for issues related to the CMS Web posting of the OPPS and ASC payment files.

Anne Calinger, (410) 786-3396, for issues related to Medicare Advantage (MA) organizations and Medicare Part D sponsor overpayments.

Elisabeth Daniel, (410) 786-0237, for issues related to OPPS drugs, radiopharmaceuticals, biologicals, blood clotting factors, packaged items/services, and brachytherapy sources payment.

Dexter Dickey, (410) 786-6856, or Dorothy Myrick, (410) 786-9671, for issues related to partial hospitalization and community mental health center (CMHC) issues.

Eva Fung, (410) 786-7539, or Vinitha Meyyur, (410) 786-8819, for issues related to Hospital OQR Program and ASCQR measures issues and publication of Hospital OQR Program data issues.

Twi Jackson, (410) 786-1159, for issues related to device-dependent APCs, composite APCs (extended assessment and management, low dose brachytherapy, multiple imaging), hospital outpatient visits, inpatient procedures list, and no cost/full credit and partial credit devices.

Marina Kushnirova, (410) 786-2682, for issues related to OPPS status indicators and comment indicators.

John McInnes, (410) 786-0791, for issues related to new technology intraocular lenses (NTIOLs).

Esther Markowitz, (410) 786-4595, for issues related to comprehensive APCs and ambulatory surgical center (ASC) payments.

David Rice, (410) 786-6004, for issues related to APC weights, blood and blood products, cancer hospital payments, conversion factor, copayments, cost-to-charge ratios (CCRs), data claims, geometric mean calculation, off-campus provider-based issues, rural hospital payments, outlier payments, and wage index.

Daniel Schroder, (410) 786-4487, for issues related to physician certification of hospital inpatient services.

Carol Schwartz, (410) 786-0576, for issues related to the Advisory Panel on Hospital Outpatient Payment (HOP Panel) and OPPS pass-through devices.

Teresa Walden, (410) 786-3755, or Patricia Taft, (410) 786-4561, for issues related to the physician self-referral law/physician-owned hospital expansion exception process.

Marjorie Baldo, (410) 786-4617, for all other issues related to hospital outpatient and ambulatory surgical center payments not previously identified.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publication of the rule, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the Internet at http://www.gpo.gov/fdsys/.

Addenda Available Only Through the Internet on the CMS Web Site

In the past, a majority of the Addenda referred to in our OPPS/ASC proposed and final rules were published in the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 OPPS/ASC proposed rule, all of the Addenda no longer appear in the Federal Register as part of the annual OPPS/ASC proposed and final rules to decrease administrative burden and reduce costs associated with publishing lengthy tables. Instead, these Addenda are published and available only on the CMS Web site. The Addenda relating to the OPPS are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html.

Alphabetical List of Acronyms Appearing in This Federal Register Document

AHA American Hospital Association

AMA American Medical Association

AMI Acute myocardial infarction

APC Ambulatory Payment Classification

ASC Ambulatory surgical center

ASCQR Ambulatory Surgical Center Quality Reporting

ASP Average sales price

AWP Average wholesale price

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

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

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Public Law 106-554

BLS Bureau of Labor Statistics

CAH Critical access hospital

CAHPS Consumer Assessment of Healthcare Providers and Systems

CAP Competitive Acquisition Program

C-APC Comprehensive Ambulatory Payment Classification

CASPER Certification and Survey Provider Enhanced Reporting

CAUTI Catheter-associated urinary tract infection

CBSA Core-Based Statistical Area

CCN CMS Certification Number

CCR Cost-to-charge ratio

CDC Centers for Disease Control and Prevention

CED Coverage with Evidence Development

CERT Comprehensive Error Rate Testing

CFR Code of Federal Regulations

CI Comment indicator

CLABSI Central Line [Catheter] Associated Blood Stream Infection

CLFS Clinical Laboratory Fee Schedule

CMHC Community mental health center

CMS Centers for Medicare & Medicaid Services

CoP Condition of participation

CPI-U Consumer Price Index for All Urban Consumers

CPT Current Procedural Terminology (copyrighted by the American Medical Association)

CR Change request

CRC Colorectal cancer

CSAC Consensus Standards Approval Committee

CT Computed tomography

CV Coefficient of variation

CY Calendar year

DFO Designated Federal Official

DIR Direct or indirect remuneration

DME Durable medical equipment

DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and Supplies

DRA Deficit Reduction Act of 2005, Public Law 109-171

DSH Disproportionate share hospital

EACH Essential access community hospital

EAM Extended assessment and management

ECG Electrocardiogram

ED Emergency department

E/M Evaluation and management

EHR Electronic health record

ESRD End-stage renal disease

ESRD QIP End-Stage Renal Disease Quality Improvement Program

FACA Federal Advisory Committee Act, Public Law 92-463

FDA Food and Drug Administration

FFS [Medicare] Fee-for-service

FY Fiscal year

GAO Government Accountability Office

GI Gastrointestinal

HAI Healthcare-associated infection

HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems

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

HCP Health care personnel

HCPCS Healthcare Common Procedure Coding System

HCRIS Healthcare Cost Report Information System

HCUP Healthcare Cost and Utilization Project

HH QRP Home Health Quality Reporting Program

HHS Department of Health and Human Services

HIE Health information exchange

HEU Highly enriched uranium

HIPAA Health Insurance Portability and Accountability Act of 1996, Public Law 104-191

HOP Hospital Outpatient Payment [Panel]

HOPD Hospital outpatient department

HOP QDRP Hospital Outpatient Quality Data Reporting Program

HPMS Health Plan Management System

IBD Inflammatory bowel disease

ICC Interclass correlation coefficient

ICD Implantable cardioverter defibrillator

ICD-9-CM International Classification of Diseases, Ninth Revision, Clinical Modification

ICH In-center hemodialysis

IDTF Independent diagnostic testing facility

IGI IHS Global Insight, Inc.

IHS Indian Health Service

I/OCE Integrated Outpatient Code Editor

IOL Intraocular lens

IORT Intraoperative radiation treatment

IPFQR Inpatient Psychiatric Facility Quality Reporting

IPPS [Hospital] Inpatient Prospective Payment System

IQR [Hospital] Inpatient Quality Reporting

IRF Inpatient rehabilitation facility

IRF QRP Inpatient Rehabilitation Facility Quality Reporting

IT Information technology

LCD Local coverage determination

LDR Low dose rate

LTCH Long-term care hospital

LTCHQR Long-Term Care Hospital Quality Reporting

MAC Medicare Administrative Contractor

MAP Measure Application Partnership

MedPAC Medicare Payment Advisory Commission

MEG Magnetoencephalography

MFP Multifactor productivity

MGCRB Medicare Geographic Classification Review Board

MIEA-TRHCA Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Public Law 109-432

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

MLR Medical loss ratio

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

MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309

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

MPFS Medicare Physician Fee Schedule

MR Medical review

MRA Magnetic resonance angiography

MRgFUS Magnetic Resonance Image Guided Focused Ultrasound

MRI Magnetic resonance imaging

MRSA Methicillin-Resistant Staphylococcus Aures

MS-DRG Medicare severity diagnosis-related group

MSIS Medicaid Statistical Information System

MUC Measure under consideration

NCCI National Correct Coding Initiative

NDC National Drug Code

NHSN National Healthcare Safety Network

NOS Not otherwise specified

NPWT Negative Pressure Wound Therapy

NPI National provider identification

NQF National Quality Forum

NQS National Quality Strategy

NTIOL New technology intraocular lens

NUBC National Uniform Billing Committee

OACT [CMS] Office of the Actuary

OBRA Omnibus Budget Reconciliation Act of 1996, Public Law 99-509

OIG [HHS] Office of the Inspector General

OMB Office of Management and Budget

ONC Office of the National Coordinator for Health Information Technology

OPD [Hospital] Outpatient Department

OPO Organ Procurement Organization

OPPS [Hospital] Outpatient Prospective Payment System

OPSF Outpatient Provider-Specific File

OQR [Hospital] Outpatient Quality Reporting

OT Occupational therapy

PBD Provider-Based Department

PCHQR PPS-Exempt Cancer Hospital Quality Reporting

PCR Payment-to-cost ratio

PDE Prescription Drug Event

PE Practice expense

PEPPER Program Evaluation Payment Patterns Electronic Report

PHP Partial hospitalization program

PHSA Public Health Service Act, Public Law 96-88

PMA Premarket approval

PN Pneumonia

POS Place of service

PPI Producer Price Index

PPS Prospective payment system

PQRI Physician Quality Reporting Initiative

PQRS Physician Quality Reporting System

QDC Quality data code

QIO Quality Improvement Organization

RAC Recovery Audit Contractor

RADV Risk Adjustment Data Validation

RFA Regulatory Flexibility Act

RHQDAPU Reporting Hospital Quality Data for Annual Payment Update

RTI Research Triangle Institute, International

RVU Relative value unit

SAMS Secure Access Management Services

SCH Sole community hospital

SCOD Specified covered outpatient drugs

SES Socioeconomic status

SI Status indicator

SIR Standardized infection ratio

SNF Skilled nursing facility

SRS Stereotactic radiosurgery

SSA Social Security Administration

SSI Surgical site infection

TEP Technical Expert Panel

TIP Transprostatic implant procedure

TMS Transcranial Magnetic Stimulation [Therapy]

TOPs Transitional Outpatient Payments

USPSTF United States Preventive Services Task Force

VBP Value-based purchasing

WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background

A. Executive Summary of This Document

1. Purpose

2. Summary of the Major Provisions

3. Summary of Costs and Benefits

B. Legislative and Regulatory Authority for the Hospital OPPS

C. Excluded OPPS Services and Hospitals

D. Prior Rulemaking

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel)

1. Authority of the Panel

2. Establishment of the Panel

3. Panel Meetings and Organizational Structure

F. Public Comments Received on the CY 2015 OPPS/ASC Proposed Rule

G. Public Comments Received on the CY 2014 OPPS/ASC Final Rule with Comment Period

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

b. Use of Single and Multiple Procedure Claims

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

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

a. Claims Preparation

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

(1) Splitting Claims

(2) Creation of “Pseudo” Single Procedure Claims

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

(2) Recommendations of the Panel Regarding Data Development

d. Calculation of Single Procedure APC Criteria-Based Costs

(1) Device-Dependent APCs

(2) Blood and Blood Products

(3) Brachytherapy Source Payment

e. Establishment of Comprehensive APCs

(1) Background

(2) CY 2015 Policy for C-APCs

(3) Public Comments

(4) Statement of Final Policy and List of CY 2015 C-APCs

f. Calculation of Composite APC Criteria-Based Costs

(1) Extended Assessment and Management Composite APCs (APC 8009)

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

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

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

3. Changes to Packaged Items and Services

a. Background and Rationale for Packaging in the OPPS

b. Revision of a Packaging Policy Established in CY 2014—Procedures Described by Add-On Codes

c. Packaging Policies for CY 2015

(1) Ancillary Services

(2) Prosthetic Supplies

4. Calculation of OPPS Scaled Payment Weights

B. Conversion Factor Update

C. Wage Index Changes

D. Statewide Average Default CCRs

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

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

1. Background

2. Payment Adjustment for Certain Cancer Hospitals for CY 2015

G. Hospital Outpatient Outlier Payments

1. Background

2. Outlier Calculation

3. Final Outlier Calculation

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

I. Beneficiary Copayments

1. Background

2. OPPS Copayment Policy

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

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

1. Treatment of New CY 2014 Level II HCPCS and CPT Codes Effective April 1, 2014 and July 1, 2014 for Which We Solicited Public Comments in the CY 2015 OPPS/ASC Proposed Rule

2. Process for New Level II HCPCS Codes That Will Be Effective October 1, 2014 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2015 for Which We Are Soliciting Public Comments in this CY 2015 OPPS/ASC Final Rule with Comment Period

3. Process for Soliciting Public Comments for New and Revised CPT Codes Released by the AMA

a. Current Process for Accepting Comments on New and Revised CPT Codes for a Year

b. Modification of Process for New and Revised CPT Codes That Are Effective January 1

B. OPPS Changes—Variations within APCs

1. Background

2. Application of the 2 Times Rule

3. Exceptions to the 2 Times Rule

C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services: Cardiac Telemetry (APC 0213)

2. Gastrointestinal (GI) Services: Upper GI Procedures (APCs 0142, 0361, 0419, and 0422)

3. Genitourinary Services

a. Gynecologic Procedures (APCs 0188, 0189, 0192, 0193, and 0202)

b. Cystourethroscopy, Transprostatic Implant Procedures, and Other Genitourinary Procedures (APCs 0160, 0161, 0162, 0163, and 1564

c. Level IV Anal/Rectal Procedures (APC 0150)

d. Percutaneous Renal Cryoablation (APC 0423)

4. Nervous System Services

a. Chemodenervation (APC 0206)

b. Epidural Lysis (APCs 0203 and 0207)

c. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0218)

5. Ocular Services: Ophthalmic Procedures and Services

6. Imaging

a. Echocardiography (APCs 0269, 0270, and 0697)

b. Optical Coherence Tomography Procedures of the Breast

c. Parathyroid Planar Imaging (APCs 0263, 0317, 0406, 0414)

7. Radiology Oncology

a. Proton Beam Therapy and Magnetoencephalography (MEG) Services (APCs 0065, 0412, 0446, 0664, and 0667)

b. Stereotactic Radiosurgery Services (SRS) and Magnetic Resonance Image Guided Focused Ultrasound (MRgFUS) (APC 0066)

8. Respiratory Services: Level II Endoscopy Lower Airway (APC 0415)

9. Other Services

a. Epidermal Autograft (APC 0327)

b. Image-Guided Breast Biopsy Procedures and Image-Guided Abscess Drainage Procedures (APCs 0005 and 0007)

c. Negative Pressure Wound Therapy (NPWT) (APCs 0012 and 0015)

d. Platelet Rich Plasma (PRP) (APC 0327)

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

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

a. Background

b. CY 2015 Policy

2. Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups

a. Background

b. CY 2015 Policy

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

1. Background

2. Policy for CY 2015

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

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

1. Background

2. Drugs and Biologicals with Expiring Pass-Through Status in CY 2014

3. Drugs, Biologicals, and Radiopharmaceuticals with New or Continuing Pass-Through Status in CY 2015

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

a. Background

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals

c. Payment Offset Policy for Contrast Agents

d. Payment Offset Policy for Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure and Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure

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

1. Background

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

a. Background

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

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

d. Pass-Through Evaluation Process for Skin Substitutes

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

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

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

b. CY 2015 Payment Policy

4. Payment Policy for Therapeutic Radiopharmaceuticals

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

6. Payment for Blood Clotting Factors

7. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital Claims Data

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

A. Background

B. Estimate of Pass-Through Spending

VII. OPPS Payment for Hospital Outpatient Visits

A. Payment for Hospital Outpatient Clinic and Emergency Department Visits

B. Payment for Critical Care Services

VIII. Payment for Partial Hospitalization Services

A. Background

B. PHP APC Update for CY 2015

C. Separate Threshold for Outlier Payments to CMHCs

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

B. Changes to the Inpatient List

X. Nonrecurring Policy Changes: Collecting Data on Services Furnished in Off-Campus Provider-Based Departments of Hospitals

XI. CY 2015 OPPS Payment Status and Comment Indicators

A. CY 2015 OPPS Payment Status Indicator Definitions

B. CY 2015 Comment Indicator Definitions

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment System

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

B. Treatment of New Codes

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

2. Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April 2014 and July 2014 for Which We Solicited Public Comments in the CY 2015 OPPS/ASC Proposed Rule

3. Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comments in this CY 2015 OPPS/ASC Final Rule with Comment Period

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

1. Covered Surgical Procedures

a. Additions to the List of ASC Covered Surgical Procedures

b. Covered Surgical Procedures Designated as Office-Based

(1) Background

(2) Changes for CY 2015 to Covered Surgical Procedures Designated as Office-Based

c. ASC Covered Surgical Procedures Designated as Device-Intensive

(1) Background

(2) Changes to List of Covered ASC Surgical Procedures Designated as Device-Intensive for CY 2015

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

e. ASC Treatment of Surgical Procedures Removed from the OPPS Inpatient List for CY 2015

2. Covered Ancillary Services

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

1. ASC Payment for Covered Surgical Procedures

a. Background

b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2015

c. Waiver of Coinsurance and Deductible for Certain Preventive Services

d. Payment for Cardiac Resynchronization Therapy Services

e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite

2. Payment for Covered Ancillary Services

a. Background

b. Payment for Covered Ancillary Services for CY 2015

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle

2. Requests to Establish New NTIOL Classes for CY 2015

3. Payment Adjustment

4. Announcement of CY 2015 Deadline for Submitting Requests for CMS Review of Applications for a New Class of NTIOLs

F. ASC Payment and Comment Indicators

1. Background

2. ASC Payment and Comment Indicators

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

1. Background

2. Calculation of the ASC Payment Rates

a. Updating the ASC Relative Payment Weights for CY 2015 and Future Years

b. Transition Period to New OMB Delineations for ASC Wage Index

c. Updating the ASC Conversion Factor

3. Display of CY 2015 ASC Payment Rates

XIII. Hospital Outpatient Quality Reporting Program Updates

A. Background

1. Overview

2. Statutory History of the Hospital OQR Program

3. Measure Updates and Data Publication

a. Maintenance of Technical Specifications for Quality Measures

b. Public Display of Quality Measures

B. Process for Retention of Hospital OQR Program Measures Adopted in Previous Payment Determinations

C. Removal of Quality Measures from the Hospital OQR Program Measure Set

1. Considerations in Removing Quality Measures from the Hospital OQR Program

2. Criteria for Removal of “Topped-Out” Measures

3. Removal of Measures from the Hospital OQR Program for the CY 2017 Payment Determination and Subsequent Years

D. Quality Measures Previously Adopted for the CY 2016 Payment Determination and Subsequent Years

1. Data Submission Requirements for OP-27: Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) Reported via NHSN for the CY 2017 Payment Determination and Subsequent Years

a. Clarification of Submission Deadline and Data Submitted

b. Clarification on Reporting by CMS Certification Number (CCN)

2. Delayed Data Collection for OP-29 and OP-30

3. OP-31: Cataracts—Improvement in Patient's Visual Function within 90 Days Following Cataract Surgery

a. Correction of Response to Public Comments

b. Delayed Data Collection for OP-31 and Exclusion from the CY 2016 Payment Determination Measure Set

c. Voluntary Collection of Data for OP-31 for the CY 2017 Payment Determination and Subsequent Years

E. New Quality Measure for the CY 2018 Payment Determination and Subsequent Years

F. Possible Hospital OQR Program Measures and Topics for Future Consideration

1. Electronic Clinical Quality Measures

2. Partial Hospitalization Program Measures

3. Behavioral Health Measures

4. National Quality Strategy and CMS Quality Strategy Measure Domains

G. Payment Reduction for Hospitals That Fail to Meet the Hospital Outpatient Quality Reporting (OQR) Program Requirements for the CY 2015 Payment Update

1. Background

2. Reporting Ratio Application and Associated Adjustment Policy for CY 2015

H. Requirements for Reporting Hospital OQR Program Data for the CY 2017 Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2017 Payment Determination and Subsequent Years

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

a. General Procedural Requirements

b. Requirements for Chart-Abstracted Measures Where Data Are Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent Years

c. Claims-Based Measure Data Requirements for the CY 2017 and CY 2018 Payment Determination and Subsequent Years

d. Data Submission Requirements for Measure Data Submitted via the CMS Web-Based Tool for the CY 2017 Payment Determination and Subsequent Years

e. Population and Sampling Data Requirements for the CY 2017 Payment Determination and Subsequent Years

f. Review and Corrections Period for Chart-Abstracted Measures

3. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent Years

a. Background

b. Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2017 Payment Determination and Subsequent Years

c. Targeting Criteria for Data Validation Selection for the CY 2017 Payment Determination and Subsequent Years

d. Methodology for Encounter Selection for the CY 2017 Payment Determination and Subsequent Years

e. Medical Record Documentation Requests for Validation and Validation Score Calculation for the CY 2017 Payment Determination and Subsequent Years

I. Hospital OQR Program Reconsideration and Appeals Procedures for the CY 2017 Payment Determination and Subsequent Years

J. Extension or Exception Process for the CY 2017 Payment Determination and Subsequent Years

XIV. Requirements for the Ambulatory Surgical Center Quality Reporting (ASCQR) Program

A. Background

1. Overview

2. Statutory History of the Ambulatory Surgical Center Quality Reporting (ASCQR) Program

3. Regulatory History of the ASCQR Program

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures

2. Policy for Removal of Quality Measures from the ASCQR Program

3. Criteria for Removal of “Topped-Out” Measures

4. ASCQR Program Quality Measures Adopted in Previous Rulemaking

5. New ASCQR Program Quality Measure for the CY 2018 Payment Determination and Subsequent Years

6. ASCQR Program Measures for Future Consideration

7. Maintenance of Technical Specifications for Quality Measures

8. Public Reporting of ASCQR Program Data

C. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements

1. Statutory Background

2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR Program Requirements for a Payment Determination Year

D. Administrative Requirements

1. Requirements Regarding QualityNet Account and Security Administrator

2. Requirements Regarding Participation Status

E. Form, Manner, and Timing of Data Submitted for the ASCQR Program

1. Requirements Regarding Data Processing and Collection Periods for Claims-Based Measures Using Quality Data Codes (QDCs)

2. Minimum Threshold, Minimum Case Volume, and Data Completeness for Claims-Based Measures Using QDCs

3. Requirements for Data Submitted Via a CMS Online Data Submission Tool

a. Data Collection for ASC-6 and ASC-7

b. Delayed Data Collection for ASC-9 and ASC-10

c. Delayed Data Collection and Exclusion for ASC-11 for the CY 2016 Payment Determination and Voluntary Data Collection for ASC-11 for the CY 2017 Payment Determination and Subsequent Years

4. Claims-Based Measure Data Requirements for the New Measure for the CY 2018 Payment Determination and Subsequent Years

5. Data Submission Requirements for ASC-8 (Influenza Vaccination Coverage Among Healthcare Personnel) Reported via the National Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination and Subsequent Years

a. Previously Adopted Requirements for the CY 2016 Payment Determination

b. Data Collection Timeframes for the CY 2017 Payment Determination and Subsequent Years and Submission Deadlines for the CY 2016 Payment Determination and Subsequent Years

6. ASCQR Program Validation of Claims-Based and CMS Web-Based Measures

7. Extraordinary Circumstances Extensions or Exemptions for the CY 2017 Payment Determination and Subsequent Years

8. ASCQR Program Reconsideration Procedures for the CY 2017 Payment Determination and Subsequent Years

XV. Changes to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law: Expansion Exception Process

A. Background

1. Statutory Basis

2. Affordable Care Act Amendments to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law

B. Limitations Identified by Stakeholders Regarding the Required Use of HCRIS Data

C. Changes to the Physician-Owned Hospital Expansion Exception Process

1. Supplemental Data Sources

a. Internal Data Sources

b. External Data Sources

c. Completeness of Supplemental Data Sources

d. Other Issues Related to Supplemental Data Sources

e. Summary of Final Provisions Regarding Supplemental Data Sources

2. Fiscal Year Standard

a. Summary of Public Comments and Our Response Regarding the Fiscal Year Standard

b. Summary of Final Provisions Regarding the Fiscal Year Standard

3. Community Input and Timing of a Complete Request

a. Summary of Public Comments and Our Responses Regarding Community Input and Timing of a Complete Request

b. Final Provisions Regarding Community Input and Timing of a Complete Request

D. Additional Considerations

E. Summary of the Final Provisions Regarding the Expansion Exception Process under the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law

XVI. Revision of the Requirements for Physician Certification of Hospital Inpatient Services Other Than Psychiatric Inpatient Services

XVII. CMS-Identified Overpayments Associated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors (§§ 422.330 and 423.352)

A. Background

1. Medicare Part C Payment Background

1. Medicare Part D Payment Background

B. Provisions of the Proposed Rule and Final Policies

1. Definitions of “Payment Data” and “Applicable Reconciliation Date”

2. Request for Corrections of Payment Data

3. Payment Offset

a. Offset Amount

b. Payment Offset Notification

4. Appeals Process for MA Organizations and Part D Sponsors

a. Reconsideration

b. Informal Hearing

c. Review by Administrator

5. Matters Subject to Appeal and Burden of Proof

6. Effective Date of Appeals Process Provisions

XVIII. Files Available to the Public Via the Internet

XIX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. Requirements in Regulation Text: Changes to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law: Expansion Exception Process (§ 411.362)

C. Associated Information Collections Not Specified in Regulatory Text

1. Hospital OQR Program

a. Revisions to the CY 2016 Payment Determination Estimates

b. Hospital OQR Program Requirements for the CY 2017 Payment Determination and Subsequent Years

c. Review and Corrections Period Requirements for the CY 2017 Payment Determination and Subsequent Years

d. Hospital OQR Program Validation Requirements for the CY 2017 Payment Determination and Subsequent Years

e. Extraordinary Circumstances Extensions or Exemptions Process

f. Reconsideration and Appeals

2. ASCQR Program Requirements

a. Background

b. Revisions to the CY 2016 Payment Determination Estimates

c. Claims-Based Measures for the CY 2014 Payment Determination and Subsequent Years

d. Web-Based Measures for the CY 2017 Payment Determination and Subsequent Years

e. Extraordinary Circumstances Extension or Exemptions Process

f. Reconsiderations and Appeals

XX. Waiver of Proposed Rulemaking and Response to Comments

A. Waiver of Proposed Rulemaking

B. Response to Comments

XXI. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need

3. Overall Impacts for the OPPS and ASC Payment Provisions

4. Detailed Economic Analyses

a. Estimated Effects of OPPS Changes in this Final Rule with Comment Period

(1) Limitations of Our Analysis

(2) Estimated Effects of OPPS Changes on Hospitals

(3) Estimated Effects of OPPS Changes on CMHCs

(4) Estimated Effect of OPPS Changes on Beneficiaries

(5) Estimated Effects of OPPS Changes on Other Providers

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

(7) Alternative OPPS Policies Considered

b. Estimated Effects of CY 2015 ASC Payment System Policies

(1) Limitations of Our Analysis

(2) Estimated Effects of CY 2015ASC Payment System Policies on ASCs

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

(4) Alternative ASC Payment Policies Considered

c. Accounting Statements and Tables

d. Effects of Requirements for the Hospital OQR Program

e. Effects of CY 2014 Policies for the ASCQR Program

f. Effects of Changes to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law

g. Effects of Policies Related to CMS-Identified Overpayments Associated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXII. Federalism Analysis

I. Summary and Background

A. Executive Summary of This Document

1. Purpose

In this final rule with comment period, we are updating the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments and Ambulatory Surgical Centers (ASCs) beginning January 1, 2015. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the relative payment weights and the conversion factor for services payable under the Outpatient Prospective Payment System (OPPS). Under section 1833(i) of the Act, we annually review and update the ASC payment rates. We describe these and various other statutory authorities in the relevant sections of this final rule with comment period. In addition, this final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

In this document, we also are making changes to the data sources permitted for expansion requests for physician-owned hospitals under the physician self-referral regulations; changes to the underlying authority for the requirement of an admission order for all hospital inpatient admissions and changes to require physician certification for hospital inpatient admissions only for long-stay cases and outlier cases; and changes to establish a formal process, including a three-level appeals process, to recoup overpayments that result from the submission of erroneous payment data by Medicare Advantage (MA) organizations and Part D sponsors in the limited circumstances in which the organization or sponsor fails to correct these data.

2. Summary of the Major Provisions

• OPPS Update: For CY 2015, we are increasing the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 2.2 percent. This increase is based on the final hospital inpatient market basket percentage increase of 2.9 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the multifactor productivity (MFP) adjustment of 0.5 percentage point, and minus a 0.2 percentage point adjustment required by the Affordable Care Act. Under this final rule with comment period, we estimate that total payments for CY 2015, including beneficiary cost-sharing, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and community mental health centers (CMHCs)), will be approximately $56.1 billion, an increase of approximately $5.1 billion compared to CY 2014 payments, or $900 million excluding our estimated changes in enrollment, utilization, and case-mix.

We are continuing to implement the statutory 2.0 percentage point reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a reporting factor of 0.980 to the OPPS payments and copayments for all applicable services.

• Rural Adjustment: We are continuing the adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This adjustment will apply to all services paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to cost.
• Cancer Hospital Payment Adjustment: For CY 2015, we are continuing to provide additional payments to cancer hospitals so that the cancer hospital's payment-to-cost ratio (PCR) after the additional payments is equal to the weighted average PCR for the other OPPS hospitals using the most recently submitted or settled cost report data. Based on those data, a target PCR of 0.89 will be used to determine the CY 2015 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment adjustments will be the additional payments needed to result in a PCR equal to 0.89 for each cancer hospital.
• Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2015, payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status are set at the statutory default of average sales price (ASP) plus 6 percent.
• Packaging Policies: We are conditionally packaging certain ancillary services when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service. The initial set of services packaged under this ancillary service policy are the services assigned to APCs having an APC geometric mean cost (prior to application of status indicator Q1) of less than or equal to $100. This $100 geometric mean cost limit for the APC is part of the methodology of establishing an initial set of conditionally packaged ancillary service APCs, and is not meant to represent a threshold above which a given ancillary service will not be packaged, but as a basis for selecting an initial set of APCs that will likely be updated and expanded in future years.
• Implementation of Comprehensive APCs: For CY 2015, we are implementing, with several modifications, the policy for comprehensive APCs (C-APCs) that was finalized in the CY 2014 OPPS/ASC final rule with comment period effective January 1, 2015. We are continuing to define the services assigned to C-APCs as primary services, and to define a C-APC as a classification for the provision of a primary service and all adjunctive services and supplies provided to support the delivery of the primary service. We continue to consider the entire hospital stay, defined as all services reported on the hospital claim reporting the primary service, to be one comprehensive service for the provision of a primary service into which all other services appearing on the claim would be packaged. This results in a single Medicare payment and a single beneficiary copayment under the OPPS for the comprehensive service based on all included charges on the claim.

We are establishing a total of 25 C-APCs for CY 2015, including all of the formerly device-dependent APCs remaining after some restructuring and consolidation of these APCs (except for APCs 0427, 0622, and 0652) and two C-APCs for other procedures that are either largely device-dependent or represent single session services with multiple components (single-session cranial stereotactic radiosurgery and intraocular telescope implantation). We are modifying the complexity adjustment criteria finalized last year by lowering volume and cost threshold criteria for complexity adjustments. Finally, we are packaging all add-on codes furnished as part of a comprehensive service, which is consistent with our general add-on code packaging policy. However, the add-on codes assigned to the CY 2014 device-dependent APCs will be being evaluated with a primary service for a potential complexity adjustment.

• Ambulatory Surgical Center Payment Update: For CY 2015, we are increasing payment rates under the ASC payment system by 1.4 percent. This increase is based on a projected CPI-U update of 1.9 percent minus a multifactor productivity adjustment required by the Affordable Care Act that is projected to be 0.5 percentage point. Based on this update, we estimate that total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2015 will be approximately $4.147 billion, an increase of approximately $236 million compared to estimated CY 2014 Medicare payments.
• Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are adding one claims-based quality measure for the CY 2018 payment determination and subsequent years instead of the CY 2017 payment determination and subsequent years as proposed. However, prior to publicly reporting this measure, we plan to conduct a dry run (a preliminary analysis) for hospitals to review their performance and provide feedback using the most recently available data. There will be no payment impact during this dry-run period, and the results of the dry run will not be publicly reported. We are refining the criteria for determining “topped-out” measures, and we are removing the OP-6 and OP-7 measures due to “topped-out” status. In addition, we are updating several previously adopted measures. We are clarifying data submission requirements for OP-27 and are noting a delayed data collection for OP-29 and OP-30. We are excluding one previously adopted measure (OP-31) from the measure set for the CY 2016 payment determination and changing this measure from required to voluntary for the CY 2017 payment determination and subsequent years. We will not subject hospitals to payment reductions with respect to the OP-31 measure for the CY 2016 payment determination or during the period of voluntary reporting. In addition, we are formalizing a review and corrections period for chart-abstracted measures. We also are updating validation procedures and changes to regulation text to correct typographical errors. We are changing the eligibility criteria for validation; a hospital will only be eligible for random selection for validation if it submits at least 12 cases to the Hospital OQR Program Clinical Data Warehouse during the quarter with the most recently available data. Hospitals also will have the option to submit validation data using electronic methods and must identify the medical record staff responsible for submission of records to the designated CMS contractor. Finally, we are clarifying how we refer to the extraordinary circumstances extensions or exemptions process.
• Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are adopting one new quality measure (ASC-12) for the CY 2018 payment determination and subsequent years. This measure will be computed using paid Medicare fee-for-service (FFS) claims data and will not impose any additional burden on ASCs. We also are excluding one measure (ASC-11) previously adopted for the CY 2016 payment determination and providing that this measure may be voluntarily rather than mandatorily reported for the CY 2017 payment determination and subsequent years. We will not subject ASCs to payment reductions with respect to this measure for the CY 2016 payment determination or during the period of voluntary reporting. In addition, we are establishing a measure removal process and criteria, defining data collection timeframes and submission deadlines, and clarifying how we refer to the extraordinary circumstances extensions or exemptions process.

3. Summary of Costs and Benefits

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

a. Impacts of the OPPS Update

(1) Impacts of All OPPS Changes

Table 49 in section XXI. of this final rule with comment period displays the distributional impact of all the OPPS changes on various groups of hospitals and CMHCs for CY 2015 compared to all estimated OPPS payments in CY 2014. We estimate that the policies in this final rule with comment period will result in a 2.3 percent overall increase in OPPS payments to providers. We estimate that total OPPS payments for CY 2015, including beneficiary cost-sharing, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) will be approximately $56.1 billion, an increase of approximately $5.1 billion compared to CY 2014 payments, or $900 million, excluding our estimated changes in enrollment, utilization, and case-mix.

We estimated the isolated impact of our OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the provider-specific structure that we adopted beginning in CY 2011 and basing payment fully on the type of provider furnishing the service, we estimate a 1.3 percent increase in CY 2015 payments to CMHCs relative to their CY 2014 payments.

(2) Impacts of the Updated Wage Indexes

We estimate that our update of the wage indexes and application of the frontier State wage index, including changes resulting from the adoption of the new OMB labor market area delineations and the transitional 1-year, 50/50 blended wage index, will mitigate any negative changes due to the new CBSA delineations.

(3) Impacts of the Rural Adjustment and the Cancer Hospital Payment Adjustment

There are no significant impacts of our CY 2015 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not making any change in policies for determining the rural and cancer hospital payment adjustments, and the adjustment amounts do not significantly impact the budget neutrality adjustments for these policies.

(4) Impacts of the OPD Fee Schedule Increase Factor

We estimate that, for most hospitals, the application of the OPD fee schedule increase factor of 2.2 percent to the conversion factor for CY 2015 will mitigate the small negative impacts of the budget neutrality adjustments. As a result of the OPD fee schedule increase factor and other budget neutrality adjustments, we estimate that urban and rural hospitals will experience increases of approximately 2.3 percent for urban hospitals and 1.9 percent for rural hospitals. Classifying hospitals by teaching status or type of ownership suggests that these hospitals will receive similar increases.

b. Impacts of the ASC Payment Update

For impact purposes, the surgical procedures on the ASC list of covered procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The percentage change in estimated total payments by specialty groups under the CY 2015 payment rates compared to estimated CY 2014 payment rates ranges between −4.0 percent for ancillary items and services and 14 percent for hematologic and lymphatic system procedures.

c. Impacts of the Hospital OQR Program

We do not expect our CY 2015 policies to significantly affect the number of hospitals that do not receive a full annual payment update.

d. Impacts of the ASCQR Program

We do not expect our CY 2015 proposed policies to significantly affect the number of ASCs that do not receive a full annual payment update.

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Social Security Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act authorizing implementation of a PPS for hospital outpatient services. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR Parts 410 and 419.

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the OPPS: The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (these two public laws are collectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; and the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013.

Under the OPPS, we pay for hospital Part B services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to identify and group the services within each APC. The OPPS includes payment for most hospital outpatient services, except those identified in section I.C. of this final rule with comment period. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by CMHCs), and certain inpatient hospital services that are paid under Part B.

The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.

All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost (or mean cost, if elected by the Secretary) for an item or service within the same APC group (referred to as the “2 times rule”). In implementing this provision, we generally use the cost of the item or service assigned to an APC group.

For new technology items and services, special payments under the OPPS may be made in one of two ways. Section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-through payments,” for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient clinical information and cost data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, diagnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized prevention plan services. The Secretary exercises the authority granted under the statute to also exclude from the OPPS certain services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule (MPFS); certain laboratory services paid under the Clinical Laboratory Fee Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that require an inpatient stay that are paid under the hospital IPPS. We set forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22.

Under § 419.20(b) of the regulations, we specify the types of hospitals that are excluded from payment under the OPPS. These excluded hospitals include: Critical access hospitals (CAHs); hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service (IHS) hospitals.

D. Prior Rulemaking

On April 7, 2000, we published in the Federal Register a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was first implemented for services furnished on or after August 1, 2000. Section 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, not less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors.

Since initially implementing the OPPS, we have published final rules in the Federal Register annually to implement statutory requirements and changes arising from our continuing experience with this system. These rules can be viewed on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel)

1. Authority of the Panel

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 106-113, requires that we consult with an external advisory panel of experts to annually review the clinical integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act which gives discretionary authority to the Secretary to convene advisory councils and committees, the Secretary expanded the panel's scope to include the supervision of hospital outpatient therapeutic services in addition to the APC groups and weights. To reflect this new role of the panel, the Secretary changed the panel's name to the Advisory Panel on Hospital Outpatient Payment (the HOP Panel, or the Panel). The Panel is not restricted to using data compiled by CMS, and in conducting its review it may use data collected or developed by organizations outside the Department.

2. Establishment of the Panel

On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, at that time named the APC Panel. This expert panel, which may be composed of up to 19 appropriate representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, the Panel also is charged with advising the Secretary on the appropriate level of supervision for individual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). The current charter specifies, among other requirements, that: The Panel continues to be technical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Official (DFO); and is chaired by a Federal Official designated by the Secretary. The current charter was amended on November 15, 2011, and the Panel was renamed to reflect expanding the Panel's authority to include supervision of hospital outpatient therapeutic services and therefore to add CAHs to its membership.

The current Panel membership and other information pertaining to the Panel, including its charter, Federal Register notices, membership, meeting dates, agenda topics, and meeting reports, can be viewed on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.

3. Panel Meetings and Organizational Structure

The Panel has held multiple meetings, with the last meeting taking place on August 25, 2014. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for Panel membership and to announce new members.

The Panel has established an operational structure that, in part, currently includes the use of three subcommittees to facilitate its required review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups and Status Indicator (SI) Assignments.

The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for resolving them. The Visits and Observation Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC relative payment weights). The Subcommittee for APC Groups and SI Assignments advises the Panel on the following issues: The appropriate SIs to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APC placement of HCPCS codes regarding services for which separate payment is made.

Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended at the August 2014 meeting that the subcommittees continue. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the August 2014 Panel meeting are included in the sections of this final rule with comment period that are specific to each recommendation. For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at: http://fido.gov/facadatabase/public.asp.

F. Public Comments Received on the CY 2015 OPPS/ASC Proposed Rule

We received approximately 719 timely pieces of correspondence on the CY 2015 OPPS/ASC proposed rule that appeared in the Federal Register on July 14, 2014 (79 FR 40915). We note that we received some public comments that are outside the scope of the CY 2015 OPPS/ASC proposed rule. Out-of-scope public comments are not addressed in this CY 2015 OPPS/ASC final rule with comment period. Summaries of those public comments that are within the scope of the proposed rule and our responses are set forth in the various sections of this final rule with comment period under the appropriate headings.

G. Public Comments Received on the CY 2014 OPPS/ASC Final Rule With Comment Period

We received approximately 490 timely pieces of correspondence on the CY 2014 OPPS/ASC final rule with comment period that appeared in the Federal Register on December 10, 2013 (78 FR 74826), some of which contained comments on the interim APC assignments and/or status indicators of new or replacement HCPCS codes (identified with comment indicator “NI” in Addenda B, AA, and BB to that final rule). Summaries of the public comments on new or replacement codes are set forth in this CY 2015 OPPS/ASC final rule with comment period under the appropriate subject-matter headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

Section 1833(t)(9)(A) of the Act requires that the Secretary review not less often than annually and revise the relative payment weights for APCs. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we calculated the relative payment weights that were implemented on August 1, 2000 for each APC group.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40925), for the CY 2015 OPPS, we proposed to recalibrate the APC relative payment weights for services furnished on or after January 1, 2015, and before January 1, 2016 (CY 2015), using the same basic methodology that we described in the CY 2014 OPPS/ASC final rule with comment period. That is, we proposed to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services, using the most recent available data to construct a database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2015, we used approximately 149 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2013, and before January 1, 2014. For this final rule with comment period, for the purpose of recalibrating the final APC relative payment weights for CY 2015, we used approximately 161 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for HOPD services furnished on or after January 1, 2013, and before January 1, 2014. For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for the CY 2015 OPPS/ASC proposed rule and this final rule with comment period on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

Of the approximately 161 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2015 OPPS payment rates for this final rule with comment period, approximately 123 million claims were the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the approximately 123 million claims, approximately 5 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). From the remaining approximately 118 million claims, we created approximately 101 million single records, of which approximately 50 million were “pseudo” single or “single session” claims (created from approximately 22 million multiple procedure claims using the process we discuss later in this section). Approximately 1 million claims were trimmed out on cost or units in excess of ± 3 standard deviations from the geometric mean, yielding approximately 101 million single bills for ratesetting. As described in section II.A.2. of this final rule with comment period, our data development process is designed with the goal of using appropriate cost information in setting the APC relative payment weights. The bypass process is described in section II.A.1.b. of this final rule with comment period. This section discusses how we develop “pseudo” single procedure claims (as defined below), with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes.

The final APC relative weights and payments for CY 2015 in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2013 that were processed through June 30, 2014. While prior to CY 2013 we historically based the payments on median hospital costs for services in the APC groups, beginning with the CY 2013 OPPS, we established the cost-based relative payment weights for the OPPS using geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2015 OPPS, we proposed and are using this same methodology, basing payments on geometric mean costs. Under this methodology, we select claims for services paid under the OPPS and match these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most recently submitted cost reports to calculate the relative costs underpinning the APC relative payment weights and the CY 2015 payment rates.

b. Use of Single and Multiple Procedure Claims

For CY 2015, in general, and as we proposed, we are continuing to use single procedure claims to set the costs on which the APC relative payment weights are based. We generally use single procedure claims to set the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one unit of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.

It is generally desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. As we have for several years, we are continuing to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. Through bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple “pseudo” single procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single procedure claims. The history of our use of a bypass list to generate “pseudo” single procedure claims is well documented, most recently in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74849 through 74851). In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and created the first composite APCs, and continued those policies through CY 2014. Increased packaging and creation of composite APCs also increased the number of bills that we were able to use for ratesetting by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the composite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the number of bills we were able to use in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for multiple imaging services through CY 2014, and as we proposed, we are continuing this policy for CY 2015. We refer readers to section II.A.2.f. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74925) for a discussion of the use of claims in modeling the costs for composite APCs and to section II.A.3. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925 through 74948) for a discussion of our packaging policies for CY 2014. In addition, as we proposed, we are establishing additional packaging policies for the CY 2015 OPPS, as discussed in section II.A.3. of this final rule with comment period.

As we proposed, we are continuing to apply these processes to enable us to use as much claims data as possible for ratesetting for the CY 2015 OPPS. This methodology enabled us to create, for this final rule with comment period, approximately 50 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.f.(4) of this final rule with comment period for further discussion), to add to the approximately 51 million “natural” single procedure claims.

For CY 2015, we proposed to bypass 227 HCPCS codes that were identified in Addendum N to the CY 2015 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year's bypass list and use the updated year's data (for CY 2015, data available for the March 10, 2014 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2013 claims processed through September 30, 2013, and CY 2012 claims data processed through June 30, 2013, used to model the payment rates for CY 2014) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. For CY 2015, we proposed to continue to bypass all of the HCPCS codes on the CY 2014 OPPS bypass list, with the exception of HCPCS codes that we proposed to delete for CY 2015, which were listed in Table 1 of the proposed rule (79 FR 40927 through 40929). We also proposed to remove HCPCS codes that are not separately paid under the OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. Some of the codes we proposed to remove from the CY 2015 bypass list are affected by the CY 2015 final packaging policy, discussed in section II.A.3. of this final rule with comment period. In addition, we proposed to add to the bypass list for CY 2015 HCPCS codes not on the CY 2014 bypass list that, using either the CY 2014 final rule with comment period data (CY 2012 claims) or the March 10, 2014 Panel data (first 9 months of CY 2013 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2015 proposal to continue to develop OPPS relative payment weights based on geometric mean costs, we also proposed that the packaged cost criterion continue to be based on the geometric mean cost. The entire list proposed for CY 2015 (including the codes that remain on the bypass list from prior years) was open to public comment in the CY 2015 OPPS/ASC proposed rule. Because we must make some assumptions about packaging in the multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, we assumed that the representation of packaging on “natural” single procedure claims for any given code is comparable to packaging for that code in the multiple procedure claims. The criteria for the bypass list are:

• There are 100 or more “natural” single procedure claims for the code. This number of single procedure claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.
• Five percent or fewer of the “natural” single procedure claims for the code have packaged costs on that single procedure claim for the code. This criterion results in limiting the amount of packaging being redistributed to the separately payable procedures remaining on the claim after the bypass code is removed and ensures that the costs associated with the bypass code represent the cost of the bypassed service.
• The geometric mean cost of packaging observed in the “natural” single procedure claims is equal to or less than $55. This criterion also limits the amount of error in redistributed costs. During the assessment of claims against the bypass criteria, we do not know the dollar value of the packaged cost that should be appropriately attributed to the other procedures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount and volume protects the validity of cost estimates for low cost services billed with the bypassed service.

We note that, as we did for CY 2014, we proposed to continue to establish the CY 2015 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifying cost patterns, we proposed to use the geometric mean cost of packaging to identify potential codes to add to the bypass list.

In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we considered whether it would be appropriate to update the $50 packaged cost threshold for inflation when examining potential bypass list additions. As discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the packaged cost threshold more restrictive over time when considering additions to the bypass list. Therefore, adjusting the threshold by the market basket increase would prevent continuing decline in the threshold's real value. Based on the same rationale described for the CY 2014 OPPS/ASC final rule with comment period (78 FR 74838), we proposed for CY 2015 to continue to update the packaged cost threshold by the market basket increase. By applying the final CY 2014 market basket increase of 1.7 percent to the prior nonrounded dollar threshold of $54.73 (78 FR 74838), we determined that the threshold remains for CY 2015 at $55 ($55.66 rounded to $55, the nearest $5 increment). Therefore, we proposed to set the geometric mean packaged cost threshold on the CY 2013 claims at $55 for a code to be considered for addition to the CY 2015 OPPS bypass list.

• The code is not a code for an unlisted service. Unlisted codes do not describe a specific service, and thus their costs would not be appropriate for bypass list purposes.

In addition, we proposed to continue to include on the bypass list HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2015 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also proposed to continue to include certain HCPCS codes on the bypass list in order to purposefully direct the assignment of packaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital critical care service) to the bypass list (73 FR 68513).

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

Comment: One commenter supported the CY 2015 proposal to remove certain codes from the bypass list, in particular for the anatomic pathology procedures, and suggested that the bypass list undervalues codes and artificially lowers their estimated costs, as evidenced by the estimated increase in payment for some of those services in the CY 2015 OPPS/ASC proposed rule.

Response: We appreciate the commenter's support. The bypass list process is used to extract more data from claims that would otherwise be unusable. We use a variety of information in identifying codes that could be potentially added to the bypass list each year, including codes selected based on the empirical criteria, CMS medical advisor recommendations, and commenter requests. In doing so, we attempt to ensure that the amount of packaged cost being redistributed as a result of the process is limited.

After consideration of the public comments we received, we are adopting as final the proposed “pseudo” single claims process. As discussed earlier in this section, there are interactions between the application of a bypass list and various other OPPS payment policies. As a result of modifications to the packaging policies described in section III. of this final rule with comment period, we are adding codes that we had originally proposed to remove from the CY 2015 bypass list back on the CY 2015 final OPPS bypass list.

Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site) includes the list of bypass codes for CY 2015. The list of bypass codes contains codes that were reported on claims for services in CY 2013 and, therefore, includes codes that were in effect in CY 2013 and used for billing but were deleted for CY 2014. We retained these deleted bypass codes on the CY 2015 bypass list because these codes existed in CY 2013 and were covered OPD services in that period, and CY 2013 claims data are used to calculate CY 2015 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the multiple imaging composite APCs are identified by asterisks (*) in the third column of Addendum N to this final rule with comment period. HCPCS codes that we are adding for CY 2015 are identified by asterisks (*) in the fourth column of Addendum N.

Table 1 of the proposed rule contained the list of codes that we proposed to remove from the CY 2015 bypass list (79 FR 40927 through 40929). Table 1 below contains the list of codes that we are removing from the final CY 2015 bypass list because these codes were either deleted from the HCPCS before CY 2013 (and therefore were not covered OPD services in CY 2013) or were not separately payable codes under the CY 2015 OPPS because these codes are not used for ratesetting through the bypass process. The list of codes for removal from the bypass list includes those that will be affected by the CY 2015 OPPS packaging policy described in section II.A.3. of this final rule with comment period.

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

In the CY 2015 OPPS/ASC proposed rule (79 FR 40929), we proposed to continue to use the hospital-specific overall ancillary and departmental cost-to-charge ratios (CCRs) to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk. To calculate the APC costs on which the proposed CY 2015 APC payment rates were based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2013 claims data by comparing these claims data to the most recently available hospital cost reports, which, in most cases, were from CY 2012. For the CY 2015 OPPS proposed rates, we used the set of claims processed during CY 2013. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2013 (the year of claims data we used to calculate the proposed CY 2015 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2013 Data Specifications Manual.

In accordance with our longstanding policy, we calculated CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 67983 through 67985). The calculation of blood costs is a longstanding exception (since the CY 2005 OPPS) to this general methodology for calculation of CCRs used for converting charges to costs on each claim. This exception is discussed in detail in the CY 2007 OPPS/ASC final rule with comment period and discussed further in section II.A.2.d.(2) of this final rule with comment period.

For the CCR calculation process, we used the same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCR calculation that excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those hospitals that filed outpatient claims in CY 2013 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information System (HCRIS). We used the most recent available cost report data, which, in most cases, were from cost reports with cost reporting periods beginning in CY 2012. For the proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2015 OPPS payment rates. If the most recently available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced above for all purposes that require use of an overall ancillary CCR. We proposed to continue this longstanding methodology for the calculation of costs for CY 2015.

Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher cost services and a higher charge markup to lower cost services. As a result, the cost-based weights may reflect some aggregation bias, undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. This issue was evaluated in a report by the Research Triangle Institute, International (RTI). The RTI final report can be found on RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_ratios_200807_Final.pdf. For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527).

We addressed the RTI finding that there was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 45467). Specifically, we created one cost center for “Medical Supplies Charged to Patients” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current cost center for “Medical Supplies Charged to Patients” into one cost center for low-cost medical supplies and another cost center for high-cost implantable devices in order to mitigate some of the effects of charge compression. In determining the items that should be reported in these respective cost centers, we adopted commenters' recommendations that hospitals should use revenue codes established by the AHA's NUBC to determine the items that should be reported in the “Medical Supplies Charged to Patients” and the “Implantable Devices Charged to Patients” cost centers. For a complete discussion of the rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” a summary of public comments received, and our responses to those public comments, we refer readers to the FY 2009 IPPS final rule.

The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginning on or after May 1, 2009. In the CY 2013 OPPS/ASC final rule with comment period, we determined that a significant volume of hospitals were utilizing the “Implantable Devices Charged to Patients” cost center. Because a sufficient amount of data from which to generate a meaningful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Implantable Devices Charged to Patients” cost center (77 FR 68225). We retained this policy for the CY 2014 OPPS and, as we proposed, we are continuing this practice for the CY 2015 OPPS.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create new standard cost centers for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac Catheterization,” and to require that hospitals report the costs and charges for these services under these new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the costs and charges of CT scans, MRIs, and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI concluded that both the IPPS and the OPPS relative payment weights would better estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization. The new standard cost centers for CT scans, MRIs, and cardiac catheterization were effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10.

Using the HCRIS update for the CY 2015 final rule cycle, which we used to estimate costs in the CY 2015 OPPS ratesetting process, as discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40930), we were able to calculate a valid implantable device CCR for 2,895 hospitals, a valid MRI CCR for 1,934 hospitals, a valid CT scan CCR for 2,035 hospitals, and a valid Cardiac Catheterization CCR for 1,397 hospitals.

In our CY 2014 OPPS/ASC proposed rule discussion (78 FR 43549), we noted that, for CY 2014, the estimated changes in geometric mean estimated APC cost of using data from the new standard cost centers for CT scans and MRIs appeared consistent with RTI's analysis of cost report and claims data in the July 2008 final report (pages 5 and 6). RTI concluded that “in hospitals that aggregate data for CT scanning, MRI, or nuclear medicine services with the standard line for Diagnostic Radiology, costs for these services all appear substantially overstated, while the costs for plain films, ultrasound and other imaging procedures are correspondingly understated.” We also noted that there were limited additional impacts in the implantable device-related APCs from adopting the new cost report Form CMS 2552-10 because we had used data from the standard cost center for implantable medical devices beginning in CY 2013 OPPS ratesetting, as discussed above.

As we indicated in prior rulemaking (77 FR 68223 through 68225), once we determined that cost report data for the new standard cost centers were sufficiently available, we would analyze that data and, if appropriate, we would propose to use the distinct CCRs for new standard cost centers described above in the calculation of the OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43550), we have conducted our analysis and concluded that we should develop distinct CCRs for each of the new cost centers and use them in ratesetting. Therefore, we began in the CY 2014 OPPS, and proposed to continue for the CY 2015 OPPS, to calculate the OPPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, MRI, and implantable medical devices. Section XXI. of this final rule with comment period includes the impacts of calculating the CY 2015 OPPS relative payment weights using these new standard cost centers.

Comment: A few commenters encouraged CMS to ensure data quality and continue to test, refine, and improve its CCR analysis for CT scans and MRI.

Response: We will continue to monitor the CCRs for these services.

After consideration of the public comments we received, we are finalizing our proposal to calculate the OPPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, MRI, and implantable medical devices for CY 2015 without modification.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), we finalized a policy to remove claims from providers that use a cost allocation method of “square feet” to calculate CCRs used to estimate costs associated with the CT and MRI APCs. This change allows hospitals additional time to use one of the more accurate cost allocation methods, and thereby improve the accuracy of the CCRs on which the OPPS relative payment weights are developed. In Table 2 below, we display CCR values for providers based on various cost allocation methods.

As part of this transitional policy to estimate the CT and MRI APC relative payment weights using only cost data from providers that do not use “square feet” as the cost allocation statistic, we adopted a policy in the CY 2014 OPPS/ASC final rule with comment period that we will sunset this policy in 4 years once the updated cost report data become available for ratesetting purposes. We stated that we believe 4 years is sufficient time for hospitals that have not done so to transition to a more accurate cost allocation method and for the related data to be available for ratesetting purposes. Therefore, in CY 2018, we will estimate the CT and MRI APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed. In Table 3 below, we display the impact of excluding claims based on the “square feet” cost allocation method from estimates of CT and MRI costs in CY 2015.

Comment: A few commenters supported CMS' proposal to continue removing claims from providers that use the “square feet” cost allocation method from the cost model. One commenter suggested that CMS continue removing claims from providers that use this method in CY 2018 and beyond.

Response: We thank the commenters for their support and are finalizing this policy as proposed. We will continue to only include cost data from providers that do not use “square feet” as the cost allocation statistic in relative payment weights through CY 2017. For CY 2018 and beyond, we will estimate the CT and MRI APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed.

In summary, as we proposed, we are continuing to use data from the “Implantable Devices Charged to Patients” and “Cardiac Catheterization” cost centers to create distinct CCRs for use in calculating the OPPS relative payment weights for the CY 2015 OPPS. For the “Magnetic Resonance Imaging (MRI)” and “Computed Tomography (CT) Scan” APCs identified in Table 3 of this final rule with comment period, we are continuing our policy of removing claims from cost modeling for those providers using “square feet” as the cost allocation statistic for CY 2015.

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

In this section of this final rule with comment period, we discuss the use of claims to calculate the OPPS payment rates for CY 2015. The Hospital OPPS page on the CMS Web site on which this final rule with comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in the development of the final payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. The CMS Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing the “OPPS Limited Data Set,” which now includes the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2013 claims that were used to calculate the final payment rates for the CY 2015 OPPS.

In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this policy changed the cost metric on which the relative payments are based, the data process in general remained the same, under the methodologies that we used to obtain appropriate claims data and accurate cost information in determining estimated service cost. For CY 2015, as we proposed, we are continuing to use geometric mean costs to calculate the relative weights on which the CY 2015 OPPS payment rates are based.

We used the methodology described in sections II.A.2.a. through II.A.2.f. of this final rule with comment period to calculate the costs we used to establish the relative weights used in calculating the OPPS payment rates for CY 2015 shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We refer readers to section II.A.4. of this final rule with comment period for a discussion of the conversion of APC costs to scaled payment weights.

a. Claims Preparation

For this final rule with comment period, we used the CY 2013 hospital outpatient claims processed through June 30, 2014, to calculate the geometric mean costs of APCs that underpin the relative payment weights for CY 2015. To begin the calculation of the relative payment weights for CY 2015, we pulled all claims for outpatient services furnished in CY 2013 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory tests for persons who are neither inpatients nor outpatients of the hospital).

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

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 123 million claims that contain hospital bill types paid under the OPPS.

1. Claims that were not bill types 12X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital—Laboratory Services Provided to Nonpatients), or 76X (Clinic—Community Mental Health Center). Other bill types are not paid under the OPPS; therefore, these claims were not used to set OPPS payment.

2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 13X are hospital outpatient claims. Claims with bill type 14X are laboratory specimen claims.

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

To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hospital-specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this final rule with comment period. We then flagged and excluded CAH claims (which are not paid under the OPPS) and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclusive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less than 0.0001); and those from hospitals with overall ancillary CCRs that were identified as outliers (that exceeded ± 3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded ± 3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs, which is the revenue code-to-cost center crosswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that is relevant to OPPS services, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing” so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall ancillary CCR for the revenue code in question as the default CCR. For example, if a visit was reported under the clinic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code. The revenue code-to-cost center crosswalk is available for inspection on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not use in establishing relative costs or to model impacts are identified with an “N” in the revenue code-to-cost center crosswalk.

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

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

We then excluded claims without a HCPCS code. We moved to another file claims that contained only influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost; therefore, these claims are not used to set OPPS rates.

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

Prior to CY 2013, our payment policy for nonpass-through separately paid drugs and biologicals was based on a redistribution methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid for separately payable drugs and biologicals under the OPPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not redistribute the pharmacy overhead costs from packaged drugs to separately paid drugs. For the CY 2014 OPPS, we continued the CY 2013 payment policy for separately payable drugs and biologicals, and we are continuing this payment policy for CY 2015. We refer readers to section V.B.3. of this final rule with comment period for a complete discussion of our CY 2015 final payment policy for separately paid drugs and biologicals.

We then removed line-items that were not paid during claim processing, presumably for a line-item rejection or denial. The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” and “V” in the prospective year's payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly removed from the inpatient list for CY 2014 that were assigned status indicator “C” in the claim year. It also preserves charges for packaged services so that the costs can be included in the cost of the services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of another service that was reported on the same claim or the code otherwise violates claims processing edits.

For CY 2015, as we proposed, we are continuing the policy we implemented for CY 2013 and CY 2014 to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2013) and nonpass-through drugs and biologicals (status indicator “K” for CY 2013) where the charges reported on the claim for the line were either denied or rejected during claims processing. Removing lines that were eligible for payment but were not paid ensures that we are using appropriate data. The trim avoids using cost data on lines that we believe were defective or invalid because those rejected or denied lines did not meet the Medicare requirements for payment. For example, edits may reject a line for a separately paid drug because the number of units billed exceeded the number of units that would be reasonable and, therefore, is likely a billing error (for example, a line reporting 55 units of a drug for which 5 units is known to be a fatal dose). As with our trimming in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74849) of line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the data used for ratesetting purposes.

For the CY 2015 OPPS, as part of our continued packaging of clinical diagnostic laboratory tests, we also are applying the line item trim to these services if they did not receive payment in the claims year. Removing these lines ensures that, in establishing the CY 2015 OPPS relative payment weights, we appropriately allocate the costs associated with packaging these services.

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

(1) Splitting Claims

For the CY 2015 OPPS, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups are presented below.) We note that, under the proposed CY 2015 OPPS packaging policy (79 FR 40933), we proposed to delete status indicator “X” and revise the title and description of status indicator “Q1” to reflect that deletion, as discussed in sections II.A.3. and XI. of this final rule with comment period. We note that we also proposed to create status indicator “J1” to reflect the comprehensive APCs (C-APCs) discussed in section II.A.2.e. of this final rule with comment period. For CY 2015, we proposed to define major procedures as any HCPCS code having a status indicator of “J1,” “S,” “T,” or “V,” define minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N,” and classify “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2015, we proposed to continue to assign status indicator “R” to blood and blood products; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “STV-packaged codes;” status indicator “Q2” to all “T-packaged codes;” and status indicator “Q3” to all codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met.

As discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of codes. As we proposed, we are treating these codes in the same manner for data purposes for CY 2015 as we have treated them since CY 2008. Specifically, we are continuing to evaluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are carried through the data either with status indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” single procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs and, therefore, they carry the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.f. of this final rule with comment period.

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

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

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

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

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

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

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

(2) Creation of “Pseudo” Single Procedure Claims

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

As proposed, we also use the bypass codes listed in Addendum N to this final rule with comment period (which is available via the Internet on our Web site) and discussed in section II.A.1.b. of this final rule with comment period to remove separately payable procedures which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The final CY 2015 “overlap bypass codes” are listed in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. If one unit of a single, separately payable procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.f.(5) of this final rule with comment period, were met. If the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be packaged and, if so, the code ceased to be available for further assessment as part of the composite APC. Because the packaged code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC costs on which the CY 2015 OPPS relative payment weights are based. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

As we proposed, we also examined the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STV-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2014 relative payment weight, and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2014 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2014 relative payment weight; other codes with status indicator “Q1;” and all other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC geometric mean cost for the status indicator “Q1” HCPCS code.

Similarly, if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or multiple units of a single code with status indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest CY 2014 relative payment weight and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2014 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2014 relative payment weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim.

If a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STV-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest relative payment weight for CY 2014 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T-packaged”) HCPCS code to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2014 relative payment weight; other codes with status indicator “Q2;” codes with status indicator “Q1” (“STV-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2014 relative payment weights. If a status indicator “Q1” HCPCS code had a higher CY 2014 relative payment weight, it became the primary code for the simulated single bill process. We changed the status indicator for the selected status indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim.

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

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

We proposed to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2015 OPPS.

We did not receive any public comments on this proposal. Therefore, we are finalizing our proposal to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2015 OPPS.

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the services reported under packaged revenue codes in Table 4 below that appeared on the claim without a HCPCS code into the cost of the single major procedure remaining on the claim. For a more complete discussion of our final CY 2015 OPPS packaging policy, we refer readers to section II.A.3. of this final rule with comment period.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that CMS should review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. As we have in the past, and as we proposed, we are continuing to compare the final list of packaged revenue codes that we adopt for CY 2015 to the revenue codes that the I/OCE will package for CY 2015 to ensure consistency.

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

For CY 2015, as we did for CY 2014, we reviewed the changes to revenue codes that were effective during CY 2013 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we proposed to package for CY 2015. We believe that the charges reported under the revenue codes listed in Table 4 of the proposed rule continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2015, we proposed to continue to package the costs that we derive from the charges reported without HCPCS codes under the revenue codes displayed in Table 4 of the proposed rule for purposes of calculating the geometric mean costs on which the final CY 2015 OPPS/ASC payment rates are based.

Comment: One commenter recommended that CMS include, in the list of packaged revenue codes, revenue codes 0331 (Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—Injected), 0332 (Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—Oral), 0335 (Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—IV), 0360 (Operating Room Services; General Classification), 0361 (Operating Room Services; Minor Surgery), 0362 (Operating Room Services; Organ Transplant—Other than Kidney), 0369 (Operating Room Services; Other OR Services), 0410 (Respiratory Services; General Classification), 0412 (Respiratory Services; Inhalation Services), 0413 (Respiratory Services; Hyperbaric Oxygen Therapy), 0419 (Respiratory Services; Other Respiratory Services), 0722 (Labor Room/Delivery; Delivery Room), 0724 (Labor Room/Delivery; Birthing Center), 0729 (Labor Room/Delivery; Other Labor Room/Delivery), 0760 (Specialty Services; General Classification), 0761 (Specialty Services; Treatment Room), 0762 (Specialty Services; Observation), 0769 (Specialty Services; Other Specialty Services), 0770 (Preventive Care Services; General Classification). The commenter stated that charge data on claim lines with these revenue codes is currently included in OPPS modeling, and including them when they appear without a HCPCS would more accurately capture the costs from these lines.

Response: On the OPPS revenue code-to-cost center modeling crosswalk that we make available online, we indicate which revenue codes we believe are appropriately used for OPPS ratesetting purposes. As the commenter noted, coded lines billed using these specific revenue codes are already currently included for ratesetting purposes. While we note that including the packaged costs associated with uncoded lines billed with these revenue codes has a minimal impact on the relative payment weights, we believe that including them when establishing the OPPS relative payment weights would better estimate the full range of costs for services to which these lines are packaged. Including the uncoded lines and capturing the costs billed using these revenue codes would generally be appropriate in establishing the OPPS relative payment weights and our ratesetting methodology. Therefore, we have updated Table 4 which appeared in the proposed rule (79 FR 40935 through 40936) (also Table 4 in this final rule with comment period) to reflect the addition of these packaged revenue codes and incorporated these changes into our cost modeling logic. We will also ensure that this list corresponds with that used for I/OCE purposes.

After consideration of the public comments we received, we are finalizing the proposed packaged revenue codes for CY 2015, which are identified in Table 4 below, with modification to include the revenue codes described earlier in this section.

In accordance with our longstanding policy, we proposed to continue to exclude: (1) Claims that had zero costs after summing all costs on the claim; and (2) claims containing packaging flag number 3. Effective for services furnished after July 1, 2014, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a service with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the Medicare Administrative Contractor (MAC) was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative payment weight of the APC to which each code was assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equaled the revenue center payment (that is, the Medicare payment) on the assumption that, where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. We proposed to continue these processes for the CY 2015 OPPS.

For the remaining claims, we proposed to then standardize 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. The claims accounting that we provide for the proposed rule and final rule with comment period contains the formula we use to standardize the total cost for the effects of the wage index. As has been our policy since the inception of the OPPS, we proposed to use the pre-reclassified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the post-reclassification wage indices and, therefore, would result in the most accurate unadjusted geometric mean costs. We proposed to use these pre-reclassified wage indices for standardization using the new OMB labor market area delineations described in section II.C. of this final rule with comment period.

In accordance with our longstanding practice, we also proposed to exclude single and “pseudo” single procedure claims for which the total cost on the claim was outside 3 standard deviations from the geometric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multiple units of the bypass codes).

After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 118 million claims were left. Using these approximately 118 million claims, we created approximately 100 million single and “pseudo” single procedure claims, of which we used approximately 51 million single bills (after trimming out approximately 1 million claims as discussed in section II.A.1.a. of this final rule with comment period) in the CY 2015 geometric mean cost development and ratesetting.

As discussed above, the OPPS has historically developed the relative weights on which APC payments are based using APC median costs. For the CY 2013 OPPS and the CY 2014 OPPS, we calculated the APC relative payment weights using geometric mean costs, and we are continuing this practice for CY 2015. Therefore, the following discussion of the 2 times rule violation and the development of the relative payment weight refers to geometric means. For more detail about the CY 2015 OPPS/ASC policy to calculate relative payment weights based on geometric means, we refer readers to section II.A.2.f. of this final rule with comment period.

We proposed to use these claims to calculate the CY 2015 geometric mean costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC geometric mean costs determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group shall not be treated as comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the same group (the 2 times rule). While we have historically applied the 2 times rule based on median costs, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS relative payment weights based on geometric mean costs, we also applied the 2 times rule based on geometric mean costs. For the CY 2015 OPPS, we are continuing to develop the APC relative payment weights based on geometric mean costs.

We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC geometric mean cost to be significant. This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing geometric mean costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC geometric mean. We note that this method of identifying significant HCPCS codes within an APC for purposes of the 2 times rule was used in prior years under the median-based cost methodology. Under our CY 2015 policy to continue to base the relative payment weights on geometric mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent with their use in the median-based cost methodology. Unlisted codes are not used in establishing the percent of claims contributing to the APC, nor are their costs used in the calculation of the APC geometric mean. Finally, we reviewed the geometric mean costs for the services for which we pay separately under this final rule with comment period, and we reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and resource homogeneity within the APCs. The APC geometric means were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means and the APC geometric means were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single procedure claims.

We did not receive any public comments on our proposed CY 2015 methodology for calculating the geometric mean costs upon which the CY 2015 OPPS payment rates are based, and therefore are finalizing our methodology as proposed.

As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this final rule with comment period, in some cases, APC geometric mean costs are calculated using variations of the process outlined above. Specifically, section II.A.2.d. of this final rule with comment period addresses the calculation of single APC criteria-based geometric mean costs. Section II.A.2.f. of this final rule with comment period discusses the calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of this final rule with comment period addresses the methodology for calculating the geometric mean costs for partial hospitalization services.

(2) Recommendations of the Panel Regarding Data Development

At the August 2014 meeting of the Panel, we discussed changes in APC geometric mean cost between the CY 2015 Proposed OPPS and the CY 2014 Final OPPS, the CY 2015 proposed comprehensive APC policy, and a study examining the packaged codes most commonly appearing with clinic visit codes.

At the August 2014 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel's data-related recommendations and our responses follow.

Recommendation: The Panel recommends that the work of the Data Subcommittee continue.

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that Jim Nelson serve as the Chair of the Data Subcommittee.

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that CMS provide the Panel with a list of APCs for which costs fluctuate by more than 20 percent relative to the APCs in the most recent prior rulemaking cycle.

CMS Response: We are accepting this recommendation and will provide this information regarding fluctuating APC costs at the next HOP Panel meeting.

d. Calculation of Single Procedure APC Criteria-Based Costs

(1) Device-Dependent APCs

Historically, device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure. The standard methodology for calculating device-dependent APC costs utilizes claims data that generally reflect the full cost of the required device by using only the subset of single procedure claims that pass the procedure-to-device and device-to-procedure edits; do not contain token charges (less than $1.01) for devices; and, until January 1, 2014, did not contain the “FB” modifier signifying that the device was furnished without cost to the provider, or where a full credit was received; and do not contain the “FC” modifier signifying that the hospital received partial credit for the device. For a full history of how we have calculated payment rates for device-dependent APCs in previous years and a detailed discussion of how we developed the standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the procedure-to-device edits and device-to-procedure edits used in ratesetting for device-dependent APCs are available in the CY 2005 OPPS final rule with comment period (69 FR 65761 through 65763) and the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 through 68071).

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74859), we finalized a policy to define 29 device-dependent APCs as single complete services and to assign them to comprehensive APCs (C-APCs) that provide all-inclusive payments for those services, but we delayed implementation of this policy until CY 2015 (78 FR 74862). This policy is a further step toward improving the prospective nature of our payments for these services where the cost of the device is relatively high compared to the other costs that contribute to the cost of the service. Table 5 of the CY 2014 OPPS/ASC final rule with comment period provided a list of the 39 APCs recognized as device-dependent APCs and identified the 29 device-dependent APCs that would have been converted to C-APCs. In addition, in the CY 2014 OPPS/ASC final rule with comment period, we finalized a policy for the treatment of the remaining 10 device-dependent APCs that applied our standard APC ratesetting methodology to calculate the CY 2014 payment rates for these APCs, but implementation of the entire policy was delayed until CY 2015.

In the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557) and in the CY 2015 OPPS/ASC proposed rule (79 FR 40937 through 40938), for CY 2015, we proposed to no longer implement procedure-to-device edits and device-to-procedure edits for any APC. Under this proposed policy, which was discussed but not finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74858), hospitals are still expected to adhere to the guidelines of correct coding and append the correct device code to the claim, when applicable. However, claims would no longer be returned to providers when specific procedure and device code pairings do not appear on a claim. As we stated in both the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74858), we believe that this is appropriate because of hospitals' multiyear experience in coding and reporting charges for medical device implantation procedures. We also believe that the C-APCs will reliably reflect the cost of the devices as the C-APCs will include all costs on the claim (except for the few categories of items and services that are excluded from the comprehensive APC policy). Therefore, we do not believe that the burden imposed upon hospitals to adhere to the procedure-to-device edits and device-to-procedure edits and the burden imposed upon the Medicare program to maintain those edits continue to be necessary. As with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately, regardless of whether there are claims processing edits in place.

The CY 2015 comprehensive APC policy that we proposed in the CY 2015 OPPS/ASC proposed rule consolidates and restructures the 39 current device-dependent APCs into 26 (of the total 28) proposed C-APCs, which were listed in Table 5 of the proposed rule. The final CY 2015 comprehensive APC policy is discussed in section II.A.2.e. of this final rule with comment period. As a result of the final CY 2015 comprehensive APC policy, only 3 of the current 39 device-dependent APCs will remain in the CY 2015 OPPS because all other device-dependent APCs are being converted to C-APCs. All of the remaining device-dependent APCs were either deleted due to the consolidation and restructuring of these APCs or they were converted to C-APCs. In conjunction with the conversion of almost all of the 39 device-dependent APCs into C-APCs, and as discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74858), in the CY 2015 OPPS/ASC proposed rule, we proposed to no longer use procedure-to-device edits and device-to-procedure edits for any APC because we continue to believe that the elimination of device-to-procedure edits and procedure-to-device edits is appropriate considering the experience that hospitals now have in coding and reporting these claims fully and, for the more costly devices, the C-APCs will reliably reflect the cost of the device if it is included anywhere on the claim.

While we believe that device-to-procedure edits and procedure-to-device edits are no longer necessary, we are sensitive to the concerns raised by stakeholders in the past about the costs of devices being reported and captured. In light of these concerns, in the CY 2015 OPPS/ASC proposed rule (79 FR 40937 through 40938), we proposed to create claims processing edits that require any of the device codes used in the previous device-to-procedure edits for device-dependent APCs to be present on the claim whenever a procedure code assigned to any of the former device-dependent APCs (most of which are being converted to C-APCs) is reported on the claim to ensure that device costs are captured by hospitals. We stated that we expect that hospitals would use an appropriate device code consistent with correct coding in order to ensure that device costs are always reported on the claim, so that costs are appropriately captured in claims that CMS uses for ratesetting.

Comment: The majority of commenters requested that CMS maintain device-to-procedure and procedure-to-device edits in order to ensure continued complete and accurate cost reporting by hospitals. One commenter recommended that CMS adopt its proposal to require any appropriate device code used in the previous device-to-procedure edits to be present on the claim, if CMS discontinues the current edits and educates hospitals on the continued need to report the actual device used in the procedure for accurate ratesetting. One commenter was cautiously optimistic that CMS' proposal requiring any appropriate device code used in the previous device-to-procedure edits to be present on the claim for most comprehensive APCs could promote complete reporting in a potentially less prescriptive way for hospitals. Another commenter believed CMS' proposed policy change would result in “ridiculous” combinations of device and procedure codes for some services and thus would result in invalid mean costs for the procedures. Other commenters recommended that CMS modify its proposed policy to incorporate edit logic that will allow exceptions for comprehensive APCs that do not require device codes to be reported with every assigned procedural code. One commenter recommended that the claims edits be implemented initially on a 1-year trial/interim basis. Other commenters suggested that CMS eliminate the device claims processing edits altogether.

Response: We continue to believe that the elimination of device-to-procedure edits and procedure-to-device edits is appropriate due to the experience hospitals now have in coding and reporting these claims fully. More specifically, for the more costly devices, we believe the C-APCs will reliably reflect the cost of the device if charges for the device are included anywhere on the claim. We remind commenters that, under our proposed policy, hospitals would still be expected to adhere to the guidelines of correct coding and append the correct device code to the claim when applicable. We also remind commenters that, as with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately, regardless of whether there are claims processing edits in place. We do not believe that our proposed policy will result in ridiculous combinations of device and procedure codes for some services, as this would require deliberate miscoding by hospitals, which we do not believe would result from this change to the device code reporting requirements. We continue to expect that hospitals would use an appropriate device code consistent with correct coding in order to ensure that device costs are always reported on the claim, so that costs are appropriately captured in claims that CMS uses for ratesetting. While we believe that device-to-procedure edits and procedure-to-device edits are no longer necessary at this time, we are sensitive to commenters' concerns that all relevant costs for the APCs currently recognized as device-dependent APCs are appropriately included in the claims that CMS will use for ratesetting. In light of those concerns, we believe creating a claims processing edit requiring a device code to be present on the claim whenever a procedure code from the APCs currently recognized as a device-dependent APCs will help to ensure continued complete and accurate cost reporting by hospitals. Device edits will not apply to procedures assigned to C-APCs that either do not use implantable medical devices or procedures that do not have device-to-procedure or procedure-to-device edits assigned to them currently for CY 2014. This will ensure that the proposed device edit policy (requiring only that any device code be reported on a claim containing a procedure assigned to one of the formerly device-dependent APCs) will only apply to those procedures that currently have device-to-procedure or procedure-to-device edits currently assigned to them.

After consideration of the public comments we received, we are finalizing our proposal to no longer implement specific procedure-to-device and device-to-procedure edits for any APC. We also are finalizing our proposal to create claims processing edits that require any of the device codes used in the previous device-to-procedure edits to be present on the claim whenever a procedure code assigned to any of the current device-dependent APCs (that remain after the consolidation and restructuring of these APCs) listed in Table 5 below is reported on the claim to ensure that device costs are captured by hospitals. CMS will monitor the claims data to ensure that hospitals continue reporting appropriate device codes on the claims for the formerly device-dependent APCs. We note that while we proposed to make all 26 of the APCs listed in Table 5 C-APCs for CY 2015, in section II.A.2.e. of this final rule with comment period, we are not finalizing our proposal to recognize APCs 0427, 0622, and 0652 as C-APCs. While APCs 0427, 0622, and 0652 will not be recognized as comprehensive APCs for CY 2015, our finalized device edit policy will apply to these 3 APCs, as these 3 APCs are formerly device-dependent APCs. The term “device-dependent APC” will no longer be employed beginning in CY 2015. We will refer to APCs with a device offset of more than 40 percent as “device-intensive” APCs. Device-intensive APCs will be subject to the no cost/full credit and partial credit device policy. For a discussion of device-intensive APCs and the no cost/full credit and partial credit device policy, we refer readers to section IV.B. of this final rule with comment period. For a discussion of ASC procedures designated as device intensive, we refer readers to section XII.C.1.c. of this final rule with comment period.

(2) Blood and Blood Products

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

In the CY 2015 OPPS/ASC proposed rule (79 FR 40938), for CY 2015, we proposed to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a significant difference in CCRs for those hospitals with and without blood-specific cost centers, and past public comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimation of the true hospital costs for blood and blood products. Specifically, in order to address the differences in CCRs and to better reflect hospitals' costs, we proposed to continue to simulate blood CCRs for each hospital that does not report a blood cost center by calculating the ratio of the blood-specific CCRs to hospitals' overall CCRs for those hospitals that do report costs and charges for blood cost centers. We proposed to apply this mean ratio to the overall CCRs of hospitals not reporting costs and charges for blood cost centers on their cost reports in order to simulate blood-specific CCRs for those hospitals. We proposed to calculate the costs upon which the proposed CY 2015 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

Comment: Commenters supported the proposal to continue to separately pay for blood and blood products using a blood-specific CCR methodology.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs.

We continue to believe that the hospital-specific simulated blood-specific CCR methodology better responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we believe that it yields more accurate estimated costs for these products. We continue to believe that this methodology in CY 2015 will result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We note that, as discussed in section II.A.2.e. of the CY 2014 OPPS/ASC final rule with comment period and this final rule with comment period, we established comprehensive APCs that will provide all-inclusive payments for certain device-dependent procedures. Under this policy, we include the costs of blood and blood products when calculating the overall costs of these comprehensive APCs. We proposed to continue to apply the blood-specific CCR methodology described in this section when calculating the costs of the blood and blood products that appear on claims with services assigned to the comprehensive APCs (79 FR 40939). Because the costs of blood and blood products will be reflected in the overall costs of the comprehensive APCs (and, as a result, in the final payment rates of the comprehensive APCs), we proposed to not make separate payments for blood and blood products when they appear on the same claims as services assigned to the comprehensive APCs (79 FR 40939).

We did not receive any public comments on this proposal and are finalizing the policy as proposed. We refer readers to Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) for the final CY 2015 payment rates for blood and blood products (which are identified with status indicator “R”). For a more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).

(3) Brachytherapy Sources

Section 1833(t)(2)(H) of the Act mandates the creation of additional groups of covered OPD services that classify devices of brachytherapy consisting of a seed or seeds (or radioactive source) (“brachytherapy sources”) separately from other services or groups of services. The statute provides certain criteria for the additional groups. For the history of OPPS payment for brachytherapy sources, we refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC final rule with comment period (77 FR 68240 through 68241). As we have stated in prior OPPS updates, we believe that adopting the general OPPS prospective payment methodology for brachytherapy sources is appropriate for a number of reasons (77 FR 68240). The general OPPS payment methodology uses costs based on claims data to set the relative payment weights for hospital outpatient services. This payment methodology results in more consistent, predictable, and equitable payment amounts per source across hospitals by averaging the extremely high and low values, in contrast to payment based on hospitals' charges adjusted to costs. We believe that the OPPS prospective payment methodology, as opposed to payment based on hospitals' charges adjusted to cost, also would provide hospitals with incentives for efficiency in the provision of brachytherapy services to Medicare beneficiaries. Moreover, this approach is consistent with our payment methodology for the vast majority of items and services paid under the OPPS. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66779 through 66787), the CY 2009 OPPS/ASC final rule with comment period (73 FR 68668 through 68670, the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533 through 60537), the CY 2011 OPPS/ASC final rule with comment period (75 FR 71978 through 71981), the CY 2012 OPPS/ASC final rule with comment period (76 FR 74160 through 74163), the CY 2013 OPPS/ASC final rule with comment period (77 FR 68240 through 68242), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74860) for further discussion of the history of OPPS payment for brachytherapy sources.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40939 through 40940), for CY 2015, we proposed to use the costs derived from CY 2013 claims data to set the proposed CY 2015 payment rates for brachytherapy sources, as we proposed to use to set the proposed payment rates for most other items and services that would be paid under the CY 2015 OPPS. We based the proposed payment rates for brachytherapy sources on the geometric mean unit costs for each source, consistent with the methodology proposed for other items and services paid under the OPPS, as discussed in section II.A.2. of the proposed rule. We also proposed to continue the other payment policies for brachytherapy sources that we finalized and first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537). We proposed to pay for the stranded and non-stranded not otherwise specified (NOS) codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, respectively, on a per source basis (as opposed to, for example, a per mCi), which is based on the policy we established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66785). We also proposed to continue the policy we first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding payment for new brachytherapy sources for which we have no claims data, based on the same reasons we discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786; which was delayed until January 1, 2010 by section 142 of Pub. L. 110-275). That policy is intended to enable us to assign new HCPCS codes for new brachytherapy sources to their own APCs, with prospective payment rates set based on our consideration of external data and other relevant information regarding the expected costs of the sources to hospitals.

The proposed CY 2015 payment rates for brachytherapy sources were included in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site) and were identified with status indicator “U.”

We invited public comment on this proposed policy and also requested recommendations for new HCPCS codes to describe new brachytherapy sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources. In the CY 2015 OPPS/ASC proposed rule, we provided an appropriate address for receipt of these recommendations; the address is repeated at the end of this section. We indicated that we will continue to add new brachytherapy source codes and descriptors to our systems for payment on a quarterly basis.

Comment: Commenters expressed a number of concerns regarding CMS' outpatient hospital claims data used to set prospective payment rates for brachytherapy sources. Commenters stated that high dose rate (HDR) brachytherapy devices decay over a 90-day period and are used to treat multiple patients during this time period. According to the commenters, the true cost of brachytherapy sources depends on the number of patients treated by a hospital within a 90-day period, as well as the number of treatments required and the intensity of the treatments. For this reason, the commenters believed that it is difficult to establish fair and adequate prospective payment rates for brachytherapy sources. Commenters also noted that the brachytherapy source payment data continue to show huge variation in per unit cost across hospitals. In addition, the commenters believed that CMS' claims data contain rank order anomalies, causing the usual cost relationship between the high activity palladium-103 source (HCPCS code C2635, Brachytherapy source, non-stranded, high activity, palladium-103, greater than 2.2 mci (NIST) per source) and the low activity palladium-103 sources (HCPCS codes C2640, Brachytherapy source, stranded, palladium-103, per source and C2641, Brachytherapy source, non-stranded, palladium-103, per source) to be reversed. The commenters noted that the proposed geometric mean costs of the brachytherapy source HCPCS codes are approximately $26, $69, and $72, respectively. The commenters stated that stranded palladium-103 sources (HCPCS code C2640) always cost more than non-stranded palladium-103 sources (HCPCS code C2641), which is not reflected in the proposed rule claims data.

Response: As stated above, we believe that geometric mean costs based on hospital claims data for brachytherapy sources have produced reasonably consistent per-source cost estimates over the past several years, comparable to the patterns we have observed for many other OPPS services whose payments are set based upon relative payment weights from claims data. We believe that our per-source payment methodology specific to each source's radioisotope, radioactive intensity, and stranded or non-stranded configuration, supplemented by payment based on the number of sources used in a specific clinical case, adequately accounts for the major expected sources of variability across treatments. (We refer readers to the CY 208 OPPS final rule with comment period (72 FR 66782); the CY 2010 OPPS/ASC final rule with comment period (74 FR 60534); the CY 2011 OPPS/ASC final rule with comment period (75 FR 71979); the CY 2012 OPPS/ASC final rule with comment period (76 FR 74161); the CY 2013 OPPS/ASC final rule with comment period (77 FR 68241); and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861)). We believe that the CY 2013 brachytherapy source claims data used for CY 2015 ratesetting produce adequate payment for these services. Also, as we have explained previously, a prospective payment system relies upon the concept of averaging, where the payment may be more or less than the estimated cost of providing a service for a particular patient. With the exception of outlier cases, the payment for services is adequate to ensure access to appropriate care. In the case of brachytherapy sources for which the law requires separate payment groups, without packaging, the costs of these individual items could be expected to show greater variation than some other APCs under the OPPS because higher variability in costs for some component items and services is not balanced with lower variability in costs for others, and because relative payment weights are typically estimated using a smaller set of claims. Nevertheless, we believe that prospective payment for brachytherapy sources based on geometric mean costs of the services reported on claims calculated according to the standard OPPS methodology is appropriate and provides hospitals with the greatest incentives for efficiency in furnishing brachytherapy treatment.

Under the budget neutral provision for the OPPS, it is the relativity of costs, not the absolute costs, that is important, and we believe that brachytherapy sources are appropriately paid according to the standard OPPS payment approach. Furthermore, some sources may have geometric mean costs and payment rates based on 50 or fewer providers because it is not uncommon for OPPS prospective payment rates to be based on claims from a relatively small number of hospitals that furnished the service in the year of claims data available for the OPPS update year. Fifty hospitals may report hundreds of brachytherapy source services on claims for many cases and comprise the universe of providers using particular low volume sources, for which we are required to pay separately by statute. Further, our methodology for estimating geometric mean costs for brachytherapy sources utilizes all line-item charges for those sources, which allows us to use all hospital reported charge and estimated cost information to set payment rates for these items. Therefore, no brachytherapy source claims are excluded from the estimate of geometric means costs. We have no reason to believe that prospective payment rates based on claims data from those providers furnishing a particular source do not appropriately reflect the cost of that source to hospitals. As for most other OPPS services, we note that the geometric mean costs for brachytherapy sources are based upon the costs of those providers sources in CY 2013. Hospitals individually determine their charge for an item or service, and one of Medicare's primary requirements for setting a charge is that it be reasonably and consistently related to the cost of the item or service for that facility. (We refer readers to the Medicare Provider Reimbursement Manual, Part I, Section 2203, which is available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929.html?DLPage=1DLSort=0DLSortDir=ascending.) We then estimate a cost from that charge using the hospital's most recent Medicare hospital cost report data in our standard OPPS ratesetting process.

We acknowledge that HDR brachytherapy sources such as HDR iridium-192 have a fixed active life and must be replaced every 90 days. As a result, a hospital's per treatment cost for the source would be dependent on the number of treatments furnished per source. The source's cost must be amortized over the life of the source. Therefore, when establishing charges for HDR iridium-192, we expect hospitals to project the number of treatments that would be provided over the life of the source and establish charges for the source accordingly (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR 74162; 77 FR 68242; and 78 FR 74861). For most payable services under the OPPS, our practice is to establish prospective payment rates based on the geometric mean costs determined from hospitals' claims data to provide incentives for efficient and cost effective delivery of these services.

In the case of high-activity and low-activity iodine-125 sources, our CY 2013 claims data show that the hospitals' relative costs for the high-activity source are greater than the costs of the low-activity sources. As we have stated in the past, we do not have any information about the expected cost differential between high-activity and low-activity sources of various isotopes other than what is available in our claims and hospital cost report data (75 FR 71979; 76 FR 74162; 77 FR 68242; and 78 FR 74861). In the case of the relationship between high-activity and low-activity palladium-103, our claims data consistently have shown higher average costs for low-activity palladium-103. For the high-activity palladium-103 sources (HCPCS code C2635), 8 hospitals reported this service in CY 2013, compared to 104 and 159 hospitals that reported services for the low-activity palladium-103 sources described by HCPCS codes C2640 and C2641, respectively. It is clear that fewer hospitals furnished the high-activity palladium-103 source than the low-activity palladium-103 sources, and we expect that the hospital cost distribution for those hospitals could be different than the cost distribution of the large numbers of hospitals reporting the low-activity palladium-103 sources, as previously stated (74 FR 60535; 75 FR 71979; 76 FR 74162; 77 FR 68242; and 78 FR 74861). These varied cost distributions clearly contribute to the observed relationship in geometric mean cost between the different types of sources. However, we see no reason why our standard ratesetting methodology for brachytherapy sources that relies on all claims data from all hospitals furnishing brachytherapy sources would not yield valid geometric mean costs for those hospitals furnishing the different brachytherapy sources upon which CY 2015 prospective payments are based.

Comment: One commenter, a developer of a linear non-stranded palladium-103 source described by HCPCS code C2636 (Brachytherapy linear source, nonstranded, palladium-103, per 1 mm), believed that CY 2013 claims data for services furnished prior to November 2013 used to determine the CY 2015 payment rates are invalid because the claims data do not reflect the costs of its linear non-stranded palladium-103 source, which became commercially available in November 2013. Further, the commenter stated that there were no other linear non-stranded palladium-103 sources commercially available prior to November 2013. Therefore, the commenter requested that payment for HCPCS code C2636 remain at the current CY 2014 payment rate until claims data for HCPCS code C2636 become available in CY 2016.

Response: We understand the commenter's claim that its linear non-stranded palladium-103 source described by HCPCS code C2636 became commercially available in November 2013. However, we disagree with the commenter's assertion that there were no other commercially available linear non-stranded palladium-103 sources described by HCPCS code C2636 prior to November 2013. We also disagree with the commenter that the CY 2013 claims data used to determine the CY 2015 payment rate for HCPCS code C2636 are invalid. As discussed in the CY 2005 OPPS final rule (69 FR 65840), we established HCPCS code C2636 to uniquely identify linear non-stranded Palladium-103 brachytherapy sources. Since the HCPCS code became effective January 1, 2005, we have used historical claims data to set the prospective payment rates. To determine the CY 2015 OPPS payment rate for HCPCS code C2636, we used CY 2013 claims data, which include brachytherapy sources costs for linear non-stranded palladium-103 sources. Despite the date of commercial availability for the commenter's linear non-stranded palladium-103 brachytherapy source, we do have CY 2013 claims data for HCPCS code C2636. Therefore, in accordance with our above-mentioned methodology and consistent with our policy used to set the prospective payment rates for brachytherapy sources, we are finalizing our proposed payment rate for HCPCS code C2636 based on CY 2013 claims data.

Comment: One commenter expressed concern regarding CMS' CY 2014 payment rate for a new brachytherapy source described by HCPCS code C2644 (Brachytherapy source, cesium-131 chloride solution, per millicurrie), which became effective July 1, 2014. In the July 2014 OPPS Change Request (CR) 8776, dated May 23, 2014, CMS established a payment rate for HCPCS code C2644 of $18.97. The commenter, who also petitioned for the initial establishment of HCPCS code C2644 to describe the new brachytherapy source, requested clarification on how the payment rate was established by CMS, given that the cost of the new brachytherapy source is $25 per millicurie and claims data are not yet available.

Response: As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786), we assign new HCPCS codes that describe new brachytherapy sources to their own APCs, with prospective payment rates set based on consideration of external data and other relevant information regarding the expected costs of the sources to hospitals. The commenter provided CMS with clinical information on the brachytherapy source cesium-131 chloride solution within its petition for the establishment of the new HCPCS code, and noted the source's clinical similarities with the liquid iodine-125 solution source, which is described by HCPCS code A9527 (Iodine I-125 sodium iodide). The commenter stated that both iodine I-125 sodium iodide and cesium-131 chloride solution “have similar energies, are capable of delivering the same radiation dose to the planned treatment volume, are supplied in liquid form, and are compatible with the GliaSite RTS Catheter”. Based on clinical information provided by the commenter and a clinical review by CMS' medical advisors, we believe that the brachytherapy sources described by HCPCS code C2644 and HCPCS code A9527 are clinical substitutes. Therefore, we set a payment rate for HCPCS code C2644 that is equal to the payment rate for HCPCS code A9527 when it became effective in CY 2014, and proposed to apply the same methodology for CY 2015. We are finalizing our proposal for CY 2015 to set the payment rate for HCPCS code C2644 as the equivalent of the payment rate for HCPCS code A9527. (We refer readers to Addendum B of this final rule with comment period for the CY 2015 OPPS payment rate. Addendum B is available via the Internet on the CMS Web site.)

After consideration of the public comments we received, we are finalizing our proposal to continue to set the payment rates for brachytherapy sources using our established prospective payment methodology, which is based on geometric mean costs. The CY 2015 final payment rates for brachytherapy sources are found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

As stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40940), we continue to invite hospitals and other parties to submit recommendations to CMS for new HCPCS codes that describe new brachytherapy sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources. Such recommendations should be directed to the Division of Outpatient Care, Mail Stop C4-03-27, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244.

e. Comprehensive APCs

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), we finalized a comprehensive payment policy that packages payment for adjunctive and secondary items, services, and procedures into the most costly primary procedure (primarily medical device implantation procedures) under the OPPS at the claim level, effective January 1, 2015. We defined a comprehensive APC (C-APC) as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. We established comprehensive APCs as a category broadly for OPPS payment and established 29 C-APCs to prospectively pay for 167 of the most costly device-dependent services assigned to these 29 APCs beginning in CY 2015 (78 FR 74910). Under this policy, we designated each service described by a HCPCS code assigned to a C-APC as the primary service and, with few exceptions described below, consider all other services reported on a hospital outpatient claim in combination with the primary service to be related to the delivery of the primary service (78 FR 74869). In addition, under this policy, we calculate a single payment for the entire hospital stay, defined by a single claim, regardless of the date of service span over which the primary service and all related services are delivered. This comprehensive APC packaging policy packages payment for all items and services typically packaged under the OPPS, but also packages payment for other items and services that are not typically packaged under the OPPS (78 FR 74909).

Because of the overall complexity of this new policy and our introduction of complexity adjustments in the CY 2014 OPPS/ASC final rule with comment period, we modeled the policy as if we were implementing it for CY 2014, but delayed the effective date until January 1, 2015, to allow additional time for further analysis, opportunity for public comment, and systems preparation. In the CY 2015 OPPS/ASC proposed rule (79 FR 40941 through 40953), we discussed our review of the policies finalized in the CY 2014 OPPS/ASC final rule with comment period for C-APCs, and summarized and responded to public comments received in response to the CY 2014 OPPS/ASC final rule with comment period relating to the comprehensive APC payment policy. We then outlined our proposed policy for CY 2015, which included several clarifications and proposed modifications in response to public comments received. In this section, we use the terms “service” and “procedure” interchangeably.

(1) Background

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), we finalized a policy, with a delayed implementation date of CY 2015, that designated certain covered OPD services as primary services (identified by a new OPPS status indicator of “J1”) assigned to C-APCs. When such a primary service is reported on a hospital outpatient claim, taking into consideration the few exceptions that are discussed below, we treat all other items and services reported on the claim as integral, ancillary, supportive, dependent, and adjunctive to the primary service (hereinafter collectively referred to as “adjunctive services”) and representing components of a comprehensive service (78 FR 74865). This results in a single prospective payment for the primary, comprehensive service based on the cost of all reported services at the claim level. We only exclude charges for services that are statutorily excluded from the OPPS, such as certain mammography and ambulance services that are never covered OPD services in accordance with section 1833(t)(1)(B)(iv) of the Act; charges for brachytherapy seeds, which must receive separate payment under section 1833(t)(2)(H) of the Act; charges for pass-through drugs and devices, which also require separate payment under section 1833(t)(6) of the Act; and charges for self-administered drugs (SADs) that are not otherwise packaged as supplies because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act (78 FR 74865).

The ratesetting process set forth in the CY 2014 OPPS/ASC final rule with comment period for the comprehensive APC payment policy is summarized as follows (78 FR 74887):

APC assignment of primary (“J1”) services. HCPCS codes assigned to status indicator “J1” are assigned to C-APCs based on our usual APC assignment methodology of evaluating the geometric mean cost of the primary service claims to establish resource similarity and the clinical characteristics of each procedure to establish clinical similarity within each APC. Claims reporting multiple procedures described by HCPCS codes assigned to status indicator “J1” are identified and the procedures are then assigned to a C-APC based on the primary HCPCS code that has the highest APC geometric mean cost. This ensures that multiple procedures described by HCPCS codes assigned to status indicator “J1” reported on claims are always paid through and assigned to the C-APC that would generate the highest APC payment. If multiple procedures described by HCPCS codes assigned to status indicator “J1” that are reported on the same claim have the same APC geometric mean estimated cost, as would be the case when two different procedures described by HCPCS codes assigned to status indicator “J1” are assigned to the same APC, identification of the primary service is then based on the procedure described by the HCPCS code assigned to status indicator “J1” with the highest HCPCS-level geometric mean cost. When there is no claims data available upon which to establish a HCPCS-level comprehensive geometric mean cost, we use the geometric mean cost for the APC to which the HCPCS code is assigned.

Complexity adjustments and determination of final C-APC groupings. We then considered reassigning complex subsets of claims for each primary service described by a HCPCS code assigned to status indicator “J1.” All claims reporting more than one procedure described by HCPCS codes assigned to status indicator “J1” are evaluated for the existence of commonly occurring pairs of procedure codes reported on claims that exhibit a materially greater comprehensive geometric mean cost relative to the geometric mean cost of the claims reporting that primary service. This indicates that the subset of procedures identified by the secondary HCPCS code has increased resource requirements relative to less complex subsets of that primary procedure (78 FR 74887). The CY 2014 complexity adjustment criteria are as follows:

• The comprehensive geometric mean cost of the claims reporting the combination of procedures is more than two times the comprehensive geometric mean cost of the single major claims reporting only the primary service;
• There are more than 100 claims in the data year reporting the specific code combination;
• The number of claims reporting the specific code combination exceed 5 percent of the volume of all claims reporting the designated primary service; and
• There would be no violation of the “2 times” rule within the receiving C-APC (78 FR 74886).

If a pair of procedure codes reported on claims is identified that meets these requirements, that is, commonly occurring and exhibiting materially greater resource requirements, the pair of procedure codes is further evaluated to confirm clinical validity as a complex subset of the primary procedure and the pair of procedure codes is then identified as complex, and primary service claims with that combination of procedure codes are subsequently reassigned as appropriate. If a pair of procedure codes does not meet the requirement for a materially greater resource requirement or does not occur commonly, the pair of procedure codes is not considered to be complex, and primary service claims with that combination of procedure codes are not reassigned. All pairs of procedures described by HCPCS codes assigned to status indicator “J1” for each primary service are similarly evaluated. Once all pairs of procedures described by HCPCS codes assigned to status indicator “J1” have been evaluated, all claims identified for reassignment for each primary service are combined and the group is assigned to a higher level C-APC within a clinical family of C-APCs, that is, an APC with greater estimated resource requirements than the initially assigned C-APC and with appropriate clinical homogeneity. We assessed resource variation for reassigned claims within the receiving APC using the geometric mean cost for all reassigned claims for the primary service relative to other services assigned to that APC using the 2 times rule criteria (78 FR 74887).

For new HCPCS codes and codes without data, we use the best information available to us to identify combinations of procedure codes that represent a more complex form of the primary service and warrant reassignment to a higher level APC. In the proposed rule, we stated that we would reevaluate our APC assignments and identification and APC placement of complex claims once claims data become available.

(2) CY 2015 Policy for C-APCs

(a) Methodology

Basic C-APC Methodology. After consideration of the public comments we received on the CY 2014 OPPS/ASC final rule with comment period, in the CY 2015 OPPS/ASC proposed rule (79 FR 40941 through 40953), we described our proposed payment methodology for C-APCs for CY 2015. For CY 2015, we proposed to establish a policy that services assigned to C-APCs would be designated as the primary services for C-APCs, using new status indicator “J1” as listed in Addendum J and Addendum B to the CY 2015 OPPS/ASC proposed rule (which are available via the Internet on the CMS Web site). We stated that the basic steps for calculating the C-APC payments remain the same as those finalized in the CY 2014 OPPS/ASC final rule with comment period, except for the complexity adjustment criteria described briefly above (78 FR 74885 through 74888). For CY 2015, we proposed to restructure and consolidate some of the current device-dependent APCs to improve both the resource and clinical homogeneity of these APCs. In addition, instead of assigning any add-on codes to status indicator “J1” as finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74873 through 74883), we proposed to package all add-on codes, consistent with our CY 2014 OPPS policy to package add-on codes (78 FR 74942), but to allow certain add-on codes to qualify a primary J1 procedure code-add-on code combination for a complexity adjustment. For CY 2015, similar to other procedures described by add-on codes under the OPPS and according to 42 CFR 419.2(b)(18), procedures described by add-on codes furnished in conjunction with primary comprehensive services would be packaged instead of being assigned to an APC with a separately payable status indicator in accordance with the CY 2014 OPPS policy for add-on codes assigned to device-dependent APCs. However, the add-on codes currently assigned to device-dependent APCs (that are converted to C-APCs) may qualify as a secondary code in a complexity adjustment code pair.

Further, we proposed to convert all current device-dependent APCs remaining after the proposed restructuring and consolidation of some of these APCs to C-APCs. We also proposed to create two new C-APCs: C-APC 0067 for single-session cranial stereotactic radiosurgery services (SRS) and C-APC 0351 for intraocular telescope implantation. In addition, we proposed to reassign CPT codes 77424 and 77425 that describe intraoperative radiation therapy (IORT) to C-APC 0648 (Level IV Breast and Skin Surgery). We discuss in detail below our proposed new complexity adjustment criteria and our proposal to package all add-on codes, but to allow complexity adjustments for qualifying code combinations of primary codes and add-on codes currently assigned to device-intensive C-APCs.

As stated in the CY 2014 OPPS/ASC final rule with comment period, we define the comprehensive APC payment policy as including all covered OPD services on a hospital outpatient claim reporting a primary service that is assigned to status indicator “J1,” excluding services that cannot be covered OPD services or that cannot by statute be paid under the OPPS. Services packaged for payment under the comprehensive APC payment packaging policy, that is, services that are typically integral, ancillary, supportive, dependent, or adjunctive to the primary service, provided during the delivery of the comprehensive service, include diagnostic procedures, laboratory tests and other diagnostic tests and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; uncoded services and supplies used during the service; durable medical equipment as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other components reported by HCPCS codes that are provided during the comprehensive service, except excluded services that are described below (78 FR 74865). In addition, payment for outpatient department services that are similar to therapy services and delivered either by therapists or nontherapists is packaged as part of the comprehensive service. These services that are provided during the perioperative period are adjunctive services and not therapy services as described in section 1834(k) of the Act, regardless of whether the services are delivered by therapists or other nontherapist health care workers. We have previously noted that therapy services are those provided by therapists under a plan of care in accordance with section 1835(a)(2)(C) and section 1835(a)(2)(D) of the Act and are paid under section 1834(k) of the Act subject to annual therapy caps, as applicable (78 FR 74867). However, certain other services similar to therapy services are considered and paid as outpatient services. Payment for these nontherapy outpatient department services that are reported with therapy codes and provided with a comprehensive service is packaged with the comprehensive service. We note that these services, even though they are reported with therapy codes, are outpatient department services and not therapy services. Therefore, the requirement for functional reporting under the regulations at 42 CFR 410.59(a)(4) and 42 CFR 410.60(a)(4) does not apply.

Items packaged for payment provided in conjunction with the primary service also include all drugs, biologicals, and radiopharmaceuticals, regardless of cost, except those drugs with pass-through payment status and those drugs that are usually self-administered (SADs), unless they function as packaged supplies (78 FR 74868 through 74869 and 74909). We refer readers to the Medicare Benefit Policy Manual, Chapter 15, Covered Medical and Other Health Services, Section 50.2.M, for a description of our policy on self-administered drugs treated as hospital outpatient supplies, including lists of SADs that function as supplies and those that do not function as supplies.

Services excluded from the comprehensive APC payment policy are as follows: SADs that are not considered supplies, because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act; services excluded from the OPPS according to section 1833(t)(1)(B) of the Act including recurring therapy services, which we considered unrelated to the comprehensive service (defined as therapy services reported on a separate facility claim for recurring services), ambulance services, diagnostic and screening mammography, the annual wellness visit providing personalized prevention plan services, and pass-through drugs and devices that are paid according to section 1833(t)(6) of the Act.

We also exclude preventive services defined in 42 CFR 410.2, “(1) [t]he specific services listed in section 1861(ww)(2) of the Act, with the explicit exclusion of electrocardiograms; (2) [t]he Initial Preventive Physical Examination (IPPE) (as specified by section 1861(ww)(1) of the Act); and (3) Annual Wellness Visit (AWV), providing Personalized Prevention Plan Services (PPPS) (as specified by section 1861(hhh)(1) of the Act).” These preventive services are listed by their HCPCS codes in Addendum J to this final rule with comment period and include: Annual wellness visits providing personalized prevention plan services; initial preventive physical examinations; pneumococcal, influenza, and hepatitis B vaccines and administrations; mammography screenings; pap smear screenings and pelvic examination screenings; prostate cancer screening tests; colorectal cancer screening tests; diabetes outpatient self-management training services; bone mass measurements; glaucoma screenings; medical nutrition therapy services; cardiovascular screening blood tests; diabetes screening tests; ultrasound screenings for abdominal aortic aneurysm; and additional preventive services as defined in section 1861(ddd)(1) of the Act. We defined and discussed these services in detail for hospital billing purposes in the CY 2011 OPPS/ASC final rule with comment period pursuant to coverage and payment provisions in the Affordable Care Act (75 FR 72013 through 72020).

This policy is consistent with our policy to exclude preventive services from the ancillary services packaging policy, will encourage the provision of preventive services, and provide maximum flexibility to beneficiaries across different sites of service in receiving preventive services. In addition, the statute does not permit assessment of beneficiary cost-sharing for most preventive services, and some receive cost-based payment (75 FR 72013 through 72020 and 78 FR 74962). While any beneficiary cost-sharing attributable to preventive services, if they were packaged, would be very small in relation to the comprehensive service overall, we believe that we should exclude these services from the OPPS beneficiary copayment calculations, as discussed in section II.I. of this final rule with comment period. We note that payment for one preventive service (HCPCS code G0102 (Prostate cancer screening; digital rectal examination)) will continue to be packaged under the OPPS in CY 2015, both broadly and in the context of comprehensive services. Currently, payment for the procedure described by this HCPCS code is packaged because it is included in evaluation and management services. We note that beneficiary cost-sharing is not waived for the service described by HCPCS code G0102.

Consistent with the policy finalized in the CY 2014 OPPS/ASC final rule with comment period, we exclude brachytherapy services and pass-through drugs, biologicals and devices that are separately payable by statute (78 FR 74868 and 74909). In addition, we exclude services assigned to OPPS status indicator “F” that are not paid under the OPPS and are instead paid on a reasonable cost basis (certain CRNA services, Hepatitis B vaccines, and corneal tissue acquisition, which is not part of a comprehensive service for CY 2015). In Table 6 below, we list the services that are excluded from the comprehensive APC payment policy.

We proposed to continue to define each hospital outpatient claim reporting a single unit of a single primary service assigned to status indicator “J1” as a single “J1” unit procedure claim (78 FR 74871). We proposed to sum all line item charges for services included in the C-APC payment, convert the charges to costs, and calculate the “comprehensive” geometric mean cost of one unit of each service assigned to status indicator “J1.” (We note that we use the term “comprehensive” to describe the geometric mean cost of a claim reporting “J1” service(s) or the geometric mean cost of a C-APC, inclusive of all of the items and services in the C-APC payment bundle). Charges for services that would otherwise have been separately payable are added to the charges for the primary service. This process differs from our traditional cost accounting methodology only in that all such services on the claim are packaged (except certain services as described above). We proposed to apply our standard data trims, excluding claims with extremely high primary units or extreme costs.

The comprehensive geometric mean costs are used to establish resource similarity and, along with clinical similarity, dictate the assignment of the primary services to the C-APCs. We proposed to establish a ranking of each primary service (single unit only) assigned to status indicator “J1” according to their comprehensive geometric mean costs. For the minority of claims reporting more than one primary service assigned to status indicator “J1” or units thereof (approximately 20 percent of CY 2013 claims), we proposed to continue to identify one “J1” service as the primary service for the claim based on our cost-based ranking of primary services. We then assign these multiple “J1” procedure claims to the C-APC to which the service designated as the primary service is assigned. If the reported “J1” services reported on a claim map to different C-APCs, we designate the “J1” service assigned to the C-APC with the highest comprehensive geometric mean cost as the primary service for that claim. If the reported multiple “J1” services on a claim map to the same C-APC, we designate the most costly service (at the HCPCS code level) as the primary service for that claim. This process results in initial assignments of claims for the primary services assigned to status indicator “J1” to the most appropriate C-APCs based on both single and multiple procedure claims reporting these services and clinical and resource homogeneity.

Complexity Adjustments. We proposed to use complexity adjustments to provide increased payment for certain comprehensive services. We proposed to apply a complexity adjustment by promoting qualifying “J1” service code combinations or code combinations of “J1” services and certain add-on codes (as described further below) from the originating C-APC (the C-APC to which the designated primary service is first assigned) to a higher paying C-APC in the same clinical family of C-APCs, if reassignment is clinically appropriate and the reassignment would not create a violation of the 2 times rule in the receiving APC (the higher paying C-APC in the same clinical family of C-APCs). We proposed to implement this type of complexity adjustment when the code combination represents a complex, costly form or version of the primary service according to the following criteria:

• Frequency of 25 or more claims reporting the code combination (frequency threshold); and
• Violation of the 2 times rule (cost threshold).

In the CY 2015 OPPS/ASC proposed rule (79 FR 40947 through 40948, we explained in detail in response to a comment to the CY 2014 OPPS/ASC final rule with comment period the differences between the finalized CY 2014 complexity adjustment criteria and the CY 2015 proposed complexity adjustment criteria and our rationale for the proposed changes.

After designating a single primary service for a claim, we proposed to evaluate that service in combination with each of the other procedure codes reported on the claim assigned to status indicator “J1” (or certain add-on codes) to determine if they meet the complexity adjustment criteria. For new HCPCS codes, we proposed to determine initial C-APC assignments and complexity adjustments using the best data available, cross-walking the new HCPCS codes to predecessor codes wherever possible.

Once we have determined that a particular code combination of “J1” services (or combinations of “J1” services reported in conjunction with certain add-on codes) represents a complex version of the primary service because it is sufficiently costly, frequent, and a subset of the primary comprehensive service overall according to the criteria described above, we proposed to promote the complex version of the primary service as described by the code combination to the next higher cost C-APC within the clinical family, unless the APC reassignment is not clinically appropriate, the reassignment would create a violation of the 2 times rule in the receiving APC, or the primary service is already assigned to the highest cost APC within the C-APC clinical family or assigned to the only C-APC in a clinical family (79 FR 40944). We did not propose to create new APCs with a geometric mean cost that is higher than the highest cost (or only) C-APC in a clinical family just to accommodate potential complexity adjustments. Therefore, the highest payment for any code combination for services assigned to a C-APC would be the highest paying C-APC in the clinical family.

As discussed below, we proposed that add-on codes reported in conjunction with a “J1” service would receive complexity adjustments when a qualifying add-on code is reported in conjunction with the primary service assigned to status indicator “J1” and satisfies the criteria described above for a complexity adjustment. Any combinations of HCPCS codes that fail to meet the proposed complexity adjustment criteria (frequency and cost thresholds) would not be identified as complex subsets of the primary procedure and would not be reassigned to a higher paying C-APC within the same clinical family of C-APCs. We provided a proposed list of qualifying code combinations (including add-on codes) in Addendum J to the proposed rule (which is available via the Internet on the CMS Web site).

We proposed to package payment for all add-on codes into the payment for the C-APC. However, we indicated that add-on codes that are assigned to the current device-dependent APCs listed in Table 5 of the proposed rule (79 FR 40938) would be evaluated for a possible complexity adjustment when they are reported in conjunction with a designated primary service assigned to status indicator “J1.” We proposed to only evaluate the add-on codes that are assigned to the current device-dependent APCs listed in Table 5 of the proposed rule for potential complexity adjustments because we believe that, in certain cases, these procedure codes may represent services with additional medical device costs that result in significantly more complex and costly procedures. To determine which combinations of primary service codes reported in conjunction with the add-on code may qualify for a complexity adjustment for CY 2015, we proposed to apply the proposed frequency and cost criteria discussed above, testing claims reporting one unit of a single primary service assigned to status indicator “J1” and any number of units of a single add-on code. If the frequency and cost criteria for a complexity adjustment were met, and reassignment to the next higher cost APC in the clinical family is appropriate, we proposed to make a complexity adjustment for the code combination; that is, we proposed to reassign the primary service code reported in conjunction with the add-on code combination to a higher cost C-APC within the same clinical family of C-APCs. If any add-on code combination reported in conjunction with the primary service code did not qualify for a complexity adjustment, payment for these services would be packaged. We listed the complexity adjustments proposed for add-on code combinations for CY 2015, along with all of the other proposed complexity adjustments, in Addendum J to the proposed rule (which is available via the Internet on the CMS Web site). One primary service code and add-on code combination (CPT code 37225 and 37233) that satisfied the frequency and cost criteria was not proposed for a complexity adjustment because we believe that these claims are miscoded. Of the 35 qualifying claims reporting this code combination, only 3 claims contained the appropriate base code (CPT code 37228) for CPT add-on code 37233.

We provided in Addendum J to the proposed rule a breakdown of cost statistics for each code combination that would qualify for a complexity adjustment (including primary code and add-on code combinations). Addendum J to the proposed rule also contained summary cost statistics for each of the code combinations proposed to be reassigned under a given primary code. The combined statistics for all proposed reassigned complex code combinations are represented by an alphanumeric code with the last 4 digits of the designated primary service followed by “A” (indicating “adjustment”). For example, the geometric mean cost listed in Addendum J for the code combination described by CPT code 33208A assigned to C-APC 0655 included all code combinations that were proposed to be reassigned to C-APC 0655 when CPT code 33208 is the primary code. Providing the information contained in Addendum J in the proposed rule allowed stakeholders the opportunity to better assess the impact associated with the proposed reassignment of each of the code combinations eligible for a complexity adjustment.

(b) Additional C-APCs

Several commenters to the CY 2014 OPPS/ASC proposed rule questioned why CMS only converted a subset of the device-dependent APCs to C-APCs (78 FR 74864). We responded that while we were initially adopting a subset of the most costly device-dependent services, we may extend comprehensive payments to other procedures in future years as part of a broader packaging initiative (78 FR 74864). Upon further review for CY 2015, we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40944 through 40945) that we believe that the entire set of the currently device-dependent APCs (after the proposed reorganization and consolidation of the current device-dependent APCs) are appropriate candidates for C-APC payment because the device-dependent APCs not included in last year's comprehensive APC payment proposal are similar to the original 29 device-dependent APCs that were proposed as C-APCs in CY 2014. Similar to the original 29 device-dependent APCs for CY 2014 that were converted to C-APCs, the additional device-dependent APCs that were proposed for conversion to C-APCs contain comprehensive services primarily intended for the implantation of costly medical devices. Therefore, in the CY 2015 OPPS/ASC proposed rule, we proposed to apply the comprehensive APC payment policy to the remaining device-dependent APCs for CY 2015.

In addition, since the publication of the CY 2014 OPPS/ASC final rule with comment period, stakeholders brought several services to our attention as appropriate candidates for C-APC payment. Stakeholders recommended that we create C-APCs for these procedures and technologies or assign them to a previously proposed C-APC. We agreed with the stakeholders. Similar to the other services designated as comprehensive in CY 2014, these procedures are comprehensive single-session services with high-cost implantable devices or high-cost equipment. For CY 2015, we proposed to convert the following existing APCs into C-APCs: APC 0067 (Single Session Cranial Stereotactic Radiosurgery) and APC 0351 (Level V Intraocular Surgery)). C-APC 0351 only contains one procedure—CPT code 0308T (Insertion of ocular telescope prosthesis including removal of crystalline lens). We also proposed to assign the CPT codes for IORT (CPT codes 77424 and 77425) to C-APC 0648 (Level IV Breast and Skin Surgery) because IORT is a single session comprehensive service that includes breast surgery combined with a special type of radiation therapy that is delivered inside the surgical cavity but is not technically brachytherapy. The HCPCS codes that we proposed to assign to these C-APCs in CY 2015 would be assigned to status indicator “J1.”

(c) Reconfiguration and Restructuring of the C-APCs

Based on further examination of the structure of the C-APCs illustrated in the CY 2014 OPPS/ASC final rule with comment period and an evaluation of their comprehensive geometric mean costs (using the updated CY 2013 claims data), in the CY 2015 OPPS/ASC proposed rule (79 FR 40945), we proposed to reorganize, combine, and restructure some of the C-APCs. The purpose of this APC restructuring is to improve resource and clinical homogeneity among the services assigned to certain C-APCs and to eliminate APCs for clinically similar services, but with overlapping geometric mean costs. The services we proposed to assign to each of the C-APCs for CY 2015, along with the relevant cost statistics, were provided in Addendum J to the proposed rule. Addendum J is available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Table 7 of the proposed rule (79 FR 40952) listed the additional 28 APCs proposed under the CY 2015 comprehensive APC policy.

In summary, our proposal to reorganize, combine, and restructure some of the C-APCs included the following proposed changes:

• Endovascular clinical family (renamed Vascular Procedures, VASCX). We proposed to combine C-APCs 0082, 0083, 0104, 0229, 0319, and 0656 illustrated for CY 2014 to form three proposed levels of comprehensive endovascular procedure APCs: C-APC 0083 (Level I Endovascular Procedures); C-APC 0229 (Level II Endovascular Procedures); and C-APC 0319 (Level IV Endovascular Procedures).
• Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices (AICDP). We proposed to combine C-APCs 0089, 0090, 0106, 0654, 0655, and 0680 as illustrated for CY 2014 to form three proposed levels of C-APCs within a broader series of APCs for pacemaker implantation and similar procedures as follows: APC 0105 (Level I Pacemaker and Similar Procedures), a non-comprehensive APC; C-APC 0090 (Level II Pacemaker and Similar Procedures); C-APC 0089 (Level III Pacemaker and Similar Procedures); and C-APC 0655 (Level IV Pacemaker and Similar Procedures).
• We proposed to delete the clinical family for Event Monitoring, which only had one C-APC (C-APC 0680 (Insertion of Patient Activated Event)) with a single CPT code 33282 as illustrated for CY 2014. We also proposed to reassign CPT code 33282 to C-APC 0090, which contains clinically similar procedures.
• In the urogenital family, we proposed two levels instead of three levels for urogenital procedures, and to reassign several codes from APC 0195 to C-APC 0202 (Level V Female Reproductive Procedures).
• We proposed to rename the arthroplasty family of APCs to “Orthopedic Surgery.” We also proposed to reassign several codes from APC 0052 to C-APC 0425, which we proposed to rename “Level V Musculoskeletal Procedures Except Hand and Foot.”
• We proposed three levels of electrophysiologic procedures, using the current inactive APC “0086” instead of APC 0444, to have consecutive APC grouping numbers for this clinical family and to rename APC 0086 “Level III Electrophysiologic Procedures.” In addition, we proposed to replace composite APC 8000 with proposed C-APC 0086 as illustrated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74870).

We also proposed three new clinical families: Gastrointestinal Procedures (GIXXX) for gastrointestinal stents, Tube/Catheter Changes (CATHX) for insertion of various catheters, and Radiation Oncology (RADTX), which would include C-APC 0067 for single session cranial SRS.

(3) Public Comments

Comment: Commenters were generally supportive of the proposed changes to the comprehensive APC payment policy for CY 2015 when compared to the CY 2014 final policy, and urged CMS to monitor implementation for payment adequacy and access to quality care. Some commenters requested that CMS delay implementation until at least July 1, 2015, to allow time to fully test systems changes. Some commenters requested that CMS delay implementation for a year or more until CMS addresses assorted concerns or so that hospitals can continue to analyze the policy and budget for the financial impact.

Response: We appreciate the commenters' support. We plan to monitor the implementation of this C-APC payment policy and will consider future revisions as necessary. We will not further delay implementation of this policy. We have already delayed implementation of the C-APC payment policy for a year, which we believe provided ample time for hospitals to evaluate the policy.

Comment: We received feedback from commenters regarding the data resources that CMS provided to support the proposed rule. Some commenters commended CMS for the technical support and assistance provided that enabled the commenters to replicate CMS' methodology and match CMS' results. Other commenters expressed concern that the data resources were insufficient, inconsistent, and unclear. Some commenters also requested that CMS enhance transparency, expand the data resources available to the public, and engage stakeholders in future comprehensive APC payment policy development. Some commenters asked that CMS provide cost data on all of the code combinations that were evaluated for the complexity adjustments, including the code combinations that qualified for a complexity adjustment. One commenter stated that discrepancies in some of the number entries between Addendum J and Addendum B violate the Administrative Procedures Act (APA) because these discrepancies “make it impossible to understand what CMS is proposing.”

Response: We appreciate the commenters' support for the proposed expansion of available data resources related to the comprehensive APC payment policy methodology. In response to the commenters who expressed concern regarding the insufficiency of the data files provided, we understand that the OPPS is technically complex. However, we believe that the data made available to the public as part of the proposed rule were appropriate, clear, and sufficient. We acknowledge the commenters' concerns regarding the transparency of related data and the desire for additional resources. Therefore, for this final rule with comment period, we are providing additional data in Addendum J, such as cost statistics related to code combinations that are not eligible for complexity adjustments. Regarding any indications of discrepancies in some of the number entries between Addendum J and Addendum B, as the commenter suggested, we understand and acknowledge that minor discrepancies may sometimes occur with complex payment rules that include various files with many different types of data. However, we do not believe any such discrepancies would limit commenters' ability to understand the proposed policies or to evaluate the impacts or effects of the proposed policy changes. The comprehensive APC payment policy has been open for public comment during three consecutive OPPS rulemaking cycles: the CY 2014 OPPS/ASC proposed rule; the CY 2014 OPPS/ASC final rule with comment period; and the CY 2015 OPPS/ASC proposed rule. Therefore, we do not believe that we provided insufficient notice of the policies that are a part of the comprehensive APC payment policy.

Comment: Commenters expressed concern regarding the misalignment between hospitals' billing practices and systems and the proposal to package all services (except for the few exceptions noted above) on a claim into the payment for the comprehensive service. The commenters observed that a significant number of comprehensive service claims spanned more than 5 days, with some claims spanning close to 30 days. The commenters recommended that CMS limit the payment bundle to services provided within 1 or 2 days of the primary service, or defining the bundle based on episodes of care. Commenters also requested that CMS clarify the guidance provided and educate providers on how to report comprehensive services that fall within the span of a recurring service claim. Some commenters expressed concern that policies which reduce or eliminate series billing for recurring services may create an operational burden for hospitals; increase claims processing activity for Medicare contractors; and increase the amount of paperwork sent to a beneficiary.

Response: Our intent is to capture all of the services associated with the primary service assigned to a C-APC, except those services that would still be separately paid under the OPPS, even when provided in conjunction with a comprehensive service. The 219 procedures assigned to the C-APCs are a small fraction of the total services provided in HOPDs. We believe that it would not be an undue hardship for some hospitals to alter their processes such that they file separate claims for services that are unrelated both clinically and in regard to time to the comprehensive service. With regard to recurring services, we have previously issued manual guidance in the Internet Only Manual, Pub. 100-4, Chapter 1, Section 50.2.2, that provides that only recurring services should be billed monthly. We also have specified that, in the event that a recurring service occurs on the same day as an acute service that falls within the span of the recurring service claim, hospitals should bill separately for recurring services on a monthly claim (repetitive billing) and submit a separate claim for the acute service. We also do not expect that these claims for comprehensive services in the outpatient setting would extend beyond a few days because the 219 procedures assigned to the 25 C-APCs are almost entirely surgical procedures. If a physician determined that furnishing one of these services would be medically necessary for the treatment of a Medicare beneficiary and expected the beneficiary to require hospital care for more than 2 midnights, inpatient admission would be appropriate.

Comment: Commenters generally supported the proposed packaging of all add-on codes reported in conjunction with comprehensive service claims with the allowance of complexity adjustments for add-on codes currently assigned to device-dependent APCs in CY 2014. One commenter requested that CMS assign add-on CPT code 57267 (Insertion of mesh or other prosthesis for repair of pelvic floor defect, each site (anterior, posterior compartment), vaginal approach (List separately in addition to code for primary procedure) to C-APC 0202 because this code has high device costs.

Response: We appreciate the commenters' support. According to 42 CFR 419.2(b)(18), add-on codes are packaged under the OPPS. Because implementation of the finalized comprehensive APC payment policy was delayed until CY 2015, for CY 2014 we maintained the structure and code assignments for the device-dependent APCs, which continued separate payment for add-on codes assigned to device-dependent APCs for CY 2014. We refer readers to Table 7 of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74859). The add-on code complexity adjustment policy is limited only to certain add-on codes that were previously assigned to device-dependent APCs and that, along with a primary comprehensive service, meet the complexity adjustment criteria. We refer readers to Table 9 of the CY 2015 OPPS/ASC proposed rule (79 FR 40959) for a listing of these add-on codes. Our intent is not to make a higher payment in every case that an add-on procedure results in higher costs. Therefore, we are finalizing the CY 2015 proposal to package all add-on codes reported on a claim in conjunction with a comprehensive service, and also to allow a limited number of add-on codes to be evaluated for a complexity adjustment when billed with a primary comprehensive service. We are not extending the complexity adjustment policy beyond those add-on codes that were assigned to device-dependent APCs. The list of add-on codes that we evaluated for a complexity adjustment is included later in this section in Table 8.

Comment: Some commenters requested that CMS divide the restructured C-APCs into more discrete groupings to increase clinical coherence and resource cost homogeneity. Some commenters believed that improved clinical coherence among the procedures within the C-APCs would increase the stability of C-APC payments from year-to-year and decrease opportunities for “gaming” the system. Some commenters also expressed concern with the high variation in geometric mean costs for services assigned to the C-APCs that do not create a violation of the 2 times rule, but would result in inadequate payment for the highest cost procedures assigned to the C-APC.

Response: We disagree with the commenters. We believe that the categorization of the restructured C-APCs better represents clinical and resource homogeneity when compared to the CY 2014 structure of the C-APCs. We also note that the OPPS is a prospective payment system that relies on groupings of procedures resulting in a weighted-average cost payment based on all of the procedures in the group. Too much discretization of APC groupings would move the OPPS more toward a fee schedule, which would have individual payments for each HCPCS code and presents an undesirable outcome for the OPPS. In addition, we encourage all members of the stakeholder public to report all suspected incidents of fraud and abuse to the Office of Inspector General or the CMS Center for Program Integrity. As required by statute, we will review and evaluate, on an annual basis, any year-to-year changes in APC and HCPCS geometric mean costs.

Comment: A few commenters disagreed with CMS' proposal to expand the C-APCs to include all of the current device-dependent APCs. The commenters noted that a significant percentage of claims for some of the lower paying C-APCs (specifically, C-APCs 0084 (Level I Electrophysiologic Procedures), 0427 (Level II Tube or Catheter Changes or Repositioning), 0622 (Level II Vascular Access Procedures), and 0652 (Insertion of Intraperitoneal and Pleural Catheters) report services assigned to noncomprehensive APCs that are significantly more costly than the primary service that is motivating the C-APC payment. Commenters believed that procedures assigned to these APCs are not infrequently performed as secondary procedures to other more costly procedures that are assigned to noncomprehensive APCs. Commenters recommended various approaches for addressing this concern: (1) Applying complexity adjustments to these claims; (2) excluding high-cost procedures from the comprehensive APC packaging policy; (3) paying for the higher-cost service and applying a multiple procedure reduction to the C-APC; or (4) eliminating the lower paying C-APCs from the comprehensive APC payment policy methodology.

Response: Our analysis shows a significant number of claims in APCs 0427 and 0622 that contain noncomprehensive services that are more costly than the procedures assigned to the proposed C-APC. In addition, similar to APCs 0427 and 0622, APC 0652 contains a total of three catheter-insertion procedures. These procedures are not similar to the other major procedures assigned to C-APCs, but are sometimes supportive of other procedures. For example, APC 0652 includes the procedure that describes the placement of a pleural catheter that can be used for drug delivery, but is not a definitive therapeutic procedure similar to most of the other procedures assigned to that C-APC. Also, APCs 0427, 0622, and 0652 are not device-intensive APCs, meaning that the device offsets are not greater than 40 percent. Therefore, we are accepting the commenters' recommendation. We are not converting APCs 0427, 0622, and 0652 into C-APCs for CY 2015. In addition, because we are not converting APC 0427 into a C-APC, we will not evaluate add-on CPT code 49435 for complexity adjustments because the APC that contains the base codes for CPT code 49435 are assigned to APC 0427. However, we are finalizing the proposal to convert APC 0084 into a C-APC. We did not find that a significant number of higher cost noncomprehensive procedures are performed in conjunction with the procedures assigned to APC 0084. Unlike many of the catheter insertion procedures assigned to APCs 0427, 0622, and 0652, the electrophysiology procedures assigned to APC 0084 are not supportive of other services, but are the definitive therapeutic procedures intended to treat a patient's cardiac condition.

Comment: Commenters urged CMS to develop adjustments to C-APC payments based on patient acuity or diagnosis to account for clinical complexity and patient characteristics, which could help mitigate the negative payment impact of expanding the comprehensive APC payment policy on hospitals that treat more clinically complex patients, such as academic medical centers, cancer hospitals, and trauma centers.

Response: As we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40951), section 1833(t)(2) of the Act provides a procedure-based payment methodology for the OPPS, which is unlike the IPPS that makes payments based on both diagnoses and procedures. Currently OPPS payments are not based on patient severity or diagnosis like payments under the IPPS. Therefore, we are unable to make payment adjustments based on diagnoses.

Comment: Commenters expressed concern that not implementing C-APCs in the ASC setting distorts the payment relationship between ASCs and HOPDs and could result in incentives to direct patients from one setting to another. Commenters recommended that CMS reprogram the ASC payment system software, as soon as possible, to allow the system to perform the complex logic needed to implement and provide adequate payment for the C-APCs for ASCs.

Response: The commenters are correct that the comprehensive APC payment policy methodology is not being adopted under the ASC payment system. However, we do not believe that this policy decision will result in site-of-service shifts, but we will continue to monitor procedure volumes in both settings. Although OPPS payments for individual surgical procedures assigned to C-APCs are higher than ASC payments for the same procedures, under the standard noncomprehensive service payment methodology that applies in the ASC for all APCs and in the OPPS for noncomprehensive services, there remains separate payment for covered procedures and covered ancillary services that are not packaged under a general packaging policy. This continuation of separate payment for covered procedures and covered ancillary services performed in the ASC (which is not available in the OPPS for procedures performed in addition to the primary procedures assigned to C-APCs) should help mitigate any incentive to perform procedures assigned to C-APCs in the HOPD. However, given the significant difference between ASC and OPPS payment rates, we do not believe that separate payment (at the multiple procedure reduction reduced rate) for additional procedures performed in the ASC setting along with a procedure that is assigned to a C-APC will draw cases away from the HOPD because, in most cases, the overall HOPD will be higher than the ASC payment for the same set of procedures. We will consider the commenters' suggestion that we develop new payment software for the ASC payment system should an opportunity to do so arise in the future.

Comment: Commenters requested that CMS provide separate payment for certain services reported on a comprehensive claim. Some commenters requested that CMS exclude the following additional services from the packaging provision under the comprehensive APC payment policy:

• Dialysis and emergency dialysis services.
• Blood products.
• Expensive diagnostic tests, such as angiography.
• High-cost drugs and devices that account for a high percentage of the geometric mean cost of a C-APC.
• Outpatient services paid under a payment schedule, such as laboratory services.

The commenters believed that the C-APC payment would not adequately cover the cost of these services. One commenter believed that packaging payment for an otherwise separately payable drug when provided in conjunction with a comprehensive service may cause hospitals, in consultation with physicians, to choose a less-expensive alternative drug.

Response: We responded to similar comments that disagreed with CMS' proposal to package payment for various items and services into the C-APC payment in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74865 through 74910). As previously stated, we disagree with the commenters. We believe that the central attribute of the comprehensive APC payment policy is the packaging of all adjunctive services, with the exception of those services described above that, according to the statute, cannot be packaged or the list of preventive services that generally would not be provided at the time of a major procedure assigned to a C-APC. We note that (as stated above in section II.A.3.a. of this final rule with comment period) where there are a variety of devices, drugs, items, and supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the most cost-efficient item that meets the patient's needs, rather than routinely using a more expensive item, which often results if separate payment is provided for the items. Furthermore, packaging also encourages hospitals to effectively negotiate with manufacturers and suppliers to reduce the purchase price of items and services (including drugs) or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care delivery.

Comment: Commenters asserted that the reliance on code combinations based on cost ranking of codes would lead to instability in the complexity adjustments from year to year, and overlook a large number of comprehensive claims with three or more “J1” services, which is common for the clinical complexity of procedures assigned to the endovascular revascularization family of APCs. Commenters suggested alternative methodologies for determining eligibility, such as applying a complexity adjustment to any claim that has three or more “J1” services or applying the cost and frequency criteria to all combinations of “J1” services.

Response: We disagree with the commenters that assigning complexity adjustments based on cost ranking of primary and secondary codes is either insufficient or would result in instability of the complexity adjustments in future years. We proposed complexity adjustments for certain code pairs to provide a higher payment in the next higher APC within a clinical family for high cost procedure pairs consisting of a primary comprehensive procedure and a secondary comprehensive procedure that represent sufficiently frequent and sufficiently costly comprehensive procedure pairs such that they are separated from and provided a higher payment than all of the cases that are accounted for in APC assignment of the primary service. We do not believe that providing a complexity adjustment to any claim that has three or more “J1” services or to all claims reporting pairs of “J1” services that meet the cost and frequency criteria would adequately serve the stated purpose of the policy. The intent of the complexity adjustment policy is to identify a limited number of costly procedure pairs for a higher payment at the next higher paying C-APC within the clinical family, not to unpackage and separately pay for all of the high cost cases that are associated with the primary “J1” procedure. Although such a policy as the commenters requested could be beneficial to the procedures assigned to the endovascular C-APC family because of the high number of codes that can be billed per case, we do not believe that this approach would serve the other clinical families that do not rely on component coding to the same extent as endovascular procedures. Therefore, we are finalizing our proposal to base the complexity adjustments on code pairs that include the two most costly “J1” services reported on the C-APC service claim.

Comment: Commenters believed that the cost threshold is too restrictive and would cause financial hardship for hospitals and jeopardize beneficiary access to care. Commenters suggested that CMS adjust the cost threshold to 1.5, 1.75, or within 2 percent of the 2 times rule limit.

Response: In response to comments to the CY 2014 OPPS/ASC final rule with comment period, we significantly lowered the cost criterion for a complexity adjustment from two times the cost of the primary procedure to two times the cost of the lowest cost procedure in the APC to which the primary procedure is assigned. This change made it significantly easier for code combinations to qualify for a complexity adjustment based on higher cost. We do not believe that further lowering of the cost criterion would be consistent with the objective of the comprehensive APC payment policy. We believe that lowering the cost criterion would result in effectively unpackaging too many cases from the primary C-APC assignment and, therefore, defeat the purpose of the policy, which is to create a comprehensive prospective payment for major, primary device-intensive procedures.

Comment: Commenters expressed concern that claims assigned to the only level or the highest level C-APC within a clinical family are ineligible to receive a complexity adjustment because there is no higher paying APC in the clinical family in which to assign these code combinations. Commenters requested that CMS add an additional C-APC level to these clinical families to provide for more granular payment levels and accommodate potential complexity adjustments.

Response: As we stated in the CY 2015 OPPS/ASC proposed rule, we would not create new APCs with a geometric mean cost that is higher than the highest cost C-APC in a clinical family just to accommodate potential complexity adjustments. Therefore, the highest payment for any code combination for services assigned to a C-APC would be the highest paying C-APC in the clinical family. We only found 7 code pairs out of the 219 procedures that are assigned to the 25 final C-APCs that would qualify for a complexity adjustment if a higher paying APC were available for assignment of the code combination. We do not believe that this small number of code combinations from the highest paying APCs in the final 12 clinical families of C-APCs that satisfy the complexity adjustment criteria necessitates creating additional APCs, especially if these APCs would be populated with only a few multiple procedure claims. In addition, in accordance with section 1833(t)(2)(B) of the Act, APCs are defined as “groups of covered OPD services” that are comparable clinically and with respect to the use of resources. If we created an additional new higher level APC within each C-APC clinical family that did not contain any primary comprehensive services and instead only contained a very small volume of complexity-adjusted code pairs, we do not believe that such APCs would constitute appropriate “groups of covered OPD services.”

Comment: One commenter urged CMS to finalize the proposal to assign CPT code 0308T to APC 0351 and to convert APC 0351 into a C-APC.

Response: We appreciate the commenter's support. For this final rule with comment period, we are finalizing our proposal to assign CPT code 0308T to APC 0351 and to convert APC 0351 into a C-APC for CY 2015.

Comment: Commenters generally agreed with the proposed structure of the Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices (AICDP) C-APCs. One commenter specifically supported the assignment of CPT code 0319T to C-APC 108.

Response: We appreciate the commenters' support.

Comment: Several commenters supported CMS' proposed assignment of CPT codes 77424 and 77425 to C-APC 0648. Another commenter believed that the services assigned to C-APC 0648 are not similar clinically or similar in resource costs, and suggested that CMS divide this C-APC into two levels.

Response: We appreciate the commenters' support for our proposal regarding C-APC 0648. However, we disagree with the commenter that the services assigned to C-APC 0648 are not similar clinically or in regard to resource costs. All of the seven services proposed to be assigned to C-APC 0648 involve the breast. The current clinical application of intraoperative radiation therapy (IORT CPT codes 77424 and 77425) is for breast cancer following lumpectomy. In regard to resource costs of the services assigned to C-APC 0648, the range from the lowest cost significant procedure to the highest cost significant procedure is between approximately $5,584 and $9,325, which is well within the 2 times rule limit. In addition, C-APC 0648 is a small APC with only 7 services and a total of approximately 5,000 claims based on CY2013 claims data. To further divide this C-APC would be less consistent with a prospective payment system than its proposed structure. Therefore, we are finalizing our proposal to assign CPT codes 77424 and 77425 to C-APC 0648.

Comment: One commenter requested that CMS exclude C-APC 0259 from the comprehensive APC payment policy. The commenter believed that the change in the procedure-to-device claim edits policy would result in more incorrectly coded claims for the procedure described by CPT code 69930 (Cochlear device implantation, with or without mastoidectomy), which is the only service assigned to C-APC 0259.

Response: We do not believe that C-APC 0259 should be excluded from the comprehensive APC payment policy. The discussion of the device edits policy is in section II.A.2.d.1. of this final rule with comment period. We believe that hospitals will continue to report the cost of the cochlear implant when one of these devices is implanted into a Medicare beneficiary because the cost of this device is 84 percent of the total cost of the procedure. After consideration of this comment, we see no reason to exempt C-APC 0259 from the comprehensive APC payment policy. We are finalizing our proposal to convert APC 0259 into a C-APC for CY 2015.

Comment: Several commenters agreed with CMS' proposed structure of the cardiac electrophysiology C-APCs: C-APC 0084 (Level I Electrophysiologic Procedures); C-APC 0085; and C-APC 0086 (Level III Electrophysiologic Procedures). One commenter requested that CMS reassign CPT code 93603 (Right ventricular recording) from C-APC 0084 to C-APC 0085 because the commenter believed that the procedure described by CPT code 93603 is more similar to the procedures assigned to C-APC 0085 than the other procedures assigned to C-APC 0084.

Response: We appreciate the commenters' support. However, we disagree with the commenter that CPT code 93603 should be reassigned from C-APC 0084 to C-APC 0085. CPT code 93603 is a very low-volume procedure, with a total of 12 claims for CY 2013. The geometric mean cost for CPT code 93603 (based on these 12 claims) is $1,807. The geometric mean cost of the lowest cost significant service in C-APC 0085 is $4,064 (CPT code 93619). Therefore, we believe that CPT code 93603 lacks resource similarity to the procedures assigned to C-APC 0085. We are finalizing the structure of the cardiac electrophysiology C-APCs, as proposed for CY 2015.

Comment: Several commenters agreed with CMS' proposed structure of the neurostimulator APCs. Two commenters believed that the difference in cost between CPT code 61885 (Insertion or replacement of cranial neurostimulator pulse generator or receiver, direct or inductive coupling; with connection to a single electrode array) and CPT code 61886 (Insertion or replacement of cranial neurostimulator pulse generator or receiver, direct or inductive coupling; with connection to 2 or more electrode arrays) is too low and that the device costs may not be adequately captured based on the accuracy of the claims data. Another commenter recommended that CMS restructure the neurostimulator APCs to improve clinical coherence by limiting C-APC 0318 to only certain full-system procedures, assigning all lead placement procedures to C-APC 0061, and assigning the remaining neurostimulator procedures to C-APC 0039.

Response: We appreciate the commenters' support. Regarding the commenters' concern about the geometric mean cost of CPT codes 61885 and 61886, the geometric mean cost of CPT code 61886 (dual channel procedure) is higher than CPT code 61885 (single channel procedure), which is to be expected. It is important to remember that the C-APC payment policy packages all procedures performed with the primary procedure, so the cost for the primary service in a C-APC may be higher than the cost associated with single claims for the same service. We note that APC groupings are based on two factors, clinical similarity and resource similarity. The OPPS requires that we group services into APCs for payment purposes based on these two factors. Clinical similarity in the APC grouping context is by definition, and by necessity, is much broader than the comparisons that distinguish individual CPT codes. All of the procedures assigned to C-APCs 0061, 0039, and 0318 include the various neurostimulator-related procedures. The neurostimulator family of C-APCs groups these procedures based on the geometric mean cost and clinical similarity of the primary service. In some cases, an APC includes implantation of a complete system of one type of neurostimulator and the implantation of either a generator alone or a complete system of other types. This is a function of the CPT coding system and the prospective nature of the comprehensive APC payment policy. Overall, we believe that the proposed structure of the neurostimulator family of C-APCs strikes the proper balance of both factors for APC construction and resource and clinical similarity. We are finalizing the proposed structure of the neurostimulator C-APCs, as proposed, and without modification.

Comment: One commenter requested that CMS divide C-APC 0425 into two APCs because the range of procedure costs in this APC is too significant. Another commenter requested that CMS reassign the following CPT codes from APC 0208 to C-APC 0425 based on more appropriate resource homogeneity to the other procedures assigned to C-APC 0425: CPT codes 22551, 22554, 22612, and 22856.

Response: We disagree with the commenters' recommendation to divide C-APC 0425 into two C-APCs. The cost range for significant procedures within C-APC 0425 (using the proposed rule code assignments) is between approximately $9,087 (for CPT code 69714) and $15,740 (for CPT code 24363), which is well within the 2 times rule limit. We agree with the commenters that CPT codes 22551 (with a geometric mean cost of $10,052), 22554 (with a geometric mean cost of $8,129), 22612 (with a geometric mean cost of $8,451), and 22856 (with a geometric mean cost of $12,958) should be reassigned from APC 0208 (with a geometric mean cost of $4,267) to C-APC 0425 (with a geometric mean cost of $10,606). We believe that assigning these four CPT codes to C-APC 0425 supports more appropriate resource and clinical similarity when compared to the current assignment to APC 0208. Otherwise, we are finalizing the proposed structure for C-APC 0425. With these additions to C-APC 0425, the cost range for significant procedures within C-APC 0425 (using the final rule code assignments) is between approximately $8,451 (for CPT code 22612) and $15,740 (for CPT code 24363).

Comment: One commenter believed that the proposed C-APCs that include drug pumps would provide inadequate payment for its developing therapy because the therapy uses an advanced technology drug pump and a very costly drug. The commenter requested that CMS either provide complexity adjustments for high-cost drugs or unpackage the payment for certain high-cost drugs.

Response: As we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74908 through 74909), we do not believe that drugs being supplied to the patient to fill the reservoir of a pump at the time of pump implantation should be excluded from the comprehensive APC payment policy because drugs supplied to fill the pump during implantation of the pump are adjunctive to the procedure. The costs of costly adjunctive services are included proportionally into the cost estimation for the primary services through our ability to use almost all claims for a service and adoption of the geometric mean cost upon which to establish relative payment weights. In addition, we do not believe that we should make complexity adjustments for higher cost drugs. Complexity adjustments are for more complex procedure variations that differ significantly from the primary “J1” procedure. Complexity adjustments are not intended as a way to provide separate payment for adjunctive drugs and supplies under the guise of a complexity adjustment. Therefore, we are not adopting this commenter's suggested changes to the comprehensive APC payment policy. We will continue to monitor the development of this technology and consider future revisions to this policy as needed.

Comment: Commenters opinions varied regarding CMS' proposal to include C-APCs 0202 (Level V Gynecologic Procedures), 0385 (Level I Urogenital Procedures), and 0386 (Level II Urogenital Procedures) in the urogenital procedures clinical family of C-APCs and to allow complexity adjustments from C-APC 0202 to C-APC 0385 and complexity adjustments from C-APC 0385 to C-APC 0386. Some commenters agreed with CMS' proposed structure of the urogenital procedures family of C-APCs, while other commenters opposed the proposal to reassign complexity adjustment code combinations from C-APC 0202 to C-APC 0385. The commenters believed that the procedures assigned to C-APC 0202, which are related to female urogenital anatomy, are not sufficiently clinically similar to the primary procedures assigned to C-APC 0385, which relate to the male urogenital anatomy.

Response: We appreciate the commenters' support for the proposed structure of the urogenital procedures C-APC clinical family and the proposed approach for complexity adjustments. However, we disagree with the commenters that complexity adjustments should not be made from C-APC 0202 to C-APC 0385 because of insufficient clinical similarity between the complex procedures with a primary code assigned to C-APC 0202 that have been reassigned according to the complexity adjustment policy to C-APC 0385 and the primary procedures assigned to C-APC 0385. Although we acknowledge that there are differences in the male and female human urogenital anatomy, we believe that many of these procedures involve relatively complex repairs of the urogenital region involving implantable medical devices and, therefore, it is appropriate to assign complexity adjusted code combinations from C-APC 0202 to the next higher paying APC in the urogenital procedures clinical family, which is C-APC 0385.

Comment: Some commenters supported the proposed structure of the C-APCs in the endovascular clinical family. Other commenters noted that payments for some endovascular procedure code combinations would be negatively impacted by the proposed structure for C-APCs 0083 (Level I Endovascular Procedures), 0229 Level II Endovascular Procedures), and 0319 (Level III Endovascular Procedures). The commenters recommended reviewing and revising these C-APCs and creating more levels beyond the proposed three levels of endovascular C-APCs.

Response: We appreciate the commenters' support for the proposed structure of the endovascular C-APC clinical family. We do not believe that additional levels of endovascular C-APCs are necessary at this time. We believe that the restructured endovascular C-APCs better reflect resource homogeneity than the CY 2014 final structure of these C-APCs because the new structure has clearer delineations between the cost ranges of the procedures assigned to the three levels. In addition, in response to comments to the CY 2014 OPPS/ASC final rule with comment period (79 FR 40951), we proposed less stricter complexity adjustment criteria, which resulted in more code combinations qualifying for higher payment than would have qualified under the CY 2014 OPPS final rule complexity adjustment criteria. We also proposed evaluating certain add-on codes that are currently assigned to device-dependent APCs for complexity adjustments, and the overwhelming majority of these add-on codes are endovascular add-on codes. We believe that these two changes to the CY 2014 comprehensive APC payment policy sufficiently mitigate much of any negative payment impact for endovascular procedures in this transition from the current payment methodology to the comprehensive APC payment methodology. As we do annually, we will reevaluate the need for adjustments to the endovascular family of C-APCs.

Comment: In the CY 2015 OPPS/ASC proposed rule (79 FR 40950 through 40951) in response to a comment to the CY 2014 OPPS/ASC final rule with comment period, we proposed to continue to pay for stem cell transplant procedures as we have done for many years through APCs 0111 (Blood Product Exchange) and 0112 (Apheresis and Stem Cell Procedures). We stated that we would not create a C-APC for stem cell transplant procedures. Some commenters supported this approach. Other commenters requested that CMS create a C-APC for these procedures.

Response: Based on the rationale discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40950 through 40951), we will continue to pay for stem cell transplant procedures through APCs 0111 and 0112 in CY 2015.

(4) Statement of Final Policy and List of CY 2015 C-APCs.

As we discussed earlier, in the CY 2015 OPPS/ASC proposed rule (79 FR 40941 through 40953), we proposed to continue to define a comprehensive service as a classification for the provision of a primary service and all adjunctive services and supplies reported on the hospital Medicare Part B claim, with few exceptions, resulting in a single beneficiary copayment per claim. The comprehensive APC payment bundle policy includes all hospital services reported on the claim that are covered under Medicare Part B, except for the excluded services or services requiring separate payment by statute as noted above. We proposed to continue to define a clinical family of C-APCs as a set of clinically related C-APCs that represent different resource levels of clinically comparable services.

After consideration of the public comments we received, we are finalizing our proposals, with some minor modifications, for establishment of C-APCs. In this final rule with comment period, we are establishing a total of 25 C-APCs within 12 clinical families for CY 2015, as described below in Table 7.

We are establishing a comprehensive APC payment methodology that adheres to the same basic principles as those finalized in the CY 2014 OPPS/ASC final rule with comment period, with the following changes for CY 2015:

• We are reorganizing and consolidating several of the current device-dependent APCs and the CY 2014 C-APCs.
• We are expanding the comprehensive APC payment policy to include all device-dependent APCs, except for APCs 0427, 0622, and 0652.
• We are creating two other new C-APCs (C-APC 0067 and C-APC 0351).
• We are establishing new complexity adjustment criteria:

Frequency of 25 or more claims reporting the HCPCS code combination (the frequency threshold); and

Violation of the “2 times” rule (the cost threshold).

• We are establishing a policy to package all add-on codes, although we evaluate claims reporting a single primary service code reported in combination with an applicable add-on code (we refer readers to Table 8 below for the list of applicable add-on codes) for complexity adjustments.

Addendum J to this final rule with comment period (which is available via the Internet on the CMS Web site) contains all of the data related to the comprehensive APC payment policy, including the list of complexity adjustments.

f. Calculation of Composite APC Criteria-Based Costs

As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide necessary, high quality care as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Combining payment for multiple, independent services into a single OPPS payment in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An additional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which may be low in volume and/or incorrectly coded. Under the OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40953), for CY 2015, we proposed to continue our composite APC payment policies for LDR prostate brachytherapy services, mental health services, and multiple imaging services, as discussed below. In addition, we noted that we finalized a policy in the CY 2014 OPPS/ASC final rule with comment period to modify our longstanding policy to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (78 FR 74910 through 74912). For CY 2014, we created one new composite APC, entitled “Extended Assessment and Management (EAM) Composite” (APC 8009), to provide payment for all qualifying extended assessment and management encounters rather than recognize two levels of EAM composite APCs (78 FR 74910 through 74912). Under this policy, we allow any visits, a Level 4 or 5 Type A ED visit or a Level 5 Type B ED visit furnished by a hospital in conjunction with observation services of substantial duration to qualify for payment through EAM composite APC 8009. In the CY 2015 OPPS/ASC proposed rule (79 FR 40953 to 40954), we proposed to pay for qualifying extended assessment and management services through composite APC 8009.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40953), we also proposed to discontinue our composite APC payment policies for cardiac electrophysiologic evaluation and ablation services (APC 8000), and to pay for these services through comprehensive APC 0086 (Level III Electrophysiologic Procedures), as presented in a proposal included under section II.A.2.e. of the CY 2015 OPPS/ASC proposed rule. As such, in the CY 2015 OPPS/ASC proposed rule, we proposed to delete APC 8000 for CY 2015 (79 FR 40953).

We note that we finalized a policy to discontinue and supersede the cardiac resynchronization therapy composite APC with comprehensive APC 0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)), as discussed in section II.A.2.e. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74902). For CY 2014, APC 0108 is classified as a composite APC, as discussed in the CY 2014 OPPS/ASC final rule with comment period, because comprehensive APCs were not made effective until CY 2015 (78 FR 74925). For CY 2015, with the implementation of our new comprehensive APC policy, in the CY 2015 OPPS/ASC proposed rule, we proposed to effectuate the policy finalized in the CY 2014 OPPS/ASC final rule with comment period, and pay for cardiac resynchronization therapy services through comprehensive APC 0108 (proposed to be renamed “Level II ICD and Similar Procedures”), which is discussed in section II.A.2.e. of the CY 2015 proposed rule (79 FR 40953).

(1) Extended Assessment and Management Composite APC (APC 8009)

Beginning in CY 2008, we included composite APC 8002 (Level I Extended Assessment and Management (EAM) Composite) and composite APC 8003 (Level II Extended Assessment and Management (EAM) Composite) in the OPPS to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (an extended visit). In most of these circumstances, observation services are furnished in conjunction with evaluation and management services as an integral part of a patient's extended encounter of care. From CY 2008 through CY 2013, in the circumstances when 8 or more hours of observation care was provided in conjunction with a high level visit, critical care, or direct referral for observation, was an integral part of a patient's extended encounter of care, and was not furnished on the same day as surgery or post-operatively, a single OPPS payment was made for the observation and evaluation and management services through one of the two composite APCs, as appropriate. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 through 74165) for a full discussion of this longstanding policy for CY 2013 and prior years. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910), we created one new composite APC, APC 8009 (Extended Assessment and Management (EAM) Composite), to provide payment for all qualifying extended assessment and management encounters rather than recognizing two levels of EAM composite services. Under the CY 2014 finalized policy, we no longer recognize composite APC 8002 or APC 8003. Beginning in CY 2014, we allowed services identified by the new single clinic visit HCPCS code G0463, a Level 4 or 5 Type A ED visit (CPT code 99284 or 99285), a Level 5 Type B ED visit (HCPCS code G0384), or critical care (CPT code 99291) provided by a hospital in conjunction with observation services of substantial duration (8 or more hours) (provided the observation was not furnished on the same day as surgery or post-operatively) (78 FR 74910 through 74912) to qualify for payment through EAM composite APC 8009.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40953 through 40954), for CY 2015, we proposed to continue our CY 2014 finalized policy to provide payment for all qualifying extended assessment and management encounters through composite APC 8009. As we did for CY 2014, in the CY 2015 OPPS/ASC proposed rule, for CY 2015, we proposed to allow a clinic visit and certain high level ED visits furnished by a hospital in conjunction with observation services of substantial duration (8 or more hours) to qualify for payment through the EAM composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). Specifically, we proposed to continue to allow a clinic visit, a Level 4 or Level 5 Type A ED visit, or a Level 5 Type B ED visit furnished by a hospital or a direct referral for observation (identified by HCPCS code G0379) performed in conjunction with observation services of substantial duration to qualify for payment through composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). We note that, for CY 2015, we also proposed to continue our current policy where one service code describes all clinic visits. We refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74912) for a full discussion of the creation of composite APC 8009.

As we noted in the CY 2014 OPPS/ASC final rule with comment period, the historical cost data used annually to calculate the geometric mean costs and payment rate for composite APC 8009 would not reflect the single clinic visit code that was new for CY 2014 (HCPCS code G0463) until our CY 2016 rulemaking cycle. We stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74912) that when hospital claims data for the CY 2014 clinic and ED visit codes become available, we would calculate the geometric mean cost for EAM composite APC 8009 using CY 2014 single and “pseudo” single procedure claims that meet each of the following criteria:

• The claims do not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we ensure that they would not contain a code for a service with status indicator “T” on the same date of service.)
• The claims contain 8 or more units of services described by HCPCS code G0378 (Observation services, per hour.)
• The claims contain one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378; CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient clinic visit for assessment and management of a patient) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

Because we have no available cost data for HCPCS code G0463, for CY 2015, we proposed to calculate the geometric mean cost for procedures assigned to APC 8009 using CY 2013 single and “pseudo” single procedure claims that met each of the following criteria:

• The claim did not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we assured that they would not contain a code for a service with status indicator “T” on the same date of service.)
• The claim contained 8 or more units of services described by HCPCS code G0378 (Observation services, per hour.)
• The claim contained one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378; or CPT code 99201 (Office or other outpatient visit for the evaluation and management of a new patient (Level 1)); CPT code 99202 (Office or other outpatient visit for the evaluation and management of a new patient (Level 2)); CPT code 99203 (Office or other outpatient visit for the evaluation and management of a new patient (Level 3)); CPT code 99204 (Office or other outpatient visit for the evaluation and management of a new patient (Level 4)); CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); CPT code 99211 (Office or other outpatient visit for the evaluation and management of an established patient (Level 1)); CPT code 99212 (Office or other outpatient visit for the evaluation and management of an established patient (Level 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and management of an established patient (Level 3)); CPT code 99214 (Office or other outpatient visit for the evaluation and management of an established patient (Level 4)); CPT code 99215 (Office or other outpatient visit for the evaluation and management of an established patient (Level 5)); CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); HCPCS code G0384 (Type B emergency department visit (Level 5)); or CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

The proposed CY 2015 geometric mean cost resulting from this methodology for EAM composite APC 8009 was approximately $1,287.

Comment: One commenter urged CMS to consider options to minimize the financial burden for the beneficiary associated with self-administered drugs while the beneficiary is receiving observation services. The commenter also supported efforts to count outpatient observation toward the Medicare skilled nursing facility (SNF) 3-day stay requirement. Another commenter expressed concern that paying for all qualifying EAM encounters through a single composite APC is likely to penalize certain outpatient facilities, such as those that are attached to safety-net or teaching hospitals, which treat more complex patients and populations. The commenter urged CMS to monitor and accept provider feedback concerning the impact of this coding change to ensure that it does not create financial pressure or incentives to admit borderline cases, deny treatment, or otherwise negatively affect clinical decision making.

Response: The comments related to beneficiary liability associated with self-administered drugs and counting outpatient observation toward the SNF 3-day qualifying stay are outside the scope of the proposed regulations. We do not believe that paying for all qualifying EAM encounters through a single composite APC is likely to penalize certain outpatient facilities that treat more complex patients and populations. We believe that this proposal accurately accounts for the cost of providing an extended assessment and management service and that this proposal does not have any substantial impact on any particular type of facility or patient type. We also do not believe that paying for all qualifying EAM encounters through a single composite APC creates any financial pressure or incentives to admit borderline cases, deny treatment, or otherwise negatively affect clinical decision making. We continue to expect hospitals to provide the appropriate medical care to all beneficiaries.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to continue our CY 2014 finalized policy to provide payment for all qualifying extended assessment and management encounters through composite APC 8009 for CY 2015. We also are finalizing our proposal, without modification, to continue to allow a clinic visit and certain high level ED visits furnished by a hospital in conjunction with observation services of substantial duration (8 or more hours) to qualify for payment through EAM composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). The final CY 2015 geometric mean cost resulting from this methodology for EAM composite APC 8009 is approximately $1,281.

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

LDR prostate brachytherapy is a treatment for prostate cancer in which hollow needles or catheters are inserted into the prostate, followed by permanent implantation of radioactive sources into the prostate through the needles/catheters. At least two CPT codes are used to report the composite treatment service because there are separate codes that describe placement of the needles/catheters and the application of the brachytherapy sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 (Interstitial radiation source application; complex), which are generally present together on claims for the same date of service in the same operative session. In order to base payment on claims for the most common clinical scenario, and to further our goal of providing payment under the OPPS for a larger bundle of component services provided in a single hospital encounter, beginning in CY 2008, we began providing a single payment for LDR prostate brachytherapy when the composite service, reported as CPT codes 55875 and 77778, is furnished in a single hospital encounter. We base the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the geometric mean cost derived from claims for the same date of service that contain both CPT codes 55875 and 77778 and that do not contain other separately paid codes that are not on the bypass list. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for a full history of OPPS payment for LDR prostate brachytherapy services and a detailed description of how we developed the LDR prostate brachytherapy composite APC.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40955), for CY 2015, we proposed to continue to pay for LDR prostate brachytherapy services using the composite APC payment methodology proposed and implemented for CY 2008 through CY 2014. That is, we proposed to use CY 2013 claims reporting charges for both CPT codes 55875 and 77778 on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the proposed payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2014 practice, in the CY 2015 OPPS/ASC proposed rule (79 FR 40955), we proposed not to use the claims that meet these criteria in the calculation of the geometric mean costs of procedures or services assigned to APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We proposed to continue to calculate the geometric mean costs of procedures or services assigned to APCs 0163 and 0651 using single and “pseudo” single procedure claims. We continue to believe that this composite APC contributes to our goal of creating hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. We also continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate geometric mean cost upon which to base the proposed composite APC payment rate.

Using a partial year of CY 2013 claims data available for the CY 2015 OPPS/ASC proposed rule, we were able to use 379 claims that contained both CPT codes 55875 and 77778 to calculate the proposed geometric mean cost of approximately $3,669 for these procedures upon which the proposed CY 2015 payment rate for composite APC 8001 is based.

Comment: Several commenters expressed concern that the proposed payment rate for APC 8001 is based only on 379 claims that reported both CPT codes 55875 and 77778 on the same date of service, a significant decrease from the CY 2014 final rule claims data used for ratesetting when 591 claims were available. Commenters also noted that the proposed payment rate of $3,504.02 yields an 8.9 percent decrease in payment compared to the CY 2014 payment rate of $3,844.64. One commenter opined that the decrease in payment for these services is partially due to the number of brachytherapy procedures provided in the hospital outpatient setting. A few commenters urged CMS to closely monitor the number of claims used to set the payment rate for this APC and to consider other ratesetting methodologies if the number of claims continues to decrease. Several commenters expressed that the low volume of claims reporting outpatient brachytherapy services also affected other APCs, notably APC 0312 (Radioelement Applications) and APC 0651 (Complex Interstitial Radiation Source Application), and cited additional decreases in the volume of claims used for ratesetting for these APCs.

Response: The CY 2015 final rule claims data show that 406 claims were available and used to set the payment rate for APC 8001, with a geometric mean cost of approximately $3,745, compared to the proposed rule claims data that showed 379 claims available and used for ratesetting, with a geometric mean cost of approximately $3,669. In response to comments regarding the decrease in the number of claims available for CY 2015 ratesetting and the geometric mean cost relative to the number of claims available for CY 2014 ratesetting and the geometric mean cost, we note that there is typically some fluctuation in costs from year to year. We acknowledge that the number of claims available and used for ratesetting for APC 8001 has decreased over recent years. However, the percentage of single frequency claims compared to total claims that we were able to use for ratesetting in this final rule with comment period is comparable to prior years. In addition, evaluation of the claims data for the 4 years prior to CY 2014 indicated that the mean or median costs used for ratesetting for APC 8001 were lower in those years than CY 2014 or CY 2015 cost levels. For APC 0651, based on final rule claims data, there are 62 single frequency claims out of a total of 3,785 claims, with a geometric mean cost of approximately $988. For APC 0312, based on final rule claims data, there are 26 single frequency claims out of a total of 378 claims, with a geometric mean cost of approximately $411. We agree with the commenters' assertion that it appears that there are an increasing number of radiation oncological technologies that are competing with prostate brachytherapy, which may be contributing to a decreased number of claims available for ratesetting for these APCs. As we stated in the CY 2014 OPPS/ASC final rule with comment period, we will continue to evaluate additional refinements and improvements to our ratesetting methodologies in order to maximize the use of claims data (78 FR 74913). In addition, we will continue to explore means by which we can use a larger volume of claims to establish the payment rate for APC 0312 and APC 0651.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to continue use of composite APC 8001 for CY 2015 and to set the payment rate for this APC using our established methodology. The final geometric mean cost for composite APC 8001 for CY 2015 is approximately $3,745.

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

In the CY 2015 OPPS/ASC proposed rule (79 FR 40955), for CY 2015, we proposed to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment for a day of partial hospitalization services provided by a hospital, which we consider to be the most resource-intensive of all outpatient mental health services. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 through 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74168) for more recent background.

Specifically, in the CY 2015 OPPS/ASC proposed rule (79 FR 40955), we proposed that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services exceeds the maximum per diem payment rate for partial hospitalization services provided by a hospital, those specified mental health services would be assigned to APC 0034 (Mental Health Services Composite). We also proposed to continue to set the payment rate for APC 0034 at the same payment rate that we proposed to establish for APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs), which is the maximum partial hospitalization per diem payment rate for a hospital, and that the hospital continue to be paid one unit of APC 0034 (79 FR 40955). Under this policy, the I/OCE would continue to determine whether to pay for these specified mental health services individually, or to make a single payment at the same payment rate established for APC 0176 for all of the specified mental health services furnished by the hospital on that single date of service. We continue to believe that the costs associated with administering a partial hospitalization program at a hospital represent the most resource-intensive of all outpatient mental health services. Therefore, we do not believe that we should pay more for mental health services under the OPPS than the highest partial hospitalization per diem payment rate for hospitals.

We did not receive any public comments on this proposal. Therefore, we are finalizing our CY 2015 proposal, without modification, to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to a single beneficiary by a hospital to the payment rate for APC 0176, which is the maximum partial hospitalization per diem payment for a hospital for CY 2015.

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

Effective January 1, 2009, we provide a single payment each time a hospital bills more than one imaging procedure within an imaging family on the same date of service, in order to reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session (73 FR 41448 through 41450). We utilize three imaging families based on imaging modality for purposes of this methodology: (1) Ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 12 of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74920 through 74924).

While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement under section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging services provided with and without contrast. While the ultrasound procedures included in the policy do not involve contrast, both CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five multiple imaging composite APCs established in CY 2009 are:

• APC 8004 (Ultrasound Composite);
• APC 8005 (CT and CTA without Contrast Composite);
• APC 8006 (CT and CTA with Contrast Composite);
• APC 8007 (MRI and MRA without Contrast Composite); and
• APC 8008 (MRI and MRA with Contrast Composite).

We define the single imaging session for the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. For example, if the hospital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment for APC 8008, the “with contrast” composite APC.

We make a single payment for those imaging procedures that qualify for composite APC payment, as well as any packaged services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging procedures performed across families. For a full discussion of the development of the multiple imaging composite APC methodology, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569).

In the CY 2015 OPPS/ASC proposed rule, for CY 2015, we proposed to continue to pay for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite APC payment methodology (79 FR 40956). We continue to believe that this policy will reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session.

The proposed CY 2015 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) were based on geometric mean costs calculated from a partial year of CY 2013 claims available for the proposed rule that qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calculate the proposed geometric mean costs, we used the same methodology that we used to calculate the final CY 2013 and CY 2014 geometric mean costs for these composite APCs, as described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918). The imaging HCPCS codes referred to as “overlap bypass codes” that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC geometric mean costs, pursuant to our established methodology as stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918), are identified by asterisks in Addendum N to the CY 2015 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site) and are discussed in more detail in section II.A.1.b. of that proposed rule.

For the CY 2015 OPPS/ASC proposed rule, we were able to identify approximately 636,000 “single session” claims out of an estimated 1.6 million potential composite APC cases from our ratesetting claims data, approximately 40 percent of all eligible claims, to calculate the proposed CY 2015 geometric mean costs for the multiple imaging composite APCs.

Table 8 of the proposed rule (79 FR 40956 through 40958) listed the proposed HCPCS codes that would be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC geometric mean costs for CY 2015.

Comment: A few commenters expressed concern that the multiple imaging composite APCs may undercompensate providers for imaging procedures. These commenters recommended that CMS provide an analysis of the effects of reductions in imaging payments due to the composite APC policy on utilization. The commenters recommended that CMS provide separate payment for each imaging procedure in light of reductions to payment for imaging procedures.

Response: We continue to believe that our multiple imaging composite policies reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session, and some of those efficiencies result in lower payments due to cost savings from furnishing multiple imaging services on the same date. We will continue to monitor the multiple imaging composite APC ratesetting methodology and the cost of providing imaging services. If appropriate, we may report any information to the HOP Panel, or discuss and propose changes to the multiple imaging composite APCs in rulemaking in the future.

After consideration of the public comments received, we are finalizing our proposal to continue the use of multiple imaging composites without modification. We were able to identify approximately 661,000 million “single session” claims out of an estimated 1.68 million potential composite cases from our CY 2013 ratesetting claims data, approximately 39 percent of all eligible claims, to calculate the final CY 2015 geometric mean costs for the multiple imaging composite APCs.

Table 9 below lists the HCPCS codes that will be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC geometric mean costs for CY 2015.

3. Changes to Packaged Items and Services

a. Background and Rationale for Packaging in the OPPS

Like other prospective payment systems, the OPPS relies on the concept of averaging to establish a payment rate for services. The payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services most efficiently and to manage their resources with maximum flexibility. Our packaging policies support our strategic goal of using larger payment bundles in the OPPS to maximize hospitals' incentives to provide care in the most efficient manner. For example, where there are a variety of devices, drugs, items, and supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the most cost-efficient item that meets the patient's needs, rather than to routinely use a more expensive item, which often results if separate payment is provided for the items.

Packaging also encourages hospitals to effectively negotiate with manufacturers and suppliers to reduce the purchase price of items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care delivery. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furnished, while scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the predictability and accuracy of payment for services over time. Finally, packaging may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and services and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency and is an essential component of a prospective payment system, packaging payment for items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000. Over the last 15 years, as we have refined our understanding of the OPPS as a prospective payment system, we have packaged numerous services that we originally paid as primary services. As we continue to develop larger payment groups that more broadly reflect services provided in an encounter or episode of care, we have expanded the OPPS packaging policies. Most, but not necessarily all, items and services currently packaged in the OPPS are listed in 42 CFR 419.2(b), including the five packaging policies that were added in CY 2014 (78 FR 74925). Our overarching goal is to make OPPS payments for all services paid under the OPPS more consistent with those of a prospective payment system and less like those of a per service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examine the payment for items and services provided in the OPPS to determine which OPPS services can be packaged to achieve the objective of advancing the OPPS as a prospective payment system.

We have examined the items and services currently provided under the OPPS, reviewing categories of integral, ancillary, supportive, dependent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment of the primary service they support. Specifically, we examined the HCPCS code definitions (including CPT code descriptors) to determine whether there were categories of codes for which packaging would be appropriate according to existing OPPS packaging policies or a logical expansion of those existing OPPS packaging policies. In general, in the CY 2015 OPPS/ASC proposed rule (79 FR 40958 through 40961), we proposed to package the costs of selected HCPCS codes into payment for services reported with other HCPCS codes where we believe that one code reported an item or service that was integral, ancillary, supportive, dependent, or adjunctive to the provision of care that was reported by another HCPCS code. Below we discuss categories and classes of items and services that we proposed to package beginning in CY 2015. For an extensive discussion of the history and background of the OPPS packaging policy, we refer readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925).

b. Revisions of a Packaging Policy Established in CY 2014—Procedures Described by Add-On Codes

In the CY 2014 OPPS/ASC final rule with comment period, we packaged add-on codes in the OPPS, with the exception of add-on codes describing drug administration services (78 FR 74943; 42 CFR 419.2(b)(18)). With regard to the packaging of add-on procedures that use expensive medical devices, we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74943) that the most expensive medical devices used in procedures to insert or implant devices in the hospital outpatient setting are included in procedures that are assigned to comprehensive APCs. Comprehensive APCs are discussed in section II.A.2.e. of this final rule with comment period. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74864), we discussed the comprehensive APC policy, which we adopted, with modification, but delayed the implementation of, until CY 2015. We stated that, for CY 2014, we would continue to pay separately for only those add-on codes (except for drug administration add-on codes) that were assigned to device-dependent APCs in CY 2014, but that, after CY 2014, these device-dependent add-on codes would be paid under the comprehensive APC policy. According to the proposed changes to the comprehensive APC policy described in section II.A.2.e. of this final rule with comment period, we proposed to package all of the procedures described by add-on codes that are currently assigned to device-dependent APCs, which will be replaced by comprehensive APCs. The device-dependent add-on codes that are separately paid in CY 2014 that we proposed to package in CY 2015 were listed in Table 9 of the CY 2015 OPPS/ASC proposed rule (79 FR 40959).

Comment: A few commenters disagreed with the proposal to package payment for the add-on codes listed in Table 9 of the proposed rule for the following reasons:

• Some commenters requested that CMS delay packaging the device-dependent add-on codes remaining for CY 2015 while additional data analysis is performed and refinements are adopted to ensure accurate payment for the full range of add-on procedures, including those not assigned to comprehensive APCs.
• A few commenters suggested that add-on codes are separate and distinct clinical procedures having unique, independent values determined by the American Medical Association (AMA) and, therefore, should not be treated as ancillary services.
• Some commenters requested that CMS establish exceptions to its proposal to package add-on codes for specific add-on procedures with high cost supply items that commenters believed would be underpaid under the policy and impede patient access to care.

Response: We disagree with the commenters that oppose packaging these remaining add-on codes. We received similar public comments during the CY 2014 rulemaking cycle and responded to those comments in the CY 2014 OPPS/ASC final rule with comment period. Generally, we disagree because add-on codes describe services that are integral, ancillary, supportive, dependent, or adjunctive to the primary service. In other words, add-on codes do not represent a stand-alone procedure and are inclusive to other procedures performed at the same time. For a full discussion of our response to these public comments, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74942 through 74943).

We also disagree with commenters' assertion that add-on code services are separate and distinct clinical procedures and should not be treated as ancillary services. We received a similar public comment last year where commenters suggested that procedures described by add-on codes are not integral, ancillary, supportive, dependent, or adjunctive to the primary service. As we noted previously (78 FR 74942 through 74943), the fundamental nature of an add-on code procedure is that it typically describes some form of a related extension of or addition to the primary procedure or service described by the primary procedure. The definition of an add-on code is that it is an extension of a primary, base service. CPT defines add-on codes as codes that describe “procedures [that] are commonly carried out in addition to the primary procedure performed” (2014 CPT Codebook Professional Edition, page xiv). Further, CPT states that “add-on codes describe additional intra-service work associated with the primary procedure (emphasis added) (2014 CPT Codebook Professional Edition, page xiv). We also disagree with commenters that some add-on codes are not related to the primary procedure but represent a separate procedure that should be paid separately from the primary procedure. If such procedures were in fact separate procedures, they would not be described by an add-on code. Thus, we believe that add-on code procedures are not always separate and distinct clinical procedures, but rather are related extensions, supportive, integral, or adjunctive of the primary procedure and, therefore, it is appropriate to package the cost of the add-on codes into the payment calculation for the primary procedure. Finally, in response to commenters who requested that CMS establish exceptions to its proposal for add-on code with high cost supply items, we are allowing certain add-on codes to be evaluated for a complexity adjustment when billed with a comprehensive APC primary procedure. We refer readers to section II.A.2.e. of this final rule with comment period for further discussion of that policy. We see no reason to grant exceptions to the add-on code packaging policy to specifically account for add-on procedures with high cost supply items, as any associated costs are accounted for in the payment for the primary procedure. The only reason we did not package the add-on codes listed in Table 9 of the proposed rule was that implementation of the comprehensive APC policy was delayed for 1 year (78 FR 74943). Because the comprehensive APC policy will be implemented in CY 2015, we are packaging these remaining add-on codes.

After consideration of the public comments we received, we are finalizing our proposal to package all of the procedures described by add-on codes that are currently assigned to device-dependent APCs, which will be replaced by comprehensive APCs, as listed in Table 9 of the CY 2015 OPPS/ASC proposed rule (79 FR 40959) and included in Table 10 below. The current device-dependent add-on codes that are separately paid in CY 2014 that will be packaged in CY 2015 are included in Table 8 under section II.A.2.e. of this final rule with comment period, which addresses the comprehensive APC policy.

c. Packaging Policies for CY 2015

(1) Ancillary Services

Under the OPPS, we currently pay separately for certain ancillary services. Some of these ancillary services are currently assigned to status indicator “X,” which is defined as “ancillary services,” but some other ancillary services are currently assigned to status indicators other than “X.” This is because the current use of status indicator “X” in the OPPS is incomplete and imprecise. Some procedures and services that are ancillary, for example, a chest X-ray, are assigned to an APC with services assigned status indicator “S.” As discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40959 through 40961), we reviewed all of the covered services provided in the HOPD and identified those that are commonly performed when provided with other HOPD services, and also provided as ancillary to a primary service in the HOPD. These ancillary services that we identified are primarily minor diagnostic tests and procedures that are often performed with a primary service, although there are instances where hospitals provide such services alone and without another primary service during the same encounter.

As discussed in section II.A.3.a. of this final rule with comment period, our intent is that the OPPS be more of a prospective payment system with expanded packaging of items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service. Given that the longstanding OPPS policy is to package items and services that are integral, ancillary, supportive, dependent, or adjunctive to a primary service, we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74945) that we believe that ancillary services should be packaged when they are performed with another service, but should continue to be separately paid when performed alone. We indicated that this packaging approach is most consistent with a prospective payment system and the regulation at 42 CFR 419.2(b) that packages many ancillary services into primary services while preserving separate payment for those instances in which one of these ancillary services is provided alone (not with any other service paid under the OPPS) to a hospital outpatient. We did not finalize the ancillary packaging policy for CY 2014 because we believed that further evaluation was necessary (78 FR 74946).

In the CY 2015 OPPS/ASC proposed rule (79 FR 40959 through 40961), we proposed to conditionally package certain ancillary services for CY 2015. Specifically, we proposed to limit the initial set of APCs that contain conditionally packaged services to those ancillary service APCs with a proposed geometric mean cost of less than or equal to $100 (prior to application of the conditional packaging status indicator). We limited this initial set of packaged ancillary service APCs to those with a proposed geometric mean cost of less than or equal to $100 in response to public comments on the CY 2014 ancillary service packaging proposal in which commenters expressed concern that certain low volume but relatively costly ancillary services would have been packaged into high volume but relatively inexpensive primary services (for example, a visit) (74 FR 74945). We noted that the proposed $100 geometric mean cost limit for selecting this initial group of conditionally packaged ancillary service APCs is less than the geometric mean cost of APC 0634, which contains the single clinic visit HCPCS code G0463, which is a single payment rate for clinic visits beginning in CY 2014, and had a CY 2015 OPPS/ASC proposed rule geometric mean cost of approximately $103. This proposed $100 geometric mean cost limit is part of the methodology of selecting the initial set of conditionally packaged ancillary service APCs under this proposed packaging policy. It is not meant to represent a threshold above which ancillary services will not be packaged, but as a basis for selecting this initial set of APCs, which will likely be updated and expanded in future years. In future years, we may package ancillary services assigned to APCs with geometric mean costs higher than $100. In addition, geometric mean costs can change over time. An increase in the geometric mean cost of any of the proposed APCs to above $100 in future years would not change the conditionally packaged status of services assigned to the APCs selected in CY 2015 in a future year. We would continue to consider these APCs to be conditionally packaged. However, we would review the conditionally packaged status of ancillary services annually.

We proposed to exclude certain services from this packaging policy even though they are assigned to APCs with a geometric mean cost of less than or equal to $100. Preventive services will continue to be paid separately, and include the following services listed in Table 11 below that would otherwise be packaged under this policy.

In addition, we did not propose to package certain psychiatry and counseling-related services as we see similarities to a visit and, at the time of issuance of the CY 2015 OPPS/ASC proposed rule, did not consider them to be ancillary services. We also did not propose to package certain low cost drug administration services as we are examining various alternative payment policies for drug administration services, including the associated drug administration add-on codes.

Finally, we proposed to delete status indicator “X” (Ancillary Services) because the majority of the services assigned to status indicator “X” were proposed to be assigned to status indicator “Q1” (STV-Packaged Codes). For the services that are currently assigned status indicator “X” that were not proposed to be conditionally packaged under this policy, we proposed to assign those services status indicator “S” (Procedure or Service, Not Discounted When Multiple), indicating separate payment and that the services are not subject to the multiple procedure reduction. The APCs that we proposed for conditional packaging as ancillary services in CY 2015 were listed in Table 11 of the CY 2015 OPPS/ASC proposed rule (79 FR 40960 through 40961).

The HCPCS codes that we proposed to conditionally package as ancillary services for CY 2015 were displayed in Addendum B to the CY 2015 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site). The supporting documents for the proposed rule are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

We also proposed to revise the regulations at 42 CFR 419.2(b)(7) to replace the phrase “Incidental services such as venipuncture” with “Ancillary services” to more accurately reflect the proposed packaging policy discussed above.

Comment: A number of commenters, which included hospital associations, health systems, and individual hospitals, supported conditionally packaging ancillary services with a geometric mean cost of $100 prior to application of the “Q1” status indicator.

Response: We appreciate the commenters' support.

Comment: A few commenters expressed concern that conditionally packaging ancillary services would disproportionately affect teaching hospitals because of the types of patients these hospitals serve and the types of services that they typically provide. One commenter submitted results from its data analysis that estimated major teaching hospitals will lose approximately −0.4 percent on average as a result of this packaging proposal, compared to nonteaching hospitals, which would gain approximately 0.2 percent. The commenter's concern was that the negative impact is a direct result of academic medical centers' caring for unique and complex patient populations, for example, trauma patients who are seen in teaching hospital emergency departments. The commenter's analysis suggested that a large proportion of certain APCs listed on Table 11 of the proposed rule (APCs 0012, 0099, 0260, 0261, 0340, and 0420) are packaged into emergency department visits and related services.

Response: Conditional packaging of ancillary services results in packaging of these services when provided with other primary services and separate payment for the services when they are performed alone. It is possible that, as the commenter asserted, the case-mix at teaching hospitals results in greater packaging of ancillary services than at nonteaching hospitals. This may be due to teaching hospitals being more likely to provide services in addition to the ancillary service, which would result in packaging of the ancillary service into the other primary service or services provided to the patient. Even if the commenter's observation is reflective of a difference between teaching and nonteaching hospitals, we do not believe that such an observation is a sufficient reason to not package ancillary services in the OPPS. Packaging is a fundamental element of a prospective payment system. As stated above, in the OPPS, we packaged items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service. We believe that the ancillary services proposed for conditional packaging are ancillary when provided with other primary services and, therefore, are appropriately conditionally packaged in the OPPS. As for the impact of the CY 2015 OPPS policies on teaching hospitals, we refer the commenter to the impact table (Table 49) in section XXI. of this final rule with comment period, which shows that teaching hospitals will receive an overall 2.3 percent payment update compared to a 2.0 percent payment update for nonteaching hospitals. Therefore, overall teaching hospitals stand to benefit more than nonteaching hospitals from the policies adopted in this final rule with comment period, despite any relative negative impacts from the ancillary packaging policy.

Comment: Several commenters requested clarification of the methodology used to identify APCs with a geometric mean cost less than or equal to $100 prior to application of the “Q1” status indicator, given that the geometric mean cost of some of the APCs listed in Table 11 of the proposed rule exceeds $100. Also, commenters requested that the $100 threshold be held constant for future years or updated annually based on inflation akin to the drug threshold methodology.

Response: As we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40960), the ancillary services APCs proposed for conditional packaging were those with a geometric mean cost of less than or equal to $100 prior to application of the “Q1” status indicator to the APC. In other words, it was ancillary service APCs with a geometric mean cost of $100 or less with all of the services assigned to the APC that had either status indicator “X” or “S.” Once status indicator “Q1” was assigned, some of the geometric mean costs of some of the APCs increased to above $100 due to conditional packaging according to the “Q1” status indicator logic. We remind the commenters that the APCs listed in Table 11 of the proposed rule (79 FR 40960 through 40961) displayed the APC geometric mean costs after application of the “Q1” status indicator, which resulted in some of the APC geometric mean costs that were below $100 prior to application of the “Q1” status indicator to exceed $100 after application of the “Q1” status indicator. We also clarify that the $100 geometric mean cost initial selection criteria for this packaging policy is not a threshold above which ancillary services will not be conditionally packaged. As we stated in the CY 2015 OPPS/ASC proposed rule, “[the $100 limit] is not meant to represent a threshold above which ancillary services will not be packaged, but as a basis for selecting this initial set of APCs, which will likely be updated and expanded in future years” (79 FR 40960). As we stated in the proposed rule, in future years, we may package additional ancillary services in APCs with a geometric mean cost (prior to the application of the conditional packaging status indicator) that exceeds $100.

Comment: One commenter expressed concern regarding the composition of APC 0077 (Level I Pulmonary Treatment), which was proposed to be conditionally packaged. The commenter believed that HCPCS code G0424 (Pulmonary rehabilitation, including exercise (includes monitoring), one hour, per session, up to two sessions per day) is not clinically similar to HCPCS code G0237 (Therapeutic procedures to increase strength or endurance of respiratory muscles, face to face, one on one, each 15 minutes (includes monitoring) and HCPCS code G0238 (Therapeutic procedures to improve respiratory function, other than described by G0237, one on one, face to face, per 15 minutes (includes monitoring), which also are assigned to APC 0077. In addition, the commenter stated that the assignment of HCPCS code G0424 to APC 0077 would create a 2 times rule violation. The commenter recommended that CMS reassign HCPCS code G0424 to APC 0078 (Level II Pulmonary Treatment).

Response: We disagree with the commenter's assertion that the assignment of HCPCS code G0424 to APC 0077 would create a 2 times rule violation. Section 1833(t)(9) of the Act requires that we annually review all the items and services within an APC group and revise the APC structures accordingly. Included in this review is the identification of any 2 times rule violations as provided under section 1833(t)(2) of the Act and, to the extent possible, rectification of these violations. We review our claims data and determine whether we need to make changes to the current APC assignment for the following year. For HCPCS codes G0238 and G0424, we evaluated their APC assignment for the CY 2015 update and determined that APC 0340 (Level II Minor Procedures) is the more appropriate assignment for these services based on resource similarity to the other services assigned to APC 0340. In addition, with the reassignment of HCPCS codes G0424 and G0238 to APC 0340, only four HCPCS codes (31270, 94668, 94669, and G0237) remained in APC 0077, one (HCPCS code 94669) of which did not have any claims volume in CY 2013. The commenter suggested that we reassign HCPCS code G0424 to APC 0078. APC 0078 has a mean cost of approximately $90, which is under the $100 initial selection criteria for conditionally packaged ancillary services. With the reduced size of APC 0077 and the mean cost of APC 0078 being less than $100, we are reassigning the procedure codes remaining in APC 0078 to APC 0077 and revising the title of APC 0077 to read “Pulmonary Treatment.” The new combined APC 0077 is assigned status indicator “Q1” under the conditional packaging policy. We note that the mean cost of this revised APC 0077 (after application of the “Q1” status indicator) is approximately $154.

Comment: One commenter requested that CMS continue separate payment, by assigning status indicator “S,” for CPT codes 92557 (comprehensive hearing test), 92601 through 92604 (cochlear implant programming), and 92640 (auditory brainstem implant programming) which are assigned to APC 0364, an APC that is proposed for conditional packaging. The commenter stated that these CPT codes are primary audiology services and are not dependent or incident to other services in the hospital.

Response: We do not believe that it is necessary to change the status indicator to “S” as we disagree that these CPT codes represent primary audiology services. Conditional packaging provides separate payment when the otherwise packaged services are provided alone without other primary services. Therefore, these services will continue to be separately paid when performed without other primary services.

Comment: Some commenters expressed concern that packaging payment for ancillary services could have a negative impact on patient access because hospitals will not have an incentive to perform ancillary services at the time of other therapeutic or evaluation/management services, even when providing such services at the same encounter would be efficient and offer patients the most appropriate and complete care. Commenters cautioned that expanded packaging policies will impede the accuracy and stability of future ratesetting under the OPPS.

Response: We appreciate stakeholders' concerns and predictions about the effect that this conditional packaging policy may have on patient access to ancillary services. We will continue to monitor service utilization trends in the HOPD. We disagree with commenters that packaging services impedes the accuracy and stability of future OPPS ratesetting. As a reminder, hospitals include HCPCS codes and charges for packaged services on their claims, and the costs associated with those packaged services are included in the costs of the separately payable procedure on the claim. We also continue to emphasize that hospitals should report all HCPCS codes for all services, including those for packaged services, according to correct coding principles.

Comment: One commenter disagreed with the proposed assignment of status indicator “Q1” to CPT code 95012 (Expired nitric oxide gas determination). The commenter requested that CMS assign status indicator “S” to CPT code 95012 because the code describes an independent, primary procedure that is not ancillary to any other procedure. The commenter also requested that CMS reassign CPT code 95012 to APC 0078 (Level II Pulmonary Treatment) because of its clinical homogeneity to other services assigned to that APC.

Response: We disagree with the commenter. We believe the procedure or service described by CPT code 95012 to be an ancillary diagnostic test and, therefore, appropriate for conditional packaging under the ancillary services policy. We believe that existing assignment to APC 0340 (Level II Minor Procedures) is appropriate in that CPT code 95012 is a minor test and that its mean cost of approximately $41 is similar to the mean cost of APC 0340 of approximately $53. Therefore, we are finalizing our proposal to maintain assignment of CPT code 95012 to APC 0340 with a “Q1” status indicator for CY 2015.

Comment: A few commenters requested that CMS make an exception to the ancillary packaging policy for pathology services, specifically those services assigned to APC 0342 (Level I Pathology) and APC 0433 (Level II Pathology). These commenters were concerned about inadequate payment for pathology services.

Response: We disagree with commenters' concern regarding inadequate payment for pathology services and do not believe that an exception to this packaging policy for the pathology services assigned to APCs 0342 and 0433 is appropriate at this time. We remind the commenters that this policy only affects the facility payment for the technical aspect of the services and does not affect the physician fee schedule payment to the pathologist for the physician work in performing pathology services. We believe that pathology services are some of the best examples of ancillary services as they typically follow a surgical or other specimen-generating procedure for the purposes of diagnosis. We also remind the commenters that in the event a patient receives a pathology test in isolation from other primary HOPD services, the test would be separately paid because the ancillary services packaging policy is a conditional packaging policy. Therefore, we are not creating an exception to this ancillary packaging policy for pathology services.

After consideration of the public comments we received, we are finalizing our ancillary services packaging policy as proposed, including deletion of status indicator “X.” We also are adopting as final our proposed revision of the regulations at 42 CFR 419.2(b)(7) to replace the phrase “Incidental services such as venipuncture” with “Ancillary services” to more accurately reflect the final packaging policy for CY 2015.

The APCs that we are conditionally packaging as ancillary services in CY 2015 are listed in Table 12 below.

The HCPCS codes that we are conditionally package as ancillary services for CY 2015 are displayed in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site). The supporting documents for this final rule with comment period are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

(2) Prosthetic Supplies

We have a longstanding policy of providing payment under the OPPS for implantable DME, implantable prosthetics, and medical and surgical supplies, as provided at sections 1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). In the CY 2014 OPPS/ASC final rule with comment period, we clarified that medical and surgical supplies under § 419.2(b)(4) include (but are not limited to) all supplies on the DMEPOS Fee Schedule except prosthetic supplies (78 FR 74947). Under 42 CFR 419.22(j), prosthetic supplies are currently excluded from payment under the OPPS and are paid under the DMEPOS Fee Schedule, even when provided in the HOPD. However, as we discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40961), under section 1833(t)(1)(B)(i) of the Act, the Secretary has the authority to designate prosthetic supplies provided in the hospital outpatient setting as covered OPD services payable under the OPPS.

As we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40961) and as mentioned above, implantable prosthetic devices are packaged in the OPPS under 42 CFR 419.2(b)(11). It is common for implantable prosthetic devices to be provided as a part of a device system. Such device systems include the implantable part or parts of the overall device system and also certain nonimplantable prosthetic supplies that are integral to the overall function of the medical device, part of which is implanted and part of which is external to the patient. These prosthetic supplies are integral to the implantable prosthetic because typically shortly after the surgical procedure to implant the implantable prosthetic device in the hospital, the surgeon and/or his or her colleagues will have to attach, fit, and program certain prosthetic supplies that are not surgically implanted into the patient but are a part of a system and that are essential to the overall function of an implanted device. Because these supplies are integral to the overall function of the implanted prosthetic, and because, as mentioned above, we package in the OPPS items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service, we believe that it is most consistent with a prospective payment system to package the payment of prosthetic supplies (along with the implantable prosthetic device) into the surgical procedure that implants the prosthetic device, as all of the components are typically necessary for the performance of the system and the hospital typically purchases the system as a single unit. Patients requiring replacement supplies at a time later than the initial surgical procedure and outside of the hospital would obtain them as they typically do from a DMEPOS supplier with payment for such supplies made under the DMEPOS Fee Schedule.

In addition to prosthetic supplies that are components of device systems, part of which are implanted, many other prosthetic supplies on the DMEPOS Fee Schedule are typical medical and surgical supplies and of the type that are packaged in the OPPS under § 419.2(b)(4). Consistent with our change from status indicator “A” to “N” for all nonprosthetic DMEPOS supplies in the CY 2014 OPPS final rule with comment period (78 FR 74947), in the CY 2015 OPPS/ASC proposed rule (79 FR 40961), we proposed to package and change the status indicator from “A” to “N” for all DMEPOS prosthetic supplies. With this proposed change, all medical and surgical supplies would be packaged in the OPPS.

Therefore, we proposed to delete “prosthetic supplies” from the regulations at § 419.22(j) because we proposed that prosthetic supplies be packaged covered OPD services in the OPPS for CY 2015. Prosthetic supplies provided in the HOPD would be included in “medical and surgical supplies” (as are all other supplies currently provided in the HOPD) under § 419.2(b)(4). The HCPCS codes for prosthetic supplies that we proposed to package for CY 2015 were displayed in Addendum B to the CY 2015 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site). The supporting documents for the proposed rule, including but not limited to Addendum B, are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

Comment: Many commenters agreed with CMS' proposal to conditionally package prosthetic supplies furnished in the HOPD.

Response: We appreciate the commenters' support.

Comment: A few commenters requested to be informed of the fund transfer amount from the DMEPOS Fee Schedule to the OPPS as a result of this proposed policy.

Response: Our CY 2013 claims analysis shows that packaging payment for prosthetic supplies under the OPPS would redistribute approximately $1 million.

Comment: Some commenters recommended that CMS implement an exception to the “unbundling” rule that currently exists for the inpatient prospective payment systems (IPPS). (We refer readers to the Medicare Claims Processing Manual, Pub. 100-04, Chapter 20—Durable Medical Equipment, Prosthetics, Orthotic Devices, and Supplies, Section 110—General Billing Requirements—for DME, Prosthetics, Orthotic Devices, and Supplies.) The commenters believed that such an exception would allow DME suppliers to bill Medicare directly for prosthetic supplies furnished to patients during an outpatient visit when the supplies are intended primarily for home use.

Response: We do not believe that an additional exception to the “unbundling” rule is necessary for the provision of prosthetic supplies in the HOPD. We remind commenters that DME, prosthetics, and orthotics can be billed by hospitals for outpatients and are paid according to the DMEPOS Fee Schedule. Only prosthetic supplies are packaged in the OPPS. Unlike inpatient stays, hospital outpatient stays are typically brief and the need for replacement supplies during a hospital outpatient stay should be minimal. If a hospital wants to provide a patient with some basic supplies for immediate home use (for example, tape, a syringe, or gauze), such supplies are packaged into the payment for whatever service the patient received at the hospital. DME suppliers can furnish additional or replacement prosthetic supplies to the patient's home and receive payment under the DMEPOS Fee Schedule.

After consideration of the public comments we received, we are adopting as final our proposed deletion of “prosthetic supplies” from the regulations at § 419.22(j) because prosthetic supplies are packaged covered OPD services in the OPPS for CY 2015. Prosthetic supplies provided in the HOPD will be included in the packaged category of “medical and surgical supplies” (as are all other supplies currently provided in the HOPD) under § 419.2(b)(4). The HCPCS codes for prosthetic supplies that we are packaging for CY 2015 are displayed in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via Internet on the CMS Web site). The supporting documents for this final rule with comment period, including but not limited to Addendum B, are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

4. Calculation of OPPS Scaled Payment Weights

In the CY 2015 OPPS/ASC proposed rule (79 FR 40961 through 40962), for CY 2015, we proposed to calculate the relative payment weights for each APC shown in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of the proposed rule. Prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid-Level Clinic Visit) because mid-level clinic visits were among the most frequently performed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC.

Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the relative payment weights to APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of the clinic visit APCs. We selected APC 0606 as the base because it was the mid-level clinic visit APC (that is, Level 3 of five levels). For the CY 2013 OPPS (77 FR 68283), we established a policy of using geometric mean-based APC costs rather than median-based APC costs to calculate relative payment weights. For CY 2015, we proposed to continue this policy.

For the CY 2014 OPPS, we standardized all of the relative payment weights to clinic visit APC 0634 as discussed in section VII. of the CY 2015 OPPS/ASC proposed rule (79 FR 41008). For CY 2015, we proposed to continue this policy to maintain consistency in calculating unscaled weights that represent the cost of some of the most frequently provided services. We proposed to assign APC 0634 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the proposed geometric mean cost for APC 0634 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed relative payment weights does not affect payments made under the OPPS because we scale the weights for budget neutrality.

Section 1833(t)(9)(B) of the Act requires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a budget neutral manner. Budget neutrality ensures that the estimated aggregate weight under the OPPS for CY 2015 is neither greater than nor less than the estimated aggregate weight that would have been made without the changes. To comply with this requirement concerning the APC changes, we proposed to compare the estimated aggregate weight using the CY 2014 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2015 unscaled relative payment weights.

We did not receive any public comments on our proposed policy for the CY 2015 unscaled relative payment weights. Therefore, we are finalizing our proposed policy to maintain consistency in calculating unscaled weights that represent the cost of some of the most frequently provided services by assigning APC 0634 a relative payment weight of 1.00 and dividing the geometric mean cost of each APC by the geometric mean cost for APC 0634 to derive the unscaled relative payment weight for each APC for CY 2015.

For CY 2014, we multiplied the CY 2014 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2013 claims to calculate the total relative payment weight for each service. We then added together the total relative payment weight for each of these services in order to calculate an estimated aggregate weight for the year. For CY 2015, we proposed to apply the same process using the CY 2015 unscaled relative payment weights rather than scaled relative payment weights. We proposed to calculate the weight scaler by dividing the CY 2014 estimated aggregate weight by the CY 2015 estimated aggregate weight (79 FR 40962). The service-mix is the same in the current and prospective years because we use the same set of claims for service volume in calculating the aggregate weight for each year. We note that the CY 2014 OPPS scaled relative weights incorporate the estimated payment weight from packaged laboratory tests previously paid at CLFS rates.

For a detailed discussion of the weight scaler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Click on the CY 2015 OPPS final rule link, then open the claims accounting document link at the bottom of the page.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40962), we proposed to include estimated payments to CMHCs in our comparison of the estimated unscaled relative payment weights in CY 2015 to the estimated total relative payment weights in CY 2014 using CY 2013 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we proposed to adjust the proposed CY 2015 unscaled relative payment weights for purposes of budget neutrality. The proposed CY 2015 unscaled relative payment weights were adjusted by multiplying them by a weight scaler of 1.3220 to ensure that the proposed CY 2015 relative payment weights are budget neutral.

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefore, the cost of those SCODs (as discussed in section V.B.3. of this final rule with comment period) is included in the budget neutrality calculations for the CY 2015 OPPS.

Comment: One commenter expressed concern that CMS did not provide detailed data on the weight scaling process. The commenter noted that it could not find the claims accounting document to which the proposed rule referenced.

Response: The direct link to the proposed rule claims accounting document is located on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CMS-1613-P-claims-accounting-narrative.pdf.

After consideration of the public comments we received, we are finalizing our proposed methodology for calculating the OPPS scaled relative payment weights without modification, including updating of the budget neutrality scaler for this final rule with comment period. Under this methodology, the final unscaled relative payment weights were adjusted by a weight scaler of 1.2977 for this final rule with comment period. The CY 2015 unscaled relative payment weights listed in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) incorporate the recalibration adjustments discussed in sections II.A.1. and II.A.2. of this final rule with comment period.

B. Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the conversion factor used to determine the payment rates under the OPPS on an annual basis by applying the OPD fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase factor is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49994), consistent with current law, based on IHS Global Insight, Inc.'s second quarter 2014 forecast of the FY 2015 market basket increase, the FY 2015 IPPS market basket update is 2.9 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iv) of the Act, as added by section 3401(i) of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of that law and further amended by section 1105(e) of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), provide adjustments to the OPD fee schedule increase factor for CY 2015.

Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49994), we discussed the calculation of the MFP adjustment for FY 2015, which is 0.5 percentage point.

As we proposed, based on more recent data that became subsequently available after the publication of the CY 2015 OPPS/ASC proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we are using such updated data, if appropriate, to determine the CY 2015 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in this CY 2015 OPPS/ASC final rule with comment period.

In addition, section 1833(t)(3)(F)(ii) of the Act requires that, for each of years 2010 through 2019, the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment described in section 1833(t)(3)(G) of the Act. For CY 2015, section 1833(t)(3)(G)(iv) of the Act provides a 0.2 percentage point reduction to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of the Act, as we proposed, we are applying a 0.2 percentage point reduction to the OPD fee schedule increase factor for CY 2015.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 percent for a year, and may result in OPPS payment rates being less than rates for the preceding year. As described in further detail below, we are finalizing an OPD fee schedule increase factor of 2.2 percent for the CY 2015 OPPS (which is 2.9 percent, the estimate of the hospital inpatient market basket percentage increase, less the 0.5 percentage point MFP adjustment, and less the 0.2 percentage point additional adjustment).

Hospitals that fail to meet the Hospital OQR Program reporting requirements are subject to an additional reduction of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates for their services, as required by section 1833(t)(17) of the Act. For further discussion of the Hospital OQR Program, we refer readers to section XIII. of this final rule with comment period.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40963), we proposed to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (6) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2015, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(iv) of the Act, as required by section 1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by an additional 0.2 percentage point for CY 2015.

We did not receive any public comments on our proposed adjustments to the OPD fee schedule increase factor or the proposed amendment to § 419.32(b)(1)(iv)(B) by adding a new paragraph (6) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act. Therefore, for the reasons discussed above, we are adjusting the OPD fee schedule increase factor for CY 2015 as proposed. We also are finalizing the amendment to § 419.32(b)(1)(iv)(B) as proposed.

To set the OPPS conversion factor for CY 2015, we proposed to increase the CY 2014 conversion factor of $72.672 by 2.1 percent. In accordance with section 1833(t)(9)(B) of the Act, we further adjusted the conversion factor for CY 2015 to ensure that any revisions made to the wage index and rural adjustment were made on a budget neutral basis. We proposed a calculated overall budget neutrality factor of 0.9998 for wage index changes by comparing total estimated payments from our simulation model using the FY 2015 IPPS wage indexes to those payments using the FY 2014 IPPS wage indexes, as adopted on a calendar year basis for the OPPS.

For CY 2015, we proposed to maintain current rural adjustment policy, as discussed in section II.E. of this final rule with comment period. Therefore, the budget neutrality factor for the rural adjustment would be 1.0000.

For CY 2015, we proposed to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this final rule with comment period. We calculated a CY 2015 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing estimated total CY 2015 payments under section 1833(t) of the Act, including the CY 2015 cancer hospital payment adjustment, to estimated CY 2015 total payments using the CY 2014 final cancer hospital payment adjustment as required under section 1833(t)(18)(B) of the Act. The CY 2015 estimated payments applying the CY 2015 cancer hospital payment adjustment are identical to estimated payments applying the CY 2014 final cancer hospital payment adjustment. Therefore, we applied a budget neutrality adjustment factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment.

For the proposed rule, we estimated that pass-through spending for drugs, biologicals, and devices for CY 2015 would equal approximately $15.5 million, which represented 0.03 percent of total projected CY 2015 OPPS spending. Therefore, the proposed conversion factor would be adjusted by the difference between the 0.02 percent estimate of pass-through spending for CY 2014 and the 0.03 percent estimate of pass-through spending for CY 2015, resulting in a proposed adjustment for CY 2015 of 0.01 percent. Finally, estimated payments for outliers would remain at 1.0 percent of total OPPS payments for CY 2015.

For the proposed rule, we proposed that hospitals that fail to meet the reporting requirements of the Hospital OQR Program would continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase factor. For hospitals that fail to meet the requirements of the Hospital OQR Program, we would make all other adjustments discussed above, but use a reduced OPD fee schedule update factor of 0.2 percent (that is, the OPD fee schedule increase factor of 2.1 percent further reduced by 2.0 percentage points). This resulted in a proposed reduced conversion factor for CY 2015 of $72.692 for hospitals that fail to meet the Hospital OQR requirements (a difference of −$1.484 in the conversion factor relative to hospitals that met the requirements).

Comment: MedPAC noted that CMS is required by law to implement the 2015 update to the conversion factor as stated in the Affordable Care Act. In its March 2014 Report to Congress, MedPAC recommended an update of 3.25 percent and Congressional action to direct the Secretary to reduce or eliminate differences in payment rates between HOPDs and physician offices, which is different from the Affordable Care Act requirement.

Response: As discussed above, section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the conversion factor used to determine the payment rates under the OPPS on an annual basis by applying the OPD fee schedule increase factor. Section 1833(t)(3)(C)(iv) provides that the OPD fee schedule increase factor, subject to sections 1833(t)(3)(F) and 1833(t)(3)(G)(iv) of the Act, is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act.

After consideration of the public comment we received, we are finalizing the calculation of the CY 2015 OPPS conversion factor as proposed. We are finalizing the proposed amendment to § 419.32(b)(1)(iv)(B) by adding a new paragraph (6) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2015 to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(iv) of the Act. We are using a reduced conversion factor of $72.661 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements (a difference of −$1.483 in the conversion factor relative to hospitals that met the requirements).

For CY 2015, we are finalizing our proposal to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this final rule with comment period.

For this final rule with comment period, we estimate that pass-through spending for drugs, biologicals, and devices for CY 2015 will equal approximately $82.8 million, which represents 0.15 percent of total projected CY 2015 OPPS spending. Therefore, the conversion factor is also adjusted by the difference between the 0.02 percent estimate of pass-through spending for CY 2014 and the 0.15 percent estimate of pass-through spending for CY 2015, resulting in an adjustment for CY 2015 of −0.13 percent. Finally, estimated payments for outliers remain at 1.0 percent of total OPPS payments for CY 2015.

As a result of these final policies, the OPD fee schedule increase factor for the CY 2015 OPPS is 2.2 percent (which is 2.9 percent, the estimate of the hospital inpatient market basket percentage increase, less the 0.5 percentage point MFP adjustment, and less the 0.2 percentage point additional adjustment). For CY 2015, we are using a conversion factor of $74.144 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs, that is the OPD fee schedule increase factor of 2.2 percent for CY 2015, the required wage index budget neutrality adjustment of approximately 0.9996, the cancer hospital payment adjustment of 1.0000, and the adjustment of −0.13 percent of projected OPPS spending for the difference in the pass-through spending result in a conversion factor for CY 2015 of $74.144.

C. Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to “determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner” (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is called the OPPS labor-related share. Budget neutrality is discussed in section II.B. of this final rule with comment period.

The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that, for all hospitals, approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40964), we proposed to continue this policy for the CY 2015 OPPS. We refer readers to section II.H. of this final rule with comment period for a description and example of how the wage index for a particular hospital is used to determine payment for the hospital.

As discussed in section II.A.2.c. of this final rule with comment period, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2015 pre-reclassified wage index that the IPPS uses to standardize costs. This standardization process removes the effects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and copayment amount.

Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS wage index as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Therefore, the wage index that applies to a particular acute care short-stay hospital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained several provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). As discussed in that final rule with comment period, section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines a “frontier State,” and amended section 1833(t) of the Act to add new paragraph (19), which requires a “frontier State” wage index floor of 1.00 in certain cases, and states that the frontier State floor shall not be applied in a budget neutral manner. We codified these requirements in § 419.43(c)(2) and (c)(3) of our regulations. In the CY 2015 OPPS/ASC proposed rule (79 FR 40964), we proposed to implement this provision in the same manner as we have since CY 2011. That is, frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural and imputed floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multicampus hospital systems, we proposed that the HOPD would receive a wage index based on the geographic location of the specific inpatient hospital with which it is associated. Therefore, if the associated hospital is located in a frontier State, the wage index adjustment applicable for the hospital also will apply for the affiliated HOPD. We refer readers to the following sections in the FY 2011 through FY 2015 IPPS/LTCH PPS final rules for discussions regarding this provision, including our methodology for identifying which areas meet the definition of “frontier States” as provided for in section 1886(d)(3)(E)(iii)(II) of the Act: For FY 2011, 75 FR 50160 through 50161; for FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR 53369 through 53370; for FY 2014, 78 FR 50590 through 50591; and for FY 2015, 79 FR 49971.

In addition to the changes required by the Affordable Care Act, we note that the FY 2015 IPPS wage indexes continue to reflect a number of adjustments implemented over the past few years, including, but not limited to, reclassification of hospitals to different geographic areas, the rural and imputed floor provisions, an adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (the out-migration adjustment). We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule and final rule (79 FR 28054 through 28084 and 79 FR 49950 through 49991, respectively) for a detailed discussion of all changes to the FY 2015 IPPS wage indexes. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed discussion of the history of these wage index adjustments as applied under the OPPS.

As discussed in the FY 2015 IPPS/LTCH PPS proposed rule and final rule (79 FR 28054 through 28055 and 79 FR 49951 through 49957, respectively), the Office of Management and Budget (OMB) issued revisions to the current labor market area delineations on February 28, 2013, that included a number of significant changes such as new Core Based Statistical Areas (CBSAs), urban counties that become rural, rural counties that become urban, and existing CBSAs that are split apart (OMB Bulletin 13-01). This bulletin can be found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), in order to allow for sufficient time to assess the new revisions and their ramifications, we intended to propose changes to the IPPS wage index based on the newest CBSA delineations in the FY 2015 IPPS/LTCH PPS proposed rule. Similarly, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74951), we stated that we intended to propose changes in the OPPS, which uses the IPPS wage index, based on the new OMB delineations in the CY 2015 OPPS/ASC proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH PPS proposed rule. We refer readers to proposed changes based on the new OMB delineations in the FY 2015 IPPS/LTCH proposed rule at 79 FR 28054 through 28084 and the final changes based on the new OMB delineations in the FY 2015 IPPS/LTCH PPS final rule at 79 FR 49950 through 49966.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40964), we proposed to use the FY 2015 hospital IPPS wage index for urban and rural areas as the wage index for the OPPS hospital to determine the wage adjustments for the OPPS payment rate and the copayment standardized amount for CY 2015. (We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49850) and the final FY 2015 hospital wage index files posted on the CMS Web site.) We note that the final FY 2015 IPPS wage indexes reflect a number of changes as a result of the new OMB delineations as well as a 1-year extension of the imputed rural floor. We proposed that the CY 2015 OPPS wage index (for hospitals paid under the IPPS and OPPS) would be the final FY 2015 IPPS wage index. Thus, any adjustments, including the adjustments related to the new OMB delineations, that were finalized for the IPPS wage index would be reflected in the OPPS wage index. As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we did not propose to change our existing regulations, which require that we use the FY 2015 IPPS wage indexes for calculating OPPS payments in CY 2015.

Hospitals that are paid under the OPPS but not under the IPPS do not have a hospital wage index under the IPPS. Therefore, for non-IPPS hospitals paid under the OPPS, we assign the wage index that would be applicable if the hospital were paid under the IPPS, based on its geographic location and any applicable wage index adjustments. We proposed to adopt the final wage index changes from the FY 2015 IPPS/LTCH PPS final rule for these hospitals. The following is a brief summary of the major changes in the FY 2015 IPPS wage indexes and any adjustments that we proposed to apply to these hospitals under the OPPS for CY 2015. We refer the reader to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 through 49991) for a detailed discussion of the changes to the wage indexes.

For CY 2015, we proposed to continue our policy of allowing non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). We stated in the proposed rule that applying this adjustment is consistent with our proposed policy of adopting IPPS wage index policies for hospitals paid under the OPPS. We note that, because non-IPPS hospitals cannot reclassify, they would be eligible for the out-migration wage adjustment if they are located in a section 505 out-migration county. This is the same out-migration adjustment policy that would apply if the hospital were paid under the IPPS. Table 4J from the FY 2015 IPPS/LTCH PPS final rule (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties eligible for the out-migration adjustment and IPPS hospitals that will receive the adjustment for FY 2015.

As we have done in prior years, we are including Table 4J from the FY 2015 IPPS/LTCH PPS final rule as Addendum L to this final rule with comment period with the addition of non-IPPS hospitals that would receive the section 505 out-migration adjustment under the CY 2015 OPPS. Addendum L is available via the Internet on the CMS Web site.

In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to adopt the new OMB labor market area delineations issued by OMB in OMB Bulletin No. 13-01 on February 28, 2013, based on standards published on June 28, 2010 (75 FR 37246 through 37252) and the 2010 Census data to delineate labor market areas for purposes of the IPPS wage index. In the FY 2015 IPPS/LTCH PPS final rule, we finalized the adoption of the new OMB delineations. For IPPS wage index purposes, for hospitals that are designated as rural under the new OMB labor market area delineations that currently are located in urban CBSAs, we generally assigned them the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (79 FR 28060 through 28061 and 79 FR 49957 through 49960). To be consistent, we proposed to apply the same policy to hospitals paid under the OPPS but not under the IPPS so that such hospitals will maintain the wage index of the CBSA in which they are physically located for FY 2014 for the next 3 calendar years. As stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40965), this proposed policy would impact six hospitals for purposes of OPPS payment.

We believe that adopting the new OMB labor market area delineations creates a more accurate wage index system, but we also recognize that implementing the new OMB delineations may cause some short-term instability in hospital payments. Therefore, similar to the policy we adopted in the FY 2005 IPPS final rule (69 FR 49033), in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49960 through 49962), we finalized a 1-year blended wage index for all hospitals that experience any decrease in their actual payment wage index exclusively due to the implementation of the new OMB delineations. Under this final IPPS policy, a post-reclassified wage index with the rural and imputed floors applied is computed based on the hospital's FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another post-reclassified wage index with the rural and imputed floors applied is computed based on the hospital's new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We then compare these two wage indexes. If the FY 2015 wage index with FY 2015 CBSAs is lower than the FY 2015 wage index with FY 2014 CBSAs, we compute a blended wage index consisting of 50 percent of each of the two wage indexes added together. This blended wage index will be the IPPS hospital's wage index for FY 2015. In the CY 2015 OPPS/ASC proposed rule, for purposes of the OPPS, we proposed to apply this 50-percent transition blend to hospitals paid under the OPPS but not under the IPPS. We stated that we believe a 1-year, 50/50 blended wage index would mitigate the short-term instability and negative payment impacts due to the implementation of the new OMB delineations, providing hospitals with a transition period during which they may adjust to their new geographic CBSA. We believe that a longer transition period would reduce the accuracy of the overall labor market area wage index system, and generally would not be warranted for hospitals moving from one urban geographic labor market area to another.

In addition, for the FY 2015 IPPS, we are continuing the extension of the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015 (79 FR 49969 through 49971). For purposes of the CY 2015 OPPS, we also proposed to apply the imputed floor policy to hospitals paid under the OPPS but not under the IPPS.

For CMHCs, we proposed to continue to calculate the wage index by using the post-reclassification IPPS wage index based on the CBSA where the CMHC is located. As with OPPS hospitals and for the same reasons, we proposed to apply a 1-year, 50/50 blended wage index to CMHCs that would receive a lower wage index due to the new CBSA delineations. In addition, as with OPPS hospitals and for the same reasons, for CMHCs currently located in urban CBSAs that are designated as rural under the new OMB labor market area delineations, we proposed to maintain the urban wage index value of the CBSA in which they are physically located for CY 2014 for the next 3 calendar years. Consistent with our current policy, the wage index that applies to CMHCs includes both the imputed floor adjustment and the rural floor adjustment, but does not include the out-migration adjustment because that adjustment only applies to hospitals.

With the exception of the out-migration wage adjustment table (Addendum L to this final rule with comment period, which is available via the Internet on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the FY 2015 IPPS wage indexes referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the final FY 2015 IPPS wage index tables.

Comment: One commenter suggested that the IPPS rural floor should utilize State-specific budget neutrality rather than national budget neutrality to prevent it from being susceptible to gaming by hospitals. The commenter suggested that, under the current policy, an urban hospital can reclassify to rural status to improve the rural wage index in the State, which in some cases is used as a floor for urban hospitals.

Response: As we stated in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50370), section 3141 of Public Law 111-148 requires that a national budget neutrality adjustment be applied in implementing the rural floor policy under the IPPS. Therefore, absent a legislative change enacted by Congress, we are unable to change the rural floor budget neutrality adjustment from a national adjustment to a State-specific adjustment. In this final rule with comment period, we are adopting the final fiscal year IPPS wage index as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50370 through 50372) for further discussion and a detailed response to a similar comment.

After considering the public comment we received, we are finalizing our proposals to use the FY 2015 IPPS final wage index as the CY 2015 wage index for OPPS hospitals and CMHCs, as discussed above and as set forth in the CY 2015 OPPS/ASC proposed rule (79 FR 40963 through 40965), without modification.

D. Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calculated from the hospital's most recent cost report to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. MACs cannot calculate a CCR for some hospitals because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital's MAC is able to calculate the hospital's actual CCR from its most recently submitted Medicare cost report. These hospitals include, but are not limited to, hospitals that are new, have not accepted assignment of an existing hospital's provider agreement, and have not yet submitted a cost report. CMS also uses the statewide average default CCRs to determine payments for hospitals that appear to have a biased CCR (that is, the CCR falls outside the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most recent cost report reflects an all-inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section 10.11). In the CY 2015 OPPS/ASC proposed rule (79 FR 40966), we proposed to update the default ratios for CY 2015 using the most recent cost report data. We discuss our policy for using default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009.

For CY 2015, we proposed to continue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting the CY 2015 OPPS relative payment weights. Table 12 published in the proposed rule (79 FR 40966 through 40968) listed the proposed CY 2015 default urban and rural CCRs by State and compared them to the CY 2014 default CCRs. These proposed CCRs represented the ratio of total costs to total charges for those cost centers relevant to outpatient services from each hospital's most recently submitted cost report, weighted by Medicare Part B charges. We also proposed to adjust ratios from submitted cost reports to reflect the final settled status by applying the differential between settled to submitted overall CCRs for the cost centers relevant to outpatient services from the most recent pair of final settled and submitted cost reports. We then proposed to weight each hospital's CCR by the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and our trimming criteria.

We did not receive any public comments on our CY 2015 proposal. Therefore, we are finalizing our proposal, without modification, to apply our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we used to adjust charges to costs on claims data for setting the CY 2015 OPPS relative payment weights. We used this methodology to calculate the statewide average default CCRs listed in Table 13 below.

For Maryland, we used an overall weighted average CCR for all hospitals in the Nation as a substitute for Maryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland because it takes into account each hospital's volume, rather than treating each hospital equally. We refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65822) for further discussion and the rationale for our longstanding policy of using the national average CCR for Maryland. In general, observed changes in the statewide average default CCRs between CY 2014 and CY 2015 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 13 below lists the statewide average default CCRs for OPPS services furnished on or after January 1, 2015.

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

In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologicals, brachytherapy sources, and devices paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provided the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, and devices paid under the pass-through payment policy, in accordance with section 1833(t)(13)(B) of the Act.

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) of the regulations to clarify that EACHs also are eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, two hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of Public Law 105-33, a hospital can no longer become newly classified as an EACH.

This adjustment for rural SCHs is budget neutral and applied before calculating outlier payments and copayments. We stated in the CY 2006 OPPS final rule with comment period (70 FR 68560) that we would not reestablish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2014. Further, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40968), for the CY 2015 OPPS, we proposed to continue our policy of a 7.1 percent payment adjustment that is done in a budget neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs.

Comment: Several commenters supported the proposed continuation of the 7.1 percent rural SCH adjustment. Several commenters, including MedPAC, also recommended that CMS update the analysis in the near future to assess if the 7.1 percent payment adjustment remains a valid figure.

Response: We appreciate the commenters' support. We agree that it is appropriate to continue the 7.1 percent adjustment for rural SCHs (including EACHs) as we proposed for CY 2015. As we indicated in the proposed rule (79 FR 40968), we may reassess the 7.1 percent rural adjustment in the near future by examining differences between urban hospitals' costs and rural hospitals' costs using updated claims, cost reports, and provider information.

After consideration of the public comments we received, we are finalizing our CY 2015 proposal to continue our policy of a 7.1 percent payment adjustment that is done in a budget neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs.

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

1. Background

Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid the 11 hospitals that meet the criteria for cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered outpatient hospital services. These cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to determine OPPS payments to cancer and children's hospitals based on their pre-BBA payment amount (often referred to as “held harmless”).

As required under section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA amount.” That is, cancer hospitals are permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not receive a payment that is lower under the OPPS than the payment they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA amount” is the product of the hospital's reasonable costs for covered outpatient services occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of the Act. The “pre-BBA amount,” including the determination of the base PCR, are defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital Cost Report or the Hospital Health Care Complex Cost Report (Form CMS-2552-96 and Form CMS-2552-10, respectively) as applicable each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Act amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed outpatient costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. Section 1833(t)(18)(A) of the Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by cancer and other hospitals. Section 1833(t)(18)(B) of the Act provides that if the Secretary determines that cancer hospitals' costs are greater than other hospitals' costs, the Secretary shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. In 2011, after conducting the study required by section 1833(t)(18)(A) of the Act, we determined that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. For a complete discussion regarding the cancer hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 through 74201).

Based on these findings, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects their higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a policy to provide additional payments to the cancer hospitals so that each cancer hospital's final PCR for services provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the calendar year. The amount of the payment adjustment is made on an aggregate basis at cost report settlement. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs are assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period. For CYs 2012 and 2013, the target PCR for purposes of the cancer hospital payment adjustment was 0.91. For CY 2014, the target PCR for purposes of the cancer hospital payment adjustment was 0.89.

2. Payment Adjustment for Certain Cancer Hospitals for CY 2015

In the CY 2015 OPPS/ASC proposed rule (79 FR 40968), for CY 2015, we proposed to continue our policy to provide additional payments to cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals using the most recent submitted or settled cost report data that were available at the time of the development of the proposed rule. To calculate the proposed CY 2015 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of the proposed rule, used to estimate costs for the CY 2015 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled.

We then limited the dataset to the hospitals with CY 2013 claims data that we used to model the impact of the proposed CY 2015 APC relative payment weights (3,881 hospitals) because it is appropriate to use the same set of hospitals that we used to calibrate the modeled CY 2015 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2012 to 2013. We then removed the cost report data of the 47 hospitals located in Puerto Rico from our dataset because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, therefore, their inclusion may bias the calculation of hospital-weighted statistics. We also removed the cost report data of 27 hospitals because these hospitals had cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic file of 3,807 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS were approximately 89 percent of reasonable cost (weighted average PCR of 0.89). Therefore, we proposed that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.89 for each cancer hospital. Table 13 of the proposed rule (79 FR 40969) indicated the estimated percentage increase in OPPS payments to each cancer hospital for CY 2015 due to the cancer hospital payment adjustment policy.

Comment: Several commenters noted that cancer hospitals have significantly higher costs than other OPPS hospitals and agreed with CMS' proposal to provide the proposed payment adjustment.

Response: We appreciate the commenters' support of our proposal. As described in detail below, we performed the same analysis as in previous years comparing the PCR for these cancer hospitals relative to other OPPS hospitals. That study indicates that there is a difference in PCRs between these hospital types. Accordingly, we are finalizing a cancer hospital adjustment with a target PCR of 0.89 based on that analysis.

After consideration of the public comments we received, we are finalizing our proposal to establish the target PCR equal to 0.89 for each cancer hospital. For this final rule with comment period, we have rerun our calculations to determine the target PCR using the latest available cost data and have determined that 0.89 is still the correct target PCR. We limited the dataset to the hospitals with CY 2013 claims data that we used to model the impact of the final CY 2015 APC relative payment weights (3,808 hospitals). The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2011 to 2013. We removed the cost report data of the 47 hospitals located in Puerto Rico from our dataset and also removed the cost report data of 14 hospitals that had cost report data that were not complete, leading to a final analytic file of 3,747 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS are approximately 89 percent of reasonable cost (weighted average PCR of 0.89). Therefore, we are finalizing that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a target PCR equal to 0.89 for each cancer hospital.

Table 14 below indicates the estimated percentage increase in OPPS payments to each cancer hospital for CY 2015 due to the cancer hospital payment adjustment policy. The actual amount of the CY 2015 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2015 payments and costs. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.

G. Hospital Outpatient Outlier Payments

1. Background

The OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cost and complex procedures, where a very costly service could present a hospital with significant financial loss. As explained in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74958 through 74960), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for the prospective year. Outlier payments are provided on a service-by-service basis when the cost of a service exceeds the APC payment amount multiplier threshold (the APC payment amount multiplied by a certain amount) as well as the APC payment amount plus a fixed-dollar amount threshold (the APC payment plus a certain amount of dollars). In CY 2014, the outlier threshold was met when the hospital's cost of furnishing a service exceeded 1.75 times (the multiplier threshold) the APC payment amount and exceeded the APC payment amount plus $2,900 (the fixed-dollar amount threshold). If the cost of a service exceeds both the multiplier threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount. Beginning with CY 2009 payments, outlier payments are subject to a reconciliation process similar to the IPPS outlier reconciliation process for cost reports, as discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).

It has been our policy to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the OPPS. Our current estimate of total outlier payments as a percent of total CY 2013 OPPS payment, using available CY 2013 claims and the revised OPPS expenditure estimate for the FY 2015 President's Budget Mid-Session Review, is approximately 1.4 percent of the total aggregated OPPS payments. Therefore, for CY 2013, we estimate that we paid 0.4 percent above the CY 2013 outlier target of 1.0 percent of total aggregated OPPS payments.

Using CY 2013 claims data and CY 2014 payment rates, we currently estimate that the aggregate outlier payments for CY 2014 will be approximately 0.8 percent of the total CY 2014 OPPS payments. The difference between 0.8 percent and the 1.0 percent target is reflected in the regulatory impact analysis in section XXII. of this final rule with comment period. We provide estimated CY 2015 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

2. Outlier Calculation

In the CY 2015 OPPS/ASC proposed rule (79 FR 40970), for CY 2015, we proposed to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS. We proposed that a portion of that 1.0 percent, an amount equal to 0.47 percent of outlier payments (or 0.0047 percent of total OPPS payments) would be allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments. As discussed in section VIII.D. of the proposed rule, for CMHCs, we proposed to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.D. of the proposed rule and this final rule with comment period.

To ensure that the estimated CY 2015 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the hospital outlier threshold be set so that outlier payments would be triggered when a hospital's cost of furnishing a service exceeds 1.75 times the APC payment amount and exceeds the APC payment amount plus $3,100.

We calculated the proposed fixed-dollar threshold of $3,100 using the standard methodology most recently used for CY 2014 (78 FR 74959 through 74960). For purposes of estimating outlier payments for the proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2014 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCRs, which are maintained by the MACs and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years.

In order to estimate the CY 2015 hospital outlier payments for the proposed rule, we inflated the charges on the CY 2013 claims using the same inflation factor of 1.1146 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). We used an inflation factor of 1.0557 to estimate CY 2014 charges from the CY 2013 charges reported on CY 2013 claims. The methodology for determining this charge inflation factor is discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321) and final rule (79 FR 50374). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of these charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and outpatient cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we could systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, we proposed to apply the same CCR inflation adjustment factor that we proposed to apply for the FY 2015 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2015 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2015, we proposed to apply an adjustment factor of 0.9813 to the CCRs that were in the April 2014 OPSF to trend them forward from CY 2014 to CY 2015. The methodology for calculating this proposed adjustment was discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321) and finalized in the FY 2015 IPPS/LTCH PS final rule (79 FR 50374).

To model hospital outlier payments for the proposed rule, we applied the overall CCRs from the April 2014 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9813 to approximate CY 2015 CCRs) to charges on CY 2013 claims that were adjusted (using the proposed charge inflation factor of 1.1146 to approximate CY 2015 charges). We simulated aggregated CY 2015 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2015 OPPS payments. We estimated that a proposed fixed-dollar threshold of $3,100, combined with the proposed multiple threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS payments to outlier payments. For CMHCs, we proposed that, if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet the Hospital OQR Program requirements, we proposed to continue the policy that we implemented in CY 2010 that the hospitals' costs will be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we refer readers to section XIII. of this final rule with comment period.

Comment: A few commenters suggested that CMS not increase the outlier payment fixed dollar threshold from $2,900 to $3,100. One commenter suggested that CMS maintain the CY 2014 fixed-dollar threshold of $2,900, while another commenter suggested that CMS lower the CY 2014 fixed-dollar threshold because CMS' projection of CY 2014 outlier payments in the proposed rule estimated that outlier payments would be below the target of 1.0 percent of OPPS payments.

Response: We set the proposed CY 2015 outlier payment fixed-dollar threshold at $3,100 so that projected outlier payments would equal 1.0 percent of total OPPS payments. We projected that CY 2014 outlier payments would fall below the 1.0 percent target with the $2,900 threshold. However, we estimated that changes to recalibrate APCs and other payment policy changes would result in outlier payments greater than the 1.0 percent target in CY 2015 if we did not increase the fixed-dollar threshold. As discussed below, based on the more recent data available for this final rule with comment period, the CY 2015 outlier payment fixed-dollar threshold will be $2,775. When combined with the multiple threshold of 1.75 times the APC payment rate, this fixed-dollar threshold will allocate an estimated 1.0 percent of projected total OPPS payments to outlier payments for CY 2015.

3. Final Outlier Calculation

Consistent with historical practice, we used updated data for this final rule with comment period. For CY 2015, we are applying the overall CCRs from the July 2014 OPSF file after adjustment (using the CCR inflation adjustment factor of 0.9821 to approximate CY 2015 CCRs) to charges on CY 2013 claims that were adjusted (using the charge inflation factor of 1.1044 to approximate CY 2015 charges). These are the same CCR adjustment and charge inflation factors that were used to set the IPPS fixed-dollar threshold for the FY 2015 IPPS/LTCH PPS final rule (79 FR 50379 through 50380). We simulated aggregated CY 2015 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments will continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2015 OPPS payments. We estimate that a fixed-dollar threshold of $2,775, combined with the multiple threshold of 1.75 times the APC payment rate, will allocate 1.0 percent of aggregated total OPPS payments to outlier payments. For CMHCs, if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment will be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

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

The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at 42 CFR Part 419, Subparts C and D. For this CY 2015 OPPS/ASC final rule with comment period, the payment rate for most services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this final rule with comment period and the relative payment weight determined under section II.A. of this final rule with comment period. Therefore, the national unadjusted payment rate for most APCs contained in Addendum A to this final rule with comment period (which is available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) was calculated by multiplying the CY 2015 scaled weight for the APC by the CY 2015 conversion factor.

We note that section 1833(t)(17) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program (formerly referred to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requirements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XIII. of this final rule with comment period.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40971 through 40972), we demonstrated the steps on how to determine the APC payments that will be made in a calendar year under the OPPS to a hospital that fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “J1,” “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” or “V” (as defined in Addendum D1 to the proposed rule), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We are finalizing the methodology as proposed and demonstrate below how to calculate final CY 2015 OPPS payments using the same parameters.

We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements. We note that we are creating new status indicator “J1” to reflect the comprehensive APCs discussed in section II.A.2.e. of this final rule with comment period. We also note that we are deleting status indicator “X” as part of the CY 2015 packaging policy for ancillary services, discussed in section II.A.3. of this final rule with comment period.

We did not receive any public comments on the proposed calculation of an adjusted Medicare payment. Therefore, we are finalizing the calculation of an adjusted Medicare payment, where appropriate, in the manner described as follows. Individual providers interested in calculating the payment amount that they will receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the reporting ratio of 0.980 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the full national unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements in order to receive the full CY 2015 OPPS fee schedule increase factor of 2.2 percent.

Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementation of the OPPS, we have used 60 percent to represent our estimate of that portion of costs attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553), we confirmed that this labor-related share for hospital outpatient services is appropriate.

The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific payment rate for a specific service.

X is the labor-related portion of the national unadjusted payment rate.

X = .60 * (national unadjusted payment rate).

Step 2. Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. We note that under the CY 2015 OPPS policy for transitioning wage indexes into the new OMB labor market area delineations, a hold harmless policy for the wage index may apply, as discussed in section II.C. of this final rule with comment period. The wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2015 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of Public Law 98-21. (For further discussion of the changes to the FY 2015 IPPS wage indices, as applied to the CY 2015 OPPS, we refer readers to section II.C. of this final rule with comment period.) As we proposed, we are continuing to apply a wage index floor of 1.00 to frontier States, in accordance with section 10324 of the Affordable Care Act of 2010.

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Public Law 108-173. Addendum L to this final rule with comment period (which is available via the Internet on the CMS Web site) contains the qualifying counties and the associated wage index increase developed for the FY 2015 IPPS and listed as Table 4J in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49854) and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

Step 4. Multiply the applicable wage index determined under Steps 2 and 3 by the amount determined under Step 1 that represents the labor-related portion of the national unadjusted payment rate.

The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the national unadjusted payment rate for the specific service by the wage index.

X_a is the labor-related portion of the national unadjusted payment rate (wage adjusted).

X_a = .60 * (national unadjusted payment rate) * applicable wage index.

Step 5. Calculate 40 percent (the nonlabor-related portion) of the national unadjusted payment rate and add that amount to the resulting product of Step 4. The result is the wage index adjusted payment rate for the relevant wage index area.

The formula below is a mathematical representation of Step 5 and calculates the remaining portion of the national payment rate, the amount not attributable to labor, and the adjusted payment for the specific service.

Y is the nonlabor-related portion of the national unadjusted payment rate.

Y = .40 * (national unadjusted payment rate).

Adjusted Medicare Payment = Y + X_a.

Step 6. If a provider is an SCH, as set forth in the regulations at § 412.92, or an EACH, which is considered to be an SCH under section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as defined in § 412.64(b), or is treated as being located in a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment.

The formula below is a mathematical representation of Step 6 and applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 1.071.

We are providing examples below of the calculation of both the full and reduced national unadjusted payment rates that will apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we used a provider that is located in Brooklyn, New York that is assigned to CBSA 35614. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The CY 2015 full national unadjusted payment rate for APC 0019 is approximately $378.41. The reduced national unadjusted payment rate for APC 0019 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $370.84. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019.

The FY 2015 wage index for a provider located in CBSA 35614 in New York is 1.2973. This is based on the 1-year 50/50 transition blend between the wage index under the old CBSA 35644 (1.3115) and the wage index under the new CBSA 35614 (1.2831). The labor-related portion of the full national unadjusted payment is approximately $294.55 (.60 * $378.41 * 1.2973). The labor-related portion of the reduced national unadjusted payment is approximately $288.65 (.60 * $370.84 * 1.2973). The nonlabor-related portion of the full national unadjusted payment is approximately $151.36 (.40 * $378.41). The nonlabor-related portion of the reduced national unadjusted payment is approximately $148.34 (40 * $370.84). The sum of the labor-related and nonlabor-related portions of the full national adjusted payment is approximately $445.91 ($294.55 + $151.36). The sum of the reduced national adjusted payment is approximately $436.99 ($288.65 + $148.34).

I. Beneficiary Copayments

1. Background

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that the effective copayment rate (determined on a national unadjusted basis) for that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in calendar years thereafter, shall not exceed 40 percent of the APC payment rate.

Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or group of such services) furnished in a year, the national unadjusted copayment amount cannot be less than 20 percent of the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

Section 4104 of the Affordable Care Act eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certain requirements, including flexible sigmoidoscopies and screening colonoscopies, and waived the Part B deductible for screening colonoscopies that become diagnostic during the procedure. Our discussion of the changes made by the Affordable Care Act with regard to copayments for preventive services furnished on and after January 1, 2011, may be found in section XII.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 72013).

2. OPPS Copayment Policy

In the CY 2015 OPPS/ASC proposed rule (79 FR 40973), for CY 2015, we proposed to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we proposed to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2015, were shown in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site). As discussed in section XII.G. of the proposed rule, for CY 2015, the Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies equals the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

We note that OPPS copayments may increase or decrease each year based on changes in the calculated APC payment rates due to updated cost report and claims data, and any changes to the OPPS cost modeling process. However, as described in the CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves beneficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459).

We did not receive any public comments regarding the proposed methodology for calculating copayments for CY 2015. Therefore, for the reasons set forth in this final rule with comment period, we are finalizing our proposed CY 2015 copayment methodology without modification.

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

Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a given service provided by a hospital that met or failed to meet its Hospital OQR Program requirements should follow the formulas presented in the following steps.

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its payment rate. For example, using APC 0019, approximately $75.68 is 20 percent of the full national unadjusted payment rate of approximately $378.41. For APCs with only a minimum unadjusted copayment in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent.

The formula below is a mathematical representation of Step 1 and calculates the national copayment as a percentage of national payment for a given service.

B is the beneficiary payment percentage.

B = National unadjusted copayment for APC/national unadjusted payment rate for APC.

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this final rule with comment period. Calculate the rural adjustment for eligible providers as indicated in Step 6 under section II.H. of this final rule with comment period.

Step 3. Multiply the percentage calculated in Step 1 by the payment rate calculated in Step 2. The result is the wage-adjusted copayment amount for the APC.

The formula below is a mathematical representation of Step 3 and applies the beneficiary payment percentage to the adjusted payment rate for a service calculated under section II.H. of this final rule with comment period, with and without the rural adjustment, to calculate the adjusted beneficiary copayment for a given service.

Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment * B.

Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted Medicare Payment * 1.071) * B.

Step 4. For a hospital that failed to meet its Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.980.

The unadjusted copayments for services payable under the OPPS that will be effective January 1, 2015, are shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We note that the national unadjusted payment rates and copayment rates shown in Addenda A and B to this final rule with comment period reflect the full CY 2015 OPD fee schedule increase factor discussed in section II.B. of this final rule with comment period.

In addition, as noted above, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

CPT and Level II HCPCS codes are used to report procedures, services, items, and supplies under the hospital OPPS. Specifically, CMS recognizes the following codes on OPPS claims:

• Category I CPT codes, which describe surgical procedures and medical services;
• Category III CPT codes, which describe new and emerging technologies, services, and procedures; and
• Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services not described by CPT codes.

CPT codes are established by the American Medical Association (AMA) and the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both through the annual rulemaking cycle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process via OPPS quarterly update CRs. Based on our review, we assign the new CPT and Level II HCPCS codes to interim status indicator (SI) and APC assignments. These interim assignments are finalized in the OPPS/ASC final rules. This quarterly process offers hospitals access to codes that may more accurately describe items or services furnished and/or provides payment or more accurate payment for these items or services in a timelier manner than if CMS waited for the annual rulemaking process. We solicit public comments on these new codes and finalize our proposals related to these codes through our annual rulemaking process.

We note that, under the OPPS, the APC assignment determines the payment rate for an item, procedure, or service. Items, procedures, or services not paid separately under the hospital OPPS are assigned to the appropriate status indicators. Section XI. of the CY 2015 OPPS/ASC proposed rule provided a discussion of the various status indicators used under the OPPS. Assigning procedures to certain status indicators would generate separate payment for the service furnished, while assignment to other status indicators would not.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40974), in Table 14 (Table 15 of this final rule with comment period), we summarized our process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing their treatment under the OPPS. We noted that because the payment rates associated with codes effective July 1 were not available to us in time for incorporation into the Addenda to the proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2014 OPPS quarterly update CR were not included in Addendum B of the proposed rule (which is available via the Internet on the CMS Web site), while those codes based upon the April 2014 OPPS quarterly update were included in Addendum B. Nevertheless, we requested public comments on the codes included in the July 2014 OPPS quarterly update and included these codes in the preamble of the proposed rule.

This process is discussed in detail below. We have separated our discussion into two sections based on whether we solicited public comments in the CY 2015 OPPS/ASC proposed rule or whether we will be soliciting public comments in this CY 2015 OPPS/ASC final rule with comment period. We note that we will be seeking public comments in this CY 2015 OPPS/ASC final rule with comment period on the interim APC and status indicator assignments for new CPT and Level II HCPCS codes that will be effective January 1, 2015. In the CY 2015 OPPS/ASC proposed rule (79 FR 40977), we also noted that we sought public comments in the CY 2014 OPPS/ASC final rule with comment period on the interim APC and status assignments for new Level II HCPCS codes that became effective October 1, 2013, or January 1, 2014. These new and revised codes, with an effective date of October 1, 2013, or January 1, 2014, were flagged with comment indicator “NI” (New code, interim APC assignment; comments will be accepted on the interim APC assignment for the new code) in Addendum B to the CY 2014 OPPS/ASC final rule with comment period to indicate that we were assigning them an interim payment status and an APC and payment rate, if applicable, and were subject to public comment following publication of the CY 2014 OPPS/ASC final rule with comment period. We are responding to public comments and finalizing our interim OPPS treatment of these codes in this CY 2015 OPPS/ASC final rule with comment period.

We received public comments on some new codes that were assigned to comment indicator “NI” in Addendum B of the CY 2014 OPPS/ASC final rule with comment period. We respond to those comments in sections III.C. of this CY 2015 OPPS/ASC final rule with comment period.

1. Treatment of New CY 2014 Level II HCPCS and CPT Codes Effective April 1, 2014 and July 1, 2014 for Which We Solicited Public Comments in the CY 2015 OPPS/ASC Proposed Rule

Through the April 2014 OPPS quarterly update CR (Transmittal 2903, Change Request 8653, dated March 11, 2014) and the July 2014 OPPS quarterly update CR (Transmittal 2971, Change Request 8776, dated May 23, 2014), we recognized several new HCPCS codes for separate payment under the OPPS.

Effective April 1, 2014, we made effective four new Level II HCPCS codes and also assigned them to appropriate interim OPPS status indicators and APCs. Through the April 2014 OPPS quarterly update CR, we allowed separate payment for three of the four new Level II HCPCS codes. Specifically, as displayed in Table 15 in the proposed rule (79 FR 40975), we provided separate payment for HCPCS codes C9021, C9739, and C9740. HCPCS code Q2052 was assigned to status indicator “N” to indicate the service described by this code is packaged under the OPPS.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40974), we solicited public comments on the proposed APC and status indicator assignments, where applicable, for the Level II HCPCS codes listed in Table 15 of that proposed rule (HCPCS codes C9021, C9739, C9740, and Q2052). We did not receive any public comments on the proposed APC and status indicator assignments for HCPCS codes C9021 and Q2052. Because HCPCS code Q2052 will only be billed by pharmacy suppliers, we are modifying our CY 2015 proposal to continue to assign HCPCS code Q2052 to status indicator “N.” Instead, for CY 2015, we are reassigning HCPCS code Q2052 from OPPS status indicator “N” to “E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)). We are adopting as final, without modification, the proposed APC and status indicator assignments for HCPCS code C9021 for CY 2015. We note that we received some public comments on HCPCS codes C9739 and C9740, which we address in section III.C.3.e. of this final rule with comment period.

Effective for CY 2015, the HCPCS Workgroup replaced HCPCS code C9021 with HCPCS code J9301. Table 16 below shows the complete long descriptor for HCPCS code J9301. Consistent with our general policy of using permanent HCPCS codes (that is, “J” codes) rather than using temporary HCPCS codes (that is, “C” codes and “Q” codes) for the reporting of drugs under the OPPS in order to streamline coding, we are showing the replacement HCPCS code for C9021, which is effective January 1, 2015, in Table 16.

In this final rule with comment period, we are assigning the Level II HCPCS codes listed in Table 16 below to the specified APCs and status indicators for CY 2015. The final payment rates for these codes, where applicable, can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

Effective July 1, 2014, we made effective several new CPT and Level II HCPCS codes and also assigned them to appropriate interim OPPS status indicators and APCs. Through the July 2014 OPPS quarterly update CR, we allowed separate payment under the OPPS for four new Level II HCPCS codes and 17 new Category III CPT codes effective July 1, 2014. Specifically, as displayed in Table 16 in the proposed rule, we allowed separate payment for HCPCS codes C2644, C9022, C9134, and Q9970. We note that HCPCS code Q9970 replaced HCPCS code C9441 (Injection, ferric carboxymaltose, 1 mg), beginning July 1, 2014. HCPCS code C9441 was made effective January 1, 2014, but the code was deleted June 30, 2014, because it was replaced with HCPCS code Q9970. HCPCS code C9441 was granted pass-through payment status when the code was implemented on January 1, 2014. Because HCPCS code Q9970 describes the same drug as HCPCS code C9441, in the CY 2015 OPPS/ASC proposed rule (79 FR 40975), we proposed to continue the pass-through payment status for HCPCS code Q9970, and assign the HCPCS Q-code to the same APC and status indicator as its predecessor HCPCS C-code, as shown in Table 16 of the proposed rule. Specifically, we proposed to assign HCPCS code Q9970 to APC 9441 (Inj, Ferric Carboxymaltose) and status indicator “G.”

In addition, the HCPCS Workgroup established HCPCS code Q9974, effective July 1, 2014, to replace HCPCS codes J2271 (Injection, morphine sulfate, 100mg) and J2275 (Injection, morphine sulfate (preservative-free sterile solution), per 10 mg). Both of these HCPCS J-codes were assigned to status indicator “N” (Packaged Services). As a result of the establishment of new HCPCS code Q9974 as a replacement for HCPCS codes J2271 and J2275, the payment indicator for HCPCS codes J2271 and J2275 was changed to “E” (Not Payable by Medicare), effective July 1, 2014. Also, because HCPCS code Q9974 describes the same services that were described by HCPCS codes J2271 and J2275, in the CY 2015 OPPS/ASC proposed rule (79 FR 40975), we proposed to continue to assign HCPCS code Q9974 to the same status indicator as its predecessor HCPCS J-codes. Specifically, we proposed to assign HCPCS code Q9974 to status indicator “N,” effective July 1, 2014.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40975), we also proposed to assign the Level II HCPCS codes listed in Table 16 to the specified proposed APCs and status indicators set forth in Table 16 of the proposed rule. This table included a complete list of the Level II HCPCS codes that were made effective July 1, 2014. The codes that were made effective July 1, 2014, did not appear in Addendum B to the proposed rule, and as a result, the proposed payment rates along with the proposed status indicators and proposed APC assignments, where applicable, for CY 2015 were provided in Table 16 of the proposed rule.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40975), we solicited public comments on the proposed status indicators and APC assignments for the HCPCS codes that were listed in Table 16 of the proposed rule. We did not receive any public comments on the proposed APC and status indicator assignments for HCPCS codes C9022, C9134, Q9970, and Q9974 for CY 2015. Therefore, we are adopting as final, without modification, the proposed APC and status indicator assignments for these four Level II HCPCS codes for CY 2015. We note that we received a public comment on HCPCS code C2644, which is addressed in section II.A.2.d.3. of this final rule with comment period.

The HCPCS Workgroup replaced HCPCS code C9022 with HCPCS code J1322, effective January 1, 2015. Because HCPCS code J1322 describes the same drug with the same dosage descriptor as its predecessor code, HCPCS code C9022, this drug will continue to receive pass-through payment status in CY 2015. Therefore, we are assigning HCPCS code J1322 to the same APC and status indicator as its predecessor code, HCPCS code C9022, as shown in Table 17 below.

In addition, the HCPCS Workgroup replaced HCPCS code C9134 with HCPCS code J7181, effective January 1, 2015. Because HCPCS code J7181 does not describe the same dosage descriptor as its predecessor code, HCPCS code J7181 has been assigned to a new APC. Specifically, HCPCS code C9134 had a dosage descriptor of “10 i.u.,” while HCPCS code J7181 has a dosage descriptor of “i.u.” Therefore, effective January 1, 2015, we are assigning HCPCS code J7181 to APC 1746, which is a different APC assignment than the APC assignment for HCPCS code C9134, to maintain data consistency for future rulemakings. Because the predecessor code, HCPCS code C9134, was granted pass-through payment status, HCPCS code J7181 will continue to be assigned to status indicator “G” for CY 2015.

We also note that the HCPCS Workgroup replaced HCPCS code Q9970 with HCPCS code J1439, effective January 1, 2015. Because HCPCS code J1439 describes the same drug with the same dosage descriptor as its predecessor code, HCPCS code Q9970, this drug will continue to receive pass-through payment status in CY 2015. Therefore, we are assigning HCPCS code J1439 to the same APC and status indicator as its predecessor code, HCPCS code Q9970, as shown in Table 17 below.

Further, the HCPCS Workgroup replaced HCPCS code Q9974 with HCPCS code J2274, effective January 1, 2015. Because HCPCS code J2274 describes the same drug with the same dosage descriptor as its predecessor code, HCPCS code Q9974, this drug will continue its packaged status indicator. Therefore, we are assigning HCPCS code J2274 to the same status indicator as its predecessor code, HCPCS code Q9974, as also shown in Table 17 below.

Table 17 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2014, with their final status indicators and APC assignments for CY 2015. The final payment rates for these codes, where applicable, can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

In the CY 2015 OPPS/ASC proposed rule (79 FR 40975), for CY 2015, we proposed to continue our established policy of recognizing Category I CPT vaccine codes for which FDA approval is imminent and Category III CPT codes that the AMA releases in January of each year for implementation in July through the OPPS quarterly update process. Under the OPPS, Category I CPT vaccine codes and Category III CPT codes that are released on the AMA Web site in January are made effective in July of the same year through the July quarterly update CR, consistent with the AMA's implementation date for the codes. For the July 2014 update, there were no new Category I CPT vaccine codes.

Through the July 2014 OPPS quarterly update CR (Transmittal 2971, Change Request 8776, dated May 23, 2014), we assigned interim OPPS status indicators and APCs for 17 of the 27 new Category III CPT codes that were made effective July 1, 2014. Specifically, as displayed in Table 17 in the proposed rule, we made interim OPPS status indicators and APC assignments for Category III CPT codes 0347T, 0348T, 0349T, 0350T, 0355T, 0356T, 0358T, 0359T, 0360T, 0362T, 0364T, 0366T, 0368T, 0370T, 0371T, 0372T, and 0373T. Table 17 of the proposed rule listed the Category III CPT codes that were implemented on July 1, 2014, along with the proposed status indicators, proposed APC assignments, and proposed payment rates, where applicable, for CY 2015. We did not receive any public comments on the proposed APC and status indicator assignments for Category III CPT codes 0347T, 0348T, 0349T, 0350T, 0356T, 0358T, 0359T, 0360T, 0362T, 0364T, 0366T, 0368T, 0370T, 0371T, 0372T, and 0373T. Therefore, we are adopting as final, without modification, the proposed APC and status indicator assignments for these 16 CPT codes for CY 2015. We received a public comment on CPT codes 0335T, which we address in section III.C.2.6. of this final rule with comment period. We also received specific public comments on CPT codes 0351T, 0352T, 0353T, and 0354T, which are addressed in section II.C.6.b. of this final rule with comment period. Table 18 below lists the Category III CPT codes that were implemented in July 2014, along with their final status indicators and APC assignments for CY 2015. The final payment rates for these codes, where applicable, can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

Further, in the CY 2015 OPPS/ASC proposed rule, we solicited public comments on the proposed CY 2015 status indicators, APC assignments, and payment rates for the Level II HCPCS codes and the Category III CPT codes that were made effective April 1, 2014, and July 1, 2014. These codes were listed in Tables 15, 16, and 17 of the proposed rule. We also proposed to finalize the status indicator and APC assignments and payment rates for these codes, if applicable, in this CY 2015 OPPS/ASC final rule with comment period. Because the new Category III CPT and Level II HCPCS codes that became effective for July were not available to us in time for incorporation into the Addenda to the proposed rule, our policy is to include the codes, the proposed status indicators, proposed APCs (where applicable), and proposed payment rates (where applicable) in the preamble of the proposed rule, but not in the Addenda to the proposed rule. These codes were listed in Tables 16 and 17, respectively, of the proposed rule. We also proposed to incorporate these codes into Addendum B to this CY 2015 OPPS/ASC final rule with comment period, which is consistent with our annual OPPS update policy. The Level II HCPCS codes implemented or modified through the April 2014 OPPS update CR and displayed in Table 15 were included in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site), where the proposed CY 2015 payment rates for these codes were also shown.

We did not receive any additional public comments on this process. The final APC and status indicator assignments and payment rates, if applicable, for the Level II HCPCS codes and the Category III CPT codes that were implemented or modified through the April 2014 or July 2014 OPPS update CR can be found in Tables 16, 17, and 18, or in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

2. Process for New Level II HCPCS Codes That Became Effective October 1, 2014 and New CPT and Level II HCPCS Codes That Will Become Effective January 1, 2015 for Which We Are Soliciting Public Comments in This CY 2015 OPPS/ASC Final Rule with Comment Period

As has been our practice in the past, we incorporate those new Category I and III CPT codes and new Level II HCPCS codes that are effective January 1 in the final rule with comment period updating the OPPS for the following calendar year. These codes are released to the public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October OPPS quarterly update CRs and incorporated these new codes in the final rule with comment period updating the OPPS for the following calendar year. For CY 2015, these codes are flagged with comment indicator “NI” in Addendum B to this OPPS/ASC final rule with comment period to indicate that we are assigning them an interim payment status which is subject to public comment. In addition, the CPT and Level II HCPCS codes that will become effective January 1, 2015, are flagged with comment indicator “NI” in Addendum B to this CY 2015 OPPS/ASC final rule with comment period. Specifically, the status indicator and the APC assignment and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are open to public comment in this final rule with comment period, and we will respond to these public comments in the OPPS/ASC final rule with comment period for the next year's OPPS/ASC update. In the CY 2015 OPPS/ASC proposed rule (79 FR 40977), we proposed to continue this process for CY 2015. Specifically, for CY 2015, we proposed to include in Addendum B to the CY 2015 OPPS/ASC final rule with comment period the following new HCPCS codes:

• New Level II HCPCS codes effective October 1, 2014, that would be incorporated in the October 2014 OPPS quarterly update CR;
• New Category I and III CPT codes effective January 1, 2015, that would be incorporated in the January 2015 OPPS quarterly update CR; and
• New Level II HCPCS codes effective January 1, 2015, that would be incorporated in the January 2015 OPPS quarterly update CR.

As stated above, the October 1, 2014 and January 1, 2015 codes are flagged with comment indicator “NI” in Addendum B to this CY 2015 OPPS/ASC final rule with comment period to indicate that we have assigned the codes an interim OPPS payment status for CY 2015. We are inviting public comments on the interim status indicator and APC assignments and payment rates for these codes, if applicable, that will be finalized in the CY 2016 OPPS/ASC final rule with comment period.

3. Process for Soliciting Public Comments for New and Revised CPT Codes Released by the AMA

We generally incorporate the new CPT codes that are effective January 1 in the OPPS/ASC final rule with comment period. We establish interim APC and status indicator assignments for these new codes for the coming year, and request comments on the interim assignments in the OPPS/ASC final rule with comment period. Similarly, we establish interim APC and status indicator assignments for existing CPT codes that have substantial revision to their code descriptors that necessitate a change in the current APC assignments, and request comments on the interim assignments in the OPPS/ASC final rule with comment period. In both cases, we assign these new and revised codes to OPPS comment indicator “NI” (New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code.) in the OPPS/ASC final rule with comment period. We respond to comments and finalize the APC and status indicator assignments for these CPT codes in the following year's OPPS/ASC final rule with comment period.

a. Current Process for Accepting Comments on New and Revised CPT Codes for a Year

As described above, under the hospital OPPS, our current process for both new CPT codes and existing CPT codes with substantial revisions to the code descriptors that are released by the AMA for use beginning January 1 is to flag these codes with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period to indicate that the codes are new for the calendar year and have been assigned interim APCs and status indicators, and that we are accepting public comments on the interim APC and status indicator assignments. We address public comments received and finalize the APC and status indicator assignments for the codes in the next year's OPPS/ASC final rule with comment period. For example, the new CPT codes that were effective January 1, 2014, were assigned to comment indicator “NI” in Addendum B to the CY 2014 OPPS/ASC final rule with comment period. We respond to public comments received on the CY 2014 OPPS/ASC final rule with comment period and finalize the APC and status indicator assignments for these codes in this CY 2015 OPPS/ASC final rule with comment period. We include the final APC and status indicator assignments for these codes in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

Many stakeholders have expressed concern with the process we use to recognize new and revised CPT codes. They believe that CMS should publish proposed APC and status indicator assignments for the new and revised CPT codes that will be effective January 1 in the OPPS/ASC proposed rule for that calendar year, and request public comments prior to finalizing the assignments. Further, the stakeholders believe that seeking public input on the APC and status indicator assignments for these new and revised codes would assist CMS in assigning the CPT codes to appropriate APCs. Similar concerns have been expressed regarding our process for assigning interim payment values for revalued, and new and revised codes, under the Medicare Physician Fee Schedule (MPFS). We refer readers to the CY 2015 MPFS proposed rule for a detailed discussion of this issue as it relates to the MPFS (79 FR 40359 through 40364).

Like the MPFS, the OPPS and the ASC payment system rely principally upon the Current Procedural Terminology (CPT®) coding system maintained by the AMA to identify specific services for billing and payment purposes. CPT is the standard code set adopted under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) for outpatient services. The AMA CPT Editorial Panel's coding cycle occurs concurrently with our calendar year rulemaking cycle for the OPPS and the ASC payment system. However, the OPPS/ASC proposed rules are published prior to the publication of the CPT codes that are made public in the Fall with a January 1 effective date, and we are currently unable to include these codes in the OPPS/ASC proposed rules. Consequently, we establish in the final rule with comment period interim APC and status indicator assignments for new and revised CPT codes that have an effective date of January 1, and we make payment based on those interim designations for one year, while accepting public comments on the final rule with comment period. We then respond to those public comments received and make final APC and status indicator assignments in the next year's final rule with comment period.

b. Modification of Process for New and Revised CPT Codes That Are Effective January 1

In the CY 2015 OPPS/ASC proposed rule (79 FR 40977 through 40979), we proposed to make changes in the process we use to establish APC assignments and status indicators for new and revised codes. We proposed that, for new and revised CPT codes that we receive from the AMA's CPT Editorial Panel too late for inclusion in the proposed rule for a year, we would delay adoption of the new and revised codes for that year, and instead, adopt coding policies and payment rates that conform, to the extent possible, to the policies and payment rates in place for the previous year. We proposed to adopt these conforming coding and payment policies on an interim basis pending the result of our specific proposals for status indicator and APC assignments for these new and revised codes through notice and comment rulemaking in the OPPS/ASC proposed rule for the following year. Because the changes in CPT codes are effective on January 1 of each year, and CMS would not have established status indicator or APC assignments for these new or revised codes, it would not be practicable for Medicare to use those CPT codes. In this circumstance, we proposed to create HCPCS G-codes to describe the predecessor codes for any codes that were revised or deleted as part of the annual CPT coding changes, but that we did not receive in time to include proposed APC and status indicator assignments in the proposed rule. However, if certain CPT codes are revised in a manner that would not affect the cost of inputs (for example, a minor change to CPT code descriptors), we would use these revised codes and continue to assign those codes to their current APC. For example, under this proposed process, if a single CPT code was separated into two codes and we did not receive those codes until May 2015, we would assign each of those CPT codes to status indicator “B” in the final rule with comment period, to indicate that an alternate code is recognized under the OPPS. Hospitals could not use those two new CPT codes to bill Medicare for outpatient services the first year after the CPT effective date of the codes. Instead, we would create a HCPCS G-code with the same description as the single predecessor CPT code, and continue to use the same APC and status indicator assignment for the new G-code during the year. We would propose APC and status indicator assignments for the two new CPT codes during rulemaking in CY 2016, accept and respond to public comments on the proposed assignments, and establish final APC and status indicator assignments for the codes in the final rule for payment beginning in CY 2017.

For new codes that describe wholly new services, as opposed to new or revised codes that describe services for which APC and status indicator assignments are already established, we would make every effort to work with the AMA's CPT Editorial Panel to ensure that we received the codes in time to propose payment rates in the proposed rule. However, if we do not receive the code for a wholly new service in time to include proposed APC and status indicator assignments in the proposed rule for a year, we would need to establish interim APC and status indicator assignments for the initial year because there would be no predecessor code we could use as a reference to establish a G-code in order to continue current payment policies for such a service. We proposed to continue to establish the initial APC and status indicator assignments for these wholly new services as interim final assignments, and to follow our current process to solicit and respond to public comments and finalize the APC and status indicator assignments in the subsequent year.

We recognize that the use of HCPCS G-codes may place an administrative burden on those providers that bill for services under the OPPS and the ASC payment system. However, the proposed use of G-codes would permit us to propose and accept public comment on the APC and status indicator assignments for the vast majority of new and revised codes before they take effect. We are hopeful that the AMA's CPT Editorial Panel ultimately will be able to adjust its timelines and processes so that most, if not all, of the annual coding changes can be addressed in the proposed rule before the new and revised CPT codes take effect on January 1. If the AMA's CPT Editorial Committee can make adjustments to its schedule, we would not need to use G-codes as described above for the purpose of maintaining outdated coding and APC and status indicator assignments for a year until we can include proposed APC and status indicator assignments for the new and revised codes in a proposed rule. We proposed to implement the revised CMS process for establishing APC and status indicator assignments for new and revised codes for CY 2016. However, we indicated in the proposed rule that we would consider alternative implementation dates if that would allow time for the AMA's CPT Editorial Panel to adjust its schedule in order to avoid the necessity to use numerous HCPCS G-codes.

In summary, in conjunction with the proposals presented in the CY 2015 MPFS proposed rule to revise the process used to address new, revised, and potentially misvalued codes under the MPFS, in the CY 2015 OPPS/ASC proposed rule (79 FR 40977 through 40979), we proposed to include in the OPPS/ASC proposed rule the proposed APC and status indicator assignments for the vast majority of new and revised CPT codes before they are used for payment purposes under the OPPS and ASC payment system. We would address new and revised CPT codes for the upcoming year that are available in time for the proposed rule by proposing APC and status indicator assignments for the codes. Otherwise, we will delay adoption of the new and revised codes for a year while using methods (including creating G-codes that describe the predecessor codes) to maintain the existing APC and status indicator assignments until the following year when we would include proposed assignments for the new and revised codes in the proposed rule. We proposed to follow this revised process except in the case of a new CPT code that describes a wholly new service (such as a new technology or new surgical procedure) that has not previously been addressed under the OPPS. For codes that describe wholly new services for which we do not receive timely information from the AMA, we proposed to establish interim APC and status indicator assignments in the OPPS/ASC final rules with comment period, as is our current process. The proposed revised process would eliminate our current practice of assigning interim APC and status indicators for the vast majority of new and revised CPT codes that take effect on January 1 each year. We invited public comments on this proposal. We indicated in the proposed rule that we were specifically interested in receiving public comments on the following topics:

• Is this proposal preferable to the present process? Are there other alternatives?
• If we were to implement this proposal, is it better to move forward with the changes or is more time needed to make the transition and, therefore, implementation should be delayed beyond CY 2016?
• Are there alternatives other than the use of HCPCS G-codes that would allow us to address the annual CPT code changes through notice and comment rather than interim final rulemaking?
• Is the process we have proposed for wholly new services appropriate? How should we define new services?
• Are there any classes of services, other than new services, that should remain on an interim final schedule?

Comment: The majority of the commenters supported the proposal to modify the current process of recognizing new and revised CPT codes because it would provide an opportunity for the public to comment on specific APC and status indicator assignments prior to those assignments being finalized. However, several commenters disagreed with our proposed implementation date of CY 2016 and requested that CMS work with the AMA to determine an appropriate implementation date. Other commenters suggested that CMS finalize the proposal but urged CMS to work with the AMA on an appropriate timeline that considers the AMA's CPT and RUC (Specialty Society Relative Value Update Committee) meeting dates as well as CMS' OPPS and MPFS regulation schedule. The AMA supported the proposal but requested that CMS finalize the proposal for CY 2017 rather than CY 2016 because the CPT codes for the CY 2016 update are almost complete.

Response: We appreciate the commenters' support for our proposal. We believe that publishing our proposed status indicator and APC assignments for the new and revised CPT codes in the proposed rule would alleviate some concerns expressed by stakeholders in the past that some of our interim APC assignments were not appropriate, and that the APC assignment process could be improved if we had the benefit of public comments before adopting final APC and status indicator assignments for new and revised codes. This new process of proposing and requesting public comments before finalizing the APC and status indicator assignments for new and revised codes allows both CMS and stakeholders the benefit of public notice and comment prior to the use of the new and revised codes for payment purposes. When we receive information on the new and revised codes from the AMA in time to include proposals for new and revised codes in the proposed rule before the codes are effective the following January 1, the revised process allows public notice and comment before finalizing APC and status indicator assignments for the codes during the calendar year before the CPT codes become effective. In addition, this new process eliminates the need to make interim APC and status indicator assignments for new and revised CPT codes, which has been unpopular among some providers because the interim assignments are used for payment for a year before we address public comments and make any appropriate changes to an APC or status indicator assignment in the subsequent year's final rule.

Although the AMA and several commenters requested that we modify our proposal by finalizing this new process for the CY 2017 OPPS update, we disagree with this recommendation. We believe the new process that permits an opportunity for public comment on proposed APC and status indicator assignments for the vast majority of new and revised codes before they are finalized and used for payment purposes will be beneficial to CMS and to hospitals and other stakeholders, and we see no reason to delay implementation of this policy change. Therefore, beginning with the CY 2016 OPPS update, we will publish proposed APC and status indicator assignments for any new and revised CPT codes for January 1, 2016 that are publicly released by the AMA in time for us to consider them for inclusion in the OPPS/ASC proposed rule. After review of the public comments received on the proposed rule, we will finalize the status indicator and APC assignments for those new and revised CPT codes in the CY 2016 OPPS/ASC final rule. Because the APC assignments would be final, we would no longer request comments in the OPPS/ASC final rules for these new and revised CPT codes that are included in the proposed rule. For any new and revised codes released too late for us to consider them for inclusion in the CY 2016 OPPS/ASC proposed rule, we will create HCPCS G-codes that reflect the same description(s), and APC and status indicator assignments, as their predecessor codes. These HCPCS G-codes will be used during CY 2016, and then we will include proposals for the corresponding new and revised codes and APC and status indicator assignments in the CY 2017 OPPS/ASC proposed rule.

Comment: Most commenters opposed the use of temporary HCPCS G-codes and requested that CMS not implement the HCPCS G-code process if it finalizes the proposal to change to process for new and revised CPT codes. The commenters recommended not establishing temporary HCPCS G-codes because these codes would be extremely burdensome for providers to use. The commenters stated that establishing HCPCS G-codes for services or procedures that are already described by existing CPT codes would be too confusing for hospitals, physicians, and other third party insurers to accurately claim costs for these procedures, and that using two different sets of codes for the same procedure or service could result in erroneous claims.

Response: As described above, we plan to publish the new and revised CPT codes that are publicly available and provided to us in time for evaluation in the CY 2016 OPPS/ASC proposed rule. Specifically, in the CY 2016 OPPS/ASC proposed rule, we expect to publish new and revised CPT codes that would be effective January 1, 2016, with the proposed status indicator and APC assignments, and request public comments on these proposed assignments as long as we receive them in time for inclusion in the proposed rule. We would finalize the status indicator and APC assignments for these new and revised CPT codes in the CY 2016 OPPS/ASC final rule.

However, for those new and revised CPT codes that are not publicly available in time for the OPPS/ASC proposed rule, we will create HCPCS G-codes that mirror the predecessor CPT codes and retain the current APC and status indicator assignments for a year until we can include proposed status indicator and APC assignments in the following year's proposed rule. These HCPCS G-codes will be assigned to comment indicator “NI” to indicate that the codes are new and open for comment for 60 days after display of the OPPS/ASC final rule with comment period. This is consistent with our current policy of seeking public comments on new CPT and Level II HCPCS codes with interim APC and status indicator assignments that were not previously published in the proposed rule. For new and revised codes, we recognize that there is a trade-off between the benefit of considering public comments on the proposed APC and status indicator assignments before they take effect and the potential confusion caused by the use of HCPCS G-codes. We anticipate that the use of HCPCS G-codes will be largely a temporary solution or may not be necessary in the OPPS, and we expect to work closely with the AMA to minimize the need for them. We note that, under the MPFS, we generally do not develop values for new and revised CPT codes until we receive recommendations provided by the AMA's RUC. In contrast, under the OPPS, we use only the publicly available new and revised CPT codes and their descriptors to develop APC and status indicator assignments. As such, we anticipate that the need to use HCPCS G-codes under the OPPS will be less frequent than under the MPFS.

After consideration of the public comments we received, we are finalizing our proposal. For the new and revised CPT codes that we receive timely from the AMA's CPT Editorial Panel, we are finalizing our proposal to include these codes that would be effective January 1 in the OPPS/ASC proposed rules, along with proposed APC and status indicator assignments for them, and to finalize the APC and status indicator assignments in the OPPS/ASC final rules beginning with the CY 2016 OPPS update. For those new and revised CPT codes that we receive too late for inclusion in the OPPS/ASC proposed rule, we are finalizing our proposal to create and use HCPCS G-codes that mirror the predecessor CPT codes and retain the current APC and status indicator assignments for a year until we can propose APC and status indicator assignments in the following year's rulemaking cycle. We note that even if we find that we need to create HCPCS G-codes in place of certain CPT codes for the MPFS proposed rule, we do not anticipate that these HCPCS G-codes will always be necessary for OPPS purposes. We will make every effort to include proposed APC and status indicator assignments for all new and revised CPT codes that the AMA makes publicly available in time for us to include them in the proposed rule, and to avoid the resort to HCPCS G-codes and the resulting delay in utilization of the most current CPT codes. We also are finalizing our proposal to make interim APC and status indicator assignments for CPT codes that are not available in time for the proposed rule and that describe wholly new services (such as new technologies or new surgical procedures), solicit public comments, and finalize the specific APC and status indicator assignments for those codes in the following year's final rule.

B. OPPS Changes—Variations Within APCs

1. Background

Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient department services. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification system, referred to as Ambulatory Payment Classifications (APCs), as set forth in § 419.31 of the regulations. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is homogeneous both clinically and in terms of resource use. Using this classification system, we have established distinct groups of similar services. We also have developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices that are not packaged into the payment for the procedure.

We have packaged into the payment for each procedure or service within an APC group the costs associated with those items and services that are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. Therefore, we do not make separate payment for these packaged items or services. In general, packaged items and services include, but are not limited to the items and services listed in § 419.2(b) of the regulations. A further discussion of packaged services is included in section II.A.3. of this final rule with comment period.

In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service (72 FR 66650 through 66652). For CY 2014, we provided composite APC payments for nine categories of services:

• Mental Health Services Composite (APC 0034)
• Cardiac Electrophysiologic Evaluation and Ablation Composite (APC 8000)
• Low Dose Rate (LDR) Prostate Brachytherapy Composite (APC 8001)
• Ultrasound Composite (APC 8004)
• CT and CTA without Contrast Composite (APC 8005)
• CT and CTA with Contrast Composite (APC 8006)
• MRI and MRA without Contrast Composite (APC 8007)
• MRI and MRA with Contrast Composite (APC 8008)
• Extended Assessment Management Composite (APC 8009)

A further discussion of composite APCs is included in section II.A.2.f. of this final rule with comment period. We note that, as a consequence of the new comprehensive APC policy, APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite) is being deleted.

Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC relative payment weight represents the hospital cost of the services included in that APC, relative to the hospital cost of the services included in APC 0634 (Hospital Clinic Visits). The APC relative payment weights are scaled to APC 0634 because it is the hospital clinic visit APC and clinic visits are among the most frequently furnished services in the hospital outpatient setting.

Section 1833(t)(9)(A) of the Act requires the Secretary to review, no less than annually, and revise the APC groups, the relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. Section 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the Panel recommendations for specific services for the CY 2015 OPPS and our responses to them are discussed in the relevant specific sections throughout this final rule with comment period).

Finally, section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest cost for an item or service in the group is more than 2 times greater than the lowest cost for an item or service within the same group (referred to as the “2 times rule”). The statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (but the Secretary may not make such an exception in the case of a drug or biological that has been designated as an orphan drug under section 526 of the Federal Food, Drug, and Cosmetic Act).

2. Application of the 2 Times Rule

In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resources, if the cost of the highest cost item or service within an APC group is more than 2 times greater than the cost of the lowest cost item or service within that same group. In making this determination, we consider only those HCPCS codes that are significant based on the number of claims. We note that, for purposes of identifying significant procedure codes for examination under the 2 times rule, we consider procedure codes that have more than 1,000 single major claims or procedure codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant (75 FR 71832). This longstanding definition of when a procedure code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims (or less than 1,000 claims) is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing costs. Similarly, a procedure code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC cost. In the CY 2015 OPPS/ASC proposed rule (79 FR 40981), for CY 2015, we proposed to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as low-volume items and services.

In the CY 2015 OPPS/ASC proposed rule, we identified the APCs with violations of the 2 times rule for CY 2015 (79 FR 40980). Therefore, we proposed changes to the procedure codes assigned to these APCs in Addendum B to the CY 2015 OPPS/ASC proposed rule. We noted that Addendum B did not appear in the printed version of the Federal Register as part of the CY 2015 OPPS/ASC proposed rule. Rather, it was published and made available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a violation of the 2 times rule or to improve clinical and resource homogeneity, we proposed to reassign these procedure codes to new APCs that contain services that are similar with regard to both their clinical and resource characteristics. In many cases, the proposed procedure code reassignments and associated APC reconfigurations for CY 2015 included in the proposed rule are related to changes in costs of services that were observed in the CY 2013 claims data newly available for CY 2015 ratesetting. We also proposed changes to the status indicators for some procedure codes that were not specifically and separately discussed in the proposed rule. In these cases, we proposed to change the status indicators for these procedure codes because we believe that another status indicator would more accurately describe their payment status from an OPPS perspective based on the policies that we proposed for CY 2015. In addition, we proposed to rename existing APCs or create new clinical APCs to complement the proposed procedure code reassignments. Addendum B to the CY 2015 OPPS/ASC proposed rule identified with a comment indicator “CH” those procedure codes for which we proposed a change to the APC assignment or status indicator, or both, that were initially assigned in the April 2014 Addendum B Update (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). In contrast, Addendum B to this final rule with comment period (available via the Internet on the CMS Web site) identifies with the “CH” comment indicator the final CY 2015 changes compared to the HCPCS codes' status as reflected in the October 2014 Addendum B update.

3. Exceptions to the 2 Times Rule

As discussed earlier, we may make exceptions to the 2 times rule limit on the variation of costs within each APC group in unusual cases such as low-volume items and services. Taking into account the APC changes that we proposed for CY 2015, we reviewed all of the APCs to determine which APCs would not meet the requirements of the 2 times rule. We used the following criteria to evaluate whether to propose exceptions to the 2 times rule for affected APCs:

• Resource homogeneity;
• Clinical homogeneity;
• Hospital outpatient setting utilization;
• Frequency of service (volume); and
• Opportunity for upcoding and code fragments.

Based on the CY 2013 claims data available for the CY 2015 OPPS/ASC proposed rule, we found 9 APCs with violations of the 2 times rule. We applied the criteria as described above to identify the APCs that we proposed to make exceptions for under the 2 times rule for CY 2015, and identified 9 APCs that met the criteria for an exception to the 2 times rule based on the CY 2013 claims data available for the proposed rule. We did not include in that determination those APCs where a 2 times rule violation was not a relevant concept, such as APC 0375 (Ancillary Outpatient Services when Patient Expires), which has an APC cost set based on multiple procedure claims. Therefore, we only identified those APCs, including those with criteria-based costs, such as device-dependent APCs, with violations of the 2 times rule. For a detailed discussion of these criteria, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 18458).

We note that, for cases in which a recommendation by the Panel appears to result in or allow a violation of the 2 times rule, we generally accept the Panel's recommendation because those recommendations are based on explicit consideration (that is, a review of the latest OPPS claims data and group discussion of the issue) of resource use, clinical homogeneity, site of service, and the quality of the claims data used to determine the APC payment rates.

Table 18 of the proposed rule (79 FR 40981) listed the 9 APCs that we proposed to make exceptions for under the 2 times rule for CY 2015 based on the criteria cited above and claims data submitted between January 1, 2013, and December 31, 2013, and processed on or before December 31, 2013. For the final rule with comment period, we stated that we intend to use claims data for dates of service between January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014, and updated CCRs, if available. Therefore, after considering the public comments we received on the CY 2015 OPPS/ASC proposed rule and making changes to APC assignments based on those comments, we analyzed the CY 2013 claims data used for this final rule with comment period to identify the APCs with violations of the 2 times rule. Based on the final CY 2013 claims data, we found 12 APCs with violations of the 2 times rule for this final rule with comment period, which is 3 more APCs that violated the 2 times rule compared to those indicated in the proposed rule. We applied the criteria as described earlier to identify the APCs that are exceptions to the 2 times rule for CY 2015, and identified three new APCs that meet the criteria for exception to the 2 times rule for this final rule with comment period, but that did not meet the criteria using proposed rule claims data. Specifically, we found that the following three new APCs violated the 2 times rule:

• APC 0095 (Cardiac Rehabilitation);
• APC 0388 (Discography); and
• APC 0420 (Level III Minor Procedures).

After consideration of the public comments we received and our review of the CY 2013 costs from hospital claims and cost report data available for this final rule with comment period, we are finalizing our proposals with some modifications. Specifically, we are finalizing our proposal to except 7 of the 9 proposed APCs from the 2 times rule for CY 2015: APCs 0057, 0066, 0330, 0433, 0450, 0634, and 0661. In contrast, we are not finalizing our proposal to except 2 of the 9 proposed APCs from the 2 times rule: APC 0012 (Level I Debridement Destruction) and APC 0015 (Level II Debridement Destruction). Our data analysis for this final rule with comment period revealed that these two APCs no longer violate the 2 times rule. Table 19 below lists 10 APCs that we are excepting from the 2 times rule for CY 2015 based on the criteria above and a review of updated claims data. We note that, for cases in which a recommendation by the HOP Panel appears to result in or allow a violation of the 2 times rule, we generally accept the Panel's recommendation because those recommendations are based on explicit consideration of resource use, clinical homogeneity, site of service, and the quality of the claims data used to determine the APC payment rates. The geometric mean costs for hospital outpatient services for these and all other APCs that were used in the development of this final rule with comment period can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

The final costs for hospital outpatient services for these and all other APCs that were used in the development of this final rule with comment period can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services: Cardiac Telemetry (APC 0213)

For CY 2015, we proposed to reassign CPT code 93229 (External mobile cardiovascular telemetry with electrocardiographic recording, concurrent computerized real time data analysis and greater than 24 hours of accessible ECG data storage (retrievable with query) with ECG triggered and patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and transmission of daily and emergent data reports as prescribed by a physician or other qualified health care professional) from APC 0209 (Level II Extended EEG, Sleep, and Cardiovascular Studies), with a proposed rule payment rate of approximately $239 to APC 0213 (Level I Extended EEG, Sleep, and Cardiovascular Studies), with a proposed payment rate of approximately $175.

Comment: One commenter opposed CMS' proposal to reassign CPT code 93229 to APC 0213 and stated that the hospital costs used to set the CY 2015 proposed payment rate is based on faulty claims data, which include miscoded claims reporting the service submitted by hospitals. The commenter indicated that based on its internal analysis of the CY 2013 hospital claims data, which were used as the basis for the CY 2015 proposed APC reassignment, several hospitals reported costs of under $100 for the procedure described by CPT code 93229. The commenter stated that the service described by CPT code 93229 involves the use of sophisticated technology requiring attended surveillance on a 24-hour, 7 days a week basis by a technician for up to 30 days. According to the commenter, this particular service requires resources that are greater than $100. The commenter further explained that the service described by CPT code 93229 requires up to 30 days of electrocardiogram (ECG) monitoring through an external device worn by the patient at home that captures, stores, and transmits ECG data in real-time through wireless technology to a receiving or monitoring center (the hospital outpatient facility). These data are then reviewed by certified cardiac technicians and the ordering physician is provided with daily reports. The commenter added that this procedure is performed primarily (approximately 90 percent of the time) by independent diagnostic testing facilities (IDTFs) and infrequently performed by hospitals, typically under arrangements with IDTFs. The commenter believed that the CY 2015 proposed payment rate of approximately $175 for APC 0213 is significantly lower than the CY 2014 MPFS payment rate of $669. The commenter stated that the actual cost of providing the service is approximately $795. Therefore, the commenter recommended that CMS either reassign CPT code 93229 to APC 0435 (Level III Extended EEG, Sleep, and Cardiovascular Studies), which has a proposed payment rate of approximately $853, or establish a new APC for outpatient cardiac telemetry services that accurately reflects the costs associated with providing this service.

Response: CPT code 93229 became effective January 1, 2009. We believe that 5 years is sufficient time to understand what procedure CPT code 93229 describes and how to appropriately report this service on hospital claims. Based on our analysis of the CY 2013 hospital outpatient claims data used for this final rule with comment period, we are unable to determine whether hospitals are miscoding the claims reporting this service. For all APCs whose payment rates are based upon relative payment weights, we note that the quality and accuracy of reported units and charges influence the geometric mean costs that are the basis for our payment rates, especially the geometric mean costs for low volume items and services. Beyond our standard OPPS trimming methodology (described in section II.A.2. of this final rule with comment period) that we apply to those claims that have passed various types of claims processing edits, it is not our general policy to determine the accuracy of hospital coding and charging practices for the purposes of ratesetting (75 FR 71838). We rely on hospitals to accurately report all of the services provided to beneficiaries using the established HCPCS and CPT codes that appropriately describe the procedures performed in accordance with their code descriptors and the CPT Editorial Panel's and CMS' instructions, as applicable, and to include these charges and costs on their Medicare hospital cost report appropriately. In addition, we do not specify the methodologies that hospitals must use to set charges for this or any other service.

We recognize that the MPFS pays separately for CPT code 93229. However, the MPFS and the OPPS are very different payment systems. Each system is established under a different set of statutory and regulatory principles, and the policies established under the MPFS do not necessarily affect the payment policies under the OPPS. Moreover, we do not agree with the commenter that CPT code 93229 should be reassigned to APC 0435. Based on the claims data available for this final rule with comment period, we believe that APC 0213 is the most appropriate APC to reassign CPT code 93229 based on the clinical homogeneity and resource costs in relation to the other procedures assigned to this APC. Our analysis of the latest hospital outpatient CY 2013 claims data shows a final geometric mean cost of approximately $105 for CPT code 93229 based on 3,505 single claims (out of 3,579 total claims), which is not inconsistent with the geometric mean cost of approximately $183 for APC 0213, which is the lowest cost APC in the extended EEG, sleep, and cardiovascular studies series of APCs.

In response to the commenter's concern regarding miscoding of hospital claims reporting the service described by CPT code 93229, we remind hospitals that CPT code 93229 is not the appropriate procedure code to use to report Holter monitoring (CPT codes 93224 through 93227), or event monitoring (CPT codes 93268 through 93278) procedures. CPT code 93229 should be used to report continuous outpatient cardiovascular monitoring that includes up to 30 consecutive days of real-time cardiac monitoring. In particular, the 2014 CPT Code Book describes the procedure described by CPT code 93229 as a mobile cardiovascular telemetry service and defines it as:

“Mobile cardiovascular telemetry (MCT): Continuously records the electrocardiographic rhythm from external electrodes placed on the patient's body. Segments of the ECG data are automatically (without patient intervention) transmitted to a remote surveillance location by cellular or landline telephone signal. The segments of the rhythm, selected for transmission, are triggered automatically (MCT device algorithm) by rapid and slow heart rates or by the patient during a symptomatic episode. There is continuous real time data analysis by preprogrammed algorithms in the device and attended surveillance of the transmitted rhythm segments by a surveillance center technician to evaluate any arrhythmias and to determine signal quality. The surveillance center technician reviews the data and notifies the physician or other qualified health care professional depending on the prescribed criteria” (2014 CPT Professional Edition; page 549).

We expect that hospitals would only report CPT code 93229 on hospital claims for providing the mobile telemetry service that is described above.

In summary, after consideration of the public comment we received, we are finalizing our CY 2015 proposal, without modification, to reassign CPT code 93229 to APC 0213 for CY 2015. Consistent with our policy of reviewing APC assignments annually, we will reevaluate the cost of CPT code 93229 and its APC assignment for the CY 2016 rulemaking.

2. Gastrointestinal (GI) Services: Upper GI Procedures (APCs 0142, 0361, 0419, and 0422)

In the CY 2014 OPPS/ASC final rule with comment period, we assigned CPT codes 43211 (Esophagoscopy, flexible transoral; with endoscopic mucosal resection), and 43254 (Esophagogastroduodenoscopy, flexible, transoral; with endoscopic mucosal resection) to APC 0141 (Level I Upper GI Procedures) on an interim basis. In addition, we assigned CPT code 43240 (Upper gastrointestinal endoscopy including esophagus, stomach, and either the duodenum and/or jejunum as appropriate; with transmural drainage of pseudocyst) to APC 0419 (Level II Upper GI Procedures), CPT code 91035 (Esophagus, gastroesophageal reflux test; with mucosal attached telemetry ph electrode placement, recording, analysis and interpretation) to APC 0361 (Level II Alimentary Tests), and CPT code 0355T (Gastrointestinal tract imaging, intraluminal (eg, capsule endoscopy), colon, with interpretation and report) to APC 0142 (Level I Small Intestine Endoscopy).

For CY 2015, we proposed to reassign CPT codes 43211 and 43254 from APC 0141 to APC 0419. We also proposed to continue to assign CPT code 43240 to APC 0419; CPT code 91035 to APC 0361; and CPT code 0355T to APC 0142.

Comment: Several commenters requested that CMS reassign CPT codes 43211 and 43254 from APC 0141 to APC 0419 in response to the CY 2014 OPPS/ASC final rule with comment period. The commenters believed that the reassignment would be consistent with the resource and clinical homogeneity principles used to assign services to appropriate classification groupings. In response to the CY 2015 OPPS/ASC proposed rule, the same commenters supported CMS' proposal to reassign CPT codes 43211 and 43254 to APC 0419 for the CY 2015 OPPS update, and applauded CMS for considering the suggestions made in response to the commenters' concerns. One commenter requested that CMS consider reassigning CPT codes 43211 and 43254 from APC 0141 to APC 0422 (Level III Upper GI Procedures) instead of from APC 0141 to APC 0419 as proposed. Based on an analysis of the CY 2013 OPPS claims data performed by the commenter, the commenter believed that the geometric mean costs associated with endoscopic mucosal resection (EMR) procedures are more closely aligned with the geometric mean cost of APC 0422 than APC 0419.

Response: EMR CPT codes 43211 and 43254 became effective January 1, 2014. As with all new codes, our policy has been to assign the service to an APC based on input from a variety of sources, including but not limited to, a review of the clinical similarity of the service in comparison to existing procedures; input from CMS medical advisors; information from interested specialty societies; and a review of all other information available to us. Based on the complexity of these procedures and input from our medical advisors, we believe that APC 0419 appropriately reflects the clinical homogeneity and resource costs associated with performing EMR procedures. Therefore, after consideration of the public comments we received, we are finalizing our CY 2015 proposal, without modification, to reassign CPT codes 43211 and 43254 from APC 0141 to APC 0419 for the CY 2015 OPPS update. As we do every year, we will review our claims data for these services for the CY 2016 OPPS rulemaking.

Comment: Several commenters expressed concern with CMS' proposal to continue to assign CPT code 43240 to APC 0419, and requested that CMS reassign the CPT code to APC 0384 (GI Procedures with Stents) based on the clinical similarity of the service to other procedures assigned to this APC.

Response: Based on our analysis of the latest hospital outpatient claims data used for this final rule with comment period, we agree with the commenters that a more appropriate APC reassignment is necessary for CPT code 43240. However, we believe that the most appropriate APC reassignment is APC 0422 (Level III Upper GI Procedures) rather than APC 0384. Our claims data show a geometric mean cost of approximately $1,574 for CPT code 43240 based on 44 single claims (out of 142 total claims), which is more comparable to the geometric mean cost of approximately $1,987 for APC 0422 than to the geometric mean cost of approximately $3,294 for APC 0384. Therefore, after consideration of the public comments we received, we are modifying our proposal regarding the APC reassignment of CPT code 43240. Specifically, we are reassigning CPT code 43240 from APC 0419 to APC 0422 for CY 2015.

Comment: Several commenters expressed concern regarding the inadequate payment rate for CPT code 91035 under Medicare's ASC payment system, and requested that CMS reassign CPT code 91035 from APC 0361 to APC 0142 as a means to increase the payment rate in the ASC setting. The commenters noted that APC 0142 includes other capsule-based procedures that are clinically similar to the procedure described by CPT code 91035, such as the procedure described by CPT code 91112 (Gastrointestinal transit and pressure measurement, stomach through colon, wireless capsule, with interpretation and report). The commenters further explained that the procedures described by CPT codes 91035 and 91112 both involve the use of a capsule to collect pH and other data from the patient's gastrointestinal tract over a period of several days.

Response: Based on our analysis of the latest hospital outpatient claims data used for this final rule with comment period, we believe that CPT code 91035 is appropriately assigned to APC 0361 to ensure adequate payment for the service in any hospital outpatient setting. Our claims data show a geometric mean cost of approximately $466 for CPT code 91035 based on 1,272 single claims (out of 5,099 total claims), while claims data for CPT code 91112 show a geometric mean cost of approximately $774 based on 353 single claims (out of 412 total claims). The geometric mean cost of APC 0361 is approximately $341 and the geometric mean cost of APC 0142 is approximately $884, which is almost twice the geometric cost of CPT code 91035. In addition, assigning CPT code 91035 to APC 0142 would create a violation of the 2 times rule within APC 0142 because the geometric mean cost of the highest cost significant procedure assigned to APC 0142 (CPT code 44361, with a geometric mean cost of approximately $1,019) is 2.2 times the geometric mean cost of CPT code 91035. Therefore, APC 0142 would not be an appropriate assignment for CPT code 91035. We are finalizing our CY 2015 proposal to continue to assign CPT code 91035 to APC 0361.

Comment: In response to the CY 2014 OPPS/ASC final rule with comment period, several commenters requested that CMS assign CPT code 0355T, which became effective July 1, 2014, to APC 0142 for the CY 2015 OPPS update. The commenters believed that the procedure described by CPT code 0355T is similar to the procedures described by existing GI capsule endoscopy CPT codes 91110 (Gastrointestinal tract imaging, intraluminal (eg, capsule endoscopy), esophagus through ileum, with interpretation and report), 91111 (Gastrointestinal tract imaging, intraluminal (eg, capsule endoscopy), esophagus with interpretation and report), and 91112 (Gastrointestinal transit and pressure measurement, stomach through colon, wireless capsule, with interpretation and report), which are all assigned to APC 0142.

Response: As published in Table 17 of the CY 2015 OPPS/ASC proposed rule (79 FR 40976), we proposed to continue to assign this new code to APC 0142. We agree with the commenters that GI endoscopy CPT codes 0355T, 91110, 91111, and 91112 are clinically similar. Therefore, we are finalizing our CY 2015 proposal, without modification, to continue to assign CPT code 0355T to APC 0142, As a result, all four GI endoscopy procedures described by CPT codes 0355T, 91110, 91111, and 91112 will be assigned to APC 0142 for the CY 2015 OPPS update.

We remind hospitals that because the payment rates associated with new codes that become effective July 1 are not available to us in time for incorporation into the Addenda to the proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2014 OPPS quarterly update CR were not included in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site). However, we listed the codes and their proposed APC assignments in the preamble of the proposed rule.

The final CY 2015 payment rate for all of the CPT codes discussed can be found in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

3. Genitourinary Services

a. Gynecologic Procedures (APCs 0188, 0189, 0192, 0193, and 0202)

For the CY 2014 OPPS update, we made several changes to specific APC assignments, which included the female reproductive APCs; APC 0192, APC 0193, and APC 0195. These proposed changes were listed in Addendum B to the CY 2014 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site). With respect to these three APCs, based on claims data available for the CY 2014 OPPS/ASC proposed rule, only APC 0193 showed a violation of the 2 times rule. We note that, under the OPPS, we may make exceptions to the 2 times rule based on the variation of costs within each APC group in unusual cases such as low-volume items and services. In the case of APC 0193, we believed that it was necessary to make an exception to the 2 times rule for the CY 2014 OPPS update because this APC sufficiently reflected the clinical and resource coherence of the Level V female reproductive procedures.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40982), we discussed our proposal to make further changes to the existing female reproductive APCs; APC 0188, APC 0189, APC 0191, APC 0192, APC 0193, APC 0195, and APC 0202 based on a presentation made at the March 10, 2014 Panel meeting. Specifically, one presenter expressed concern regarding the reassignment of the female reproductive procedures within existing APCs 0192 (Level IV Female Reproductive Procedures), 0193 (Level V Female Reproductive Procedures), and 0195 (Level VI Female Reproductive Procedures) that became effective with the CY 2014 OPPS update. The presenter stated that the proposed changes would compromise beneficiary access to pelvic floor repair procedures, and urged the Panel to request that CMS reconsider its packaging policy for the procedures assigned to APCs 0193 and 0195 and allow stakeholders the opportunity to work with CMS to appropriately reassign these procedures to accurately account for the clinical complexity associated with providing these services. In addition, the presenter requested that CMS delay the conversion of existing APC 0202 (Level VII Female Reproductive Procedures) to a C-APC to allow for further study of the complexity of pelvic floor repair procedures. After review of the information provided by the presenter and examination of the hospital outpatient claims data available for the CY 2015 OPPS/ASC proposed rule, the Panel did not make any recommendations regarding any of the female reproductive APCs.

For the CY 2015 OPPS update, based on our review of the latest hospital outpatient claims data available for the CY 2015 OPPS/ASC proposed rule, there were no violations of the 2 times rule within any of the female reproductive APCs (79 FR 40982). However, we proposed to restructure the female reproductive APCs to more appropriately reflect the resource and clinical characteristics of the procedures assigned to each APC. The proposed restructuring resulted in the use of five APCs for the CY 2015 OPPS update, as compared to the seven APCs used for the CY 2014 OPPS update. We believe that the proposed five-level APC structure will provide more accurate payments for the female reproductive procedures furnished to Medicare beneficiaries.

Tables 21 and 22 of the proposed rule (79 FR 40983) showed the current CY 2014 and proposed CY 2015 female reproductive APCs. Specifically, Table 21 showed the female reproductive APCs, APC titles, and their status indicator assignments for CY 2014, while Table 22 showed the proposed female reproductive APCs, APC titles, and their status indicator assignments for CY 2015. In the proposed rule, we noted that one of the five levels of the female reproductive APCs, APC 0202, is proposed to be converted to a C-APC. We refer readers to section II.A.2.e. of this final rule with comment period for further discussion of our comprehensive APC policy.

In addition, for CY 2015, we proposed to consolidate the two existing hysteroscopy APCs; APC 0190 (Level I Hysteroscopy) and APC 0387 (Level II Hysteroscopy). Specifically, we proposed to delete APC 0387 and to reassign the procedures currently assigned to this APC to APC 0190. In conjunction with this proposed reassignment, we proposed to rename APC 0190 from “Level II Hysteroscopy” to “Hysteroscopy.” Based on the hospital outpatient claims data available for the CY 2015 OPPS/ASC proposed rule, we believe that the two-leveled structure of the hysteroscopy APCs is no longer necessary because the single-leveled hysteroscopy APC sufficiently reflects the resources and clinical similarities of all the hysteroscopic procedures. We note that, for CY 2014, the payment rates for APCs 0190 and 0387 are $1,763 and $2,818, respectively. For CY 2015, the proposed payment rate for APC 0190 was approximately $2,014.

Comment: Many commenters supported CMS' proposal to reassign several of the female reproductive procedures to APC 0202 and stated that the proposed restructuring of these APCs more appropriately reflects clinical and resource homogeneity among similar procedures.

Response: We appreciate the commenters' support.

Comment: Some commenters opposed CMS' proposal to reassign CPT code 57155 (Insertion of uterine tandem and/or vaginal ovoids for clinical brachytherapy) from APC 0193 (Level IV Female Reproductive Procedures) to APC 0192 (Level III Female Reproductive Procedures) for the CY 2015 OPPS update. According to the commenters, the proposed CY 2015 OPPS payment rate of approximately $501 for CPT code 57155 is significantly lower than the CY 2014 OPPS payment rate of approximately $1,375, which represents a 63-percent reduction in the payment for this service. The commenters noted that the APC assignment for this procedure has varied between APC 0192 and APC 0193 since the inception of the code, and recommended that CMS reexamine the procedures assigned to APCs 0192, 0193, and 0202 to ensure that the proposed structure of these APCs provides the most appropriate payment for the services assigned to each APC. Some commenters requested that CMS continue to assign CPT code 57155 to APC 0193 for the CY 2015 update. The commenters also recommended that CMS closely monitor medical practice patterns to ensure beneficiary access to this treatment if CMS finalizes the proposal to reassign CPT code 57155 to APC 0192.

Response: CPT code 57155 became effective January 1, 2002. Since that time, CPT code 57155 has been assigned to either APC 0192 or APC 0193. For CYs 2002, 2003, and 2006 through 2013, CPT code 57155 was assigned to APC 0192. For CYs 2004, 2005, and 2014, CPT code 57155 was assigned to APC 0193. Consistent with CMS' statutory requirement under section 1833(t)(9) of the Act to review and revise APC assignments annually and to construct the most appropriate APC groupings as well as, to the extent desirable, correct any 2 times rule violations, we evaluated the resource consumption and clinical coherence associated with the female reproductive APCs for the CY 2015 OPPS update. Based on an analysis of the latest hospital outpatient claims data for this final rule with comment period, CPT code 57155 has a geometric mean cost of approximately $731 based on 858 single claims (out of 2,461 total claims). The geometric mean costs for the significant procedures assigned to APC 0192 range between approximately $398 (for CPT code 56605) and $731 (for CPT code 57155). Therefore, we believe that CPT code 57155 is appropriately assigned to APC 0192 based on the comparable resource costs associated with the other procedures assigned to this APC and are not making any changes to our proposal for this final rule with comment period. We note that APC 0192 had a proposed payment rate of approximately $501, which was based on hospital outpatient claims data submitted between January 1, 2013, and December 31, 2013, and processed on or before December 31, 2013. For this final rule with comment period, the final payment rate for APC 0192 is approximately $487, which is based on hospital outpatient claims data submitted between January 1, 2013, and December 31, 2013, and processed on or before June 30, 2014.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to reassign CPT code 57155 from APC 0193 to APC 0192 for CY 2015.

Comment: Several commenters requested that CMS not finalize the proposal to consolidate the two existing hysteroscopy APCs. Instead, the commenters suggested that CMS maintain the two-leveled structure of the hysteroscopy APCs to differentiate the less costly diagnostic hysteroscopic services from the more resource-intensive hysteroscopic procedures. One commenter stated that the reconfiguration of these APCs for CY 2015 is premature and warrants more discussion prior to finalizing a proposal regarding this issue. Another commenter believed that it is not clinically coherent to combine the diagnostic hysteroscopy procedure described by CPT code 58555 with a significant therapeutic procedure, such as a hysteroscopic myomectomy described by CPT code 58561. The commenter explained that all of the gynecology specialty societies recommend minimally invasive alternatives to hysterectomy when available. In addition, the commenter believed that the proposal to consolidate the hysteroscopy APCs would provide incentives for hospitals to encourage treatment that is not the standard of care.

Response: Based on a review of the latest hospital outpatient claims data for the CY 2015 OPPS update, we believe that restructuring and consolidating the gynecology APCs is prudent in order to improve the comparability of resource and clinical similarity of all the hysteroscopy procedures assigned to a specific APC. In addition, we disagree with the commenter's assertion regarding hospitals' incentives to deliver substandard care for the purposes of financial gain. We believe that hospitals and physicians will offer their patients the appropriate care and treatment, which may or may not employ an expensive medical device.

Comment: Several commenters suggested that modifications to the proposed APC assignments for certain related procedures be considered if CMS finalizes the proposal to restructure and consolidate the female reproductive APCs. One commenter suggested that CMS reassign CPT codes 58561 and 58563 to APC 0202 instead of APC 0190 based on the clinical similarities in relation to the other procedures assigned to APC 0202.

Response: Based on input from our medical advisors, we agree with the commenter that APC 0202 is the most appropriate APC assignment for CPT codes 58561 and 58563 based on their clinical similarity in relation to the other procedures assigned to this APC. We note that APC 0202 is designated as a C-APC for the CY 2015 OPPS update. Further information on C-APCs can be found in section II.A.2.e. of this final rule with comment period.

Comment: One commenter suggested that CMS reconsider the proposal to consolidate the hysteroscopy APCs and establish two separate APCs for female reproductive procedures; one for the more resource-intensive hysteroscopic procedures and another for the lower-cost and less complex hysteroscopic procedures. Specifically, the commenter recommended assigning the following seven resource-intensive female reproductive procedures to a higher-paying APC, with a geometric mean cost ranging between approximately $3,010 and $4,350: CPT codes 58353, 58356, 58561, 58563, 58565, 58559, and 58560. The commenter also suggested assigning the following four less complex female reproductive procedures to a lower-paying APC, with a geometric mean cost ranging between approximately $1,758 and $2,099: CPT codes 58555, 58558, 58562, and 58579. Another commenter believed that the necessary resources required to provide the service described by CPT code 58555 are significantly less than the resources required to provide the service described by CPT code 58561. The commenter stated that the resource costs for providing the services described by CPT codes 58353, 58561, 58563, and 58565 are similar and recommended that these procedures be assigned to the same APC.

Response: We reviewed our latest hospital outpatient claims data used for this final rule with comment period for all of the hysteroscopic procedures. Based on our review and after consideration of the public comments we received, we are modifying our proposal regarding the proposed APC assignments for several of the hysteroscopic procedures for the CY 2015 OPPS update. Specifically, we are deleting APC 0190 and reassigning the eight procedures that were proposed to be assigned to this APC to APC 0188, APC 0193, or APC 0202.

In summary, after consideration of the public comments received, we are finalizing our proposals with some modifications. For the hysteroscopy procedure APCs, we proposed to reassign all of the procedures assigned to APC 0387 to APC 0190, which resulted in a one-leveled APC containing all of the hysteroscopy procedures. Specifically, we proposed to delete APC 0387 (Level II Hysteroscopy), and to rename APC 0190 “Hysteroscopy.” However, based on our analysis of the hospital outpatient claims data available for this final rule with comment period, we are modifying our proposal. Instead, we are reassigning all of the hysteroscopy procedures that we proposed to assign to APC 0190 to one of the female reproductive APCs. That is, we are reassigning all of the procedures proposed for reassignment to APC 0190 to APC 0188, APC 0193, or APC 0202. Consequently, with no procedures remaining in APC 0190, we deleted this APC for CY 2015. In addition, we are finalizing our proposal to restructure the female reproductive APCs to more appropriately reflect the resource and clinical characteristics of the procedures assigned to each APC. Specifically, we are finalizing our proposal to assign all of the female reproductive procedures to APCs 0188, 0189, 0192, 0193, or 0202. In addition, because of our revision to the hysteroscopy procedures APCs, we are revising the APC titles for the five female reproductive APCs; APC 0188, APC 0189, APC 0192, APC 0193, and APC 0202, from “Female Reproductive Procedures” to “Gynecologic Procedures” to more appropriately describe the procedures assigned to these APCs. Table 20 below lists the hysteroscopic procedures CPT codes, along with their long descriptors, proposed CY 2015 OPPS status indicators and APC assignments, as well as their final CY 2015 OPPS status indicators and APC assignments. Table 21 below lists the final APC titles and status indicators for the gynecologic procedure APCs. The final CY 2015 payment rates for the gynecologic procedures APCs, as well as the hysteroscopic procedures CPT codes listed in Table 21 can be found in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

b. Cystourethroscopy, Transprostatic Implant Procedures, and Other Genitourinary Procedures (APCs 0160, 0161, 0162, 0163, and 1564)

For the CY 2015 OPPS update, based on our review of the latest hospital outpatient claims data available for the CY 2015 OPPS/ASC proposed rule, we proposed to restructure the APCs containing cystourethroscopy and other genitourinary procedures to more appropriately reflect the resource costs and clinical characteristics of the procedures assigned within each APC (79 FR 40987). We note that, for the CY 2014 OPPS update, there are five levels of APCs that contain cystourethroscopy and genitourinary procedures. These APCs were listed in Table 26 of the CY 2015 OPPS/ASC proposed rule (79 FR 40986), along with their status indicator assignments for CY 2014. The proposed restructuring resulted in the use of four APCs for the CY 2015 OPPS update, as compared to the five APCs used for the CY 2014 OPPS update. Specifically, based on our review and evaluation of the procedures assigned to these APCs and the latest hospital outpatient claims data available, in the CY 2015 OPPS/ASC proposed rule, we proposed to delete APC 0429 (Level V Cystourethroscopy and Other Genitourinary Procedures) and reassign the procedures that were previously assigned to this APC to either APC 0161 (Level I Cystourethroscopy and Other Genitourinary Procedures) or APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures). We believe that the procedures currently assigned to APC 0429 would be more appropriately assigned to either APC 0161 or APC 0163 based on their geometric mean costs for the CY 2015 OPPS update. Further, we believe that this proposed restructuring appropriately categorizes all of the cystourethroscopy and other genitourinary procedures that are comparable clinically and with respect to resource use within an APC group. We also proposed to delete APC 0169 (Lithotripsy) because the one procedure, specifically the procedure described by CPT code 50590 (Lithotripsy, extracorporeal shock wave), that was assigned to this APC was proposed for reassignment to APC 0163 (79 FR 40987). Table 27 of the CY 2015 OPPS/ASC proposed rule (79 FR 40987) listed the proposed APCs that contain cystourethroscopy and other genitourinary procedures, the APC titles, and the proposed status indicator assignments for CY 2015. The proposed payment rates for the specific APCs listed in Table 27 were listed in Addendum A to the proposed rule. The proposed payment rates for the specific cystourethroscopy and other genitourinary procedure codes were listed in Addendum B to the proposed rule. (Addenda A and B to the proposed rule are available via the Internet on the CMS Web site.)

Comment: Several commenters opposed CMS' proposal to delete APC 0169 and reassign the extracorporeal shock wave lithotripsy (ESWL) CPT code 50590 to APC 0163. The commenters noted that the procedure described by CPT code 50590 is classified as a noninvasive therapy and is not similar, clinically or with respect to resource costs, to the other more invasive surgical urological procedures that are proposed for assignment to APC 0163. One commenter stated that the ESWL procedure does not involve the use of an endoscope and, therefore, should not be assigned to APC 0163. This commenter believed that the payment rate for APC 0163 would be influenced by dominating the claims data for CPT code 50590 because ESWL is a commonly performed procedure resulting in a significant high volume of single frequency claims. The commenter requested that CMS delay finalizing this proposal or, alternatively, reassign CPT code 50590 to APC 0162 (Level III Cystourethroscopy and Other Genitourinary Procedures) because this APC encompasses a broader and more diverse grouping of procedures than APC 0163.

Response: As part of our standard annual OPPS update process, we review each APC assignment for the clinical similarity and resource homogeneity of the procedures assigned to each APC. An analysis of our latest hospital outpatient claims data available for this final rule with comment period revealed a geometric mean cost of approximately $3,094 based on 32,370 single claims (out of 44,816 total claims) for CPT code 50590, which is comparable to the geometric mean cost of approximately $3,230 for APC 0163. The significant procedures assigned to APC 0163 have geometric mean costs ranging between $2,946 and $4,088. We do not agree with the commenters that APC 0162 is the more appropriate APC assignment because the geometric mean cost for this APC, approximately $2,163, is significantly lower than the geometric mean cost of approximately $3,094 for CPT code 50590. In addition, the geometric mean cost of APC 0163 (using proposed rule data) and without CPT code 50590 assigned to this APC was approximately $3,058, which is close to the final rule geometric mean cost of CPT code 50590 of $3,094. Although the ESWL procedure does not involve the use of an endoscope, we note that not every procedure proposed for reassignment, or ultimately reassigned, to APC 0163 uses an endoscope. In addition, we do not agree with the commenters that the ESWL procedure is not clinically similar to the other procedures assigned to APC 0163. There are no general rules for clinical similarity that apply to all APCs. Instead, the evaluation of clinical similarity depends upon the particular characteristics of the services being evaluated for a particular APC assignment. The use of single procedure APCs, like APC 0169, the APC to which CPT code 50590 is assigned for CY 2014, generally is not considered appropriate under the OPPS because payment rates based on a single procedure code's geometric mean cost is more consistent with a fee schedule than a prospective payment system. However, there are limited circumstances in which we assign a single procedure code to an APC; for example, the intraocular procedures assigned to an APC series. Specifically, APC 0673 (Level III Intraocular Procedures) has a geometric mean cost of approximately $3,239. APC 0293 (Level IV Intraocular Procedures) is the next higher level APC in the intraocular procedures APC series, and it has a single procedure (CPT code 65770 (Keratoprosthesis)) assigned to it, which has a geometric mean cost of approximately $8,766. The highest cost procedure assigned to APC 0673 is CPT code 67113 (Repair of complex retinal detachment), which has a geometric mean cost of approximately $4,065. The geometric mean cost of CPT code 65770 is significantly higher, 2.2 times the geometric mean cost of CPT code 67113. Therefore, we assigned CPT code 65770 to a different APC because the resource costs are not similar. Because the procedure described by CPT code 65770 is an intraocular surgery and there are no other APCs that contain clinically similar procedures, we assigned CPT code 65770 to APC 0293 without any other procedures. Continuing in this series, we assigned CPT code 0308T (Insertion of intraocular telescope prosthesis including removal of crystalline lens) to APC 0351 (Level V Intraocular Procedures) without any other procedures. CPT code 0308T has a geometric mean cost of approximately $23,947, which is 2.73 times the geometric mean cost of the procedure described by CPT code 65770, which is assigned to APC 0293, which is one level lower than APC 0351 in the intraocular procedures APC series. CPT code 0308T is the only procedure code assigned to APC 0351 because there are no other procedures that are similar in terms of resource costs. We do not believe that similar APC series assignment is applicable to CPT code 50590. Therefore, we proposed to reassign CPT code 50590 to APC 0163 and delete APC 0169 (79 FR 40986 through 40987). In summary, based on our review of the latest hospital outpatient claims data for this final rule with comment period, we believe that CPT code 50590 would be appropriately assigned to APC 0163 based on its clinical and resource similarity to the other procedures assigned to APC 0163, several of which are dedicated to kidney stone removal. Therefore, we are finalizing our proposal, without modification, to assign CPT code 50590 to APC 0163 for CY 2015.

Comment: One commenter requested that CMS not finalize the proposal to delete APC 0429, and suggested that CMS maintain this APC until data become available for CPT code 52356 (Cystourethroscopy, with ureteroscopy and/or pyeloscopy; with lithotripsy including insertion of indwelling ureteral stent (eg., Gibbons or double-J type)), which became effective January 1, 2014.

Response: We believe that CPT code 52356 is appropriately categorized by APC 0163 based on its similarity to the other procedures assigned to this APC. Because CPT code 52356 became effective January 1, 2014, we expect to have claims data for the procedure described by this code available for the CY 2016 OPPS rulemaking cycle. We note that, consistent with CMS' policy of reviewing APC assignments annually in accordance with the statutory requirement, we will reevaluate the APC assignment for CPT code 52356 for the CY 2016 OPPS update. Therefore, after consideration of the public comment we received, we are finalizing our proposals, without modification, to delete APC 0429 and to assign CPT code 52356 to APC 0163 for CY 2015.

Comment: Some commenters disagreed with CMS' proposal to reassign CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) from APC 0163 to APC 0162. The commenters stated that the proposal would result in a 28-percent reduction in the payment for this service when the CY 2014 payment rate of approximately $2,905 for APC 0163 is compared to the CY 2015 proposed payment rate of approximately $2,091 for APC 0162. The commenters noted that CPT code 55875 has been assigned to APC 0163 since the code's inception in CY 2007, and believed that the proposed payment rate for APC 0163 more accurately reflects the resources necessary to provide this service. The commenters urged CMS to maintain the APC assignment of CPT code 55875 to APC 0163.

Response: Analysis of our latest hospital claims data used for this final rule with comment period revealed a geometric mean cost of approximately $2,501 for CPT code 55875 based on 703 single claims (out of 4,681 total claims), which is comparable to the geometric mean cost of approximately $2,163 for APC 0162. We do not agree with the commenters that APC 0163 is the more appropriate APC because its geometric mean cost of approximately $3,230 is significantly higher than the geometric mean cost of approximately $2,501 for CPT code 55875. We believe that CPT code 55875 is appropriately assigned to APC 0162 based on its clinical homogeneity and resource costs to the procedures currently assigned to this APC. Therefore, after consideration of the public comments we received, we are finalizing our proposal, without modification, to reassign CPT code 55875 to APC 0162 for CY 2015.

Comment: One commenter opposed CMS' proposal to reassign CPT code 53850 (Transurethral destruction of prostate tissue; by microwave thermotherapy) from APC 0429 to APC 0161. The commenter stated that the CY 2015 proposed payment rate for APC 0161 is approximately $1,235, which is significantly lower than the CY 2014 payment rate of approximately $3,304 for APC 0429. The commenter suggested that CMS reassign CPT code 53850 to APC 0163, the APC to which CPT code 53852 (Transurethral destruction of prostate tissue; by radiofrequency thermotherapy) is proposed to be reassigned. The commenter explained that both procedures are similar in clinical technique because both procedures use a thermal approach as an alternative to open prostatectomy or transurethral resection of the prostate for the treatment of benign prostatic hyperplasia (BPH).

Response: As has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. Based on the latest hospital outpatient claims data used for this final rule with comment period, our analysis does not support the reassignment of CPT code 53850 to APC 0163. Our analysis of the claims data shows a geometric mean cost of approximately $1,542 for CPT code 53850 based on 107 single claims (out of 142 total claims), which is relatively similar to the geometric mean cost of approximately $1,273 for APC 0161. While we acknowledge that both procedures are similar, our analysis of the claims data shows that the resource costs of providing the procedure described by CPT code 53852 is significantly higher than the resource cost of providing the procedure described by CPT code 53850. Specifically, the geometric mean cost for CPT code 53852 is approximately $3,339 based on 98 single claims (out of 156 total claims), which is comparable to the geometric mean cost of APC 0163 of approximately $3,230. We do not agree with the commenters that APC 0163 is the more appropriate APC assignment because its geometric mean cost is significantly higher than the geometric mean cost of CPT code 53850 of approximately $1,542. We believe that CPT code 53850 would be appropriately assigned to APC 0161 based on its clinical homogeneity and resource costs to the procedures currently assigned to this APC. Therefore, after consideration of the public comment we received, we are finalizing our proposal, without modification, to reassign CPT code 53850 from APC 0429 to APC 0161 for CY 2015.

In addition, effective April 1, 2014, we created HCPCS codes C9739 (Cystourethroscopy, with insertion of transprostatic implant; 1 to 3 implants) and C9740 (Cystourethroscopy, with insertion of transprostatic implant; 4 or more implants) as a result of an application to assign the transprostatic implant procedures (TIPs) to a New Technology APC. We assigned HCPCS codes C9739 and C9740 to APCs 0162 (Level III Cystourethroscopy and other Genitourinary Procedures) and 1564 (New Technology—Level XXVII), respectively, based on the estimated costs of the procedures, which include 1 to 3 implants in the case of procedures described by HCPCS code C9739, and 4 or more implants in the case of procedures described by HCPCS code C9740. We based the number of implants for HCPCS codes C9739 and C9740 on the number of implant utilization data per patient that the New Technology applicant provided within its approved application. The CY 2014 payment rates for APCs 0162 and 1564 are $2,007.32 and $4,750.00, respectively.

The AMA's CPT Editorial Panel recently created two new codes for this technology, which become effective on January 1, 2015: CPT codes 52441 (Cystourethroscopy, with insertion of permanent adjustable transprostatic implant; single implant) and 52442 (Cystourethroscopy, with insertion of permanent adjustable transprostatic implant; each additional permanent adjustable transprostatic implant (List separately in addition to code for primary procedure)).

Comment: One commenter stated that the TIPs described by HCPCS codes C9739 and C9740 do not receive adequate payment under the OPPS because of the code descriptors for these procedure codes as they relate to the number of implants allowed in each respective code (1 to 3 implants for HCPCS code C9739 and 4 or more implants for HCPCS code C9740), when categorized by the APCs in which these services are assigned. The commenter also believed that the TIPs are unable to be performed in the ASC setting because of the inadequate payment rate for the specific APCs. The commenter believed that the procedures described by HCPCS codes C9739 and C9740 are device dependent because a majority of the procedures' costs are associated with the costs of the implants, with a mean of 4.9 implants per procedure. The commenter also believed that there is considerable variation in the number of implants used for each procedure. The commenter believed that the ASC payment is extremely low because the procedures are not designated as “device intensive” in the ASC setting (that is, the procedures are not assigned to ASC payment indicator “J8”), nor are the procedures assigned to a C-APC under the OPPS, which would most likely allow for the performance of the device-intensive treatment in the ASC setting, similar to most of the proposed C-APCs that are defined as device-intensive APCs. The commenter stated that the proposed OPPS payments for HCPCS codes C9739 and C9740 are inadequate to cover both the costs of the number of implants required and the cost of the procedure. The commenter recommended several possible APC assignments to improve the payments for TIPs. The commenter recommended using new CPT codes 52441 and 52442 to report the TIPs under the OPPS, and assigning the procedures to C-APC 0385 (Level I Urogenital Procedures) because the proposed payment rate for C-APC 0385 of approximately $7,659 is comparable to the estimated cost of performing TIPs using 5 implants, which is approximately $7,519. The commenter's second recommendation was to continue to report the performance of the TIPs using HCPCS codes C9739 and C9740, and to assign HCPCS code C9740 to APC 0385, as described previously, and HCPCS code C9739 to APC 0202 (Level V Female Reproductive Procedures) and remove “Female” from the title of APC 0202. According to the commenter, the proposed payment for APC 0202 of approximately $4,366 is equivalent to the cost of a TIP using 2 or 3 implants. The commenter believed that because APC 0202 is designated as a C-APC, the ASC payment for the procedure would also prove to be adequate. The commenter's third recommendation was to use new CPT codes 52441 and 52442 to report TIPs and to assign the procedure codes to APC 0168 (Level II Urethral Procedures) on an interim basis until OPPS claims data are available for these codes. The commenter believed that the proposed payment rate for APC 0168 of approximately $2,533 more appropriately equates to the cost of a single implant procedure described by CPT code 52441, while additional implant procedures described by CPT code 52442 would be paid at 50 percent, or approximately $1,267, because APC 0168 is subject to the multiple procedure discount (that is, the APC is assigned to status indicator “T”), which, the commenter claimed, more appropriately equates to the estimated cost of providing the procedure described by CPT code 52442 of approximately $1,248. However, the commenter noted that, because APC 0168 is not a C-APC, payment for the procedure may not be designated as “device intensive” to ensure adequate ASC payment. The commenter recommended that CMS consider any procedure that has device costs that are greater than 40 percent as device intensive.

Response: We agree with the commenter that the cost of the implants associated with the procedures described by HCPCS codes C9739 and C9740 represents the majority of the costs of the procedures. We considered those costs and the variation in the number of implants per procedure when we created HCPCS codes C9739 and C9740 and assigned the procedure codes to APCs 0162 and 1564, respectively. We believe that HCPCS codes C9739 and C9740 are preferable to the new CPT codes 52441 and 52442 with respect to OPPS and ASC payments because the new codes describe complete procedures instead of the insertion of individual implants, which are almost always incomplete procedures because patients usually receive multiple implants. We do not believe that any of the APCs recommended by the commenter are appropriate for assignment of HCPCS codes C9739 and C9740 at this time because our usual policy with new codes is to wait until we have OPPS claims data available before making an APC reassignment. In regard to the ASC payment for the procedures, neither APC 0162 nor APC 1564 is designated as device intensive. Therefore, the multiple procedure payment reduction under OPPS applies to the entire payment amount under the ASC payment as well. Currently, there is no policy regarding designating services that are assigned to a New Technology APC as device intensive for the ASC setting. We may consider such a policy in future rulemakings.

We will maintain payment for the cystourethroscopy with insertion of TIPs using HCPCS codes C9739 and C9740 because we believe that the code descriptors more appropriately reflect complete procedures and the distribution of implant utilization per patient. For CY 2015, we are maintaining our APC assignments for HCPCS codes C9739 and C9740 to APCs 0162 and 1564, respectively. The APC assignments for HCPCS codes C9739 and C9740 are initial APC assignments until we obtain claims data for these two codes for the CY 2016 OPPS update. The final CY 2015 geometric mean costs for APC 0162 is approximately $2,163, and the final CY 2015 payment rate (there are no geometric mean costs for New Technology APCs, only payment bands) for APC 1564 is approximately $4,750. CPT codes 52441 and 52442 will not be payable under the OPPS for CY 2015; we are assigning these two CPT codes to status indicator “B” (Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x)).

After consideration of the public comments we received, we also are finalizing our proposal to restructure the APCs containing cystourethroscopy, transprostatic implant procedures, and other genitourinary procedures, and to use a four-level APC grouping to classify the procedures based on our analysis of the latest hospital outpatient claims data available for this final rule with comment period. The final payment rates for the cystourethroscopy, transprostatic implant procedures, and other genitourinary procedure codes, as well as the specific CPT codes on which we received public comments and that are discussed in this section, can be found in Addendum B to this final rule with comment period, which is available via the Internet on the CMS Web site. The final payment rates for APCs 0160, 0161, 0162, and 0163, which are the final CY 2015 cystourethroscopy, transprostatic implant procedures, and other genitourinary APCs, can be found in Addendum A to this final rule with comment period, which is also available via the Internet on the CMS Web site.

We remind commenters that every year we revise, if necessary, the APC assignments for procedure codes based on our analysis of the latest hospital outpatient claims data. We anticipate that there will be further significant revisions to the urology-related APCs in futures years because the current overall APC structure is suboptimal and can be improved with respect to the clinical similarity and resource similarity of the groupings. In addition, we note that section 1833(t)(9)(A) of the Act requires the Secretary to review, on a recurring basis occurring no less than annually, and revise the groups, the relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. Although we do not discuss every APC change in the proposed and final rules with comment period, these changes are listed in Addendum B to the proposed and final rules with comment period. Specifically, procedure codes with proposed revisions to the APC and/or status indicator assignments are assigned to comment indicator “CH” (Active HCPCS code in current year and next calendar year, status indicator and/or APC assignment has changed) in Addendum B to the proposed rule.

c. Level IV Anal/Rectal Procedures (APC 0150)

We created HCPCS code C9735 (Anoscopy; with directed submucosal injection(s), any substance) effective April 1, 2013, and assigned the service to APC 0150 (Level IV Anal/Rectal Procedures) for CY 2013, which had a payment rate of $2,365.97. We maintained the assignment of HCPCS code C9735 to APC 0150 for CY 2014, with a payment rate of $2,501.31. HCPCS code C9735 involves injection of a bulking agent, L8605 (Injectable bulking agent dextranomer/hyaluronic acid copolymer implant, anal canal, 1 ml, includes shipping and necessary supplies). One commenter in response to the CY 2014 OPPS/ASC proposed rule believed that the proposed assignment for HCPCS code C9735 to APC 0150 was inappropriate, and asserted that the entire HCPCS code C9735 procedure costs far more than the proposed payment rate for APC 0150. The commenter recommended creating a new Level V Anal/Rectal Procedures APC, composed of HCPCS code C9735, and two other procedures. CMS responded in the CY 2014 OPPS/ASC final rule with comment period that HCPCS code C9735 became effective April 1, 2013, so there were no claims data yet on this procedure, and that our longstanding policy is to wait until there are claims data on a new procedure before reassigning the service to another clinical APC (78 FR 74981). We did not agree with the commenters that creating a Level V Anal/Rectal Procedures APC was warranted for CY 2014. We believed that the suggested Level V APC would have a low volume of single frequency claims, and HCPCS code C9735 had no claims volume at that time. We stated that the low volume of claims for such an APC would contribute to APC cost and payment volatility.

For CY 2015, we proposed to maintain the assignment of HCPCS code C9735 to APC 0150, which had a proposed payment rate of $2,612.71. The AMA's CPT Editorial Panel created new Category III CPT code 0377T (Anoscopy with directed submucosal injection of bulking agent for fecal incontinence), which describes the procedure performed by HCPCS code C9735, to be effective January 1, 2015.

Comment: A few commenters recommended that CMS divide APC 0150 into two APCs by creating a higher cost Level V Anal/Rectal Procedures APC. The commenters stated that there are four procedure codes that have a geometric mean cost that is more than $500 higher than the proposed geometric mean cost of APC 0150, which is $2,735.52, and one procedure code that has a geometric mean cost that is approximately $300 higher than the proposed geometric mean cost of APC 0150. One commenter specifically stated that the proposed payment rate for APC 0150 is insufficient to cover the cost of the procedure described by HCPCS code C9735, which is one of the five procedure codes recommended for assignment to the suggested Level V Anal/Rectal Procedures APC, because the proposed payment rate for APC 0150 is lower than the total cost of the procedure. The commenter pointed out that the proposed geometric mean cost of HCPCS code C9735 is $3,241.32, which is considerably higher that the proposed geometric mean cost of APC 0150, which is $2,735.52. The commenter also recommended creating a Level V Anal/Rectal Procedures APC, and assigning HCPCS code C9735 and other codes to this recommended APC. In addition, the commenter recommended that CMS use new CPT code 0377T for hospitals to report the anoscopy with directed submucosal injection of bulking agent for fecal incontinence procedure, effective January 1, 2015.

Response: The claims data available for this final rule with comment period, which are used to establish final payment rates for the CY 2015 OPPS, show a geometric mean cost of approximately $2,698 for APC 0150, while the geometric mean cost for HCPCS code C9735 is approximately $2,863 based on 56 single frequency claims. We believe that the geometric mean cost of HCPCS code C9735 is similar to the geometric mean cost of APC 0150. Further, the procedure described by HCPCS code C9735 is no longer one of the five highest cost procedures assigned to APC 0150 based on claims data available for this final rule with comment period. Similarly, there are other higher cost, lower volume procedures with geometric mean costs that are greater than the geometric mean cost of APC 0150, but do not create a violation of the 2 times rule because of the APC assignment. For instance, CPT code 46762 (Sphincteroplasty, anal, for incontinence, adult; implantation artificial sphincter) has a final rule geometric mean cost of approximately $11,873 based on 9 single frequency claims. The volume of claims for this CPT code is too low to consider this procedure significant for purposes of evaluating a potential violation of the 2 times rule. Therefore, we do not believe that the range of costs for the significant procedures assigned to APC 0150 warrants the creation of a higher level APC. Based on claims data available for this final rule with comment period, the five highest cost procedures assigned to APC 0150 have a total number of single frequency claims that equals less than 220 claims. The suggested Level V Anal/Rectal Procedures APC would have a low volume of single frequency claims and would contribute to APC cost and payment volatility, as was the case when based on CY 2014 claims data. As we stated in the CY 2014 OPPS/ASC final rule with comment period, we are not accepting the commenter's recommendation because a low volume APC will contribute to the APC's cost volatility, which in turn contributes to payment volatility for the procedures assigned to the low volume APC (78 FR 74981).

After consideration of the public comments we received regarding the composition of APC 0150, we are finalizing our proposal to continue to assign HCPCS code C9735 to APC 0150 for CY 2015. The CY 2015 final geometric mean cost of APC 0150 is approximately $2,698. In addition, new CPT code 0377T also is assigned to APC 0150 for CY 2015 because we agree with the commenters that HCPCS code C9735 should be deleted after December 31, 2014. We are instructing hospitals to use CPT code 0377T to report this service beginning with the code's effective date, January 1, 2015.

d. Percutaneous Renal Cryoablation (APC 0423)

For CY 2014, we assigned CPT codes 50593 (Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) and 0340T (Ablation, pulmonary tumor(s), including pleura or chest wall when involved by tumor extension, percutaneous, cryoablation, unilateral, includes imaging guidance) to APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures), which has a payment rate of $4,106.19. For CY 2015, we proposed to continue to assign these two CPT codes to APC 0423, with a proposed payment rate of $4,053.32.

Comment: One commenter believed that CMS' proposal to continue to assign CPT codes 50593 and 0340T to APC 0423 does not accurately reflect the costs incurred when performing these cryoablation procedures. The commenter noted that APC 0423 includes several other radiofrequency ablation and endoscopy procedures, which do not include high-cost device systems like the cryoablation procedures described by CPT codes 50593 and 0340T. Although the commenter acknowledged that there is no violation of the 2 times rule, the commenter stated that the proposed geometric mean cost of CPT code 50593 is significantly higher than the proposed geometric mean cost of APC 0423. In addition, the commenter asserted that the cryoablation procedures described by CPT codes 50593 and 0340T are not clinically similar to other procedures assigned to APC 0423. The commenter further noted that less than half of claims used to establish the proposed geometric mean cost of CPT code 50593 were correctly coded, and did not include the device HCPCS code C2618 (Probe, cryoablation). The commenter recommended that CMS create a new Level III Percutaneous Abdominal and Biliary Procedures APC, and assign CPT codes 50593 and 0340T to this APC.

Response: We disagree with the commenter that the proposed geometric mean cost of CPT code 50593, which is $4,937.12 is significantly higher than the proposed geometric mean cost of APC 0423, which is $4,243.84. The claims data available for this final rule with comment period show a geometric mean cost of approximately $4,249 for APC 0423, and approximately $4,985 for CPT code 50593, which is based on 749 single frequency claims. The geometric mean cost of CPT code 50593 is the highest cost procedure assigned to APC 0423, but is well within a normal range of costs associated with the other procedures assigned to this APC, and does not approach the 2 times limit that would create a violation of the 2 times rule. CPT code 0340T has no claims at this time because the procedure code became effective beginning in CY 2014. Therefore, we do not believe that a new Level III Percutaneous Abdominal and Biliary Procedures APC is warranted based on the geometric mean cost of CPT code 50593 relative to the geometric mean cost of APC 0423. We also remind the commenter that we typically do not investigate allegations of hospital cost underreporting or incorrect coding. As we stated in the CY 2011 OPPS/ASC final rule with comment period, “Beyond our standard OPPS trimming methodology . . . that we apply to those claims that have passed various types of claims processing edits, it is not our general policy to judge the accuracy of hospital coding and charging for purposes of ratesetting” (75 FR 71838). We believe that the cryoablation procedures described by CPT codes 50593 and 0340T are clinically similar to the other procedures assigned to APC 0423. Many of the procedures assigned to APC 0423 are ablative procedures, and all of the procedures assigned to this APC are abdominal or biliary. Therefore, we are finalizing the CY 2015 proposal, without modification, to continue to assign CPT codes 50593 and 0340T to APC 0423. We will specifically review the APC assignment of CPT code 0340T when claims data for this service become available.

4. Nervous System Services

a. Chemodenervation (APC 0206)

For CY 2015, we proposed to continue to assign CPT code 64616 (Chemodenervation of muscle(s); neck muscle(s), excluding muscles of the larynx, unilateral (eg, for cervical dystonia, spasmodic torticollis)) to APC 0204 (Level I Nerve Injections), with a proposed payment rate of approximately $218. We note that CPT code 64616 became effective January 1, 2014.

Comment: One commenter requested that CMS reassign CPT code 64616 from APC 0204 to APC 0206 (Level II Nerve Injections), which had a proposed payment rate of approximately $375. The commenter noted that this recommendation for APC reassignment was also submitted in response to the CY 2014 OPPS/ASC final rule with comment period. The commenter stated that APC 0206 is the APC that was assigned to CPT code 64613 (Chemodenervation of muscle(s); neck muscle(s) (eg, for spasmodic torticollis, spasmodic dysphonia), which is the predecessor code for CPT code 64616 in effect prior to January 1, 2014. Based on the commenter's analysis of the CY 2013 hospital outpatient claims data that was used for the CY 2015 OPPS/ASC proposed rule, the commenter believed that APC 0206 is the most appropriate APC assignment for CPT code 64616 based on the resource costs and clinical homogeneity of the predecessor code, CPT code 64613, in relation to the other procedures assigned to APC 0206.

Response: We reviewed the latest hospital outpatient claims data reporting the service described by predecessor code, CPT code 64613, and the replacement code, CPT code 64616. We acknowledge that the procedure described by CPT code 64616 was previously described by CPT code 64613. Based on our analysis of the latest hospital outpatient claims data available for this final rule with comment period, we agree with the commenter's recommendation that CPT code 64616 should be reassigned from APC 0204 to APC 0206 for the CY 2015 update. Specifically, we reviewed the latest hospital outpatient claims data for CPT code 64613 based on claims submitted by hospitals for dates of service between January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014. Our review of the latest claims data shows a geometric mean cost of approximately $322 for CPT code 64613 based on 11,177 single claims (out of 13,743 total claims), which is comparable to the geometric mean cost of approximately $387 for APC 0206. There are 21 procedures assigned to APC 0206 and the geometric mean costs for the procedures with significant claims data range approximately between $322 (for CPT code 64613) and $536 (for CPT code 62270). Based on these data, we agree with the commenter that APC 0206 is the most appropriate APC assignment for CPT code 64616 based on clinical homogeneity to the other procedures assigned to this APC and the resource similarity of the predecessor code, CPT code 64613, to the other procedures assigned to APC 0206.

Therefore, after consideration of the public comment we received, we are not adopting our proposal to continue to assign CPT code 64616 to APC 0204. Instead, we are reassigning CPT code 64616 to APC 0206 for the CY 2015 OPPS update. The final CY 2015 payment rate for CPT code 64616 can be found in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

b. Epidural Lysis (APCs 0203 and 0207)

For CY 2015, we proposed to continue to assign CPT code 62263 (Percutaneous lysis of epidural adhesions using solution injection (eg, hypertonic saline, enzyme) or mechanical means (eg, catheter) including radiologic localization (includes contrast when administered), multiple adhesiolysis sessions; 2 or more days) to APC 0203 (Level IV Nerve Injections), with a proposed payment rate of approximately $1,524. We also proposed to continue to assign CPT code 62264 (Percutaneous lysis of epidural adhesions using solution injection (eg, hypertonic saline, enzyme) or mechanical means (eg, catheter) including radiologic localization (includes contrast when administered), multiple adhesiolysis sessions; 1 day) to APC 0207 (Level III Nerve Injections), with a proposed payment rate of approximately $683.

Comment: One commenter opposed CMS' proposals to continue to assign CPT code 62263 to APC 0203 and CPT code 62264 to APC 0207. The commenter stated that CMS has overcompensated for the cost of providing the service described by CPT code 62263 by assigning the procedure to APC 0203. Alternatively, the commenter believed that CMS has undercompensated the cost of providing the service described by CPT code 62264 by assigning the procedure to APC 0207. The commenter stated that the resources utilized during the performance of the services described by both CPT codes are comparable, and each CPT code should be reassigned to a more appropriate APC to ensure adequate payment for the services provided.

Response: We reviewed the latest hospital outpatient claims data reporting services described by CPT codes 62263 and 62264 for dates of service between January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014. For CPT code 62263, our analysis of the claims data shows a geometric mean cost of approximately $1,215 based on 70 single claims (out of 88 total claims), which is comparable to the geometric mean cost of approximately $1,525 for APC 0203. For CPT code 62264, our analysis of the claims data shows a geometric mean cost of approximately $798 based on 1,971 single claims (out of 4,174 total claims), which is comparable to the geometric mean cost of approximately $697 for APC 0207. Therefore, we believe that the procedures described by CPT code 66263 and CPT code 62264 are appropriately assigned to APCs 0203 and 0207, respectively, based on clinical and resource similarities in relation to the other procedures assigned to these APCs. We remind the commenter that the OPPS is a system of averages, in which the costs of services, calculated from the most recent year's claims data, are weighted relative to the other services in the system, for that given year. Furthermore, as has been our practice since the implementation of the OPPS, we annually review all the items and services within an APC group to determine, with respect to comparability of the use of resources, any violations of the 2 times rule. In making this determination, we review our claims data and determine whether we need to make changes to the current APC assignments for the following year. We will reevaluate the APC assignment for CPT codes 62263 and 62264 for the CY 2016 OPPS rulemaking.

After consideration of the public comment that we received, we are finalizing our CY 2015 proposal, without modification, to continue to assign CPT code 62263 to APC 0203 and CPT code 62264 to APC 0207. The final CY 2015 payment rates for the two procedures can be found in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

c. Transcranial Magnetic Stimulation (TMS) Therapy (APC 0218)

Since July 2006, CPT codes have existed to describe Transcranial Magnetic Stimulation (TMS) therapy. The initial CPT codes were temporary Category III CPT codes, specifically, CPT codes 0160T (Therapeutic repetitive transcranial magnetic stimulation treatment planning) and 0161T (Therapeutic repetitive transcranial magnetic stimulation treatment delivery and management, per session), that became effective July 1, 2006. For CY 2011, the CPT Editorial Panel deleted CPT code 0160T on December 31, 2010, and replaced this procedure code with CPT code 90867 (Therapeutic repetitive transcranial magnetic stimulation (tms) treatment; initial, including cortical mapping, motor threshold determination, delivery and management), effective January 1, 2011. Similarly, CPT code 0161T was deleted on December 31, 2010, and was replaced with CPT code 90868 (Therapeutic repetitive transcranial magnetic stimulation (tms) treatment; subsequent delivery and management, per session), effective January 1, 2011. In CY 2012, the CPT Editorial Panel established an additional TMS therapy code, specifically, CPT code 90869 (Therapeutic repetitive transcranial magnetic stimulation (tms) treatment; subsequent motor threshold re-determination with delivery and management), that became effective January 1, 2012.

For the CY 2014 update, CPT codes 90867 and 90868 were assigned to APC 0216 (Level II Nerve and Muscle Tests), with a payment rate of $216.79, and CPT code 90869 was assigned to APC 0218 (Level II Nerve and Muscle Tests), with a payment rate of $127.75. For the CY 2015 update, as listed in Addendum B to the CY 2015 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 90869 to APC 0218, with a proposed payment rate of approximately $160. In addition, we proposed to reassign CPT codes 90867 and 90868 from APC 0216 to APC 0218, the same APC assignment for CPT code 90869.

Comment: One commenter disagreed with CMS' proposal to reassign CPT codes 90867 and 90868 from APC 0216 to APC 0218, and to continue to assign CPT code 90869 to APC 0218. The commenter stated that the proposed addition of certain nerve conduction study codes to APC 0218 for the CY 2015 update has negatively affected the proposed payment rate for APC 0218. The commenter believed that this proposal resulted in a decreased payment rate of approximately $160 for APC 0218, compared to the CY 2014 payment rate of approximately $217; thereby effectuating a potential financial loss for the provider with each treatment because a typical course of TMS therapy includes a total of 25 daily treatment sessions. In addition, the commenter stated that assigning CPT codes 90867, 90868, and 90869 to APC 0218 is clinically inappropriate because these CPT codes describe therapy services, whereas the other procedure codes assigned to APC 0218 describe diagnostic tests (simple nerve conduction and electromyography studies). To correct the perceived clinical and resource discrepancies, the commenter suggested that CMS establish a new APC specifically for the TMS therapy codes, and that CMS title the APC “Transcranial Magnetic Stimulation.”

Response: We believe that APC 0218 is the most appropriate APC assignment for the three TMS therapy CPT codes. The CPT codes describing the procedures assigned to APC 0218 all describe noninvasive services that affect the nervous system. Based on the latest hospital outpatient claims data used for this final rule with comment period, our analysis revealed that the resources associated with providing the services described by CPT codes 90867, 90868, and 90869 are comparable to the other services assigned to APC 0218. Specifically, based on CY 2013 claims data used for this final rule with comment period, the geometric mean cost for CPT code 90867 is approximately $210 based on 72 single claims (out of 72 total claims), the geometric mean cost for CPT code 90868 is approximately $201 based on 2,513 single claims (out of 2,516 total claims), and the geometric mean cost for CPT code 90869 is approximately $194 based on 28 single claims (out of 30 total claims). In addition, a review of the procedures assigned to APC 0218 shows that the range of geometric mean cost for the services assigned to APC 0218 is approximately between $95 (for CPT code 95937) and $327 (for CPT code 95875), which is comparable to the geometric mean costs for all three TMS therapy CPT codes. Based on the clinical and resource similarities in relation to the other procedures currently assigned to APC 0218, we believe that the TMS therapy codes would be appropriately assigned to APC 0218.

After consideration of the public comment we received, we are finalizing our CY 2015 proposal, without modification, to reassign CPT codes 90867 and 90868 from APC 0216 to APC 0218, and to continue to assign CPT code 90869 to APC 0218 for CY 2015.

5. Ocular Services: Ophthalmic Procedures and Services

For the CY 2015 OPPS update, based on our evaluation of the latest hospital outpatient claims data, we proposed to restructure all of the ophthalmic APCs to better reflect the costs and clinical characteristics of the procedures within each APC. This proposed restructuring resulted in the use of 13 APCs for the ophthalmology-related procedures for the CY 2015 OPPS update, as compared to the 24 APCs used for the CY 2014 OPPS update. We believe that this major restructuring and consolidation of APCs more appropriately categorizes all of the ophthalmology-related procedures and services within an APC group, such that the services within each newly-configured APC are more comparable clinically and with respect to resource use. Tables 19 and 20 in the proposed rule showed the current CY 2014 and proposed CY 2015 ophthalmology-related APCs. Specifically, Table 19 of the CY 2015 OPPS/ASC proposed rule (79 FR 40981) showed the CY 2014 ophthalmology-related APCs and status indicator assignments, while Table 20 showed the proposed restructured ophthalmology-related APCs and their status indicator assignments for CY 2015 (79 FR 40981 through 40982). The proposed payment rates for the ophthalmology-related APCs listed in Table 20 were listed in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site).

In the CY 2015 OPPS/ASC proposed rule, we invited public comments on this proposal.

Comment: Several commenters stated that the proposed restructuring and consolidation of the CY 2015 ophthalmic APC is substantial, and requested that CMS not finalize this proposal. The commenters also stated that CMS has not provided information regarding the criteria used to differentiate the various levels of treatments or procedures for the restructured 13 ophthalmic APCs. The commenters stated that the configuration and structure of the existing 24 APCs do not appear to be inconsistent with the requirements for clinical coherence or resource use. The commenters disagreed with CMS' proposal to establish broader categories within these APCs, and indicated that such a change in APC groupings has the potential to aggregate procedures that vary significantly in resource costs and clinical coherence. In addition, the commenters stated that some of the procedures in the restructured ophthalmic APCs appear to be inappropriately categorized. For example, the restructuring of the ophthalmic APCs has resulted in the consolidation of cornea procedures within one of the restructured APCs, and the procedures are no longer assigned to a separate classification grouping based on the previous APC configurations. The commenters pointed out that the major cornea transplant codes have been reassigned to restructured APC 0673 (Level III Intraocular Procedures), along with procedures that treat glaucoma and retina conditions. The commenters further explained that the equipment used for these services when performed in alternative settings and the depths of the condition of the eye and the appropriate treatments vastly differ, as does the time and other resources necessary to perform these types of surgeries. As a result, the commenters believed that additional APCs are needed to appropriately categorize ophthalmic procedures based on clinical homogeneity and resource consumption. The commenters also requested the opportunity to work with CMS to make appropriate adjustments to the restructured ophthalmic APC groupings to ensure clinical coherence and to minimize payment variances for these procedures.

Response: Consistent with CMS' statutory requirement under section 1833(t)(9) of the Act to review and revise APC assignments annually and to construct the most appropriate APC groupings, as well as, to the extent desirable, correct any 2 times rule violations, we evaluated the resource consumption and clinical coherence associated with the ophthalmic APCs for the CY 2015 update. Based on our analysis of the latest hospital outpatient claims data used for this final rule with comment period and understanding of the clinical aspects of these procedures, we believe that the restructured and consolidated ophthalmic APCs more appropriately group these ophthalmology-related services according to their current resource costs, as well as their clinical characteristics. The former ophthalmic procedures APC structure unnecessarily separated, from a clinical and resource similarity prospective, ophthalmic procedures based on disease state or traditional subdivisions within ophthalmic surgery. APC groupings were never intended to precisely track traditional ophthalmology subspecialty divisions, such as cornea surgery, retina surgery, or glaucoma surgery, as the commenters suggested. We also believe that larger APC groupings are more consistent with a prospective payment system than smaller groupings. We note that we regularly accept meetings from interested parties throughout the year, and we encourage stakeholders to continue a dialogue with us during the rulemaking cycle and throughout the year on our continuing efforts to improve the coherence of the OPPS APC groupings.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to restructure and consolidate the ophthalmic APCs. Table 22 below shows the final ophthalmology-related APCs and their status indicator assignments for CY 2015. The final payment rates for these APCs can be found in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site). We also remind the public that we review the OPPS and APC structures and assignments annually and may propose additional restructurings of the APCs and procedure code assignments for other clinical areas and APC groupings in CY 2016 and future rulemakings.

6. Imaging

a. Echocardiography Services Without Contrast (APCs 0269, 0270, and 0697)

We proposed to continue to use for the CY 2015 update the three APCs that describe echocardiography services without contrast, APC 0697 (Level I Echocardiogram Without Contrast), APC 0269 (Level II Echocardiogram Without Contrast), and APC 0270 (Level III Echocardiogram Without Contrast), and to maintain the CY 2014 HCPCS code assignments for these APCs.

Comment: One commenter requested that CMS reexamine the services assigned to the APCs for echocardiography services without contrast. In particular, the commenter requested that CMS reassign CPT codes 76825 (Echocardiography, fetal, cardiovascular system, real time with image documentation (2D), with or without M-mode recording); and 76826 (Echocardiography, fetal, cardiovascular system, real time with image documentation (2D), with or without M-mode recording; follow-up or repeat study) from APC 0697 to APC 0269 based on the clinical and resource similarities to the other echocardiography procedures assigned to APC 0269.

Response: Based on our review of the latest hospital outpatient claims data available for this final rule with comment period, we agree with the commenter that CPT codes 76825 and 76826 should be reassigned to APC 0269, which more appropriately supports the clinical and resource homogeneity of the APCs rather than reassigning the procedure codes to APC 0697. The geometric mean cost of CPT code 76825 is approximately $384, and the geometric mean cost of CPT code 76826 is approximately $285. These costs are sufficiently close to the geometric mean cost of CPT code 93306 (Echocardiography, transthoracic, real time with image documentation (2D), includes M-mode recording, when performed, complete, with spectral Doppler echocardiography, and with color flow Doppler echocardiography), which is approximately $430. CPT code 93306 comprises 93 percent of the service volume within APC 0269. By reassigning CPT codes 76825 and 76826 to APC 0269, only one procedure code would remain in APC 0697. Therefore, we also are reassigning CPT code 93308 (Echocardiography, transthoracic, real time with image documentation (2D), includes M-mode recording, when performed, follow-up or limited study) from APC 0697 to APC 0267 (Level III Diagnostic and Screening Ultrasound) for CY 2015. We are deleting APC 0697 for the CY 2015 OPPS update because all of the procedure codes previously assigned to APC 0697 have been reassigned to more appropriate APCs to ensure adequate payment for the services provided and the clinical and resource homogeneity of APCs.

b. Optical Coherence Tomography (OCT) Procedures of the Breast

For the July 2014 quarterly update, the CPT Editorial Panel established four new Category III CPT codes to describe optical coherence tomography (OCT) procedures of the breast: CPT code 0351T (Optical coherence tomography of breast or axillary lymph node, excised tissue, each specimen; real time intraoperative); CPT code 0352T (Optical coherence tomography of breast or axillary lymph node, excised tissue, each specimen; interpretation and report, real time or referred); CPT code 0353T (Optical coherence tomography of breast, surgical cavity; real time intraoperative); and CPT code 0354T (Optical coherence tomography of breast, surgical cavity; interpretation and report, real time or referred). As listed in Table 17 of the CY 2015 OPPS/ASC proposed rule (79 FR 40976), we proposed to assign CPT codes 0351T and 0353T to OPPS status indicator “N” (paid under OPPS; payment is packaged into payment for other services; there is no separate APC payment), and CPT codes 0352T and 0354T to OPPS status indicator “B” (codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x)).

Comment: Some commenters expressed concern regarding CMS' proposal to assign CPT codes 0351T and 0353T to OPPS status indicator “N” and noted that both procedures describe independent, unique services and should be assigned to specific APCs. The commenters recommended assigning CPT codes 0351T and 0353T to any one of the following APCs: APC 0028 (Level I Breast and Skin Surgery), which had a proposed payment rate of approximately $2,176; APC 0029 (Level II Breast and Skin Surgery), which had a proposed payment rate of approximately $3,018; or APC 0030 (Level III Breast and Skin Surgery), which had a proposed payment rate of approximately $4,150.

Response: Consistent with our packaging policy for intraoperative procedures, we proposed to assign CPT codes 0351T and 0353T to OPPS status indicator “N” because both procedure codes describe supportive dependent services that are performed during independent procedures. As clarified in the CY 2008 OPPS final rule with comment period (72 FR 66627), we define “intraoperative” procedures as services that are provided during and, therefore, on the same date of service as another procedure that is separately payable under the OPPS. We further define intraoperative as services that support the performance of an independent procedure and are provided in the same operative session as the independent procedure. Both of the procedures described by CPT codes 0351T and 0353T must always be performed in conjunction with another procedure; specifically, the surgical procedure is performed followed by the breast OCT to improve the surgical outcome. We believe that these procedure codes clearly describe services that conform to the definition of “intraoperative” procedures. For further information on our policy for intraoperative services under the hospital OPPS, we refer readers to the CY 2008 OPPS final rule with comment period (72 FR 66627 through 66630).

In summary, we believe that CPT codes 0351T and 0353T are procedures that support the performance of an independent procedure and are provided in the same operative session as the independent procedure. Specifically, we believe that both procedures are provided during and, therefore, on the same date of service as another procedure that is separately payable under the OPPS. In addition, we believe that CPT codes 0351T and 0353T are always integral to, and dependent upon, the independent procedure that they support. Therefore, payment for these services will be packaged because the procedures would generally be performed on the same date as another procedure that is separately payable under the OPPS. After consideration of the public comments we received, we are finalizing our proposals to assign CPT codes 0351T and 0353T to OPPS status indicator “N” and CPT codes 0352T and 0354T to OPPS status indicator “B” for CY 2015.

c. Parathyroid Planar Imaging (APCs 0263, 0317, 0406, and 0414)

For CY 2015, we proposed to assign CPT code 78071 (Parathyroid planar imaging (including subtraction, when performed); with tomographic (SPECT)) to APC 0263 (Level I Miscellaneous Radiology Procedures), for which we proposed a CY 2015 geometric mean cost of approximately $357. We also proposed to assign CPT code 78072 (Parathyroid planar imaging (including subtraction, when performed); with tomographic (SPECT), and concurrently acquired computed tomography (CT) for anatomical localization) to APC 0317 (Level II Miscellaneous Radiology Procedures), for which we proposed a CY 2015 geometric mean cost of approximately $577. In addition, we proposed to change the status indicators for CPT codes 78071 and 78072 from “X” to “S.”

Comment: Commenters agreed with CMS' proposal to assign CPT codes 78071 and 78072 to status indicator “S,” but opposed the proposal to assign CPT code 78071 to APC 0263. The commenters believed that CPT codes 78071 and 78072 should be assigned to the nuclear medicine APCs instead of the radiology APCs because the nuclear medicine APCs are more representative of the resources utilized in the performance of these procedures. The commenters suggested that CMS assign CPT codes 78071 and 78072 to either APC 0414 (Level II Tumor/Infection Imaging) or 0408 (Level III Tumor/Infection Imaging).

Response: We agree with the commenters that the resources utilized in the performance of the procedures described by CPT codes 78071 and 78072 are more comparable to the procedures assigned to the nuclear medicine APCs. However, we do not agree with the commenters that CPT codes 78071 and 78072 are more appropriately assigned to either APC 0408 or APC 0414. We believe that APC 0406 (Level I Tumor/Infection Imaging) is the most appropriate APC assignment for CPT codes 78071 and 78072 because the procedures currently assigned to APC 0406 are similar to the procedures described by CPT codes 78071 and 78072 in clinical nature and resource utilization. The final CY 2015 APC geometric mean costs of approximately $362 for CPT code 78071 and approximately $427 for CPT code 78072 are similar to the geometric mean costs of the significant procedures assigned to APC 0406, which range between approximately $307 and approximately $427.

After consideration of the public comments we received, we are not finalizing our CY 2015 proposal to assign CPT codes 78071 and 78072 to APCs 0263 and 0317, respectively. Instead, based on consideration of the public comments we received, for CY 2015, we are assigning CPT codes 78071 and 78072 to APC 0406, which has a final CY 2015 APC geometric mean cost of approximately $391.

7. Radiology Oncology

a. Proton Beam Therapy and Magnetoencephalography (MEG) Services (APCs 0065, 0412, 0446, 0664, and 0667)

In the CY 2015 OPPS/ASC proposed rule (79 FR 40989), we proposed several changes to the radiation therapy APCs for CY 2015. To correct a violation of the 2 times rule within APC 0664 (Level I Proton Beam Radiation Therapy), we proposed to reassign CPT code 77520 from APC 0664 to APC 0412 (Level III Radiation Therapy). We believe that CPT code 77520 is both clinically similar and comparable in geometric mean cost to the other services assigned to APC 0412. We also proposed to reassign CPT code 77522 from APC 0664 to proposed newly renamed APC 0667 (Level IV Radiation Therapy) because we believe that the procedure described by CPT code 77522 is both clinically similar and comparable in geometric mean cost to the other services assigned to APC 0667. Because there would be no other codes assigned to APC 0664 if these proposed reassignments are finalized, we also proposed to delete APC 0664 for CY 2015 (79 FR 40989). In addition, we proposed to rename existing APC 0667 to “Level IV Radiation Therapy” (instead of using the existing title of “Level II Proton Beam Radiation Therapy”), to make the title consistent with other APCs in the radiation therapy series. In conjunction with this proposed change, we proposed to reassign the following three services to proposed newly renamed APC 0667 for CY 2015: CPT codes 77522, 77523, and 77525.

Comment: Commenters generally supported CMS' proposals regarding the radiation therapy APCs, with one exception. The commenters supported the proposal to reassign CPT code 77520 from APC 0664 to APC 0412. However, the commenters expressed concern regarding the proposal to reassign CPT code 77522 from APC 0664 to proposed newly renamed APC 0667. Commenters disagreed with CMS' determination that the procedure described by CPT code 77522 is clinically similar and comparable in geometric mean cost to the other services assigned to APC 0667 in 2014, specifically the procedures described by CPT codes 77523 and 77525. The commenters recommended that CMS maintain the assignment of CPT code 77522 to APC 0664 and not delete the classification grouping, which would result in CPT code 77522 being the only service assigned to this APC.

Response: We appreciate the commenters' support for our proposals regarding the radiation therapy APCs, specifically our proposal to reassign CPT code 77520 from APC 0664 to APC 0412. In regard to the proposed reassignment of CPT code 77522 from APC 0664 to APC 0667, we disagree with the commenters for the following reasons. The three CPT codes, 77522, 77523, and 77525, are similar clinically. All three of these CPT codes describe procedures that involve proton beam therapy delivery services with a continuum of complexity. The procedure described by CPT code 77520 is the least complex. The procedure described by CPT code 77522 is more complex than the procedure described by CPT code 77520, and the procedure described by CPT code 77523 is more complex than the procedure described by CPT code 77522. The procedure described by CPT code 77525 is the most complex procedure of the series proposed to be reassigned to APC 0667. We proposed to reassign CPT code 77520 from APC 0664 to APC 0412 because of the resource comparability with respect to the other procedures involving proton beam therapy delivery services assigned to APC 0412, not based on the clinical dissimilarity with respect to the procedures assigned to APC 0664. In regard to the remaining three procedures involving proton beam therapy delivery services (the procedures described by CPT codes 77522, 77523, and 77525), we believe that these procedures are clinically similar, but each has a slightly varying level of complexity relative to the others. The proposed configuration of APC 0667 only contains the three proton beam therapy delivery services described by CPT codes 77522, 77523, and 77525, and does not include any other service codes. APC 0667 is the most clinically homogeneous APC under the OPPS to assign these services that would ensure adequate payment, with the exception of single service APCs. With regard to the resource comparability of the procedures described by CPT codes 77522, 77523 and 77525, the lowest geometric mean cost among these procedures is associated with the procedure described by CPT code 77522, which is approximately $1,033, and the highest geometric mean cost is associated with the procedure described by CPT code 77525, which is approximately $1,244. The statutory prong that dictates when resources become dissimilar between two services is the 2 times rule. Based on the limitations imposed by the 2 times rule, the highest cost significant service assigned to an APC cannot exceed the lowest cost by greater than two times. In this case, the geometric mean cost of the procedure described by CPT code 77525 is only 1.2 times the geometric mean cost of the procedure described by CPT code 77522, which is well within the 2 times limit. Therefore, we determined that the resource similarity among the services proposed to be reassigned to APC 0667 is comparable. In addition, we generally prefer to assign procedures to the most appropriate APC that would ensure adequate payment, as opposed to using single-service APCs, which the commenters recommended for the procedure described by CPT code 77522, unless no other reasonable options exist, because single-service APCs are more consistent with a fee schedule than a prospective payment system.

Therefore, we are finalizing the following proposals affecting the proton beam therapy services for CY 2015: (1) We are reassigning CPT code 77520 from APC 0664 to APC 0412; (2) we are reassigning CPT code 77522 from 0664 to APC 0667;(3) we are reassigning CPT codes 77523 and 77525 to APC 0667; (4) we are deleting APC 0664; and (5) we are renaming APC 0667 to “Level IV Radiation Therapy.”

In the CY 2015 OPPS/ASC proposed rule (79 FR 40989), we also proposed to delete APC 0065 (IORT, MRgFUS, and MEG) because we proposed to reassign the services assigned to this APC to more appropriate APCs based on clinical similarities and comparable geometric mean cost. With respect to MEG services, we proposed to reassign the MEG CPT codes 95965 and 95966 from APC 0065 to APC 0446 (Level IV Nerve and Muscle Services), which would only contain MEG services.

Comment: One commenter applauded CMS for the establishment of new APC 0446, the APC to which the MEG procedures are proposed to be reassigned. The commenter believed that the reassignment of CPT codes 95965 and 95966 would produce more accurate data related to MEG usage. Alternatively, one commenter expressed concern that the current proposal does not adequately cover the costs associated with providing MEG services, and urged CMS to work with hospitals and other stakeholders to ensure that HOPDs submit claims correctly to capture the full costs of providing these services.

Response: Based on our analysis of the latest hospital outpatient claims data used for this final rule with comment period, we believe that the establishment of APC 0446 is necessary to ensure clinical and resource homogeneity and adequate payment for MEG services. Therefore, after consideration of the public comments we received, we are finalizing our CY 2015 proposal without modification. As we do every year, we will review our claims data for these services for the CY 2016 OPPS rulemaking.

b. Stereotactic Radiosurgery Services (SRS) and Magnetic Resonance Image Guided Focused Ultrasound (MRgFUS) (APC 0066)

For CY 2015, for SRS, we proposed to continue to assign CPT code 77373 (Stereotactic body radiation therapy, treatment delivery, per fraction to 1 or more lesions, including image guidance, entire course not to exceed 5 fractions) to APC 0066, with a proposed payment rate of approximately $1,893. We also proposed to rename APC 0066 from “Level I Stereotactic Radiosurgery” to “Level V Radiation Therapy” (79 FR 40989).

In addition, we proposed to continue to assign CPT codes 77371 (Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s) consisting of 1 session; multi-source cobalt 60 based) and 77372 (Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s) consisting of 1 session; linear accelerator based) to APC 0067 (Single Session Cranial Stereotactic Radiosurgery), with a proposed payment rate of approximately $9,768. We also proposed to rename APC 0067 from “Level II Stereotactic Radiosurgery” to “Single Session Cranial Stereotactic Radiosurgery,” which we proposed as a C-APC. For further discussion regarding C-APCs and SRS CPT codes 77371 and 77372 assigned to C-APC 0067, we refer readers to section II.A.2.e. of this final rule with comment period.

Comment: Several commenters requested that CMS reinstate the use of SRS G-codes because the SRS CPT codes do not accurately describe current clinical practices or adequately cover the cost of providing fractionated linac-based SRS.

Response: For the CY 2014 update, we finalized our proposal to adopt the full range of SRS CPT codes and to discontinue the use of the remaining SRS G-codes under the OPPS. HOPDs must use and report SRS CPT codes 77371, 77372, and 77371 to describe the delivery of stereotactic radiosurgery treatment services under the OPPS. For a full discussion of this issue, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74989 through 749995). In addition, for the CY 2015 update, HCPCS code G0173 (Linear accelerator based stereotactic radiosurgery, complete course of therapy in one session), and HCPCS code G0251 ((Linear accelerator based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, maximum five sessions per course of treatment)) will be deleted, effective December 31, 2014, because these codes will no longer be used under the MPFS. However, HCPCS code G0339 (Image-guided robotic linear accelerator-based stereotactic radiosurgery, complete course of therapy in one session or first session of fractionated treatment) and HCPCS code G0340 (Image-guided robotic linear accelerator-based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, second through fifth sessions, maximum five sessions per course of treatment) will continue to be used under the MPFS and, therefore, will continue to be active codes for the CY 2015 MPFS update. However, HCPCS codes G0339 and G0340 will not be active codes for the CY 2015 OPPS update. Instead, HOPDs must use and report SRS CPT codes 77371, 77372, and 77373 to describe the delivery of stereotactic radiosurgery treatment services under the OPPS.

Comment: Many commenters requested that CMS reassign HCPCS code G0251 to a different APC to resolve a violation of the 2 times rule within APC 0066. Several commenters recommended excluding the claims data for HCPCS code G0251 prior to determining the final payment rate for APC 0066. The commenters indicated that HCPCS code G0251 is used most often for fractionated cranial SRS, not for stereotactic body radiation therapy (SBRT), as described by CPT code 77373.

Response: Both HCPCS code G0251 and CPT code 77373 describe fractionated cranial stereotactic radiosurgery services that involve between 2 and 5 fractions of treatment. Single-session cranial SRS are reported using either CPT code 77371 or 77372. Based on the code descriptor, we believe that the service described by HCPCS code G0251 is appropriately crosswalked to the service described by CPT code 77373. We explained the code crosswalk in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74991).

We note that, under the OPPS, we may make exceptions to the 2 times rule in unusual cases, such as low-volume items or services. For the CY 2015 update (taking into consideration the APC changes that we proposed for CY 2015), we reviewed all of the APCs to determine which APCs would not satisfy the requirement of the 2 times rule. In the case of APC 0066, we believe that it is necessary to make an exception to the 2 times rule for this APC because the three G-codes that caused the violation of the 2 times rule to occur have been crosswalked to CPT code 77373. We expect to have claims data for only CPT code 77373 available for the CY 2016 rulemaking. At that time, we will reevaluate the APC assignments for all of the SRS CPT codes.

In addition to our proposal to continue to assign SRS CPT code 77373 to APC 0066, we proposed to assign all four of the MRgFUS procedures to APC 0066 because in the past MRgFUS services were assigned to the same APC as some of the former SRS G-codes for fractionated linac-based SRS. Specifically, for CY 2015, we proposed to reassign HCPCS codes 0071T (Focused ultrasound ablation of uterine leiomyomata, including mr guidance; total leiomyomata volume less than 200 cc of tissue), 0072T (Focused ultrasound ablation of uterine leiomyomata, including mr guidance; total leiomyomata volume greater or equal to 200 cc of tissue), C9734 (Focused ultrasound ablation/therapeutic intervention, other than uterine leiomyomata, with magnetic resonance (mr) guidance), and 0301T (Destruction/reduction of malignant breast tumor with externally applied focused microwave, including interstitial placement of disposable catheter with combined temperature monitoring probe and microwave focusing sensocatheter under ultrasound thermotherapy guidance) from APC 0065 (IORT, MRgFUS, and MEG) to APC 0066. We proposed to delete APC 0065 for CY 2015.

Comment: Several commenters stated that the proposed payment rate for APC 0066 of approximately $1,893 does not adequately reflect the level of resources required to perform MRgFUS procedures. Instead, the commenters believed that the MRgFUS procedures are similar to the stereotactic radiosurgery procedures that are assigned to C-APC 0067 in terms of treatment set-up, delivery of radiation, and post-procedure recovery. The commenters further believed that the MRgFUS procedures would be more appropriately assigned to a C-APC from a clinical and resource perspective. The commenters explained that certain procedures are commonly reported in conjunction with MRgFUS procedures, similar to stereotactic radiosurgery procedures. Therefore, the commenters recommended that CMS reassign the MRgFUS procedures to C-APC 0067.

Response: CPT codes 0071T and 0072T became effective January 1, 2005. CPT code 0301T became effective January 1, 2012. HCPCS code C9734 became effective April 1, 2013. Currently, we do not have any single claims reporting any of the four MRgFUS procedures. However, because we are deleting APC 0065, we believe that reassigning these procedures to APC 0066 for the CY 2015 update is more appropriate because, in the past, MRgFUS services were assigned to the same APC as some of the former fractionated linac-based SRS G-codes. We also believe that the MRgFUS procedures are clinically dissimilar to single-session cranial SRS because MRgFUS procedures may involve more than one treatment session. However, we will review and consider the comments related to C-APC 0067 in a future annual update.

After consideration of the public comments we received, we are finalizing our proposal without modification. Specifically, for SRS CPT code 77373, we are finalizing our proposal to continue to assign this code to APC 0066 for the CY 2015 update. In addition, we are finalizing our proposal to reassign MRgFUS HCPCS codes 0071T, 0072T, 0301T, and C9734 from APC 0065 to APC 0066 for CY 2015. We are deleting APC 0065 for CY 2015. Because we are deleting APC 0065, we are renaming APC 0066 from “Level I Stereotactic Radiosurgery” to “Level V Radiation Therapy.” The final payment rates for SRS CPT code 77373 and MRgFUS HCPCS codes 0071T, 0072T, 0301T, and C9734 can be found in Addendum B to this final rule with comment period, which is available via the Internet on the CMS Web site.

8. Respiratory Services: Level II Endoscopy Lower Airway (APC 0415)

In the CY 2015 OPPS/ASC proposed rule, we proposed to continue the APC assignment of the procedure codes that have been historically assigned to APC 0415 (Level II Endoscopy Lower Airway). Commenters responding to the CY 2014 OPPS/ASC proposed rule had recommended that CMS split the procedure codes assigned to APC 0415 into two levels of lower airway endoscopy APCs. We did not split APC 0415 into two levels for CY 2014, as the commenters suggested, because the geometric mean costs would have been based on a relatively low volume of single frequency claims and would have potentially effectuated APC and cost volatility (78 FR 74996). In the CY 2015 OPPS/ASC proposed rule, we did not propose any changes to the composition of APC 0415. There were not any violations of the 2 times rule for the services assigned to APC 0415 based on claims data available for the proposed rule. The proposed geometric mean cost of APC 0415 was approximately $2,368.

Comment: Several commenters recommended that CMS create a Level III Lower Airway Endoscopy APC and assign the procedure codes currently assigned and proposed for continued assignment to APC 0415 to this newly created APC based on geometric mean costs, procedure complexity, and clinical similarity. Specifically, one commenter recommended that CMS assign CPT code 31647 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with balloon occlusion, when performed, assessment of air leak, airway sizing, and insertion of bronchial valve(s), initial lobe) to the recommended Level III APC. Another commenter recommended that CMS assign CPT code 31626 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with placement of fiducial markers, single or multiple) to the recommended Level III APC. One commenter recommended that seven specific procedure codes be assigned to the newly created Level III APC, namely: CPT codes 31634 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with balloon occlusion, with assessment of air leak, with administration of occlusive substance (eg, fibrin glue), if performed), 31638 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with revision of tracheal or bronchial stent inserted at previous session (includes tracheal/bronchial dilation as required)), 31626, 31631 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with placement of tracheal stent(s) (includes tracheal/bronchial dilation as required)), 31636 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with placement of bronchial stent(s) (includes tracheal/bronchial dilation as required), initial bronchus), 31660 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with bronchial thermoplasty, 1 lobe), and 31661 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with bronchial thermoplasty, 2 or more lobes). The commenters believed that a new Level III Lower Airway Endoscopy APC would more accurately reflect the costs of expensive lower airway procedures that utilize new technologies.

Response: We believe that there is considerable clinical similarity in regard to the procedures assigned to APC 0415. All of the procedures are lower airway bronchoscopy procedures and are generally clinically more complex than the lower airway endoscopy procedures assigned to APC 0076 (Level I Endoscopy Lower Airway). We do not believe that the range of costs for the significant procedures assigned to APC 0415 warrants the creation of a Level III lower airway endoscopy APC. The final rule geometric mean cost for APC 0415 is approximately $2,341. Several of the procedures that the commenters recommended for assignment to the recommended Level III APC have final rule geometric mean costs comparable to the geometric mean cost of APC 0415. For CY 2015, CPT code 31634 has a final geometric mean cost of approximately $1,539; CPT code 31638 has a final geometric mean cost of approximately $2,320; and CPT code 31626 has a final geometric mean cost of approximately $2,897. The other CPT codes recommended by the commenters have somewhat higher approximate geometric mean costs, namely: CPT code 31631 (which has a geometric mean cost of approximately $3,488), CPT code 31661 (which has a geometric mean cost of approximately $3,789), CPT code 31660 (which has a geometric mean cost of approximately $3,840), and CPT code 31636 (which has a geometric mean cost of approximately $4,090). Assigning any of these procedures to APC 0415 does not create a violation of the 2 times rule when compared to the geometric mean cost of the lowest significant procedure assigned to this APC, CPT code 31629 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with transbronchial needle aspiration biopsy(s), trachea, main stem and/or lobar bronchus(i)), which is approximately $2,186. Among the procedures discussed above, CPT codes 31626 and 31660 describe the only significant procedures assigned to this APC and are the procedures that we would normally apply the 2 times rule provisions. There are not any violations of the 2 times rule in regard to these procedures' costs. Although CPT code 31647 has a considerably higher geometric mean cost of approximately $5,373 based on 11 single frequency claims, it is not a significant procedure. We would not reassign this procedure to another APC based on a violation of the 2 times rule. Moreover, considering the final rule claims data for the five highest cost procedures assigned to APC 0415, the total number of single frequency claims is 649. The possible composition of a Level III lower airway endoscopy APC would still be based on a low volume of claims, similar to the low volume of claims in regard to the Level III lower airway endoscopy APC recommended by the commenters in CY 2014. As we stated in the CY 2014 OPPS/ASC final rule with comment period, a low-volume APC would contribute to the APC's cost volatility, which in turn contributes to payment volatility for the procedures assigned to the low-volume APC (78 FR 74996).

After consideration of the public comments we received regarding the composition of APC 0415, we are finalizing our proposal to continue the assignment of the procedure codes that have been historically assigned to APC 0415 for CY 2015. However, for CY 2016, we will explore possible changes to the lower airway endoscopy APCs as a part of our broader efforts to thoroughly review, revise, and consolidate APCs to improve both clinical and resource homogeneity. The CY 2015 final geometric mean cost of APC 0415 is approximately $2,341.

9. Other Services

a. Epidermal Autograft (APC 0327)

In the CY 2014 OPPS/ASC final rule with comment period, we assigned CPT code 15110 to APC 0329 (Level IV Skin Repair), with a payment rate of approximately $2,260. The payment rate for CPT code 15110 was derived from the latest hospital outpatient claims data used for the CY 2014 ratesetting, which showed a geometric mean cost of approximately $2,174 based on 10 single claims (out of 29 total claims).

As stated in section III.B. of this final rule with comment period, we review, on an annual basis, the APC assignments for all services and items paid under the OPPS. Analysis of the latest hospital outpatient claims data available for the CY 2015 OPPS/ASC proposed rule showed a geometric mean cost for CPT code 15110 of approximately $774 based on 90 single claims (out of 122 total claims). Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40987), we proposed to reassign CPT code 15110 from APC 0329 to APC 0327 (Level II Skin Procedures), which has a geometric mean cost of approximately $451. We believe that APC 0327 is the most appropriate APC assignment for CPT code 15110 when considering the similarities in relation to the other procedures assigned to this APC.

In addition, we proposed to revise the APC titles for the four skin repair APCs (79 FR 40987). Specifically, we proposed to rename APC 0326 from “Level I Skin Repair” to “Level I Skin Procedures,” APC 0327 from “Level II Skin Repair” to “Level II Skin Procedures,” APC 0328 from “Level III Skin Repair” to “Level III Skin Procedures,” and APC 0329 from “Level IV Skin Repair” to “Level IV Skin Procedures.”

Table 28 of the proposed rule (79 FR 40987) showed the long descriptor, as well as the proposed CY 2015 APC and status indicator assignment for CPT code 15110. The proposed CY 2015 payment rate for CPT code 15110 can be found in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site).

Comment: Several commenters requested that CMS reevaluate the claims data for CPT code 15110, and recommended that CMS not finalize the proposal to reassign the procedure code to APC 0327. The commenters stated that the procedure described by CPT code 15110 allows patients with chronic or non-healing wounds to recover much sooner and without the use of expensive surgical interventions, which has resulted in cost savings for hospitals, patients, and payers. Other commenters suggested that CMS reassign CPT code 15110 to APC 0328 (Level III Skin Procedures), which has a proposed CY 2015 payment rate of approximately $1,408. The commenters believed that APC 0328 has clinically similar procedures and is more comparable to the geometric mean costs of CPT code 15110. Another commenter believed that the low volume of claims data for CPT code 15110 is attributable to providers and hospitals miscoding the performance of the service by not including the cost of the device.

Response: We reviewed the historical claims data for CPT code 15110, dating back to CY 2008, which is the first year that claims data for this code became available. As listed in Table 23 below, for CY 2008 through CY 2013, the payment rate for CPT code 15110 has ranged between $288.30 and $393.38 based on a range of single claims between 3 and 8. In addition, for the CY 2014 update, which was based on hospital outpatient claims data that were submitted between January 1, 2012, and December 31, 2012, and processed on or before June 30, 2013, the payment rate for CPT code 15110 was significantly higher (approximately $2,260.46) based on 10 single claims. However, as has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. Based on the latest hospital outpatient claims data used for this final rule with comment period, our analysis does not support the continued assignment of CPT code 15110 to APC 0329, which is the APC to which the procedure was assigned during CY 2014, or the suggested APC 0328. We examined the latest hospital outpatient claims data for CPT code 15110 for dates of service between January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014. Our analysis of the claims data shows a geometric mean cost for CPT code 15110 of approximately $748 based on 127 single claims (out of 165 total claims). We do not believe that APC 0328 is the most appropriate APC assignment because the geometric mean cost for this APC is approximately $1,460, which is significantly higher than the geometric mean cost for CPT code 15110, which is approximately $748. Assigning CPT code 15110 to APC 0328 would result in an overpayment for the service provided. We believe that APC 0327 is the most appropriate APC assignment for CPT code 15110 based on clinical homogeneity to the other skin-related procedures assigned to this APC.

Further, based on our analysis of the CY 2013 hospital outpatient claims data used for this final rule with comment period, we are unable to determine whether hospitals are miscoding claims reporting this service. For all APCs whose payment rates are based upon relative payment weights, we note that the quality and accuracy of reported units and charges influence the geometric mean costs that are the basis for our payment rates, especially for low-volume items and services. Beyond our standard OPPS trimming methodology (described in section II.A.2. of this final rule with comment period) that we apply to those claims that have passed various types of claims processing edits, it is not our general policy to determine the accuracy of hospital coding and charging practices for purposes of ratesetting (75 FR 71838). We rely on hospitals to bill all HCPCS codes accurately in accordance with their code descriptors and CPT and CMS instructions, as applicable, and to report charges on claims and charges and costs on their Medicare hospital cost report appropriately. In addition, we do not specify the methodologies that hospitals must use to set charges for this or any other service.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to reassign CPT code 15110 to APC 0327 for CY 2015. The final payment rate for CPT code 15110 can be found in Addendum B to this final rule with comment period, which is available via the Internet on the CMS Web site.

b. Image-Guided Breast Biopsy Procedures and Image-Guided Abscess Drainage Procedures (APCs 0005 and 0007)

For the CY 2014 OPPS update, the AMA's CPT Editorial Panel deleted the image-guided breast biopsy CPT codes 19102 and 19103 and replaced these procedure codes with six new CPT codes that “bundled” payment for associated imaging services, effective January 1, 2014. As shown in Table 23 of the proposed rule (79 FR 40983), CPT codes 19102 and 19103 described percutaneous image-guided breast biopsies using specific devices. Specifically, CPT code 19102 described a breast biopsy performed using a core needle, and CPT code 19103 described a breast biopsy performed using either a vacuum-assisted or rotating device.

In CY 2013, to appropriately report the performance of an image-guided breast biopsy using a core needle, an automated vacuum-assisted device, or a rotating biopsy device, multiple procedure codes were required to identify the specific service performed. That is, a procedure code describing the device-related breast biopsy procedure was required to be reported in combination with the procedure code describing the localization device used during the procedures, as well as the specific image-guidance procedure codes describing the imaging service. Table 23 of the proposed rule showed how image-guided breast biopsy procedures were reported prior to CY 2014. Table 23 of the proposed rule also showed the CY 2013 OPPS status indicators, APC assignments, and payment rates for the breast biopsy procedure codes, the localization devices used during the procedures, and the specific image-guidance procedure codes describing the imaging service.

For the CY 2014 OPPS update, the AMA's CPT Editorial Panel grouped the multiple procedures that describe these imaging services into single comprehensive service codes; specifically, CPT codes 19081, 19082, 19083, 19084, 19085, and 19086. Table 24 of the proposed rule showed the six new CPT codes that replaced obsolete CPT codes 19102 and 19103. These comprehensive breast biopsy procedure codes are differentiated based on the use of specific imaging-guidance devices—specifically imaging services performed using stereotactic guidance, ultrasound guidance, or magnetic-resonance guidance.

As has been our practice since the implementation of the OPPS in 2000, we review all new procedure codes before assigning the codes to an APC. Consistent with our longstanding policy for the treatment of new codes, we assigned these new replacement CPT codes to interim APCs for CY 2014. Based on our understanding of the resources required to furnish the service as defined in the code descriptor, as well as input from our medical advisors, we assigned replacement CPT codes 19081, 19083, and 19085 to APC 0005 (Level II Needle Biopsy/Aspiration Except Bone Marrow) for the CY 2014 OPPS update. In addition, we assigned new CPT codes 19081, 19083, and 19085 to comment indicator “NI” in Addendum B to the CY 2014 OPPS/ASC final rule with comment period (which is available via the CMS Web site) to indicate that the codes were new with an interim APC assignment that was subject to public comment. We note that, for the CY 2014 OPPS update, we finalized our policy to package all add-on codes (except those for drug administration), effective January 1, 2014. Consequently, payment for replacement CPT codes 19082, 19084, and 19086, which describe add-on procedures, was packaged for CY 2014.

At the Panel's March 10, 2014 meeting, one presenter requested that CMS reassign comprehensive CPT codes 19081, 19083, and 19085 from APC 0005 (Level II Needle Biopsy/Aspiration Except Bone Marrow), which has a CY 2014 OPPS payment rate of $702.08, to APC 0037 (Level IV Needle Biopsy/Aspiration Except Bone Marrow), which has a CY 2014 OPPS payment rate of $1,223.25. The presenter indicated that it is inappropriate to combine all of the new replacement CPT codes into one APC without regard for the imaging modality or device used to perform the procedure. The presenter also requested that CMS maintain the historic assignment of the predecessor CPT codes cost data until claims data become available for the new comprehensive CPT codes. The Panel agreed with the presenter and recommended that CMS reassign the new replacement comprehensive CPT codes, as the presenter suggested.

In light of the public presentation, the Panel's recommendation, and our longstanding policy of reviewing, on an annual basis, the APC assignments for all services and items paid under the OPPS, we evaluated the geometric mean costs associated with all of the procedures assigned to the existing four needle biopsy APCs, specifically, APCs 0004 (Level I Needle Biopsy/Aspiration Except Bone Marrow), 0005, 0685 (Level III Needle Biopsy/Aspiration Except Bone Marrow), and 0037. In the CY 2015 OPPS/ASC proposed rule (79 FR 40984), based on our review of the latest hospital outpatient claims data available for the proposed rule, we proposed to reassign all of the procedures assigned to APCs 0685 and 0037 to either APC 0004 or APC 0005 based on clinical and resource homogeneity. If CMS finalizes this proposed revision, there would be no procedures assigned to APCs 0685 or 0037. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40984), we proposed to delete APCs 0685 and 0037 for CY 2015.

Consequently, for the CY 2015 OPPS update, we proposed to only use two needle biopsy APCs, specifically, APCs 0004 and 0005. The proposed reassignment of all of the procedures assigned to APCs 0685 and 0037 results in increased payment rates for both APCs 0004 and 0005. For CY 2015, the proposed payment rate for APC 0004 is approximately $494, which is 20 percent higher than the CY 2014 OPPS payment rate of approximately $411. Similarly, the proposed payment rate for APC 0005 is approximately $1,062, which is 51 percent higher than the CY 2014 OPPS payment rate of approximately $702. Therefore, we proposed to continue to assign CPT codes 19081, 19083, and 19085 to APC 0005 for the CY 2015 OPPS update (79 FR 40985). In addition, we proposed to continue to package payment for add-on CPT codes 19082, 19084, and 19086 under the OPPS for CY 2015, consistent with our packaging policy for add-on codes that was implemented on January 1, 2014. Because we proposed to delete APC 0037 we believe that the proposed increased payment rate for APC 0005 is consistent with the Panel's recommendation to reassign CPT codes 19081, 19083, and 19085 to an appropriate APC based on resource utilization and clinical coherence.

Comment: Commenters supported CMS' proposal to continue to assign CPT codes 19081, 19083, and 19085 to APC 0005. The commenters stated that the assignment of these CPT codes to APC 0005 is clinically coherent and more accurately captures the resource cost associated with providing these services when compared to the CY 2014 APC assignment.

Response: We appreciate the commenters' support.

Comment: Some commenters expressed concern regarding the inadequate payment for ancillary services associated with multiple biopsies that may be performed on the same date of service. The commenters indicated that patients sometimes present with multiple lesions, which requires a biopsy of each lesion. According to the commenters, prior to the establishment of the comprehensive CY 2014 breast biopsy CPT codes, hospitals would report each biopsy, imaging guidance, and marker or localization placements separately. The commenters requested that CMS provide guidance on how to report multiple biopsies performed on the same date of service.

Response: We expect hospitals to report the performance of breast biopsies using the comprehensive breast biopsy CPT codes, consistent with the latest CPT coding guidelines. As stated in the CY 2014 CPT code book, image-guided breast biopsies, including the placement of localization devices when performed, are reported using the comprehensive breast biopsy CPT codes 19081 through 19086. Image-guided placement of localization devices without the performance of a biopsy are required to be reported using CPT codes 19281 through 19288. In addition, when more than one biopsy is performed using the same imaging modality, hospitals are required to report each biopsy using an add-on code. However, if more than one biopsy is performed using different imaging modalities, hospitals are required to report a separate primary code for each additional imaging modality.

We note that it is extremely important that hospitals use all of the required HCPCS codes to report the performance of all services they furnish, consistent with the code descriptors, CPT and/or CMS instructions, and correct coding principles, whether payment for the services is made separately or packaged. The accuracy of the OPPS payment rates depends on the quality and completeness of the claims data that hospitals submit for the services they furnish to Medicare beneficiaries.

After consideration of the public comments we received, we are finalizing our proposal to continue to assign CPT codes 19081, 19083, and 19085 to APC 0005 for CY 2015. In addition, we are finalizing our proposal to continue to package payment for add-on CPT codes 19082, 19084, and 19086 under the OPPS for CY 2015, consistent with our packaging policy for add-on codes that was implemented on January 1, 2014. Furthermore, we are finalizing our proposal to delete APC 0037 because we believe that the proposed increased payment rate for APC 0005 is consistent with the Panel's recommendation to reassign CPT codes 19081, 19083, and 19085 to an appropriate APC based on resource utilization and clinical coherence. Table 24 below shows the final status indicators, APC assignments, and payment rates for the image-guided breast biopsy CPT codes 19081 through 19086.

In addition to the proposal to maintain the APC assignment of the breast biopsy comprehensive CPT codes to APC 0005, we also discussed in the CY 2015 OPPS/ASC proposed rule our proposal to reassign CPT code 10030 from APC 0006 (Level I Incision Drainage) to APC 0007 (Level II Incision and Drainage). We note that, for the CY 2014 OPPS update, the AMA's CPT Editorial Panel established CPT code 10030 to report the bundled service of image-guided fluid collection drainage by catheter for percutaneous soft tissue, and CPT code 49407 to report the bundled service of image-guided fluid collection drainage by catheter for peritoneal, retroperitoneal, transvaginal or transrectal collections, effective January 1, 2014. As shown in Table 25 of the CY 2015 OPPS/ASC proposed rule, which showed the long descriptors for CPT codes 10030 and 49407, and as listed in Addendum B to the CY 2014 OPPS/ASC final rule with comment period, we assigned CPT code 10030 to APC 0006, with a payment rate of $159.66 and CPT code 49407 to APC 0685, with a payment rate of $757.76. As listed in Addendum B to the CY 2014 OPPS/ASC final rule with comment period, both procedure codes were assigned to comment indicator “NI” to indicate that the codes were new codes and assigned interim APC and status indicator assignments that were subject to public comment.

At the Panel's March 10, 2014 meeting, one presenter requested that CMS reassign CPT codes 10030 and 49407 from APC 0006 and APC 0685, respectively, to APC 0037 (Level IV Needle Biopsy/Aspiration Except Bone Marrow), which has a CY 2014 OPPS payment rate of $1,223.25. The commenter noted that similar procedures also are assigned to APC 0037. Specifically, the presenter indicated that all the image-guided fluid collection drainage procedures should be treated as one clinically cohesive group and assigned to APC 0037. The Panel agreed with the presenter and recommended that CMS reassign CPT code 49407 to APC 0037. However, the Panel did not agree with the presenter that CPT code 10030 would be more appropriately assigned to APC 0037. Rather, the Panel believed that the most appropriate APC assignment for CPT code 10030 would be APC 0007. We agreed with the Panel's recommendation that CPT code 10030 should be assigned to APC 0007. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40986), we proposed to reassign CPT code 10030 from APC 0006 to APC 0007 for the CY 2015 OPPS update. In light of the Panel's recommendation to reassign CPT code 49407 and the image-guided breast biopsy procedures to APC 0037 and APC 0007, respectively, and our longstanding policy of reviewing, on an annual basis, the APC assignments for all services and items paid under the OPPS, we evaluated the geometric mean costs associated with the procedures assigned to the existing four needle biopsy APCs, as previously stated, and proposed to reassign the procedures assigned to APCs 0685 and 0037 to either APC 0004 or APC 0005 based on clinical and resource homogeneity and to delete APCs 0685 and 0037 for CY 2015. Specifically, we proposed to reassign CPT code 49407 from APC 0685 to APC 0005 for CY 2015, and to delete APCs 0037 and 0685. Table 25 of the proposed rule also showed the long descriptors for CPT codes 10030 and 49407, and their proposed status indicator and APC assignments for the CY 2015 OPPS update. The proposed CY 2015 payment rate for CPT codes 10030 and 49407 can be found in Addendum B to this CY 2015 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site).

Comment: Some commenters recommended that CMS reassign CPT code 10030 from APC 0006 to APC 0005. The commenters stated that, according to an internal analysis, CPT code 10030 is comparable with respect to clinical and resource characteristics and costs to the other abscess drainage procedures assigned to APC 0005.

Response: In light of the Panel's recommendation to reassign the procedure to APC 0007 and because CPT code 10030 is a new code for CY 2014, we are not accepting the commenters' suggestion to assign this procedure to APC 0005. Rather, we are reassigning CPT code 10030 from APC 0006 to APC 0007 for the CY 2015 OPPS update, as recommended by the Panel. We note that we will have CY 2014 hospital claims data available for CPT codes 10030 and 49407 in preparation for the CY 2016 OPPS rulemaking. At that time, we will reevaluate the APC assignments for all the abscess drainage CPT codes.

Therefore, after consideration of the public comments we received, we are finalizing our proposal, without modification, to reassign CPT code 10030 from APC 0006 to APC 0007. In addition, we are finalizing our proposal to reassign the procedures assigned to APCs 0685 and 0037 to either APC 0004 or APC 0005 based on clinical and resource homogeneity. Because there would be no other procedures assigned to APCs 0685 and 0037 as a result of this reassignment, we are finalizing our proposal to delete APCs 0685 and 0037 for CY 2015. The final CY 2015 payment rate for CPT codes 10030 and 49407 can be found in Addendum B to this CY 2015 OPPS/ASC final rule (which is available via the Internet on the CMS Web site).

c. Negative Pressure Wound Therapy (NPWT) (APCs 0012, 0013, 0015 and 0016)

For CY 2015, we proposed to assign all of the NPWT services to APC 0015 (Level II Debridement Destruction), with a proposed payment rate of $141.66. We proposed to continue to assign CPT code 97606 (Negative pressure wound therapy (eg, vacuum assisted drainage collection), including topical application(s), wound assessment, and instruction(s) for ongoing care, per session; total wound(s) surface area greater than 50 square centimeters) to APC 0015. In addition, for the CY 2015 OPPS update, we proposed to reassign CPT code 97605 (Negative pressure wound therapy (eg, vacuum assisted drainage collection), including topical application(s), wound assessment, and instruction(s) for ongoing care, per session; total wound(s) surface area less than or equal to 50 square centimeters) from APC 0013 (Level II Debridement Destruction), the APC to which the procedure is assigned for CY 2014, to APC 0015. As listed in Table 29 of the CY 2015 OPPS/ASC proposed rule (79 FR 40916), we also proposed to reassign HCPCS codes G0456 (Negative pressure wound therapy (e.g. vacuum assisted drainage collection) using a mechanically-powered device, not durable medical equipment, including provision of cartridge and dressing(s), topical application(s), wound assessment, and instructions for ongoing care, per session; total wounds(s) surface area less than or equal to 50 square centimeters) and G0457 (Negative pressure wound therapy (e.g. vacuum assisted drainage collection) using a mechanically-powered device, not durable medical equipment, including provision of cartridge and dressing(s), topical application(s), wound assessment, and instructions for ongoing care, per session; total wounds(s) surface area greater than 50 square centimeters) from APC 0016 (Level III Debridement Destruction) to APC 0015.

We note that CPT codes 97605 and 97606 became effective on January 1, 2005, and describe the type of NPWT services that employ durable medical equipment (DME). Alternatively, HCPCS codes G0456 and G0457, which are relatively new codes that became effective on January 1, 2013, were established by CMS to provide a payment mechanism for NPWT services furnished using disposable supplies instead of DME. We proposed to maintain the assignment of status indicator “T” to these two codes.

For the CY 2013 OPPS update, we assigned CPT code 97605 to APC 0013 (Level II Debridement Destruction), with a payment rate of $71.54 and CPT code 97606 to APC 0015 (Level III Debridement Destruction), with a payment rate of $106.96. In addition, we assigned HCPCS codes G0456 and G0457 to APC 0016 (Level IV Debridement Destruction), with a payment rate of $209.65.

For the CY 2014 OPPS update, we continued to assign CPT code 97605 to APC 0013 and CPT code 97606 to APC 0015. We also continued to assign HCPCS codes G0456 and G0457 to APC 0016, with a payment rate of $274.81. We note that we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75001) that some commenters requested the reassignment of HCPCS codes G0456 and G0457 to a higher paying APC, with a payment rate specifically ranging between $450 and $500. The commenters believed that a higher paying APC would be more reflective of the cost of providing NPWT services using disposable supplies. We further stated that because HCPCS codes G0456 and G0457 were new codes for the CY 2013 OPPS update, we expected to have claims data available for these codes during the CY 2015 rulemaking cycle and, at that time, we would reevaluate the APC assignments for these services in preparation for the CY 2015 OPPS update.

For the CY 2015 OPPS update, we analyzed the latest hospital outpatient claims data available for the CY 2015 OPPS/ASC proposed rule, which was based on claims submitted between January 1, 2013 and December 31, 2013, and processed on or before December 31, 2013. The data indicated that the geometric mean cost of APC 0013 was comparable to the geometric mean cost of APC 0015. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40988), we proposed to combine these APCs by reassigning all of the procedures from APC 0013 to APC 0015; delete APC 0013, and retain APC 0015 for the CY 2015 OPPS update. In addition, we proposed to rename the Debridement and Destruction APC series (excluding APC 0012) as follows: APC 0015 (Level II Debridement and Destruction); APC 0016 (Level III Debridement and Destruction); and APC 0017 (Level IV Debridement and Destruction).

Furthermore, the CY 2013 claims data available for the proposed rule also indicated that the geometric mean cost for HCPCS code G0456 was approximately $152 based on 4,509 single claims (out of 5,772 total claims), and approximately $193 for HCPCS code G0457 based on 386 single claims (out of 591 total claims). The claims data also showed that the geometric mean cost for CPT code 97605 was approximately $101 based on 58,901 single claims (out of 75,378 total claims), and approximately $140 for CPT code 97606 based on 6,722 single claims (out of 9,063 total claims). The proposed geometric mean costs of HCPCS codes G0456 and G0457, and CPT codes 97605 and 97606 were all comparable to the proposed geometric mean cost for APC 0015 of approximately $148. Based on analysis of the most recent claims data available for the proposed rule, we stated that we believed that the most appropriate assignment for all of the NPWT services was APC 0015 based on the clinical and resource homogeneity of the services assigned to this APC. The next higher cost APC in the series, APC 0016, had a proposed geometric mean cost of approximately $284, which was significantly higher than the proposed geometric mean cost of any of the NPWT services. Therefore, in the CY 2015 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 97606 to APC 0015, reassign CPT code 97605 from APC 0013 to APC 0015, and reassign HCPCS codes G0456 and G0457 from APC 0016 to APC 0015 for the CY 2015 OPPS update.

Comment: Most commenters requested that CMS continue to assign the disposable NPWT HCPCS codes G0456 and G0457 to APC 0016 for the CY 2015 OPPS update, which is the same APC to which these services are assigned for CY 2014. The commenters believed that hospitals may have miscoded claims reporting these services and, consequently, the CY 2015 proposed payment rate of approximately $142 for HCPCS codes G0456 and G0457 is insufficient because the CY 2013 OPPS claims data do not accurately capture the cost of the disposable supplies that is included in providing the service. One commenter stated that the cost of the disposable NPWT supplies range between $200 and $700 per case. The commenter provided copies of individual invoices that were forwarded to various hospitals from the manufacturer that showed a cost of approximately $220 for one disposable NPWT system. In addition, based on its analysis of charges reported by hospitals, the commenter believed that hospitals failed to understand the differences between the type of NPWT services that employ DME, which are described by CPT codes 97605 and 97606, and the type of disposable NPWT services described by HCPCS G-codes. The commenter stated that, according to its data analysis, there was no difference in hospital charges for the two types of NPWT services reported on claims. The commenter believed that hospitals miscoded these claims because they may have believed that the services described by the CPT codes for the type of NPWT services that use DME are similar to the services described by the disposable NPWT HCPCS G-codes. Several commenters explained that the cost of the type of NPWT services that use DME does not include the cost of the devices and supplies that are used to provide the services described by the HCPCS G-codes. The commenter speculated that, although it appeared that hospitals did not include the cost of the disposable devices when reporting their charges for the services described by the disposable NPWT HCPCS G-codes, hospitals should have included such costs. Therefore, the commenters urged CMS to continue to assign HCPCS codes G0456 and G0457 to APC 0016 for the CY 2015 OPPS update.

Response: Based on the significant number of claims that are available for this final rule with comment period, we believe that APC 0015 best reflects the clinical characteristics and resource costs of HCPCS codes G0456 and G0457. In addition, we do not believe that continuing to assign HCPCS codes G0456 and G0457 to APC 0016 would be appropriate for CY 2015. Our analysis of the latest hospital outpatient claims data available for this CY 2015 OPPS/ASC final rule with comment period, which is based on claims submitted between January 1, 2013 and December 31, 2013, and processed on or before June 30, 2014, indicates that the geometric mean costs for both HCPCS codes (G0456 and G0457) are very similar to the geometric mean cost of APC 0015. Specifically, our latest hospital outpatient claims data for this final rule with comment period show a geometric mean cost of approximately $158 for HCPCS code G0456 based on 5,198 single claims (out of 6,645 total claims), which is close to the geometric mean cost of APC 0015, which is approximately $152. Similarly, our claims data show a geometric mean cost of approximately $202 for HCPCS code G0457 based on 476 single claims (out of 676 total claims), which is also closer to the geometric mean cost of APC 0015, which is approximately $152 than the geometric mean cost of APC 0016, which is approximately $294.

In addition, we are not convinced that hospitals are reporting the same charges for the two types of NPWT services (DME-based and disposable) because a review of the latest claims data shows that the geometric mean costs for the most highly utilized procedures described by HCPCS code G0456 (geometric mean cost of approximately $158) and CPT code 97605 (geometric mean cost of approximately $101) are significantly different. This difference in costs captured in the claims data demonstrates that hospitals are not reporting identical charges for the different types of NPWT services, DME and disposable-based. Furthermore, we note that for all APCs whose payment rates are based upon relative payment weights, the quality and accuracy of reported units and charges influence the geometric mean costs that are the basis for our payment rates, especially for low volume items and services. However, beyond our standard OPPS trimming methodology (described in section II.A.2. of this final rule with comment period) that we apply to those claims that have passed various types of claims processing edits, it is not our general policy to judge the accuracy of hospital coding and charging for purposes of ratesetting (75 FR 71838). We rely on hospitals to bill all HCPCS codes accurately in accordance with their code descriptors and CPT and CMS instructions, as applicable, and to report charges on claims and charges and costs on their Medicare hospital cost reports appropriately. In addition, we do not specify the methodologies that hospitals must use to set charges for this or any other service. Therefore, based on the latest hospital outpatient claims data available for this final rule with comment period, we believe that APC 0015 best reflects the clinical characteristics and resource costs of HCPCS codes G0456 and G0457.

Comment: One commenter recommended that CMS make certain changes to APCs 0015 and 0016. Specifically, the commenter recommended that CMS lower the geometric mean cost for APC 0016 to $190, which would result in reassigning certain codes that were in APC 0015 whose geometric mean cost met or exceeded this amount to APC 0016. This commenter stated that such reassignment would retain HCPCS codes G0456 and G0457 in APC 0016.

Response: We believe that the proposed structures of APCs 0015 and 0016 (aside from the few code reassignments that are being made for the purpose of resolving a violation of the 2 times rule in APC 0015 that are discussed below) are optimal in terms of clinical and resource homogeneity. The geometric mean cost range for significant procedures assigned to APC 0015 is between approximately $110 (for CPT code 17250) and approximately $201 (for CPT code 11100). The geometric mean cost range for significant procedures assigned to APC 0016 is between approximately $230 (for CPT code 17282) and approximately $368 (for CPT code 11043). Reassigning HCPCS code G0456 from APC 0015 to APC 0016 would either violate the 2 times rule in APC 0016 or necessitate dividing APC 0016 into two APCs, which we do not believe is appropriate or necessary. Both of these options are undesirable, especially given that the geometric mean cost of HCPCS code G0456 (approximately $158) is comparable to the geometric mean cost of APC 0015 (approximately $152).

In summary, based on the latest claims data used for this final rule with comment period, we believe that HCPCS codes G0456 and G0457 are appropriately assigned in APC 0015 for the CY 2015 update based on the clinical and resource similarity to the other procedures in APC 0015. As has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. We will again review the APC assignments for all the NPWT services in light of the CY 2014 claims data and the proposed APC structures for clinically relevant APCs and determine whether an APC reassignment for any of the NPWT codes would be appropriate in the CY 2016 rulemaking.

In addition, in the CY 2015 OPPS/ASC proposed rule, there were violations of the 2 times rule noted for both APCs 0012 and 0015 (79 FR 40981). Every year we make every effort to minimize the number of APCs that are listed as exceptions to the 2 times rule. To resolve the violations of the 2 times rule in APCs 0012 and 0015, we are making the following code reassignments:

• CPT codes 11719, 11720, 11721, 11740, and 17340, and HCPCS code G0127 from APC 0012 to APC 0340.
• CPT codes 11901, 12014, 96920, and 97605 from APC 0015 to APC 0012.

These code reassignments eliminated the 2 times rule violations that existed in APCs 0012 and 0015 in the CY 2015 OPPS/ASC proposed rule. We note that APC 0012 is one of the APCs included in the ancillary services packaging policy that is discussed in section II.A.3.c.(1) of this final rule with comment period. Because CPT code 97605 is assigned to APC 0012, the code will be conditionally packaged and assigned to status indicator “Q1” for CY 2015.

After consideration of the public comments we received, we are finalizing our CY 2015 proposal, with modification. Specifically, we are finalizing our proposal to assign CPT code 97606 and HCPCS codes G0456 and G0457 to APC 0015. However, we are reassigning CPT code 97605 from our proposed APC 0015 to APC 0012 for the CY 2015 update to eliminate the violation of the 2 times rule that existed in APC 0015 based on claims data available for the proposed rule.

In addition, for the CY 2015 update, the CPT Editorial Panel established two new CPT codes to describe disposable NPWT services and revised the long descriptors for existing CPT codes 97605 and 97606, effective January 1, 2015. Consistent with our general policy of using permanent codes rather than using temporary HCPCS G-codes in order to streamline coding, we are deleting HCPCS codes G0456 and G0457 because they are replaced with two new CPT codes effective January 1, 2015. Table 25 below shows the replacement CPT codes for HCPCS codes G0456 and G0457 as well as the revised long descriptors for existing CPT codes 97605 and 97606. The final CY 2015 payment rate for the NPWT services codes can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site). Like all new codes effective January 1, 2015, the APC assignments for the new disposable NPWT CPT codes are open for comment for 60 days after display of this CY 2015 OPPS/ASC final rule with comment period.

d. Platelet Rich Plasma (PRP) (APC 0327)

For CY 2015, we proposed to continue to assign HCPCS code G0460 (Autologous platelet rich plasma for chronic wounds/ulcers, including phlebotomy, centrifugation, and all other preparatory procedures, administration and dressings, per treatment) to APC 0327 (Level II Debridement Destruction), with a proposed payment rate of approximately $431. We note that HCPCS code G0460, which became effective July 1, 2013, describes both the procedure and product components associated with the autologous platelet rich plasma service.

Comment: One commenter requested that CMS exempt HCPCS code G0460 from the geographic wage index variations to enable hospitals to more willingly participate in the AutoloGel Coverage with Evidence Development (CED) protocols. According to the commenter, HOPDs are reluctant to enroll in the CED protocols because they are concerned that the proposed APC payment rate will not cover the cost of the product, the procedure, the overhead, and the additional administrative effort associated with CED data collection requirements. In addition, the commenter requested that CMS establish a final payment rate for APC 0327 based on the geometric mean cost of $496.99 to help achieve some stability regarding the payment for the procedures assigned to this APC.

Response: We note that comments related to CED protocols or data collection are outside the scope of the proposed rule. With regard to the geographic wage index exemption requested by the commenter, we have never made such an exception. Under the hospital OPPS, all procedures and services that include devices are wage adjusted. Moreover, the payment rates for procedures and APCs are not based on a specific projected amount. The final payment rate for APC 0327 is based on the geometric mean cost of all the procedures described by the HCPCS codes assigned to this APC. We believe that the procedure described by HCPCS code G0460 is appropriately assigned to APC 0327 for the CY 2015 OPPS update based on the clinical and resource similarities in relation to the other procedures assigned to APC 0327. We note that, for this final rule with comment period, which is based on hospital outpatient claims submitted between January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014, our latest hospital outpatient claims data show no claims reporting the service described by HCPCS code G0460. As has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. We will review the APC assignment for HCPCS code G0460 when sufficient claims data become available to determine whether a reassignment to a more appropriate APC is necessary for the CY 2016 update. After consideration of the public comment we received, we are finalizing our proposal, without modification, to continue to assign HCPCS code G0460 to APC 0327 for CY 2015. The final CY 2015 payment rate for HCPCS code G0460 can be found in Addendum B to this CY 2015 OPPS/ASC final rule (which is available via the Internet on the CMS Web site).

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

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

a. Background

Section 1833(t)(6)(B)(iii) of the Act sets forth the period for which a device category eligible for transitional pass-through payments under the OPPS may be in effect. The implementing regulation at 42 CFR 419.66(g) provides that this pass-through payment eligibility period begins on the date CMS establishes a particular transitional pass-through category of devices. We may establish a new device category for pass-through payment in any quarter, and under our established policy, we base the pass-through status expiration date for a device category on the date on which pass-through payment is effective for the category; that is, the date CMS establishes a particular category of devices eligible for transitional pass-through payments. We propose and finalize the dates for expiration of pass-through status for device categories as part of the OPPS annual update.

We also have an established policy to package the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now separately paid in accordance with section 1833(t)(2)(H) of the Act, are an exception to this established policy.

b. CY 2015 Policy

There currently is one device category eligible for pass-through payment, which we established effective October 1, 2013: HCPCS code C1841 (Retinal prosthesis, includes all internal and external components). Recognizing that this device category has been eligible for at least 2 years, but not more than 3 years, of pass-through status by the end of CY 2015, in the CY 2015 OPPS/ASC proposed rule (79 FR 40989), we proposed the expiration of pass-through payment for HCPCS code C1841 devices on December 31, 2015. Therefore, in accordance with our established policy, beginning with CY 2016, we proposed to package the costs of the HCPCS code C1841 devices into the costs related to the procedures with which the device is reported in the hospital claims data (79 FR 40989 through 40990).

Comment: A few commenters requested that CMS extend the pass-through payment period for the device described by HCPCS code C1841 due to delay of the first date of sale of the device until January 2014. The commenters asserted that the delay was due to various regulatory delays, including the Food and Drug Administration's (FDA's) Humanitarian Device Exemption (HDE) approval process and Federal Communications Commission (FCC) regulations regarding utilization of a radiofrequency (RF) band approval. The commenters therefore requested that CMS use the date of the first sale or the date of the first HCPCS code C1841 device implant (January 16, 2014) to “reset” the start date for pass-through payment eligibility, which would result in another year of pass-through payment status.

Response: According to 42 CFR 419.66(g), “CMS limits the eligibility for a pass-through payment established under this section to a period of at least 2 years, but not more than 3 years, beginning on the date that CMS establishes a category of devices” (emphasis added). We cannot extend the pass-through payment status of HCPCS code C1841 beyond CY 2015 because such an extension would make the pass-through payment status effective longer than the maximum 3-year period permitted under 42 CFR 419.66(g). Moreover, the HCPCS code C1841 device category was made effective in the OPPS on October 1, 2013. The HCPCS code C1841 device category will have had more than 2 years of pass-through payment status as of December 31, 2015. Extending pass-through payment status through December 31, 2016, as requested by the commenter, would afford the HCPCS code C1841 device category longer than the 3-year maximum pass-through payment period. Therefore, after consideration of the public comments we received, we are finalizing our proposal to expire HCPCS code C1841 device category from pass-through payment status after December 31, 2015. We are finalizing our proposal to package the costs for devices described by HCPCS code C1841 into the costs of the procedure with which the device is reported in the hospital claims data used in the development of the OPPS relative payment weights that will be used to establish the ASC payment rates for CY 2016.

With the expiration of HCPCS code C1841 device category from pass-through payment status at the end of CY 2015, there are no other currently active categories for which we would expire pass-through status in CY 2015. If we create new device categories for pass-through payment status during the remainder of CY 2014 or during CY 2015, we will propose future expiration dates in accordance with 42 CFR 419.66(g).

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

a. Background

Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional pass-through payment for an eligible device as the amount by which the hospital's charges for a device, adjusted to cost (the cost of the device) exceeds the portion of the otherwise applicable Medicare outpatient department fee schedule amount (the APC payment amount) associated with the device. We have an established policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of the associated devices that are eligible for pass-through payments (66 FR 59904) for purposes of estimating the portion of the otherwise applicable APC payment amount associated with pass-through devices. For eligible device categories, we deduct an amount that reflects the portion of the APC payment amount that we determine is associated with the cost of the device, defined as the device APC offset amount, from the charges adjusted to cost for the device, as provided by section 1833(t)(6)(D)(ii) of the Act, to determine the pass-through payment amount for the eligible device. We have consistently used an established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC rates (72 FR 66751 through 66752). We establish and update the applicable device APC offset amounts for eligible pass-through device categories through the transmittals that implement the quarterly OPPS updates.

We published a list of all procedural APCs with the CY 2014 portions (both percentages and dollar amounts) of the APC payment amounts that we determined are associated with the cost of devices on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The dollar amounts are used as the device APC offset amounts. In addition, in accordance with our established practice, the device APC offset amounts in a related APC are used in order to evaluate whether the cost of a device in an application for a new device category for pass-through payment is not insignificant in relation to the APC payment amount for the service related to the category of devices, as specified in our regulations at § 419.66(d).

Beginning in CY 2010, we include packaged costs related to implantable biologicals in the device offset calculations in accordance with our policy that the pass-through evaluation process and payment methodology for implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and that are newly approved for pass-through status beginning on or after January 1, 2010, be the device pass-through process and payment methodology only (74 FR 60476).

b. CY 2015 Policy

In the CY 2015 OPPS/ASC proposed rule (79 FR 40990), we proposed to continue, for CY 2015, our established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to (that is, reflect) the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC payment rates. We proposed to continue our policy, for CY 2015, that the pass-through evaluation process and pass-through payment methodology for implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and that are newly approved for pass-through status, be the device pass-through process and payment methodology only. The rationale for this policy is provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 through 60477). We also proposed to continue our established policies for calculating and setting the device APC offset amounts for each device category eligible for pass-through payment. In addition, we proposed to continue to review each new device category on a case-by-case basis to determine whether device costs associated with the new category are already packaged into the existing APC structure. If device costs packaged into the existing APC structure are associated with the new category, we proposed to deduct the device APC offset amount from the pass-through payment for the device category. As stated earlier, these device APC offset amounts also would be used in order to evaluate whether the cost of a device in an application for a new device category for pass-through payment is not insignificant in relation to the APC payment amount for the service related to the category of devices (§ 419.66(d)).

In the CY 2015 OPPS/ASC proposed rule (79 FR 40990), for CY 2015, we also proposed to continue our policy established in CY 2010 to include implantable biologicals in our calculation of the device APC offset amounts. In addition, we proposed to continue to calculate and set any device APC offset amount for any new device pass-through category that includes a newly eligible implantable biological beginning in CY 2015, using the same methodology we have historically used to calculate and set device APC offset amounts for device categories eligible for pass-through payment, and to include the costs of implantable biologicals in the calculation of the device APC offset amounts (79 FR 40990).

In addition, in the CY 2015 OPPS/ASC proposed rule (79 FR 40900), we proposed to update the list of all procedural APCs with the final CY 2015 portions of the APC payment amounts that we determine are associated with the cost of devices on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html so that this information is available for use by the public in developing potential CY 2015 device pass-through payment applications and by CMS in reviewing those applications.

Comment: One commenter objected to CMS' proposal to continue its policy of evaluating implantable biological pass-through applications through the device evaluation process. The commenter believed that all biologicals should be evaluated through the drug and biological pass-through process, which is intended for the evaluation of drugs and biologicals.

Response: We have discussed our rationale for this policy in the CY 2010 OPPS/ASC final rule (74 FR 60463). Implantable biologicals function as implantable medical devices and are used in the HOPD in surgical procedures in a manner similar to implantable medical devices. Therefore, since CY 2010, we have treated them as medical devices for pass-through payment purposes. In addition, like implantable medical devices, implantable biologicals are treated as packaged surgical supplies in the OPPS under 42 CFR 419.2(b)(16). For these reasons, we will continue to treat implantable biologicals as devices for pass-through payment purposes in CY 2015.

After consideration of the public comment we received, we are finalizing, without modification, the aforementioned proposed policies for calculation of the device APC offset amounts for CY 2015. In addition, we are updating, on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html,, the list of all procedural APCs with the final CY 2015 portions of the APC payment amounts that we determine are associated with the cost of devices so that this information is available for use by the public in developing potential CY 2015 device pass-through payment applications and by CMS in reviewing those applications.

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

1. Background

To ensure equitable OPPS payment when a hospital receives a device without cost or with full credit, in CY 2007, we implemented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals are instructed to report no cost/full credit cases on the claim using the “FB” modifier on the line with the procedure code in which the no cost/full credit device is used. In cases in which the device is furnished without cost or with full credit, the hospital is instructed to report a token device charge of less than $1.01. In cases in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospital is instructed to report as the device charge the difference between its usual charge for the device being implanted and its usual charge for the device for which it received full credit. In CY 2008, we expanded this payment adjustment policy to include cases in which hospitals receive partial credit of 50 percent or more of the cost of a specified device. Hospitals are instructed to append the “FC” modifier to the procedure code that reports the service provided to furnish the device when they receive a partial credit of 50 percent or more of the cost of the new device. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for more background information on the “FB” and “FC” payment adjustment policies (72 FR 66743 through 66749).

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 through 75007), beginning in CY 2014, we modified our policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit. For CY 2013 and prior years, our policy had been to reduce OPPS payment by 100 percent of the device offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the specified device. For CY 2014, we reduced OPPS payment, for the applicable APCs, by the full or partial credit a hospital receives for a replaced device. Specifically, under this modified policy, hospitals are required to report on the claim the amount of the credit in the amount portion for value code “FD” (Credit Received from the Manufacturer for a Replaced Medical Device) when the hospital receives a credit for a replaced device that is 50 percent or greater than the cost of the device. For CY 2014, we also limited the OPPS payment deduction for the applicable APCs to the total amount of the device offset when the “FD” value code appears on a claim.

2. Policy for CY 2015

In the CY 2015 OPPS/ASC proposed rule (79 FR 40990 through 40992), for CY 2015, we proposed to continue our existing policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit. Specifically, for CY 2015, we proposed to continue to reduce the OPPS payment, for the applicable APCs listed in Table 31 of the proposed rule, by the full or partial credit a provider receives for a replaced device. Under this proposed policy, hospitals would continue to be required to report on the claim the amount of the credit in the amount portion for “FD” when the hospital receives a credit for a replaced device listed in Table 32 of the proposed rule that is 50 percent or greater than the cost of the device.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40990 through 40992), for CY 2015, we also proposed to continue using the three criteria established in the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to which our proposed CY 2015 policy would apply (71 FR 68072 through 68077). Specifically: (1) All procedures assigned to the selected APCs must involve implantable devices that would be reported if device insertion procedures were performed; (2) the required devices must be surgically inserted or implanted devices that remain in the patient's body after the conclusion of the procedure (at least temporarily); and (3) the device offset amount must be significant, which, for purposes of this policy, is defined as exceeding 40 percent of the APC cost. We also proposed to continue to restrict the devices to which the APC payment adjustment would apply to a specific set of costly devices to ensure that the adjustment would not be triggered by the implantation of an inexpensive device whose cost would not constitute a significant proportion of the total payment rate for an APC. We stated that we continue to believe these criteria are appropriate because no cost devices and device credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the beneficiary leaves the hospital. We believe that the reduction in payment is appropriate only when the cost of the device is a significant part of the total cost of the APC into which the device cost is packaged, and that the 40-percent threshold is a reasonable definition of a significant cost.

Comment: One commenter urged CMS to discontinue its current policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit. The commenter stated that procedures which involve the replacement of a device are of greater complexity than the original insertion of the device. The commenter recommended that, because the replacement procedures are not paid at a higher rate, CMS not further penalize the hospital by reducing the OPPS payment when the device is furnished without cost or with a full or partial credit to the hospital.

Response: We do not agree with the commenter and believe that it is appropriate to reduce the OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit.

After consideration of the public comments we received, we are finalizing our proposals to continue our existing policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit, and to continue using the three criteria established in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68072 through 68077) for determining the APCs to which our CY 2015 policy will apply.

We examined the offset amounts calculated from the CY 2015 final rule with comment period data and the clinical characteristics of the final CY 2015 APCs to determine which APCs meet the criteria for CY 2015. Table 26 below lists the APCs to which the payment adjustment policy for no cost/full credit and partial credit devices will apply in CY 2015. Table 27 below lists the devices to which the payment adjustment policy for no cost/full credit and partial credit devices will apply in CY 2015.

Based on the final CY 2013 claims data available for this CY 2015 OPPS/ASC final rule with comment period, we have updated the lists of APCs and devices to which the no cost/full credit and partial credit device adjustment policy will apply for CY 2015, consistent with the three criteria discussed earlier in this section.

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

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

1. Background

Section 1833(t)(6) of the Act provides for temporary additional payments or “transitional pass-through payments” for certain drugs and biologicals. Throughout this final rule with comment period, the term “biological” is used because this is the term that appears in section 1861(t) of the Act. “Biological” as used in this final rule with comment period includes “biological product” or “biologic” as defined in the Public Health Service Act. As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), this provision requires the Secretary to make additional payments to hospitals for: current orphan drugs, as designated under section 526 of the Federal Food, Drug, and Cosmetic Act; current drugs and biologicals and brachytherapy sources used in cancer therapy; and current radiopharmaceutical drugs and biologicals. “Current” refers to drugs or biologicals that are outpatient hospital services under Medicare Part B for which payment was made on the first date the hospital OPPS was implemented.

Transitional pass-through payments also are provided for certain “new” drugs and biologicals that were not being paid for as an HOPD service as of December 31, 1996 and whose cost is “not insignificant” in relation to the OPPS payments for the procedures or services associated with the new drug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” As required by statute, transitional pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a period of at least 2 years, but not more than 3 years, after the payment was first made for the product as a hospital outpatient service under Medicare Part B. CY 2015 pass-through drugs and biologicals and their designated APCs are assigned status indicator “G” in Addenda A and B to this final rule with comment period, which are available via the Internet on the CMS Web site.

Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment amount, in the case of a drug or biological, is the amount by which the amount determined under section 1842(o) of the Act for the drug or biological exceeds the portion of the otherwise applicable Medicare OPD fee schedule that the Secretary determines is associated with the drug or biological. If the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the pass-through payment amount is determined by the Secretary to be equal to the average price for the drug or biological for all competitive acquisition areas and the year established under such section as calculated and adjusted by the Secretary. However, we note that the Part B drug competitive acquisition program (CAP) has been postponed since CY 2009, and such a program has not been reinstated for CY 2015.

This methodology for determining the pass-through payment amount is set forth in regulations at 42 CFR 419.64. These regulations specify that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determines is associated with the drug or biological. Section 1847A of the Act establishes the average sales price (ASP) methodology, which is used for payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses several sources of data as a basis for payment, including the ASP, the wholesale acquisition cost (WAC), and the average wholesale price (AWP). In this final rule with comment period, the term “ASP methodology” and “ASP-based” are inclusive of all data sources and methodologies described therein. Additional information on the ASP methodology can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.

The pass-through application and review process for drugs and biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.

2. Drugs and Biologicals With Expiring Pass-Through Payment Status in CY 2014

In the CY 2015 OPPS/ASC proposed rule (79 FR 40992), we proposed that the pass-through status of 9 drugs and biologicals would expire on December 31, 2014, as listed in Table 33 of the proposed rule (79 FR 40993). All of these drugs and biologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2014. These drugs and biologicals were approved for pass-through status on or before January 1, 2013. With the exception of those groups of drugs and biologicals that are always packaged when they do not have pass-through status (specifically, diagnostic radiopharmaceuticals; contrast agents; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure), our standard methodology for providing payment for drugs and biologicals with expiring pass-through status in an upcoming calendar year is to determine the product's estimated per day cost and compare it with the OPPS drug packaging threshold for that calendar year (which is $95 for CY 2015), as discussed further in section V.B.2. of this final rule with comment period. If the estimated per day cost for the drug or biological is less than or equal to the applicable OPPS drug packaging threshold, we would package payment for the drug or biological into the payment for the associated procedure in the upcoming calendar year. If the estimated per day cost of the drug or biological is greater than the OPPS drug packaging threshold, we would provide separate payment at the applicable relative ASP-based payment amount (which is ASP+6 percent for CY 2015, as discussed further in section V.B.3. of this final rule with comment period).

Comment: Commenters, including several hospitals, physicians, and a manufacturer, requested that CMS continue to pay separately for Exparel® (bupivacaine liposome injectable suspension) described by HCPCS code C9290 (Injection, bupivicaine liposome, 1 mg) once pass-through payment status expires on December 31, 2014. Commenters disagreed with CMS' proposal to package Exparel® as a surgical supply and stated that the drug is used to control postoperative pain and is not used in the actual surgical procedure. In addition, commenters noted that the product cost of Exparel® exceeds the proposed CY 2015 packaging threshold of $90 and is not FDA-approved as a local anesthetic.

Response: We disagree with the commenters' characterization of Exparel® as not functioning as a surgical supply because it is indicated for the alleviation of postoperative pain. The indications and usage of Exparel® as listed in the FDA-approved label are as follows: “Exparel® is a liposome injection of bupivacaine, an amide-type local anesthetic, indicated for administration into the surgical site to produce postsurgical analgesia.” Exparel® is injected immediately after the surgical procedure while the patient is still on the operating room table at the surgical wound site to control postoperative pain, which is an important part of the surgical care of the patient affecting the surgical outcome. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925 through 74939), we finalized our policy at 42 CFR 419.2(b)(16) to unconditionally package all drugs and biologicals that function as supplies in a surgical procedure. According to OPPS policy, drugs, biologicals, radiopharmaceuticals, implantable medical devices, and other items and products that are not equipment can be supplies in the OPPS (78 FR 43571 and 43575). While the commenter stated that the cost of Exparel® exceeds the drug packaging threshold, we emphasize that cost consideration is not a factor in determining whether an item is a surgical supply. We consider all items related to the surgical outcome and provided during the hospital stay in which the surgery is performed, including postsurgical pain management drugs, to be part of the surgery for purposes of our drug and biological surgical supply packaging policy. Therefore, for CY 2015, we are finalizing our proposal to package Exparel® described by HCPCS code C9290 and to assign status indicator “N” to the code for CY 2015.

Comment: A few commenters recommended that CMS continue pass-through payment status for new drugs, specifically diagnostic radiopharmaceuticals and contrast agents, for a full 3 years. The commenters asserted that providing pass-through payment status for 3 years would help provide a more current and accurate data set on which to base payment amounts of the procedure when the diagnostic radiopharmaceutical or contrast agent is subsequently packaged. The commenters further recommended that CMS expire pass-through payment status for drugs and biologicals on a quarterly as opposed to an annual basis.

Response: As we stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74287), the CY 2013 OPPS/ASC final rule with comment period (77 FR 68363), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75010), and as described in section V.A. of this final rule with comment period, section 1833(t)(6)(c)(i)(II) of the Act permits CMS to make pass-through payments for a period of at least 2 years, but not more than 3 years, after the product's first payment as a hospital outpatient service under Medicare Part B OPPS. We continue to believe that this period of payment appropriately facilitates dissemination of these new products into clinical practice and facilitates the collection of sufficient hospital claims data reflective of their costs for future OPPS ratesetting. Our longstanding practice has been to provide pass-through payment for a period of 2 to 3 years, with expiration of pass-through payment status proposed and finalized through the annual rulemaking process. Each year, when proposing to expire the pass-through payment status of certain drugs and biologicals, we examine our claims data for these products. We observe that hospitals typically have incorporated these products into their chargemasters based on the utilization and costs observed in our claims data. Under the existing pass-through payment policy, we begin pass-through payment on a quarterly basis, depending on when applications are submitted to us for consideration. We are confident that the period of time for which drugs, biologicals, contrast agents, and radiopharmaceuticals receive pass-through payment status, which is at least 2 but no more than 3 years, is appropriate for CMS to collect the sufficient amount of data to make a packaging determination.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to expire the pass-through payment status of the nine drugs and biologicals listed in Table 28 below. Table 28 lists the drugs and biologicals for which pass-through payment status will expire on December 31, 2014, the status indicators, and the assigned APCs for CY 2015.

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Payment Status in CY 2015

In the CY 2015 OPPS/ASC proposed rule (79 FR 40993), we proposed to continue pass-through payment status in CY 2015 for 22 drugs and biologicals. None of these drugs and biologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2014. These drugs and biologicals, which were approved for pass-through status between January 1, 2013 and July 1, 2014, were listed in Table 34 of the proposed rule (79 FR 40994). The APCs and HCPCS codes for these drugs and biologicals approved for pass-through status through July 1, 2014 were assigned status indicator “G” in Addenda A and B to the proposed rule. Addenda A and B to the proposed rule are available via the Internet on the CMS Web site.

Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for pass-through drugs and biologicals (the pass-through payment amount) as the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Payment for drugs and biologicals with pass-through status under the OPPS is currently made at the physician's office payment rate of ASP+6 percent. We stated in the proposed rule that we believe it is consistent with the statute to propose to continue to provide payment for drugs and biologicals with pass-through status at a rate of ASP+6 percent in CY 2015, which is the amount that drugs and biologicals receive under section 1842(o) of the Act.

Therefore, for CY 2015, we proposed to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the rate these drugs and biologicals would receive in the physician's office setting in CY 2015. We proposed that a $0.00 pass-through payment amount would be paid for most pass-through drugs and biologicals under the CY 2015 OPPS because the difference between the amount authorized under section 1842(o) of the Act, which is ASP+6 percent, and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is appropriate, proposed at ASP+6 percent, is $0.

In the case of policy-packaged drugs (which include the following: Contrast agents; diagnostic radiopharmaceuticals; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs; and biologicals that function as supplies when used in a surgical procedure), we proposed that their pass-through payment amount would be equal to ASP+6 percent for CY 2015 because, if not on pass-through status, payment for these products would be packaged into the associated procedure.

In addition, we proposed to continue to update pass-through payment rates on a quarterly basis on the CMS Web site during CY 2015 if later quarter ASP submissions (or more recent WAC or AWP information, as applicable) indicate that adjustments to the payment rates for these pass-through drugs or biologicals are necessary. For a full description of this policy, we refer readers to the CY 2006 OPPS/ASC final rule with comment period (70 FR 68632 through 68635).

In CY 2015, as is consistent with our CY 2014 policy for diagnostic and therapeutic radiopharmaceuticals, we proposed to provide payment for both diagnostic and therapeutic radiopharmaceuticals that are granted pass-through payment status based on the ASP methodology. As stated above, for purposes of pass-through payment, we consider radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through payment status during CY 2015, we proposed to follow the standard ASP methodology to determine the pass-through payment rate that drugs receive under section 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we proposed to provide pass-through payment at WAC+6 percent, the equivalent payment provided to pass-through drugs and biologicals without ASP information. If WAC information also is not available, we proposed to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.

Comment: Several commenters supported CMS' proposal to provide payment at ASP+6 percent for drugs, biologicals, contrast agents, and radiopharmaceuticals that are granted pass-through payment status. A few commenters requested that CMS provide an additional payment for radiopharmaceuticals that are granted pass-through payment status.

Response: As discussed above, the statute provides that mandated pass-through payment for pass-through drugs and biologicals for CY 2015 equals the amount determined under section 1842(o) of the Act minus the portion of the otherwise applicable APC payment that CMS determines is associated with the drug or biological. Therefore, the pass-through payment is determined by subtracting the otherwise applicable payment amount under the OPPS (ASP+6 percent for CY 2015) from the amount determined under section 1842(o) of the Act (ASP+6 percent).

Regarding the commenters' request that CMS provide an additional payment for radiopharmaceuticals that are granted pass-through payment status, we note that, for CY 2015, consistent with our CY 2014 payment policy for diagnostic and therapeutic radiopharmaceuticals, we proposed to provide payment for both diagnostic and therapeutic radiopharmaceuticals with pass-through payment status based on the ASP methodology. As stated above, the ASP methodology, as applied under the OPPS, uses several sources of data as a basis for payment, including the ASP, the WAC if the ASP is unavailable, and 95 percent of the radiopharmaceutical's most recent AWP if the ASP and WAC are unavailable. For purposes of pass-through payment, we consider radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through payment status during CY 2015, we proposed to follow the standard ASP methodology to determine its pass-through payment rate under the OPPS to account for the acquisition and pharmacy overhead costs, including compounding costs. We continue to believe that a single payment is appropriate for diagnostic radiopharmaceuticals with pass-through payment status in CY 2015, and that the payment rate of ASP+6 percent (or payment based on the ASP methodology) is appropriate to provide payment for both the radiopharmaceutical's acquisition cost and any associated nuclear medicine handling and compounding costs. We refer readers to section V.B.3. of this final rule with comment period for further discussion of payment for therapeutic radiopharmaceuticals based on ASP information submitted by manufacturers, and readers also may refer to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

After consideration of the public comments we received, we are finalizing our proposal to provide payment for drugs, biologicals, diagnostic and therapeutic radiopharmaceuticals, and contrast agents that are granted pass-through payment status based on the ASP methodology. If a diagnostic or therapeutic radiopharmaceutical receives pass- through status during CY 2015, we will follow the standard ASP methodology to determine the pass-through payment rate that drugs receive under section 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we will provide pass-through payment at WAC+6 percent, the equivalent payment provided to pass-through drugs and biologicals without ASP information. If WAC information also is not available, we will provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.

As discussed in more detail in section II.A.3. of this final rule with comment period, we implemented a policy whereby payment for the following nonpass-through items is packaged into payment for the associated procedure: diagnostic radiopharmaceuticals; contrast agents; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure. As stated earlier, pass-through payment is the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Because payment for a drug that is policy-packaged would otherwise be packaged if the product did not have pass-through payment status, we believe the otherwise applicable OPPS payment amount would be equal to the policy-packaged drug APC offset amount for the associated clinical APC in which the drug or biological is utilized. The calculation of the policy-packaged drug APC offset amounts is described in more detail in section V.A.4. of this final rule with comment period. It follows that the copayment for the nonpass-through payment portion (the otherwise applicable fee schedule amount that we would also offset from payment for the drug or biological if a payment offset applies) of the total OPPS payment for those drugs and biologicals, therefore, would be accounted for in the copayment for the associated clinical APC in which the drug or biological is used.

According to section 1833(t)(8)(E) of the Act, the amount of copayment associated with pass-through items is equal to the amount of copayment that would be applicable if the pass-through adjustment was not applied. Therefore, as we did in CY 2014, in the CY 2015 OPPS/ASC proposed rule, we proposed to continue to set the associated copayment amount to zero for CY 2015 for pass-through drugs and biologicals that would otherwise be packaged if the item did not have pass-through payment status. The 22 drugs and biologicals that we proposed would continue to have pass-through payment status for CY 2015 or have been granted pass-through payment status as of January 2015 were shown in Table 34 of the proposed rule (79 FR 40994).

Comment: Commenters supported the CY 2015 proposal to continue to set the associated copayment amounts for pass-through diagnostic radiopharmaceuticals and contrast agents that would otherwise be packaged if the product did not have pass-through payment status to zero. The commenters noted that this policy is consistent with statutory requirements and provides cost-saving benefits to Medicare beneficiaries.

Response: We appreciate the commenters' support of our proposal. As discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40993 through 40994), we believe that for drugs and biologicals that are “policy-packaged,” the copayment for the nonpass-through payment portion of the total OPPS payment for this subset of drugs and biologicals is accounted for in the copayment of the associated clinical APC in which the drug or biological is used. According to section 1833(t)(8)(E) of the Act, the amount of copayment associated with pass-through items is equal to the amount of copayment that would be applicable if the pass-through adjustment was not applied. Therefore, we believe that the copayment amount should be zero for drugs and biologicals that are “policy-packaged,” including diagnostic radiopharmaceuticals and contrast agents. We also believe that the copayment amount should be zero for anesthesia drugs that would otherwise be packaged if the item did not have pass-through payment status.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to continue to set the associated copayment amount for pass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs that would otherwise be packaged if the item did not have pass-through payment status to zero for CY 2015.

The 35 drugs and biologicals that will continue to have pass-through payment status for CY 2015 or have been granted pass-through payment status as of January 1, 2015 are shown in Table 29 below. As is our standard methodology, we annually review new permanent HCPCS codes and delete temporary HCPCS C-codes if an alternate permanent HCPCS code is available for purposes of OPPS billing and payment. Table 29 below includes those coding changes.

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

a. Background

Prior to CY 2008, diagnostic radiopharmaceuticals and contrast agents were paid separately under the OPPS if their mean per day costs were greater than the applicable year's drug packaging threshold. In CY 2008 (72 FR 66768), we began a policy of packaging payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents as ancillary and supportive items and services into their associated nuclear medicine procedures. Therefore, beginning in CY 2008, nonpass-through diagnostic radiopharmaceuticals and contrast agents were not subject to the annual OPPS drug packaging threshold to determine their packaged or separately payable payment status, and instead all nonpass-through diagnostic radiopharmaceuticals and contrast agents were packaged as a matter of policy.

For CY 2014, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925), we continued to package payment for all nonpass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs, and we began packaging all nonpass-through drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies when used in a surgical procedure. These packaging policies are codified at 42 CFR 419.2(b).

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals

As previously noted, radiopharmaceuticals are considered to be drugs for OPPS pass-through payment purposes. As described above, section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for diagnostic radiopharmaceuticals an amount reflecting the portion of the APC payment associated with predecessor radiopharmaceuticals in order to ensure no duplicate radiopharmaceutical payment is made.

In CY 2009, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 through 68641). Specifically, we use the policy-packaged drug offset fraction for APCs containing nuclear medicine procedures, calculated as 1 minus the following: The cost from single procedure claims in the APC after removing the cost for policy-packaged drugs divided by the cost from single procedure claims in the APC. To determine the actual APC offset amount for pass-through diagnostic radiopharmaceuticals that takes into consideration the otherwise applicable OPPS payment amount, we multiply the policy-packaged drug offset fraction by the APC payment amount for the nuclear medicine procedure with which the pass-through diagnostic radiopharmaceutical is used and, accordingly, reduce the separate OPPS payment for the pass-through diagnostic radiopharmaceutical by this amount. For CY 2015, as we did in CY 2014, we proposed to continue to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals.

There is currently one diagnostic radiopharmaceutical with pass-through status under the OPPS. HCPCS code A9520 (Technetium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries) was granted pass-through payment status beginning October 1, 2013. We currently apply the established radiopharmaceutical payment offset policy to pass-through payment for this product.

Table 35 of the CY 2015 OPPS/ASC proposed rule (79 FR 40995) displayed the proposed APCs to which nuclear medicine procedures would be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of diagnostic radiopharmaceuticals with pass-through status.

Comment: A few commenters requested that CMS reinstate the “FB” modifier to specified nuclear medicine procedures in cases in which the diagnostic radiopharmaceutical is received at no cost or full credit. The commenters requested that the policy be maintained for CY 2015 and beyond.

Response: As we discussed in the CY2014 OPPS/ASC final rule with comment period (78 FR 75016), our review of claims data showed that hospitals rarely received diagnostic radiopharmaceuticals at no cost or full credit. Therefore, we do not believe that the “FB” modifier policy is warranted for diagnostic radiopharmaceuticals.

Comment: A few commenters agreed that pass-through payment status for HCPCS code A9520 should be extended for CY 2015.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to continue to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals, as described in the CY 2015 OPPS/ASC proposed rule (79 FR 40994 through 40995). We will continue to reduce the payment amount for procedures in the APCs listed in Table 30 in this final rule with comment period by the full policy-packaged offset amount appropriate for diagnostic radiopharmaceuticals.

Table 30 below displays the APCs to which nuclear medicine procedures will be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of diagnostic radiopharmaceuticals with pass-through payment status.

c. Payment Offset Policy for Contrast Agents

Section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for contrast agents an amount reflecting the portion of the APC payment associated with predecessor contrast agents in order to ensure no duplicate contrast agent payment is made.

In CY 2010, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor contrast agents when considering new contrast agents for pass-through payment (74 FR 60482 through 60484). Specifically, we use the policy-packaged drug offset fraction for procedural APCs, calculated as 1 minus the following: The cost from single procedure claims in the APC after removing the cost for policy packaged drugs divided by the cost from single procedure claims in the APC. To determine the actual APC offset amount for pass-through contrast agents that takes into consideration the otherwise applicable OPPS payment amount, in the CY 2015 OPPS/ASC proposed rule (79 FR 40995), we proposed to multiply the policy packaged drug offset fraction by the APC payment amount for the procedure with which the pass-through contrast agent is used and, accordingly, reduce the separate OPPS payment for the pass-through contrast agent by this amount. For CY 2015, as we did in CY 2014, we proposed to continue to apply our standard contrast agents offset policy to payment for pass-through contrast agents (we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 75017) for the final CY 2014 policy and the CY 2015 OPPS/ASC proposed rule (79 FR 40995 through 40996) for the proposed CY 2015 policy).

Although there are currently no contrast agents with pass-through payment status under the OPPS, we believe that a payment offset is necessary in the event that a new contrast agent is approved for pass-through status during CY 2015 in order to provide an appropriate transitional pass-through payment for new contrast agents. We proposed to identify procedural APCs for which we expect a contrast offset could be applicable in the case of a pass-through contrast agent as any procedural APC with a policy-packaged drug amount greater than $20 that is not a nuclear medicine APC identified in Table 35 of the proposed rule, and these APCs were displayed in Table 36 of the proposed rule. The methodology used to determine a proposed threshold cost for application of a contrast agent offset policy is described in detail in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60483 through 60484). For CY 2015, we proposed to continue to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 36 of the proposed rule (79 FR 40995 through 40996), a specific offset based on the procedural APC would be applied to payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent.

We did not receive any public comments on this proposal. Therefore, we are finalizing our proposal for CY 2015 without modification. We will continue to recognize that when a contrast agent with pass-through payment status is billed with any procedural APC listed in Table 31 below, a specific offset based on the procedural APC will be applied to the payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent.

d. Payment Offset Policy for Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure and Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure

Section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925), we finalized our policy to package drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies when used in a surgical procedure. As a part of this policy, we specifically finalized that skin substitutes and stress agents used in myocardial perfusion imaging (MPI) be policy packaged in CY 2014, in addition to diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs (78 FR 75019). Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we finalized a policy for CY 2014 to deduct from the pass-through payment for skin substitutes and stress agents an amount reflecting the portion of the APC payment associated with predecessor skin substitutes and stress agents in order to ensure no duplicate skin substitute or stress agent payment is made (78 FR 75019).

In CY 2014, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor skin substitutes or stress agents when considering a new skin substitute or stress agent for pass-through payment (78 FR 75019). Specifically, in the case of pass-through skin substitutes, we use the policy-packaged drug offset fraction for skin substitute procedural APCs, calculated as 1 minus the following: The cost from single procedure claims in the APC after removing the cost for policy-packaged drugs divided by the cost from single procedure claims in the APC. Because policy packaged radiopharmaceuticals also would be included in the drug offset fraction for the APC to which MPI procedures are assigned, in the case of pass-through stress agents, we use the policy-packaged drug offset fraction for the procedural APC, calculated as 1 minus the following: The cost from single procedure claims in the APC after removing the cost for policy-packaged drugs excluding policy-packaged diagnostic radiopharmaceuticals divided by the cost from single procedure claims in the APC. To determine the actual APC offset amount for pass-through skin substitutes and pass-through stress agents that takes into consideration the otherwise applicable OPPS payment amount, we multiply the policy-packaged drug offset fraction by the APC payment amount for the procedure with which the pass-through skin substitute or pass-through stress agent is used and, accordingly, reduce the separate OPPS payment for the pass-through skin substitute or pass-through stress agent by this amount (78 FR 75019). In the CY 2015 OPPS/ASC proposed rule (79 FR 40996), for CY 2015, as we did in CY 2014, we proposed to continue to apply the skin substitute and stress agent offset policy to payment for pass-through skin substitutes and stress agents.

There are currently six skin substitutes (HCPCS codes Q4121, Q4122, Q4127, Q4131, Q4132, and Q4133) with pass-through payment status under the OPPS. We currently apply the established skin substitute payment offset policy to pass-through payment for these products. Table 37 of the CY 2015 OPPS/ASC proposed rule (79 FR 40996) displayed the proposed APCs to which skin substitute procedures would be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of skin substitutes with pass-through status.

Although there are currently no stress agents with pass-through status under the OPPS, we believe that a payment offset is necessary in the event that a new stress agent is approved for pass-through status during CY 2015 in order to provide an appropriate transitional pass through payment for new stress agents. Table 38 of the CY 2015 OPPS/ASC proposed rule (79 FR 40996) displayed the proposed APCs to which MPI procedures would be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of a stress agent with pass-through status.

We did not receive any public comments on these proposals. Therefore, we are finalizing our proposal, without modification, to recognize that when a skin substitute with pass-through payment status is billed with any procedural APC listed in Table 32 below, a specific offset based on the procedural APC will be applied to the payment for the skin substitute to ensure that duplicate payment is not made for the skin substitute. In addition, when a stress agent with pass-through payment status is billed with any procedural APC listed in Table 33 below, a specific offset based on the procedural APC will be applied to the payment for the stress agent to ensure that duplicate payment is not made for the stress agent. Table 32 below displays the APCs to which skin substitute procedures will be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of skin substitutes with pass-through payment status. Table 33 below displays the APCs to which MPI procedures will be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of a stress agent with pass-through payment status.

As we proposed, we will continue to post annually on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset amounts that will be used for that year for purposes of both evaluating cost significance for candidate pass-through device categories and drugs and biologicals and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide the amounts and percentages of APC payment associated with packaged implantable devices, policy-packaged drugs, and threshold packaged drugs and biologicals for every OPPS clinical APC.

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

1. Background

Under the CY 2013 OPPS, we currently pay for drugs, biologicals, and radiopharmaceuticals that do not have pass-through payment status in one of two ways: as a packaged payment included in the payment for the associated service, or as a separate payment (individual APCs). We explained in the April 7, 2000 OPPS final rule with comment period (65 FR 18450) that we generally package the cost of drugs and radiopharmaceuticals into the APC payment rate for the procedure or treatment with which the products are usually furnished. Hospitals do not receive separate payment for packaged items and supplies, and hospitals may not bill beneficiaries separately for any packaged items and supplies whose costs are recognized and paid within the national OPPS payment rate for the associated procedure or service.

Packaging costs into a single aggregate payment for a service, procedure, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility.

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

a. Background

As indicated in section V.B.1. of this final rule with comment period, in accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate APCs for payment of drugs and biologicals was set to $50 per administration during CYs 2005 and 2006. In CY 2007, we used the four quarter moving average Producer Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) to trend the $50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold became effective) to the third quarter of CY 2007. We then rounded the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 threshold amount of $55. Using the same methodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086)), we set the packaging threshold for establishing separate APCs for drugs and biologicals at $90 for CY 2014.

Following the CY 2007 methodology, for the CY 2015 OPPS/ASC proposed rule (79 FR 40997), we used the most recently available four quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2015 and rounded the resulting dollar amount ($91.46) to the nearest $5 increment, which yielded a figure of $90. In performing this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' Office of the Actuary (OACT). We refer below to this series generally as the PPI for Prescription Drugs.

Based on the calculations described above, we proposed a packaging threshold for CY 2015 of $90. (For a more detailed discussion of the OPPS drug packaging threshold and the use of the PPI for Prescription Drugs, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086).)

Following the CY 2007 methodology, for this CY 2015 OPPS/ASC final rule with comment period, we used the most recently available four quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2015 and rounded the resulting dollar amount ($93.48) to the nearest $5 increment, which yielded a figure of $95. In performing this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' Office of the Actuary (OACT). Therefore, for this CY 2015 OPPS/ASC final rule with comment period, using the CY 2007 OPPS methodology, we are establishing a packaging threshold for CY 2015 of $95.

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

In the CY 2015 OPPS/ASC proposed rule (79 FR 40997), to determine the proposed CY 2015 packaging status for all nonpass-through drugs and biologicals that are not policy packaged, we calculated, on a HCPCS code-specific basis, the per day cost of all drugs, biologicals, and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPCS code in CY 2013 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2013 claims processed before January 1, 2014 for this calculation. However, we did not perform this calculation for those drugs and biologicals with multiple HCPCS codes that include different dosages, as described in section V.B.2.c. of the proposed rule, or for the following policy-packaged items that we proposed to continue to package in CY 2015: diagnostic radiopharmaceuticals; contrast agents; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure.

In order to calculate the per day costs for drugs, biologicals, and therapeutic radiopharmaceuticals to determine their proposed packaging status in CY 2015, we used the methodology that was described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 68638). For each drug and biological HCPCS code, we used an estimated payment rate of ASP+6 percent (which is the payment rate we proposed for separately payable drugs and biologicals for CY 2015, as discussed in more detail in section V.B.3.b. of the proposed rule) to calculate the CY 2015 proposed rule per day costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2013 (data that were used for payment purposes in the physician's office setting, effective April 1, 2014) to determine the proposed rule per day cost.

As is our standard methodology, for CY 2015, we proposed to use payment rates based on the ASP data from the fourth quarter of CY 2013 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site) because these were the most recent data available for use at the time of development of the proposed rule. These data also were the basis for drug payments in the physician's office setting, effective April 1, 2014. For items that did not have an ASP-based payment rate, such as some therapeutic radiopharmaceuticals, we used their mean unit cost derived from the CY 2013 hospital claims data to determine their per day cost.

We proposed to package items with a per day cost less than or equal to $90, and identify items with a per day cost greater than $90 as separately payable. Consistent with our past practice, we crosswalked historical OPPS claims data from the CY 2013 HCPCS codes that were reported to the CY 2014 HCPCS codes that we displayed in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site) for payment in CY 2015.

Comment: The majority of the commenters opposed the continuation of the OPPS packaging threshold of $90 for CY 2015. The commenters believed that, over the past 5 years, CMS has rapidly increased the packaging threshold, which contradicts Congressional intent. As such, the commenters recommended that CMS eliminate the packaging threshold and provide separate payment for all drugs with HCPCS codes or freeze the packaging threshold at the current level ($90).

Response: As stated in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68086), we believe that packaging certain items is a fundamental component of a prospective payment system, that updating the packaging threshold of $50 for the CY 2005 OPPS is consistent with industry and government practices, and that the PPI for Prescription Drugs is an appropriate mechanism to gauge Part B drug inflation. Therefore, because of our continued belief that packaging is a fundamental component of a prospective payment system that continues to provide important flexibility and efficiency in the delivery of high quality hospital outpatient services, we are not adopting commenters' recommendations to pay separately for all drugs, biologicals, and radiopharmaceuticals for CY 2015 or to eliminate the packaging threshold or to freeze the packaging threshold at $90.

Since publication of the CY 2015 OPPS/ASC proposed rule, consistent with our policy of updating the packaging threshold with more recently available data for this final rule with comment period, we have again followed the CY 2007 methodology for CY 2015 and used updated four quarter moving average PPI index levels provided by the CMS Office of the Actuary to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2015. We then rounded the resulting updated dollar amount ($93.48) to the nearest $5 increment, which yielded a figure of $95. Therefore, after consideration of the public comments we received, and consistent with our methodology for establishing the packaging threshold using the most recent PPI forecast data, we are adopting a CY 2015 packaging threshold of $95.

Our policy during previous cycles of the OPPS has been to use updated ASP and claims data to make final determinations of the packaging status of HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals for the OPPS/ASC final rule with comment period. We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/ASC final rule with comment period for the update year. Only HCPCS codes that are identified as separately payable in the final rule with comment period are subject to quarterly updates. For our calculation of per day costs of HCPCS codes for drugs and biologicals in this CY 2015 OPPS/ASC final rule with comment period, we used ASP data from the first quarter of CY 2014, which is the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective July 1, 2014, along with updated hospital claims data from CY 2013. We note that we also used these data for budget neutrality estimates and impact analyses for this CY 2015 OPPS/ASC final rule with comment period.

Payment rates for HCPCS codes for separately payable drugs and biologicals included in Addenda A and B to this final rule with comment period are based on ASP data from the second quarter of CY 2014. These data are the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective October 1, 2014. These payment rates will then be updated in the January 2015 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2015. For items that do not currently have an ASP-based payment rate, we recalculated their mean unit cost from all of the CY 2013 claims data and updated cost report information available for this CY 2015 final rule with comment period to determine their final per day cost.

Consequently, the packaging status of some HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals in the CY 2015 OPPS/ASC proposed rule may be different from the same drug HCPCS code's packaging status determined based on the data used for this CY 2015 OPPS/ASC final rule with comment period. Under such circumstances, we proposed to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose cost fluctuates relative to the proposed CY 2015 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2014. Specifically, for CY 2015, consistent with our historical practice, we proposed to apply the following policies to these HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the drug packaging threshold changes based on the updated drug packaging threshold and on the final updated data:

• HCPCS codes for drugs and biologicals that were paid separately in CY 2014 and that were proposed for separate payment in CY 2015, and that then have per day costs equal to or less than the CY 2015 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2015 final rule, would continue to receive separate payment in CY 2015.
• HCPCS codes for drugs and biologicals that were packaged in CY 2014 and that were proposed for separate payment in CY 2015, and that then have per day costs equal to or less than the CY 2015 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2015 final rule, would remain packaged in CY 2015.
• HCPCS codes for drugs and biologicals for which we proposed packaged payment in CY 2015 but then have per day costs greater than the CY 2015 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2015 final rule, would receive separate payment in CY 2015.

We did not receive any public comments on our proposal to apply the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose cost fluctuates relative to the CY 2015 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2013. Therefore, we are finalizing our proposal, without modification, for CY 2015.

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

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74938), we unconditionally packaged skin substitute products into their associated surgical procedures as part of a broader policy to package all drugs and biologicals that function as supplies when used in a surgical procedure. The adoption of this policy, to package all drugs and biologicals that function as supplies when used in a surgical procedure, followed these packaging policies: (1) Packaging of medical and surgical supplies into the related procedure under 42 CFR 419.2(b)(4) (68 FR 18543); (2) packaging of implantable devices (68 FR 18444); and (3) packaging of implantable biologicals (73 FR 68634). As noted in the CY 2014 OPPS/ASC final rule with comment period, we believe these policies represented an example of a broader category of drugs and biologicals that should be packaged in the OPPS, that is, drugs and biologicals that function as supplies in a surgical procedure (78 FR 74930). As part of the policy to finalize the packaging of skin substitutes, we also finalized a methodology that divides the skin substitutes into a high cost group and a low cost group, in order to ensure adequate resource homogeneity among APC assignments for the skin substitute application procedures (78 FR 74933). For the CY 2014 update, assignment to the high cost or low cost skin substitute group depended upon a comparison of the July 2013 ASP+6 percent payment amount for each skin substitute to the weighted average payment per unit for all skin substitutes. The weighted average was calculated using the skin substitute utilization from the CY 2012 claims data and the July 2013 ASP+6 percent payment amounts. The high cost/low cost skin substitute threshold for CY 2014 is $32 per cm². Skin substitutes that had a July 2013 ASP+6 percent amount above $32 per cm² were classified in the high cost group, and skin substitutes that had a July 2013 ASP+6 percent amount at or below $32 per cm² were classified in the low cost group. Any new skin substitutes without pricing information are assigned to the low cost category until pricing information is available to compare to the $32 per cm² threshold for CY 2014. Skin substitutes with pass-through payment status are assigned to the high cost category, with an offset applied as described in section V.A.4.d. of the CY 2015 OPPS/ASC proposed rule (79 FR 40996).

As discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40998 through 40999), after the effective date of the CY 2014 packaging policy, some skin substitute manufacturers brought the following issues to our attention regarding the CY 2014 methodology for determining the high cost/low cost threshold:

• Using ASP to determine a product's placement in the high or low cost category may unfairly disadvantage the limited number of skin substitute products that are sold in large sizes (that is, above 150 cm²). Large size skin substitute products are primarily used for burns that are treated on an inpatient basis. These manufacturers contend that nonlinear pricing for skin substitute products sold in both large and small sizes results in lower per cm² prices for large sizes. Therefore, the use of ASP data to categorize products into high and low cost categories can result in placement of products that have significant inpatient use of the large, lower-priced (per cm²) sizes into the low cost category, even though these large size products are not often used in the hospital outpatient department.
• Using a weighted average ASP to establish the high/low cost categories, combined with the drug pass-through policy, will lead to unstable high/low cost skin substitute categories in the future. According to one manufacturer, under our CY 2014 policy, manufacturers with products on pass-through payment status have an incentive to set a very high price because hospitals are price-insensitive to products paid with pass-through payments. As these new high priced pass-through skin substitutes capture more market share, the weighted average ASP high cost/low cost threshold could escalate rapidly, resulting in a shift in the assignment of many skin substitutes from the high cost category to the low cost category.

As stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40998), we agree with stakeholder concerns regarding the potential instability of the high/low cost categories associated with the drug pass-through policy, as well as stakeholder concerns about the inclusion of large-sized products that are primarily used for inpatients in the ASP calculation, when ASP is used to establish the high cost/low cost categories. As an alternative to using ASP data, we believe that establishing the high cost/low cost threshold using an alternative methodology (that is, the weighted average mean unit cost (MUC) for all skin substitute products from claims data) may provide more stable high/low cost categories and will resolve the issue associated with large sized products because the MUC will be derived from hospital outpatient claims only. The threshold would be based on costs from hospital outpatient claims data instead of manufacturer reported sales prices that would not include larger sizes primarily used for inpatient burn cases.

Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40999), we proposed to maintain the high cost/low cost APC structure for skin substitute procedures in CY 2015. However, we proposed to revise the current methodology used to establish the high cost/low cost threshold, and to establish the high cost/low cost threshold based on the weighted average MUC for all skin substitutes using CY 2013 claims (which was proposed to be $27 per cm²). Skin substitutes with an MUC above $27 per cm² using CY 2013 claims were proposed to be classified in the high cost group and those with an MUC at or below $27 per cm² were proposed to be classified in the low cost group. Table 39 of the CY 2015 OPPS/ASC proposed rule (79 FR 40999) showed the CY 2014 high cost/low cost status for each skin substitute product and the proposed CY 2015 high cost/low cost status based on the weighted average MUC threshold of $27. We proposed to continue the CY 2014 policy that skin substitutes with pass-through payment status would be assigned to the high cost category for CY 2015. Skin substitutes with pricing information but without claims data to calculate an MUC would be assigned to either the high or low cost category based on the product's ASP+6 percent payment rate. If ASP is not available we would use WAC+6 percent or 95 percent of AWP to assign a product to either the high cost or low cost category. We also proposed that any new skin substitute without pricing information be assigned to the low cost category until pricing information is available to compare to the CY 2015 threshold.

Comment: Several commenters supported CMS' proposal to revise the methodology used to establish the high cost/low cost threshold from an ASP-based methodology to a methodology based on the weighted average MUC for all skin substitutes using CY 2013 claims data. The commenters agreed that the MUC methodology would promote stability of assignments to the high and low cost categories and not disadvantage certain skin substitutes that are sold in especially large sizes.

Response: We appreciate the commenters' support.

Comment: Other commenters requested that CMS retain the ASP-based methodology for calculating the high cost/low cost threshold because, in their opinion, the ASP is a better metric for skin substitute costs than hospital outpatient claims data.

Response: We disagree with the assertion that ASP better represents the hospital costs for skin substitutes than hospital claims data. ASP is a blend of sales prices from a variety of purchasers, including various nonhospital entities. ASP also excludes a significant number of hospital sales, for example sales to 340B hospitals. Hospital claims data are specific to hospitals, and are used in assessing the costs of almost all other items and services in the OPPS, including other similar surgical supplies, such as implantable devices and implantable biologicals, which we package for payment purposes in the OPPS. Furthermore, as stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40998), we believe that using MUC will better promote stability versus ASP for high and low cost category assignments for skin substitutes, because ASP can be set very high by skin substitute manufacturers and disproportionally impact the threshold calculation.

Comment: Two commenters recommended an alternative high cost/low cost threshold calculation methodology. Instead of basing the threshold on the unit cost the commenters urged CMS to calculate the high cost/low cost threshold based on the total skin substitute costs per patient, per day, which is currently the mechanism used to set the general OPPS drug, biological, and radiopharmaceutical packaging threshold, which was proposed as $90 for CY 2015. These commenters believed that calculating the threshold cost per cm² does not accurately reflect the true cost of products as they are used clinically, and could result in displacing larger single-size skin substitutes approved through a Premarket Approval (PMA) into the low-cost skin substitute group beginning in CY 2016. They believed that this is partly a consequence of CMS' broad categorization of products as skin substitutes that, according to the commenters, includes 510(k)-cleared wound dressings and human cell, tissue, and cellular and tissue-based products (HCT/Ps) under section 361 of the Public Health Service Act (PHSA) (for example, cadaver skin or placental tissue). According to these commenters, manufacturers of products regulated through these processes can market different sizes of their skin substitutes with greater ease than can manufacturers of skin substitutes approved through a PMA, who must reapply for an updated label through the FDA to change or add a different product size. The commenters are concerned that a unit cost threshold may result in large products with lower per cm² costs, but with higher total costs per case, being assigned to the low cost category in the future. One of these commenters, although generally supportive of the change from an ASP-based methodology to an MUC-based methodology, also submitted a hypothetical predictive model comparing per unit high cost/low cost calculations with per day threshold calculations for the various skin substitutes and requested that CMS adopt a per day high cost/low cost calculation methodology beginning in CY 2016 to prevent their skin substitutes from moving from the high cost to the low cost group in CY 2016.

Response: As we explained in the CY 2014 OPPS/ASC final rule with comment period, the FDA treatment of the various skin substitutes does not affect how skin substitutes are treated under our policy of packaging drugs and biologicals that function as supplies in a surgical procedure (78 FR 74932 through 74933). The 61 skin substitutes listed in Table 34 below are available in many different sizes. Product sizing, product packaging, quantity per package, and other such individual product attributes are manufacturer business decisions that do not concern the agency. We also believe that the commenters' analogy between the general drug, biological, and radiopharmaceutical packaging threshold and the high cost/low cost skin substitute threshold is imperfect. Per day costs are used for the general drug, biological, and radiopharmaceutical packaging threshold because this threshold applies to the entire spectrum of drugs, biologicals, and radiopharmaceuticals, which have a wide variety of dosing units and dose descriptors, among others, such that per unit comparisons are not possible and therefore a total per day dollar amount is calculated. On the contrary, skin substitutes divided into the high and low cost categories are all dosed per cm², which is also the standard measurement for sizing wounds. Therefore, notwithstanding the various sizes of the 61 skin substitutes listed in Table 34, meaningful unit cost comparisons can be made for skin substitutes. As discussed earlier, we believe that the MUC methodology will help mitigate or eliminate the effect of high skin substitute ASPs on the high cost/low cost threshold. However, using a per day cost methodology as suggested by the commenters could adversely affect the majority of products that are tailored to the wound size. We will evaluate the per day cost methodology and compare it to the MUC methodology next year once CY 2014 claims data are available.

After consideration of the public comments we received, we are finalizing our proposal to maintain the high cost/low cost APC structure for skin substitute procedures in CY 2015, and our proposal to revise the current methodology used to establish the high/low cost threshold with the alternative MUC methodology. We also are finalizing for CY 2015 the policy that skin substitutes with pass-through payment status would be assigned to the high cost category. Skin substitutes with pricing information but without claims data to calculate an MUC will be assigned to either the high cost or low cost category based on the product's ASP+6 percent payment rate. If ASP is not available, we will use WAC+6 percent or 95 percent of AWP to assign a product to either the high cost or low cost category. We also are finalizing our proposal that any new skin substitutes without pricing information will be assigned to the low cost category until pricing information is available to compare to the CY 2015 threshold. New skin substitute manufacturers must submit pricing information to CMS no later than the 15th of the third month prior to the effective date of the next OPPS quarterly update. For example, for a new skin substitute with new pricing information to be included in the July 1 OPPS update and designated as included in the high cost group, verifiable pricing information must be provided to CMS no later than April 15. Table 34 below shows the CY 2014 high cost/low cost status for each skin substitute product and the final CY 2015 high cost/low cost status based on the weighted average MUC threshold of $25, which decreased slightly from the proposed $27 threshold due to updated final rule claims data. Skin substitutes with an MUC above $25 are assigned to the high cost group for CY 2015. For 2014 there are 16 high cost skin substitutes and 27 low cost skin substitutes. For CY 2015, there are 62 skin substitute codes, which represent the following products: 30 high cost skin substitutes; 24 low cost skin substitutes; 7 powdered, liquid, or micronized skin substitutes; and 1 miscellaneous skin substitute code.

d. Pass-Through Evaluation Process for Skin Substitutes

At the beginning of the OPPS, skin substitutes were originally evaluated for pass-through status using the medical device pass-through process (65 FR 67839). Since mid-2001, skin substitutes have been evaluated for pass-through payment status through the drug, biological, and radiopharmaceutical pass-through payment process. In 2001, there were two distinct HCPCS codes describing skin substitutes. For the CY 2015 update, there are 61 distinct HCPCS codes describing skin substitutes (not including the not otherwise classified HCPCS code, Q4100), and of these 61 products, 18 products that are listed in Table 35 below have had, currently have, or will have pass-through payment status.

As discussed earlier, and as we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40999 through 41001) and in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74938), we packaged all skin substitutes not on pass-through payment status under the policy that packages all drugs and biologicals that function as supplies when used in a surgical procedure (78 FR 74938), because we consider skin substitutes to be a type of surgical supply in the HOPD. The adoption of the policy to package all drugs and biologicals that function as supplies when used in a surgical procedure, followed the packaging policies for implantable biologicals, implantable devices, and more broadly, the policy to package medical and surgical supplies into the related procedure under 42 CFR 419.2(b)(4). Further, as noted in the CY 2014 OPPS/ASC final rule with comment period, we believe these policies represented an example of a broader category of drugs and biologicals that should be packaged in the OPPS, that is, drugs and biologicals that function as supplies in a surgical procedure (78 FR 74930).

Separately, in the CY 2010 OPPS/ASC final rule with comment period, we finalized a policy to evaluate implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) for pass-through payment through the medical device pass-through evaluation process, because implantable biologicals function as implantable devices (74 FR 60473), which have historically been considered supplies in the OPPS (65 FR 18443), and have been evaluated for pass-through payment through the medical device pass-through evaluation process since CY 2010. As noted earlier, the finalized packaging policy in the CY 2014 OPPS/ASC final rule with comment period to package all drugs and biologicals that function as supplies when used in a surgical procedure included skin substitutes as a type of surgical supply, and, notably, the similarities between implantable biologicals and skin substitutes were a key factor in packaging (like we did beginning in 2009 with implantable biologicals) skin substitutes into the associated surgical procedure (78 FR 74932). We also note that many skin substitutes are FDA-approved or cleared as devices, even though skin substitutes have traditionally been treated as biologicals under the OPPS. The similarities between these classes of products (implantable devices, implantable biologicals, and skin substitutes) informed our proposal to similarly treat applications for pass-through payment for skin substitutes using the OPPS device pass-through process, described below.

In the CY 2015 OPPS/ASC proposed rule (79 FR 41000), we proposed that applications for pass-through payment for skin substitutes be evaluated using the medical device pass-through process and payment methodology. As a result of this proposal, we proposed that the last skin substitute pass-through applications evaluated using the drug and biological pass-through payment evaluation process would be those with an application deadline of the first business date in September 2014, and an effective date of January 1, 2015. In light of this proposal, we would change the December 1, 2014 pass-through payment application deadline (for an effective date of April 1, 2015) for both drugs and biologicals and devices to January 15, 2015, in order to provide sufficient time for applicants to adjust to the new policies and procedures in effect as of January 1, 2015. Any applications submitted after the first business date in September 2014, through January 15, 2015, would be evaluated for the April 1, 2015 cycle. We believe that requiring skin substitutes seeking pass-through payment to use the OPPS device pass-through evaluation process is more appropriate because, although skin substitutes have characteristics of both surgical supplies and biologicals, we believe skin substitutes are best characterized as surgical supplies or devices because of their required surgical application and because they share significant clinical similarity with other surgical devices and supplies, including implantable biologicals. Therefore, we stated in the proposed rule that if this proposal is finalized, beginning with applications seeking pass-through payment effective April 1, 2014, new skin substitutes would no longer be eligible to submit biological pass-through applications; rather, such applications for pass-through payment would be evaluated using the medical device pass-through payment evaluation process, for which payment is based on charges reduced to cost from claims. We refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/ to view the device pass-through payment application requirements and review criteria that would apply to the evaluation of all skin substitute product applications for pass-through payment status beginning on or after January 1, 2015. Those skin substitutes that are approved for pass-through payment status as biologicals effective on or before January 1, 2015, would continue to be paid as pass-through biologicals for the duration of their period of pass-through payment.

We also proposed to revise our regulations at §§ 419.64 and 419.66 to reflect this proposed new policy. Specifically, we proposed to revise § 419.64 by deleting the existing paragraph (a)(4)(iv) text because it is currently outdated and adding new text at paragraph (a)(4)(iv) to exclude skin substitutes from consideration for drug and biological pass-through payment. We proposed to modify the regulation at § 419.66(b)(3) to add that a pass-through device may be applied in or on a wound or other skin lesion, and we proposed to simplify the language that “whether or not it remains with the patient when the patient is released from the hospital” to read “either permanently or temporarily.” We also proposed to delete the current example in § 419.66(b)(4)(iii) of the regulations regarding the exclusion of materials, for example, biological or synthetic materials, that may be used to replace human skin from device pass-through payment eligibility. We invited public comment on these proposals.

Comment: Several commenters supported CMS' proposal to evaluate skin substitute pass-through applications through the medical device pass-through process and pay for pass-through skin substitutes according to the medical device pass-through payment methodology beginning January 1, 2015. The commenters believed that this policy change will limit instability in the high cost/low cost groups from pass-through skin substitutes with very high ASPs. The commenter stated that instability could occur because manufacturers set ASP and hospitals are relatively insensitive to price for separately paid pass-through skin substitutes. Therefore, the commenter added, a new high priced pass-through skin substitute could gain significant sales and move the high cost/low cost threshold significantly higher from year to year.

Response: We agree with the commenters and appreciate their support.

Comment: Several commenters opposed CMS' proposal to evaluate skin substitute pass-through applications through the medical device pass-through process. Some of these commenters argued that CMS lacks the authority to change the process for evaluating skin substitute pass-through applications. The commenters also believed that biologicals approved by the FDA under section 351 of the PHSA (those approved by the FDA under biologics license applications (BLAs)) cannot be treated as devices for pass-through payment evaluation purposes according to the Social Security Act and Congressional intent. The commenters also claimed that changing the pass-through payment process for skin substitutes will stifle innovation of new wound care products.

Response: We disagree with the commenters' assertion that the agency lacks the authority to change the process for evaluating skin substitutes for pass-through and that biologicals approved by the FDA under section 351 of the PHSA (BLA process) cannot be treated as devices for pass-through payment evaluation purposes according to the Social Security Act and Congressional intent. As we stated in the 2010 OPPS final rule in response to a similar comment on the proposal to change the pass-through evaluation process for implantable biologicals: “We do not agree with the commenters who asserted that Congress intended biologicals approved under BLAs to be paid under the specific OPPS statutory provisions that apply to SCODs, including the pass-through provisions” (74 FR 60476). Similarly, Congress did not specify that we must pay for skin substitutes as separately payable biologicals rather than devices or supplies, if they also meet our criteria for payment as a device. We believe that skin substitutes can satisfy the definitions applied under the OPPS of a device or supply and a biological and that, for OPPS payment purposes, it is appropriate for us to consider skin substitutes as devices or supplies under both pass-through and nonpass-through payment policies, and not as separately payable biologicals. For example, beginning in CY 2014, we package the costs of skin substitutes into the costs of the surgical procedures in which they are used, as we do for implantable biologicals and other implantable devices. Therefore, we do not believe that we must pay for skin substitutes under our OPPS payment methodologies for separately payable biologicals, rather than our device payment methodologies.

In addition, for the skin substitute packaging policy, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74933), we stated the following: “We do not believe that the FDA approval process should exempt products from this packaging proposal or factor into the level of Medicare payment.” Similarly, regarding our proposal to change the pass-through payment evaluation process and payment methodology for skin substitutes from the drug and biological process to the device process, we also believe that any particular FDA approval process should not exempt such products that appropriately fall under the category of skin substitutes under the OPPS from the application of this pass-through payment proposal or direct which pass-through payment evaluation process must be used.

Notably, none of the current 61 skin substitute products described by distinct HCPCS codes and listed in Table 35 above have been approved by FDA under section 351 of the PHSA. This fact is somewhat counterintuitive, as biologics or biologicals or biological products are most commonly understood to be products approved by the FDA under section 351 of the PHSA. Current skin substitute products' FDA classifications include a variety of Class III medical devices, Class II medical devices, and HCT/Ps under section 361 of the PHSA, which are tissue bank materials not subject to FDA approval requirements. We also note that whether a future wound healing product is described by the OPPS packaged category of products described in 42 CFR 419.2(b)(16) as “skin substitutes and similar products that aid wound healing” will depend upon the particular characteristics of the future product. We do not intend for the category of products described as “skin substitutes and similar products that aid wound healing” to necessarily include all products with a wound healing indication. However, if a new wound healing product, regardless of FDA approval or clearance type, fits with the “skin substitutes and similar products that aid wound healing” category of products, all of the applicable OPPS policies that apply to “skin substitutes and similar products that aid wound healing” would also apply to the new wound healing product.

Finally, we do not believe that this policy will stifle innovation of new skin substitutes, as new skin substitutes that can demonstrate a substantial clinical improvement over current wound treatments could receive pass-through status as a device. In addition, there are currently 61 distinct HCPCS codes for various skin substitutes. Of these 61 products, only 18 (30 percent) have had, currently have, or will have pass-through payment status granted through the drug and biological pass-through payment process. Therefore, pass-through payment does not appear to be necessary for the commercialization of these products, which have (in terms of distinct HCPCS codes describing them) expanded significantly from 2 skin substitutes in CY 2001 to 61 skin substitutes in CY 2015. Furthermore, we have not restricted access to the high cost skin substitute group, and we have only required manufacturers of new skin substitutes to submit pricing information for assignment to the high cost group of skin substitutes. For these reasons, we do not believe that any CMS OPPS payment policies will stifle innovation or impede the development of new skin substitutes.

Comment: One commenter was concerned that the substantial clinical improvement criterion for medical device pass-through places an unduly high burden on new skin substitute products. The commenter believed that this requirement is “incompatible with skin substitute products, which are not required to submit efficacy data to the Food and Drug Administration.” This commenter also disagreed with CMS' proposal to not accept any skin substitute applications though the drug and biological pass-through payment process after September 1, 2014, and to move the final pass-through payment deadline for drug and biologicals and devices from December 1, 2014, to January 15, 2015. The commenter requested that additional guidance on substantial clinical improvement be provided specifically for application to skin substitute products, beyond that described in the November 2, 2001, interim final rule with comment period entitled “Medicare Program—Prospective Payment System for Hospital Outpatient Services: Criteria for Establishing Additional Pass-Through Categories for Medical Devices” (66 FR 55850).

Response: The comment that FDA does not require submission of efficacy data for skin substitute products is overly simplified. The different skin substitute products that have been identified in Table 35 above are subject to different FDA regulatory requirements (that is, based on review by CBER versus CDRH, regulatory classification and claims).

FDA/CDRH draws a distinction between wound dressing devices intended only to serve as a wound covering versus products intended to promote wound healing. Those devices that are intended to promote wound healing are subject to Premarket Approval (PMA) and require clinical data to support safety and effectiveness of the device. Those devices that are intended to serve as a wound covering are subject to Premarket Notification (510(k)) and require demonstration of substantial equivalence (that is, the device demonstrates that it is as safe and effective as a legally marketed predicate device). Generally, substantial equivalence in safety and effectiveness is demonstrated through comparative bench and animal studies and leveraged with historical clinical effectiveness data for similar devices. The weakness of the evidence for many skin substitute products has been documented in two recent technology assessments by the Agency for Healthcare Research and Quality. However, different pre-market data requirements for skin substitute products regulated by FDA should not excuse these products from the substantial clinical improvement pass-through criterion for device pass-through payment. Pass-through payment status is not intended to be granted to every new product, but only to those that satisfy the pass-through payment requirements. As stated in the CY 2001 OPPS interim final rule: “We believe it is important for hospitals to receive pass-through payments for devices that offer substantial clinical improvement in the treatment of Medicare beneficiaries to facilitate access by beneficiaries to the advantages of the new technology. Conversely, the need for additional payments for devices that offer little or no clinical improvement over a previously existing device is less apparent” (66 FR 55852).

Regarding the requirements for satisfying the substantial clinical improvement criterion, we believe that the list on page 55852 of the CY 2001 OPPS interim final rule suffices. For example, among the items listed is: “More rapid beneficial resolution of the disease process treated because of the use of the device.” If a new skin substitute demonstrated improved wound healing compared to existing wound treatments, it could potentially qualify for pass-through as a medical device, assuming that the skin substitute is not described by an expired pass-through payment device category.

Finally, we believe that sufficient notice was provided of this policy change in the CY 2015 OPPS/ASC proposed rule, and that accepting drug and biological applications through the first business date of September 2014 deadline for a January 1, 2015 pass-through payment effective date is a fair application of a policy that takes effect on January 1, 2015. The regular December 1, 2014 application deadline, which is being extended to January 15, 2015 for this cycle, was for pass-through payment applications with an earliest effective date of April 1, 2015, which is well past the effective date of this new policy.

After consideration of the public comments we received, we are finalizing our proposal for applications seeking pass-through payment for skin substitute and similar wound healing products effective beginning April 1, 2015, to apply using the medical device pass-through evaluation process.

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

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66776), we began recognizing, for OPPS payment purposes, multiple HCPCS codes reporting different dosages for the same covered Part B drugs or biologicals in order to reduce hospitals' administrative burden by permitting them to report all HCPCS codes for drugs and biologicals. In general, prior to CY 2008, the OPPS recognized for payment only the HCPCS code that described the lowest dosage of a drug or biological. During CYs 2008 and 2009, we applied a policy that assigned the status indicator of the previously recognized HCPCS code to the associated newly recognized code(s), reflecting the packaged or separately payable status of the new code(s).

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 60491), we finalized a policy to make a single packaging determination for a drug, rather than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages because we believed that adopting the standard HCPCS code-specific packaging determinations for these codes could lead to inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others. We continue to believe that making packaging determinations on a drug-specific basis eliminates payment incentives for hospitals to report certain HCPCS codes for drugs and allows hospitals flexibility in choosing to report all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 41001), we proposed to continue our policy to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2015.

For CY 2015, in order to propose a packaging determination that is consistent across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2013 claims data and our pricing information at ASP+6 percent across all of the HCPCS codes that describe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descriptor. The following drugs did not have pricing information available for the ASP methodology for this CY 2015 OPPS/ASC final rule with comment period and, as is our current policy for determining the packaging status of other drugs, we used the mean unit cost available from the fourth quarter CY 2013 claims data to make the packaging determinations for these drugs: HCPCS code J3471 (Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units)) and HCPCS code J3472 (Injection, hyaluronidase, ovine, preservative free, per 1000 usp units).

For all other drugs and biologicals that have HCPCS codes describing different doses, we then multiplied the weighted average ASP+6 percent per unit payment amount across all dosage levels of a specific drug or biological by the estimated units per day for all HCPCS codes that describe each drug or biological from our claims data to determine the estimated per day cost of each drug or biological at less than or equal to $95 (so that all HCPCS codes for the same drug or biological would be packaged) or greater than $95 (so that all HCPCS codes for the same drug or biological would be separately payable).

The proposed packaging status of each drug and biological HCPCS code to which this methodology would apply was displayed in Table 41 of the CY 2015 OPPS/ASC proposed rule (79 FR 41001 through 41002).

We did not receive any public comments on this proposal. Therefore, we are finalizing our CY 2015 proposal, without modification, to continue to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages. Table 36 below displays the packaging status of each drug and biological HCPCS code to which the methodology applies for CY 2015.

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

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

Section 1833(t)(14) of the Act defines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” (known as a SCOD) is defined as a covered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a separate APC has been established and that either is a radiopharmaceutical agent or is a drug or biological for which payment was made on a pass-through basis on or before December 31, 2002.

Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and biologicals are designated as exceptions and are not included in the definition of SCODs. These exceptions are—

• A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.
• A drug or biological for which a temporary HCPCS code has not been assigned.
• During CYs 2004 and 2005, an orphan drug (as designated by the Secretary).

Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Most physician Part B drugs are paid at ASP+6 percent pursuant to section 1842(o) and section 1847A of the Act.

Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in OPPS payment rates for SCODs to take into account overhead and related expenses, such as pharmacy services and handling costs. Section 1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead and related expenses and to make recommendations to the Secretary regarding whether, and if so how, a payment adjustment should be made to compensate hospitals for overhead and related expenses. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the weights for ambulatory procedure classifications for SCODs to take into account the findings of the MedPAC study.

It has been our longstanding policy to apply the same treatment to all separately payable drugs and biologicals, which include SCODs, and drugs and biologicals that are not SCODs. Therefore, we apply the payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, as required by statute, but we also apply it to separately payable drugs and biologicals that are not SCODs, which is a policy determination rather than a statutory requirement. In the CY 2015 OPPS/ASC proposed rule (79 FR 41002), we proposed to apply section 1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and biologicals, including SCODs. Although we do not distinguish SCODs in this discussion, we note that we are required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying this provision to other separately payable drugs and biologicals, consistent with our history of using the same payment methodology for all separately payable drugs and biologicals.

Since CY 2006, we have attempted to establish a drug payment methodology that reflects hospitals' acquisition costs for drugs and biologicals while taking into account relevant pharmacy overhead and related handling expenses. We have attempted to collect more data on hospital overhead charges for drugs and biologicals by making several proposals that would require hospitals to change the way they report the cost and charges for drugs. None of these proposals were adopted due to significant stakeholder concern, including that hospitals stated that it would be administratively burdensome to report hospital overhead charges. We established a payment policy for separately payable drugs and biologicals, authorized by section 1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is calculated by comparing the estimated aggregate cost of separately payable drugs and biologicals in our claims data to the estimated aggregate ASP dollars for separately payable drugs and biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642 through 68643). We referred to this methodology as our standard drug payment methodology. Taking into consideration comments made by the pharmacy stakeholders and acknowledging the limitations of the reported data due to charge compression and hospitals' reporting practices, we added an “overhead adjustment” in CY 2010 (an internal adjustment of the data) by redistributing cost from coded and uncoded packaged drugs and biologicals to separately payable drugs in order to provide more appropriate payments for drugs and biologicals in the HOPD. We continued this methodology, and we further refined it in CY 2012 by finalizing a policy to update the redistribution amount for inflation and to keep the redistribution ratio constant between the proposed rule and the final rule. For a detailed discussion of our OPPS drug payment policies from CY 2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68383 through 68385).

Because of continuing uncertainty about the full cost of pharmacy overhead and acquisition cost, based in large part on the limitations of the submitted hospital charge and claims data for drugs, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386), we indicated our concern that the continued use of the standard drug payment methodology (including the overhead adjustment) still may not appropriately account for average acquisition and pharmacy overhead cost and, therefore, may result in payment rates that are not as predictable, accurate, or appropriate as they could be. Section 1833(t)(14)(A)(iii)(II) of the Act requires an alternative methodology for determining payment rates for SCODS wherein, if hospital acquisition cost data are not available, payment shall be equal (subject to any adjustment for overhead costs) to payment rates established under the methodology described in section 1842(o), 1847A, or 1847B of the Act. We refer to this alternative methodology as the “statutory default.” In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386), we noted that section 1833(t)(14)(A)(iii)(II) of the Act authorizes the Secretary to calculate and adjust, as necessary, the average price for a drug in the year established under section 1842(o), 1847A, or 1847B of the Act, as the case may be, in determining payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, Part B drugs are paid at ASP+6 percent when furnished in physicians' offices. We indicated that we believe that establishing the payment rates based on the statutory default of ASP+6 percent is appropriate as it yields increased predictability in payment for separately payable drugs and biologicals under the OPPS and, therefore, we finalized our proposal for CY 2013 to pay for separately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). We also finalized our proposal that the ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals, that payments for separately payable drugs and biologicals are included in the budget neutrality adjustments under the requirements in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payments for these separately paid drugs and biologicals for CY 2013 (77 FR 68389).

b. CY 2015 Payment Policy

In the CY 2015 OPPS/ASC proposed rule (79 FR 41003), we proposed to continue our CY 2014 policy and pay for separately payable drugs and biologicals at ASP+6 percent pursuant to section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). We proposed that the ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals. We also proposed that payments for separately payable drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payments for these separately paid drugs and biologicals.

Comment: Commenters supported CMS' proposal to pay for separately payable drugs and biologicals based on the statutory default rate of ASP+6 percent. A few commenters supported CMS' proposal, but recommended that CMS examine ways to compensate hospitals for the unique, higher overhead and handling costs associated with therapeutic radiopharmaceuticals.

Response: We appreciate the commenters' support of our proposal. We continue to believe that ASP+6 percent based on the statutory default is appropriate for hospitals for CY 2015 and that this percentage amount includes payment for acquisition and overhead cost. We see no evidence that an additional overhead adjustment is required for separately payable drugs, biologicals, and therapeutic radiopharmaceuticals for CY 2015.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to pay for separately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). The ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals for CY 2015. In addition, we are finalizing our proposal which states that payment for separately payable drugs and biologicals be included in the budget neutrality adjustments, under the requirements of section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payment of these separately paid drugs and biologicals. We note that separately payable drug and biological payment rates listed in Addenda A and B to this final rule with comment period (available via the Internet on the CMS Web site), which illustrate the final CY 2015 payment of ASP+6 percent for separately payable nonpass-through drugs and biologicals and ASP+6 percent for pass-through drugs and biologicals, reflect either ASP information that is the basis for calculating payment rates for drugs and biologicals in the physician's office setting effective October 1, 2014, or WAC, AWP, or mean unit cost from CY 2013 claims data and updated cost report information available for this final rule with comment period. In general, these published payment rates are not reflective of actual January 2015 payment rates. This is because payment rates for drugs and biologicals with ASP information for January 2015 will be determined through the standard quarterly process where ASP data submitted by manufacturers for the third quarter of 2014 (July 1, 2014 through September 30, 2014) are used to set the payment rates that are released for the quarter beginning in January 2015 near the end of December 2014. In addition, payment rates for drugs and biologicals in Addenda A and B to this final rule with comment period for which there was no ASP information available for October 2014 are based on mean unit cost in the available CY 2013 claims data. If ASP information becomes available for payment for the quarter beginning in January 2015, we will price payment for these drugs and biologicals based on their newly available ASP information. Finally, there may be drugs and biologicals that have ASP information available for this final rule with comment period (reflecting October 2014 ASP data) that do not have ASP information available for the quarter beginning in January 2015. These drugs and biologicals will then be paid based on mean unit cost data derived from CY 2013 hospital claims. Therefore, the payment rates listed in Addenda A and B to this final rule with comment period are not for January 2015 payment purposes and are only illustrative of the CY 2015 OPPS payment methodology using the most recently available information at the time of issuance of this final rule with comment period.

4. Payment Policy for Therapeutic Radiopharmaceuticals

Beginning in CY 2010 and continuing for CY 2014, we established a policy to pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biologicals. If ASP information is unavailable for a therapeutic radiopharmaceutical, we base therapeutic radiopharmaceutical payment on mean unit cost data derived from hospital claims. We believe that the rationale outlined in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) for applying the principles of separately payable drug pricing to therapeutic radiopharmaceuticals continues to be appropriate for nonpass-through separately payable therapeutic radiopharmaceuticals in CY 2015. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 41003), we proposed for CY 2015 to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals at ASP+6 percent, based on the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full discussion of ASP-based payment for therapeutic radiopharmaceuticals, we refer readers to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521). We also proposed to rely on CY 2013 mean unit cost data derived from hospital claims data for payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable and to update the payment rates for separately payable therapeutic radiopharmaceuticals according to our usual process for updating the payment rates for separately payable drugs and biologicals, on a quarterly basis if updated ASP information is available. For a complete history of the OPPS payment policy for therapeutic radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811), the CY 2006 OPPS final rule with comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524).

The proposed CY 2015 payment rates for nonpass-through separately payable therapeutic radiopharmaceuticals were included in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site).

Comment: Several commenters supported CMS' proposal to pay for separately payable therapeutic radiopharmaceuticals under the statutory default payment rate of ASP+6 percent, if ASP data are submitted to CMS.

Response: We appreciate the commenters' support. We continue to believe that providing payment for therapeutic radiopharmaceuticals based on ASP or mean unit cost if ASP information is not available would provide appropriate payment for these products. When ASP data are not available, we believe that paying for therapeutic radiopharmaceuticals using mean unit cost will appropriately pay for the average hospital acquisition and associated handling costs of nonpass-through separately payable therapeutic radiopharmaceuticals. As we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60523), although using mean unit cost for payment for therapeutic radiopharmaceuticals when ASP data are not available is not the usual OPPS process (the usual process relies on alternative data sources such as WAC or AWP when ASP information is temporarily unavailable, prior to defaulting to the mean unit cost from hospital claims data), we continue to believe that WAC or AWP is not an appropriate proxy to provide OPPS payment for average therapeutic radiopharmaceutical acquisition cost and associated handling costs when manufacturers are not required to submit ASP data. Payment based on WAC or AWP under the established OPPS methodology for payment of separately payable drugs and biologicals is usually temporary for a calendar quarter until a manufacturer is able to submit the required ASP data in accordance with the quarterly ASP submission timeframes for reporting under section 1847A of the Act. Because ASP reporting for OPPS payment of separately payable therapeutic radiopharmaceuticals is not required, a manufacturer's choice to not submit ASP could result in payment for a separately payable therapeutic radiopharmaceutical based on WAC or AWP for a full year, a result that we believe would be inappropriate.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to continue to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals at ASP+6 percent. We also are finalizing our proposal to continue to rely on CY 2013 mean unit cost data derived from hospital claims data for payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable. The CY 2015 final rule payment rates for nonpass-through separately payable therapeutic radiopharmaceuticals are included in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site).

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

Radioisotopes are widely used in modern medical imaging, particularly for cardiac imaging and predominantly for the Medicare population. Technetium-99 (Tc-99m), the radioisotope used in the majority of such diagnostic imaging services, is currently produced in legacy reactors outside of the United States using highly enriched uranium (HEU).

The United States would like to eliminate domestic reliance on these reactors, and is promoting the conversion of all medical radioisotope production to non-HEU sources. Alternative methods for producing Tc-99m without HEU are technologically and economically viable, and conversion to such production has begun and is expected to be completed within a 3-year time period. We expect this change in the supply source for the radioisotope used for modern medical imaging will introduce new costs into the payment system that are not accounted for in the historical claims data.

Therefore, for CY 2013, we finalized a policy to provide an additional payment of $10 for the marginal cost for radioisotopes produced by non-HEU sources (77 FR 68323). Under this policy, hospitals report HCPCS code Q9969 (Tc-99m from non-highly enriched uranium source, full cost recovery add-on per study dose) once per dose along with any diagnostic scan or scans furnished using Tc-99m as long as the Tc-99m doses used can be certified by the hospital to be at least 95 percent derived from non-HEU sources. The time period for this additional payment was not to exceed 5 years from January 1, 2013 (77 FR 68321).

Comment: A few commenters requested that CMS extend payment for HCPCS code Q9969 an additional 3 to 5 years to ensure adequate data are collected and provide a longer ramp up period for more widespread use of non-HEU materials since they are not yet widely available. One commenter believed that the $10 payment is not sufficient and requested that CMS increase the payment rate. This commenter also requested that CMS eliminate the copayment.

Response: We stated in our CY 2013 OPPS/ASC final rule with comment period (77 FR 68316) that our expectation was that the transition to non-HEU sourced Mo-99 would be completed within 4 to 5 years and that there might be a need to make differential payments for a period of 4 to 5 years. We further stated that we would reassess, and propose if necessary, on an annual basis whether such an adjustment continued to be necessary and whether any changes to the adjustment were warranted. We have reassessed this payment for CY 2015 and have not identified any new information that would cause us to modify payment at this time. We do not agree with the commenter's suggestion to eliminate the beneficiary's copayment because section 1833(t)(8) of the Act and §§ 419.41 through 419.45 of the regulations require a beneficiary copayment. We are continuing the policy of providing an additional $10 payment for radioisotopes produced by non-HEU sources for CY 2015. Although we will reassess this policy annually, consistent with the original policy in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68321), we do not anticipate that this additional payment would extend beyond CY 2017.

6. Payment for Blood Clotting Factors

For CY 2014, we provided payment for blood clotting factors under the same methodology as other nonpass-through separately payable drugs and biologicals under the OPPS and continued paying an updated furnishing fee. That is, for CY 2014, we provided payment for blood clotting factors under the OPPS at ASP+6 percent, plus an additional payment for the furnishing fee. We note that when blood clotting factors are provided in physicians' offices under Medicare Part B and in other Medicare settings, a furnishing fee is also applied to the payment. The CY 2014 updated furnishing fee was $0.192 per unit.

In the CY 2015 OPPS/ASC proposed rule (79 FR 41003), for CY 2015, we proposed to pay for blood clotting factors at ASP+6 percent, consistent with our proposed payment policy for other nonpass-through separately payable drugs and biologicals, and to continue our policy for payment of the furnishing fee using an updated amount. Our policy to pay for a furnishing fee for blood clotting factors under the OPPS is consistent with the methodology applied in the physician office and inpatient hospital setting, and first articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and later discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). The proposed furnishing fee update was based on the percentage increase in the Consumer Price Index (CPI) for medical care for the 12-month period ending in June of the previous year. Because the Bureau of Labor Statistics releases the applicable CPI data after the MPFS and OPPS/ASC proposed rules are published, we were not able to include the actual updated furnishing fee in the proposed rules. Therefore, in accordance with our policy, as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we proposed to announce the actual figure for the percent change in the applicable CPI and the updated furnishing fee calculated based on that figure through applicable program instructions and posting on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.

Comment: Commenters supported CMS' proposal to continue to apply the furnishing fee for blood clotting factors provided in the OPD. The commenters also supported CMS' proposal to pay for separately payable drugs at ASP+6 percent based on the statutory default for CY 2015.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to provide payment for blood clotting factors under the same methodology as other separately payable drugs and biologicals under the OPPS and to continue payment of an updated furnishing fee. We will announce the actual figure of the percent change in the applicable CPI and the updated furnishing fee calculation based on that figure through the applicable program instructions and posting on the CMS Web site.

7. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital Claims Data

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) did not address the OPPS payment in CY 2005 and subsequent years for drugs, biologicals, and radiopharmaceuticals that have assigned HCPCS codes, but that do not have a reference AWP or approval for payment as pass-through drugs or biologicals. Because there was no statutory provision that dictated payment for such drugs, biologicals, and radiopharmaceuticals in CY 2005, and because we had no hospital claims data to use in establishing a payment rate for them, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799).

For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS codes (specifically those new drug, biological, and radiopharmaceutical HCPCS codes in each of those calendar years that did not crosswalk to predecessor HCPCS codes) but which did not have pass-through status, at a rate that was equivalent to the payment they received in the physician's office setting, established in accordance with the ASP methodology for drugs and biologicals, and based on charges adjusted to cost for radiopharmaceuticals. Beginning in CY 2008 and continuing through CY 2014, we implemented a policy to provide payment for new drugs and biologicals with HCPCS codes (except those that are policy-packaged), but which did not have pass-through status and were without OPPS hospital claims data, at an amount consistent with the final OPPS payment methodology for other separately payable nonpass-through drugs and biologicals for the given year.

In the CY 2015 OPPS/ASC proposed rule (79 FR 41004), for CY 2015, we proposed to continue this policy and provide payment for new drugs, biologicals, and therapeutic radiopharmaceuticals that do not have pass-through status at ASP+6 percent, consistent with the proposed CY 2015 payment methodology for other separately payable nonpass-through drugs, biologicals, and therapeutic radiopharmaceuticals, which was proposed to be ASP+6 percent. We believe this proposed policy would ensure that new nonpass-through drugs, biologicals, and therapeutic radiopharmaceuticals would be treated like other drugs, biologicals, and therapeutic radiopharmaceuticals under the OPPS.

For CY 2015, we are also continuing to package payment for all new nonpass-through policy-packaged products (diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure) with HCPCS codes but without claims data (those new CY 2015 HCPCS codes that do not crosswalk to predecessor HCPCS codes). This is consistent with the CY 2014 finalized policy packaging proposal of all existing nonpass-through diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure, as discussed in more detail in section II.A.3. of this final rule with comment period.

In accordance with the OPPS ASP methodology, in the absence of ASP data, for CY 2015, we proposed to continue our policy of using the WAC for the product to establish the initial payment rate for new nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS claims data. However, we note that if the WAC is also unavailable, we would make payment at 95 percent of the product's most recent AWP. We also proposed to assign status indicator “K” (Separately paid nonpass-through drugs and biologicals, including therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and biologicals without OPPS claims data and for which we have not granted pass-through status. With respect to new nonpass-through drugs and biologicals for which we do not have ASP data, we proposed that once their ASP data become available in later quarterly submissions, their payment rates under the OPPS would be adjusted so that the rates would be based on the ASP methodology and set to the proposed ASP-based amount (proposed for CY 2015 at ASP+6 percent) for items that have not been granted pass-through status. This proposed policy, which utilizes the ASP methodology for new nonpass-through drugs and biologicals with an ASP, is consistent with prior years' policies for these items and would ensure that new nonpass-through drugs and biologicals would be treated like other drugs and biologicals under the OPPS, unless they are granted pass-through status.

Similarly, we proposed to continue to base the initial payment for new therapeutic radiopharmaceuticals with HCPCS codes, but which do not have pass-through status and are without claims data, on the WACs for these products if ASP data for these therapeutic radiopharmaceuticals are not available. If the WACs also are unavailable, we proposed to make payment for new therapeutic radiopharmaceuticals at 95 percent of the products' most recent AWP because we would not have mean costs from hospital claims data upon which to base payment. As we proposed with new drugs and biologicals, we proposed to continue our policy of assigning status indicator “K” to HCPCS codes for new therapeutic radiopharmaceuticals without OPPS claims data for which we have not granted pass-through status.

Consistent with other ASP-based payment, for CY 2015, we proposed to announce any changes to the payment amounts for new drugs and biologicals in this CY 2015 OPPS/ASC final rule with comment period and also on a quarterly basis on the CMS Web site during CY 2015 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that changes to the payment rates for these drugs and biologicals are necessary. The payment rates for new therapeutic radiopharmaceuticals also would be changed accordingly based on later quarter ASP submissions. We note that the new CY 2015 HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals were not available at the time of development of the proposed rule. However, these agents are included in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site), where they are assigned comment indicator “NI.” This comment indicator reflects that their interim final OPPS treatment is open to public comment in this CY 2015 OPPS/ASC final rule with comment period.

There are several nonpass-through drugs and biologicals that were payable in CY 2013 and/or CY 2014 for which we did not have CY 2013 hospital claims data available for the proposed rule and for which there are no other HCPCS codes that describe different doses of the same drug, but which have pricing information available for the ASP methodology. In order to determine the packaging status of these products for CY 2015, we proposed to continue our policy to calculate an estimate of the per day cost of each of these items by multiplying the payment rate of each product based on ASP+6 percent, similar to other nonpass-through drugs and biologicals paid separately under the OPPS, by an estimated average number of units of each product that would typically be furnished to a patient during one day in the hospital outpatient setting. This rationale was first adopted in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68666 through 68667).

We proposed to package items for which we estimated the per day administration cost to be less than or equal to $90 (although, as mentioned in section V.B.2. of this final rule with comment period, we are finalizing a packaging threshold of $95 for CY 2015) and to pay separately for items for which we estimated the per day administration cost to be greater than $90 (with the exception of diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure, which we proposed to continue to package regardless of cost) in CY 2015. We also proposed that the CY 2015 payment for separately payable items without CY 2013 claims data would be ASP+6 percent, similar to payment for other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the ASP methodology paid in the physician's office setting, in the absence of ASP data, we proposed to use the WAC for the product to establish the initial payment rate and, if the WAC is also unavailable, we would make payment at 95 percent of the most recent AWP available. The proposed estimated units per day and status indicators for these items were displayed in Table 42 of the proposed rule (79 FR 41005).

Finally, there were 35 drugs and biologicals, shown in Table 43 of the proposed rule (79 FR 41005 through 41006), that were payable in CY 2013 but for which we lacked CY 2013 claims data and any other pricing information for the ASP methodology for the CY 2015 OPPS/ASC proposed rule. For CY 2010, we finalized a policy to assign status indicator “E” (Not paid by Medicare when submitted on outpatient claims [any outpatient bill type]) whenever we lacked claims data and pricing information and were unable to determine the per day cost of a drug or biological. In addition, we noted that we would provide separate payment for these drugs and biologicals if pricing information reflecting recent sales became available mid-year for the ASP methodology.

For CY 2015, as we finalized in CY 2014 (78 FR 75031), we proposed to continue to assign status indicator “E” to drugs and biologicals that lack CY 2013 claims data and pricing information for the ASP methodology. All drugs and biologicals without CY 2013 hospital claims data or data based on the ASP methodology that were assigned status indicator “E” on this basis at the time of the proposed rule for CY 2015 were displayed in Table 43 of the proposed rule (79 FR 41005 through 41006). We also proposed to continue our policy to assign the products status indicator “K” and pay for them separately for the remainder of CY 2015 if pricing information becomes available.

We did not receive any specific public comments regarding our proposed payment for nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes, but without OPPS hospital claims data. Many commenters supported our proposal to pay for separately payable drugs at ASP+6 percent under the statutory default. However, these comments were not specific to new drugs and biologicals with HCPCS codes but without OPPS claims data.

After consideration of the public comments we received, we are finalizing our CY 2015 proposal without modification, including our proposal to assign drug or biological products status indicator “K” and pay for them separately for the remainder of CY 2015 if pricing information becomes available. The final estimated units per day and status indicators for drugs and biologicals without CY 2013 claims data are displayed in Table 37 below.

We did not receive any public comments on our proposal to continue to assign status indicator “E” to drugs and biologicals that lack CY 2013 claims data and pricing information for the ASP methodology and, therefore, we are finalizing this proposal without modification. All drugs and biologicals without CY 2013 hospital claims data and without pricing information for the ASP methodology that are assigned status indicator “E” on this basis at the time of this final rule with comment period for CY 2015 are displayed in Table 38 below.

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

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable percentage,” currently not to exceed 2.0 percent of total program payments estimated to be made for all covered services under the OPPS furnished for that year. If we estimate before the beginning of the calendar year that the total amount of pass-through payments in that year would exceed the applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction in the amount of each of the transitional pass-through payments made in that year to ensure that the limit is not exceeded. We estimate the pass-through spending to determine whether payments exceed the applicable percentage and the appropriate prorata reduction to the conversion factor for the projected level of pass-through spending in the following year to ensure that total estimated pass-through spending for the prospective payment year is budget neutral, as required by section 1833(t)(6)(E) of the Act.

For devices, developing an estimate of pass-through spending in CY 2015 entails estimating spending for two groups of items. The first group of items consists of device categories that are currently eligible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2015. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group of items consists of items that we know are newly eligible, or project may be newly eligible, for device pass-through payment beginning in CY 2015. The sum of the CY 2015 pass-through estimates for these two groups of device categories equals the total CY 2015 pass-through spending estimate for device categories with pass-through status. We base the device pass-through estimated payments for each device category on the amount of payment as established in section 1833(t)(6)(D)(ii) of the Act, and as outlined in previous rules, including the CY 2014 OPPS/ASC final rule with comment period (78 FR 75034 through 75036). We note that, beginning in CY 2010, the pass-through evaluation process and pass-through payment for implantable biologicals newly approved for pass-through payment beginning on or after January 1, 2010 that are surgically inserted or implanted (through a surgical incision or a natural orifice) is the device pass-through process and payment methodology (74 FR 60476). As has been our past practice (76 FR 74335), in the CY 2015 OPPS/ASC proposed rule (79 FR 41007), for CY 2015, we proposed to include an estimate of any implantable biologicals eligible for pass-through payment in our estimate of pass-through spending for devices. We also proposed that, beginning in CY 2015, applications for pass-through payment for skin substitutes and similar products be evaluated using the medical device pass-through process and payment methodology. We proposed that the last skin substitute pass-through applications evaluated using the drugs and biologicals pass-through evaluation process would be those with an application deadline of September 1, 2014, and an earliest effective date of January 1, 2015. Therefore, in light of this proposal, we proposed to change the December 1, 2014 pass-through application deadline (for an earliest effective date of April 1, 2015) for both drugs and biologicals and devices to January 15, 2015, in order to provide sufficient time for applicants to adjust to the new policies and procedures that will be in effect as of January 1, 2015. We discuss our proposal to change the pass-through evaluation process for skin substitutes and address comments to this proposal and the proposal to change the April 1, 2015 pass-through effective date application deadline in section V.B.2.d. of this final rule with comment period, where we explain that we are finalizing this proposal. Therefore, beginning in CY 2015, we will include an estimate of any skin substitutes eligible for pass-through payment in our estimate of pass-through spending for devices.

We did not receive any public comments on our proposed methodology or proposed estimate for pass-through spending for devices. Therefore, we are finalizing our proposal to base the pass-through estimate for devices on our established methodology, as described above. Moreover, we are finalizing our proposal, beginning in CY 2015 and in future years, to include an estimate of any skin substitutes eligible for pass-through payment in our estimate of pass-through spending for devices.

For drugs and biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. We note that the Part B drug CAP program has been postponed since CY 2009, and such a program has not been reinstated for CY 2015. Because, as we proposed, we will pay for most nonpass-through separately payable drugs and biologicals under the CY 2015 OPPS at ASP+6 percent, as we discuss in section V.B.3. of the proposed rule and this final rule with comment period, which represents the otherwise applicable fee schedule amount associated with most pass-through drugs and biologicals, and because, as we proposed, we will pay for CY 2015 pass-through drugs and biologicals at ASP+6 percent, as we discuss in section V.A. of the proposed rule and this final rule with comment period, our estimate of drug and biological pass-through payment for CY 2015 for this group of items is $0, as discussed below.

Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals and contrast agents, without pass-through status will always be packaged into payment for the associated procedures and these products will not be separately paid. In addition, we policy-package all nonpass-through drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies when used in a surgical procedure, as discussed in section II.A.3. of this final rule with comment period. In the CY 2015 OPPS/ASC proposed rule (79 FR 41007), we proposed that all of these policy-packaged drugs and biologicals with pass-through status would be paid at ASP+6 percent, like other pass-through drugs and biologicals, for CY 2015. Therefore, our estimate of pass-through payment for policy-packaged drugs and biologicals with pass-through status approved prior to CY 2015 is not $0. In section V.A.4. of this final rule with comment period, we discuss our proposed and finalized policy to determine if the costs of certain policy-packaged drugs or biologicals are already packaged into the existing APC structure. If we determine that a policy-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologicals already included in the costs of the APCs that are associated with the drug receiving pass-through payment, we proposed to offset the amount of pass-through payment for the policy-packaged drug or biological. For these drugs or biologicals, the APC offset amount is the portion of the APC payment for the specific procedure performed with the pass-through drug or biological, which we refer to as the policy-packaged drug APC offset amount. If we determine that an offset is appropriate for a specific policy-packaged drug or biological receiving pass-through payment, we reduce our estimate of pass-through payments for these drugs or biologicals by this amount.

Similar to pass-through estimates for devices, the first group of drugs and biologicals requiring a pass-through payment estimate consists of those products that were recently made eligible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2015. The second group contains drugs and biologicals that we know are newly eligible, or project will be newly eligible, beginning in CY 2015. The sum of the CY 2015 pass-through estimates for these two groups of drugs and biologicals equals the total CY 2015 pass-through spending estimate for drugs and biologicals with pass-through status.

B. Estimate of Pass-Through Spending

In the CY 2015 OPPS/ASC proposed rule (79 FR 41007), we proposed to set the applicable pass-through payment percentage limit at 2.0 percent of the total projected OPPS payments for CY 2015, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, and our OPPS policy from CY 2004 through CY 2014 (78 FR 75034 through 75036).

For the first group of devices for pass-through payment estimation purposes, there is one device category, HCPCS code C1841 (Retinal prosthesis, includes all internal and external components), eligible for pass-through payment as of October 1, 2013, continuing to be eligible for CY 2014, and that will continue to be eligible for pass-through payment for CY 2015. Based on the one device category, HCPCS code C1841, we are finalizing our proposed rule estimate for the first group of devices of $0.5 million.

In estimating our CY 2015 pass-through spending for device categories in the second group, we include: Device categories that we knew at the time of the development of the final rule will be newly eligible for pass-through payment in CY 2015; additional device categories that we estimate could be approved for pass-through status subsequent to the development of the final rule and before January 1, 2015; and contingent projections for new device categories established in the second through fourth quarters of CY 2015. We proposed to use the general methodology described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking into account recent OPPS experience in approving new pass-through device categories. For the proposed rule, the estimate of CY 2015 pass-through spending for this second group of device categories was $10.0 million. We did not receive any public comments regarding our proposed pass-through estimate for devices. We are establishing one new device category subsequent to the publication of the proposed rule, HCPCS code C2624 (Implantable wireless pulmonary artery pressure sensor with delivery catheter, including all system components), that will be effective January 1, 2015. We estimate that HCPCS code C2624 will cost $50.5 million in pass-through expenditures in CY 2015. Therefore, for this CY 2015 OPPS/ASC final rule with comment period, the estimate of CY 2015 pass-through spending for this second group of device categories is $60.5 million.

To estimate CY 2015 pass-through spending for drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing on pass-through payment status for CY 2015, we proposed to utilize the most recent Medicare physician claims data regarding their utilization, information provided in the respective pass-through applications, historical hospital claims data, pharmaceutical industry information, and clinical information regarding those drugs or biologicals to project the CY 2015 OPPS utilization of the products.

For the known drugs and biologicals (excluding policy-packaged diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure) that will be continuing on pass-through payment status in CY 2015, we estimate the pass-through payment amount as the difference between ASP+6 percent and the payment rate for nonpass-through drugs and biologicals that will be separately paid at ASP+6 percent, which is zero for this group of drugs. Because payment for policy-packaged drugs and biologicals is packaged if the product was not paid separately due to its pass-through status, we proposed to include in the CY 2015 pass-through estimate the difference between payment for the policy-packaged drug or biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the policy-packaged drug APC offset amount, if we determine that the policy-packaged drug or biological approved for pass-through payment resembles a predecessor drug or biological already included in the costs of the APCs that are associated with the drug receiving pass-through payment. For the proposed rule, using the methodology described above, we calculated a CY 2015 proposed spending estimate for this first group of drugs and biologicals of approximately $2.8 million.

We did not receive any public comments on our proposed methodology for calculating for calculating the spending estimate for the first group of drugs and biologicals.

For this final rule with comment period, using the methodology described above, we calculated a final CY 2015 spending estimate for this first group of drugs and biologicals of approximately $11.7 million.

To estimate proposed CY 2015 pass-through spending for drugs and biologicals in the second group (that is, drugs and biologicals that we know are newly eligible, or project will be newly eligible, beginning in CY 2015), in the CY 2015 OPPS/ASC proposed rule (79 FR 41008), we proposed to use utilization estimates from pass-through applicants, pharmaceutical industry data, clinical information, recent trends in the per unit ASPs of hospital outpatient drugs, and projected annual changes in service volume and intensity as our basis for making the CY 2015 pass-through payment estimate. We also proposed to consider the most recent OPPS experience in approving new pass-through drugs and biologicals. Using our proposed methodology for estimating CY 2015 pass-through payments for this second group of drugs, we calculated a proposed spending estimate for this second group of drugs and biologicals of approximately $2.2 million.

We did not receive any public comments on our proposed methodology for calculating for calculating the spending estimate for the second group of drugs and nonimplantable biologicals.

For this final rule with comment period, using our finalized methodology for estimating CY 2015 pass-through payments for this second group of drugs, we calculated a spending estimate for this second group of drugs and biologicals of approximately $10.1 million. Our CY 2015 estimate for total pass-through spending for drugs and biologicals (spending for the first group of drugs and biologicals ($11.7 million) plus spending for the second group of drugs and biologicals ($10.1 million)) equals $21.8 million.

In summary, in accordance with the methodology described above in this section, for this final rule with comment period, we estimate that total pass-through spending for the device categories and the drugs and biologicals that are continuing to receive pass-through payment in CY 2015 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2015 will be approximately $82.8 million (approximately $61.0 million for device categories and approximately $21.8 million for drugs and biologicals), which represents 0.15 percent of total projected OPPS payments for CY 2015. Therefore, we estimate that pass-through spending in CY 2015 will not amount to 2.0 percent of total projected OPPS CY 2015 program spending.

VII. OPPS Payment for Hospital Outpatient Visits

A. Payment for Hospital Outpatient Clinic and Emergency Department Visits

Since April 7, 2000, we have instructed hospitals to report facility resources for clinic and ED hospital outpatient visits using the CPT E/M codes and to develop internal hospital guidelines for reporting the appropriate visit level (65 FR 18451). Because a national set of hospital-specific codes and guidelines do not currently exist, we have advised hospitals that each hospital's internal guidelines that determine the levels of clinic and ED visits to be reported should follow the intent of the CPT code descriptors, in that the guidelines should be designed to reasonably relate the intensity of hospital resources to the different levels of effort represented by the codes.

While many hospitals have advocated for hospital-specific national guidelines for visit billing since the OPPS started in 2000, and we have signaled in past rulemaking our intent to develop guidelines, this complex undertaking has proven challenging. Our work with interested stakeholders, such as hospital associations, along with a contractor, has confirmed that no single approach could consistently and accurately capture hospitals' relative costs. Public comments received on this issue, as well as our own knowledge of how clinics operate, have led us to conclude that it is not feasible to adopt a set of national guidelines for reporting hospital clinic visits that can accommodate the enormous variety of patient populations and service-mix provided by hospitals of all types and sizes throughout the country. Moreover, no single approach has been broadly endorsed by the stakeholder community.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75036 through 75045), we finalized a new policy which created an alphanumeric HCPCS code, G0463 (Hospital outpatient clinic visit for assessment and management of a patient), for hospital use only representing any and all clinic visits under the OPPS and assigned HCPCS code G0463 to new APC 0634. We also finalized a policy to use CY 2012 claims data to develop the CY 2014 OPPS payment rates for HCPCS code G0463 based on the total geometric mean cost of the levels one through five CPT E/M codes for clinic visits previously recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). In addition, we finalized a policy to no longer recognize a distinction between new and established patient clinic visits.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75036 through 75043), we also stated our policy that we would continue to use our existing methodology to recognize the existing CPT codes for Type A ED visits as well as the five HCPCS codes that apply to Type B ED visits, and to establish the OPPS payment under our established standard process. We refer readers to the CY 2014 OPPS/ASC final rule with comment period for a detailed discussion of the public comments and our rationale for the CY 2014 policies.

In the CY 2015 OPPS/ASC proposed rule (79 FR 41008 through 41009), for CY 2015, we proposed to continue the current policy, adopted in CY 2014, for clinic and ED visits. HCPCS code G0463 (for hospital use only) will represent any and all clinic visits under the OPPS. We proposed to continue to assign HCPCS code G0463 to APC 0634. We proposed to use CY 2013 claims data to develop the CY 2015 OPPS payment rates for HCPCS code G0463 based on the total geometric mean cost of the levels one through five CPT E/M codes for clinic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). Finally, as we established in the CY 2014 OPPS/ASC final rule with comment period, there is no longer a policy to recognize a distinction between new and established patient clinic visits.

Comment: Commenters requested that CMS discontinue the single HCPCS G-code for reporting clinic visits and return to a reporting structure that recognizes differences in clinical acuity and resource utilization. The commenters expressed concern that CMS' clinic visit coding proposal creates a payment bias that unfairly penalizes certain providers, such as trauma centers, cancer hospitals, and major teaching hospitals, which provide care for more severely ill Medicare beneficiaries. One commenter urged CMS to carefully review its ratesetting process for HCPCS code G0463 to ensure that claims containing packaged services that are intended to be part of the hospital clinic rates are not being excluded from the payment computations, thereby creating artificially low rates. Another commenter recommended that CMS work with the American Medical Association (AMA) to develop facility-specific CPT codes for E/M clinic visits (with no distinction between new and established patients) and seek input from industry stakeholders to develop descriptions for these new codes that allow for their consistent application by hospital outpatient clinics/facilities.

Response: We believe that the spectrum of hospital resources provided during an outpatient hospital clinic visit is appropriately captured and reflected in the single level payment for clinic visits. We also believe that the single visit code is consistent with a prospective payment system, where payment is based on an average estimated relative cost for the service, although the cost of individual cases may be more or less costly than the average. We believe the proposed payment rate for APC 0634 represents an appropriate payment for clinic visits, as it is based on the geometric mean costs of all visits. Although the cost for any given clinic visit may be higher or lower than the geometric mean cost of APC 0634, the payment remains appropriate to the hospital delivering a variety of clinic visits. The high volume of claims from every level of clinic CPT code that we used for ratesetting for HCPCS code G0463 allows us to have accurate data upon which to develop appropriate payment rates.

With regard to specific concerns for hospitals that treat patients with a more complex case-mix, we note that the relatively low estimated cost of clinic visits overall would result in much less underpayment or overpayment for hospitals that may serve a population with a more complex case-mix. As we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 41008), we proposed to use CY 2013 claims data to develop the CY 2015 OPPS payment rates for HCPCS code G0463 based on the total geometric mean cost of the levels one through five CPT E/M codes for clinic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). We note that claims containing packaged services that are intended to be part of the hospital clinic rates are not excluded from payment computations for HCPCS code G0463, consistent with our application of our line-item trim as described in section II.A.2.a. of this final rule with comment period. The line-item trim described in section II.A.2.a. of this final rule with comment period requires the lines to be eligible for payment in both the claims year and the prospective years. Therefore, the lines that would be packaged when modeling clinic visits would not be subject to this trim. For a more detailed discussion of the OPPS data process, we refer readers to section II.A. of this final rule with comment period.

With regard to the potential for facility-specific CPT codes, as we have stated in the past (76 FR 74346), if the AMA were to create facility-specific CPT codes for reporting visits provided in HOPDs (based on internally developed guidelines), we would consider such codes for OPPS use.

After consideration of the public comments we received, we are finalizing our CY 2015 proposal, without modification, to continue to use HCPCS code G0463 (for hospital use only) to represent any and all clinic visits under the OPPS for CY 2015. In addition, for CY 2015 we are finalizing our proposals, without modification, to continue to assign HCPCS code G0463 to APC 0634 and to use CY 2013 claims data to develop the CY 2015 OPPS payment rates for HCPCS code G0463 based on the total geometric mean cost of the levels one through five CPT E/M codes for clinic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215).

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75040), we stated that additional study was needed to fully assess the most suitable payment structure for ED visits, including the particular number of visit levels that would not underrepresent resources required to treat the most complex patients, such as trauma patients and that we believed it was best to delay any change in ED visit coding while we reevaluate the most appropriate payment structure for Type A and Type B ED visits. At this time, we continue to believe that additional study is needed to assess the most suitable payment structure for ED visits. In the CY 2015 OPPS/ASC proposed rule, we did not propose any change in ED visit coding. Rather, for CY 2015, we proposed to continue to use our existing methodology to recognize the existing CPT codes for Type A ED visits as well as the five HCPCS codes that apply to Type B ED visits, and to establish the CY 2015 proposed OPPS payment rates using our established standard process. We stated that we intend to further explore the issues described above related to ED visits, including concerns about excessively costly patients, such as trauma patients. We also stated that we may propose changes to the coding and APC assignments for ED visits in future rulemaking.

Comment: Commenters supported CMS' proposal to continue its current methodology to recognize the existing five CPT codes for Type A ED visits, as well as the five HCPCS codes for Type B ED visits, and to establish the associated CY 2015 OPPS payment rates using its standard process. Commenters commended CMS for proceeding with caution and agreed that additional study is needed on the appropriate payment structure for ED visits. Commenters also expressed their desire to work with CMS on a future policy proposal to create an appropriate payment structure for ED visits. Some commenters stated that one level of hospital ED payment is not appropriate for the various levels of resources required in ED visits, especially at major teaching hospitals, and expressed concern that a single level of ED visit payment would create a payment bias that would unfairly penalize certain providers, such as trauma centers and major teaching hospitals, which provide care for more severely ill Medicare beneficiaries. One commenter requested that CMS continue with its current ED visit payment policy for the foreseeable future and no longer attempt to make future changes to the policy in the coming years. Another commenter recommended that CMS work with the AMA to develop facility-specific CPT codes for Type A ED visits and Type B ED visits and seek input from industry stakeholders to develop descriptions for these new codes that allow for their consistent application by hospital outpatient clinics/facilities.

Response: We appreciate the commenters' support of our proposal to continue the current coding structure for ED visits while we continue to study the most appropriate payment structure for Type A and Type B ED visits. As discussed above, we received multiple comments that a single payment for an ED visit might underrepresent resources required to treat the most complex patients, such as trauma patients. As we have stated before (78 FR 75040), considering this issue requires additional study. As we continue to give additional study to this issue, we continue to welcome stakeholder input on the particular number of visit levels that would not underrepresent resources required to treat the most complex patients, such as trauma patients.

With regard to the potential for facility-specific CPT codes, as we have also stated in the past (76 FR 74346), if the AMA were to create facility-specific CPT codes for reporting visits provided in HOPDs (based on internally developed guidelines), we would consider such codes for OPPS use.

Comment: One commenter recommended, on a short-term basis, that CMS develop a set of three trauma‐specific HCPCS codes for all trauma patients, for whom a trauma team is activated.

Response: We appreciate the alternative presented by the commenter. We will take this recommendation into consideration as we continue to study and fully consider the most appropriate payment structure for Type A and Type B ED visits.

After consideration of the public comments we received, we are finalizing our proposals, without modification, to continue to use our existing methodology to recognize the existing CPT codes for Type A ED visits as well as the five HCPCS codes that apply to Type B ED visits, and to establish the CY 2015 OPPS payment rates using our established standard process. We intend to further explore the issues described above related to ED visits, including concerns about excessively costly patients, such as trauma patients. We note that we may propose changes to the coding and APC assignments for ED visits in the future rulemaking.

B. Payment for Critical Care Services

For the history of the payment policy for critical care services, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 75043). In the CY 2014 OPPS/ASC final rule with comment period, we continued to use the methodology established in the CY 2011 OPPS/ASC final rule with comment period for calculating a payment rate for critical care services that includes packaged payment of ancillary services, for example electrocardiograms, chest X-rays, and pulse oximetry. Critical care services are described by CPT codes 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes (List separately in addition to code for primary service)).

As we discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 41009), compared to the CY 2012 hospital claims data used for the CY 2014 OPPS ratesetting, the CY 2013 hospital claims data used for the CY 2015 OPPS ratesetting again show increases in the geometric mean line item costs as well as the geometric mean line item charges for CPT code 99291, which continue to suggest that hospitals' billing practices for CPT code 99291 have remained the same. Because the CY 2013 claims data do not support any significant change in hospital billing practices for critical care services, we stated in the proposed rule that we continue to believe that it would be inappropriate to pay separately for the ancillary services that hospitals typically report in addition to CPT codes for critical care services. Therefore, for CY 2015, we proposed to continue our policy (that has been in place since CY 2011) to recognize the existing CPT codes for critical care services and establish a payment rate based on historical claims data. We also proposed to continue to implement claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment. We stated that we will continue to monitor the hospital claims data for CPT code 99291 in order to determine whether revisions to this policy are warranted based on changes in hospitals' billing practices.

We did not receive any public comments on this issue. Accordingly, we are finalizing our proposals, without modification, to continue our policy to recognize the existing CPT codes for critical care services and establish a payment rate based on historical claims data, and to continue to implement claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment.

VIII. Payment for Partial Hospitalization Services

A. Background

Partial hospitalization is an intensive outpatient program of psychiatric services provided to patients as an alternative to inpatient psychiatric care for individuals who have an acute mental illness. Section 1861(ff)(1) of the Act defines partial hospitalization services as “the items and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursuant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such program), which sets forth the physician's diagnosis, the type, amount, frequency, and duration of the items and services provided under the plan, and the goals for treatment under the plan.” Section 1861(ff)(2) of the Act describes the items and services included in partial hospitalization services. Section 1861(ff)(3)(A) of the Act specifies that a partial hospitalization program (PHP) is a program furnished by a hospital to its outpatients or by a community mental health center (CMHC) (as defined in subparagraph (B)), and “which is a distinct and organized intensive ambulatory treatment service offering less than 24-hour-daily care other than in an individual's home or in an inpatient or residential setting.” Section 1861(ff)(3)(B) of the Act defines a community mental health center for purposes of this benefit.

Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the authority to designate the OPD services to be covered under the OPPS. The Medicare regulations that implement this provision specify, under 42 CFR 419.21, that payments under the OPPS will be made for partial hospitalization services furnished by CMHCs as well as Medicare Part B services furnished to hospital outpatients designated by the Secretary, which include partial hospitalization services (65 FR 18444 through 18445).

Section 1833(t)(2)(C) of the Act, in pertinent part, requires the Secretary to “establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on median (or, at the election of the Secretary, mean) hospital costs” using data on claims from 1996 and data from the most recent available cost reports. In pertinent part, subparagraph (B) provides that the Secretary may establish groups of covered OPD services, within a classification system developed by the Secretary for covered OPD services, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we have developed the PHP APCs. Section 1833(t)(9)(A) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors.”

Because a day of care is the unit that defines the structure and scheduling of partial hospitalization services, we established a per diem payment methodology for the PHP APCs, effective for services furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under this methodology, the median per diem costs have been used to calculate the relative payment weights for PHP APCs.

From CY 2003 through CY 2006, the median per diem costs for CMHCs fluctuated significantly from year to year, while the median per diem costs for hospital-based PHPs remained relatively constant. We were concerned that CMHCs may have increased and decreased their charges in response to Medicare payment policies. Therefore, we began efforts to strengthen the PHP benefit through extensive data analysis and policy and payment changes finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). We made two refinements to the methodology for computing the PHP median: The first remapped 10 revenue codes that are common among hospital-based PHP claims to the most appropriate cost centers; and the second refined our methodology for computing the PHP median per diem cost by computing a separate per diem cost for each day rather than for each bill. We refer readers to a complete discussion of these refinements in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676).

In CY 2009, we implemented several regulatory, policy, and payment changes, including a two-tiered payment approach for PHP services under which we paid one amount for days with 3 services (APC 0172 Level I Partial Hospitalization) and a higher amount for days with 4 or more services (APC 0173 Level II Partial Hospitalization). We refer readers to section X.B. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693) for a full discussion of the two-tiered payment system. In addition, for CY 2009, we finalized our policy to deny payment for any PHP claims submitted for days when fewer than 3 units of therapeutic services are provided (73 FR 68694).

Furthermore, for CY 2009, we revised the regulations at 42 CFR 410.43 to codify existing basic PHP patient eligibility criteria and to add a reference to current physician certification requirements under 42 CFR 424.24 to conform our regulations to our longstanding policy (73 FR 68694 through 68695). These changes have helped to strengthen the PHP benefit. We also revised the partial hospitalization benefit to include several coding updates. We refer readers to section X.C.3. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68695 through 68697) for a full discussion of these requirements.

For CY 2010, we retained the two-tiered payment approach for PHP services and used only hospital-based PHP data in computing the APC per diem payment rates. We used only hospital-based PHP data because we were concerned about further reducing both PHP APC per diem payment rates without knowing the impact of the policy and payment changes we made in CY 2009. Because of the 2-year lag between data collection and rulemaking, the changes we made in CY 2009 were reflected for the first time in the claims data that we used to determine payment rates for the CY 2011 rulemaking (74 FR 60556 through 60559).

In CY 2011, in accordance with section 1301(b) of the Health Care and Education Reconciliation Act of 2010 (HCERA 2010), we amended the description of a PHP in our regulations to specify that a PHP must be a distinct and organized intensive ambulatory treatment program offering less than 24-hour daily care “other than in an individual's home or in an inpatient or residential setting.” In addition, in accordance with section 1301(a) of HCERA 2010, we revised the definition of a CMHC in the regulations to conform to the revised definition now set forth under section 1861(ff)(3)(B) of the Act. We discussed our finalized policies for these two provisions of HCERA 2010 in section X.C. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71990).

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we also established four separate PHP APC per diem payment rates, two for CMHCs (for Level I and Level II services) and two for hospital-based PHPs (for Level I and Level II services), based on each provider's own unique data. As stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46300) and the final rule with comment period (75 FR 71991), for CY 2011, using CY 2009 claims data, CMHC costs had significantly decreased again. We attributed the decrease to the lower cost structure of CMHCs compared to hospital-based PHP providers, and not the impact of the CY 2009 policies. CMHCs have a lower cost structure than hospital-based PHP providers, in part, because the data showed that CMHCs generally provide fewer PHP services in a day and use less costly staff than hospital-based PHPs. Therefore, it was inappropriate to continue to treat CMHCs and hospital-based providers in the same manner regarding payment, particularly in light of such disparate differences in costs. We also were concerned that paying hospital-based PHPs at a lower rate than their cost structure reflects could lead to hospital-based PHP closures and possible access problems for Medicare beneficiaries because hospital-based PHPs are located throughout the country and, therefore, offer the widest access to PHP services. Creating the four payment rates (two for CMHCs and two for hospital-based PHPs) based on each provider's data supported continued access to the PHP benefit, while also providing appropriate payment based on the unique cost structures of CMHCs and hospital-based PHPs. In addition, separation of data by provider type was supported by several hospital-based PHP commenters who responded to the CY 2011 OPPS/ASC proposed rule (75 FR 71992).

For CY 2011, we instituted a 2-year transition period for CMHCs to the CMHC APC per diem payment rates based solely on CMHC data. For CY 2011, under the transition methodology, CMHC PHP APCs Level I and Level II per diem costs were calculated by taking 50 percent of the difference between the CY 2010 final hospital-based PHP median costs and the CY 2011 final CMHC median costs and then adding that number to the CY 2011 final CMHC median costs. A 2-year transition under this methodology moved us in the direction of our goal, which is to pay appropriately for PHP services based on each provider type's data, while at the same time allowing providers time to adjust their business operations and protect access to care for beneficiaries. We also stated that we would review and analyze the data during the CY 2012 rulemaking cycle and, based on these analyses, we might further refine the payment mechanism. We refer readers to section X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994) for a full discussion.

After publication of the CY 2011 OPPS/ASC final rule with comment period, a CMHC and one of its patients filed an application for a preliminary injunction, challenging the OPPS payment rates for PHP services provided by CMHCs in CY 2011 as adopted in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71995). We refer readers to the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius, 2011 WL 3102049 (W.D.Tex. 2011), aff'd, 684 F.3d 527 (5th Cir. 2012) (Paladin). The plaintiffs in the Paladin case challenged the agency's use of cost data derived from both hospitals and CMHCs in determining the relative payment weights for the OPPS payment rates for PHP services furnished by CMHCs, alleging that section 1833(t)(2)(C) of the Act requires that such relative payment weights be based on cost data derived solely from hospitals. As discussed above, section 1833(t)(2)(C) of the Act requires CMS to “establish relative payment weights for covered OPD services (and any groups of such services . . .) . . . based on . . . hospital costs.” Numerous courts have held that “based on” does not mean “based exclusively on.” On July 25, 2011, the District Court dismissed the plaintiffs' complaint and application for a preliminary injunction for lack of subject-matter jurisdiction, which the plaintiffs appealed to the United States Court of Appeals for the Fifth Circuit. On June 15, 2012, the Court of Appeals affirmed the District Court's dismissal for lack of subject-matter jurisdiction and found that the Secretary's payment rate determinations for PHP services are not a facial violation of a clear statutory mandate (Paladin, 684 F.3d at 533).

For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74348 through 74352), we determined the relative payment weights for PHP services provided by CMHCs based on data derived solely from CMHCs and the relative payment weights for hospital-based PHP services based exclusively on hospital data. The statute is reasonably interpreted to allow the relative payment weights for the OPPS payment rates for PHP services provided by CMHCs to be based solely on CMHC data and relative payment weights for hospital-based PHP services to be based exclusively on hospital data. Section 1833(t)(2)(C) of the Act requires the Secretary to “establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on . . . hospital costs.” In pertinent part, subparagraph (B) provides that “the Secretary may establish groups of covered OPD services . . . so that services classified within each group are comparable clinically and with respect to the use of resources.” In accordance with subparagraph (B), we developed the PHP APCs, as set forth in § 419.31 of the regulations (65 FR 18446 and 18447; 63 FR 47559 through 47562 and 47567 through 47569). As discussed above, PHP services are grouped into APCs.

Based on section 1833(t)(2)(C) of the Act, we believe that the word “establish” can be interpreted as applying to APCs at the inception of the OPPS in 2000 or whenever a new APC is added to the OPPS. In creating the original APC for PHP services (APC 0033), we did “establish” the initial relative payment weight for PHP services, provided in both hospital-based and CMHC-based settings, only on the basis of hospital data. Subsequently, from CY 2003 through CY 2008, the relative payment weights for PHP services were based on a combination of hospital and CMHC data. For CY 2009, we established new APCs for PHP services based exclusively on hospital data. Specifically, we adopted a two-tiered APC methodology (in lieu of the original APC 0033) under which CMS paid one rate for days with 3 services (APC 0172) and a different payment rate for days with 4 or more services (APC 0173). These two new APCs were established using only hospital data. For CY 2011, we added two new APCs (APCs 0175 and 0176) for PHP services provided by hospitals and based the relative payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were designated for PHP services provided by CMHCs and were based on a mixture of hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, the relative payment weights for the two APCs for PHP services provided by CMHCs in CY 2011 were “based on” hospital data, no less than the relative payment weights for the two APCs for hospital-based PHP services.

Although we used hospital data to establish the relative payment weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we believe that we have the authority to discontinue the use of hospital data in determining the OPPS relative payment weights for PHP services provided by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make plain that the data source for the relative payment weights is subject to change from one period to another. Section 1833(t)(2)(C) of the Act provides that, in establishing the relative payment weights, “the Secretary shall . . . us[e] data on claims from 1996 and us[e] data from the most recent available cost reports.” We used 1996 data (in addition to 1997 data) in determining only the original relative payment weights for 2000. In the ensuing calendar year updates, we continually used more recent cost report data.

Moreover, section 1833(t)(9)(A) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors.” For purposes of the CY 2012 update, we exercised our authority under section 1833(t)(9)(A) of the Act to change the data source for the relative payment weights for PHP services provided by CMHCs based on “new cost data, and other relevant information and factors.”

In the CY 2014 OPPS/ASC final rule with comment period, we finalized our proposal to base the relative payment weights that underpin the OPPS APCs, including the four PHP APCs, on geometric mean costs rather than on the median costs. For CY 2014, we established the four PHP APC per diem payment rates based on geometric mean cost levels calculated using the most recent claims and cost data for each provider type. We refer readers to the CY 2014 OPPS/ASC final rule with comment period for a more detailed discussion (78 FR 75047 through 75050).

B. PHP APC Update for CY 2015

In the CY 2015 OPPS/ASC proposed rule (79 FR 41009 through 41012), for CY 2015, we proposed to continue to apply our established policies to calculate the four PHP APC per diem payment rates based on geometric mean per diem costs using the most recent claims and cost data for each provider type. We computed proposed CMHC PHP APC geometric mean per diem costs for Level I (3 services per day) and Level II (4 or more services per day) PHP services using only CY 2013 CMHC claims data and the most recent cost data, and proposed hospital-based PHP APC geometric mean per diem costs for Level I and Level II PHP services using only CY 2013 hospital-based PHP claims data and the most recent cost report data. These proposed geometric mean per diem costs were shown in Table 44 of the CY 2015 OPPS/ASC proposed rule (79 FR 41011). To prevent confusion, we will refer to the per diem information listed in Table 44 of the proposed rule and Tables 39 and 40 of this final rule with comment period as the PHP APC per diem costs or the PHP APC geometric mean per diem costs, and the per diem information listed in Addendum A as the PHP APC per diem payment rates or the PHP APC geometric mean per diem rates. The PHP APC per diem costs are the provider-specific costs derived from the most recent claims and cost data. The PHP APC per diem payment rates are the national unadjusted payment rates calculated after applying the OPPS budget neutrality adjustments described in sections II.A.4. and II.B of this final rule with comment period.

For CY 2015, the proposed geometric mean per diem costs for days with 3 services (Level I) were approximately $97 for CMHCs and approximately $177 for hospital-based PHPs. The proposed geometric mean per diem costs for days with 4 or more services (Level II) were approximately $115 for CMHCs and approximately $190 for hospital-based PHPs.

The CY 2015 proposed geometric mean per diem costs for CMHCs calculated under the proposed CY 2015 methodology using CY 2013 claims data and the most recent cost data remained relatively constant when compared to the CY 2014 final geometric mean per diem costs for CMHCs established in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75050), with geometric mean per diem costs for Level I CMHC PHP services decreasing from approximately $99 to approximately $97 for CY 2015, and geometric mean per diem costs for Level II CMHC PHP services increasing from approximately $112 to approximately $115 for CY 2015.

The CY 2015 proposed geometric mean per diem costs for hospital-based PHPs calculated under the proposed CY 2015 methodology using CY 2013 claims data and the most recent cost report data showed more variation when compared to the CY 2014 final geometric mean per diem costs for hospital-based PHPs, with geometric mean per diem costs for Level I hospital-based PHP services decreasing from approximately $191 to approximately $177 for CY 2015, and geometric mean per diem costs for Level II hospital-based PHP services decreasing from approximately $214 to approximately $190 for CY 2015.

We understand that having little variation in the PHP per diem payment rates from one year to the next allows providers to more easily plan their fiscal needs. However, we believe that it is important to base the PHP payment rates on the claims and cost reports submitted by each provider type so these rates accurately reflect the cost information for these providers. We recognize that several factors may cause a fluctuation in the per diem payment rates, including direct changes to the PHP APC per diem costs (for example, establishing separate APCs and associated per diem payment rates for CMHCs and hospital-based providers based on the provider type's costs), changes to the OPPS (for example, basing the relative payment weights on geometric mean costs), and provider-driven changes (for example, a provider's decision to change its mix of services or to change its charges and clinical practice for some services). We refer readers to a more complete discussion of this issue in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75049). We invited public comments on what causes PHP costs to fluctuate from year to year and on these proposals.

The proposed CY 2015 geometric mean per diem costs for the CMHC and hospital-based PHP APCs were shown in Table 44 of the proposed rule. We invited public comments on these proposals.

Comment: Several commenters opposed the proposed CY 2015 PHP APC per diem payment rates and raised concerns about a continued decline in payments for these services. Commenters stated that the proposed per diem payment rates were inadequate to pay providers for furnishing these services, and were below most program costs for providing PHP services. Other commenters suggested that CMS continue to use the CY 2014 payment rates for CY 2015. A few commenters expressed concerns that the 15-percent reduction in payment rates for Level II services in hospitals dropped the payment rates too far below providers' costs. Another commenter asked that CMS provide documentation to support the proposed payment rates for PHP services.

Response: We acknowledge the concerns raised by the commenters who believe that reduced payment rates for CY 2015 will not adequately pay their costs to provide PHP services. However, the per diem payment rates reflect the cost of what each provider type expends to maintain such programs. Therefore, we do not believe that the final payment rates would be inadequate to cover the costs of providing these services.

Based on the final geometric mean per diem costs derived from CY 2013 claims data and the most recent cost data, CMHCs' geometric mean per diem costs increased from CY 2014 to CY 2015 for APC 0172 Level I (3 services per day) from approximately $99 to approximately $100, and for APC 0173 Level II (4 or more services per day) from approximately $112 to approximately $119. These per diem cost increases for CMHC APCs 0172 and 0173 are 0.76 percent and 5.7 percent, respectively. Final hospital-based PHP per diem costs decreased by significantly smaller amounts than the per diem costs that were proposed, but still declined when compared to CY 2014 geometric mean per diem costs. The PHP APC geometric mean per diem costs decreased for hospital-based PHPs from CY 2014 to CY 2015 for APC 0175 Level I (3 services per day) from approximately $191 to approximately $186, and for APC 0176 Level II (4 or more service per day) from approximately $214 to approximately $203. These final hospital-based PHP APC geometric mean per diem cost decreases are 2.6 percent for APC 0175 (instead of the proposed decrease of 7.1 percent) and 5.3 percent for APC 0176 (instead of the proposed decrease of 11.3 percent). We believe that the PHP APC per diem payment rates for both providers accurately reflect the claims and cost data of each provider type. Again, the resulting PHP APC per diem payment rates and the APC payment structures reflect the cost of what providers expend to maintain such programs. At this time, we cannot establish payment rates that do not accurately reflect the current claims and cost data. For these reasons, we are not suspending implementation of the CY 2015 PHP APC per diem payment rates for CMHCs and hospital-based PHPs.

The PHP APC per diem payment rates are directly related to the accuracy of the claims and cost data submitted by providers. Therefore, it is imperative that providers submit accurate claims and cost data in order for the payment rates to accurately reflect the providers' costs.

Regarding the documentation supporting the proposed PHP per diem payment rates, for each calendar year update, we explain how the PHP APC per diem payment rates are calculated in a proposed rule and a final rule. The industry is welcome to comment during the rulemaking process. We also make available to the public the OPPS PHP limited data set (LDS) and the OPPS LDS, which we discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40931). The OPPS PHP LDS can be used to recreate the PHP cost estimates and, when used in conjunction with the OPPS LDS, can be used to recreate the PHP APC payment rates. Both of these files are available twice a year, once for the proposed rule and again for the final rule. The LDSs are available for purchase under a CMS data use agreement through the CMS Web sites at: http://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/HospitalOPPSPHPLDS.html and http://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/HospitalOPPS.html.

Comment: A number of commenters noted the difficulty in planning and budgeting when payment rates for these services fluctuate and asked that CMS establish consistent and stable payments. Several commenters stated that they are committed to working with CMS to better understand and stabilize the payment rates for the PHP benefit, and to determine the factors driving the fluctuation in rates. One commenter asserted that the wide variability in PHP APC payment rates from year-to-year does not allow quality providers to plan for and to maintain services in a predictable way. Another commenter believed that the erratic payment rate structure could diminish access to care because providers may be unable to forecast statistical and financial parameters based on the proposed PHP APC payment rates.

In response to our solicitation for public comments in the proposed rule on what the industry believed was causing the fluctuation in payment rates, a few commenters stated that other types of hospitals (rehabilitation, long-term acute care, and inpatient psychiatric facilities) are now providing PHP-like services, and questioned whether the cost structure of these facilities could be distorting PHP APC payment rates. Another commenter stated that as providers move away from PHPs and toward other mental health care options, the sample size used in calculating payment rates is smaller. The commenter further stated that volumes of services in a few areas could take on greater influence in the calculations and affect costs, creating instability in the PHP APC payment rates and difficulty in planning.

A few commenters mentioned that their PHPs had not experienced significant operational or clinical protocol changes, and no changes in the personnel delivering the mix of services that would support a reduction in the geometric mean per diem costs. Several commenters stated that almost one-third of the proposed PHP APC payment rate reduction could be explained by the budget neutrality adjustment, which disproportionately affects PHPs, and which, for CY 2015, may have led to payment rates that are less than the geometric mean per diem costs.

A few commenters cited a study that they had a contractor conduct to investigate the fluctuations. The commenters stated that the study results did not suggest that the tiered payments, the use of a geometric mean versus a median methodology, the different payments by site of service, or provider-driver factors, such as service-mix or patient-mix, were the source of the problem. The commenters noted that the study found a dramatic decrease in the total volume of PHP services provided, but an increase in hospital-based PHP days, particularly for Level II services. The commenters believed that this shift to providing more hospital-based PHP services has partially offset the decline in CMHC PHP days and may have caused PHP costs to fluctuate. The commenters suggested several areas for potential future study, including the shift of services from CMHCs to hospital-based PHPs, a different of mix of providers within the hospital category, other types of hospitals newly offering PHP services, volume, and the size of hospitals and of PHPs.

Response: We acknowledge the difficulties in planning and budgeting that can occur when payments fluctuate, or when payment rates decline. However, we are continuing to pay for PHP services based on provider data. We also believe that changes in payment rates from one year to the next are appropriate in a payment system that is annually updated to more accurately estimate the cost of a service upon which the relative payment weights are based. We continue to believe that payment rates for PHP services have fluctuated from year to year based on a variety of factors, including direct changes to the PHP APC per diem payment rate, and changes to the OPPS. Over the past several years, we have made changes to the OPPS methodology for calculating PHP APC per diem payment rates to more accurately align the payments with costs. The changes have included establishing two PHP APC payment tiers, establishing separate APCs and associated per diem payment rates for CMHCs and hospital-based providers based on each provider's costs, and basing payments on the geometric mean costs rather than on median costs.

In addition, the OPPS is a budget neutral payment system and, as a result, changes in the relative payment weights associated with certain services may affect those of other services in the payment system. Furthermore, provider-driven changes, such as a provider's decision to change its mix of services or to change its charges and clinical practice for some services, may cause fluctuations in the per diem payment rates. We provided a detailed discussion of possible reasons for the fluctuation in the rates in the CY 2015 OPPS/ASC proposed rule (79 FR 41012) and in section VIII.B. of this final rule with comment period.

We appreciate the commenters' providing possible reasons for fluctuations or declines in the payment rates. While several providers noted that their operations have not changed to support a decline in payments, we reiterate that our payment rates are based upon claims and cost data submitted to us by providers and, therefore, reflect the cost of what providers expend to maintain such programs. We also acknowledge the variables raised by the commenters that could cause the payment rate fluctuations and the study that several commenters had commissioned to look into PHP payments. We are unable to comment directly on the study results because we are not certain of the detailed methods used for this study. However, we appreciate the areas of potential future study suggested by commenters, and will take them into consideration in future analyses.

Comment: Many commenters stated that the methodology for calculating payment rates was “flawed and illogical” and asked CMS to reexamine the methodology to determine why payment rates are declining. The commenters suggested that CMS consider other methods for paying for PHP services, such as removing PHP services from APC group assignments and creating PHPs under an independent payment status, such as is done under the home health benefit. The commenters suggested that CMS establish a base payment rate for PHP services at a higher level than the current mean cost, and annually adjust the base rate by an inflation factor.

A few commenters supported the two-tiered payment methodology. However, the commenters suggested using only hospital-based data, which was implemented in CY 2009. Some commenters disagreed with CMS paying PHPs differently by site of service. One commenter disputed CMS' assertion that CMHCs generally provide fewer PHP services in a day. The commenter stated that claims information indicates that CMHCs submit a greater percentage of their claims for 4 or more services per day. The commenter added that CMS does not collect wage data on CMHCs in its costs reports. Several commenters did not support continued use of the CY 2014 policy, which uses the geometric mean per diem costs to calculate PHP payment rates.

Many commenters suggested other alternatives to the current payment system, such as developing oversight strategies for poorly performing CMHCs if their performance suggests a high risk of fraud, and allowing top performing CMHCs to admit patients into intensive outpatient programs similarly structured as PHPs. One commenter noted that some hospital-based providers are moving away from PHPs and providing programs that are structured similarly to a PHP, but are not Medicare-certified PHPs (that is, providing several individual mental health services in a day that would be similar to a PHP, but providers are not enrolled as a PHP). The commenter stated that the programs similar to PHPs would require fewer services and be subject to fewer regulatory requirements (for example, no certification or recertification, no physical examination requirement, and no minimum attendance mandate), and yet have similar payment rates as those established for PHPs. The commenter suggested that CMS require that these programs bill for furnishing these services under the mental health services composite APC under the OPPS, with payment aligned with how commercial insurers pay for these services. The commenter also suggested that CMS consider policy levers to ease regulatory requirements for administering PHPs.

Response: The OPPS successfully pays for outpatient services provided, such as and including partial hospitalization services, and we disagree that the system is flawed and illogical. This system bases payment on the geometric mean costs of providing the service or services using provider data from claims and cost reports. As discussed above, we believe this system provides appropriate payment for partial hospitalization services based on provider costs.

Sections 1833(t)(2) and 1833(t)(9) of the Act set forth the requirements for establishing and adjusting the OPPS payment rates, including the PHP payment rates. As such, we are directed to pay for these services under the OPPS (which uses APCs) and may not remove these PHP services from the OPPS and pay for them separately (such as by establishing a base rate and annually adjusting it for inflation). The estimated costs of the PHP APCs are based on the most updated cost and claims data. The OPPS conversion factor used to calculate payments for those PHP APCs is updated by a market basket each year. While we continuously examine ways in which the data process could be improved, we also welcome and appreciate public comment with regard to potential improvements. Similarly, we appreciate the meaningful comments that stakeholders provided regarding ways that the cost modeling process could be more accurate or methods to extract more appropriate data from the claims available for OPPS cost modeling. For a more detailed discussion of the OPPS ratesetting process, including PHP payments, we refer readers to the CY 2015 OPPS Final Rule Claims Accounting document, available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Click on the link for “Hospital Outpatient Regulations and Notices”, then on the link to the CY 2015 OPPS final rule, and then on the CY2015 OPPS Claims Accounting document.

With respect to the commenters' request to return to the two-tiered payment methodology calculated using only hospital-based data that was implemented in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693), we refer commenters to the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994). Because the cost of providing PHP services differs significantly by site of service, in CY 2011, we implemented differing PHP payment rates for hospital-based PHPs and CMHCs. We added two new APCs (APCs 0175 and 0176) for PHP services provided by hospitals, and based the relative payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were designated for PHP services provided by CMHCs and were based on a blend of CMHC and hospital data. We calculate the PHP APC per diem payment rates based on the data provided for each type of provider in order to pay for services. The resulting PHP APC per diem payment rates reflect the cost of what providers expend to maintain such programs based on data provided by these types of providers, which we believe is an improvement over the two-tiered payment methodology calculated using only hospital-based data.

In regard to the commenters' concerns regarding the use of geometric mean rather than the median, in the CY 2013 OPPS/ASC final rule with comment period, we established the geometric mean rather than the median as the measure upon which to base the relative payment weights that underpin the OPPS APCs, including the four PHP APCs (77 FR 68406 to 68412). The CY 2015 PHP APC per diem payment rates are based on geometric mean costs. While a few commenters disagreed with our use of geometric mean costs, we believe that the use of geometric mean costs rather than median costs represents an improvement to our cost estimation process. As we stated in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68409), we believe that including outlier observations in developing the relative payment weights and capturing the full range of service costs lead to more accurate relative payment weights. In addition to better incorporating those cost values that surround the median and, therefore, describing a broader range of cost patterns, basing the relative payment weight on geometric mean costs also may promote better stability in the payment system by making OPPS payments more reflective of the range of costs associated with providing services. Further, applying the geometric mean to the PHP APCs helps ensure that the relativity of the OPPS payment weights is properly aligned. We do not believe that paying for some services based on median costs, while using geometric mean costs for other services is appropriate or equitable.

We believe that paying providers using the four PHP APC per diem payment rates based on the methodologies described above supports continued access to the PHP benefit, while also providing appropriate payment based on the unique cost structures of CMHCs and hospital-based PHPs. We also believe that each of these policies enables us to continue our responsible stewardship of the Medicare Trust Fund by more accurately matching payments with costs. For a full discussion of each of these policies implemented in prior rulemaking, including details on the rationales, we refer readers to the above-mentioned final rules with comment period, which are available on the CMS OPPS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

In response to the commenters' concerns regarding CMS' statement that CMHCs provide fewer services in a day, as stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75047 through 75050), we are calculating the payment rates for PHP services based on the claims and cost data submitted by providers. The updated data used for calculating payments for this CY 2015 OPPS/ASC final rule with comment period indicate that CMHCs do indeed have a greater percentage of PHP days with 4 or more services, compared to hospital-based PHPs (94.6 percent of days compared to 88.3 percent of days, respectively). However, in spite of their providing a greater percentage of days with 4 or more services, our updated cost data continue to show that CMHC costs per day are lower than those of hospital-based PHPs.

In response to the question about wage data, CMHCs are required to include wage data for their staff on their cost reports, with certain exceptions. We direct readers to Medicare's cost reporting instructions for CMHCs that are available online in the Provider Reimbursement Manual, Part 2, Chapter 18 on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html?DLPage=1DLSort=0DLSortDir=ascending.

With respect to the suggestion that CMS develop oversight strategies for poor performing CMHCs with conduct that suggests potential fraud, we already have oversight strategies in place for providers that operate in a questionable manner. For example, MACs perform medical reviews of certain PHP claims, and PHP providers with claims that present ongoing concerns may have their claims placed on prepayment review. In some cases, CMHC and hospital-based PHP payments may be suspended or a CMHC's or hospital's billing privileges may be revoked. Our Office of Financial Management (OFM) has Recovery Audit Contractors (RACs), which regularly identify and collect overpayments from Medicare providers. Additionally, the Center for Program Integrity (CPI) and Zone Program Integrity Contractors (ZPICs) investigate potential fraud, waste, and abuse across the Medicare program, including potential concerns within CMHCs. Finally, the Office of Inspector General (OIG) and other law enforcement agencies continue in their efforts to address fraud and abuse throughout the Medicare program, including questionable billing for partial hospitalization services.

With respect to the commenters' request to allow top performing CMHCs to admit beneficiaries who require partial hospitalization services into outpatient programs that are structured similarly to PHPs, Medicare covers and pays for reasonable and necessary PHP services provided by hospitals and CMHCs under the OPPS. While some private insurers and some State Medicaid programs recognize other types of intensive outpatient mental health programs as a distinct benefit like PHP services, the Medicare program does not. However, hospitals may provide and bill for individual services that make up various other mental health programs.

Because all Medicare outpatient mental health services are capped at the hospital-based Level II PHP per diem payment rate, from a payment standpoint, it does not matter how many of these individual services are billed to Medicare because payment will never exceed the hospital-based Level II PHP per diem payment rate. However, CMHCs may only be paid for partial hospitalization services under the OPPS.

We are constantly monitoring the OPPS in search of potential refinements that would improve the accuracy and stability of the payment system. We are unclear about the policy changes that the commenters suggested that we make regarding easing the regulatory requirements for administering PHPs. Some of the PHP requirements are set forth in the statute. For example, physician certification and recertification requirements for PHP services are set forth in section 1835(a)(2)(F) of the Act and would require Congressional legislation to change. However, if providers have suggestions for specific policy changes to improve PHP operations while safeguarding access to PHP services and paying accurately for these services, we welcome those suggestions during rulemaking or through other dialogue with the industry.

Comment: Many commenters described the key role that PHPs play in the continuum of care for patients with mental health issues. A number of commenters stated that if CMS moved forward with the proposed payment rates, much-needed PHP programs would struggle to remain financially viable. Multiple commenters believed that additional reductions in payments for CY 2015 would limit the ability of hospitals and CMHCs to provide these vital psychiatric services, reducing capacity or leading to closures, especially in rural areas, and thereby reducing access to care for Medicare patients. Several commenters noted that, as access to PHP services decreases, the decreases could lead to patients not receiving any services or to patients receiving services that are not appropriate for their needs; to use of more expensive inpatient psychiatric services; or to use of already stressed emergency departments. One commenter believed that CMS was concerned about the potential for hospital-based PHP closures, but not about CMHC closures.

Response: In response to commenters' concern about reduced PHP payment rates leading to decreased capacity and PHP closures, thereby reducing access to care and further eroding the viability of the safety net system, we emphasize again that the resulting PHP APC per diem payment rates for CY 2015 reflect the costs of what providers expend to maintain PHP programs. Therefore, it continues to be unclear to us why reduced PHP payment rates would lead to reduced capacity or program or business closures. As noted previously, the final CY 2015 per diem costs increased for CMHCs compared to CY 2014, and decreased less than proposed for hospital-based PHPs. As we stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74350), the closure of PHPs may be due to any number of reasons, such as poor business management or marketing decisions, competition, oversaturation of certain geographic areas, and Federal and State fraud and abuse efforts, among others. It does not directly follow that closure could be due to reduced per diem payment rates alone, especially when these per diem payment rates reflect the costs of PHP providers as stated in claims and cost data.

In response to the commenters' concerns that further reduction in the CMHC and hospital-based PHP APC per diem payment amounts could further erode the viability of the safety net system and make it more difficult for patients to receive needed mental health services, we take such concerns seriously for both CMHCs and hospital-based PHPs. We will continue to monitor facility closings and openings for both rural and urban areas to make sure that access issues do not exist. We also remain steadfast in our concern regarding access to care for all beneficiaries, while also providing appropriate payments for such care.

A PHP is not the only program in which a Medicare beneficiary is able to receive needed mental health care. Access to other forms of mental health services is also available. Although not equivalent to a PHP, Medicare provides payment for outpatient mental health services in addition to PHP services. Many beneficiaries in need of mental health treatment receive other outpatient services generally from hospital programs that are available nationwide.

Comment: Many commenters suggested that future payment rates be tied to quality criteria. One commenter recommended a payment system that rewards individual providers for outstanding quality and outcomes while keeping costs under control, and suggested that CMS use value-based purchasing rather than “antiquated cost reimbursement-based purchasing.” One commenter suggested that CMS conduct an analysis to determine what quality PHP care entails in terms of costs and staffing, rather than basing payment rates on reported costs.

Response: We responded to a similar public comment in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68410 through 68411) and refer readers to a summary of that comment and our response. Sections 1833(t)(2) and 1833(t)(9) of the Act set forth the requirements for establishing and adjusting OPPS rates, which include PHP rates. Section 1833(t)(17) of the Act authorizes the Hospital OQR Program, which applies a payment reduction to subsection (d) hospitals that fail to meet program requirements. In the CY 2015 OPPS/ASC proposed rule (79 FR 41040), we considered future inclusion of, and requested comments on, the following quality measures addressing PHP issues that would apply in the hospital outpatient setting: (1) 30-Day Readmissions; (2) Group Therapy; and (3) No Individual Therapy. We refer readers to section XIII. of this final rule with comment period for a more detailed discussion of PHP measures considered for inclusion in the Hospital OQR Program in future years. The Hospital OQR Program does not apply to CMHCs. Further, currently, there is no statutory language explicitly authorizing a value-based purchasing program for PHPs. With respect to the suggestion of conducting an analysis to determine what quality PHP care entails in terms of costs and staffing, we will take the suggestion into consideration in future analyses.

We do not consider the OPPS, the system under which PHPs are paid, to be “antiquated.” Rather, we find the OPPS to be a robust system, which aligns payments with provider costs. As noted previously, we regularly monitor the OPPS and, in recent years, have made changes to further improve the system's ability to pay accurately for services provided.

Comment: Many commenters noted that they provide services to Medicare beneficiaries which they cannot bill for on their claims. The services cited by the commenters included, for example: Assisting patients in finding appropriate housing; accessing other health care services; obtaining medications; working through issues with family members; accessing transportation to medical and other appointments; assisting with information and appointments with Social Security; answering Medicare questions; accessing food banks and food stamps; obtaining eye and dental services; and integrating highly volatile and anxious patients into the milieu without upsetting the environment. Commenters stated that, currently, there is no way to show through the billing process that these events take place because there are no billing codes that capture these activities.

Response: Section 1861(ff) of the Act and 42 CFR 410.43 describe the items and services included in partial hospitalization services. As set forth in these sections, partial hospitalization services generally consist of a variety of group, individual, and family psychotherapy sessions, supplemented with occupational therapy, the services of social workers, trained psychiatric nurses, and other staff trained to work with psychiatric patients, drugs and biologicals furnished for therapeutic purposes that cannot be self-administered, diagnostic services, education and training, and certain activity therapies designed to stabilize an acute episode of mental illness. Section 1861(ff)(2)(I) of the Act explicitly excludes meals and transportation from the items and services included in partial hospitalization services. The PHP APC per diem payment rate is the bundled payment for partial hospitalization services. Only the items and services specifically identified in the statute and regulations are considered partial hospitalization services. All other items and services are not paid as part of partial hospitalization services.

Comment: A number of commenters asked that CMS have a dialogue with the PHP industry, and that the public comments on the proposed rule be directly addressed by CMS in an open forum where ideas could be cooperatively shared.

Response: We maintain positive working relationships with various industry leaders representing both CMHCs and hospital-based PHP providers with whom we have consistently met over the years to discuss industry concerns and ideas. These relationships have provided significant and valuable input regarding PHP ratesetting. We also hold Hospital Outpatient Open Door Forum calls monthly, in which all individuals are welcome to participate and/or submit questions regarding specific issues, including questions related to PHPs. Furthermore, we initiate rulemaking annually, through which we receive public comments on proposals set forth in a proposed rule, and we respond to those comments in a final rule. All individuals are provided an opportunity to comment, and we give consideration to each comment that we receive. Given the relationships that we have established with various industry leaders and the various means for us to receive comments and recommendations, we believe that we receive adequate input regarding PHP ratesetting and take that input into consideration when establishing the PHP per diem payment amounts. We continue to welcome any input and information that the industry is willing to provide.

Comment: Several commenters requested a better understanding of the Program for Evaluating Payment Patterns Electronic Report (PEPPER), the areas of risk it has identified, how the PEPPER fits into fraud and abuse efforts, and how the PEPPER fits into the benefit in general, and indicated that this information might be helpful to providers. The commenters expressed concern regarding various areas of risk cited by the PEPPER, including “No individual therapy.” The commenter stated that although most providers furnish individual therapy, it is often not documented or billed as it is not included in the local coverage determinations (LCDs).

Response: The PEPPER is a data report that contains statistics for each PHP area identified nationally to be at risk for improper payment (referred to in the report as “target areas”). Each PEPPER contains a single PHP provider's claims data statistics, obtained from claims submitted to the MAC for these target areas. PEPPER does not identify the presence of improper payments, but it can be used by the provider as a guide for auditing and monitoring efforts. A provider can use the PEPPER to compare its claims data over time to identify areas of potential concern and to identify changes in billing practices. When a provider is sent a PEPPER, the report includes a user's guide, which describes the PEPPER and the target areas, among other things, and provides contact information for additional questions or information. Additional information on the PEPPER, including training and resources, is available at the PEPPER Web site at: http://pepperresources.org/.

Regarding “individual therapy,” which is one area of risk that the PEPPER is assessing, individual therapy is a partial hospitalization service. For a review of the partial hospitalization services, we refer readers to section 1861(ff)(2)(A) of the Act and our regulations at 42 CFR 410.43(a)(4)(i). We expect that providers would furnish individual therapy services as one of the services provided within a PHP.

Comment: One commenter noted that new Medicare conditions of participation (CoPs) are about to become effective for CMHCs, and stated that most CMHCs are unaware of them. One commenter noted that complying with the new CoPs would increase its costs. The commenter also stated that, under a provision of the Affordable Care Act that became effective October 1, 2014, providers need to be aware that a CMHC must provide at least 40 percent of its items and services to individuals who are not eligible for benefits under Medicare.

Response: The Conditions of Participation for Community Mental Health Centers final rule (78 FR 64604, October 29, 2013) established, for the first time, CoPs that CMHCs must meet in order to participate in the Medicare program. The CMHC CoPs are codified in 42 CFR Part 485, Subpart J, and became effective on October 29, 2014. Prior to the issuance of this final rule, on June 17, 2011, CMS issued a proposed rule (76 FR 35684) outlining the CoPs for Medicare-certified CMHCs. The proposed rule was open to public comment until August 16, 2011. Also, CMS issued press releases and fact sheets on the CoPs. CMS also has been working with trade organizations and the States to inform providers about the CoPs and the implementation date. Therefore, we believe that all CMHCs should be aware of these new requirements. More information on the CoPs for CMHCs can be found at 42 CFR Part 485, and through the link to the final rule at: http://www.gpo.gov/fdsys/pkg/FR-2013-10-29/pdf/2013-24056.pdf. The proposed rule can be accessed through the following link on the Web site found at: http://www.gpo.gov/fdsys/pkg/FR-2011-06-17/pdf/2011-14673.pdf. The final rule fact sheets can be accessed through the following link to the Web site found at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2013-Fact-sheets-items/2013-10-28.html. The proposed rule press release can be accessed through the following link to the Web site found at: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2011-Press-releases-items/2011-06-16.html. We believe that the cost associated with the CoPs is a reasonable and necessary business expense to ensure the health and safety of all CMHC clients. In addition, effective October 29, 2014, under 42 CFR 485.918(b)(1)(v), pursuant to section 1861(ff)(3)(B) of the Act, a CMHC must provide at least 40 percent of its items and services to individuals who are not eligible for benefits under title XVIII of the Social Security Act, as measured by the total number of CMHC clients treated by the CMHC for whom services are not paid by Medicare, divided by the total number of clients treated by the CMHC in the applicable timeframe. Under this requirement, a newly enrolling or revalidating CMHC must submit to CMS a certification statement provided by an independent entity (such as an accounting technician). The document must indicate that (1) the entity has reviewed the CMHC's client care data, and (2) the CMHC meets the applicable 40 percent requirement. (We refer readers to 78 FR 64620). CMS has issued a change request that instructs MACs on the processing of such CMHC certifications. This requirement implements the provision of the Affordable Care Act noted by the commenter. For more detailed information, we refer readers to the Conditions of Participation for Community Mental Health Centers final rule (78 FR 64604).

Comment: A number of commenters noted the complexities of abiding by the LCDs on PHPs and believed that such LCDs are making it difficult for hospital-based PHP providers to continue to provide PHP services. Some commenters questioned whether the LCDs should be clarified or updated.

Response: LCDs issued by MACs specify under what clinical circumstances an item or service is considered to be reasonable and necessary. They are administrative and educational tools to assist providers in submitting correct claims for payment. The MACs publish LCDs to provide guidance to the public and medical community within their jurisdictions. The MACs develop LCDs by considering medical literature, the advice of local medical societies and medical consultants, public comments, and comments from the provider community. LCDs must be consistent with the statutory requirements for the Medicare program and with Medicare regulations and guidance. More information about LCDs can be found in the CMS Program Integrity Manual (Internet only manual) 100-08, Chapter 13, available at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/pim83c13.pdf.

Providers with questions about LCDs should contact their MAC for clarification or assistance. Inquiries of a clinical nature, such as the rationale behind coverage or noncoverage of certain items or services, are handled within the Medical Review (MR) department under the MAC responsible for the development of the LCD.

Comment: One commenter recommended that the annual payment update for PHP APCs reflect the market basket update that is applied to all other OPPS APCs.

Response: The PHP APC payment rates are based on the OPPS conversion factor, to which the market basket update is applied. Therefore, the market basket update is applied to the PHP APC payment rates. The OPPS conversion factor is discussed in further detail in section II.B. of this final rule with comment period.

Comment: One commenter stated that physicians are billing inpatient codes rather than PHP codes. The commenter believed that the change in physician reporting may have altered what facilities reported, which would have reduced the number of facility fees reported, and skewed the APC data downward. The commenter recommended that CMS conduct an analysis of the frequency and type of CPT codes that have been submitted for PHP over the last 3 years.

Response: As stated in section 1861(ff) of the Act and 42 CFR 410.43, payment for partial hospitalization services generally represents the provider's overhead costs, support staff, some drugs and the services of some nurses, clinical social workers, and occupational therapists, whose professional services are considered to be partial hospitalization services for which payment is made to the provider. Physician services that meet the requirements of 42 CFR 415.102(a) are separately covered and not paid as part of partial hospitalization services. Therefore, we do not use physician claims in developing the PHP APC geometric mean per diem costs and it is unclear to us how physician billing would impact PHP APC payment rates.

Regarding the recommendation that CMS conduct an analysis of the frequency and type of CPT codes that have been submitted for PHP services over the last 3 years, we will take the suggestion under consideration for future rulemaking, as we strengthen the PHP payment structure.

In summary, after consideration of the public comments we received, we are finalizing our CY 2015 proposal, without modification, to update the four PHP APC per diem costs based on geometric mean cost levels calculated using the most recent claims and cost data for each provider type. The updated PHP APCs geometric mean per diem costs for PHP services that we are finalizing for CY 2015 are shown in Table 39 and 40 below. As noted earlier in this section, we refer readers to Addendum A to this final rule with comment for the final PHP APC payment rates.

C. Separate Threshold for Outlier Payments to CMHCs

As discussed in the CY 2004 OPPS final rule with comment period (68 FR 63469 through 63470), after examining the costs, charges, and outlier payments for CMHCs, we believed that establishing a separate OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific outlier policy would direct OPPS outlier payments towards genuine cost of outlier cases, and address situations where charges were being artificially increased to enhance outlier payments. We created a separate outlier policy that would be specific to the estimated costs and OPPS payments provided to CMHCs. We note that, in the CY 2009 OPPS/ASC final rule with comment period, we established an outlier reconciliation policy to comprehensively address charging aberrations related to OPPS outlier payments (73 FR 68594 through 68599). Therefore, beginning in CY 2004, we designated a portion of the estimated OPPS outlier target amount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS each year, excluding outlier payments, and established a separate outlier threshold for CMHCs.

The separate outlier threshold for CMHCs resulted in $1.8 million in outlier payments to CMHCs in CY 2004, and $0.5 million in outlier payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments. We believe that this difference in outlier payments indicates that the separate outlier threshold for CMHCs has been successful in keeping outlier payments to CMHCs in line with the percentage of OPPS payments made to CMHCs.

In the CY 2015 OPPS/ASC proposed rule (79 FR 41012), we proposed to continue designating a portion of the estimated 1.0 percent outlier target amount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS in CY 2015, excluding outlier payments. CMHCs are projected to receive 0.03 percent of total OPPS payments in CY 2015, excluding outlier payments. Therefore, we proposed to designate 0.47 percent of the estimated 1.0 percent outlier target amount for CMHCs, and establish a threshold to achieve that level of outlier payments. Based on our simulations of CMHC payments for CY 2015, in the CY 2015 OPPS/ASC proposed rule, we proposed to continue to set the threshold for CY 2015 at 3.40 times the highest CMHC PHP APC payment rate (that is, APC 0173 (Level II Partial Hospitalization)) (79 FR 41012). We stated that we continue to believe that this approach would neutralize the impact of inflated CMHC charges on outlier payments and better target outlier payments to those truly exceptionally high-cost cases that might otherwise limit beneficiary access. In addition, we proposed to continue to apply the same outlier payment percentage that applies to hospitals. Therefore, for CY 2015, we proposed to continue to pay 50 percent of CMHC per diem costs over the threshold. In section II.G. of the CY 2015 OPPS/ASC proposed rule (79 FR 41012), for the hospital outpatient outlier payment policy, we proposed to set a dollar threshold in addition to an APC multiplier threshold. Because the PHP APCs are the only APCs for which CMHCs may receive payment under the OPPS, we would not expect to redirect outlier payments by imposing a dollar threshold. Therefore, we did not propose to set a dollar threshold for CMHC outlier payments.

In summary, in the CY 2015 OPPS/ASC proposed rule, we proposed to establish that if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. We invited public comments on these proposals.

We did not receive any public comments regarding our proposed outlier policy. Therefore, we are finalizing our CY 2015 proposal to set a separate outlier threshold for CMHCs. As discussed in section II.G. of this final rule with comment period, using more recent data for this final rule with comment period, we set the target for hospital outpatient outlier payments at 1.00 percent of total estimated OPPS payments. We allocated a portion of the 1.00 percent, an amount equal to 0.65 percent of outlier payments, or 0.0065 percent of total estimated OPPS payments, to CMHCs for PHP outlier payments. For CY 2015, as proposed, we are setting the CMHC outlier threshold at 3.40 multiplied by the APC 0173 payment rate and the CY 2015 outlier percentage applicable to costs in excess of the threshold at 50 percent. In other words, if a CMHC's cost for partial hospitalization services paid under either APC 0172 or APC 0173 exceeds 3.40 times the payment rate for APC 0173, the outlier payment will be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74352 through 74353) for a full historical discussion of our longstanding policies on how we identify procedures that are typically provided only in an inpatient setting (referred to as the inpatient list) and, therefore, will not be paid by Medicare under the OPPS; and on the criteria that we use to review the inpatient list each year to determine whether or not any procedures should be removed from the list.

B. Changes to the Inpatient List

In the CY 2015 OPPS/ASC proposed rule (79 FR 41012 through 41013), for the CY 2015 OPPS, we proposed to use the same methodology (described in the November 15, 2004 final rule with comment period (69 FR 65835)) of reviewing the current list of procedures on the inpatient list to identify any procedures that may be removed from the list. The established criteria upon which we make such a determination are as follows:

1. Most outpatient departments are equipped to provide the services to the Medicare population.

2. The simplest procedure described by the code may be performed in most outpatient departments.

3. The procedure is related to codes that we have already removed from the inpatient-only list.

4. A determination is made that the procedure is being performed in numerous hospitals on an outpatient basis.

5. A determination is made that the procedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list.

Using this methodology, we did not identify any procedures that potentially could be removed from the inpatient list for CY 2015. Therefore, we proposed to not remove any procedures from the inpatient list for CY 2015.

After our annual review of APCs and code assignments as required by section 1833(t)(9) of the Act and further clinical review performed by CMS medical officers, we proposed to add CPT code 22222 (Osteotomy of spine, including discectomy, anterior approach, single vertebral segment; thoracic) to the CY 2015 inpatient list.

The complete list of codes that we proposed to be paid by Medicare in CY 2015 only as inpatient procedures was included as Addendum E to the proposed rule (which is available via the Internet on the CMS Web site).

Comment: Several commenters supported CMS' proposal to add CPT code 22222 to the inpatient list.

Response: We appreciate the commenters' support.

Comment: Several commenters requested that CMS remove CPT codes 0312T (Vagus nerve blocking therapy (morbid obesity); laparoscopic implantation of neurostimulator electrode array, anterior and posterior vagal trunks adjacent to esophagogastric junction (EGJ), with implantation of pulse generator, includes programming); 43771 (Laparoscopy, surgical, gastric restrictive procedure; revision of adjustable gastric restrictive device component only); 43772 (Laparoscopy, surgical, gastric restrictive procedure; removal of adjustable gastric restrictive device component only); 43773 (Laparoscopy, surgical, gastric restrictive procedure; removal and revision of adjustable gastric restrictive device component only); 43774 (Laparoscopy, surgical, gastric restrictive procedure; removal of adjustable gastric restrictive device and subcutaneous port components); 54411 (Removal and replacement of a multi-component inflatable penile prosthesis through an infected field at the same operative session); and 54417 (Removal and replacement of a non-inflatable (semi-rigid) or inflatable (self-contained) penile prosthesis through an infected field at the same operative session) from the CY 2015 inpatient list based on their own experience, specialty society recommendation, or designation of a procedure as safe in the outpatient setting under one of the many clinical guidelines available.

Response: We reevaluated data on CPT codes 0312T, 43771, 43772, 43773, 43774, 54411, and 54417 using recent utilization data and further clinical review performed by CMS' medical advisors. As a result of the reevaluation, we have determined that these procedures can be safely performed only in the inpatient setting. We are not removing them from the inpatient list for CY 2015.

Comment: Some commenters requested that CPT code 63044 (Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated intervertebral disc, reexploration, single interspace; each additional lumbar interspace) be removed from the inpatient list.

Response: We reevaluated data on CPT code 63044 using recent utilization data and further clinical review performed by CMS medical advisors. As a result of the reevaluation, we agree with the commenters that this procedure can be safely performed in the outpatient setting. In addition, as a result of our reevaluation, we believe that CPT code 63043 (Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated intervertebral disc, reexploration, single interspace; each additional cervical interspace) can be safely performed in the outpatient setting. Therefore, we are removing CPT codes 63043 and 63044 from the inpatient list. Because CPT codes 63043 and 63044 are add-on codes, they are being assigned status indicator “N” for CY 2015.

Comment: Other commenters urged CMS to continue reviewing its inpatient only policy in light of ongoing changes in delivery systems and procedural safety and technological advances.

Response: We agree with the commenters and will continue to review the inpatient only policy.

After consideration of the public comments we received, we are finalizing our proposals for the inpatient only list, with modifications. We are removing CPT codes 63043 and 63044 from the inpatient list and adding CPT code 22222 (Osteotomy of spine, including discectomy, anterior approach, single vertebral segment; thoracic) to the CY 2015 inpatient list.

The complete list of codes that will be paid by Medicare in CY 2015 only as inpatient procedures is included as Addendum E to this final rule with comment period (which is available via the Internet on the CMS Web site.

X. Nonrecurring Policy Changes: Collecting Data on Services Furnished in Off-Campus Provider-Based Departments of Hospitals

As we discussed in the CY 2014 OPPS/ASC proposed rule and final rule with comment period (78 FR 43626 and 78 FR 75061) and in the CY 2014 Medicare Physician Fee Schedule (MPFS) proposed rule and final rule with comment period (78 FR 43301 and 78 FR 74427), in recent years, the research literature and popular press have documented the increased trend toward hospital acquisition of physician practices, integration of those practices as a department of the hospital, and the resultant increase in the delivery of physicians' services in a hospital setting. When a Medicare beneficiary receives outpatient services in a hospital, the total payment amount for outpatient services made by Medicare is generally higher than the total payment amount made by Medicare when a physician furnishes those same services in a freestanding clinic or in a physicians' office.

In the CY 2015 OPPS/ASC proposed rule (79 FR 41013), we stated that we continue to seek a better understanding of how the growing trend toward hospital acquisition of physicians' offices and subsequent treatment of those locations as off-campus provider-based departments (PBDs) of hospitals affects payments under the MPFS and the OPPS, as well as beneficiary cost-sharing obligations. We also noted that MedPAC continues to question the appropriateness of increased Medicare payment and beneficiary cost-sharing when physicians' offices become hospital outpatient departments and to recommend that Medicare pay selected hospital outpatient services at MPFS rates (MedPAC March 2012 and June 2013 Report to Congress). In order to understand how this trend is affecting Medicare, we need information on the extent to which this shift is occurring. To that end, during the CY 2014 OPPS/ASC rulemaking cycle, we sought public comment regarding the best method for collecting information and data that would allow us to analyze the frequency, type, and payment for physicians' and outpatient hospital services furnished in off-campus PBDs of hospitals (78 FR 75061 through 75062 and 78 FR 74427 through 74428). In response to our solicitation, we received many detailed public comments. However, the commenters did not present a consensus opinion regarding whether this data collection was advisable or which data collection method would be preferable. Based on our analysis of the public comments we received, we proposed for the CY 2015 OPPS/ASC proposed rule that the most efficient and equitable means of gathering this important information across two different payment systems would be to create a HCPCS modifier to be reported with every code for physicians' services and outpatient hospital services furnished in an off-campus PBD of a hospital on both the CMS-1500 claim form for physicians' services and the UB-04 form (CMS Form 1450) for hospital outpatient services. We noted that a main provider may treat an off-campus facility as provider-based if certain requirements in 42 CFR 413.65 are satisfied, and we define a “campus” at 42 CFR 413.65(a)(2) to be the physical area immediately adjacent to the provider's main buildings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yards of the main buildings, and any other areas determined on an individual case basis, by the CMS regional office, to be part of the provider's campus.

Section 220(a)(1) of the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93) added a new subparagraph (M) under section 1848(c)(2) of the Act that granted CMS the authority to engage in data collection to support valuation of services paid under the MPFS. In the CY 2015 OPPS/ASC proposed rule, we indicated that we are seeking more information on the frequency and type of services furnished in PBDs under this authority to improve the accuracy of MPFS practice expense payments for services furnished in off-campus PBDs. We discussed this issue in more detail in the CY 2015 MPFS proposed rule (79 FR 40333). In that discussion, we noted our concerns that our current MPFS practice expense methodology primarily distinguishes between the resources involved in furnishing services in two sites of service: the nonfacility setting and the facility setting. As more physician practices become hospital-based and are treated as off-campus PBDs, we believe it is important to develop an understanding of which practice expense costs typically are incurred by the physicians and practitioners in the setting, which are incurred by the hospital, and whether the facility and nonfacility site-of-service differentials adequately account for the typical resource costs, given these new ownership arrangements.

To understand how this trend is affecting Medicare, including the accuracy of payments made through the MPFS, we stated in the proposed rule that we need to develop data to assess the extent to which this shift toward hospital-based physician practices is occurring. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 41013), we proposed to collect information on the type and frequency of physicians' services and outpatient hospital services furnished in off-campus PBDs beginning January 1, 2015, in accordance with our authority under section 1848(c)(2)(M) of the Act (as added by section 220(a) of Pub. L. 113-93). As noted above, we proposed to create a HCPCS modifier that is to be reported with every code for physicians' services and outpatient hospital services furnished in an off-campus PBD of a hospital. Under the proposal, the modifier would be reported on both the CMS-1500 claim form for physicians' services and the UB-04 form (CMS Form 1450) for hospital outpatient services. In the proposed rule (79 FR 41013), we sought additional public comments on whether or not the use of a modifier code is the best mechanism for collecting this service-level data in the hospital outpatient department.

Comment: Many commenters agreed on the need to collect information on the frequency, type, and payment of services furnished in off-campus PBDs of hospitals. However, several commenters expressed concern that the HCPCS modifier would create additional administrative burden for providers. Many of these commenters stated that the new modifier would require significant changes to hospitals' billing systems, including a separate chargemaster for outpatient off-campus PBDs and training for staff on how to use the new modifier. Many of these commenters suggested that CMS should re-propose a detailed data collection methodology, test it with providers, make adjustments, and allow additional time for implementation. One commenter suggested that CMS withdraw the current proposal and ask the Advisory Panel on Hospital Outpatient Payment (HOP Panel) to develop a proposal for data collection.

Response: While we understand the commenters' concerns about the additional administrative burden of reporting a new HCPCS modifier, we have weighed the burden of reporting the modifier for each service against the benefit of having data that will allow us to obtain and assess accurate information on the type and frequency of physicians' services and outpatient hospital services furnished in off-campus PBDs. We do not believe that the modifier is excessively burdensome for providers to report. This is especially the case because, under current rules, when billing for services, providers must know where services are performed in order to accurately complete value code 78 of an outpatient claim or the service location portion of a professional claim. However, as discussed later in this section, we agree that a place of service (POS) code on the professional claim allows for the same type of data collection as a modifier on the hospital claim and would be less burdensome than the modifier for practitioner billing. We discuss the timeframe for implementation later in this section. With respect to bringing this proposal to the HOP Panel, we note that such a proposal is outside the scope of the HOP Panel, which is generally charged with advising Medicare on the clinical integrity of APCs and their associate relative payment weights. The proposed modifier is for collecting data and, as structured, does not affect APCs and their associated relative payment weights. Therefore, it would not be appropriate to solicit HOP Panel discussion or recommendations on this proposal on data collection.

Comment: Some commenters who were concerned about the administrative burden of the new HCPCS modifier suggested several alternative methods for CMS to collect data on services furnished in off-campus PBDs. Several of these commenters recommended that CMS consider the establishment of a new POS code for professional claims, or for both professional claims and hospital claims, because they believed this approach would be less administratively burdensome than attaching a modifier to each service reported on the claim that was furnished in an off-campus PBD. Some commenters preferred identifying services furnished in off-campus PBDs on the Medicare cost report (CMS-2552-10). Some commenters suggested using provider numbers and addresses to identify off-campus PBDs, or changing the provider enrollment process to be able to track these data. Other commenters suggested creating a new bill type to track outpatient hospital services furnished in off-campus PBDs.

Commenters generally recommended that CMS choose the least administratively burdensome approach that would ensure accurate data collection, but did not necessarily agree on what approach would optimally achieve that result. Some commenters believed that a HCPCS modifier would more clearly identify specific services furnished at off-campus PBDs, and would provide better information about the type and level of care furnished. Some commenters believed that a HCPCS modifier would be the least administratively burdensome approach because hospitals and physicians already report a number of claims-based modifiers. Other commenters argued that additional modifiers would increase administrative burden because this approach would increase the modifiers that would need to be considered when billing.

Response: With respect to creating a new POS code to obtain data on services furnished in off-campus PBDs of a hospital, we note that POS codes are only reported on professional claims and are not included on hospital claims. Therefore, a POS code could not be easily implemented for hospital claims. However, POS codes are already required to be reported on every professional claim and POS 22 is currently used to report when physicians' services are furnished in an outpatient hospital department. (More information on existing POS codes is available on the CMS Web site at: http://www.cms.gov/Medicare/Coding/place-of-service-codes/Place_of_Service_Code_Set.html.)

Although we considered proposing a new POS code for professional claims to collect data on services furnished in the off-campus PBD setting, we ultimately did not do so, in part because we were aware that previous Government Accountability Office and Office of the Inspector General reports (October 2004, A-05-04-0025; January 2005, A-06-04-00046; July 2010, A-01-09-00503; September 2011, A-01-10-00516) have noted frequent inaccuracies in the reporting of POS codes. In addition, at the time the proposed rule was developed, we had concerns that using a POS code to report this information might not give us the reliable data we are looking to collect, especially if such data were to be crosswalked with hospital claims for the same service, because the hospital claim would have a modifier, not a POS code. However, we have been persuaded by public comments suggesting that use of a POS code would be less administratively burdensome on professional claims than use of a modifier. Specifically, because a POS code is already required on every professional claim, we believe that creating a new POS code to distinguish outpatient hospital services that are furnished on-campus versus off-campus would require less staff training and education than would use of a modifier on the professional claim. In addition, professional claims only have space for four modifiers. While a very small percentage of professional claims have four modifiers, required use of an additional modifier for every professional claim could lead to more occurrences where there would not be space for all applicable modifiers. Unlike hospital claims, we note that a new professional claim is required whenever the place of service changes. That is, even if the same practitioner treats the same patient on the same day in the office and hospital, the services furnished in the office setting must be submitted on one claim with the POS 11 (Office) code, while those furnished in the outpatient hospital department would be submitted on a separate claim with the POS 22 (Outpatient Hospital) code (we note that the POS 22 code will be changing under the final policy). Likewise, if a new POS code were to be created for an off-campus PBD setting, a separate claim for services furnished in that setting would be required relative to a claim for services furnished on the main campus by the same practitioner to the same patient on the same day. Based on public comments and after further consultation with Medicare billing experts, we believe that the use of the POS code on professional claims would be no less accurate than the use of a modifier on professional claims in identifying services furnished in off-campus PBDs. In addition, we believe that the POS code would be less administratively burdensome for practitioners billing using the professional claim because a POS code is already required for every professional claim.

With respect to adding new fields to existing claim forms or creating a new bill type, we do not believe that this data collection warrants these measures. We believe that those changes would create greater administrative burden than a HCPCS modifier or POS code, especially because providers are already accustomed to using modifiers and POS codes. Revisions to the claim form to add new fields or an additional bill type would create significant administrative burden to revise claims processing systems and educate providers, which we believe is not necessary, given the availability of a modifier and POS codes. Although providers may not be familiar with this new modifier or any new POS code; because these types of codes already exist generally for hospital and professional claims, providers and suppliers should already have an understanding of these types of codes and how to apply them. Finally, we do not believe that expansions to the claim form or use of a new bill type would provide us with detailed information on exactly which services were furnished in an off-campus PBD versus those furnished on the main campus when those services are furnished on the same day.

We also do not believe that we could accurately determine which services are furnished at off-campus PBDs using currently available national provider identifier (NPI) and facility address data. Hospitals are required to report the 9-digit zip code indicating where a service was furnished for purposes of paying properly for physician and anesthesia services paid under the MPFS when that zip code differs from the master address for the hospital on file in CMS claims systems (Pub. 100-04, Transmittal 1681, February 13, 2009). However, the billing zip code for the hospital main campus could be broad enough to incorporate on and off-campus PBDs. Further, a zip code reported in value code 78 does not allow CMS to distinguish between services furnished in different locations on the same date. Therefore, we do not believe that a comparison of the zip code captured in value code 78 and the main campus zip code is sufficiently precise.

Finally, while we considered the suggestion that CMS use currently reported Medicare hospital cost report (CMS-2552-10) data to identify services furnished at off-campus PBDs, we note that although aggregate data on services furnished in different settings must be reported through the appropriate cost center, we would not be able to obtain the service-specific level of detail that we would be able to obtain from claims data.

We will take under consideration the suggestion that CMS create a way for hospitals to report their acquisition of off-campus PBDs through the enrollment process, although this information, as currently reported, like many of the suggestions above, would not allow us to know exactly which services are furnished in off-campus PBDs and which services are furnished on the hospital's main campus when a hospital provides both on the same day.

Comment: Commenters noted that the proposed modifier would not allow CMS to know the precise location of the off-campus PBDs for billed services or when services are furnished at different off-campus PBD locations in the same day.

Response: We agree that neither the proposed modifier nor a POS code provides precise information on the specific location of each off-campus PBD for each furnished service. However, we believe having information on the type and frequency of services furnished at all off-campus locations will assist CMS in better understanding the distribution of services between on-campus locations and off-campus locations.

Comment: MedPAC believed there may be some value in collecting data on services furnished in off-campus PBDs to validate the accuracy of site-of-service reporting when the physician's office is off-campus but bills as an outpatient department. MedPAC indicated that any data collection effort should not prevent the development of policies to align payment rates across settings. MedPAC encouraged CMS to seek legislative authority to set equal payment rates across settings for evaluation and management office visits and other select services.

Response: We thank MedPAC for its support of our data collection efforts to better inform the frequency and types of services that are being furnished in off-campus PBDs.

Comment: Many commenters suggested that providers would not be able to accurately apply the new modifier by the January 1, 2015 implementation timeline and recommended a 1-year delay before providers would be required to apply the modifier to services furnished at off-campus PBDs. Some commenters requested only a 6-month delay in implementation. Commenters indicated that significant revisions to internal billing processes would require additional time to implement.

Response: Although we believe that the customary January 1st effective date that applies to most policies adopted in the final rules with comment period for both the MPFS and the OPPS would provide sufficient lead time, we understand the commenters' concerns with the proposed timeline for implementation, given that the new reporting requirements may require changes to billing systems as well as education and training for staff. Accordingly, although we are finalizing our proposal to create a HCPCS modifier for hospital services furnished in an off-campus PBD setting, we are adopting a voluntary reporting period of the new HCPCS modifier for 1 year. That is, reporting the new HCPCS modifier for services furnished at an off-campus PBD will not be mandatory until January 1, 2016, in order to allow providers time to make systems changes, test these changes, and train staff on use of the new modifier before reporting is required. We welcome early reporting of the modifier and believe a full year of preparation should provide hospitals with sufficient time to modify their systems for accurate reporting. With respect to the POS code for professional claims, we will request two new POS codes to replace POS code 22 (Hospital Outpatient) through the POS Workgroup and expect that it will take some time for these new codes to be established. Once the new POS codes are ready and integrated into CMS claims systems, practitioners would be required to use them, as applicable. More information on the availability of the new POS codes will be forthcoming in subregulatory guidance. However, we do not expect the new POS codes to be available prior to July 1, 2015. There will be no voluntary reporting period of the POS codes for applicable professional claims because each professional claim requires a POS code in order to be accepted by Medicare. However, we do not view this to be problematic because we intend to give prior notice on the POS coding changes and, as many of the commenters noted, because practitioners are already accustomed to using a POS code on every claim they submit.

Comment: Many commenters expressed concern that this data collection would eventually lead to equalizing payment for similar services furnished in the nonfacility setting and the off-campus PBD setting. Several commenters noted that the trend of hospitals acquiring physician practices is due to efforts to better integrate care delivery and suggested that CMS weigh the benefits of care integration when deciding payment changes. Some commenters suggested that CMS use these data to equalize payment for similar services between these two settings. These commenters suggested that there is little difference in costs and care between the two settings that would warrant the difference in payment. Several of these commenters highlighted beneficiary cost-sharing as one reason for site-neutral payment, noting that the total payment amount for outpatient services is generally higher than the total payment amount for those same services when furnished in a physician's office.

Response: We appreciate these comments. At this time, we are only finalizing a data collection in this final rule with comment period. We did not propose and, therefore, are not finalizing any adjustment to payments furnished in the off-campus PBD setting.

Comment: One commenter noted that the CMS proposal would not provide additional information on how a physician practice billed prior to becoming an off-campus PBD, which would be important for analyzing the impact of this trend.

Response: We agree that understanding physician billing patterns prior to becoming an off-campus PBD is important in analyzing the impact of this trend, and we will continue to evaluate ways to analyze claims data to gather this information. We believe that collecting data using the additional modifier and POS code finalized in this final rule with comment period will be an important tool in furthering this analysis.

Comment: Some commenters suggested that the term “off-campus” be better defined. Commenters asked how billing would occur for hospitals with multiple campuses because the CMS definition of campus references main buildings and does not include remote locations. The commenters maintained that remote locations are not the same as off-campus departments and that remote campuses furnish both inpatient and outpatient hospital services, in contrast to individual hospital departments. The commenters argued that these types of locations are not ones that were formerly a physician office practice, and furnish completely different types of services than a physician office. One commenter also asked whether the modifier is intended to cover services furnished in freestanding emergency departments.

Response: For purposes of the modifier and the POS codes we are finalizing in this final rule with comment period, we define “campus” using the definition at 42 CFR 413.65(a)(2) to be the physical area immediately adjacent to the provider's main buildings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yards of the main buildings, and any other areas determined on an individual case basis, by the CMS regional office, to be part of the provider's campus. Our intent is to capture outpatient services furnished off of the hospital's main campus and off of any other hospital campuses. The term “remote location of a hospital” is defined at 42 CFR 413.65(a)(2). Under these regulations, a “remote location” includes a hospital campus other than the main hospital campus. Specifically, a remote location is “a facility or an organization that is either created by, or acquired by, a hospital that is a main provider for the purpose of furnishing inpatient hospital services under the name, ownership, and financial and administrative control of the main provider. . . .” Therefore, we agree with the commenter that remote locations of the hospital should not be required to report the modifier nor should practitioners be required to report the off-campus POS code in these settings. This term “remote location” does not include “satellite” locations of a hospital, but because a satellite facility is one that provides inpatient services in a building also used by another hospital, or in one or more entire buildings located on the same campus as buildings used by another hospital, we also are not requiring satellite facilities to report the modifier or the POS codes. Satellite facilities are described in the regulations at 42 CFR 412.22(h). Accordingly, reporting of the modifier and POS codes would be required for outpatient services furnished in PBDs beyond 250 yards from the main campus of the hospital, excluding services furnished in a remote location or satellite facility of the hospital.

We also appreciate the comment on emergency departments. We do not intend for hospitals to report the new modifier for services furnished in an emergency department that is provider-based to a hospital. We note that there is already a POS code for the emergency department, POS 23 (emergency room-hospital), and this code would continue to be used for emergency department services. That is, the new off-campus PBD code that will be created for purposes of this data collection would not apply to hospital emergency department services. Hospitals that have questions about which departments are considered to be “off-campus PBDs” should review additional guidance that CMS releases on this policy and work with the appropriate CMS regional office if individual, specific questions remain.

Comment: Several commenters asked for clarification on when to report the modifier for services furnished both on-campus and off-campus on the same day. The commenters provided several scenarios of visits and diagnostic services furnished on the same day.

Response: The location where the service is actually furnished would dictate the use of the modifier, regardless of where the order for services initiated. We expect the modifier and the POS code for off-campus PBDs to be reported in locations in which the hospital expends resources to furnish the service in an off-campus PBD setting. For example, hospitals would not report the modifier for a diagnostic test that is ordered by a practitioner who is located in an off-campus PBD when the service is actually furnished on the main campus of the hospital. This issue does not impact use of the POS codes because practitioners submit a different claim for each POS where they furnish services for a specific beneficiary.

Comment: A few commenters asked for clarification on whether their entity constitutes a PBD.

Response: PBDs are departments of the hospital that meet the criteria specified in regulations at 42 CFR 413.65. Questions about PBDs may be directed to the appropriate CMS regional office.

Comment: One commenter recommended that CMS publish the data it acquires through adoption of this modifier.

Response: Data collected through the new HCPCS modifier would be part of the Medicare Limited Data Set and would be available to the public for purchase along with the remainder of the Limited Data Set. Similarly, professional claims data with revised POS coding would be available as a standard analytic file for purchase.

In summary, after consideration of the public comments received, we are finalizing our proposal with modifications. For hospital claims, we are creating a HCPCS modifier that is to be reported with every code for outpatient hospital services furnished in an off-campus PBD of a hospital. This code will not be required to be reported for remote locations of a hospital defined at 42 CFR 412.65, satellite facilities of a hospital defined at 42 CFR 412.22(h), or for services furnished in an emergency department. This 2-digit modifier will be added to the HCPCS annual file as of January 1, 2015, with the label “PO,” the short descriptor “Serv/proc off-campus pbd,” and the long descriptor “Services, procedures and/or surgeries furnished at off-campus provider-based outpatient departments.” Reporting of this new modifier will be voluntary for 1 year (CY 2015), with reporting required beginning on January 1, 2016. Additional instruction and provider education will be forthcoming in subregulatory guidance.

For professional claims, instead of finalizing a HCPCS modifier, in response to public comments, we will be deleting current POS code 22 (outpatient hospital department) and establishing two new POS codes—one to identify outpatient services furnished in on-campus, remote, or satellite locations of a hospital, and one to identify services furnished in an off-campus PBD hospital setting. We will maintain the separate POS code 23 (Emergency room-hospital) to identify services furnished in an emergency department of the hospital. These new POS codes will be required to be reported as soon as they become available. However, advanced notice of the availability of these codes will be shared publicly as soon as practicable.

XI. CY 2015 OPPS Payment Status and Comment Indicators

A. CY 2015 OPPS Payment Status Indicator Definitions

Payment status indicators (SIs) that we assign to HCPCS codes and APCs serve an important role in determining payment for services under the OPPS. They indicate whether a service represented by a HCPCS code is payable under the OPPS or another payment system and also whether particular OPPS policies apply to the code. The complete list of the CY 2015 payment status indicators and their definitions is displayed in Addendum D1 to this final rule with comment period, which is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The CY 2015 payment status indicator assignments for APCs and HCPCS codes are shown in Addendum A and Addendum B, respectively, to this final rule with comment period, which are available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The changes to CY 2015 payment status indicators and their definitions are discussed in detail below.

We note that, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74869 through 74888), for CY 2014, we created a new status indicator “J1” to identify HCPCS codes that are paid under a comprehensive APC. However, because we delayed implementation of the new comprehensive APC policy until CY 2015, we also delayed the effective date of payment status indicator “J1” to CY 2015. A claim with payment status indicator “J1” will trigger a comprehensive APC payment for the claim. We refer readers to section II.A.2.e. of this final rule with comment period for a discussion of implementation of the new comprehensive APC policy.

In the CY 2015 OPPS/ASC proposed rule (79 FR 41014), for CY 2015, we proposed to delete payment status indicator “X” and to assign ancillary services that are currently assigned payment status indicator “X” to either payment status indicator “Q1” or “S.” We also proposed to revise the definition of payment status indicator “Q1” by removing payment status indicator “X” from the packaging criteria, so that codes assigned payment status indicator “Q1” would be designated as STV-packaged, rather than STVX-packaged, because payment status indicator “X” was proposed for deletion. These proposed changes, the public comments we received and our responses, and our finalized policies are discussed in section II.A.3.c.(1) of this final rule with comment period. Section II.A.3.c.(1) of this final rule with comment period discusses the ancillary services packaging policy. The ancillary services packaging policy is the policy that makes maintaining status indicator “X” no longer necessary. After consideration of the public comments that we received and that are discussed in section II.A.3.c.(1) of this final rule with comment period, we are finalizing, without modification, our CY 2015 proposal to delete payment status indicator “X” and to assign ancillary services that are currently assigned payment status indicator “X” to either payment status indicator “Q1” or “S.”

In addition, for CY 2015, we proposed to clarify the definition of payment status indicator “E” to state that payment status indicator “E” applies to items, codes, and services in any of the following cases:

• For which pricing is not available;
• Not covered by any Medicare outpatient benefit category;
• Statutorily excluded by Medicare; or
• Not reasonable and necessary.

Regarding items “for which pricing is not available,” this applies to drugs and biologicals assigned a HCPCS code but with no available pricing information (for example, WAC).

In reviewing the OPPS status indicators and Addendum D1 for CY 2015, we noticed that there are a few drugs or biologicals that are currently assigned payment status indicator “A,” indicating payment under a non-OPPS fee schedule. These drugs or biologicals are administered infrequently in conjunction with emergency dialysis for patients with ESRD, but when administered in the HOPD, they are paid under the standard OPPS drug payment methodology for drugs and biologicals, that is, at ASP+6 percent unless they are packaged. (We refer readers to section V. of this final rule with comment period for additional discussion of these drugs and their status indicators.) We proposed to change the status indicators for these drugs or biologicals for CY 2015 by removing the phrase “EPO for ESRD Patients” from the list of examples for status indicator “A.” In addition, we proposed to clarify the definition of payment status indicator “A” by adding the phrase “separately payable” to nonimplantable prosthetic and orthotic devices.

We did not receive any public comments regarding our proposed change and clarifications of the definitions of payment status indicators “E” and “A.” Therefore, we are finalizing our clarification and proposed policies, without modifications, for CY 2015.

B. CY 2015 Comment Indicator Definitions

In the CY 2015 OPPS/ASC proposed rule (79 FR 41014), for the CY 2015 OPPS, we proposed to use the same two comment indicators that are in effect for the CY 2014 OPPS.

• “CH”—Active HCPCS code in current and next calendar year; status indicator and/or APC assignment have changed or active HCPCS code that will be discontinued at the end of the current calendar year.
• “NI”—New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code.

We proposed to use the “CH” comment indicator in the CY 2015 OPPS/ASC proposed rule (79 FR 41014) to indicate HCPCS codes for which the status indicator or APC assignment, or both, are proposed for change in CY 2015 compared to their assignment as of June 30, 2014. We believed that using the “CH” indicator in the proposed rule would facilitate the public's review of the changes that we proposed for CY 2015. We proposed to use the “CH” comment indicator in the CY 2015 OPPS/ASC final rule with comment period to indicate HCPCS codes for which the status indicator or APC assignment, or both, would change in CY 2015 compared to their assignment as of December 31, 2014. Use of the comment indicator “CH” in association with a composite APC indicates that the configuration of the composite APC would be changed in the CY 2015 OPPS/ASC final rule with comment period.

In addition, we proposed that any existing HCPCS codes with substantial revisions to the code descriptors for CY 2015 compared to the CY 2014 descriptors would be labeled with comment indicator “NI” in Addendum B to the CY 2015 OPPS/ASC final rule with comment period. However, in order to receive the comment indicator “NI,” the CY 2015 revision to the code descriptor (compared to the CY 2014 descriptor) must be significant such that the new code descriptor describes a new service or procedure for which the OPPS treatment may change. We use comment indicator “NI” to indicate that these HCPCS codes will be open for comment as part of the CY 2015 OPPS/ASC final rule with comment period. In the CY 2015 OPPS/ASC proposed rule, we stated that, like all codes labeled with comment indicator “NI,” we would respond to public comments and finalize their OPPS treatment in the CY 2016 OPPS/ASC final rule with comment period.

In accordance with our usual practice, we proposed that CPT and Level II HCPCS codes that are new for CY 2015 also would be labeled with comment indicator “NI” in Addendum B to the CY 2015 OPPS/ASC final rule with comment period.

We did not receive any public comments on the proposed use of comment indicators for CY 2015.

We believe that the CY 2014 definitions of the OPPS comment indicators continue to be appropriate for CY 2015. Therefore, we are continuing to use those definitions without modification for CY 2015. Only HCPCS codes with comment indicator “NI” in this CY 2015 OPPS/ASC final rule with comment period are subject to comment. HCPCS codes that do not appear with comment indicator “NI” in this CY 2015 OPPS/ASC final rule with comment period will not be open to public comment, unless we specifically request additional comments elsewhere in this final rule with comment period.

The definitions of the OPPS comment indicators for CY 2015 are listed in Addendum D2 to this final rule with comment period, which is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment System

For a detailed discussion of the legislative history and statutory authority related to payments to ASCs under Medicare, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74377 through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through 32292). For a discussion of prior rulemaking on the ASC payment system, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74378 through 74379), the CY 2013 OPPS/ASC final rule with comment period (77 FR 68434 through 68467), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75064 through 75090).

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

Under 42 CFR 416.2 and 416.166 of the Medicare regulations, subject to certain exclusions, covered surgical procedures in an ASC are surgical procedures that are separately paid under the OPPS, that would not be expected to pose a significant risk to beneficiary safety when performed in an ASC, and for which standard medical practice dictates that the beneficiary would not typically be expected to require active medical monitoring and care at midnight following the procedure (“overnight stay”). We adopted this standard for defining which surgical procedures are covered under the ASC payment system as an indicator of the complexity of the procedure and its appropriateness for Medicare payment in ASCs. We use this standard only for purposes of evaluating procedures to determine whether or not they are appropriate to be furnished to Medicare beneficiaries in ASCs. We define surgical procedures as those described by Category I CPT codes in the surgical range from 10000 through 69999, as well as those Category III CPT codes and Level II HCPCS codes that directly crosswalk or are clinically similar to ASC covered surgical procedures (72 FR 42478).

In the August 2, 2007 final rule, we also established our policy to make separate ASC payments for the following ancillary items and services when they are provided integral to ASC covered surgical procedures: (1) Brachytherapy sources; (2) certain implantable items that have pass-through payment status under the OPPS; (3) certain items and services that we designate as contractor-priced, including, but not limited to, procurement of corneal tissue; (4) certain drugs and biologicals for which separate payment is allowed under the OPPS; and (5) certain radiology services for which separate payment is allowed under the OPPS. These covered ancillary services are specified in § 416.164(b) and, as stated previously, are eligible for separate ASC payment (72 FR 42495). Payment for ancillary items and services that are not paid separately under the ASC payment system is packaged into the ASC payment for the covered surgical procedure.

We update the lists of, and payment rates for, covered surgical procedures and covered ancillary services in ASCs in conjunction with the annual proposed and final rulemaking process to update the OPPS and the ASC payment system (§ 416.173; 72 FR 42535). In addition, as discussed in detail in section XII.B. of this final rule with comment period, because we base ASC payment policies for covered surgical procedures, drugs, biologicals, and certain other covered ancillary services on the OPPS payment policies, and we use quarterly change requests to update services covered under the OPPS, we also provide quarterly update change requests (CRs) for ASC covered surgical procedures and covered ancillary services throughout the year (January, April, July, and October). CMS releases new Level II codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes are recognized on Medicare claims) via these ASC quarterly update CRs. Thus, these quarterly updates are to implement newly created Level II HCPCS and Category III CPT codes for ASC payment and to update the payment rates for separately paid drugs and biologicals based on the most recently submitted ASP data. New Category I CPT codes, except vaccine codes, are released only once a year and, therefore, are implemented only through the January quarterly update. New Category I CPT vaccine codes are released twice a year and are implemented through the January and July quarterly updates. We refer readers to Table 41 in the CY 2012 OPPS/ASC proposed rule for the process used to update the HCPCS and CPT codes (76 FR 42291).

In our annual updates to the ASC list of, and payment rates for, covered surgical procedures and covered ancillary services, we undertake a review of excluded surgical procedures (including all procedures newly proposed for removal from the OPPS inpatient list), new procedures, and procedures for which there is revised coding, to identify any that we believe meet the criteria for designation as ASC covered surgical procedures or covered ancillary services. Updating the lists of ASC covered surgical procedures and covered ancillary services, as well as their payment rates, in association with the annual OPPS rulemaking cycle is particularly important because the OPPS relative payment weights and, in some cases, payment rates, are used as the basis for the payment of covered surgical procedures and covered ancillary services under the revised ASC payment system. This joint update process ensures that the ASC updates occur in a regular, predictable, and timely manner.

B. Treatment of New Codes

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

Category I CPT, Category III CPT, and Level II HCPCS codes are used to report procedures, services, items, and supplies under the ASC payment system. Specifically, we recognize the following codes on ASC claims: (1) Category I CPT codes, which describe surgical procedures and vaccine codes; (2) Category III CPT codes, which describe new and emerging technologies, services, and procedures; and (3) Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services not described by CPT codes.

We finalized a policy in the August 2, 2007 final rule to evaluate each year all new Category I and Category III CPT codes and Level II HCPCS codes that describe surgical procedures, and to make preliminary determinations during the annual OPPS/ASC rulemaking process regarding whether or not they meet the criteria for payment in the ASC setting as covered surgical procedures and, if so, whether or not they are office-based procedures (72 FR 42533 through 42535). In addition, we identify new codes as ASC covered ancillary services based upon the final payment policies of the revised ASC payment system.

We have separated our discussion below into two sections based on whether we proposed to solicit public comments in the CY 2015 OPPS/ASC proposed rule (and respond to those comments in this CY 2015 OPPS/ASC final rule with comment period) or whether we are soliciting public comments in this CY 2015 OPPS/ASC final rule with comment period (and responding to those comments in the CY 2016 OPPS/ASC final rule with comment period).

We note that we sought public comment in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75067) on the new Category I and Category III CPT and Level II HCPCS codes that were effective January 1, 2014. We also sought public comment in the CY 2014 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2013. These new codes, with an effective date of October 1, 2013, or January 1, 2014, were flagged with comment indicator “NI” in Addenda AA and BB to the CY 2014 OPPS/ASC final rule with comment period to indicate that we were assigning them an interim payment status and payment rate, if applicable, which were subject to public comment following publication of the CY 2014 OPPS/ASC final rule with comment period. In the proposed rule, we stated that we will respond to public comments and finalize the treatment of these codes under the ASC payment system in this CY 2015 OPPS/ASC final rule with comment period.

2. Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April 2014 and July 2014 for Which We Solicited Public Comments in the CY 2015 OPPS/ASC Proposed Rule

In the April 2014 and July 2014 CRs, we made effective for April 1, 2014 and July 1, 2014, respectively, a total of seven new Level II HCPCS codes and four new Category III CPT codes that describe ASC covered surgical procedures and covered ancillary services that were not addressed in the CY 2014 OPPS/ASC final rule with comment period.

In the April 2014 ASC quarterly update (Transmittal 2927, CR 8675, dated April 10, 2014), we added two new surgical Level II HCPCS codes and one new drug and biological Level II HCPCS code to the list of covered surgical procedures and covered ancillary services, respectively. Table 45 of the CY 2015 OPPS/ASC proposed rule (79 FR 41016) listed the new Level II HCPCS codes that were implemented April 1, 2014, along with their proposed payment indicators for CY 2015.

In the July 2014 quarterly update (Transmittal 2970, CR 8786, dated May 23, 2014), we added one new brachytherapy Level II HCPCS code and three new drug and biological Level II HCPCS codes to the list of covered ancillary services. Table 46 of the CY 2015 OPPS/ASC proposed rule (79 FR 41016 through 41017) listed the new Level II HCPCS codes that were implemented July 1, 2014 along with their proposed payment indicators and proposed ASC payment rates for CY 2015.

Through the July 2014 quarterly update CR, we also implemented ASC payment for four new Category III CPT codes as one ASC covered surgical procedure and three covered ancillary services, effective July 1, 2014. These codes were listed in Table 47 of the CY 2015 OPPS/ASC proposed rule (79 FR 41017), along with their proposed payment indicators and proposed payment rates for CY 2015.

The HCPCS codes listed in Table 45 of the CY 2015 OPPS/ASC proposed rule (79 FR 41016) were included in Addenda AA or BB to the proposed rule (which are available via the Internet on the CMS Web site). Because the payment rates associated with the new Level II HCPCS codes and Category III CPT codes that became effective July 1, 2014 (listed in Table 46 and Table 47 of the proposed rule (79 FR 41016 through 41017)) were not available to us in time for incorporation into the Addenda to the OPPS/ASC proposed rule, our policy is to include these HCPCS codes and their proposed payment indicators and payment rates in the preamble to the proposed rule but not in the Addenda to the proposed rule. These codes and their final payment indicators and rates are included in the appropriate Addendum to this CY 2015 OPPS/ASC final rule with comment period. Therefore, the codes implemented by the July 2014 ASC quarterly update CR and their proposed CY 2015 payment indicators and rates that were displayed in Table 46 and Table 47 of the proposed rule were not included in Addenda AA or BB to the proposed rule (which are available via the Internet on the CMS Web site). The final list of ASC covered surgical procedures and covered ancillary services and the associated payment weights and payment indicators are included in Addenda AA or BB to this CY 2015 OPPS/ASC final rule with comment period, consistent with our annual update policy.

We invited public comment on these proposed payment indicators and the proposed payment rates for the new Category III CPT code and Level II HCPCS codes that were newly recognized as ASC covered surgical procedures or covered ancillary services in April 2014 and July 2014 through the quarterly update CRs, as listed in Tables 45, 46, and 47 of the CY 2015 OPPS/ASC proposed rule (79 FR 41016 through 41017). We proposed to finalize their payment indicators and their payment rates in this CY 2015 OPPS/ASC final rule with comment period.

We did not receive any public comments regarding these proposed ASC payment indicators. Therefore, we are adopting as final for CY 2015 the ASC payment indicators for the ASC covered surgical procedures and covered ancillary services described by the new Level II HCPCS codes implemented in April 2014 and July 2014 through the quarterly update CRs as shown below, in Tables 41 and 42, respectively.

For the new Category III CPT codes implemented in July 2014 through the quarterly update CR, as shown below in Table 43, we are not finalizing the “Z2” payment indicator that we proposed for CPT codes 0348T, 0349T, and 0350T. For CY 2015, these codes will be conditionally packaged under the OPPS when provided with a significant procedure (status indicator “Q1”). With the exception of device removal procedures (as discussed in section XII.D.1.b. of this final rule with comment period), HCPCS codes that are conditionally packaged under the OPPS are always packaged (payment indicator “N1”) under the ASC payment system. Therefore, we are changing the final CY 2015 ASC payment indicator for CPT codes 0348T, 0349T, and 350T from “Z2” to “N1.” We are adopting as final the payment indicator proposed for CPT code 0356T.

These new HCPCS and CPT codes also are displayed in Addenda AA and BB to this final rule with comment period (which are available via the Internet on the CMS Web site). We note that after publication of the CY 2015 OPPS/ASC proposed rule, the CMS HCPCS Workgroup created permanent HCPCS J-codes for CY 2015 to replace certain temporary HCPCS C-codes and Q-codes made effective for CY 2014. These permanent CY 2015 HCPCS J-codes are listed alongside the temporary CY 2014 HCPCS C-codes and Q-codes in Tables 41 and 42 below. We also note that the CMS HCPCS Workgroup created a long descriptor for J1781 that is slightly different from the long descriptor listed for HCPCS code C9134 in the CY 2015 OPPS/ASC proposed rule.

3. Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comments in This CY 2015 OPPS/ASC Final Rule With Comment Period

As has been our practice in the past, we incorporate those new Category I and Category III CPT codes and new Level II HCPCS codes that are effective January 1 in the final rule with comment period updating the ASC payment system for the following calendar year. These codes are released to the public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January ASC quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October ASC quarterly update CRs and incorporated these new codes in the final rule with comment period updating the ASC payment system for the following calendar year. All of these codes are flagged with comment indicator “NI” in Addenda AA and BB to the OPPS/ASC final rule with comment period to indicate that we are assigning them an interim payment status which is subject to public comment. The payment indicator and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are open to public comment in the OPPS/ASC final rule with comment period, and we respond to these comments in the final rule with comment period for the next calendar year's OPPS/ASC update.

In the CY 2015 OPPS/ASC proposed rule (79 FR 41017), we proposed to continue this process for CY 2015. Specifically, for CY 2015, we proposed to include in Addenda AA and BB to the CY 2015 OPPS/ASC final rule with comment period any new Category I and III CPT codes effective January 1, 2015, that would be incorporated in the January 2015 ASC quarterly update CR and any new Level II HCPCS codes, effective October 1, 2014 or January 1, 2015, that would be released by CMS in its October 2014 and January 2015 ASC quarterly update CRs. We stated that these codes would be flagged with comment indicator “NI” in Addenda AA and BB to this CY 2015 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim payment status. We also stated that their payment indicators and payment rates, if applicable, would be open to public comment in this CY 2015 OPPS/ASC final rule with comment period and would be finalized in the CY 2016 OPPS/ASC final rule with comment period.

We did not receive any public comments regarding this proposed process. Therefore, for CY 2015, we are finalizing our proposal, without modification, to continue our established process for recognizing and soliciting public comments on new Level II HCPCS codes and Category I and III CPT codes that become effective on October 1, 2014, or January 1, 2015, as described above.

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

1. Covered Surgical Procedures

a. Additions to the List of ASC Covered Surgical Procedures

In the CY 2015 OPPS/ASC proposed rule (79 FR 41017 through 41018), we proposed to update the list of ASC covered surgical procedures by adding 10 procedures to the list for CY 2015. These 10 procedures were among those excluded from the ASC list for CY 2014 because we believed they did not meet the definition of a covered surgical procedure based on our expectation that they would be expected to pose a significant risk to beneficiary safety when performed in an ASC, or would be expected to require active medical monitoring and care of the beneficiary at midnight following the procedure. We conducted a review of all HCPCS codes that currently are paid under the OPPS, but not included on the ASC list of covered surgical procedures, to determine if changes in technology and/or medical practice affected the clinical appropriateness of these procedures for the ASC setting. We determined that these 10 procedures would not be expected to pose a significant risk to beneficiary safety when performed in an ASC, and would not be expected to require active medical monitoring and care of the beneficiary at midnight following the procedure and, therefore, we proposed to include them on the list of ASC covered surgical procedures for CY 2015.

The 10 procedures that we proposed to add to the ASC list of covered surgical procedures, including their HCPCS code long descriptors and proposed CY 2015 payment indicators, were displayed in Table 48 of the CY 2015 OPPS/ASC proposed rule (79 FR 41018).

Comment: Several commenters supported adding the 10 procedures to the CY 2015 covered surgical procedures list for ASCs.

Response: We thank the commenters for their support. As indicated later in this section, we are finalizing our proposal to add these procedure codes to the ASC list, in addition to two other procedure codes recommended by commenters.

Comment: Some commenters stated that the APC relative weight for APC 0208 is too low for the cervical and lumbar fusion procedures (as described by HCPCS codes 22551, 22554, and 22612) proposed to be added to the list of ASC covered surgical procedures, and they urged CMS to reassign these three procedures codes to another APC with a higher relative weight.

Response: As discussed in detail in section II.A.2.e. of this final rule with comment period, we agree with the commenters, and we are reassigning CPT codes 22551, 22554, and 22612 to APC 0425 for CY 2015 because the geometric mean costs of these codes are more similar to the geometric mean cost of APC 0425, which has a higher geometric mean cost than APC 0208.

Comment: Some commenters stated that, in order to perform the procedures proposed to be added to the ASC list of covered surgical procedures, additional procedure codes needed to be added to the list because some of the proposed additions to the list could not be furnished without procedures described by additional codes. Other codes were requested to be added because they represent procedures that are commonly furnished in conjunction with procedures described by the codes that were proposed to be added. Commenters stated that without adding the additional codes for procedures that must be performed in conjunction with or are often performed along with the proposed added procedures, these types of cases will continue to not be furnished in the ASC setting. Commenters stated that some of the procedures described by these codes were covered by other carriers and could be safely performed in the ASC setting for Medicare patients. Some commenters believed that, because Medicare makes facility payments for unlisted CPT codes under the OPPS, CMS should provide ASCs with the same flexibility to use unlisted CPT codes to report procedures. The list of codes that commenters requested to be added in addition to those that were proposed to be added is shown in Table 44 below.